Exhibit 10.101

 

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ASSET PURCHASE AGREEMENT

 

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By and Among

 

AUDIOVOX COMMUNICATIONS CORP.

 

QUINTEX MOBILE COMMUNICATIONS CORPORATION

 

AUDIOVOX COMMUNICATIONS CANADA CO.

 

UTSTARCOM, INC.

 

UTSTARCOM CANADA COMPANY

 

and

 

with respect to Sections 2.05, 2.07, 2.09, 3.01, 3.02, 3.11(b), 3.30, 5.06,
5.08, 5.19, 5.20, 5.21,
5.22, 5.24 and Articles VII – X only,

 

AUDIOVOX  CORPORATION

 

Dated as of June 11, 2004

 

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TABLE OF CONTENTS

 

ARTICLE I

Page

 

 

DEFINITIONS

 

 

 

SECTION 1.01. Certain Defined Terms

2

SECTION 1.02. Definitions

14

SECTION 1.03. Interpretation and Rules of Construction

15

 

 

ARTICLE II

 

 

 

PURCHASE AND SALE

 

 

 

SECTION 2.01. Purchase and Sale of Purchased Assets

16

SECTION 2.02. Assumption and Exclusion of Liabilities

18

SECTION 2.03. Purchase Price; Allocation of Purchase Price

20

SECTION 2.04. Closing

20

SECTION 2.05. Closing Deliveries by the Seller

20

SECTION 2.06. Closing Deliveries by the Purchaser

21

SECTION 2.07. Post-Closing Adjustment of Purchase Price

22

SECTION 2.08. Escrow

25

SECTION 2.09. Receivables

25

SECTION 2.10. Inventories

26

 

 

ARTICLE III

 

 

 

REPRESENTATIONS AND WARRANTIES
OF THE SELLER

 

 

 

SECTION 3.01. Organization, Authority and Qualification and Corporate Power of
the Seller and Audiovox

27

SECTION 3.02. No Conflict

28

SECTION 3.03. Governmental Consents and Approvals

28

SECTION 3.04. Financial Information; Books and Records

28

SECTION 3.05. Absence of Undisclosed Liabilities

29

SECTION 3.06. Receivables

29

SECTION 3.07. Inventories

29

SECTION 3.08. Assumed Contracts

30

SECTION 3.09. Sales and Purchase Order Backlog

30

SECTION 3.10. Conduct in the Ordinary Course; Absence of Certain Changes, Events
and Conditions

30

SECTION 3.11. Litigation

33

SECTION 3.12. Compliance with Laws

34

SECTION 3.13. Environmental and Other Permits and Licenses; Related Matters

34

 

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SECTION 3.14. Material Contracts

35

SECTION 3.15. Intellectual Property

37

SECTION 3.16. Real Property

38

SECTION 3.17. Tangible Personal Property

39

SECTION 3.18. Assets

40

SECTION 3.19. Customers

40

SECTION 3.20. Suppliers

40

SECTION 3.21. Employee Benefit Matters

41

SECTION 3.22. Labor Matters

42

SECTION 3.23. Key Employees

43

SECTION 3.24. Certain Interests

44

SECTION 3.25. Taxes

44

SECTION 3.26. Insurance

44

SECTION 3.27. Certain Business Practices

45

SECTION 3.28. INTENTIONALLY OMITTED

45

SECTION 3.29. Brokers

45

SECTION 3.30. Board Approval; Vote Required

45

 

 

ARTICLE IV

 

 

 

REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER

 

 

 

SECTION 4.01. Organization and Authority of the Purchaser

46

SECTION 4.02. No Conflict

46

SECTION 4.03. Governmental Consents and Approvals

46

SECTION 4.04. Financing

47

SECTION 4.05. Litigation

47

SECTION 4.06. Brokers

47

SECTION 4.07. UTStarcom Canada

47

 

 

ARTICLE V

 

 

 

ADDITIONAL AGREEMENTS

 

 

 

SECTION 5.01. Conduct of Business Prior to the Closing

47

SECTION 5.02. Access to Information

48

SECTION 5.03. Confidentiality

49

SECTION 5.04. Regulatory and Other Authorizations; Notices and Consents

49

SECTION 5.05. Notice of Developments

50

SECTION 5.06. No Solicitation or Negotiation

50

SECTION 5.07. Use of Intellectual Property

53

SECTION 5.08. Non-Competition

53

SECTION 5.09. INTENTIONALLY OMITTED

54

SECTION 5.10. Bulk Transfer Laws

54

SECTION 5.11. Inter-company Arrangements

54

SECTION 5.12. Payments on Behalf of Affiliates

54

 

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SECTION 5.13. Transition Services

54

SECTION 5.14. Tax Cooperation and Exchange of Information

54

SECTION 5.15. Conveyance Taxes

55

SECTION 5.16. Further Action

55

SECTION 5.17. INTENTIONALLY OMITTED

55

SECTION 5.18. Proration of Taxes and Certain Charges

56

SECTION 5.19. Proxy Statement

56

SECTION 5.20. Audiovox Stockholders’ Meeting

57

SECTION 5.21. Trademark License Agreement

57

SECTION 5.22. Replication Service

57

SECTION 5.23. Limited Updating of Disclosure Schedules

58

SECTION 5.24. Leases

58

SECTION 5.25. Section 404 Compliance

58

 

 

ARTICLE VI

 

 

 

EMPLOYEE MATTERS

 

 

 

SECTION 6.01. Offer of Employment

58

 

 

ARTICLE VII

 

 

 

CONDITIONS TO CLOSING

 

 

 

SECTION 7.01. Conditions to Obligations of the Seller and Audiovox

59

SECTION 7.02. Conditions to Obligations of the Purchaser

60

 

 

ARTICLE VIII

 

 

 

INDEMNIFICATION

 

 

 

SECTION 8.01. Survival of Representations and Warranties

61

SECTION 8.02. Indemnification by the Seller and Audiovox

62

SECTION 8.03. Indemnification by the Purchaser

63

SECTION 8.04. Limitation on Obligation to Indemnify

63

SECTION 8.05. Notice of Loss; Third Party Claims

64

SECTION 8.06. Distributions from Escrow Fund

65

SECTION 8.07. Other Provisions

65

SECTION 8.08. Tax Treatment

65

 

 

ARTICLE IX

 

 

 

TERMINATION, AMENDMENT AND WAIVER

 

 

 

SECTION 9.01. Termination

65

SECTION 9.02. Effect of Termination

67

SECTION 9.03. Expenses

67

SECTION 9.04. Amendment

67

 

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SECTION 9.05. Waiver

68

 

 

ARTICLE X

 

 

 

GENERAL PROVISIONS

 

 

 

SECTION 10.01. Notices

68

SECTION 10.02. Public Announcements

69

SECTION 10.03. Severability

69

SECTION 10.04. Entire Agreement

69

SECTION 10.05. Assignment

70

SECTION 10.06. No Third Party Beneficiaries

70

SECTION 10.07. Governing Law

70

SECTION 10.08. Waiver of Jury Trial

70

SECTION 10.09. Arbitration

70

SECTION 10.10. Currency

71

SECTION 10.11. Counterparts

71

 

iv

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EXHIBITS

 

Exhibit A

 

Rules for Valuing Inventories

 

 

 

1.01(a)

 

Form of Trademarks and Domain Name Assignment

 

 

Form of Patent Assignment

 

 

 

1.01(b)

 

INTENTIONALLY OMITTED

 

 

 

1.01(c)

 

Form of Assumption Agreement

 

 

 

1.01(d)

 

Form of Bill of Sale and Assignment

 

 

 

2.08

 

Form of Escrow Agreement

 

 

 

5.13

 

Form of Transition Services Agreement

 

 

 

5.21

 

Form of Trademark License Agreement

 

 

 

7.02(i)(i)

 

555 Wireless Sublease Term Sheet

 

 

 

7.02(i)(ii)

 

Cerritos Lease Term Sheet

 

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DISCLOSURE SCHEDULE

 

The Disclosure Schedule shall include the following Sections:

 

Section

 

Title

 

 

 

1.01

 

Shared MIS Software

2.01(a)(x)

 

Assumed Contracts

2.01(b)(vii)

 

Excluded Intellectual Property

3.01(c)

 

Organization, Authority and Qualification and Corporate Power of the Seller and
Audiovox

3.02(c)

 

No Conflict

3.03

 

Governmental Consents and Approvals

3.04(a)(i)

 

Financial Information; Book and Records

3.05

 

Absence of Undisclosed Liabilities

3.06

 

Receivables

3.07(a)(i)

 

Inventories

3.07(a)(ii)

 

Inventories

3.07(a)(iii)

 

Inventories

3.07(b)

 

Inventories

3.08

 

Acquired Assets

3.09(a)

 

Sales and Purchase Order Backlog

3.09(b)

 

Sales and Purchase Order Backlog

3.10(d)

 

Conduct in the Ordinary Course; Absence of Certain Changes, Events and
Conditions

3.10(k)

 

Conduct in the Ordinary Course; Absence of Certain Changes, Events and
Conditions

3.10(m)

 

Conduct in the Ordinary Course; Absence of Certain Changes, Events and
Conditions

3.10(o)

 

Conduct in the Ordinary Course; Absence of Certain Changes, Events and
Conditions

3.10(p)

 

Conduct in the Ordinary Course; Absence of Certain Changes, Events and
Conditions

3.11(a)

 

Litigation

3.12(a)

 

Compliance with Laws

3.12(b)

 

Compliance with Laws

3.13(a)

 

Environmental and Other Permits and Licenses; Related Matters

3.14(a)

 

Material Contracts

3.14(b)

 

Material Contracts

3.14(e)

 

Material Contracts

3.15(a)(i)

 

Intellectual Property

3.15(b)

 

Intellectual Property

3.15(f)

 

Intellectual Property

3.15(g)

 

Intellectual Property

3.15(j)

 

Intellectual Property

3.16(c)

 

Real Property

3.16(d)

 

Real Property

 

vi

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Section

 

Title

 

 

 

3.16(g)

 

Real Property

3.17(a)

 

Tangible Personal Property

3.19

 

Customers

3.20

 

Suppliers

3.21(a)

 

Employee Benefit Matters

3.21(b)

 

Employee Benefit Matters

3.22

 

Labor Matters

3.23(a)

 

Key Employees

3.23(b)

 

Key Employees

3.24

 

Certain Interests

3.25(c)

 

Taxes

3.25(e)

 

Taxes

3.26

 

Insurance

3.27(a)

 

Certain Business Practices

5.01(a)

 

Conduct of Business Prior to the Closing

5.01(b)

 

Conduct of Business Prior to the Closing

5.04

 

Regulatory and Other Authorizations; Notices and Consents

5.08(a)

 

Non-Competition

5.11

 

Inter-company Arrangements

6.01

 

Offer of Employment

7.02(e)(i)

 

Conditions to Obligations of the Purchaser

7.02(e)(ii)

 

Conditions to Obligations of the Purchaser

7.02(g)

 

Conditions to Obligations of the Purchaser

 

vii

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ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of June 11, 2004, by and
among AUDIOVOX COMMUNICATIONS CORP., a Delaware corporation (“ACC”), QUINTEX
MOBILE COMMUNICATIONS CORPORATION, a Delaware corporation (“Quintex”), AUDIOVOX
COMMUNICATIONS CANADA CO., a Nova Scotia company (“ACCC”; and, together with ACC
and Quintex, collectively, the “Seller”), UTSTARCOM, INC., a Delaware
corporation (“UTStarcom”), UTSTARCOM CANADA COMPANY, a Nova Scotia company
(“UTStarcom Canada” and, together with UTStarcom, the “Purchaser”) and, with
respect to Sections 2.05, 2.07, 2.09, 3.01, 3.02, 3.11(b), 3.30, 5.06, 5.08,
5.19, 5.20, 5.21, 5.22, 5.24 and Articles VII – X only, AUDIOVOX CORPORATION, a
Delaware corporation (“Audiovox”).

 

WHEREAS, the Seller is engaged in the business of marketing mobile cellular
handset systems and other wireless communications devices, including, without
limitation, personal digital assistants, transceiver PCMCIA cards and
non-telematic devices, that use the infrastructure of wireless communication
carriers (“Carriers”) and are sold through the Carrier distribution channel
which is comprised of (a) a direct channel (which consists of (i) retail stores
owned by Carriers and (ii) the Carriers’ sales organizations for corporate
enterprise customers) through which Seller sells products to Carriers; and (b)
an indirect channel through which Seller sells products to retailers,
distributors and agents that are authorized by Carriers to activate products, to
sell air time on behalf of Carriers, to promote products to end users and to
perform other activities that support the sale of products to end users on
behalf of Carriers. The Seller’s business, however, excludes consumer
electronics products, including those with wireless communications capability,
not having as their primary function cellular telephone connectivity or cellular
telephone activation, but rather having as their primary function entertainment,
information processing, data downloading/uploading, and security (e.g., products
such as navigation devices, audio/video entertainment devices, computing devices
and security products) (hereinafter the “Business”);

 

WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser wishes to
purchase from the Seller, the Business, including all right, title and interest
of the Seller in and to the property and assets of the Business, and in
connection therewith the Purchaser is willing to assume certain liabilities of
the Seller relating thereto, all upon the terms and subject to the conditions
set forth herein;

 

WHEREAS, the Boards of Directors of the Seller, Audiovox, and the Purchaser have
determined that the transactions contemplated by this Agreement are fair to and
in the best interests of their respective corporations and stockholders and have
approved and adopted this Agreement and the transactions contemplated hereby;

 

WHEREAS, as a condition to the Purchaser’s willingness to enter into this
Agreement, the Purchaser and John Shalam (the “Stockholder”) has entered into a
voting agreement dated as of the date hereof (the “Voting Agreement”), providing
that, among other things, the Stockholder will vote all of his shares of stock
of Audiovox (a) in favor of this Agreement and the transactions contemplated in
this Agreement and (b) against any action that would result in a breach of any
covenant, representation, warranty or agreement under this Agreement;

 

1

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WHEREAS, Audiovox and Toshiba Corporation, a Japanese corporation, acting
through its Mobile Communications Company (“Toshiba”) in their capacity as the
sole shareholders of ACC have approved and adopted this Agreement and the
transactions contemplated hereby;

 

WHEREAS, as an inducement to the Purchaser to enter into this Agreement, the
Seller shall facilitate the transfer of, and hiring by the Purchaser as of the
Closing, certain of the employees employed by the Seller in connection with the
Business;

 

WHEREAS, ACCC and UTStarcom Canada are parties to this Agreement solely for
purposes of the transfer of the Canadian assets of the Business;

 

WHEREAS, as an inducement to the Purchaser to enter into this Agreement,
concurrently with the execution of this Agreement, Philip Christopher has
entered into an employment agreement with the Purchaser (the “Employment
Agreement”);

 

WHEREAS, concurrently with the consummation of the transactions contemplated
hereby, Audiovox and the Purchaser will enter into a Trademark License Agreement
substantially in the form attached hereto as Exhibit 5.21, pursuant to which,
among other things, Audiovox will license to the Purchaser certain rights in and
to the Audiovox trademark, upon the terms and subject to the conditions set
forth in the Trademark License Agreement; and

 

WHEREAS, Audiovox and Toshiba are direct or indirect stockholders of the Seller.

 

NOW, THEREFORE, in consideration of the promises and the mutual agreements and
covenants hereinafter set forth, and intending to be legally bound, the Seller,
Audiovox and the Purchaser hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

SECTION 1.01.  Certain Defined Terms.  For purposes of this Agreement:

 

“ACC Internal Reporting Controls” means a process of internal financial
reporting controls, including certain control matrices, to provide reasonable
assurance regarding the reliability of financial reporting of the Business and
the preparation of financial statements of the Business in accordance with GAAP,
including the Reporting Policies and Procedures, in compliance with Section 404
and, in each case, designed to work within the policies and procedures
constituting the UTSI’s Internal Reporting Controls upon the consummation of the
transactions contemplated by this Agreement.

 

“Accounts Payable” means any and all accounts payable, notes and other amounts
payable to third parties, including vendors and employees, arising from the
conduct of the Business, whether or not in the ordinary course, together with
any unpaid financing charges accrued thereon as determined in accordance with
GAAP.

 

2

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“Accrued Expenses” means expenses of the Business, other than Excluded Accrued
Expenses, that have been incurred, but not yet paid for as determined in
accordance with GAAP.

 

“Accrued Sales Incentives” means any and all amounts owed to customers under
various sales incentives programs offered to the customers of the Business as
determined in accordance with GAAP.

 

“Acquisition Documents” means this Agreement, the Ancillary Agreements and the
certificates delivered pursuant to Sections 2.05(h) and 2.05(i).

 

“Action” means any claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority.

 

“Affiliate” means, with respect to any specified Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person; with
respect to the Seller, such other Person shall include Audiovox but expressly
exclude Toshiba.

 

“Ancillary Agreements” means the Bill of Sale, each Assignment of Lease, the
Assignment of Intellectual Property, the Trademark License Agreement, the
Assumption Agreement, the Transition Services Agreement and the Escrow
Agreement.

 

“Assignment of Intellectual Property” means the assignment of Intellectual
Property to be executed by the Seller at the Closing, substantially in the form
of Exhibit 1.01(a).

 

“Assignment of Lease” means the Assignment of Lease to be executed by the Seller
at the Closing with respect to each parcel of Leased Real Property listed on
Section 3.16(b) of the Disclosure Schedule, in a form to be mutually agreed by
the Seller and the Purchaser.

 

“Assumption Agreement” means the Assumption Agreement to be executed by the
Purchaser and the Seller at the Closing, substantially in the form of
Exhibit 1.01(c).

 

“Bill of Sale” means the Bill of Sale and Assignment to be executed by the
Seller at the Closing, substantially in the form of Exhibit 1.01(d).

 

“Business Day” means any day that is not a Saturday, a Sunday or other day on
which banks are required or authorized by Law to be closed in The City of New
York.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended through the Closing.

 

“Claims” means any and all administrative, regulatory or judicial actions,
suits, petitions, appeals, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations, proceedings, consent orders or
consent agreements.

 

3

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“Closing Statement of Inventories” means the Statement of Inventories prepared
by the Seller setting forth the amount of Inventories, net of reserves, of the
Business as of 5:30 p.m. EST on the date of the Closing, which Inventories, for
purposes of the Closing Statement of Inventories, the Preliminary Net Working
Capital Balance and the Final Net Working Capital Balance shall be determined in
accordance with the rules set forth in Exhibit A attached hereto.

 

“Closing Statement of Net Assets” means the statement of Net Assets of the
Business to be prepared pursuant to Section 2.07(a) and to be dated as of the
close of business on the date of the Closing.

 

“Closing Statement of Receivables” means a statement certified by an officer of
the Seller, including the information constituting the Receivables Listing and
setting forth the Receivables Reserve.

 

“Code” means the Internal Revenue Code of 1986, as amended through the date
hereof.

 

“Confidentiality Agreement” means the non-disclosure agreement, dated February
11, 2004, among the Purchaser, Audiovox and the Seller.

 

“Control” (including the terms “controlled by” and “under common control with”),
with respect to the relationship between or among two or more Persons, means the
possession, directly or indirectly or as trustee, personal representative or
executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee, personal representative or executor, by contract, credit arrangement or
otherwise.

 

“Conveyance Taxes” means all sales, use, value added, transfer, stamp, stock
transfer, real property transfer or gains and similar Taxes, including, without
limitation, Canadian GST and PST.

 

“Copyrights” means mask works, rights of publicity and privacy, and copyrights
in works of authorship of any type, including Software, registrations and
applications for registration thereof throughout the world, all rights therein
provided by international treaties and conventions, all  common law rights
thereto, and all other rights associated therewith.

 

“Customer” means the party on the Receivables Listing owing a Receivable to the
Seller.

 

“Determination of Satisfactory Controls” means a determination by the Purchaser
made reasonably and in good faith that the Seller has developed and implemented
the ACC Internal Reporting Controls and that the ACC Internal Reporting Controls
are prepared for the commencement of outside auditor testing of compliance with
Section 404.

 

“Developed Software” means Software created by, or for the use of, the Seller or
Audiovox for use in the Business that is used in conjunction with third-party
Software and hardware.

 

4

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“Disclosure Schedule” means the Disclosure Schedule attached hereto, dated as of
the date hereof, delivered by the Seller to the Purchaser in connection with
this Agreement.

 

“Documentary Acceptances” means amounts owed by the Business for borrowed money
under unsecured lines of credit with suppliers used to finance inventory
purchases.

 

“Encumbrance” means any security interest, pledge, hypothecation, mortgage, lien
(including environmental and tax liens), violation, charge, lease, license,
encumbrance, servient easement, adverse claim, reversion, reverter, preferential
arrangement, restrictive covenant, condition or restriction of any kind,
including any restriction on the use, voting, transfer, receipt of income or
other exercise of any attributes of ownership.

 

“Environment” means surface waters, groundwaters, soil, subsurface strata and
ambient air.

 

“Environmental Claims” means any Claims relating in any way to any Environmental
Law or any Environmental Permit, including (a) any and all Claims by
Governmental Authorities for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law and (b)
any and all Claims by any Person seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the Environment.

 

“Environmental Laws” means all Laws, now or hereafter in effect and as amended,
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, health, safety, natural resources or Hazardous Materials, including
CERCLA; the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq.;
the Hazardous Materials Transportation Act, 49 U.S.C. §§ 6901 et seq.; the Clean
Water Act, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act, 15
U.S.C. §§ 2601 et seq.; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the Safe
Drinking Water Act, 42 U.S.C. §§ 300f et seq.; the Atomic Energy Act, 42 U.S.C.
§§ 2011 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. §§ 136 et seq.; and the Federal Food, Drug and Cosmetic Act, 21 U.S.C. §§
301 et seq.

 

“Environmental Permits” means all permits, approvals, identification numbers,
licenses and other authorizations required under or issued pursuant to any
applicable Environmental Law.

 

“ERISA Affiliate” of any Person means any other Person that is a member of the
same controlled group of such Person for purposes of Section 4001(a)(14) of
ERISA.

 

“Escrow Agent” means J.P. Morgan-Chase.

 

“Escrow Amount” means an amount equal to 5% of the Purchase Price.

 

“Escrow Fund” means the Escrow Amount deposited with the Escrow Agent as such
sum may be increased or decreased as provided in the Escrow Agreement.

 

5

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“Excluded Accrued Expenses” means payroll, divisional bonuses, FICA, withholding
taxes, unemployment taxes, disability taxes, the Employee Stock Purchase Plan,
amounts due under 401(k) plan, officer’s salaries, travel & entertainment
reimbursement accrual, long term disability and life insurance, dental expense
accrual, medical insurance, sales tax, GST, sales commissions payable and
accrued professional fees.

 

“Excluded Taxes” means (i) all Income Taxes owed by the Seller or any of its
Affiliates for any period; (ii) all Taxes relating to the Excluded Assets or
Excluded Liabilities for any period; (iii) all Taxes relating to the Purchased
Assets, the Business or the Assumed Liabilities for any Pre-Closing Tax Period;
(iv) all Taxes of Seller or any other Person by reason of being a member of a
consolidated, combined, unitary or affiliated group that includes the Seller or
any of its present or past Affiliates prior to the Closing, by reason of a tax
sharing, tax indemnity or similar agreement entered into by the Seller or any of
its present or past Affiliates prior to the Closing (other than this Agreement)
or by reason of transferee or successor liability arising in respect of a
transaction undertaken by the Seller or any of its present or past Affiliates
prior to the Closing; and (v) Taxes imposed on Purchaser as a result of any
breach of warranty or misrepresentation under Section 3.25 hereof, or breach by
the Seller of any covenant relating to Taxes.  For purposes of this Agreement,
in the case of any Straddle Period, (i) Property Taxes relating to the Purchased
Assets allocable to the Pre-Closing Tax Period shall be equal to the amount of
such Property Taxes for the entire Straddle Period multiplied by a fraction, the
numerator of which is the number of days during the Straddle Period that fall
within the Pre-Closing Tax Period and the denominator of which is the number of
days in the entire Straddle Period, and (ii) Taxes (other than Property Taxes)
relating to the Purchased Assets for the Pre-Closing Tax Period shall be
computed as if such taxable period ended as of the close of business on the date
of the Closing.

 

“Final Net Working Capital Balance” means the Net Working Capital Balance as
reflected on the Closing Statement of Net Assets that is deemed final pursuant
to Section 2.07(c), as adjusted so that the value of the Inventory shall be as
set forth on the Closing Statement of Inventory that is deemed final pursuant to
Section 2.07(c).

 

“GAAP” means United States generally accepted accounting principles applied on a
basis consistent with past practices and procedures for interim and year end
financial statements of the Seller (for avoidance of doubt, in connection with
the preparation of the Closing Statement of Net Assets, the accountants, in
preparing such statement in accordance with GAAP, shall have the ability to
consider events and circumstances occurring subsequent to the Closing (but only
if those events or circumstances occurred prior to the date of the report of the
Seller’s Accountants delivered pursuant to Section 2.07(a)).

 

“Governmental Authority” means any federal, national, supranational, state,
provincial, local, or similar government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or
judicial or arbitral body.

 

“Governmental Order” means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.

 

6

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“Hazardous Materials” means (a) petroleum and petroleum products, radioactive
materials, asbestos-containing materials, urea formaldehyde foam insulation,
transformers or other equipment that contain polychlorinated biphenyls and radon
gas, (b) any other chemicals, materials or substances defined as or included in
the definition of “hazardous substances”, “hazardous wastes”, “hazardous
materials”, “extremely hazardous wastes”, “restricted hazardous wastes”, “toxic
substances”, “toxic pollutants”, “contaminants” or “pollutants”, or words of
similar import, under any applicable Environmental Law, and (c) any other
chemical, material or substance which is regulated by any Environmental Law.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.

 

“Income Taxes” means Taxes imposed on or measured by reference to gross or net
income or receipts, and franchise, net worth, capital or other doing business
Taxes.

 

“Indebtedness” means, with respect to any Person, (a) all indebtedness of such
Person, whether or not contingent, for borrowed money, (b) all obligations of
such Person for the deferred purchase price of property or services, (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all obligations of such Person as lessee under
leases that have been or should be, in accordance with GAAP, recorded as capital
leases, (f) all obligations, contingent or otherwise, of such Person under
banker’s acceptance, letter of credit or similar facilities, (g) all obligations
of such Person to purchase, redeem, retire, defease or otherwise acquire for
value any capital stock of such Person or any warrants, rights or options to
acquire such capital stock, valued, in the case of redeemable preferred stock,
at the greater of its voluntary or involuntary liquidation preference plus
accrued and unpaid dividends, (h) all Indebtedness of others referred to in
clauses (a) through (g) above guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to
supply funds to or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of whether such property
is received or such services are rendered) or (iv) otherwise to assure a
creditor against loss, and (i) all Indebtedness referred to in clauses (a)
through (g) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Encumbrance on
property (including accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness.

 

“Indemnified Party” means a Purchaser Indemnified Party or a Seller Indemnified
Party, as the case may be.

 

“Indemnifying Party” means the Seller and Audiovox, on a joint and several
basis, pursuant to Section 8.02 or the Purchaser pursuant to Section 8.03, as
the case may be.

 

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“Intellectual Property” means (a) Patents, (b) Trademarks, (c) Copyrights,
(d) Trade Secrets and (e) Software.

 

“Inter-company Payables” means amounts owed by the Seller to Audiovox or any
subsidiaries, divisions, or affiliates of Audiovox as determined in accordance
with GAAP.

 

“Interim Milestones” means (i) the development of the written policies and
procedures, including the control matrices based on the Purchaser’s standard
template for such matrices, constituting the ACC Internal Reporting Controls,
(ii) the preliminary testing/walk-through by the Purchaser’s Reporting Controls
Advisors of the implemented ACC Internal Reporting Controls, (iii) the
remediation of any ACC Internal Reporting Controls not in compliance with
Section 404 and (iv) the subsequent testing/walk-through by the Purchaser’s
Reporting Controls Advisors of the implemented ACC Internal Reporting Controls.

 

“Interim Statement Date” means February 29, 2004.

 

“Interim Statement of Net Assets” means the statement of Net Assets (including a
calculation of the Net Working Capital Balance) of the Business, dated as of
February 29, 2004, a copy of which is set forth in Section 3.04(a)(i) of the
Disclosure Schedule.

 

“Inventories” means all inventory, merchandise, finished goods, raw materials,
packaging, labels, supplies and other personal property used in the Business and
maintained, held or stored by or for the Seller, and any prepaid deposits for
any of the same.  Inventories are valued at the lower of the actual cost to
purchase (primarily on a weighted moving average basis) and/or the current
estimated market value of the inventory less expected costs to sell the
inventory, as determined in accordance with GAAP.

 

“IRS” means the Internal Revenue Service of the United States.

 

“Law” means any federal, national, supranational, state, provincial, local or
similar statute, law, ordinance, regulation, rule, code, order, requirement or
rule of law (including common law).

 

“Leased Real Property” means the real property used in the Business leased by
the Seller, as tenant, together with, to the extent leased by the Seller and
used in the Business, all buildings and other structures, facilities or
improvements located thereon, all fixtures, systems, equipment and items of
personal property of the Seller attached or appurtenant thereto and all
easements, licenses, rights and appurtenances relating to the foregoing.

 

“Liabilities” means any and all debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or unmatured or determined or
determinable, including those arising under any Law (including any Environmental
Law), Action or Governmental Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.

 

“Licensed Intellectual Property” means Intellectual Property licensed to the
Seller pursuant to the Transferred IP Agreements.

 

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“Material Adverse Effect” means any circumstance, change in or effect on the
Business or the Seller that, individually or in the aggregate with all other
circumstances, changes in or effects on the Business or the Seller is or is
reasonably likely to be materially adverse to the business, operations, assets
or liabilities (including contingent liabilities), results of operations or the
financial condition of the Business; provided, however, that (v) effects
attributable to general or industry specific economic conditions, except those
effects that adversely affect the Business or the Seller to a materially greater
extent than they affect other entities operating in such industries, (w) a
termination of the supply arrangement between the Seller and Curitel, (x) a
decline in the market price of Audiovox common stock, in itself, (y) the
failure, in itself, to achieve estimated or projected results of the Business
(provided, that, any circumstances, change or effect on the Business giving rise
to such failure to achieve estimated or projected results may constitute a
Material Adverse Effect) and (z) changes resulting from the permitted disclosure
of this Agreement or the transactions contemplated hereby, in each case, shall
not constitute a Material Adverse Effect.

 

“Net Assets” means the difference between (a) the sum of  Inventories, Prepaids
and other Current Assets, Property, Plant and Equipment, and Other Long-Term
Assets included in the Purchased Assets and (b) the sum of third party Accounts
Payable, Accrued Expenses, Accrued Sales Incentives, Documentary Acceptances and
Other Long-Term Liabilities (excluding long-term notes payable to Toshiba),
other than the Excluded Liabilities, as determined in accordance with GAAP.

 

“Net Working Capital Balance” means the difference between (a) the sum of
Inventories and Prepaids and other Current Assets, and (b) the sum of
third-party Accounts Payable, Accrued Expenses, Accrued Sales Incentives and
Documentary Acceptances, of the Business.

 

“Other Long-Term Assets” means the value of non-cash assets of the Business not
due within one year as determined in accordance with GAAP.

 

“Other Long-Term Liabilities” means notes and other amounts payable to third
parties, including vendors, arising from the conduct of the Business, whether or
not in the ordinary course, together with any unpaid financing charges accrued
thereon not due within one year as determined in accordance with GAAP.

 

“Owned Intellectual Property” means Intellectual Property owned by the Seller
and used in the Business as set forth in Section 3.15(a) of the Disclosure
Schedule.

 

“Owned Real Property” means the real property in which the Seller has fee title
(or equivalent) interest that is used in the Business, together with all
buildings and other structures, facilities or improvements currently or
hereafter located thereon, all fixtures, systems, equipment and items of
personal property of the Seller that are used in the Business attached or
appurtenant thereto and all easements, licenses, rights and appurtenances
relating to the foregoing.

 

“Patents” means United States, foreign and international patents, patent
applications and statutory invention registrations, including reissues,
divisions, continuations,

 

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continuations-in-part, extensions and reexaminations thereof, and all rights
therein provided by international treaties and conventions.

 

“Per Customer Amount” means the aggregate amount of Receivables owed by each
Customer to the Seller, net of the Receivables Reserve for such Customer.

 

“Permitted Encumbrances” means such of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been commenced
and as to which the Seller is not otherwise subject to civil or criminal
liability due to its existence:  (a) liens for Taxes not yet due and payable,
for which adequate reserves have been maintained in accordance with GAAP,
(b) Encumbrances imposed by Law, such as materialmen’s, mechanics’, carriers’,
workmen’s and repairmen’s liens and other similar liens arising in the ordinary
course of business securing obligations that (i) are not overdue for a period of
more than 30 days and (ii) are not in excess of $5,000 in the case of a single
property or $50,000 in the aggregate at any time; (c) pledges or deposits to
secure obligations under workers’ compensation laws or similar legislation or to
secure public or statutory obligations; and (d) minor survey exceptions,
reciprocal easement agreements and other customary encumbrances on title to real
property that (i) were not incurred in connection with any Indebtedness, (ii) do
not render title to the property encumbered thereby unmarketable and (iii) do
not, individually or in the aggregate, materially adversely affect the value of
or the use of such property for its current purposes.

 

“Person” means any individual, partnership, firm, corporation, limited liability
company, association, trust, unincorporated organization or other entity, as
well as any syndicate or group that would be deemed to be a person under
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

 

 “Post-Closing Tax Period” means any taxable period (or portion thereof)
beginning after the date of the Closing.

 

“Pre-Closing Tax Period” means any taxable period (or portion thereof) ending on
or prior to the date of the Closing.

 

“Preliminary Net Working Capital Balance” means the difference between (a) the
sum of Inventories and Prepaids and other Current Assets, and (b) the sum of
third-party Accounts Payable, Accrued Expenses, Accrued Sales Incentives and
Documentary Acceptances, of the Business.

 

“Preliminary Statement of Net Assets” means the statement of Net Assets of the
Business as of the close of business on the date of the Closing, which shall
include the Preliminary Net Working Capital Balance, prepared in good faith by
the Seller in consultation with the Seller’s Accountants and certified by an
officer of the Seller.

 

“Prepaids and other Current Assets” means either (i) pre-payments made to
vendors of the Business related to operating costs, which have not been used and
(ii) the value of non-cash assets used in the Business due within one year as
determined in accordance with GAAP.

 

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“Property, Plant and Equipment” means physical assets including, without
limitation, furniture, fixtures, displays, machinery and equipment, computer
hardware and software and automobiles, owned by the Seller and used in the
Business, as determined in accordance with GAAP.

 

“Property Taxes” means real and personal ad valorem property Taxes and any other
Taxes imposed on a periodic basis and measured by the value of any item.

 

“Purchase Price Bank Account” means a bank account in the United States to be
designated by the Seller in a written notice to the Purchaser at least two
Business Days before the Closing.

 

“Purchaser Material Adverse Effect” means any circumstance, change in or effect
on the Purchaser that, individually or in the aggregate with all other
circumstances, changes in or effects on the Purchaser is or is reasonably likely
to be materially adverse to the business, operations, assets or liabilities
(including contingent liabilities), results of operations or the financial
condition of the Purchaser; provided, however, that (x) effects attributable to
general or industry specific economic conditions, except those effects that
adversely affect the Purchaser to a materially greater extent than they affect
other entities operating in such industries, (y) a decline in the market price
of the Purchaser common stock, in itself, (z) changes resulting from the
permitted disclosure of this Agreement or the transactions contemplated hereby,
in each case, shall not constitute a Purchaser Material Adverse Effect.

 

“Purchaser’s Accountants” means PricewaterhouseCoopers LLP, independent
accountants of the Purchaser.

 

“Purchaser’s Reporting Controls Advisors” means a West-Coast based team of
advisors from Deloitte & Touche LLP.

 

“Receivables” means any and all accounts receivable, notes and other amounts
receivable from third parties, including Vendors, customers and employees,
arising from the conduct of the Business, whether or not in the ordinary course,
together with any unpaid financing charges accrued thereon, as determined in
accordance with GAAP.

 

“Receivables Listing” means a computer file containing a list setting forth all
outstanding Receivables of the Business as of 5:30 p.m. EST on the date of the
Closing, including the name of the Customer that owes the Receivable to the
Seller, the Per Customer Amount owed by each Customer and an invoice number or
other information identifying each Receivable thereon.  The Receivables Listing
shall not include any Vendor Receivables.

 

“Receivables Reserve” means the reserve for the Receivables on a
Customer-by-Customer basis set forth in the Receivables Listing, determined in
accordance with GAAP, which amount shall be deemed to be the amount of the
Receivables Reserve set forth on the Receivables Listing, unless and until such
amount is determined to be otherwise in accordance with Section 2.07(c).

 

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“Regulations” means the Treasury Regulations (including Temporary Regulations)
promulgated by the United States Department of Treasury with respect to the Code
or other federal tax statutes.

 

“Release” means disposing, discharging, injecting, spilling, leaking, leaching,
dumping, emitting, escaping, emptying, seeping, placing and the like into or
upon any land or water or air or otherwise entering into the Environment.

 

“Remedial Action” means all action to (a) clean up, remove, treat or handle in
any other way Hazardous Materials in the Environment; (b) prevent the Release of
Hazardous Materials so that they do not migrate, endanger or threaten to
endanger public health or the Environment; or (c) perform remedial
investigations, feasibility studies, corrective actions, closures and
post-remedial or post-closure studies, investigations, operations, maintenance
and monitoring.

 

“Reporting Policies and Procedures” means policies and procedures that (i)
pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the Purchaser
or the Business, as applicable (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and expenditures of the
Purchaser or the Business, as applicable, are being made only in accordance with
authorizations of management and directors of the Purchaser or of the Seller, as
applicable and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the assets of the
Purchaser or the Business, as applicable, that could have a material effect on
the financial statements.

 

“SEC” means the Securities and Exchange Commission.

 

“Section 404” means Section 404 of the Sarbanes-Oxley Act of 2002.

 

“Seller’s Accountants” means Grant Thornton LLP, independent accountants of the
Seller.

 

“Seller’s Prior Accountants” means KPMG LLP, prior independent accountants of
the Seller.

 

“Seller’s Reporting Controls Advisors” means an East-Coast based team of
advisors from Deloitte & Touche LLP.

 

“Shared MIS Systems” means the Software and hardware owned or licensed by
Audiovox and which is used by the Seller in the operation of the Business, as
set forth in Section 1.01 of the Disclosure Schedule.

 

“Software” means computer software, programs and databases in any form,
including Internet web sites, web content and links, source code, object code,
operating systems and specifications, data, databases, database management code,
utilities, graphical user interfaces, menus, images, icons, forms, methods of
processing, software engines, platforms and

 

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data formats, all versions, updates, corrections, enhancements and modifications
thereof, and all related documentation, developer notes, comments and
annotations.

 

“Straddle Period” means any taxable period beginning on or prior to and ending
after the date of the Closing.

 

“Tax” or “Taxes” means any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any government or taxing authority, including taxes or other charges
on or with respect to income, franchises, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll, employment, social
security, workers’ compensation, unemployment compensation, or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value added, or gains taxes; license, registration and documentation
fees; and customs’ duties, tariffs, and similar charges.

 

“Tax Return” means any return, declaration, report, election, claim for refund
or information return or other statement or form filed or required to be filed
with any Governmental Authority relating to Taxes, including any schedule or
attachment thereto or any amendment thereof.

 

“Trade Secrets” means trade secrets, know-how and other confidential or
proprietary technical, business and other information, including manufacturing
and production processes and techniques, research and development information,
technology, drawings, specifications, designs, plans, proposals, technical data,
financial, marketing and business data, pricing and cost information, business
and marketing plans, customer and supplier lists and information, and all rights
in any jurisdiction to limit the use or disclosure thereof.

 

“Trademarks” means trademarks, service marks, trade dress, logos, trade names,
corporate names, URL addresses, domain names and symbols, slogans and other
indicia of source or origin, including the goodwill of the business symbolized
thereby or associated therewith, common law rights thereto, registrations and
applications for registration thereof throughout the world, all rights therein
provided by international treaties and conventions, and all other rights
associated therewith.

 

“Transferred IP Agreements” means (a) licenses of Owned Intellectual Property by
the Seller to third parties, (b) licenses of Intellectual Property by third
parties to the Seller and used in the Business (c) agreements between the Seller
and third parties relating to the development or use of Intellectual Property,
the development or transmission of data, or the use, modification, framing,
linking advertisement, or other practices with respect to Internet web sites, in
each case, that are used in the Business and (d) consents, settlements, decrees,
orders, injunctions, judgments or rulings governing the use, validity or
enforceability of Owned Intellectual Property,  as set forth in Section 3.15(a)
of the Disclosure Schedule.

 

“UTSI’s Internal Reporting Controls” means the process of internal financial
reporting controls, including certain control matrices, developed by and in the
process of being implemented by the Purchaser to provide reasonable assurance
regarding the reliability of

 

13

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financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP, including the Reporting Policies and
Procedures, in compliance with Section 404.

 

“Vendors” means any and all vendors who are unaffiliated with the Seller and who
supply raw materials, components, spare parts, supplies, goods, merchandise or
services to the Seller (as such relate to the Business).

 

SECTION 1.02.  Definitions.  The following terms have the meanings set forth in
the Sections set forth below:

 

Definition

 

Location

 

 

 

“555 Wireless Sublease”

 

7.02(i)(i)

“AAA”

 

10.09

“Additional Reserved Receivables”

 

2.07(d)

“Adjusted Target NWCB”

 

2.07(c)(i)(B)

“Agreement”

 

Preamble

“Allocation”

 

2.03(b)

“Ancillary Lease Documents”

 

3.16(d)

“Assumed Contracts”

 

2.01(a)(xi)

“Assumed Liabilities”

 

2.02(a)

“Audiovox Board”

 

3.30(a)

“Audiovox Recommendation”

 

5.19(b)

“Audiovox Stockholders’ Meeting”

 

5.19(a)

“Audiovox Triggering Event”

 

9.01

“Business”

 

Recitals

“Cerritos Lease”

 

7.02(i)(ii)

“Change in the Audiovox Recommendation”

 

5.06(c)

“Claims”

 

2.01(a)(ix)

“Closing”

 

2.04

“Collection Period”

 

2.09(d)

“Competing Transaction”

 

5.06(d)

“Consent Costs”

 

5.04(e)

“Disputed Receivable”

 

2.09(a)

“Employee Amounts”

 

6.02

“Employment Agreements”

 

Recitals

“ERISA”

 

3.21(a)

“Escrow Agreement”

 

2.08

“Excluded Assets”

 

2.01(b)

“Excluded Intellectual Property”

 

2.01(b)(vii)

“Excluded Liabilities”

 

2.02(b)

“Expense Reimbursement”

 

9.01(b)

“Expenses”

 

9.03(a), (c)

“Fee”

 

9.03(b)

“Financial Statements”

 

3.04(a)(ii)

 

14

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Definition

 

Location

 

 

 

“Independent Accounting Firm”

 

2.07(b)(ii)

“Initial Termination Date”

 

9.01(b)

“Interim Financial Statements”

 

3.04(a)(iii)

“Key Employees”

 

7.02(g)

“Lease”

 

3.16

“Loss”

 

8.02

“Material Contracts”

 

3.14(a)

“Notice of Superior Proposal”

 

5.06(c)

“Options”

 

3.16(c)

“Plans”

 

3.21(a)

“PRC Antitrust Approvals”

 

7.01(b)

“Proxy Statement”

 

5.19(a)

“Preliminary Purchase Price Increase”

 

2.07(C)(i)(B)

“Preliminary Purchase Price Reduction”

 

2.07(C)(i)(K)

“Purchase Price”

 

2.03(a)

“Purchased Assets”

 

2.01(a)

“Purchaser”

 

Preamble

“Purchaser Indemnified Party”

 

8.02

“Replication Service”

 

5.22

“Restricted Period”

 

5.08(a)

“Seller”

 

Preamble

“Seller Indemnified Party”

 

8.03

“Stockholder”

 

Recitals

“Superior Proposal”

 

5.06(e)

“Tangible Personal Property”

 

3.17(a)

“Target NWCB”

 

2.07(C)(i)

“Third Party Claim”

 

8.05(b)

“Trademark License Agreement”

 

5.20

“Transferred Employee”

 

6.01

“Transition Services Agreement”

 

5.13

“Voting Agreement”

 

Recitals

 

SECTION 1.03.  Interpretation and Rules of Construction.  In this Agreement,
except to the extent otherwise provided or that the context otherwise requires:

 

(A)                                  WHEN A REFERENCE IS MADE IN THIS AGREEMENT
TO AN ARTICLE, SECTION, EXHIBIT OR SCHEDULE, SUCH REFERENCE IS TO AN ARTICLE OR
SECTION OF, OR A SCHEDULE OR EXHIBIT TO, THIS AGREEMENT UNLESS OTHERWISE
INDICATED;

 

(B)                                 THE TABLE OF CONTENTS AND HEADINGS FOR THIS
AGREEMENT ARE FOR REFERENCE PURPOSES ONLY AND DO NOT AFFECT IN ANY WAY THE
MEANING OR INTERPRETATION OF THIS AGREEMENT;

 

(C)                                  WHENEVER THE WORDS “INCLUDE,” “INCLUDES” OR
“INCLUDING” ARE USED IN THIS AGREEMENT, THEY ARE DEEMED TO BE FOLLOWED BY THE
WORDS “WITHOUT LIMITATION”;

 

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(D)                                 THE WORDS “HEREOF,” “HEREIN” AND “HEREUNDER”
AND WORDS OF SIMILAR IMPORT, WHEN USED IN THIS AGREEMENT, REFER TO THIS
AGREEMENT AS A WHOLE AND NOT TO ANY PARTICULAR PROVISION OF THIS AGREEMENT;

 

(E)                                  ALL TERMS DEFINED IN THIS AGREEMENT HAVE
THE DEFINED MEANINGS WHEN USED IN ANY CERTIFICATE OR OTHER DOCUMENT MADE OR
DELIVERED PURSUANT HERETO, UNLESS OTHERWISE DEFINED THEREIN;

 

(F)                                    THE DEFINITIONS CONTAINED IN THIS
AGREEMENT ARE APPLICABLE TO THE SINGULAR AS WELL AS THE PLURAL FORMS OF SUCH
TERMS;

 

(G)                                 ANY LAW DEFINED OR REFERRED TO HEREIN OR IN
ANY AGREEMENT OR INSTRUMENT THAT IS REFERRED TO HEREIN MEANS SUCH LAW OR STATUTE
AS FROM TIME TO TIME AMENDED, MODIFIED OR SUPPLEMENTED, INCLUDING BY SUCCESSION
OF COMPARABLE SUCCESSOR LAWS;

 

(H)                                 REFERENCES TO A PERSON ARE ALSO TO ITS
SUCCESSORS AND PERMITTED ASSIGNS; AND

 

(I)                                     THE USE OF “OR” IS NOT INTENDED TO BE
EXCLUSIVE UNLESS EXPRESSLY INDICATED OTHERWISE.

 

ARTICLE II

PURCHASE AND SALE

 

SECTION 2.01.  Purchase and Sale of Purchased Assets.  (a)  Upon the terms and
subject to the conditions of this Agreement, at the Closing, the Seller shall
sell, assign, transfer, convey and deliver, or cause to be sold, assigned,
transferred, conveyed and delivered, to the Purchaser, and the Purchaser shall
purchase from the Seller, the Seller’s right, title and interest at the Closing
in and to the following (the assets to be purchased by the Purchaser, together
with the covenants contained in Section 5.08, being referred to as the
“Purchased Assets”):

 

(I)                                     ALL RIGHTS IN RESPECT OF THE LEASED REAL
PROPERTY;

 

(II)                                  ALL PROPERTY, PLANT AND EQUIPMENT;

 

(III)                               ALL VEHICLES AND ROLLING STOCK USED  IN THE
BUSINESS;

 

(IV)                              ALL INVENTORIES;

 

(V)                                 ALL BOOKS OF ACCOUNT, GENERAL, FINANCIAL,
AND PERSONNEL RECORDS, INVOICES, SHIPPING RECORDS, SUPPLIER LISTS,
CORRESPONDENCE AND OTHER DOCUMENTS, RECORDS AND FILES AND ANY RIGHTS THERETO
WHICH ARE OWNED, OR EMPLOYED BY THE SELLER PRIMARILY IN CONNECTION WITH THE
BUSINESS EXCEPT FOR (X) ORGANIZATION DOCUMENTS, MINUTE AND STOCK RECORD BOOKS,
STOCK CERTIFICATES AND THE CORPORATE SEAL OF THE SELLER AND (Y) THOSE RELATING
TO THE EXCLUDED ASSETS OR THE EXCLUDED LIABILITIES (INCLUDING ALL RECORDS
RELATING TO TAXES);

 

(VI)                              THE GOODWILL RELATING TO THE BUSINESS;

 

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(VII)                           ALL THE SELLER’S RIGHT, TITLE AND INTEREST IN,
TO AND UNDER THE OWNED INTELLECTUAL PROPERTY AND THE LICENSED INTELLECTUAL
PROPERTY, COPIES AND TANGIBLE EMBODIMENTS THEREOF IN WHATEVER FORM OR MEDIUM,
AND ALL RIGHTS TO SUE AND RECOVER DAMAGES FOR PAST, PRESENT AND FUTURE
INFRINGEMENT, DILUTION, MISAPPROPRIATION, VIOLATION, UNLAWFUL IMITATION OR
BREACH THEREOF;

 

(VIII)                        ALL CLAIMS, CAUSES OF ACTION, CHOSES IN ACTION,
RIGHTS OF RECOVERY AND RIGHTS OF SETOFF OF ANY KIND (INCLUDING RIGHTS TO
INSURANCE PROCEEDS AND RIGHTS UNDER AND PURSUANT TO ALL WARRANTIES,
REPRESENTATIONS AND GUARANTEES MADE BY SUPPLIERS OF PRODUCTS, MATERIALS, OR
EQUIPMENT, OR COMPONENTS THEREOF), RELATED TO THE BUSINESS PERTAINING TO,
ARISING OUT OF AND INURING TO THE BENEFIT OF THE SELLER (“CLAIMS”) INCLUDING
THOSE REASONABLY NECESSARY OR DESIRABLE TO ENFORCE SUCH RIGHTS AGAINST THIRD
PARTIES OR TO DEFEND AGAINST THOSE SEEKING TO ENFORCE THE ASSUMED LIABILITIES;
EXCEPT THOSE CLAIMS WHICH ARE RELATED TO THE EXCLUDED LIABILITIES OR THE
EXCLUDED ASSETS;

 

(IX)                                ALL SALES AND PROMOTIONAL LITERATURE,
CUSTOMER LISTS AND OTHER SALES-RELATED MATERIALS OF THE SELLER USED IN THE
BUSINESS;

 

(X)                                   ALL RIGHTS OF THE SELLER UNDER THE
CONTRACTS, LICENSES, SUBLICENSES, AGREEMENTS, LEASES, COMMITMENTS, AND SALES AND
PURCHASE ORDERS, AND UNDER ALL BIDS AND OFFERS RELATED TO THE BUSINESS SET FORTH
ON SECTION 2.01(A)(X) OF THE DISCLOSURE SCHEDULE (THE “ASSUMED CONTRACTS”);

 

(XI)                                ALL MUNICIPAL, STATE AND FEDERAL FRANCHISES,
PERMITS, LICENSES, AGREEMENTS, WAIVERS AND AUTHORIZATIONS HELD OR USED BY THE
SELLER IN CONNECTION WITH, OR REQUIRED FOR, THE BUSINESS, TO THE EXTENT
TRANSFERABLE;

 

(XII)                             ALL THE SELLER’S RIGHT, TITLE AND INTEREST AT
THE CLOSING IN, TO AND UNDER ALL OTHER ASSETS, RIGHTS AND CLAIMS OF EVERY KIND
AND NATURE DIRECTLY OR INDIRECTLY OWNED BY THE SELLER OR TO WHICH THE SELLER IS
DIRECTLY OR INDIRECTLY ENTITLED, IN EACH CASE, USED IN THE OPERATION OF, OR
RESIDING WITH, THE BUSINESS;

 

(XIII)                          PREPAIDS AND OTHER CURRENT ASSETS;

 

(XIV)                         OTHER LONG-TERM ASSETS;

 

(XV)                            ALL AUDIOVOX’S RIGHTS, TITLE AND INTEREST IN THE
SHARED MIS SYSTEMS; AND

 

(xvi)                         All the Seller’s or Audiovox’s rights, title and
interest in the replicated copy of the Developed Software replicated in
accordance with Section 5.22.

 

(B)                                 NOTWITHSTANDING ANYTHING IN SECTION 2.01(A)
TO THE CONTRARY, THE PURCHASED ASSETS SHALL EXCLUDE THE FOLLOWING ASSETS AND
PROPERTIES OWNED BY THE SELLER (THE “EXCLUDED ASSETS”):

 

(I)                                     CASH AND MARKETABLE SECURITIES AND ALL
BANK ACCOUNTS OF THE SELLER RELATING TO THE BUSINESS;

 

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(II)                                  THE PURCHASE PRICE BANK ACCOUNT;

 

(III)                               ALL RIGHTS OF THE SELLER UNDER THIS
AGREEMENT AND THE ANCILLARY AGREEMENTS;

 

(IV)                              TAX RETURNS OF THE SELLER (AND RELATED
WORKPAPERS);

 

(V)                                 EXCEPT AS PROVIDED IN SECTION 5.18(A), ALL
TAX REFUNDS OF THE SELLER;

 

(VI)                              TRADEMARKS OWNED BY AUDIOVOX OR TOSHIBA, OR
THEIR RESPECTIVE EMPLOYEES, AFFILIATES (OTHER THAN THE SELLER), SUCCESSORS OR
ASSIGNS;

 

(VII)                           THE INTELLECTUAL PROPERTY SET FORTH IN SECTION
2.01(B)(VII) OF THE DISCLOSURE SCHEDULE (THE “EXCLUDED INTELLECTUAL PROPERTY”);

 

(VIII)                        ALL RECEIVABLES OF THE BUSINESS AS OF 5:30 P.M.
EST ON THE DATE OF THE CLOSING;

 

(IX)                                ALL FURNITURE AND OTHER TANGIBLE PROPERTY
USED BY, AND IN THE OFFICE OF, JOHN SHALAM ON THE DATE OF CLOSING;

 

(X)                                   ALL CLAIMS, INCLUDING CLAIMS ARISING UNDER
INSURANCE POLICIES, RELATED TO THE EXCLUDED LIABILITIES OR EXCLUDED ASSETS,
INCLUDING THOSE REASONABLY NECESSARY OR DESIRABLE TO ENFORCE RIGHTS AGAINST
THIRD PARTIES OR DEFEND AGAINST THOSE SEEKING TO ENFORCE EXCLUDED LIABILITIES;

 

(XI)                                ALL RIGHTS AGAINST COMPAL ELECTRONICS, INC.
RELATING TO ACTIONS OCCURRING PRIOR TO CLOSING;

 

(XII)                             ANY RIGHTS, SOFTWARE OR OTHER LICENSE OR
PRACTICES WITH RESPECT TO WEBSITES, INTERNET ADDRESSES OR DOMAIN NAMES USED IN
CONNECTION WITH THE BUSINESS;

 

(XIII)                          THE EQUITY INTERESTS IN THE SELLER AND THOSE
ENTITIES SET FORTH IN SECTION 3.01(C) OF THE DISCLOSURE SCHEDULE;

 

(XIV)                         ORGANIZATION DOCUMENTS, MINUTE AND STOCK RECORD
BOOKS, STOCK CERTIFICATES AND THE CORPORATE SEAL OF THE SELLER AND THOSE
ENTITIES SET FORTH IN SECTION 3.01(C) OF THE DISCLOSURE SCHEDULE; AND

 

(XV)                            ALL BOOKS OF ACCOUNT, GENERAL, FINANCIAL AND
PERSONNEL RECORDS, INVOICES, CORRESPONDENCE AND OTHER DOCUMENTS RELATING
EXCLUSIVELY TO THE EXCLUDED ASSETS AND THE EXCLUDED LIABILITIES (INCLUDING ALL
RECORDS RELATING TO TAXES).

 

SECTION 2.02.  Assumption and Exclusion of Liabilities.  (a)  Upon the terms and
subject to the conditions of this Agreement, at the Closing, the Purchaser shall
assume and shall agree to pay, perform and discharge the following Liabilities
of the Seller, except for the Excluded Liabilities (the “Assumed Liabilities”):

 

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(I)                                     ALL LIABILITIES REFLECTED OR RESERVED
AGAINST ON THE CLOSING STATEMENT OF NET ASSETS (OTHER THAN TAX LIABILITIES);

 

(II)                                  ALL LIABILITIES OF THE SELLER ARISING
UNDER THE ASSUMED CONTRACTS (OTHER THAN LIABILITIES OR OBLIGATIONS ATTRIBUTABLE
TO (A) ANY FAILURE BY THE SELLER TO COMPLY WITH THE TERMS THEREOF PRIOR TO THE
CLOSING, (B) PRODUCTS LIABILITY OR PERSONAL INJURY CLAIMS ARISING PRIOR TO THE
CLOSING AND (C) INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS ARISING PRIOR TO THE
CLOSING); AND

 

(III)                               PRODUCT WARRANTIES AND CLAIMS THEREUNDER
RELATING TO THE PRODUCTS OF THE BUSINESS.

 

(B)                                 NOTWITHSTANDING SUBSECTION (A) ABOVE, THE
SELLER SHALL RETAIN, AND SHALL BE RESPONSIBLE FOR PAYING, PERFORMING AND
DISCHARGING WHEN DUE, AND THE PURCHASER SHALL NOT ASSUME OR HAVE ANY
RESPONSIBILITY FOR, ALL LIABILITIES OF THE SELLER AS OF THE CLOSING OTHER THAN
THE ASSUMED LIABILITIES (THE “EXCLUDED LIABILITIES”), INCLUDING, WITHOUT
LIMITATION:

 

(I)                                     ALL EXCLUDED TAXES;

 

(II)                                  ALL LIABILITIES RELATING TO OR ARISING OUT
OF THE EXCLUDED ASSETS;

 

(III)                               CLAIMS ARISING PRIOR TO THE CLOSING MADE BY
EMPLOYEES OF THE SELLER (INCLUDING THE TRANSFERRED EMPLOYEES) RELATING TO THEIR
EMPLOYMENT WITH THE SELLER;

 

(IV)                              ALL INTER-COMPANY PAYABLES;

 

(V)                                 ALL LIABILITIES OR OBLIGATIONS ATTRIBUTABLE
TO (A) ANY FAILURE BY THE SELLER TO COMPLY WITH THE TERMS OF ANY ASSUMED
CONTRACT PRIOR TO THE CLOSING, (B) PRODUCTS LIABILITY OR PERSONAL INJURY CLAIMS
ARISING PRIOR TO THE CLOSING AND (C) INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS
ARISING PRIOR TO THE CLOSING; AND

 

(v)                                 all Liabilities pursuant to Environmental
Law arising from or related to any action, event, circumstance or condition
related to the Business or the Leased Real Property, in each case occurring or
existing on or before the Closing, including:  (A) any Release of any Hazardous
Material into the Environment on or before the Closing at, to or from the Leased
Real Property or any property formerly owned, leased, used or occupied by the
Business (and any additional migration of such Hazardous Material after the
Closing); (B) any transportation, disposal or discharge, or the arrangement for
such activities, on or before the Closing, of any Hazardous Material originating
at the Leased Real Property or any property formerly owned, leased, used or
occupied by the Business to or at any location (and any additional
transportation, disposal or discharge of such Hazardous Material after the
Closing); and (C) any noncompliance with or violation of any applicable
Environmental Law or Environmental Permit relating in any way to the Business on
or before the Closing (and any continuation of such noncompliance or violation
after the Closing).

 

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SECTION 2.03.  Purchase Price; Allocation of Purchase Price.  (a)  Subject to
the adjustments set forth in Section 2.07, the purchase price for the Purchased
Assets shall be $165,100,000 (the “Purchase Price”).

 

(B)                                 THE PURCHASER AND THE SELLER SHALL, IN GOOD
FAITH, USE REASONABLE COMMERCIAL EFFORTS TO, WITHIN 120 DAYS AFTER THE DATE OF
CLOSING, REACH AN AGREEMENT AS TO THE ALLOCATION OF THE SUM OF THE PURCHASE
PRICE AND THE ASSUMED LIABILITIES AMONG THE PURCHASED ASSETS (INCLUDING THE
ASSETS IN CANADA) (THE “ALLOCATION”).  ANY SUBSEQUENT ADJUSTMENTS TO THE SUM OF
THE PURCHASE PRICE AND ASSUMED LIABILITIES SHALL BE REFLECTED IN THE ALLOCATION
IN A MANNER CONSISTENT WITH SECTION 1060 OF THE CODE AND THE REGULATIONS
THEREUNDER.  IF THE PURCHASER AND THE SELLER HAVE AGREED ON AN ALLOCATION, THEN
THE PURCHASER AND THE SELLER SHALL EACH FILE IRS FORM 8594 CONSISTENT WITH THE
ALLOCATION AND NEITHER THE SELLER NOR THE PURCHASER WILL TAKE ANY POSITION
INCONSISTENT THEREWITH IN ANY TAX RETURN, IN ANY REFUND CLAIM, IN ANY
LITIGATION, OR OTHERWISE.  IF THE PURCHASER AND THE SELLER CANNOT AGREE ON AN
ALLOCATION, EACH PARTY MAY REPORT AN ALLOCATION THAT, IN ITS SOLE DISCRETION, IS
CONSISTENT WITH SECTION 1060 OF THE CODE AND THE REGULATIONS THEREUNDER.

 

SECTION 2.04.  Closing.  Subject to the terms and conditions of this Agreement,
the sale and purchase of the Purchased Assets and the assumption of the Assumed
Liabilities contemplated by this Agreement shall take place at a closing (the
“Closing”) to be held at the offices of Shearman & Sterling LLP, 599 Lexington
Avenue, New York, New York at 1:30 P.M. New York time on the second Business Day
following the satisfaction or waiver of all conditions to the obligations of the
parties set forth in Section 7.01 and Section 7.02 (other than conditions with
respect to actions the respective parties will take at the Closing itself, but
subject to the satisfaction of those conditions) or at such other place or at
such other time or on such other date as the Seller and the Purchaser may
mutually agree upon in writing.

 

SECTION 2.05.  Closing Deliveries by the Seller.  At the Closing, Audiovox (as
to items (e), (g) and (i)) or the Seller shall deliver or cause to be delivered
to the Purchaser:

 

(A)                                  THE ASSUMPTION AGREEMENT, THE BILL OF SALE,
THE ASSIGNMENT OF INTELLECTUAL PROPERTY, EACH ASSIGNMENT OF LEASE, THE TRADEMARK
LICENSE AGREEMENT AND SUCH OTHER INSTRUMENTS, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE PURCHASER, AS MAY BE REASONABLY REQUESTED BY THE PURCHASER
TO TRANSFER THE PURCHASED ASSETS TO THE PURCHASER OR EVIDENCE SUCH TRANSFER ON
THE PUBLIC RECORDS, WHICH REQUEST SHALL BE PROVIDED TO THE SELLER AT LEAST FIVE
(5) DAYS BEFORE THE CLOSING;

 

(B)                                 EXECUTED COUNTERPARTS OF EACH ANCILLARY
AGREEMENT TO WHICH THE SELLER IS A PARTY OTHER THAN THE ANCILLARY AGREEMENTS
DELIVERED PURSUANT TO SECTION 2.05(A);

 

(C)                                  A RECEIPT FOR THE PURCHASE PRICE LESS THE
ESCROW AMOUNT;

 

(D)                                 A TRUE AND COMPLETE COPY, CERTIFIED BY THE
SECRETARY OR AN ASSISTANT SECRETARY OF THE SELLER, OF THE RESOLUTIONS DULY AND
VALIDLY ADOPTED BY THE BOARD OF DIRECTORS OF THE SELLER EVIDENCING ITS
AUTHORIZATION OF THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE ANCILLARY
AGREEMENTS AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY;

 

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(E)                                  TRUE AND COMPLETE COPIES, CERTIFIED BY THE
SECRETARY OR AN ASSISTANT SECRETARY OF AUDIOVOX OF THE RESOLUTIONS DULY AND
VALIDLY ADOPTED BY THE BOARD OF DIRECTORS OF AUDIOVOX, EVIDENCING ITS
AUTHORIZATION OF THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY;

 

(F)                                    A CERTIFICATE OF THE SECRETARY OR AN
ASSISTANT SECRETARY OF THE SELLER CERTIFYING THE NAMES AND SIGNATURES OF THE
OFFICERS OF THE SELLER AUTHORIZED TO SIGN THIS AGREEMENT AND THE ANCILLARY
AGREEMENTS AND THE OTHER DOCUMENTS TO BE DELIVERED HEREUNDER AND THEREUNDER;

 

(G)                                 CERTIFICATES OF THE SECRETARY OR AN
ASSISTANT SECRETARY OF AUDIOVOX CERTIFYING THE NAMES AND SIGNATURES OF THE
OFFICERS OF AUDIOVOX AUTHORIZED TO SIGN THIS AGREEMENT AND THE OTHER DOCUMENTS
TO BE DELIVERED HEREUNDER;

 

(H)                                 A CERTIFICATE OF A DULY AUTHORIZED OFFICER
OF THE SELLER CERTIFYING AS TO ITSELF AS TO THE MATTERS SET FORTH IN SECTION
7.02(A);

 

(I)                                     A CERTIFICATE OF A DULY AUTHORIZED
OFFICER OF AUDIOVOX CERTIFYING AS TO ITSELF AS TO THE MATTERS SET FORTH IN
SECTION 7.02(A); AND

 

(J)                                     A CERTIFICATE OF NON-FOREIGN STATUS (IN
A FORM REASONABLY ACCEPTABLE TO PURCHASER) PURSUANT TO SECTION 1.1445-2(B)(2) OF
THE REGULATIONS.

 

SECTION 2.06.  Closing Deliveries by the Purchaser.  (a)  At the Closing, the
Purchaser shall deliver to the Seller:

 

(I)                                     THE PURCHASE PRICE AND THE $70,000
CONTEMPLATED BY SECTION 5.22 HEREOF, LESS THE ESCROW AMOUNT, BY WIRE TRANSFER IN
IMMEDIATELY AVAILABLE FUNDS TO THE PURCHASE PRICE BANK ACCOUNT;

 

(II)                                  EXECUTED COUNTERPARTS OF THE ASSUMPTION
AGREEMENT, EACH ASSIGNMENT OF LEASE, THE ASSIGNMENT OF INTELLECTUAL PROPERTY AND
THE TRADEMARK LICENSE AGREEMENT;

 

(III)                               EXECUTED COUNTERPARTS OF EACH ANCILLARY
AGREEMENT (OTHER THAN THE ANCILLARY AGREEMENTS DELIVERED PURSUANT TO SECTION
2.06(A)(II)) TO WHICH THE PURCHASER IS A PARTY;

 

(IV)                              A TRUE AND COMPLETE COPY, CERTIFIED BY THE
SECRETARY OR AN ASSISTANT SECRETARY OF THE PURCHASER, OF THE RESOLUTIONS DULY
AND VALIDLY ADOPTED BY THE BOARD OF DIRECTORS OF THE PURCHASER EVIDENCING ITS
AUTHORIZATION OF THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE ANCILLARY
AGREEMENTS TO WHICH IT IS A PARTY AND THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY;

 

(V)                                 A CERTIFICATE OF THE SECRETARY OR AN
ASSISTANT SECRETARY OF THE PURCHASER CERTIFYING THE NAMES AND SIGNATURES OF THE
OFFICERS OF THE PURCHASER AUTHORIZED TO SIGN THIS AGREEMENT AND THE ANCILLARY
AGREEMENTS AND THE OTHER DOCUMENTS TO BE DELIVERED HEREUNDER AND THEREUNDER; AND

 

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(VI)                              A CERTIFICATE OF A DULY AUTHORIZED OFFICER OF
THE PURCHASER CERTIFYING AS TO THE MATTERS SET FORTH IN SECTION 7.01(A).

 

(B)                                 AT THE CLOSING, THE PURCHASER SHALL DELIVER
TO THE ESCROW AGENT, IN ACCORDANCE WITH THE ESCROW AGREEMENT, THE ESCROW AMOUNT
BY WIRE TRANSFER IN IMMEDIATELY AVAILABLE FUNDS TO THE ACCOUNTS DESIGNATED
THEREFORE IN THE ESCROW AGREEMENT.

 

SECTION 2.07.  Post-Closing Adjustment of Purchase Price.  The Purchase Price
shall be subject to adjustment after the Closing as specified in this
Section 2.07:

 

(A)                                  PRELIMINARY AND CLOSING STATEMENTS OF NET
ASSETS.  (I) ON OR BEFORE THE DATE THAT IS 25 CALENDAR DAYS FOLLOWING THE
CLOSING, THE SELLER SHALL DELIVER TO THE PURCHASER THE PRELIMINARY STATEMENT OF
NET ASSETS.

 

(II)                                  AS PROMPTLY AS PRACTICABLE, AFTER THE DATE
THAT IS 90 CALENDAR DAYS FOLLOWING THE CLOSING, THE SELLER SHALL DELIVER TO THE
PURCHASER THE CLOSING STATEMENT OF NET ASSETS, TOGETHER WITH THE REPORT THEREON
OF THE SELLER’S ACCOUNTANTS, STATING THAT THE CLOSING STATEMENT OF NET ASSETS
FAIRLY PRESENTS NET ASSETS OF THE BUSINESS AS OF THE CLOSE OF BUSINESS ON THE
DATE OF THE CLOSING IN ACCORDANCE WITH GAAP.

 

(B)                                 DISPUTES.  (I)  SUBJECT TO CLAUSE (II) OF
THIS SECTION 2.07(B), THE CLOSING STATEMENT OF NET ASSETS, THE CLOSING STATEMENT
OF INVENTORIES AND THE RECEIVABLES RESERVE SET FORTH ON THE CLOSING STATEMENT OF
RECEIVABLES DELIVERED BY THE SELLER TO THE PURCHASER SHALL BE FINAL, BINDING AND
CONCLUSIVE ON THE PARTIES HERETO.

 

(ii)                                  The Purchaser may dispute any amounts
reflected on (A) the Closing Statement of Net Assets, but only on the basis that
the amounts reflected on the Closing Statement of Net Assets were not arrived at
in accordance with GAAP (it being understood that any adjustments, estimates,
accruals and calculations made on the Closing Statement of Net Assets that are
made on the same basis as similar items on the Interim Statement of Net Assets
shall be deemed to be made in accordance with GAAP) or were arrived at based on
mathematical or clerical error, (B) the Closing Statement of Inventories but
only on the basis that the amounts reflected on the Closing Statement of
Inventories was not calculated in accordance with the rules set forth on Exhibit
A hereto or that they were arrived at based on mathematical or clerical error
and (C) the Receivables Reserve, but only on the basis that the Receivables
Reserve was not arrived at in accordance with GAAP (it being understood that any
adjustments, estimates, accruals and calculations made in respect of the
Receivables Reserve that are made on the same basis as similar items on the
Interim Statement of Net Assets shall be deemed to be made in accordance with
GAAP) or were arrived at based on mathematical or clerical error; provided,
however, that the Purchaser shall have notified the Seller and the Seller’s
Accountants in writing of each disputed item, specifying the estimated amount
thereof in dispute and setting forth, in reasonable detail, the basis for such
dispute, within 30 Business Days of the Seller’s delivery of the Closing
Statement of Net Assets to the Purchaser.  In the event of such a dispute, the
Seller’s Accountants and the Purchaser’s Accountants shall attempt to reconcile
their differences, and any resolution by them as to any disputed amounts shall
be final, binding and conclusive on the parties hereto.  If any

 

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such resolution by the Seller’s Accountants and the Purchaser’s Accountants
regarding the Closing Statement of Net Assets or the Closing Statement of
Inventories leaves in dispute amounts the net effect of which in the aggregate
would not affect the Final Net Working Capital Balance, all such amounts
remaining in dispute shall then be deemed to have been resolved in favor of the
Closing Statement of Net Assets or the Closing Statement of Inventories, as
applicable, delivered by the Seller to the Purchaser.  If the Seller’s
Accountants and the Purchaser’s Accountants are unable to reach a resolution
with such effect within 20 Business Days after the receipt by the Seller and the
Seller’s Accountants of the Purchaser’s written notice of dispute, the Seller’s
Accountants and the Purchaser’s Accountants shall submit the items remaining in
dispute for resolution to Deloitte & Touche LLP (or, if such firm shall decline
or is unable to act or is not, at the time of such submission, independent of
the Seller and the Purchaser, to another independent accounting firm of
international reputation mutually acceptable to the Seller and the Purchaser)
(either Deloitte & Touche LLP or such other accounting firm being referred to
herein as the “Independent Accounting Firm”), which shall, within 30 Business
Days after such submission, determine and report to the Seller and the Purchaser
upon such remaining disputed items, and such report shall be final, binding and
conclusive on the Seller and the Purchaser.  The fees and disbursements of the
Independent Accounting Firm shall be allocated between the Seller and the
Purchaser in the same proportion that the aggregate amount of such remaining
disputed items so submitted to the Independent Accounting Firm that is
unsuccessfully disputed by each such party (as finally determined by the
Independent Accounting Firm) bears to the total amount of such remaining
disputed items so submitted.

 

(iii)                               In acting under this Agreement, the Seller’s
Accountants, the Purchaser’s Accountants and the Independent Accounting Firm
shall be entitled to the privileges and immunities of arbitrators.

 

(C)                                  PURCHASE PRICE ADJUSTMENTS.  (I)
PRELIMINARY PURCHASE PRICE ADJUSTMENT.  (A)  IN THE EVENT THAT THE PRELIMINARY
NET WORKING CAPITAL BALANCE SET FORTH ON THE PRELIMINARY STATEMENT OF NET ASSETS
IS LESS THAN $40,000,000 (THE “TARGET NWCB”), THEN THERE SHALL BE A PRELIMINARY
DOWNWARD ADJUSTMENT OF THE PURCHASE PRICE IN AN AMOUNT EQUAL TO SUCH DEFICIENCY,
THE PURCHASER SHALL DELIVER WRITTEN NOTICE TO THE ESCROW AGENT SPECIFYING THE
AMOUNT OF SUCH PRELIMINARY DOWNWARD ADJUSTMENT OF THE PURCHASE PRICE, AND THE
ESCROW AGENT SHALL, WITHIN THREE BUSINESS DAYS OF ITS RECEIPT OF SUCH NOTICE AND
IN ACCORDANCE WITH THE TERMS OF THE ESCROW AGREEMENT, PAY AN AMOUNT (THE
“PRELIMINARY PURCHASE PRICE REDUCTION”) EQUAL TO SEVENTY-FIVE PERCENT (75%) OF
SUCH DEFICIENCY TO THE PURCHASER OUT OF THE ESCROW FUND BY WIRE TRANSFER IN
IMMEDIATELY AVAILABLE FUNDS.  IN THE EVENT THAT THE ESCROW FUND IS INSUFFICIENT
TO COVER THE AMOUNT OF THE PRELIMINARY PURCHASE PRICE REDUCTION, THEN THE ESCROW
AGENT SHALL DISTRIBUTE THE ENTIRE ESCROW FUND TO THE PURCHASER AS PROVIDED ABOVE
AND THE SELLER OR AUDIOVOX, ON BEHALF OF THE SELLER, SHALL PAY, ON OR PRIOR TO
THE SAME DATE AS THE ESCROW AGENT DISTRIBUTES THE ESCROW FUND TO THE PURCHASER,
AN AMOUNT TO THE PURCHASER, BY WIRE TRANSFER IN IMMEDIATELY AVAILABLE FUNDS,
EQUAL TO THE AMOUNT OF SUCH DEFICIENCY.  NO FAILURE OF THE PURCHASER TO DELIVER
A NOTICE OF THE TYPE SPECIFIED IN THE IMMEDIATELY PRECEDING SENTENCE SHALL
RELIEVE THE SELLER OF THE OBLIGATION TO PAY THE AMOUNT OF SUCH DEFICIENCY TO THE
PURCHASER.

 

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(B)                                In the event that the Preliminary Net Working
Capital Balance exceeds the Target NWCB, then there shall be a preliminary
upward adjustment of the  Purchase Price in an amount equal to such excess and
the Purchaser shall pay on or before the date that is 30 days following the date
of the Closing an amount (the “Preliminary Purchase Price Increase”) equal to
seventy-five percent (75%) of such excess to the Seller by wire transfer in
immediately available funds.  Following the preliminary purchase price
adjustments described in this Section 2.07(c)(i), the Target NWCB shall be
adjusted to (1) subtract any Preliminary Purchase Price Reduction previously
paid to the Purchaser by the Escrow Agent or the Seller or (2) add any
Preliminary Purchase Price Increase previously paid to the Seller by the
Purchaser (as so adjusted, the “Adjusted Target NWCB”)

 

(II)                                  FINAL PURCHASE PRICE ADJUSTMENT.  EACH OF
THE CLOSING STATEMENT OF NET ASSETS, THE CLOSING STATEMENT OF INVENTORIES AND
THE RECEIVABLES RESERVE SHALL BE DEEMED FINAL FOR THE PURPOSES OF THIS
SECTION 2.07 UPON THE EARLIEST OF (X) THE FAILURE OF THE PURCHASER TO NOTIFY THE
SELLER OF A DISPUTE WITHIN 30 BUSINESS DAYS OF THE SELLER’S DELIVERY OF THE
CLOSING STATEMENT OF NET ASSETS TO THE PURCHASER, (Y) THE RESOLUTION OF ALL
DISPUTES, PURSUANT TO SECTION 2.07(B)(II), BY THE SELLER’S ACCOUNTANTS AND THE
PURCHASER’S ACCOUNTANTS AND (Z) THE RESOLUTION OF ALL DISPUTES, PURSUANT TO
SECTION 2.07(B)(II), RELATING TO THE CLOSING STATEMENT OF NET ASSETS THE CLOSING
STATEMENT OF INVENTORIES OR THE RECEIVABLES RESERVE, AS APPLICABLE, BY THE
INDEPENDENT ACCOUNTING FIRM.  WITHIN FIVE BUSINESS DAYS OF BOTH THE CLOSING
STATEMENT OF NET ASSETS AND THE CLOSING STATEMENT OF INVENTORIES BEING DEEMED
FINAL, THE SELLER’S ACCOUNTANTS SHALL, WITH THE AGREEMENT OF THE PURCHASER’S
ACCOUNTANTS, CALCULATE THE FINAL NET WORKING CAPITAL BALANCE AND THE PURCHASE
PRICE SHALL BE FINALLY ADJUSTED AS FOLLOWS:

 

(A)                              In the event that the Final Net Working Capital
Balance is less than the Adjusted Target NWCB, then the Purchaser shall deliver
written notice to the Escrow Agent and the Seller specifying the amount of such
shortfall and the Escrow Agent shall, within three Business Days of its receipt
of such notice and in accordance with the terms of the Escrow Agreement, pay to
the Purchaser the amount of such shortfall out of the Escrow Fund by wire
transfer in immediately available funds.  In the event that the Escrow Fund is
insufficient to cover the amount of such shortfall, then the Escrow Agent shall
distribute the entire Escrow Fund to the Purchaser as provided above and the
Seller or Audiovox, on behalf of the Seller, shall pay, on or prior to the same
date as the Escrow Agent distributes the Escrow Fund to the Purchaser, an amount
to the Purchaser, by wire transfer in immediately available funds, equal to the
amount of such deficiency.  No failure of the Purchaser to deliver a notice of
the type specified in the immediately preceding sentence shall relieve the
Seller of the obligation to pay the amount of such deficiency to the Purchaser.

 

(B)                                In the event that the Final Net Working
Capital Balance exceeds the Adjusted Target NWCB, then the Purchaser shall pay
within three Business Days of the Final Net Working Capital Balance being
calculated by the Seller’s

 

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Accountants, with the agreement of the Purchaser’s Accountants, the amount of
such excess to the Seller by wire transfer in immediately available funds.

 

(D)                                 UNTIL THE CLOSING STATEMENT OF NET ASSETS IS
DEEMED FINAL PURSUANT TO SECTION 2.07(C), THE PURCHASER SHALL RESPOND TO AND
PROCESS WARRANTY CLAIMS IN SUBSTANTIALLY THE SAME MANNER IN WHICH THE SELLER
RESPONDED TO AND PROCESSED WARRANTY CLAIMS PRIOR TO THE CLOSING, INCLUDING USING
THE SAME THIRD PARTY SERVICE PROVIDERS USED BY THE SELLER AND CHARGING ACTUAL
COSTS FOR IN-HOUSE REPAIRS (WHICH COSTS SHALL BE CALCULATED CONSISTENTLY WITH
HOW THEY WERE CALCULATED BY THE SELLER).

 

SECTION 2.08.  Escrow.  Prior to the Closing, the Seller and the Purchaser shall
enter into an Escrow Agreement with the Escrow Agent substantially in the form
of Exhibit 2.08 (the “Escrow Agreement”).  In accordance with the terms of the
Escrow Agreement, the Purchaser shall deposit the Escrow Amount at the Closing,
in an account to be managed and paid out by the Escrow Agent in accordance with
the terms of the Escrow Agreement.

 

SECTION 2.09.  Receivables.

 

(A)                                  ON OR PRIOR TO 5:30 P.M. EST ON THE
BUSINESS DAY IMMEDIATELY FOLLOWING THE DATE ON WHICH THE CLOSING OCCURS, THE
SELLER SHALL DELIVER TO THE PURCHASER THE CLOSING STATEMENT OF RECEIVABLES.  ANY
AMOUNTS PAID BY ANY CUSTOMER (OR ANY OF ITS WHOLLY OWNED SUBSIDIARIES) TO THE
PURCHASER (OR ANY OF ITS WHOLLY-OWNED SUBSIDIARIES), WHETHER IN RESPECT OF A
RECEIVABLE LISTED ON THE RECEIVABLES LISTING OR OTHERWISE, SHALL, NO LATER THAN
(I) IN THE CASE OF A RECEIVABLE PAID BY WIRE TRANSFER, THE BUSINESS DAY
FOLLOWING THE DAY ON WHICH PAYMENT WAS RECEIVED AND (II) IN THE CASE OF A
RECEIVABLE PAID OTHER THAN BY WIRE TRANSFER, THE THIRD BUSINESS DAY FOLLOWING
THE DAY ON WHICH PAYMENT WAS RECEIVED, BE PAID BY WIRE TRANSFER OF IMMEDIATELY
AVAILABLE FUNDS TO THE SELLER; PROVIDED, HOWEVER THAT (I) PURCHASER SHALL HAVE
NO OBLIGATION TO PAY OVER AMOUNTS RECEIVED BY A PARTICULAR CUSTOMER ONCE THE
AGGREGATE AMOUNT PAID TO THE SELLER AND THE PURCHASER BY SUCH CUSTOMER BEGINNING
ON THE BUSINESS DAY FOLLOWING THE CLOSING EQUALS THE PER CUSTOMER AMOUNT AND
(II) IF A CUSTOMER HAS GIVEN NOTICE TO THE SELLER OR THE PURCHASER THAT SUCH
CUSTOMER IS DISPUTING ITS OBLIGATION TO PAY ANY AMOUNT OF THE RECEIVABLE LISTED
ON THE RECEIVABLES LISTING AS BEING OWED BY THE CUSTOMER (TO THE EXTENT SUCH
RECEIVABLE IS DISPUTED, A “DISPUTED RECEIVABLE”) OR IF A RECEIVABLE IS DEEMED TO
BE A DISPUTED RECEIVABLE (AS DESCRIBED BELOW), THE PURCHASER SHALL NOT BE
OBLIGATED TO PAY OVER AMOUNTS RECEIVED FROM SUCH CUSTOMER IN EXCESS OF SUCH
CUSTOMER’S PER CUSTOMER AMOUNT LESS THE AMOUNT ANY DISPUTED RECEIVABLE.  ANY
RECEIVABLE NOT FULLY PAID BY A CUSTOMER BY THE DATE THAT IS 25 DAYS AFTER THE
DATE THAT SUCH RECEIVABLE IS DUE MAY BE DEEMED BY THE SELLER OR THE PURCHASER,
UPON WRITTEN NOTICE THEREOF, TO THE OTHER PARTY TO BE A DISPUTED RECEIVABLE.

 

(B)                                 EACH OF THE PURCHASER AND THE SELLER SHALL
GIVE PROMPT WRITTEN NOTICE TO THE OTHER THAT IT HAS RECEIVED NOTICE OF A
DISPUTED RECEIVABLE.  THE SELLER SHALL NOT INITIATE, OR THREATEN TO INITIATE,
ANY LEGAL PROCEEDINGS AGAINST A CUSTOMER WHO IS THE OBLIGOR OF A DISPUTED
RECEIVABLE TO COLLECT SUCH DISPUTED RECEIVABLE UNTIL AT LEAST 15 BUSINESS DAYS
FOLLOWING THE DATE OF THE NOTICE OF THE DISPUTED RECEIVABLE.  IF, AT THE END OF
SUCH 15 BUSINESS DAY PERIOD, SUCH DISPUTED RECEIVABLE HAS NOT BEEN PAID TO THE
SELLER (EITHER BY THE CUSTOMER OR BY THE PURCHASER ON BEHALF OF SUCH CUSTOMER),
THE SELLER MAY TAKE ANY AND ALL LEGAL ACTIONS IT BELIEVES ARE DESIRABLE TO CAUSE
SUCH DISPUTED RECEIVABLE TO BE PAID TO IT.

 

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(C)                                  PRIOR TO 6 P.M. EST ON EACH BUSINESS DAY
DURING THE COLLECTION PERIOD (AS HEREINAFTER DEFINED), THE PURCHASER AND THE
SELLER SHALL INFORM EACH OTHER BY EMAIL OF THE AMOUNT OF PAYMENTS THAT IT HAS
RECEIVED FROM EACH CUSTOMER ON SUCH BUSINESS DAY; PROVIDED, HOWEVER THAT NO
INFORMATION NEED BE GIVEN WITH RESPECT TO ANY CUSTOMER ONCE THE SELLER HAS
RECEIVED FROM SUCH CUSTOMER THE FULL AMOUNT OF SUCH CUSTOMER’S PER CUSTOMER
AMOUNT.  ALL AMOUNTS PAID BY A CUSTOMER, WHETHER PAID TO THE SELLER DIRECTLY OR
REMITTED TO THE PURCHASER AND THEN PAID TO THE SELLER SHALL BE CREDITED AGAINST
SUCH CUSTOMER’S PER CUSTOMER AMOUNT.  IN THE EVENT THAT, DURING THE 120 DAY
PERIOD FOLLOWING THE CLOSING, A CUSTOMER GIVES NOTICE THAT A RECEIVABLE SET
FORTH ON THE RECEIVABLES LISTING IS A DISPUTED RECEIVABLE AND, HAD SUCH NOTICE
BEEN GIVEN AT AN EARLIER DATE, THE PURCHASER WOULD NOT HAVE BEEN OBLIGATED TO
PAY TO THE SELLER AN AMOUNT PURSUANT TO THIS SECTION 2.09 THAT THE PURCHASER HAS
PAID OVER TO THE SELLER, THEN THE SELLER SHALL PAY BACK TO THE PURCHASER THE
FULL AMOUNT DISPUTED BY SUCH CUSTOMER WITHIN THREE BUSINESS DAYS BY WIRE
TRANSFER OF IMMEDIATELY AVAILABLE FUNDS.  FOR 120 DAYS AFTER THE CLOSING, THE
PURCHASER SHALL DIRECT AND INSTRUCT ITS RELEVANT EMPLOYEES TO REASONABLY
COOPERATE WITH THE SELLER IN PROMPTLY COLLECTING ALL RECEIVABLES AND IN
RESOLVING DISPUTED RECEIVABLES, IN EACH CASE, IN A MANNER CONSISTENT WITH THE
PAST PRACTICES OF THE BUSINESS.

 

(D)                                 FROM AND AFTER THE CLOSING UNTIL THE EARLIER
OF (X) THE 90TH BUSINESS DAY FOLLOWING THE CLOSING AND (Y) THE DATE ON WHICH THE
SELLER HAS RECEIVED FULL PAYMENT OF ALL RECEIVABLES REFLECTED ON THE RECEIVABLES
LISTING, NET OF THE AGGREGATE RECEIVABLES RESERVE AND ANY DISPUTED RECEIVABLES
(SUCH PERIOD, THE “COLLECTION PERIOD”), THE PURCHASER SHALL NOT, AND IT SHALL
CAUSE ITS AFFILIATES AND REPRESENTATIVES NOT TO, TAKE ANY ACTION THAT WOULD
REASONABLY BE EXPECTED TO INTERFERE WITH THE SELLER’S ABILITY TO PROMPTLY
COLLECT ANY RECEIVABLE REFLECTED ON THE RECEIVABLES LISTING, INCLUDING, WITHOUT
LIMITATION, BY SUGGESTING OR TELLING ANY CUSTOMER THAT FOR ANY REASON IT SHOULD
NOT PAY, OR THAT IT SHOULD DELAY PAYING, THE FULL AMOUNT OF ITS RECEIVABLE
REFLECTED ON THE RECEIVABLES LISTING.

 

(E)                                  IN THE EVENT THAT THE RECEIVABLES RESERVE
IS ADJUSTED UPWARD PURSUANT TO SECTION 2.07(C), THE PURCHASER SHALL GIVE WRITTEN
NOTICE TO THE SELLER OF ANY PER CUSTOMER AMOUNTS PAID OVER TO THE SELLER BY THE
PURCHASER IN ACCORDANCE WITH THIS SECTION 2.09 PRIOR TO THE RECEIVABLES RESERVE
HAVING BEEN FINALLY DETERMINED THAT WOULD BE REDUCED BY VIRTUE OF SUCH
ADJUSTMENT AND THE SELLER SHALL PAY BACK TO THE PURCHASER SUCH EXCESS PER
CUSTOMER AMOUNTS (NET OF ANY AMOUNTS THAT THE PURCHASER WOULD BE REQUIRED TO PAY
TO THE SELLER PURSUANT TO THIS SECTION 2.09(E)) WITHIN TWO BUSINESS DAYS
FOLLOWING SUCH ADJUSTMENT BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS.  IN
THE EVENT THAT THE RECEIVABLES RESERVE IS ADJUSTED DOWNWARD PURSUANT TO SECTION
2.07(C), THE PURCHASER SHALL PAY OVER TO THE SELLER WITHIN TWO BUSINESS DAYS
FOLLOWING SUCH ADJUSTMENT ANY AMOUNTS THAT THE PURCHASER WOULD HAVE BEEN
REQUIRED TO PAY TO THE SELLER HAD THE RECEIVABLES RESERVE BEEN SO ADJUSTED
IMMEDIATELY FOLLOWING THE CLOSING (NET OF ANY AMOUNTS THAT THE SELLER  WOULD BE
REQUIRED TO PAY BACK TO THE PURCHASER PURSUANT TO THIS SECTION 2.09(E)).

 

SECTION 2.10.  Inventories.  On the day immediately following the date of the
Closing, the Seller shall deliver to the Purchaser the Closing Statement of
Inventories.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES
OF THE SELLER

 

As an inducement to the Purchaser to enter into this Agreement, the Seller and
Audiovox (only as to itself with respect to the matters set forth in Sections
3.01, 3.02, 3.11(b) and 3.30) hereby represent and warrant to the Purchaser as
follows:

 

SECTION 3.01.  Organization, Authority and Qualification and Corporate Power of
the Seller and Audiovox .  (a)  Each of the Seller and Audiovox is a corporation
duly organized, validly existing, and in good standing under the Laws of its
jurisdiction of incorporation, has the requisite corporate power and authority
to carry on its business as it is now being conducted and to own and operate the
properties and assets now owned and operated by it.  The Seller is duly licensed
or qualified to do business and is in good standing in each jurisdiction which
the properties leased by it or the operation of its business makes such
licensing or qualification necessary except where the failure to be so qualified
or in good standing will not result in a Material Adverse Effect.

 

(b)                                 Each of the Seller and Audiovox has the
requisite corporate power and authority to execute, deliver and, subject to
receipt of the vote of the Audiovox stockholders contemplated in Section 3.30(b)
and the approval of the Seller’s stockholders, which has been obtained, perform
this Agreement and each of the Ancillary Agreements to be executed, delivered
and performed in connection with this Agreement, and except as set forth in
Sections 3.02 and 3.03, each of the Seller and Audiovox has all requisite power
and authority to transfer the Purchased Assets to the Purchaser.  The execution,
delivery and performance of this Agreement and each of the Ancillary Agreements
to which the Seller and Audiovox is a party, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action (corporate or otherwise) on the part of the Seller and Audiovox
(other than the vote of the Audiovox stockholders contemplated in Section
3.30(b) and the approval of the Seller’s stockholders, which has been
obtained).  This Agreement has been, and upon their execution and delivery the
Ancillary Agreements shall have been, duly and validly executed and delivered by
the Seller and Audiovox, and (assuming due authorization, execution and delivery
by the Purchaser) this Agreement constitutes, and upon their execution and
delivery the Ancillary Agreements shall constitute, the legal, valid and binding
obligation of the Seller and Audiovox, enforceable against the Seller and
Audiovox in accordance with their respective terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement of creditors’ rights generally.  No other corporate
proceedings on the part of the Seller or Audiovox are necessary to authorize
this Agreement and the Ancillary Agreements (other than the vote of the Audiovox
stockholders contemplated in Section 3.30(b) and the approval of the Seller’s
stockholders, which has been obtained).

 

(c)                                  There are no subsidiaries or Affiliates of
Audiovox, other than ACC, Quintex and ACCC, which own, lease or have the legal
right to use, or which are a party to and enjoy the right to the benefits of the
Assumed Contracts and other arrangements which constitute, the Purchased
Assets.  Section 3.01(c) of the Disclosure Schedule sets forth the

 

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subsidiaries of ACC other than Quintex and ACCC.  None of the entities set forth
in Section 3.01(c) of the Disclosure Schedule have any assets.  The liabilities
of GLM Wireless Communications, Inc. exceed its assets.

 

SECTION 3.02.  No Conflict.  The execution, delivery and performance of this
Agreement and the Ancillary Agreements by each of the Seller and Audiovox do not
and will not (a) violate, conflict with or result in the breach of any provision
of the certificate of incorporation or by-laws (or similar organizational
documents) of the Seller or Audiovox, as the case may be, (b) conflict with or
violate any material Law or Governmental Order applicable to the Seller or
Audiovox, as the case may be, or any of its assets, properties or businesses,
including the Business (except as may result from any facts or circumstances
relating solely to the Purchaser), or (c) except as set forth in Section 3.02(c)
of the Disclosure Schedule, conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any Encumbrance on any of the
Purchased Assets pursuant to, any material note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other
instrument or arrangement to which the Seller or Audiovox is a party or by which
any of the Purchased Assets is bound or affected.  The Seller knows of no reason
(except as may result from any facts or circumstances relating solely to the
Purchaser) why all consents set forth in Section 3.02(c) of the Disclosure
Schedule will not be received.

 

SECTION 3.03.  Governmental Consents and Approvals.  The execution, delivery and
performance of this Agreement and each Ancillary Agreement by the Seller do not
and will not require any material consent, approval, authorization or other
order of, action by, filing with or notification to, any Governmental Authority
applicable to the Seller or Audiovox, except (a) as described in Section 3.03 of
the Disclosure Schedule and (b) the pre-merger notification and waiting period
requirements of the HSR Act.  The Seller knows of no reason why all the
consents, approvals and authorizations necessary for the consummation of the
transactions contemplated by this Agreement will not be received.

 

SECTION 3.04.  Financial Information; Books and Records.  (a)  True and complete
copies of (i) the Interim Statement of Net Assets as set forth in Section 3.04
of the Disclosure Schedule, (ii) the audited balance sheet of the Seller for
each of the two fiscal years ended as of November 30, 2003 and 2002
respectively, and the related audited statements of income, stockholders’ equity
and cashflows of the Seller, together with all related notes and schedules
thereto, accompanied by the reports thereon of the Seller’s Accountants and
Seller’s Prior Accountants (collectively referred to herein as the “Financial
Statements”) and (iii) the unaudited balance sheet of the Seller as of February
29, 2004, and the related statements of income, stockholders’ equity and
cashflows of the Seller (collectively referred to herein as the “Interim
Financial Statements”) have been delivered by the Seller to the Purchaser.  The
Interim Statement of Net Assets (i) was prepared in accordance with the books of
account and other financial records of the Seller, (ii) presents fairly, in all
material respects, the Net Assets of the Business as of the date thereof (except
that it excludes the Excluded Assets and Excluded Liabilities), (iii) has been
prepared in accordance with GAAP, and (iv) includes all adjustments that are
necessary for a fair presentation of the financial condition of the Business as
of the date thereof.  The Financial Statements and the Interim Financial
Statement (i) were prepared in

 

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accordance with the books of account and other financial records of the Seller,
(ii) present fairly, in all material respects, the financial condition and
results of operations of the Business as of the dates thereof or for the periods
covered thereby, (iii) have been prepared in accordance with GAAP and (iv) in
the case of the Interim Statement of Net Assets, include all adjustments
(consisting only of normal recurring accruals) that are necessary for a fair
presentation of the financial condition of the Business and the results of the
operations of the Business as of the dates thereof or for the periods covered
thereby.

 

(B)                                 THE BOOKS OF ACCOUNT AND OTHER FINANCIAL
RECORDS OF THE SELLER IN ALL MATERIAL RESPECTS:  (I) REFLECT ALL ITEMS OF INCOME
AND EXPENSE AND ALL ASSETS AND LIABILITIES REQUIRED TO BE REFLECTED THEREIN IN
ACCORDANCE WITH GAAP, (II) ARE COMPLETE AND CORRECT, AND DO NOT CONTAIN OR
REFLECT ANY MATERIAL INACCURACIES OR DISCREPANCIES AND (III) HAVE BEEN
MAINTAINED IN ACCORDANCE WITH GOOD BUSINESS AND ACCOUNTING PRACTICES.

 

(C)                                  THE SELLERS HAVE THE PARTS THAT IT BELIEVES
ARE REASONABLY NECESSARY TO FULFILL ITS CONTRACTUAL OBLIGATIONS TO REPAIR
PRODUCTS SOLD BY THE BUSINESS PRIOR TO THE CLOSING.  THERE ARE NO MATERIAL
LIABILITIES RELATING TO OBLIGATIONS UNDER THE ASSUMED CONTRACTS FOR THE
PROVISION OF TRAINING OR TECHNICAL SUPPORT, OTHER THAN LIABILITIES THAT ARE
REFLECTED ON THE INTERIM STATEMENT OF NET ASSETS AND WILL BE REFLECTED ON THE
CLOSING STATEMENT OF NET ASSETS.

 

SECTION 3.05.  Absence of Undisclosed Liabilities.  There are no material
Liabilities of the Business, other than Liabilities (i) reflected or reserved
against on the Interim Statement of Net Assets, (ii) set forth in Section 3.05
of the Disclosure Schedule, (iii) incurred since the date of the Interim
Statement of Net Assets in the ordinary course of business, consistent with past
practice, of the Seller and which do not and could not have a Material Adverse
Effect or (iv) arising out of the Assumed Contracts.

 

SECTION 3.06.  Receivables.  Section 3.06 of the Disclosure Schedule is an aged
list of the Receivables as of the Interim Statement Date showing separately
those Receivables that as of such date had been outstanding for (a) 30 days or
less, (b) 31 to 60 days, (c) 61 to 90 days, and (d) more than 90 days.  Except
to the extent, if any, reserved for on the Interim Statement of Net Assets, all
Receivables reflected on the Interim Statement of Net Assets arose from, and the
Receivables existing as of the Closing will have arisen from, the sale of
Inventory or services to Persons not affiliated with the Seller and in the
ordinary course of business consistent with past practice and, except as
reserved against on the Interim Statement of Net Assets, constitute or will
constitute, as the case may be, only valid, undisputed claims of the Seller not
subject to valid claims of setoff or other defenses or counterclaims other than
normal cash discounts and warranty claims and customary reserves required by
GAAP accrued in the ordinary course of business consistent with past practice.

 

SECTION 3.07.  Inventories.  (a)  Subject to amounts reserved therefor on the
Interim Statement of Net Assets, the values at which all Inventories are carried
on the Interim Statement of Net Assets is consistent with the last sentence of
the definition of “Inventories” herein.  Except as set forth in Section
3.07(a)(i) of the Disclosure Schedule, the Seller has good and marketable title
to the Inventories free and clear of all Encumbrances.  Except as set forth in
Section 3.07(ii) of the Disclosure Schedule, the Inventories do not consist of,
in any material amount, items that are obsolete, defective or slow-moving.  The
Inventories do not consist of any

 

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items held on consignment.  The Seller is not under any obligation or liability
with respect to accepting returns of items of Inventory or merchandise in the
possession of their customers other than in the ordinary course of business
consistent with past practice or except as set forth in Section 3.07(a)(iii) of
the Disclosure Schedule.  No clearance or extraordinary sale of the Inventories
has been conducted since the Interim Statement Date.  The Seller has not
acquired or committed to acquire Inventory for sale which is not of a quality
and quantity usable in the ordinary course of business within a reasonable
period of time and consistent with past practice, nor has the Seller changed the
price of any Inventory except for (i) price reductions to reflect any reduction
in the cost thereof to the Seller, (ii) reductions and increases responsive to
normal competitive conditions and consistent with the Seller’s past sales
practices, (iii) increases to reflect any increase in the cost thereof to the
Seller and (iv) increases and reductions made with the written consent of the
Purchaser.

 

(b)                                 Section 3.07(b) of the Disclosure Schedule
includes a complete list of the addresses of all warehouses and other facilities
in which the Inventories are located.

 

SECTION 3.08.  Assumed Contracts.  Each description of an Assumed Contract or
category of Assumed Contracts described in Part II of Section 2.01(a)(x) of the
Disclosure Schedule is accurate in all material respects.

 

SECTION 3.09.  Sales and Purchase Order Backlog.  (a)  As of the Business Day
immediately preceding the date hereof, open sales orders accepted by the Seller
and relating to the Business totaled $244,768,080.  Section 3.09(a) of the
Disclosure Schedule lists all sales orders exceeding $100,000 per order which
have been accepted by the Seller (related to the Business), and which were open
as of the date hereof.

 

(B)                                 AS OF THE BUSINESS DAY IMMEDIATELY PRECEDING
THE DATE HEREOF, OPEN PURCHASE ORDERS ISSUED BY THE SELLER AND RELATING TO THE
BUSINESS, TOTALED $737,911,285.  SECTION 3.09(B) OF THE DISCLOSURE SCHEDULE
LISTS ALL PURCHASE ORDERS EXCEEDING $100,000 PER ORDER WHICH HAVE BEEN ISSUED BY
THE SELLER (RELATED TO THE BUSINESS) AND WHICH WERE OPEN AS OF THE DATE HEREOF.

 

SECTION 3.10.  Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions.  Except as set forth in Section 3.10 of the Disclosure
Schedule, since the Interim Statement Date, and, except with respect to clause
(x) below (which speaks as of the date hereof and, pursuant to Section 7.02(a),
as of the date of the Closing), prior to the date hereof, the Business has been
conducted in the ordinary course and consistent with past practice.  As
amplification and not limitation of the foregoing, since the Interim Statement
Date, the Seller has not:

 

(A)                                  PERMITTED OR ALLOWED ANY OF THE PURCHASED
ASSETS TO BE SUBJECTED TO ANY ENCUMBRANCE, OTHER THAN PERMITTED ENCUMBRANCES AND
ENCUMBRANCES THAT WILL BE RELEASED AT OR PRIOR TO THE CLOSING;

 

(B)                                 EXCEPT IN THE ORDINARY COURSE OF BUSINESS
CONSISTENT WITH PAST PRACTICE AND PAYMENTS UNDER CONTRACTS ENTERED INTO PRIOR TO
THE DATE HEREOF AS DISCLOSED IN SECTION 3.14 OF THE DISCLOSURE SCHEDULE,
DISCHARGED OR OTHERWISE OBTAINED THE RELEASE OF ANY

 

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ENCUMBRANCE RELATED TO THE BUSINESS, OR PAID OR OTHERWISE DISCHARGED ANY
LIABILITY RELATED TO THE BUSINESS, OTHER THAN CURRENT LIABILITIES REFLECTED ON
THE INTERIM  STATEMENT OF NET ASSETS AND CURRENT LIABILITIES INCURRED IN THE
ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICE SINCE THE INTERIM
STATEMENT DATE;

 

(C)                                  WRITTEN DOWN OR WRITTEN UP (OR FAILED TO
WRITE DOWN OR WRITE UP IN ACCORDANCE WITH GAAP CONSISTENT WITH PAST PRACTICE)
THE VALUE OF ANY INVENTORIES OR RECEIVABLES OR REVALUED ANY OF THE PURCHASED
ASSETS OTHER THAN IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST
PRACTICE AND IN ACCORDANCE WITH GAAP;

 

(D)                                 MADE ANY CHANGE IN ANY METHOD OF ACCOUNTING
OR ACCOUNTING PRACTICE OR POLICY USED BY THE SELLER AND RELATING TO THE
BUSINESS, OTHER THAN SUCH CHANGES REQUIRED BY GAAP;

 

(E)                                  AMENDED, TERMINATED, CANCELLED OR
COMPROMISED ANY MATERIAL CLAIMS OF THE SELLER (RELATED TO THE BUSINESS) OR
WAIVED ANY OTHER RIGHTS OF SUBSTANTIAL VALUE TO THE SELLER (RELATED TO THE
BUSINESS), OTHER THAN WITH RESPECT TO THE EXCLUDED ASSETS;

 

(F)                                    SOLD, TRANSFERRED, LEASED, SUBLEASED,
LICENSED OR OTHERWISE DISPOSED OF ANY PROPERTIES OR ASSETS, REAL, PERSONAL OR
MIXED (INCLUDING LEASEHOLD INTERESTS AND INTANGIBLE PROPERTY) OF THE SELLER
(RELATED TO THE BUSINESS), OTHER THAN THE SALE OF INVENTORIES IN THE ORDINARY
COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICE, OTHER THAN WITH RESPECT TO THE
EXCLUDED ASSETS;

 

(G)                                 MERGED WITH, ENTERED INTO A CONSOLIDATION
WITH OR ACQUIRED AN INTEREST OF 5% OR MORE IN ANY PERSON ENGAGED IN A BUSINESS
RELATING TO THE BUSINESS OR ACQUIRED A SUBSTANTIAL PORTION OF THE ASSETS OR
BUSINESS OF ANY PERSON ENGAGED IN A BUSINESS RELATING TO THE BUSINESS OR ANY
DIVISION OR LINE OF BUSINESS THEREOF, OR OTHERWISE ACQUIRED ANY MATERIAL ASSETS
RELATING TO THE BUSINESS OTHER THAN IN THE ORDINARY COURSE OF BUSINESS
CONSISTENT WITH PAST PRACTICE;

 

(H)                                 MADE ANY CAPITAL EXPENDITURE OR COMMITMENT
FOR ANY CAPITAL EXPENDITURE , IN EACH CASE RELATING TO THE BUSINESS, IN EXCESS
OF $500,000 INDIVIDUALLY OR $2,000,000 IN THE AGGREGATE;

 

(I)                                     EXCEPT IN THE ORDINARY COURSE OF
BUSINESS CONSISTENT WITH PAST PRACTICE, ISSUED ANY SALES ORDERS OR OTHERWISE
AGREED TO MAKE ANY PURCHASES, IN EACH CASE RELATING TO THE BUSINESS, INVOLVING
EXCHANGES IN VALUE IN EXCESS OF $5,000,000 INDIVIDUALLY OR $10,000,000 IN THE
AGGREGATE;

 

(J)                                     MADE ANY MATERIAL CHANGES IN THE
CUSTOMARY METHODS OF OPERATIONS OF THE BUSINESS, INCLUDING THOSE RELATING TO
PURCHASING, INVENTORIES, MARKETING, BOOKING SALES OR RECEIVABLES, SELLING AND
PRICING;

 

(K)                                  MADE, REVOKED OR CHANGED ANY TAX ELECTION
OR METHOD OF TAX ACCOUNTING, OR SETTLED OR COMPROMISED ANY LIABILITY WITH
RESPECT TO TAXES, IN EACH CASE RELATING TO THE BUSINESS OR THE PURCHASED ASSETS;

 

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(L)                                     INCURRED ANY MATERIAL INDEBTEDNESS
RELATING TO THE BUSINESS, OTHER THAN INTER-COMPANY PAYABLES INCURRED IN THE
ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICE;

 

(M)                               MADE ANY LOAN TO, GUARANTEED ANY INDEBTEDNESS
OF OR OTHERWISE INCURRED ANY INDEBTEDNESS ON BEHALF OF ANY PERSON IN CONNECTION
WITH THE BUSINESS, EXCEPT FOR ANY AMOUNT THAT WILL BE DISCHARGED PRIOR TO THE
CLOSING;

 

(N)                                 FAILED TO PAY ANY CREDITOR OF THE BUSINESS
ANY MATERIAL AMOUNT OWED TO SUCH CREDITOR WHEN DUE UNLESS SUCH AMOUNT WAS
DISPUTED IN GOOD FAITH AND SUBJECT TO CUSTOMARY ADJUSTMENTS;

 

(O)                                 EXCEPT IN THE ORDINARY COURSE OF BUSINESS
CONSISTENT WITH PAST PRACTICE OR AS REQUIRED BY LAW (I) GRANTED ANY INCREASE, OR
ANNOUNCED ANY INCREASE, IN THE WAGES, SALARIES, COMPENSATION, BONUSES,
INCENTIVES, PENSION OR OTHER BENEFITS PAYABLE BY THE SELLER TO ANY OF ITS
EMPLOYEES TO WHOM OFFERS OF EMPLOYMENT WILL BE MADE PURSUANT TO SECTION 6.01,
INCLUDING ANY INCREASE OR CHANGE PURSUANT TO ANY PLAN, OR (II) ESTABLISHED OR
INCREASED OR PROMISED TO INCREASE ANY BENEFITS UNDER ANY PLAN;

 

(P)                                 ENTERED INTO ANY AGREEMENT, ARRANGEMENT OR
TRANSACTION RELATING TO THE BUSINESS WITH ANY OF ITS DIRECTORS, OFFICERS,
EMPLOYEES OR STOCKHOLDERS (OR WITH ANY RELATIVE, BENEFICIARY, SPOUSE OR
AFFILIATE OF SUCH PERSONS);

 

(Q)                                 TERMINATED, DISCONTINUED, CLOSED OR DISPOSED
OF ANY PLANT, FACILITY OR OTHER BUSINESS OPERATION USED IN THE BUSINESS, OR LAID
OFF ANY EMPLOYEES EMPLOYED IN CONNECTION WITH THE BUSINESS (OTHER THAN LAYOFFS
IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICE) OR IMPLEMENTED
ANY EARLY RETIREMENT, SEPARATION OR PROGRAM PROVIDING EARLY RETIREMENT WINDOW
BENEFITS WITHIN THE MEANING OF SECTION 1.401(A)-4 OF THE REGULATIONS OR
ANNOUNCED OR PLANNED ANY SUCH ACTION OR PROGRAM FOR THE FUTURE;

 

(R)                                    DISCLOSED ANY SECRET OR CONFIDENTIAL
INTELLECTUAL PROPERTY RELATING TO THE BUSINESS (EXCEPT BY WAY OF ISSUANCE OF A
PATENT) OR PERMITTED TO LAPSE OR BECOME ABANDONED ANY INTELLECTUAL PROPERTY
RELATING TO THE BUSINESS (OR ANY REGISTRATION OR GRANT THEREOF OR ANY
APPLICATION RELATING THERETO) TO WHICH, OR UNDER WHICH, THE SELLER HAS ANY
RIGHT, TITLE, INTEREST OR LICENSE;

 

(S)                                  ALLOWED ANY PERMIT OR ENVIRONMENTAL PERMIT
RELATING TO THE BUSINESS TO LAPSE OR TERMINATE OR FAILED TO RENEW ANY INSURANCE
POLICY, PERMIT OR ENVIRONMENTAL PERMIT RELATING TO THE BUSINESS THAT IS
SCHEDULED TO TERMINATE OR EXPIRE WITHIN 45 CALENDAR DAYS OF THE CLOSING;

 

(T)                                    FAILED TO MAINTAIN THE PLANT, PROPERTY
AND EQUIPMENT INCLUDED IN THE PURCHASED ASSETS IN GOOD REPAIR AND OPERATING
CONDITION, ORDINARY WEAR AND TEAR EXCEPTED;

 

(U)                                 SUFFERED ANY CASUALTY LOSS OR DAMAGE WITH
RESPECT TO ANY OF THE PURCHASED ASSETS WHICH IN THE AGGREGATE HAVE A REPLACEMENT
COST OF MORE THAN $100,000, WHETHER OR NOT SUCH LOSS OR DAMAGE SHALL HAVE BEEN
COVERED BY INSURANCE;

 

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(V)                                 AMENDED, MODIFIED OR CONSENTED TO THE
TERMINATION OF ANY MATERIAL CONTRACT OR THE SELLER’S RIGHTS THEREUNDER;

 

(W)                               (I) ABANDONED, SOLD, ASSIGNED, OR GRANTED ANY
SECURITY INTEREST IN OR TO ANY ITEM OF THE OWNED INTELLECTUAL PROPERTY, LICENSED
INTELLECTUAL PROPERTY OR TRANSFERRED IP AGREEMENTS, INCLUDING FAILING TO PERFORM
OR CAUSE TO BE PERFORMED ALL APPLICABLE FILINGS, RECORDINGS AND OTHER ACTS, AND
PAY OR CAUSED TO BE PAID ALL REQUIRED FEES AND TAXES, TO MAINTAIN AND PROTECT
ITS INTEREST IN SUCH INTELLECTUAL PROPERTY, (II) GRANTED TO ANY THIRD PARTY ANY
LICENSE WITH RESPECT TO ANY OWNED INTELLECTUAL PROPERTY OR LICENSED INTELLECTUAL
PROPERTY, OTHER THAN LICENSES OF TRANSFERRED SOFTWARE TO THE CUSTOMERS OF THE
BUSINESS IN THE ORDINARY COURSE OF ITS BUSINESS, (III) DEVELOPED, CREATED OR
INVENTED ANY INTELLECTUAL PROPERTY JOINTLY WITH ANY THIRD PARTY (OTHER THAN SUCH
JOINT DEVELOPMENT, CREATION OR INVENTION WITH A THIRD PARTY THAT IS IN PROGRESS
PRIOR TO INTERIM STATEMENT DATE) OR (IV) DISCLOSED, OR ALLOW TO BE DISCLOSED,
ANY CONFIDENTIAL INTELLECTUAL PROPERTY, UNLESS SUCH INTELLECTUAL PROPERTY IS
SUBJECT TO A CONFIDENTIALITY OR NON-DISCLOSURE COVENANT PROTECTING AGAINST
DISCLOSURE THEREOF;

 

(X)                                   SUFFERED ANY MATERIAL ADVERSE EFFECT;

 

(Y)                                 AGREED, WHETHER IN WRITING OR OTHERWISE, TO
TAKE IN A LEGALLY ENFORCEABLE MANNER ANY OF THE ACTIONS SPECIFIED IN THIS
SECTION 3.10 OR GRANTED ANY OPTIONS TO PURCHASE, RIGHTS OF FIRST REFUSAL, RIGHTS
OF FIRST OFFER OR ANY OTHER SIMILAR RIGHTS OR COMMITMENTS WITH RESPECT TO ANY OF
THE ACTIONS SPECIFIED IN THIS SECTION 3.10, EXCEPT AS EXPRESSLY CONTEMPLATED BY
THIS AGREEMENT AND THE ANCILLARY AGREEMENTS;

 

(Z)                                   TERMINATED THE EMPLOYMENT NOR RECEIVED THE
RESIGNATION OF ANY KEY EMPLOYEES;

 

(AA)                            ISSUED A NOTICE OF INTENTION TO TERMINATE THE
EMPLOYMENT OF ANY KEY EMPLOYEES NOR RECEIVED A NOTICE OF INTENTION TO RESIGN BY
ANY KEY EMPLOYEES; OR

 

(BB)                          SETTLED, OR AGREED TO SETTLE, ANY ACTION, SUIT OR
PROCEEDING RELATING TO THE BUSINESS OR THE PURCHASED ASSETS OTHER THAN IN THE
ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICE.

 

SECTION 3.11.  Litigation.  (a) Except as set forth in Section 3.11 of the
Disclosure Schedule (which, with respect to each Action set forth therein, sets
forth the parties and the date and method commenced), there are no material
Actions by or against the Seller or any Affiliate thereof and relating to the
Business or affecting any of the Purchased Assets or the Business pending before
any Governmental Authority (or, to the best knowledge of the Seller, threatened
to be brought by or before any Governmental Authority).  The Seller is not
subject to any Action relating to the Business that has a Material Adverse
Effect or is reasonably likely to affect the legality, validity or
enforceability of this Agreement, any Ancillary Agreement or the consummation of
the transactions contemplated hereby or thereby.  Neither the Seller nor any of
the Seller’s assets or properties, including the Purchased Assets, is subject to
any Governmental Order (nor, to the best knowledge of the Seller, are there any
such Governmental Orders threatened to be imposed by any Governmental Authority)
which has a Material Adverse Effect

 

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or could affect the legality, validity or enforceability of this Agreement, any
Ancillary Agreement or the consummation of the transactions contemplated hereby
or thereby.

 

(b) Audiovox is not subject to any Action relating to the Business that has a
Material Adverse Effect or is reasonably likely to affect the legality, validity
or enforceability of this Agreement, any Ancillary Agreement or the consummation
of the transactions contemplated hereby or thereby.  Audiovox is not subject to
any Governmental Order (nor, to the best knowledge of Audiovox, are there any
such Governmental Orders threatened to be imposed by any Governmental Authority)
which has a Material Adverse Effect or could affect the legality, validity or
enforceability of this Agreement, any Ancillary Agreement or the consummation of
the transactions contemplated hereby or thereby.

 

SECTION 3.12.  Compliance with Laws.  (a)  The Seller has conducted and
continues to conduct the Business in accordance with all material Laws and
Governmental Orders applicable to the Seller or any of its properties or assets,
including the Purchased Assets, and the Seller is not in material violation, or
the Seller has not been in material violation during the last three years, of
any such Law or Governmental Order, except as set forth in Section 3.12 (a) of
the Disclosure Schedule.

 

(B)                                 SECTION 3.12(B) OF THE DISCLOSURE SCHEDULE
SETS FORTH A BRIEF DESCRIPTION OF EACH GOVERNMENTAL ORDER APPLICABLE TO THE
SELLER (RELATED TO THE BUSINESS) OR ANY OF ITS PROPERTIES OR ASSETS, INCLUDING
THE PURCHASED ASSETS, OR THE BUSINESS AND NO SUCH GOVERNMENTAL ORDER HAS OR HAS
HAD A MATERIAL ADVERSE EFFECT OR IS REASONABLY LIKELY TO AFFECT THE LEGALITY,
VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

SECTION 3.13.  Environmental and Other Permits and Licenses; Related Matters. 
(a)  Except as set forth in Section 3.13(a) of the Disclosure Schedule:

 

(I)                                     THE SELLER (AS IT RELATES TO THE
BUSINESS) IS IN MATERIAL COMPLIANCE WITH ALL APPLICABLE ENVIRONMENTAL LAWS AND
ALL ENVIRONMENTAL PERMITS.

 

(II)                                  THERE HAS BEEN NO MATERIAL RELEASE OF ANY
HAZARDOUS MATERIAL ON ANY OF THE LEASED REAL PROPERTY OR, DURING THE PERIOD OF
THE SELLER’S OWNERSHIP, LEASE, USE OR OCCUPANCY THEREOF, ON ANY PROPERTY
FORMERLY OWNED, LEASED, USED OR OCCUPIED BY THE SELLER.

 

(III)                               THERE ARE NO ENVIRONMENTAL CLAIMS PENDING
OR, TO THE BEST KNOWLEDGE OF THE SELLER, THREATENED AGAINST THE SELLER (RELATING
TO THE BUSINESS) OR THE LEASED REAL PROPERTY, AND TO THE SELLER’S BEST KNOWLEDGE
THERE ARE NO CIRCUMSTANCES THAT CAN REASONABLY BE EXPECTED TO FORM THE BASIS OF
ANY SUCH ENVIRONMENTAL CLAIM.

 

(IV)                              THE SELLER HAS NO ACTUAL OR ALLEGED MATERIAL
LIABILITY, WHETHER FIXED OR CONTINGENT, RELATING TO THE BUSINESS UNDER ANY
ENVIRONMENTAL LAW.

 

(b)                                 Neither the execution of this Agreement or
the Ancillary Agreements nor the consummation of the transactions contemplated
hereby or thereby will require any Remedial

 

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Action or notice to or consent of Governmental Authorities or third parties
pursuant to any applicable Environmental Law or Environmental Permit.

 

SECTION 3.14.  Material Contracts.  (a)  Section 3.14(a) of the Disclosure
Schedule lists each of the following contracts and agreements (including,
without limitation, oral agreements and informal arrangements) of the Seller
relating to the Business (collectively, the “Material Contracts”):

 

(I)                                     EACH CONTRACT, AGREEMENT, INVOICE,
PURCHASE ORDER AND OTHER ARRANGEMENT, FOR THE PURCHASE OF INVENTORY, SPARE
PARTS, OTHER MATERIALS OR PERSONAL PROPERTY, WITH ANY SUPPLIER OR FOR THE
FURNISHING OF SERVICES TO THE SELLER OR OTHERWISE RELATED TO THE BUSINESS UNDER
THE TERMS OF WHICH THE SELLER:  (A) IS REASONABLY LIKELY TO PAY OR OTHERWISE
GIVE CONSIDERATION OF MORE THAN $500,000 IN THE AGGREGATE DURING THE FISCAL YEAR
ENDING NOVEMBER 30, 2004, (B) IS REASONABLY LIKELY TO PAY OR OTHERWISE GIVE
CONSIDERATION OF MORE THAN $120,000 IN THE AGGREGATE OVER THE REMAINING TERM OF
THE CONTRACT, OR (C) CANNOT BE CANCELLED BY THE SELLER WITHOUT PENALTY OR
FURTHER PAYMENT AND WITHOUT MORE THAN 30 DAYS’ NOTICE AND IS REASONABLY LIKELY
TO PAY OR OTHERWISE GIVE CONSIDERATION OF MORE THAN $120,000 IN THE AGGREGATE
OVER THE REMAINING TERM OF THE CONTRACT;

 

(II)                                  EACH CONTRACT, AGREEMENT, INVOICE, SALES
ORDER AND OTHER ARRANGEMENT, FOR THE SALE OF INVENTORY OR OTHER PERSONAL
PROPERTY, OR FOR THE FURNISHING OF SERVICES BY THE SELLER WHICH:  (A) IS LIKELY
TO INVOLVE CONSIDERATION OF MORE THAN $100,000 IN THE AGGREGATE DURING THE
FISCAL YEAR ENDING NOVEMBER 30, 2004, (B) IS LIKELY TO INVOLVE CONSIDERATION OF
MORE THAN $500,000 IN THE AGGREGATE OVER THE REMAINING TERM OF THE CONTRACT OR
(C) CANNOT BE CANCELLED BY THE SELLER WITHOUT PENALTY OR FURTHER PAYMENT AND
WITHOUT MORE THAN 30 DAYS’ NOTICE AND IS LIKELY TO INVOLVE CONSIDERATION OF MORE
THAN $500,000 IN THE AGGREGATE DURING THE REMAINING TERM OF THE CONTRACT;

 

(III)                               ALL BROKER, DISTRIBUTOR, DEALER,
MANUFACTURER’S REPRESENTATIVE, FRANCHISE, AGENCY, SALES PROMOTION, MARKET
RESEARCH, MARKETING, CONSULTING AND ADVERTISING CONTRACTS AND AGREEMENTS TO
WHICH THE SELLER IS A PARTY AND WHICH WOULD REQUIRE A PAYMENT IN 2004 IN EXCESS
OF $120,000;

 

(IV)                              ALL MANAGEMENT CONTRACTS AND CONTRACTS WITH
INDEPENDENT CONTRACTORS OR CONSULTANTS (OR SIMILAR ARRANGEMENTS) TO WHICH THE
SELLER IS A PARTY AND WHICH ARE NOT CANCELABLE WITHOUT PENALTY OR FURTHER
PAYMENT AND WITHOUT MORE THAN 30 DAYS’ NOTICE AND WHICH WOULD REQUIRE A PAYMENT
IN 2004 IN EXCESS OF $120,000;

 

(V)                                 ALL CONTRACTS AND AGREEMENTS RELATING TO
INDEBTEDNESS OF THE SELLER;

 

(VI)                              ALL CONTRACTS AND AGREEMENTS WITH ANY
GOVERNMENTAL AUTHORITY TO WHICH THE SELLER IS A PARTY;

 

(VII)                           ALL CONTRACTS AND AGREEMENTS THAT LIMIT OR
PURPORT TO LIMIT THE ABILITY OF THE SELLER TO COMPETE IN ANY LINE OF BUSINESS OR
WITH ANY PERSON OR IN ANY GEOGRAPHIC AREA OR DURING ANY PERIOD OF TIME;

 

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(VIII)                        ALL CONTRACTS AND AGREEMENTS BETWEEN OR AMONG THE
SELLER AND ANY AFFILIATE OF THE SELLER;

 

(IX)                                ALL CONTRACTS AND AGREEMENTS PROVIDING FOR
EMPLOYEE BENEFITS UNDER ANY PLAN LISTED IN SECTION 3.21 OF THE DISCLOSURE
SCHEDULE;

 

(X)                                   ALL EMPLOYMENT CONTRACTS, WRITTEN OR ORAL,
WITH ANY OFFICER, CONSULTANT, DIRECTOR OR EMPLOYEE OF THE BUSINESS;

 

(XI)                                ALL CONTRACTS AND AGREEMENTS RELATING TO
RESTRICTIONS ON COMPETITION OF THE EMPLOYEES OF THE SELLER;

 

(XII)                             ALL JOINT VENTURE CONTRACTS OR ARRANGEMENTS OR
OTHER ARRANGEMENTS INVOLVING SHARING OF PROFITS;

 

(XIII)                          ALL AGREEMENTS RELATING TO THE DISPOSITION OR
ACQUISITION OF ASSETS OR ANY INTEREST IN ANY BUSINESS ENTERPRISE OTHER THAN
THOSE ENTERED INTO IN THE ORDINARY COURSE AND CONSISTENT WITH PAST PRACTICE;

 

(XIV)                         ALL SETTLEMENTS OF ADMINISTRATIVE, JUDICIAL,
MEDIATION OR ARBITRATION PROCEEDINGS;

 

(XV)                            ALL LEASES OR SUBLEASES OF LEASED REAL PROPERTY;

 

(XVI)                         ALL LEASES OR SUBLEASES OF TANGIBLE PERSONAL
PROPERTY WHICH REQUIRE A PAYMENT IN 2004 IN EXCESS OF $100,000;

 

(XVII)                      ALL TRANSFERRED IP AGREEMENTS; AND

 

(XVIII)                   ALL OTHER CONTRACTS AND AGREEMENTS, WHETHER OR NOT
MADE IN THE ORDINARY COURSE OF BUSINESS, WHICH ARE MATERIAL TO THE SELLER OR THE
CONDUCT OF THE BUSINESS, OR THE ABSENCE OF WHICH WOULD HAVE A MATERIAL ADVERSE
EFFECT.

 

(B)                                 EXCEPT AS SET FORTH IN SECTION 3.14(B) OF
THE DISCLOSURE SCHEDULE, EACH MATERIAL CONTRACT IS VALID AND BINDING ON THE
SELLER THERETO AND IS IN FULL FORCE AND EFFECT.  THE SELLER IS NOT IN MATERIAL
BREACH OF, OR DEFAULT UNDER, ANY MATERIAL CONTRACT.

 

(C)                                  TO THE BEST KNOWLEDGE OF THE SELLER, NO
OTHER PARTY TO ANY MATERIAL CONTRACT IS IN MATERIAL BREACH THEREOF OR DEFAULT
THEREUNDER AND THE SELLER HAS NOT RECEIVED ANY NOTICE OF TERMINATION,
CANCELLATION, BREACH OR DEFAULT UNDER ANY MATERIAL CONTRACT.

 

(D)                                 THE SELLER HAS MADE AVAILABLE TO THE
PURCHASER TRUE AND COMPLETE COPIES OF ALL MATERIAL CONTRACTS, INCLUDING ALL
AMENDMENTS, SUPPLEMENTS AND MODIFICATIONS THERETO OR WAIVERS CURRENTLY IN EFFECT
THEREUNDER.

 

(E)                                  EXCEPT AS SET FORTH IN SECTION 3.14(E) OF
THE DISCLOSURE SCHEDULE, THERE IS NO CONTRACT, AGREEMENT OR OTHER ARRANGEMENT
GRANTING ANY PERSON ANY PREFERENTIAL RIGHT TO

 

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PURCHASE, OTHER THAN IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST
PRACTICE, ANY OF THE PURCHASED ASSETS.

 

SECTION 3.15.  Intellectual Property.  (a)  Section 3.15(a) of the Disclosure
Schedule sets forth a true and complete list of (i) all patents and patent
applications, registered trademarks and trademark applications, and registered
copyrights and copyright applications, and domain names included in the Owned
Intellectual Property, (ii) all Transferred IP Agreements and (iii) all other
Owned Intellectual Property (other than trade secrets) material to the Business.

 

(B)                                 EXCEPT AS SET FORTH IN SECTION 3.15(B) OF
THE DISCLOSURE SCHEDULE TO THE BEST KNOWLEDGE OF THE SELLER, THE OPERATION OF
THE BUSINESS AS CURRENTLY CONDUCTED OR AS CONTEMPLATED TO BE CONDUCTED, THE USE
OF THE OWNED INTELLECTUAL PROPERTY, THE LICENSED INTELLECTUAL PROPERTY, THE
SHARED MIS SYSTEMS AND THE DEVELOPED SOFTWARE IN CONNECTION THEREWITH AND THE
SELLER’S TRANSMISSION, USE, LINKING AND OTHER PRACTICES RELATED TO THE OPERATION
OF THEIR WEB SITES IN CONNECTION WITH THE BUSINESS, THE CONTENT THEREOF AND THE
ADVERTISEMENTS CONTAINED THEREIN, DO NOT, IN ANY MATERIAL RESPECTS, CONFLICT
WITH, INFRINGE, MISAPPROPRIATE OR OTHERWISE VIOLATE THE INTELLECTUAL PROPERTY OR
OTHER PROPRIETARY RIGHTS, INCLUDING RIGHTS OF PRIVACY, PUBLICITY AND
ENDORSEMENT, OF ANY THIRD PARTY, AND NO ACTIONS OR CLAIMS ARE PENDING OR, TO THE
BEST KNOWLEDGE OF THE SELLER, THREATENED AGAINST THE SELLER ALLEGING ANY OF THE
FOREGOING.

 

(C)                                  THE SELLER IS THE EXCLUSIVE OWNER OF THE
ENTIRE AND UNENCUMBERED RIGHT, TITLE AND INTEREST IN AND TO THE OWNED
INTELLECTUAL PROPERTY AND THE TRANSFERRED IP AGREEMENTS, AND THE SELLER HAS A
VALID RIGHT TO USE THE OWNED INTELLECTUAL PROPERTY AND LICENSED INTELLECTUAL
PROPERTY IN THE ORDINARY COURSE OF THE BUSINESS AS CURRENTLY CONDUCTED OR AS
CONTEMPLATED TO BE CONDUCTED SUBJECT ONLY TO THE TERMS OF THE TRANSFERRED IP
AGREEMENTS IN THE CASE OF LICENSED INTELLECTUAL PROPERTY.

 

(D)                                 NO OWNED INTELLECTUAL PROPERTY OR DEVELOPED
SOFTWARE, OR TO THE BEST KNOWLEDGE OF SELLER, ANY LICENSED INTELLECTUAL
PROPERTY, IS SUBJECT TO ANY OUTSTANDING DECREE, ORDER, INJUNCTION, JUDGMENT OR
RULING RESTRICTING THE USE OF SUCH INTELLECTUAL PROPERTY OR THAT WOULD IMPAIR
THE VALIDITY OR ENFORCEABILITY OF SUCH INTELLECTUAL PROPERTY.

 

(E)                                  EXCEPT FOR THE EXCLUDED INTELLECTUAL
PROPERTY, THE OWNED INTELLECTUAL PROPERTY AND THE LICENSED INTELLECTUAL PROPERTY
INCLUDE ALL OF THE INTELLECTUAL PROPERTY USED IN THE ORDINARY DAY-TO-DAY CONDUCT
OF THE BUSINESS, AND THERE ARE NO OTHER ITEMS OF INTELLECTUAL PROPERTY THAT ARE
MATERIAL TO THE ORDINARY DAY-TO-DAY CONDUCT OF THE BUSINESS.  THE OWNED
INTELLECTUAL PROPERTY AND THE DEVELOPED SOFTWARE AND, TO THE BEST KNOWLEDGE OF
THE SELLER, THE LICENSED INTELLECTUAL PROPERTY, ARE SUBSISTING, VALID AND
ENFORCEABLE, AND HAVE NOT BEEN ADJUDGED INVALID OR UNENFORCEABLE IN WHOLE OR
PART.

 

(F)                                    EXCEPT AS SET FORTH IN SECTION 3.15(F) OF
THE DISCLOSURE SCHEDULE, NO MATERIAL ACTIONS OR CLAIMS HAVE BEEN ASSERTED OR ARE
PENDING OR, TO THE BEST KNOWLEDGE OF THE SELLER, ARE THREATENED AGAINST THE
SELLER (I) BASED UPON OR CHALLENGING OR SEEKING TO DENY OR RESTRICT THE USE BY
THE SELLER OF ANY OF THE OWNED INTELLECTUAL PROPERTY, THE LICENSED INTELLECTUAL
PROPERTY, THE SHARED MIS SYSTEMS AND THE DEVELOPED SOFTWARE, (II) ALLEGING THAT
ANY SERVICES PROVIDED BY, PROCESSES USED BY, OR PRODUCTS MANUFACTURED OR SOLD BY
THE SELLER (IN CONNECTION WITH THE BUSINESS) INFRINGE OR MISAPPROPRIATE ANY
INTELLECTUAL PROPERTY RIGHT OF ANY THIRD PARTY OR

 

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(III) ALLEGING THAT THE LICENSED INTELLECTUAL PROPERTY IS BEING LICENSED OR
SUBLICENSED IN CONFLICT WITH THE TERMS OF ANY LICENSE OR OTHER AGREEMENT.

 

(G)                                 TO THE BEST KNOWLEDGE OF THE SELLER, NO
PERSON IS ENGAGING IN ANY ACTIVITY THAT INFRINGES THE OWNED INTELLECTUAL
PROPERTY OR LICENSED INTELLECTUAL PROPERTY.  EXCEPT AS SET FORTH IN SECTION
3.15(G) OF THE DISCLOSURE SCHEDULE, THE SELLER HAS NOT GRANTED ANY LICENSE OR
OTHER RIGHT TO ANY THIRD PARTY WITH RESPECT TO THE OWNED INTELLECTUAL PROPERTY
OR LICENSED INTELLECTUAL PROPERTY.

 

(H)                                 THERE IS NO SOFTWARE (I) MATERIAL TO THE
OPERATION OF THE BUSINESS OR (II) MANUFACTURED, DISTRIBUTED, SOLD, LICENSED TO A
THIRD PARTY OR MARKETED BY THE SELLER IN CONNECTION WITH THE BUSINESS, OTHER
THAN, IN EACH CASE, THE EXCLUDED INTELLECTUAL PROPERTY.

 

(I)                                     THE SELLER HAS TAKEN REASONABLE STEPS IN
ACCORDANCE WITH NORMAL INDUSTRY PRACTICE TO MAINTAIN THE CONFIDENTIALITY OF THE
TRADE SECRETS AND OTHER CONFIDENTIAL INTELLECTUAL PROPERTY USED IN THE
BUSINESS.  TO THE BEST KNOWLEDGE OF THE SELLER, (I) THERE HAS BEEN NO
MISAPPROPRIATION OF ANY TRADE SECRETS USED IN THE BUSINESS BY ANY PERSON; (II)
NO EMPLOYEE, INDEPENDENT CONTRACTOR OR AGENT OF THE SELLER HAS MISAPPROPRIATED
ANY TRADE SECRETS OF ANY OTHER PERSON IN THE COURSE OF PERFORMANCE AS AN
EMPLOYEE, INDEPENDENT CONTRACTOR OR AGENT OF THE BUSINESS; AND (III) NO
EMPLOYEE, INDEPENDENT CONTRACTOR OR AGENT OF THE SELLER IS IN MATERIAL DEFAULT
OR MATERIAL BREACH OF ANY TERM OF ANY WRITTEN EMPLOYMENT AGREEMENT,
NONDISCLOSURE AGREEMENT, ASSIGNMENT OF INVENTION AGREEMENT OR SIMILAR AGREEMENT
OR CONTRACT RELATING IN ANY WAY TO THE PROTECTION, OWNERSHIP, DEVELOPMENT, USE
OR TRANSFER OF INTELLECTUAL PROPERTY.

 

(J)                                     THE SHARED MIS SYSTEMS AND THE DEVELOPED
SOFTWARE, TOGETHER WITH THE OWNED INTELLECTUAL PROPERTY AND THE LICENSED
INTELLECTUAL PROPERTY, INCLUDES ALL OF THE SOFTWARE NECESSARY TO ENABLE THE
BUSINESS TO BECOME A FULLY OPERATIONAL ENTITY WITH ALL CURRENT FUNCTIONALITY AND
APPROPRIATE CONTROLS TO PROTECT THE BUSINESS FROM ANY NON-BUSINESS ACCESS.  UPON
CLOSING, THE PURCHASER SHALL OWN OR OTHERWISE HAVE A VALID RIGHT TO USE (ON THE
SAME TERMS AND CONDITIONS THAT THE SELLER OR AUDIOVOX PREVIOUSLY HAD SUCH RIGHT
TO USE) ALL SHARED MIS SYSTEMS AND DEVELOPED SOFTWARE.

 

SECTION 3.16.  Real Property.  (a)  There are no parcels of Owned Real Property
used in the Business or included in the Purchased Assets.

 

(B)                                 THE SELLER HAS NOT LEASED OR SUBLEASED ANY
PARCEL OR ANY PORTION OF ANY PARCEL OF LEASED REAL PROPERTY TO ANY OTHER PERSON
AND NO OTHER PERSON HAS ANY RIGHTS TO THE USE, OCCUPANCY OR ENJOYMENT THEREOF
PURSUANT TO ANY LEASE, SUBLEASE, LICENSE, OCCUPANCY OR OTHER AGREEMENT, NOR HAS
THE SELLER ASSIGNED ITS INTEREST UNDER ANY LEASE OR SUBLEASE OF ANY PARCEL OR
ANY PORTION OF ANY PARCEL OF LEASED REAL PROPERTY TO ANY THIRD PARTY.

 

(C)                                  SECTION 3.16(C) OF THE DISCLOSURE SCHEDULE
SETS FORTH A TRUE AND COMPLETE LIST OF ALL LEASES AND SUBLEASES RELATING TO THE
LEASED REAL PROPERTY AND ANY AND ALL MATERIAL ANCILLARY DOCUMENTS PERTAINING
THERETO (INCLUDING ALL MATERIAL AMENDMENTS, MODIFICATIONS, SUPPLEMENTS,
EXHIBITS, SCHEDULES, ADDENDA AND RESTATEMENTS THERETO AND THEREOF AND ALL
CONSENTS, INCLUDING CONSENTS FOR ALTERATIONS, ASSIGNMENTS AND SUBLETS, DOCUMENTS
RECORDING VARIATIONS, MEMORANDA OF LEASE, OPTIONS, RIGHTS OF EXPANSION,
EXTENSION, FIRST REFUSAL AND FIRST OFFER AND

 

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EVIDENCE OF COMMENCEMENT DATES AND EXPIRATION DATES) (SUCH LEASES, SUBLEASES AND
ANCILLARY DOCUMENTS BEING THE “LEASE DOCUMENTS”).  THE SELLER HAS MADE AVAILABLE
TO THE PURCHASER COPIES OF ALL WRITTEN LEASE DOCUMENTS.  WITH RESPECT TO EACH OF
SUCH LEASES AND SUBLEASES, THE SELLER HAS NOT EXERCISED OR GIVEN ANY NOTICE OF
EXERCISE, NOR HAS ANY LESSOR OR LANDLORD EXERCISED OR RECEIVED ANY NOTICE OF
EXERCISE BY A LESSOR OR LANDLORD OF, ANY OPTION, RIGHT OF FIRST OFFER OR RIGHT
OF FIRST REFUSAL CONTAINED IN ANY SUCH LEASE OR SUBLEASE, INCLUDING ANY SUCH
OPTION OR RIGHT PERTAINING TO PURCHASE, EXPANSION, RENEWAL, EXTENSION OR
RELOCATION (COLLECTIVELY, “OPTIONS”).

 

(D)                                 EXCEPT AS DISCLOSED IN SECTION 3.16(D) OF
THE DISCLOSURE SCHEDULE, THE INTERESTS OF SELLER IN THE LEASED REAL PROPERTY TO
BE TRANSFERRED PURSUANT TO THIS AGREEMENT ARE SUFFICIENT FOR THE CONTINUED
CONDUCT OF THE BUSINESS AFTER THE CLOSING IN SUBSTANTIALLY THE SAME MANNER AS
CONDUCTED PRIOR TO THE CLOSING.

 

(E)                                  TO THE BEST KNOWLEDGE OF THE SELLER, ALL
THE LEASED REAL PROPERTY IS OCCUPIED UNDER A VALID AND CURRENT CERTIFICATE OF
OCCUPANCY OR SIMILAR PERMIT.

 

(F)                                    THE RENTAL SET FORTH IN EACH LEASE OR
SUBLEASE OF THE LEASED REAL PROPERTY IS THE ACTUAL RENTAL BEING PAID, AND THERE
ARE NO SEPARATE AGREEMENTS OR UNDERSTANDINGS WITH RESPECT TO SUCH RENTAL.

 

(G)                                 EXCEPT AS SET FORTH IN SCHEDULE 3.16(G) OF
THE DISCLOSURE SCHEDULE, THE SELLER HAS THE FULL RIGHT TO EXERCISE ANY OPTION
CONTAINED IN THE LEASES AND SUBLEASES PERTAINING TO THE LEASED REAL PROPERTY ON
THE TERMS AND CONDITIONS CONTAINED THEREIN AND UPON DUE EXERCISE WOULD BE
ENTITLED TO ENJOY THE FULL BENEFIT OF SUCH OPTIONS WITH RESPECT THERETO.

 

(H)                                 TO THE BEST KNOWLEDGE OF THE SELLER, NONE OF
THE LEASED REAL PROPERTY TO BE TRANSFERRED PURSUANT TO THIS AGREEMENT IS THE
SUBJECT OF ANY OFFICIAL COMPLAINT OR NOTICE OF VIOLATION OF ANY APPLICABLE LAW,
ZONING ORDINANCE, BUILDING CODE OR REGULATION GOVERNING LAND USE, AND NO SUCH
VIOLATION EXISTS WHICH DETRACTS FROM OR INTERFERES WITH THE PRESENT USE OF SUCH
PROPERTIES OR IMPAIRS THE OPERATIONS THEREON; AND THERE IS NO LAW, ZONING
ORDINANCE, BUILDING CODE, USE OR OCCUPANCY RESTRICTION OR CONDEMNATION ACTION OR
PROCEEDING PENDING, OR, TO THE BEST KNOWLEDGE OF THE SELLER, THREATENED WITH
RESPECT TO ANY SUCH LEASED REAL PROPERTY WHICH WOULD DETRACT FROM, OR INTERFERE
WITH THE PRESENT USE OF, SUCH PROPERTY OR IMPAIR THE OPERATIONS THEREON, AS
PRESENTLY CONDUCTED.

 

For purposes of this Section 3.16 and Sections 3.17 and 3.18, the term “lease”
shall include any and all leases, subleases, sale/leaseback agreements or
similar arrangements.

 

SECTION 3.17.  Tangible Personal Property.  (a)  Section 3.17(a) of the
Disclosure Schedule lists (as of the end of the most recent calendar month for
which such data is available preceding the date of this Agreement) each item or
distinct group of machinery, equipment, tools, supplies, furniture, fixtures,
personalty, vehicles, rolling stock and other tangible personal property (the
“Tangible Personal Property”) used in the Business.

 

(B)                                 THE SELLER HAS THE FULL RIGHT TO EXERCISE
ANY RENEWAL OPTIONS CONTAINED IN THE LEASES AND SUBLEASES PERTAINING TO THE
TANGIBLE PERSONAL PROPERTY ON THE TERMS AND CONDITIONS CONTAINED THEREIN AND
UPON DUE EXERCISE WOULD BE ENTITLED TO ENJOY THE USE OF EACH ITEM OF LEASED
TANGIBLE PERSONAL PROPERTY FOR THE FULL TERM OF SUCH RENEWAL OPTIONS.

 

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SECTION 3.18.  Assets.  (a)  The Seller owns, leases or has the legal right to
use all the properties and assets, including the Owned Intellectual Property,
the Licensed Intellectual Property, the Transferred IP Agreements, the Leased
Real Property and the Tangible Personal Property, used in the conduct of the
Business, and, with respect to contract rights, is a party to and enjoys the
right to the benefits of all such contracts, agreements and other arrangements
used by the Seller (as such relate to the Business) or in or relating to the
conduct of the Business, all of which properties, assets and rights constitute
Purchased Assets (subject to obtaining the third party consents and approvals)
except for the Excluded Assets.  The Seller has good and marketable title to,
or, in the case of leased or subleased Purchased Assets, valid and subsisting
leasehold interests in, all the Purchased Assets, free and clear of all
Encumbrances, except Permitted Encumbrances.

 

(B)                                 THE PURCHASED ASSETS CONSTITUTE ALL THE
PROPERTIES, ASSETS AND RIGHTS FORMING A PART OF, USED OR HELD IN, AND ALL SUCH
PROPERTIES, ASSETS AND RIGHTS AS ARE NECESSARY IN THE CONDUCT OF, THE BUSINESS
OTHER THAN THE EXCLUDED INTELLECTUAL PROPERTY.

 

(C)                                  FOLLOWING THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE EXECUTION OF THE INSTRUMENTS
OF TRANSFER CONTEMPLATED BY THIS AGREEMENT (AND SUBJECT TO THE RECEIPT OF
REQUIRED CONSENTS AND APPROVALS), THE PURCHASER WILL OWN, WITH GOOD, VALID AND
MARKETABLE TITLE, OR LEASE, UNDER VALID AND SUBSISTING LEASES, OR OTHERWISE
ACQUIRE THE INTERESTS OF THE SELLER IN THE PURCHASED ASSETS, FREE AND CLEAR OF
ANY ENCUMBRANCES, OTHER THAN PERMITTED ENCUMBRANCES, AND WITHOUT INCURRING ANY
PENALTY OR OTHER ADVERSE CONSEQUENCE, INCLUDING ANY INCREASE IN RENTALS,
ROYALTIES, OR LICENSE OR OTHER FEES IMPOSED AS A RESULT OF, OR ARISING FROM, THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 

SECTION 3.19.  Customers.  Listed in Section 3.19 of the Disclosure Schedule are
the names and addresses of the ten largest customers (by revenue) of the
Business for the twelve-month period ended February 29, 2004 and the amount for
which each such customer was invoiced during such period.  Except as set forth
in Section 3.19 of the Disclosure Schedule, the Seller as of the date hereof has
not received any notice and has no reason to believe that any such significant
customer of the Business has ceased, or will cease, to use the products,
equipment, goods or services of the Business, or has substantially reduced, or
will substantially reduce, the use of such products, equipment, goods or
services at any time except for reasons which may be attributable to the
Purchaser.

 

SECTION 3.20.  Suppliers.  Listed in Section 3.20 of the Disclosure Schedule are
the names and addresses of each of the ten largest suppliers of raw materials,
supplies, merchandise and other goods for the Business for the twelve-month
period ended February 29, 2004 and the amount for which each such supplier
invoiced the Seller during such period.  Except as set forth in Section 3.20 of
the Disclosure Schedule, as of the date hereof the Seller has not received any
notice and has no reason to believe that any such supplier will not sell raw
materials, supplies, merchandise and other goods to the Purchaser at any time
after the Closing on terms and conditions substantially similar to those used in
its current sales to the Business, subject only to general and customary price
increases except for reasons which may be attributable to the Purchaser.  Except
as set forth in Section 3.20 of the Disclosure Schedule, none of the raw
materials, supplies, merchandise or other goods supplied to the Business are
such that they are not generally available in the market from more than one
source.

 

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SECTION 3.21.  Employee Benefit Matters.  (a)  Plans and Material Documents. 
Section 3.21(a) of the Disclosure Schedule lists (i) all employee benefit plans
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”)) and all bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance or other benefit plans, programs
or arrangements, and all employment, termination, severance or other contracts
or agreements, whether legally enforceable or not, to which the Seller is a
party, with respect to which the Seller has any obligation or which are
maintained, contributed to or sponsored by the Seller, in each case, for the
benefit of any current or former employee, officer or director of the Business,
(ii) each employee benefit plan for which the Seller could incur liability under
Section 4069 of ERISA in the event such plan has been or were to be terminated,
(iii) any plan in respect of which the Seller could incur liability under
Section 4212(c) of ERISA, and (iv) any contracts, arrangements or understandings
between the Seller or any of its Affiliates and any employee of the Business,
including any contracts, arrangements or understandings relating to the sale of
the Purchased Assets (collectively, the “Plans”); provided, that there shall be
no obligation to list in Section 3.21(a) of the Disclosure Schedule any Plan
that is not material.  The Seller has furnished to the Purchaser a complete and
accurate copy of each Plan that is in writing and a complete and accurate copy
of each material document prepared in connection with each such Plan, including
a copy of (i) each trust or other funding arrangement, (ii) each summary plan
description and summary of material modifications, (iii) the most recently filed
IRS Form 5500, (iv) the most recently received IRS determination letter for each
such Plan, and (v) the most recently prepared actuarial report and financial
statement in connection with each such Plan.  Except as set forth in
Section 3.21(a) of the Disclosure Schedule or as permitted to be excluded from
the definition of Plan, there are no other employee benefit plans, programs,
arrangements or agreements, whether formal or informal, whether in writing or
not, to which the Seller is a party, with respect to which the Seller has any
obligation or which are maintained, contributed to or sponsored by the Seller,
in each case, for the benefit of any current or former employee, officer or
director of the Business.  The Seller has no express or implied commitment,
whether legally enforceable or not, to (i) create or incur liability with
respect to or cause to exist any other employee benefit plan, program or
arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual, or (iii) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Code, in each of the foregoing cases, for
the benefit of any current or former employee, officer or director of the
Business.

 

(B)                                 ABSENCE OF CERTAIN TYPES OF PLANS.  NONE OF
THE PLANS IS SUBJECT TO TITLE IV OF ERISA OR SECTION 412 OF THE CODE AND NONE OF
THE COMPANY, ACC OR ANY OF THEIR ERISA AFFILIATES CURRENTLY CONTRIBUTES TO, OR
DURING ANY TIME DURING THE LAST SIX YEARS HAD AN OBLIGATION TO CONTRIBUTE TO, OR
HAS ANY LIABILITY TO A PLAN SUBJECT TO TITLE IV OF ERISA OR SECTION 412 OF THE
CODE.  EXCEPT AS SET FORTH IN SECTION 3.21(B) OF THE DISCLOSURE SCHEDULE, NONE
OF THE PLANS PROVIDES FOR THE PAYMENT OF SEPARATION, SEVERANCE, TERMINATION OR
SIMILAR-TYPE BENEFITS TO ANY PERSON OR OBLIGATES THE SELLER TO PAY SEPARATION,
SEVERANCE, TERMINATION OR SIMILAR-TYPE BENEFITS SOLELY AS A RESULT OF ANY
TRANSACTION CONTEMPLATED BY THIS AGREEMENT OR AS A RESULT OF A CHANGE IN
CONTROL.  EXCEPT AS SET FORTH IN SECTION 3.21(B) OF THE DISCLOSURE SCHEDULE,
NONE OF THE PLANS PROVIDES FOR OR PROMISES RETIREE MEDICAL, DISABILITY OR LIFE
INSURANCE BENEFITS TO ANY CURRENT OR FORMER EMPLOYEE, OFFICER OR DIRECTOR OF THE
BUSINESS, OTHER THAN COBRA CONTINUATION COVERAGE.

 

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EXCEPT AS SET FORTH IN SECTION 3.21(B) OF THE DISCLOSURE SCHEDULE, EACH OF THE
PLANS IS SUBJECT ONLY TO THE LAWS OF THE UNITED STATES OR A POLITICAL
SUBDIVISION THEREOF.

 

(C)                                  COMPLIANCE WITH APPLICABLE LAW.  EACH PLAN
HAS BEEN OPERATED IN ALL MATERIAL RESPECTS IN ACCORDANCE WITH THE REQUIREMENTS
OF ALL APPLICABLE LAW, INCLUDING ERISA AND THE CODE, AND THE SELLER AND, TO THE
KNOWLEDGE OF THE SELLER AFTER DISCHARGING ITS FIDUCIARY DUTY TO SATISFY ANY DUE
INQUIRY, ALL PERSONS WHO PARTICIPATE IN THE OPERATION OF SUCH PLANS AND ALL PLAN
“FIDUCIARIES” (WITHIN THE MEANING OF SECTION 3(21) OF ERISA) HAVE ACTED IN ALL
MATERIAL RESPECTS  IN ACCORDANCE WITH THE PROVISIONS OF ALL APPLICABLE LAW,
INCLUDING ERISA AND THE CODE.  THE SELLER HAS PERFORMED ALL OBLIGATIONS REQUIRED
TO BE PERFORMED BY IT UNDER, IS NOT IN ANY RESPECT IN DEFAULT UNDER OR IN
VIOLATION OF, AND HAS NO KNOWLEDGE OF ANY DEFAULT OR VIOLATION BY ANY PARTY TO,
ANY PLAN, IN EACH CASE AS WOULD NOT RESULT IN ANY MATERIAL LIABILITY TO THE
SELLER OR THE BUSINESS.  NO ACTION IS PENDING OR, TO THE BEST KNOWLEDGE OF THE
SELLER, THREATENED WITH RESPECT TO ANY PLAN (OTHER THAN CLAIMS FOR BENEFITS IN
THE ORDINARY COURSE) AND, TO THE KNOWLEDGE OF THE SELLER, NO FACT OR EVENT
EXISTS THAT COULD GIVE RISE TO ANY SUCH ACTION.

 

(D)                                 QUALIFICATION OF CERTAIN PLANS.  EACH PLAN
THAT IS INTENDED TO BE QUALIFIED UNDER SECTION 401(A) OF THE CODE OR
SECTION 401(K) OF THE CODE HAS RECEIVED A FAVORABLE DETERMINATION LETTER FROM
THE IRS THAT IT IS SO QUALIFIED, AND EACH TRUST ESTABLISHED IN CONNECTION WITH
ANY PLAN THAT IS INTENDED TO BE EXEMPT FROM FEDERAL INCOME TAXATION UNDER
SECTION 501(A) OF THE CODE HAS RECEIVED A DETERMINATION LETTER FROM THE IRS THAT
IT IS SO EXEMPT, AND, TO THE KNOWLEDGE OF THE SELLER, NO FACT OR EVENT HAS
OCCURRED SINCE THE DATE OF SUCH DETERMINATION LETTER FROM THE IRS TO ADVERSELY
AFFECT THE QUALIFIED STATUS OF ANY SUCH PLAN OR THE EXEMPT STATUS OF ANY SUCH
TRUST.  EACH TRUST MAINTAINED OR CONTRIBUTED TO BY THE SELLER OR ANY OF ITS
ERISA AFFILIATES THAT IS INTENDED TO BE QUALIFIED AS A VOLUNTARY EMPLOYEES’
BENEFICIARY ASSOCIATION AND THAT IS INTENDED TO BE EXEMPT FROM FEDERAL INCOME
TAXATION UNDER SECTION 501(C)(9) OF THE CODE HAS RECEIVED A FAVORABLE
DETERMINATION LETTER FROM THE IRS THAT IT IS SO QUALIFIED AND SO EXEMPT, AND, TO
THE KNOWLEDGE OF THE SELLER, NO FACT OR EVENT HAS OCCURRED SINCE THE DATE OF
SUCH DETERMINATION BY THE IRS TO ADVERSELY AFFECT SUCH QUALIFIED OR EXEMPT
STATUS.

 

(E)                                  ABSENCE OF CERTAIN LIABILITIES AND EVENTS. 
THE SELLER HAS ENGAGED IN NO, AND, TO THE KNOWLEDGE OF THE SELLER, THERE HAS
BEEN NO, PROHIBITED TRANSACTION (WITHIN THE MEANING OF SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE) WITH RESPECT TO ANY PLAN.  NEITHER THE SELLER NOR ANY
OF ITS ERISA AFFILIATES HAS INCURRED ANY LIABILITY FOR ANY PENALTY OR TAX
ARISING UNDER SECTION 4971, 4972, 4980, 4980B OR 6652 OF THE CODE OR ANY
LIABILITY UNDER SECTION 502 OF ERISA, AND, TO THE KNOWLEDGE OF THE SELLER, NO
FACT OR EVENT EXISTS THAT COULD GIVE RISE TO ANY SUCH LIABILITY.

 

SECTION 3.22.  Labor Matters.  The Seller is not a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Seller in connection with the Business, and to the best
knowledge of the Seller currently there are no organizational campaigns,
petitions or other unionization activities seeking recognition of a collective
bargaining unit which could affect the Business.  There are no strikes,
slowdowns, work stoppages or material controversies pending or, to the best
knowledge of the Seller, threatened between the Seller and any employees of the
Business, and the Seller has not experienced any such strike, slowdown or work
stoppage or material controversies within the past three years.  There are no
unfair labor practice complaints pending against the Seller before

 

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the National Labor Relations Board or any other Governmental Authority or any
current union representation questions involving Persons employed by or, to the
best knowledge of the Seller, otherwise providing services for the Seller in
connection with the Business.  The Seller with respect to the Business is
currently in material compliance with all applicable Laws relating to the
employment of labor, including those related to wages, hours, collective
bargaining and the payment and withholding of Taxes and other sums as required
by the appropriate Governmental Authority and has withheld and paid to the
appropriate Governmental Authority or is holding for payment not yet due to such
Governmental Authority all material amounts required to be withheld from
employees of the Business and is not liable for any material arrears of wages,
Taxes, penalties or other sums for failure to comply with any of the foregoing. 
The Seller has in all material respects paid in full to all the Persons employed
by or otherwise performing services for the Business or adequately accrued for
in accordance with GAAP all wages, salaries, commissions, bonuses, benefits and
other compensation due to or on behalf of such Persons.  There is no material
claim with respect to payment of wages, salary or overtime pay that has been
asserted or is now pending or, to the best knowledge of the Seller, threatened,
in each case, before any Governmental Authority with respect to any current or
former employee of the Business.  The Seller is not a party to, or otherwise
bound by, any consent decree with, or citation by, any Governmental Authority
relating to employees or employment practices with respect to the Business. 
Except as set forth in Section 3.22 of the Disclosure Schedule, there is no
charge or proceeding with respect to a material violation of any occupational
safety or health standard that has been asserted or is now pending or, to the
best knowledge of the Seller, threatened with respect to the Business.  Except
as set forth in Section 3.22 of the Disclosure Schedule, there is no charge of
discrimination in employment or employment practices with respect to the
Business, for any reason, including age, gender, race, religion or other legally
protected category, which has been asserted or is now pending before the United
States Equal Employment Opportunity Commission, or any other Governmental
Authority in any jurisdiction in which the Seller has employed or currently
employs any Person in connection with the Business nor, to the best knowledge of
the Seller has any such charge been threatened.  Except as set forth in Section
3.22 of the Disclosure Schedule, to the best knowledge of the Seller, the Seller
has not used, in connection with the Business, the services of workers provided
by third party contract labor suppliers, temporary employees, “leased employees”
(as that term is defined in Section 414(n) of the Code), or Persons who have
provided services as independent contractors, to an extent that could reasonably
be expected to result in the disqualification of any Plan under applicable Law,
or the imposition of penalties or excise Taxes with respect to any Plan by the
IRS, the U.S. Department of Labor or any other Governmental Authority, or a
claim by such Person for participation or eligibility for benefits under any
Plan.

 

SECTION 3.23.  Key Employees.  (a)  Section 3.23 of the Disclosure Schedule
lists, for each employee of the Business, the name, title, place of employment,
hire date, actual W-2 compensation for 2002 and 2003 and annualized compensation
for 2004, accrued vacation and sick leave and paid time off as of the date of
this Agreement and a description of the position and job function of each
current salaried employee of the Seller who is employed or retained in
connection with the Business and whose annual compensation exceeded (or, in
2004, is expected to exceed) $75,000.

 

(B)                                 EXCEPT AS SET FORTH IN SECTION 3.23(B) OF
THE DISCLOSURE SCHEDULE, NO DIRECTOR, OFFICER, MANAGEMENT EMPLOYEE OR TECHNICAL
AND PROFESSIONAL PERSON WHO IS EMPLOYED

 

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BY OR WHO OTHERWISE PERFORM SERVICES FOR THE SELLER IN CONNECTION WITH THE
BUSINESS ARE UNDER WRITTEN OBLIGATION TO THE SELLER TO MAINTAIN IN CONFIDENCE
ALL CONFIDENTIAL OR PROPRIETARY INFORMATION ACQUIRED BY THEM IN THE COURSE OF
THEIR EMPLOYMENT AND TO ASSIGN TO THE SELLER ALL INVENTIONS MADE BY THEM WITHIN
THE SCOPE OF THEIR EMPLOYMENT DURING SUCH EMPLOYMENT AND FOR A REASONABLE PERIOD
THEREAFTER.

 

SECTION 3.24.  Certain Interests.  Except as set forth in Section 3.24 of the
Disclosure Schedule, to the best knowledge of the Seller, no stockholder,
officer or director of the Seller and no relative or spouse (or relative of such
spouse) who resides with, or is a dependent of, any such stockholder, officer or
director:

 

(A)                                  HAS ANY DIRECT OR INDIRECT MATERIAL
FINANCIAL INTEREST IN ANY COMPETITOR, SUPPLIER OR CUSTOMER OF THE BUSINESS;
PROVIDED, HOWEVER, THAT THE OWNERSHIP OF SECURITIES REPRESENTING NO MORE THAN
ONE PERCENT OF THE OUTSTANDING VOTING POWER OF ANY COMPETITOR, SUPPLIER OR
CUSTOMER AND THAT ARE ALSO LISTED ON ANY NATIONAL SECURITIES EXCHANGE, SHALL NOT
BE DEEMED TO BE A “FINANCIAL INTEREST” SO LONG AS THE PERSON OWNING SUCH
SECURITIES HAS NO OTHER CONNECTION OR RELATIONSHIP WITH SUCH COMPETITOR,
SUPPLIER OR CUSTOMER;

 

(B)                                 OWNS, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN
PART, OR HAS ANY OTHER INTEREST IN ANY TANGIBLE OR INTANGIBLE PROPERTY THAT THE
SELLER USES IN THE CONDUCT OF THE BUSINESS; OR

 

(C)                                  HAS OUTSTANDING ANY INDEBTEDNESS TO THE
SELLER.

 

SECTION 3.25.  Taxes.  Except as set forth in Section 3.25 of the Disclosure
Schedule, (a) all Tax Returns required to be filed by or with respect to the
Seller, the Purchased Assets or the Business (including any consolidated,
combined or unitary Tax Return that includes the Seller) have been timely filed,
and taxes in connection therewith have been timely paid; (b) all such Tax
Returns are true, correct and complete in all material respects; (c) no
adjustment relating to such Tax Returns has been proposed formally or informally
by any Governmental Authority and, to the best knowledge of the Seller, no basis
exists for any such adjustment; (d) there are no pending or, to the best
knowledge of the Seller, threatened Actions for the assessment or collection of
Taxes against the Seller, the Purchased Assets or the Business or any Person
that was included in the filing of a Tax Return with the Seller on a
consolidated, combined or unitary basis; (e) there are no Tax liens on any of
the Purchased Assets; (f) there are no requests for information outstanding that
could affect the Taxes relating to the Purchased Assets or the Business; (g) the
Seller has not received any notice or inquiry from any jurisdiction where the
Seller does not currently file Tax Returns to the effect that such filings may
be required with respect to the Purchased Assets or the Business or that the
Purchased Assets or the Business may otherwise be subject to taxation by such
jurisdiction; (h) the Seller has properly and timely withheld, collected or
deposited all amounts required to be withheld, collected or deposited in respect
of Taxes and (i) to the best knowledge of the Seller, there are no Tax
investigations, inquiries or audits by any Tax authority in progress relating to
the Purchased Assets or the Business, nor has the Seller received any written
notice indicating that a Governmental Authority intends to conduct such an audit
or investigation.

 

SECTION 3.26.  Insurance.  Set forth in Section 3.26 of the Disclosure Schedule
is a list of all material insurance policies related to the Business, which
policies cover all material

 

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assets, properties and reasonably anticipated risks of the Business.  All such
policies are in full force and effect, all premiums due thereon have been paid
and the Seller has complied in all material respects with the provisions of such
policies.  No proceeding is pending or, to the best knowledge of the Seller,
threatened to revoke or cancel or limit such policies and no notice of
cancellation of any such policies has been received by the Seller.

 

SECTION 3.27.  Certain Business Practices.  Except as set forth in Section 3.27
of the Disclosure Schedule, neither the Seller nor any of its directors,
officers, agents, representatives or employees (in their capacity as directors,
officers, agents, representatives or employees) has:  (a) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity in respect of the Business; (b) directly or indirectly,
paid or delivered any fee, commission or other sum of money or item of property,
however characterized, to any finder, agent, or other party acting on behalf of
or under the auspices of a governmental official or Governmental Authority, in
the United States or any other country, which is in any manner illegal under any
Law of the United States or any other country having jurisdiction; or (c) made
any payment to any customer or supplier of the Seller or any officer, director,
partner, employee or agent of any such customer or officer, director, partner,
employee or agent for the unlawful reciprocal practice, or made any other
unlawful payment or given any other unlawful consideration to any such customer
or supplier or any such officer, director, partner, employee or agent, in
respect of the Business.

 

SECTION 3.28.  INTENTIONALLY OMITTED.

 

SECTION 3.29.  Brokers.  Except for Jefferies & Company, Inc., no broker, finder
or investment banker is entitled to any brokerage, finder’s or other fee or
commission in connection with the transactions contemplated by this Agreement or
the Ancillary Agreements based upon arrangements made by or on behalf of the
Seller or its Affiliates.  The Seller is solely responsible for the fees and
expenses of Jefferies & Company, Inc.

 

SECTION 3.30.  Board Approval; Vote Required.  (a)  The Board of Directors of
Audiovox (the “Audiovox Board”), by resolutions duly adopted by unanimous vote
of those voting at a meeting duly called and held and not subsequently rescinded
or modified in any way, has duly (i) determined that this Agreement and the
transactions contemplated hereby are fair to and in the best interests of
Audiovox and its stockholders, (ii) approved this Agreement and the transactions
contemplated hereby and declared their advisability and (iii) recommended that
the stockholders of Audiovox approve and adopt this Agreement and approve the
transactions contemplated hereby and directed that this Agreement and the
transactions contemplated hereby be submitted for consideration by Audiovox’s
stockholders at the Audiovox Stockholders’ Meeting (as hereinafter defined).

 

(B)                                 THE ONLY VOTE OF THE HOLDERS OF ANY CLASS OR
SERIES OF CAPITAL STOCK OF AUDIOVOX NECESSARY TO APPROVE THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY IS THE AFFIRMATIVE VOTE OF THE HOLDERS OF A
MAJORITY OF THE VOTES UNDER THE OUTSTANDING SHARES OF CLASS A COMMON STOCK AND
CLASS B COMMON STOCK OF AUDIOVOX VOTING AS A SINGLE CLASS IN FAVOR OF THE
APPROVAL AND ADOPTION OF THIS AGREEMENT.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER

 

As an inducement to the Seller to enter into this Agreement, the Purchaser
hereby represents and warrants to the Seller as follows:

 

SECTION 4.01.  Organization and Authority of the Purchaser.  The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all necessary corporate power
and authority to enter into this Agreement and the Ancillary Agreements to which
it is a party, to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby.  The execution and
delivery by the Purchaser of this Agreement and the Ancillary Agreements to
which it is a party, the performance by the Purchaser of its obligations
hereunder and thereunder and the consummation by the Purchaser of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action on the part of the Purchaser.  This Agreement has
been, and upon their execution the Ancillary Agreements to which the Purchaser
is a party shall have been, duly executed and delivered by the Purchaser, and
(assuming due authorization, execution and delivery by the Seller) this
Agreement constitutes, and upon their execution the Ancillary Agreements to
which the Purchaser is a party shall constitute, legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with their respective terms.

 

SECTION 4.02.  No Conflict.  Assuming compliance with the pre-merger
notification and waiting period requirements of the HSR Act and the making and
obtaining of all filings, notifications, consents, approvals, authorizations and
other actions referred to in Section 4.03, except as may result from any facts
or circumstances relating solely to the Seller, the execution, delivery and
performance by the Purchaser of this Agreement and the Ancillary Agreements to
which it is a party do not and will not (a) violate, conflict with or result in
the breach of any provision of the Certificate of Incorporation or By-laws of
the Purchaser, (b) conflict with or violate any material Law or Governmental
Order applicable to the Purchaser or (c) conflict with, or result in any breach
of, constitute a default (or event which with the giving of notice or lapse of
time, or both, would become a default) under, require any consent under, or give
to others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, any material note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other
instrument or arrangement to which the Purchaser is a party, which would
adversely affect the ability of the Purchaser to carry out its obligations
under, and to consummate the transactions contemplated by, this Agreement or the
Ancillary Agreements.

 

SECTION 4.03.  Governmental Consents and Approvals.  The execution, delivery and
performance by the Purchaser of this Agreement and each Ancillary Agreement to
which the Purchaser is a party do not and will not require any material consent,
approval, authorization or other order of, action by, filing with, or
notification to any Governmental Authority applicable to the Purchaser, except
(a) as described in a writing given to the Seller by the Purchaser on the

 

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date of this Agreement, (b) the pre-merger notification and waiting period
requirements of the HSR Act and (c) the applicable antitrust approvals in the
Peoples Republic of China.

 

SECTION 4.04.  Financing.  The Purchaser has, and at the Closing will have, all
funds necessary to consummate all the transactions contemplated by this
Agreement and the Ancillary Agreements.

 

SECTION 4.05.  Litigation.  Except as set forth in a writing given to the Seller
by the Purchaser on the date of this Agreement, no Action by or against the
Purchaser is pending or, to the best knowledge of the Purchaser, threatened,
which would materially and adversely affect the legality, validity or
enforceability of this Agreement, any Ancillary Agreement or the consummation of
the transactions contemplated hereby or thereby.

 

SECTION 4.06.  Brokers.  Except for Merrill Lynch, Pierce, Fenner & Smith
Incorporated, no broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Purchaser.  The Purchaser shall be solely responsible for
payment of the fees and expenses of Merrill Lynch, Pierce, Fenner & Smith
Incorporated.

 

SECTION 4.07.  UTStarcom Canada.  UTStarcom Canada is registered in Canada and
in the Province of Ontario and is eligible to apply for the certificates
necessary to exempt either the Seller or the Purchaser from paying GST and PST
taxes in Canada and in the Province of Ontario as a result of the transactions
contemplated by this Agreement.

 

ARTICLE V

ADDITIONAL AGREEMENTS

 

SECTION 5.01.  Conduct of Business Prior to the Closing.  (a)  The Seller
covenants and agrees that, except as described in Section 5.01(a) of the
Disclosure Schedule, between the date hereof and the time of the Closing, the
Seller shall not conduct the Business other than in the ordinary course and
consistent with the Seller’s prior practice.  Without limiting the generality of
the foregoing, except as described in Section 5.01(a) of the Disclosure
Schedule, the Seller shall (as it relates to the Business) (i) continue its
advertising and promotional activities, and pricing and purchasing policies, in
accordance with past practice and good business judgment; (ii) not shorten or
lengthen the customary payment cycles for any of its payables or receivables;
(iii) use its reasonable commercial efforts to (A) preserve intact the business
organization of the Business, (B) keep available to the Purchaser (without any
obligation to increase their compensation) the services of the employees of the
Seller to whom offers of employment are to be made pursuant to Section 6.01,
(C) continue in full force and effect without material modification all existing
policies or binders of insurance currently maintained in respect of the Business
and (D) preserve its current relationships with the customers and suppliers of
the Business and other persons with which the Business has had significant
business relationships; (iv) exercise, but only after notice to the Purchaser
and receipt of the Purchaser’s prior written approval (not to be unreasonably
withheld), any rights of renewal pursuant to the terms of any of the leases or
subleases set forth in Section 3.16(c) of the

 

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Disclosure Schedule which by their terms would otherwise expire; and (v) except
in accordance with Section 5.06 or Article IX, not engage in any practice, take
any action, fail to take any action or enter into any transaction which would
render it unable to satisfy the condition set forth in Section 7.02(a).

 

(B)                                 EXCEPT AS DESCRIBED IN SECTION 5.01(B) OF
THE DISCLOSURE SCHEDULE, THE SELLER COVENANTS AND AGREES THAT, BETWEEN THE DATE
HEREOF AND THE TIME OF THE CLOSING, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
PURCHASER (NOT TO BE UNREASONABLY WITHHELD), THE SELLER WILL NOT TAKE ANY OF THE
ACTIONS ENUMERATED IN THE SECOND SENTENCE OF SECTION 3.10 AND ALL CLAUSES
THEREOF (OTHER THAN CLAUSES (K), (U), (X), (Z) AND (AA), WHICH SHALL BE
EXCLUDED).

 

SECTION 5.02.  Access to Information.  (a)  From the date hereof until the
Closing, subject to applicable limitations under confidentiality agreements to
which the Seller is bound, upon reasonable notice, the Seller shall cause its
officers, directors, employees, agents, representatives, accountants and counsel
to:  (i) afford the officers, employees, agents, accountants, counsel, financing
sources and representatives of the Purchaser reasonable access, during normal
business hours, to the offices, properties, plants, other facilities, and books
and records of the Seller relating to the Business and to those officers,
directors, employees, agents, accountants and counsel of the Seller who have any
knowledge relating to the Business and (ii) furnish to the officers, employees,
agents, accountants, counsel, financing sources and representatives of the
Purchaser such additional financial and operating data and other information
regarding the assets, properties, liabilities and goodwill of the Business (or
legible copies thereof) that are reasonably available to the Seller as the
Purchaser may from time to time reasonably request.  All information disclosed
hereunder shall be subject to the Confidentiality Agreement.

 

(B)                                 IN ORDER TO FACILITATE THE RESOLUTION OF ANY
CLAIMS MADE AGAINST OR INCURRED BY THE SELLER, THE MAKING OF ANY NECESSARY
FILING BY AUDIOVOX OR THE SELLER OR FOR ANY OTHER REASONABLE PURPOSE, FOR A
PERIOD OF SEVEN YEARS AFTER THE CLOSING, THE PURCHASER SHALL (I) RETAIN THE
BOOKS AND RECORDS RELATING TO THE BUSINESS RELATING TO PERIODS PRIOR TO THE
CLOSING IN A MANNER REASONABLY CONSISTENT WITH THE PRIOR PRACTICE OF THE SELLER,
(II) AUTHORIZE, DIRECT AND INSTRUCT ITS EMPLOYEES WITH KNOWLEDGE OF SUCH CLAIMS
TO REASONABLY COOPERATE AND ASSIST THE SELLER IN CONNECTION WITH SUCH CLAIMS AND
(III) UPON REASONABLE NOTICE, AFFORD THE OFFICERS, EMPLOYEES, AGENTS AND
REPRESENTATIVES OF AUDIOVOX OR THE SELLER REASONABLE ACCESS (INCLUDING THE RIGHT
TO MAKE, AT THE SELLER’S EXPENSE, PHOTOCOPIES), DURING NORMAL BUSINESS HOURS, TO
SUCH BOOKS AND RECORDS.

 

(C)                                  IN ORDER TO FACILITATE THE RESOLUTION OF
ANY CLAIMS MADE BY OR AGAINST OR INCURRED BY THE PURCHASER AFTER THE CLOSING OR
FOR ANY OTHER REASONABLE PURPOSE, FOR A PERIOD OF SEVEN YEARS FOLLOWING THE
CLOSING, THE SELLER SHALL (I) RETAIN THE BOOKS AND RECORDS OF THE SELLER WHICH
RELATE TO THE BUSINESS AND ITS OPERATIONS FOR PERIODS PRIOR TO THE CLOSING AND
WHICH SHALL NOT OTHERWISE HAVE BEEN DELIVERED TO THE PURCHASER, (II) AUTHORIZE,
DIRECT AND INSTRUCT ITS EMPLOYEES WITH KNOWLEDGE OF SUCH CLAIMS TO REASONABLY
COOPERATE AND ASSIST THE PURCHASER IN CONNECTION WITH SUCH CLAIMS AND (III) UPON
REASONABLE NOTICE, AFFORD THE OFFICERS, EMPLOYEES, AGENTS AND REPRESENTATIVES OF
THE PURCHASER REASONABLE ACCESS (INCLUDING THE RIGHT TO MAKE PHOTOCOPIES, AT THE
PURCHASER’S EXPENSE), DURING NORMAL BUSINESS HOURS, TO SUCH BOOKS AND RECORDS.

 

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SECTION 5.03.  Confidentiality.  Subject to the Seller’s rights with respect to
the Excluded Assets and the Excluded Liabilities, the Seller agrees to, and
shall cause its agents, representatives, Affiliates, employees, officers and
directors to:  (i) treat and hold as confidential (and not disclose or provide
access to any Person to) all information relating to trade secrets, processes,
patent applications, product development, price, customer and supplier lists,
pricing and marketing plans, policies and strategies, details of client and
consultant contracts, operations methods, product development techniques,
business acquisition plans, new personnel acquisition plans and all other
confidential or proprietary information with respect to the Business, (ii) in
the event that the Seller or any such agent, representative, Affiliate,
employee, officer or director becomes legally compelled to disclose any such
information, provide the Purchaser with prompt written notice of such
requirement so that the Purchaser may seek a protective order or other remedy or
waive compliance with this Section 5.03, and (iii) in the event that such
protective order or other remedy is not obtained, or the Purchaser waives
compliance with this Section 5.03, furnish only that portion of such
confidential information which is legally required to be provided and exercise
its reasonable commercial efforts to obtain assurances that confidential
treatment will be accorded such information; provided, however, that this
sentence shall not apply to any information that, (x) at the time of disclosure,
is available publicly and was not disclosed in breach of this Agreement by the
Seller, its agents, representatives, Affiliates, employees, officers or
directors, (y) the Seller reasonably believes is necessary or advisable in
connection with any claim against the Seller or for which the Seller is
purportedly responsible, whether by a third party or otherwise or (z) the
performance by the Seller of its obligations, or the assertion by the Seller of
any of its rights or remedies, under any Acquisition Document; and provided
further that, with respect to Intellectual Property, specific information shall
not be deemed to be within the foregoing exception merely because it is embraced
in general disclosures in the public domain.  In addition, with respect to
Intellectual Property, any combination of features shall not be deemed to be
within the foregoing exception merely because the individual features are in the
public domain unless the combination itself and its principle of operation are
in the public domain.  Notwithstanding the foregoing, the Seller and its
Affiliates may make such disclosures as are required under applicable securities
or state law or regulation or national stock exchange rules or regulations.  The
Seller agrees and acknowledges that remedies at law for any breach of its
obligations under this Section 5.03 are inadequate and that in addition thereto
the Purchaser shall be entitled to seek equitable relief, including injunction
and specific performance, in the event of any such breach.

 

SECTION 5.04.  Regulatory and Other Authorizations; Notices and Consents.  (a) 
The Seller shall use its reasonable commercial efforts to obtain all
authorizations, consents, orders and approvals of all third parties, including
all Governmental Authorities and officials that may be or become reasonably
necessary for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement and the Ancillary Agreements and will
cooperate fully with the Purchaser in promptly seeking to obtain all such
authorizations, consents, orders and approvals.  Each party hereto agrees to
make an appropriate filing, if necessary, pursuant to the HSR Act with respect
to the transactions contemplated by this Agreement within ten (10) Business Days
of the date hereof and to supply as promptly as practicable to the appropriate
Governmental Authorities any additional information and documentary material
that may be requested pursuant to the HSR Act.  The filing fee for such HSR Act
filing shall be borne by the Purchaser.

 

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(B)                                 THE SELLER SHALL COOPERATE AND USE ITS
REASONABLE COMMERCIAL EFFORTS TO OBTAIN OR ASSIST THE PURCHASER IN OBTAINING
SUCH THIRD PARTY CONSENTS AND ESTOPPEL CERTIFICATES AS MAY BE REASONABLY
NECESSARY OR DESIRABLE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.

 

(C)                                  THE PURCHASER SHALL COOPERATE AND USE ALL
REASONABLE EFFORTS TO ASSIST THE SELLER IN GIVING SUCH NOTICES AND OBTAINING
SUCH CONSENTS AND ESTOPPEL CERTIFICATES; PROVIDED, HOWEVER, THAT THE PURCHASER
SHALL HAVE NO OBLIGATION TO GIVE ANY GUARANTEE OR OTHER CONSIDERATION OF ANY
NATURE IN CONNECTION WITH ANY SUCH NOTICE, CONSENT OR ESTOPPEL CERTIFICATE OR TO
CONSENT TO ANY CHANGE IN THE TERMS OF ANY AGREEMENT OR ARRANGEMENT WHICH THE
PURCHASER IN ITS SOLE DISCRETION MAY DEEM ADVERSE TO THE INTERESTS OF THE
PURCHASER OR THE BUSINESS.

 

(D)                                 THE SELLER AND THE PURCHASER AGREE THAT, IN
THE EVENT THAT ANY CONSENT, APPROVAL OR AUTHORIZATION REASONABLY NECESSARY OR
DESIRABLE TO PRESERVE FOR THE BUSINESS ANY RIGHT OR BENEFIT UNDER ANY ASSUMED
CONTRACT IS NOT OBTAINED PRIOR TO THE CLOSING, THE SELLER WILL, SUBSEQUENT TO
THE CLOSING, COOPERATE WITH THE PURCHASER IN ATTEMPTING TO OBTAIN SUCH CONSENT,
APPROVAL OR AUTHORIZATION AS PROMPTLY THEREAFTER AS IS REASONABLY PRACTICABLE. 
IF SUCH CONSENT, APPROVAL OR AUTHORIZATION CANNOT BE OBTAINED, THE SELLER SHALL
USE ITS REASONABLE COMMERCIAL EFFORTS TO PROVIDE THE PURCHASER WITH, OR CAUSE TO
BE PROVIDED TO THE PURCHASER, THE RIGHTS AND BENEFITS OF THE AFFECTED ASSUMED
CONTRACT FOR THE TERM OF SUCH ASSUMED CONTRACT.  TO THE EXTENT THAT ANY ASSUMED
CONTRACT IS NOT CAPABLE OF BEING ASSIGNED, TRANSFERRED, SUBLEASED OR SUBLICENSED
WITHOUT THE CONSENT OR WAIVER OF THE OTHER PARTY THERETO OR ANY THIRD PARTY
INCLUDING A GOVERNMENT OR GOVERNMENTAL UNIT, OR IF SUCH ASSIGNMENT, TRANSFER,
SUBLEASE OR SUBLICENSE OR ATTEMPTED ASSIGNMENT, TRANSFER, SUBLEASE OR SUBLICENSE
WOULD CONSTITUTE A BREACH THEREOF OR A VIOLATION OF ANY LAW, DECREE, ORDER,
REGULATION, OR OTHER GOVERNMENTAL EDICT, THIS AGREEMENT SHALL NOT CONSTITUTE AN
ASSIGNMENT, TRANSFER, SUBLEASE OR SUBLICENSE THEREOF, OR AN ATTEMPTED
ASSIGNMENT, TRANSFER, SUBLEASE OR SUBLICENSE OF ANY SUCH ASSUMED CONTRACT.

 

(E)                                  IN USING ITS REASONABLE COMMERCIAL EFFORTS
TO OBTAIN ANY AUTHORIZATION, ORDER, CONSENT, APPROVAL, ASSIGNMENT, ESTOPPEL
CERTIFICATE OR WAIVER HEREUNDER, THE SELLER SHALL NOT BE OBLIGATED TO INCUR
COSTS, EXPENSES (INCLUDING THIRD-PARTY LEGAL FEES) AND (COLLECTIVELY, “CONSENT
COSTS”) WHICH, ALONG WITH ALL OTHER CONSENT COSTS INCURRED BY THE SELLER, (X)
EXCEED $500,000 IN THE AGGREGATE AND (Y) ARE OTHER THAN ONE-TIME COSTS TO BE
PAID IN CONNECTION WITH OBTAINING SUCH AUTHORIZATION, ORDER, CONSENT, APPROVAL,
ASSIGNMENT OR WAIVER.  FOR THE SAKE OF CLARITY, AUDIOVOX SHALL NOT HAVE ANY
OBLIGATION TO INCUR CONSENT COSTS.

 

SECTION 5.05.  Notice of Developments.  Prior to the Closing, the Seller shall
promptly notify the Purchaser (a) in writing of all events, circumstances, facts
and occurrences arising subsequent to the date of this Agreement which could
reasonably be expected to result in a failure to satisfy the condition set forth
in Section 7.02(a) and (b) all other material and adverse developments affecting
the Purchased Assets, Liabilities, business, financial condition, operations,
results of operations, customer or supplier relations, employee relations,
projections or prospects of the Business.

 

SECTION 5.06.  No Solicitation or Negotiation.  (a) Each of the Seller and
Audiovox agrees that neither it nor any of its directors, officers or employees
will, and that it will cause its agents, advisors and other representatives
(including, without limitation, any investment

 

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banker, attorney or accountant retained by it), not to, directly or indirectly,
(i) solicit, initiate or encourage (including by way of furnishing nonpublic
information), or take any other action to facilitate, any inquiries or the
making of any proposal or offer (including, without limitation, any proposal or
offer to the  stockholders of Audiovox) that constitutes, or may reasonably be
expected to lead to, any Competing Transaction (as hereinafter defined), or (ii)
enter into or maintain or continue discussions or negotiations with any person
or entity in furtherance of such inquiries or to obtain a proposal or offer for
a Competing Transaction, or (iii) agree to, approve, endorse or recommend any
Competing Transaction or enter into any letter of intent or other contract,
agreement or commitment contemplating or otherwise relating to any Competing
Transaction.  The Seller or Audiovox, as applicable, shall notify the Purchaser
as promptly as practicable (and in any event within two (2) days after the
Seller or Audiovox, as applicable, attains knowledge thereof), orally and in
writing, if any proposal or offer, or any inquiry or contact with any person
with respect thereto, regarding a Competing Transaction is made, specifying the
material terms and conditions thereof and the identity of the party making such
proposal or offer or inquiry or contact (and the Seller or Audiovox, as
applicable, shall notify the Purchaser concerning any material amendments to
such proposal or offer).  Audiovox shall provide the Purchaser with forty-eight
(48) hours prior notice (or such lesser prior notice as is provided to the
members of the Audiovox Board) of any meeting of the Audiovox Board at which the
Audiovox Board is reasonably expected to consider any Competing Transaction. 
The Seller and Audiovox immediately shall cease and cause to be terminated all
existing discussions or negotiations with any parties conducted heretofore with
respect to a Competing Transaction.  The Seller and Audiovox agree not to,
without the prior written consent of the Purchaser, release any Person from, or
waive any provision of, any confidentiality or standstill agreement (unless the
Audiovox Board, in order to comply with its fiduciary obligations to Audiovox
and its stockholders under applicable Law, must waive the standstill provisions
so that such Person may make a proposal or offer which may reasonably be
expected to lead to a Superior Proposal) to which the Seller and Audiovox is a
party relating to Audiovox, the Seller or the Purchased Assets.

 

(B)                                 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
SECTION 5.06, THE AUDIOVOX BOARD MAY FURNISH INFORMATION TO, AND ENTER INTO
DISCUSSIONS WITH, A PERSON WHO HAS MADE AN UNSOLICITED, WRITTEN, BONA FIDE
PROPOSAL OR OFFER REGARDING A COMPETING TRANSACTION, AND THE AUDIOVOX BOARD HAS
(I) DETERMINED, IN ITS GOOD FAITH JUDGMENT (AFTER HAVING RECEIVED THE ADVICE OF
A FINANCIAL ADVISOR OF NATIONALLY RECOGNIZED REPUTATION), THAT SUCH PROPOSAL OR
OFFER CONSTITUTES, OR MAY BE REASONABLY EXPECTED TO LEAD TO, A SUPERIOR PROPOSAL
(AS HEREUNDER DEFINED), (II) DETERMINED, IN ITS GOOD FAITH JUDGMENT AFTER
CONSULTATION WITH INDEPENDENT LEGAL COUNSEL (WHO MAY BE AUDIOVOX’S REGULARLY
ENGAGED INDEPENDENT LEGAL COUNSEL), THAT, IN LIGHT OF SUCH PROPOSAL OR OFFER,
THE FURNISHING OF SUCH INFORMATION OR ENTERING INTO DISCUSSIONS IS REQUIRED TO
COMPLY WITH ITS FIDUCIARY OBLIGATIONS TO AUDIOVOX AND ITS STOCKHOLDERS UNDER
APPLICABLE LAW, (III) PROVIDED WRITTEN NOTICE TO THE PURCHASER OF ITS INTENT TO
FURNISH INFORMATION OR ENTER INTO DISCUSSIONS WITH SUCH PERSON, AND (IV)
OBTAINED FROM SUCH PERSON AN EXECUTED CONFIDENTIALITY AGREEMENT ON TERMS NO LESS
FAVORABLE TO AUDIOVOX THAN THOSE CONTAINED IN THE CONFIDENTIALITY AGREEMENT (IT
BEING UNDERSTOOD THAT SUCH CONFIDENTIALITY AGREEMENT AND ANY RELATED AGREEMENTS
SHALL NOT INCLUDE ANY PROVISION CALLING FOR ANY EXCLUSIVE RIGHT TO NEGOTIATE
WITH SUCH PARTY OR HAVING THE EFFECT OF PROHIBITING AUDIOVOX FROM SATISFYING ITS
OBLIGATIONS UNDER THIS AGREEMENT).

 

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(C)                                  EXCEPT AS SET FORTH IN THIS SECTION
5.06(C), NEITHER THE AUDIOVOX BOARD NOR ANY COMMITTEE THEREOF SHALL WITHDRAW OR
MODIFY, OR PROPOSE TO WITHDRAW OR MODIFY, IN A MANNER ADVERSE TO THE PURCHASER,
THE AUDIOVOX RECOMMENDATION (A “CHANGE IN THE AUDIOVOX RECOMMENDATION”) OR
APPROVE OR RECOMMEND, OR CAUSE OR PERMIT AUDIOVOX TO ENTER INTO ANY LETTER OF
INTENT, AGREEMENT OR OBLIGATION WITH RESPECT TO, ANY COMPETING TRANSACTION. 
NOTWITHSTANDING THE FOREGOING, IF THE AUDIOVOX BOARD DETERMINES, IN ITS GOOD
FAITH JUDGMENT PRIOR TO THE TIME OF THE AUDIOVOX STOCKHOLDERS’ MEETING AND AFTER
CONSULTATION WITH INDEPENDENT LEGAL COUNSEL (WHO MAY BE AUDIOVOX’S REGULARLY
ENGAGED INDEPENDENT LEGAL COUNSEL), THAT IT IS REQUIRED TO MAKE A CHANGE IN THE
AUDIOVOX RECOMMENDATION TO COMPLY WITH ITS FIDUCIARY OBLIGATIONS TO AUDIOVOX AND
ITS STOCKHOLDERS UNDER APPLICABLE LAW, THE AUDIOVOX BOARD MAY MAKE A CHANGE IN
THE AUDIOVOX RECOMMENDATION TO RECOMMEND A SUPERIOR PROPOSAL, BUT ONLY (I) AFTER
PROVIDING WRITTEN NOTICE TO THE PURCHASER (A “NOTICE OF SUPERIOR PROPOSAL”)
ADVISING AUDIOVOX THAT THE AUDIOVOX BOARD HAS RECEIVED A SUPERIOR PROPOSAL,
SPECIFYING THE MATERIAL TERMS AND CONDITIONS OF SUCH SUPERIOR PROPOSAL AND
IDENTIFYING THE PERSON MAKING SUCH SUPERIOR PROPOSAL AND INDICATING THAT THE
AUDIOVOX BOARD INTENDS TO EFFECT A CHANGE IN THE AUDIOVOX RECOMMENDATION AND THE
MANNER IN WHICH IT INTENDS (OR MAY INTEND) TO DO SO, AND (II) IF THE PURCHASER
DOES NOT, WITHIN THREE (3) BUSINESS DAYS OF PURCHASER’S RECEIPT OF THE NOTICE OF
SUPERIOR PROPOSAL, MAKE AN OFFER THAT THE AUDIOVOX BOARD DETERMINES, IN ITS GOOD
FAITH JUDGMENT (AFTER HAVING RECEIVED THE ADVICE OF A FINANCIAL ADVISOR OF
NATIONALLY RECOGNIZED REPUTATION) TO BE AT LEAST AS FAVORABLE TO AUDIOVOX’S
STOCKHOLDERS AS SUCH SUPERIOR PROPOSAL.  ANY DISCLOSURE THAT THE AUDIOVOX BOARD
MAY DETERMINE THAT IT IS COMPELLED TO MAKE WITH RESPECT TO THE RECEIPT OF A
PROPOSAL OR OFFER FOR A COMPETING TRANSACTION OR OTHERWISE IN ORDER TO COMPLY
WITH ITS FIDUCIARY OBLIGATIONS TO AUDIOVOX AND ITS STOCKHOLDERS UNDER APPLICABLE
LAW, INCLUDING UNDER RULE 14D-9 OR 14E-2 OF THE RULES PROMULGATED UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WILL NOT CONSTITUTE A VIOLATION OF
THIS AGREEMENT.

 

(D)                                 A “COMPETING TRANSACTION” MEANS ANY OF THE
FOLLOWING (OTHER THAN THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT):  (I) ANY
MERGER, CONSOLIDATION, SHARE EXCHANGE, BUSINESS COMBINATION, RECAPITALIZATION,
LIQUIDATION, DISSOLUTION OR OTHER SIMILAR TRANSACTION INVOLVING AUDIOVOX OR THE
SELLER; (II) ANY SALE, LEASE, EXCHANGE, TRANSFER OR OTHER DISPOSITION OF ALL OR
A SUBSTANTIAL PART OF THE ASSETS OF AUDIOVOX OR THE SELLER (OTHER THAN A
DISPOSITION OF THE ASSETS OF AUDIOVOX THAT DO NOT COMPRISE THE PURCHASED
ASSETS); (III) ANY SALE, EXCHANGE, TRANSFER OR OTHER DISPOSITION OF 15% OR MORE
OF ANY CLASS OF EQUITY SECURITIES OF AUDIOVOX OR OF THE SELLER; (IV) ANY TENDER
OFFER OR EXCHANGE OFFER THAT, IF CONSUMMATED, WOULD RESULT IN ANY PERSON
BENEFICIALLY OWNING 15% OR MORE OF ANY CLASS OF EQUITY SECURITIES OF AUDIOVOX OR
OF THE SELLER; OR (V) ANY SOLICITATION IN OPPOSITION TO APPROVAL AND ADOPTION OF
THIS AGREEMENT BY AUDIOVOX’S STOCKHOLDERS.

 

(E)                                  A “SUPERIOR PROPOSAL” MEANS AN UNSOLICITED
WRITTEN BONA FIDE OFFER MADE BY A THIRD PARTY TO CONSUMMATE ANY OF THE FOLLOWING
TRANSACTIONS:  (I) A MERGER, CONSOLIDATION, SHARE EXCHANGE, BUSINESS COMBINATION
OR OTHER SIMILAR TRANSACTION INVOLVING AUDIOVOX OR THE SELLER PURSUANT TO WHICH
THE STOCKHOLDERS OF AUDIOVOX OR THE SELLER, AS THE CASE MAY BE, IMMEDIATELY
PRECEDING SUCH TRANSACTION WOULD HOLD LESS THAN 50% OF THE EQUITY INTEREST IN
THE SURVIVING OR RESULTING ENTITY OF SUCH TRANSACTION; (II) THE ACQUISITION BY
ANY PERSON OR GROUP (INCLUDING BY MEANS OF A TENDER OFFER OR AN EXCHANGE OFFER
OR A TWO-STEP TRANSACTION INVOLVING A TENDER OFFER FOLLOWED WITH REASONABLE
PROMPTNESS BY A CASH-OUT MERGER INVOLVING AUDIOVOX), DIRECTLY OR INDIRECTLY, OF
OWNERSHIP OF 51% OF THE THEN OUTSTANDING SHARES OF STOCK OF AUDIOVOX

 

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OR 90% OF THE THEN OUTSTANDING SHARES OF STOCK OF THE SELLER, OR (III) AN
ACQUISITION OF 85% OF THE ASSETS OF THE SELLER, IN EACH CASE ON TERMS (INCLUDING
CONDITIONS TO CONSUMMATION OF THE CONTEMPLATED TRANSACTION) THAT THE AUDIOVOX
BOARD DETERMINES, IN ITS GOOD FAITH JUDGMENT (AFTER HAVING RECEIVED THE ADVICE
OF A FINANCIAL ADVISOR OF NATIONALLY RECOGNIZED REPUTATION), TO BE MORE
FAVORABLE TO AUDIOVOX STOCKHOLDERS THAN TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT; PROVIDED, HOWEVER, THAT ANY SUCH OFFER SHALL NOT BE DEEMED TO BE A
“SUPERIOR PROPOSAL” IF ANY FINANCING REQUIRED TO CONSUMMATE THE TRANSACTION
CONTEMPLATED BY SUCH OFFER IS NOT COMMITTED AND IS NOT LIKELY IN THE GOOD FAITH
JUDGMENT OF THE AUDIOVOX BOARD (AFTER HAVING RECEIVED THE ADVICE OF A FINANCIAL
ADVISOR OF NATIONALLY RECOGNIZED REPUTATION) TO BE OBTAINED BY SUCH THIRD PARTY
ON A TIMELY BASIS.

 

SECTION 5.07.  Use of Intellectual Property.  From and after the Closing,
neither the Seller nor any of its Affiliates shall use any of the Owned
Intellectual Property or any of the Licensed Intellectual Property, except for
the Excluded Assets.

 

SECTION 5.08.  Non-Competition.  (a)  For a period of five years after the
Closing (the “Restricted Period”), neither the Seller nor Audiovox shall
conduct, directly or indirectly, the Business or, without the prior written
consent of the Purchaser, directly or indirectly, own an interest in, manage,
operate, control, as a partner, stockholder or otherwise, any Person that
conducts the Business; provided, however, that, (x) for the purposes of this
Section 5.08, ownership of securities having no more than five percent of the
outstanding voting power of any such Person shall not be deemed to be in
violation of this Section 5.08 as long as the Person owning such securities has
no other material connection or relationship with, and no express ability to
effect the management of, such other Person and (y) ownership of a Person
hereafter acquired by the Seller or Audiovox that conducts the Business shall
not be deemed a violation of this Section 5.08, provided, that (1) such Person
is not engaged primarily in conducting the Business, (2) if Audiovox or the
Seller, as the case may be, causes that Person to cease conducting the Business
within six months of Audiovox or the Seller becoming the owner of such Person
and (3) such Person shall not use the Audiovox name to promote the Business
during such period of ownership by Audiovox or the Seller; and provided,
further, that the ownership interests described in Section 5.08(a) of the
Disclosure Schedule shall not be deemed to be in violation of this Section 5.08.

 

(B)                                 AS A SEPARATE AND INDEPENDENT COVENANT, THE
SELLER AGREES WITH THE PURCHASER THAT, FOR A PERIOD OF FIVE YEARS FOLLOWING THE
CLOSING, NEITHER THE SELLER NOR AUDIOVOX WILL IN ANY WAY, DIRECTLY OR
INDIRECTLY, MATERIALLY INTERFERE WITH OR ATTEMPT TO MATERIALLY INTERFERE WITH
ANY OFFICERS, EMPLOYEES, REPRESENTATIVES OR AGENTS OF THE BUSINESS OR SOLICIT OR
ATTEMPT TO SOLICIT ANY EMPLOYEE OF THE PURCHASER TO LEAVE THE EMPLOY OF THE
PURCHASER OR VIOLATE THE TERMS OF THEIR CONTRACTS, OR ANY EMPLOYMENT
ARRANGEMENTS, WITH THE PURCHASER; PROVIDED, HOWEVER, THAT THE FOREGOING WILL NOT
PROHIBIT A GENERAL SOLICITATION TO THE PUBLIC.

 

(C)                                  THE RESTRICTED PERIOD SHALL BE EXTENDED BY
THE LENGTH OF ANY PERIOD DURING WHICH THE SELLER OR AUDIOVOX IS IN BREACH OF THE
TERMS OF THIS SECTION 5.08.

 

(D)                                 THE SELLER ACKNOWLEDGES THAT THE COVENANTS
OF THE SELLER SET FORTH IN THIS SECTION 5.08 ARE AN ESSENTIAL ELEMENT OF THIS
AGREEMENT AND THAT, BUT FOR THE AGREEMENT OF THE SELLER TO COMPLY WITH THESE
COVENANTS, THE PURCHASER WOULD NOT HAVE ENTERED INTO THIS

 

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AGREEMENT.  THE SELLER ACKNOWLEDGES THAT THIS SECTION 5.08 CONSTITUTES AN
INDEPENDENT COVENANT THAT SHALL NOT BE AFFECTED BY PERFORMANCE OR NONPERFORMANCE
OF ANY OTHER PROVISION OF THIS AGREEMENT BY THE PURCHASER.  THE SELLER HAS
INDEPENDENTLY CONSULTED WITH ITS COUNSEL AND AFTER SUCH CONSULTATION AGREES THAT
THE COVENANTS SET FORTH IN THIS SECTION 5.08 ARE REASONABLE AND PROPER.

 

SECTION 5.09.  INTENTIONALLY OMITTED.

 

SECTION 5.10.  Bulk Transfer Laws.  The Purchaser hereby waives compliance by
the Seller with any applicable bulk sale or bulk transfer laws of any
jurisdiction in connection with the sale of the Purchased Assets to the
Purchaser (other than any obligations with respect to the application of the
proceeds therefrom).  The Seller agrees to indemnify the Purchaser in accordance
with Article VIII against any and all liabilities (including any liabilities for
Taxes of Seller as a transferee or otherwise) which may be asserted by third
parties against the Purchaser as a result of the Seller’s noncompliance with any
such law.

 

SECTION 5.11.  Inter-company Arrangements.  Prior to the Closing, the Seller
shall cause any contract or arrangement that is disclosed (or should have been
disclosed) in Section 3.14(a)(viii) of the Disclosure Schedule, other than the
Inter-company Payables and those contracts or arrangements set forth in Section
5.11 of the Disclosure Schedule, to be terminated.

 

SECTION 5.12.  Payments on Behalf of Affiliates.  Payments made or received by
the Purchaser pursuant to Article II, this Article V or Article VIII hereof
shall, in appropriate circumstances, be made on behalf of, or received in trust
for the benefit of, the relevant Affiliate of the Purchaser.  The Purchaser may
direct in writing any such payment to be made by or to the appropriate
Affiliate, and the Seller shall comply with any such direction received at least
two Business Days prior to the date such payment is due.

 

SECTION 5.13.  Transition Services.  Following the Closing, the Seller shall
provide, or cause to be provided, to the Business certain services that are
currently provided by the Seller and its Affiliates to the Business, all in
accordance with the transition services agreement substantially in the form
attached hereto as Exhibit 5.13 (the “Transition Services Agreement”) to be
entered into by the Seller and the Purchaser as of the Closing.

 

SECTION 5.14.  Tax Cooperation and Exchange of Information.  Upon the terms set
forth in Section 5.02 of this Agreement, the Seller and the Purchaser shall
provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Tax Return, amended Tax Return
or claim for refund, determining a liability for Taxes or a right to a refund of
Taxes, participating in or conducting any audit or other proceeding in respect
of Taxes.  Such cooperation and information shall include providing copies of
relevant Tax Returns or portions thereof, together with accompanying schedules,
related work papers and documents in their possession relating to rulings or
other determinations by Tax authorities.  The Seller and the Purchaser shall
make themselves (and shall direct and instruct their respective employees to be)
available on a basis mutually convenient to both parties to provide explanations
of any documents or information provided under this Section 5.14.  Each of the
Seller and the Purchaser shall retain all Tax Returns, schedules and work
papers, records and other documents

 

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in its possession (or in the possession of its Affiliates) relating to Tax
matters relevant to the Purchased Assets or the Business for each taxable period
first ending after the Closing and for all prior taxable periods until the later
of (a) the expiration of the statute of limitations of the taxable periods to
which such Tax Returns and other documents relate, without regard to extensions
except to the extent notified by the other party in writing of such extensions
for the respective Tax periods, or (b) six years following the due date (without
extension) for such Tax Returns.  After such time, before the Seller or the
Purchaser shall dispose of any such documents in its possession (or in the
possession of its Affiliates), the other party shall be given the opportunity,
after 90 days’ prior written notice, to remove and retain all or any part of
such documents as such other party may select (at such other party’s expense). 
Any information obtained under this Section 5.14 shall be kept confidential in
accordance with Section 5.03, except as may be otherwise necessary in connection
with the filing of Tax Returns or claims for refund or in conducting an audit or
other proceeding.

 

The Purchaser shall, in accordance with Section 5.02(b), make available the
Transferred Employees and direct and instruct such Transferred Employees to
cooperate with the Seller in the resolution of any Tax claims made against or
incurred by the Seller prior to the Closing.

 

SECTION 5.15.  Conveyance Taxes.  The Seller shall be liable for and shall hold
the Purchaser harmless against any Conveyance Taxes which become payable in
connection with the transactions contemplated by this Agreement.  The Seller,
after the review and consent by the Purchaser, shall file such applications and
documents as shall permit any such Conveyance Tax to be assessed and paid on or
prior to the Closing in accordance with any available pre-sale filing
procedure.  The Purchaser shall execute and deliver all instruments and
certificates necessary to enable the Seller to comply with the foregoing.  The
Purchaser shall complete and execute resale or other exemption certificates, if
available, with respect to the Purchased Assets acquired hereunder, and shall
provide the Seller with executed copies thereof.  The Purchaser will use its
reasonable commercial efforts to cooperate with the Seller to take all actions
reasonably necessary or desirable in order to exempt the transactions
contemplated by this Agreement from any GST and PST taxes in Canada and in the
Province of Ontario.

 

SECTION 5.16.  Further Action.  (a)  If, after the Closing, the Seller becomes
aware of, or the Purchaser brings to the attention of the Seller, any assets of
the Seller that should have been transferred as of the Closing but were not so
transferred, then such assets shall be transferred to the Purchaser (or to one
or more Affiliates of the Purchaser designated by the Purchaser) as soon as
possible.  This provision, however, shall not limit, in any way, the rights and
remedies of the Purchaser under this Agreement.

 

(b)                                 Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things reasonably necessary under applicable Law, and to
execute and deliver such documents and other papers, as may be required to carry
out the provisions of this Agreement and the Ancillary Agreements to which it is
a party and consummate and make effective the transactions contemplated hereby
and thereby.

 

SECTION 5.17.  INTENTIONALLY OMITTED.

 

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SECTION 5.18.  Proration of Taxes and Certain Charges.  (a)  Except as provided
in Section 5.15, all Property Taxes levied with respect to the Purchased Assets
for any Straddle Period, whether imposed or assessed in the Pre-Closing Tax
Period or Post-Closing Tax Period, shall be prorated between the Seller and the
Purchaser as of 12:01 A.M. on the day after the date of the Closing.  If any
Taxes subject to proration are paid by Purchaser, on the one hand, or Seller, on
the other hand, the proportionate amount of such Taxes paid (or in the event a
refund of any portion of such Taxes previously paid is received, such refund)
shall be paid promptly by (or to) the other after the payment of such Taxes (or
promptly following the receipt of any such refund).

 

(B)                                 EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT, ALL INSTALLMENTS OF SPECIAL ASSESSMENTS OR OTHER CHARGES ON OR WITH
RESPECT TO THE PURCHASED ASSETS PAYABLE BY THE SELLER FOR ANY PERIOD IN WHICH
THE CLOSING SHALL OCCUR, INCLUDING, WITHOUT LIMITATION, BASE RENT, COMMON AREA
MAINTENANCE, ROYALTIES, ALL MUNICIPAL, UTILITY OR AUTHORITY CHARGES FOR WATER,
SEWER, ELECTRIC OR GAS CHARGES, GARBAGE OR WASTE REMOVAL, AND COST OF FUEL,
SHALL BE APPORTIONED AS OF THE CLOSING AND EACH PARTY SHALL PAY ITS
PROPORTIONATE SHARE PROMPTLY UPON THE RECEIPT OF ANY BILL, STATEMENT OR OTHER
CHARGE WITH RESPECT THERETO.  IF SUCH CHARGES OR RATES ARE ASSESSED EITHER BASED
UPON TIME OR FOR A SPECIFIED PERIOD, SUCH CHARGES OR RATES SHALL BE PRORATED
BETWEEN THE SELLER AND THE PURCHASER AS OF THE 12:01 A.M. ON THE DAY AFTER THE
DATE OF THE CLOSING.  IF SUCH CHARGES OR RATES ARE ASSESSED BASED UPON USAGE OF
UTILITY OR SIMILAR SERVICES, SUCH CHARGES SHALL BE PRORATED BASED UPON METER
READINGS TAKEN ON THE DATE OF THE CLOSING.

 

(C)                                  ALL REFUNDS, REIMBURSEMENTS, INSTALLMENTS
OF BASE RENT, ADDITIONAL RENT, LICENSE FEES OR OTHER USE RELATED REVENUE
RECEIVABLE BY ANY PARTY TO THE EXTENT ATTRIBUTABLE TO THE OPERATION OF THE
BUSINESS FOR ANY PERIOD IN WHICH THE CLOSING SHALL OCCUR SHALL BE PRORATED SO
THAT THE SELLER SHALL BE ENTITLED TO THAT PORTION OF ANY SUCH INSTALLMENT
APPLICABLE TO ANY PERIOD FROM AND AFTER THE DAY AFTER THE DATE OF THE CLOSING,
AND IF PURCHASER OR SELLER, AS THE CASE MAY BE, SHALL RECEIVE ANY SUCH PAYMENTS
AFTER THE DATE OF THE CLOSING, THEY SHALL PROMPTLY REMIT TO SUCH OTHER PARTIES
THEIR SHARE OF SUCH PAYMENTS.

 

(D)                                 THE PRORATIONS PURSUANT TO THIS SECTION 5.18
MAY BE CALCULATED AFTER THE CLOSING, AS EACH ITEM TO BE PRORATED (INCLUDING
WITHOUT LIMITATION ANY SUCH TAX, OBLIGATION, ASSESSMENT, CHARGE, REFUND,
REIMBURSEMENT, RENT INSTALLMENT, FEE OR REVENUE) ACCRUES OR COMES DUE, PROVIDED
THAT, IN ANY EVENT, ANY SUCH PRORATION SHALL BE CALCULATED NOT LATER THAN THIRTY
(30) DAYS AFTER THE PARTY REQUESTING PRORATION OF ANY ITEM OBTAINS THE
INFORMATION REQUIRED TO CALCULATE SUCH PRORATION.

 

SECTION 5.19.  Proxy Statement.  (a)  As promptly as practicable after the
execution of this Agreement, Audiovox shall prepare and file with the SEC the
proxy statement to be sent to the stockholders of Audiovox relating to the
meeting of the Audiovox stockholders (the “Audiovox Stockholders’ Meeting”) to
be held to consider approval and adoption of this Agreement or any information
statement to be sent to such stockholders, as appropriate (such proxy statement
or information statement, as amended or supplemented, being referred to herein
as the “Proxy Statement”).   The Seller shall furnish all information concerning
the Seller as Audiovox may reasonably request in connection with such actions
and the preparation of the Proxy Statement.  As promptly as practicable after
the execution of this Agreement, Audiovox shall mail the Proxy Statement to its
stockholders.

 

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(B)                                 EXCEPT AS PROVIDED IN SECTION 5.06(C),
AUDIOVOX COVENANTS THAT NONE OF THE AUDIOVOX BOARD OR ANY COMMITTEE THEREOF
SHALL WITHDRAW OR MODIFY, OR PROPOSE TO WITHDRAW OR MODIFY, IN A MANNER ADVERSE
TO THE PURCHASER, THE APPROVAL OR RECOMMENDATION BY THE AUDIOVOX BOARD OR ANY
COMMITTEE THEREOF OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT AND THE PROXY STATEMENT SHALL INCLUDE, THE RECOMMENDATION TO THE
STOCKHOLDERS OF AUDIOVOX IN FAVOR OF APPROVAL AND ADOPTION OF THIS AGREEMENT AND
APPROVAL OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (THE “AUDIOVOX
RECOMMENDATION”).

 

(C)                                  AUDIOVOX WILL ADVISE THE PURCHASER,
PROMPTLY AFTER IT RECEIVES NOTICE THEREOF, OF ANY REQUEST BY THE SEC FOR
AMENDMENT OF THE PROXY STATEMENT OR COMMENTS THEREON AND RESPONSES THERETO OR
REQUESTS BY THE SEC FOR ADDITIONAL INFORMATION.

 

(D)                                 AUDIOVOX REPRESENTS THAT THE INFORMATION IN
THE PROXY STATEMENT SHALL NOT, AT (I) THE TIME THE PROXY STATEMENT (OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO) IS FIRST MAILED TO THE STOCKHOLDERS OF
AUDIOVOX, (II) THE TIME OF THE AUDIOVOX STOCKHOLDERS’ MEETING AND (III) THE
CLOSING, CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR FAIL TO STATE ANY
MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY IN ORDER TO MAKE THE
STATEMENTS THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE,
NOT MISLEADING. ALL DOCUMENTS THAT AUDIOVOX IS RESPONSIBLE FOR FILING WITH THE
SEC IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT WILL COMPLY AS TO FORM AND SUBSTANCE IN ALL MATERIAL RESPECTS WITH THE
APPLICABLE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND
THE RULES AND REGULATIONS THEREUNDER.

 

SECTION 5.20.  Audiovox Stockholders’ Meeting.  Audiovox shall, subject only to
such delays as are necessary to enable the Audiovox Board to discharge its
fiduciary obligations in determining whether any unsolicited offer or proposal
regarding a Competing Transaction constitutes a Superior Proposal in accordance
with Section 5.06 hereof, (i) call and hold the Audiovox Stockholders’ Meeting
as promptly as practicable for the purpose of voting upon the approval and
adoption of this Agreement and Audiovox shall use its reasonable best efforts to
hold the Audiovox Stockholders’ Meeting as soon as practicable after the date of
this Agreement and (ii) use its reasonable best efforts to solicit from its
stockholders proxies in favor of the approval and adoption of this Agreement and
shall take all other action necessary or advisable to secure the required vote
or consent of its stockholders.

 

SECTION 5.21.  Trademark License Agreement.  Concurrently with the Closing,
Audiovox and the Purchaser shall enter into a trademark license agreement
substantially in the form attached hereto as Exhibit 5.21 (the “Trademark
License Agreement”).

 

SECTION 5.22.  Replication Service.  On or prior to the Closing, Audiovox and
the Seller shall replicate, for the Purchaser, all Developed Software, which,
together with the Shared MIS Systems, Owned Intellectual Property and Licensed
Intellectual Property, will enable the Business to become a fully operational
entity with all current functionality and appropriate controls to protect the
Business from any non-Business access (the “Replication Service”).  All hardware
brands and configurations used in the Replication Service shall be approved by
the Purchaser prior to such use.  The Purchaser shall pay $70,000 for the
Replication Service but in no event shall the Purchaser be obligated to make any
other payments in respect of the Replication Service or the resulting replicated
environment.

 

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SECTION 5.23.  Limited Updating of Disclosure Schedules.  At the Closing, the
Seller shall, to the extent necessary, update Sections 3.07(b), 3.12(b),
3.14(a), 3.14(b), 3.15(a), 3.16(c), 3.17(a) and 3.26 of the Disclosure Schedule
(provided, that, in the case of Section 3.14(b) of the Disclosure Schedule, the
Seller may only update the disclosure as to contracts which are no longer in
full force and effect due to their expiration or termination in accordance with
their terms) to reflect information arising after the date of this Agreement and
the updating of such Sections of the Disclosure Schedule shall not be deemed to
be a breach of the representations and warranties which such disclosures modify
except to the extent that (i) the actions giving rise to such updating
constitute a breach of Section 5.01 hereof or (ii) the additional information
disclosed would have a Material Adverse Effect.

 

SECTION 5.24.  Leases.  Audiovox and the Purchaser shall use reasonable
commercial efforts to negotiate and agree upon the form of the 555 Wireless
Sublease within 45 days after the date of this Agreement.  The Purchaser shall
use reasonable commercial efforts to negotiate and agree upon the form of the
Cerritos Lease within 45 days after the date of this Agreement.

 

SECTION 5.25.  Section 404 Compliance.  (a)  Promptly after the date of this
Agreement, the Seller shall retain the Seller’s Reporting Controls Advisors, as
outside advisors, to work with the Seller to develop and implement the ACC
Internal Reporting Controls and to satisfy the Interim Milestones.  The Seller
shall use its best efforts to (i) satisfy the Interim Milestones and (ii)
develop and implement the ACC Internal Reporting Controls prior to September 30,
2004.  The Purchaser and the Purchaser’s Reporting Controls Advisors shall work
cooperatively with the Seller and the Seller’s Reporting Controls Advisors to
provide necessary information on a timely basis to the Seller concerning the
UTSI Internal Reporting Controls to enable the Seller to develop and implement
the ACC Internal Reporting Controls, meet the Interim Milestones and satisfy the
condition set forth in Section 7.02(j).  All costs and expenses of the Seller
and the Seller’s Reporting Controls Advisors relating to the development and
implementation of the ACC Internal Reporting Controls shall be borne by the
Seller.

 

(B)                                 IN THE EVENT THAT THE PURCHASER SHALL NOT
HAVE MADE THE DETERMINATION OF SATISFACTORY CONTROLS BY SEPTEMBER 30, 2004, THE
PURCHASER AND THE SELLER AGREE THAT THE SELLER SHALL NO LONGER BE OBLIGATED
HEREUNDER TO DEVELOP AND IMPLEMENT THE ACC INTERNAL REPORTING CONTROLS.

 

ARTICLE VI

EMPLOYEE MATTERS

 

SECTION 6.01.  Offer of Employment.  As of the Closing, the Purchaser shall
offer employment to each of the then-current employees of the Seller listed on
Section 6.01 of the Disclosure Schedule providing for employee benefits (other
than equity compensation arrangements) on terms that are no less favorable than
the terms and conditions applicable to similarly situated employees of the
Purchaser, it being understood that such employees shall receive credit for all
prior periods of service with the Seller for purposes of participation in
compensation and employee benefit plans, programs or arrangements of the
Purchaser; provided, however, that such crediting of service shall not operate
to duplicate any benefit or the funding

 

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of any such benefit.  At Closing, Purchaser shall hire all employees who accept
such offer of employment.  As used herein, “Transferred Employee” shall mean
each employee who accepts such offer.  In addition, the Purchaser agrees to (i)
credit each of the Transferred Employees with a number of paid vacation, sick
leave and personal days immediately following the date of Closing equal to the
number of such days each such Transferred Employee has accrued but not used as
of the date of Closing under the applicable policies of the Seller as in effect
immediately prior to the date of Closing, and (ii) allow each of the Transferred
Employees to use such days following the date of Closing in accordance with the
applicable policies of the Purchaser as are in effect from time to time.  The
Purchaser and Seller shall undertake in good faith to consider the preparation
and filing of employment tax reports with respect to the Transferred Employees
using the alternative procedure set forth in Revenue Procedure 96-60 under the
Code.

 

ARTICLE VII

CONDITIONS TO CLOSING

 

SECTION 7.01.  Conditions to Obligations of the Seller and Audiovox.  The
obligations of the Seller and Audiovox to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or written
waiver by Audiovox or the Seller, at or prior to the Closing, of each of the
following conditions:

 

(A)                                  REPRESENTATIONS, WARRANTIES AND COVENANTS. 
THE REPRESENTATIONS AND WARRANTIES OF THE PURCHASER CONTAINED IN THIS AGREEMENT
SHALL HAVE BEEN TRUE AND CORRECT WHEN MADE AND SHALL BE TRUE AND CORRECT AT AND
AS OF THE CLOSING (DISREGARDING FOR THESE PURPOSES ANY MATERIALITY OR COROLLARY
QUALIFICATIONS CONTAINED THEREIN), EXCEPT TO THE EXTENT THAT ANY FAILURES OF
SUCH REPRESENTATIONS AND WARRANTIES TO BE SO TRUE AND CORRECT WOULD NOT HAVE A
PURCHASER MATERIAL ADVERSE EFFECT, EXCEPT TO THE EXTENT SUCH REPRESENTATIONS AND
WARRANTIES ARE AS OF ANOTHER DATE, IN WHICH CASE, SUCH REPRESENTATIONS AND
WARRANTIES SHALL BE TRUE AND CORRECT AS OF THAT DATE WITH THE SAME FORCE AND
EFFECT AS IF MADE AS OF THE CLOSING EXCEPT TO THE EXTENT THAT ANY FAILURES OF
SUCH REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT THAT WOULD NOT HAVE A
PURCHASER MATERIAL ADVERSE EFFECT, AND THE COVENANTS AND AGREEMENTS CONTAINED IN
THIS AGREEMENT TO BE COMPLIED WITH BY THE PURCHASER ON OR BEFORE THE CLOSING
SHALL HAVE BEEN COMPLIED WITH IN ALL MATERIAL RESPECTS;

 

(B)                                 HSR ACT.  ANY WAITING PERIOD (AND ANY
EXTENSION THEREOF) UNDER THE HSR ACT APPLICABLE TO THE PURCHASE OF THE PURCHASED
ASSETS CONTEMPLATED BY THIS AGREEMENT SHALL HAVE EXPIRED OR SHALL HAVE BEEN
TERMINATED AND THE APPLICABLE APPROVALS AND/OR CLEARANCES WITH RESPECT TO THE
ANTITRUST REVIEW IN THE PEOPLES REPUBLIC OF CHINA (THE “PRC ANTITRUST
APPROVALS”) HAVE BEEN RECEIVED;

 

(C)                                  NO PROCEEDING OR LITIGATION.  NO ACTION
SHALL HAVE BEEN COMMENCED BY OR BEFORE ANY GOVERNMENTAL AUTHORITY AGAINST ANY OF
AUDIOVOX, THE SELLER OR THE PURCHASER, SEEKING TO RESTRAIN OR MATERIALLY AND
ADVERSELY ALTER THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT WHICH, IN THE
REASONABLE, GOOD FAITH DETERMINATION OF THE SELLER, IS LIKELY TO RENDER IT
IMPOSSIBLE OR UNLAWFUL TO CONSUMMATE SUCH TRANSACTIONS;

 

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PROVIDED, HOWEVER, THAT THE PROVISIONS OF THIS SECTION 7.01(C) SHALL NOT APPLY
IF THE SELLER HAS DIRECTLY OR INDIRECTLY SOLICITED OR ENCOURAGED ANY SUCH
ACTION; AND

 

(d)                                 Audiovox Stockholders’ Approval.  This
Agreement and the transactions contemplated by this Agreement have been approved
and adopted by the requisite affirmative vote of the stockholders of Audiovox in
accordance with the General Corporation Law of Delaware, and Audiovox’s
certificate of incorporation, and such approval shall not have been rescinded,
revoked or otherwise withdrawn.

 

SECTION 7.02.  Conditions to Obligations of the Purchaser.  The obligations of
the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment or written waiver by the Purchaser, at or
prior to the Closing, of each of the following conditions:

 

(A)                                  REPRESENTATIONS, WARRANTIES AND COVENANTS. 
THE REPRESENTATIONS AND WARRANTIES OF THE SELLER AND AUDIOVOX CONTAINED IN THIS
AGREEMENT SHALL HAVE BEEN TRUE AND CORRECT WHEN MADE AND SHALL BE TRUE AND
CORRECT AT AND AS OF THE CLOSING (DISREGARDING FOR THESE PURPOSES ANY
MATERIALITY, MATERIAL ADVERSE EFFECT OR COROLLARY QUALIFICATIONS CONTAINED
THEREIN), EXCEPT TO THE EXTENT THAT ANY FAILURES OF SUCH REPRESENTATIONS AND
WARRANTIES TO BE SO TRUE AND CORRECT WOULD NOT HAVE A MATERIAL ADVERSE EFFECT,
EXCEPT TO THE EXTENT SUCH REPRESENTATIONS AND WARRANTIES ARE AS OF ANOTHER DATE,
IN WHICH CASE, SUCH REPRESENTATIONS AND WARRANTIES SHALL BE TRUE AND CORRECT AS
OF THAT DATE WITH THE SAME FORCE AND EFFECT AS IF MADE AS OF THE CLOSING EXCEPT
TO THE EXTENT THAT ANY FAILURES OF SUCH REPRESENTATIONS AND WARRANTIES TO BE
TRUE AND CORRECT THAT WOULD NOT HAVE A MATERIAL ADVERSE EFFECT, AND THE
COVENANTS AND AGREEMENTS CONTAINED IN THIS AGREEMENT TO BE COMPLIED WITH BY THE
SELLER AND AUDIOVOX ON OR BEFORE THE CLOSING SHALL HAVE BEEN COMPLIED WITH IN
ALL MATERIAL RESPECTS;

 

(B)                                 HSR ACT.  ANY WAITING PERIOD (AND ANY
EXTENSION THEREOF) UNDER THE HSR ACT APPLICABLE TO THE PURCHASE OF THE PURCHASED
ASSETS CONTEMPLATED BY THIS AGREEMENT SHALL HAVE EXPIRED OR SHALL HAVE BEEN
TERMINATED AND THE PRC ANTITRUST APPROVALS HAVE BEEN RECEIVED];

 

(C)                                  NO PROCEEDING OR LITIGATION.  NO ACTION
SHALL HAVE BEEN COMMENCED BY OR BEFORE ANY GOVERNMENTAL AUTHORITY AGAINST ANY OF
AUDIOVOX, THE SELLER OR THE PURCHASER, SEEKING TO RESTRAIN OR MATERIALLY AND
ADVERSELY ALTER THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT WHICH, IN THE
REASONABLE, GOOD FAITH DETERMINATION OF THE PURCHASER, IS LIKELY TO RENDER IT
IMPOSSIBLE OR UNLAWFUL TO CONSUMMATE SUCH TRANSACTIONS OR WHICH IS REASONABLY
LIKELY TO HAVE A MATERIAL ADVERSE EFFECT; PROVIDED, HOWEVER, THAT THE PROVISIONS
OF THIS SECTION 7.02(C) SHALL NOT APPLY IF THE PURCHASER HAS DIRECTLY OR
INDIRECTLY SOLICITED OR ENCOURAGED ANY SUCH ACTION;

 

(D)                                 GOVERNMENTAL CONSENTS AND APPROVALS.  THE
PURCHASER AND THE SELLER SHALL HAVE RECEIVED, EACH IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE PURCHASER, (I) ALL AUTHORIZATIONS, CONSENTS,
ORDERS AND APPROVALS OF ALL GOVERNMENTAL AUTHORITIES AND OFFICIALS WHICH ARE
NECESSARY FOR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT AND THE ANCILLARY AGREEMENTS;

 

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(E)                                  THIRD PARTY CONSENTS AND APPROVALS. WITH
RESPECT TO EACH AGREEMENT LISTED IN SECTION 7.02(E)(I) OF THE DISCLOSURE
SCHEDULE, THE PURCHASER OR SELLER SHALL HAVE RECEIVED EITHER (X) CONSENT THAT
SUCH AGREEMENT MAY BE ASSIGNED TO THE PURCHASER IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR (Y) THE OPPORTUNITY TO ENTER INTO
A NEW AGREEMENT THAT IS, IN THE AGGREGATE, NOT MATERIALLY LESS FAVORABLE TO
PURCHASER THAN, ON THE DATE OF THE CLOSING, IS THE AGREEMENT THAT IT IS
REPLACING.  WITH RESPECT TO THREE OF THE FIVE AGREEMENTS LISTED IN SECTION
7.02(E)(II) OF THE DISCLOSURE SCHEDULE, THE PURCHASER OR SELLER SHALL HAVE
RECEIVED (X) CONSENT THAT SUCH AGREEMENT MAY BE ASSIGNED TO THE PURCHASER IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR (Y) THE
OPPORTUNITY TO ENTER INTO A NEW AGREEMENT THAT IS, IN THE AGGREGATE, NOT
MATERIALLY LESS FAVORABLE TO PURCHASER THAN, ON THE DATE OF THE CLOSING, IS THE
AGREEMENT THAT IT IS REPLACING.

 

(F)                                    EMPLOYMENT AGREEMENTS.  THE EMPLOYMENT
AGREEMENT SHALL HAVE BEEN VALIDLY ENTERED INTO AND SHALL BE IN FULL FORCE AND
EFFECT AND PHILIP CHRISTOPHER SHALL, AS OF CLOSING, BECOME AN EMPLOYEE OF THE
PURCHASER; AND

 

(G)                                 KEY EMPLOYEES.  AT LEAST 80% OF THE KEY
EMPLOYEES LISTED IN SECTION 7.02(G) OF THE DISCLOSURE SCHEDULE (“KEY EMPLOYEES”)
TO WHOM THE PURCHASER EXTENDED OFFERS OF EMPLOYMENT PRIOR TO THE CLOSING SHALL
HAVE ACCEPTED THE PURCHASER’S OFFER OF EMPLOYMENT AND SHALL, AS OF CLOSING,
BECOME EMPLOYEES OF THE PURCHASER.

 

(H)                                 AUDIOVOX STOCKHOLDERS’ APPROVAL.  THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT HAVE BEEN APPROVED
AND ADOPTED BY THE REQUISITE AFFIRMATIVE VOTE OF THE STOCKHOLDERS OF AUDIOVOX IN
ACCORDANCE WITH THE GENERAL CORPORATION LAW OF DELAWARE, AND AUDIOVOX’S
CERTIFICATE OF INCORPORATION, AND SUCH APPROVAL SHALL NOT HAVE BEEN RESCINDED,
REVOKED OR OTHERWISE WITHDRAWN.

 

(I)                                     LEASES.  (I) AUDIOVOX AND THE PURCHASER
SHALL HAVE ENTERED INTO A SUBLEASE AGREEMENT (THE “555 WIRELESS SUBLEASE”) FOR
SPACE AT 555 WIRELESS BLVD., HAUPPAUGE, NEW YORK IN A FORM MUTUALLY AGREED BY
THE PARTIES ON THE TERMS SET FORTH IN EXHIBIT 7.02(I)(I) AND (II) MARQUARDT
ASSOCIATES AND THE PURCHASER SHALL HAVE ENTERED INTO A LEASE AGREEMENT (THE
“CERRITOS LEASE”) FOR SPACE AT 16820 MARQUARDT AVENUE, CERRITOS, CALIFORNIA IN A
FORM MUTUALLY AGREED BY THE PARTIES ON THE TERMS SET FORTH IN EXHIBIT
7.02(I)(II).

 

(J)                                     SECTION 404 COMPLIANCE.  THE PURCHASER
SHALL HAVE MADE THE DETERMINATION OF SATISFACTORY CONTROLS ON OR BEFORE
SEPTEMBER 30, 2004; PROVIDED, THAT, FROM AND AFTER JANUARY 1, 2005, THIS SECTION
7.02(J) SHALL NO LONGER BE A CONDITION TO THE PURCHASER’S OBLIGATION TO
CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT

 

ARTICLE VIII

INDEMNIFICATION

 

SECTION 8.01.  Survival of Representations and Warranties.  (a)  The
representations and warranties of the Seller and Audiovox contained in this
Agreement and the

 

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Ancillary Agreements shall survive the Closing until the second anniversary of
the Closing; provided, however, that (i) the representations and warranties made
pursuant to Sections 3.01 and 3.29 shall survive indefinitely and (ii) the
representations and warranties dealing with Tax matters shall survive until 120
days after the expiration of the relevant statute of limitations for the Tax
liabilities in question.  Neither the period of survival nor the liability of
the Seller and Audiovox with respect to the Seller’s and Audiovox’s
representations and warranties shall be reduced by any investigation made at any
time by or on behalf of the Purchaser.  If written notice of a claim has been
given prior to the expiration of the applicable representations and warranties
by the Purchaser to the Seller and Audiovox, then the relevant representations
and warranties shall survive as to such claim, until such claim has been finally
resolved.

 

(b)                                 The representations and warranties of the
Purchaser contained in this Agreement and the Ancillary Agreements shall survive
the Closing until the second anniversary of the Closing.  Neither the period of
survival nor the liability of the Purchaser with respect to the Purchaser’s
representations and warranties shall be reduced by any investigation made at any
time by or on behalf of the Seller.  If written notice of a claim has been given
prior to the expiration of the applicable representations and warranties by the
Seller to the Purchaser, then the relevant representations and warranties shall
survive as to such claim, until such claim has been finally resolved.

 

SECTION 8.02.  Indemnification by the Seller and Audiovox.  If the Closing shall
occur, the Purchaser and its Affiliates, officers, directors, employees, agents,
successors and assigns (each a “Purchaser Indemnified Party”) shall be
indemnified and held harmless by the Seller and Audiovox, on a joint and several
basis, for and against any and all Liabilities, losses, damages, claims, costs
and expenses, interest, awards, judgments and penalties (including attorneys’
and consultants’ fees and expenses) actually suffered or incurred by them
(including any Action brought or otherwise initiated by any of them)
(hereinafter a “Loss”), arising out of or resulting from:

 

(a)                                  the breach of any representation or
warranty made by the Seller contained in the Acquisition Documents;

 

(b)                                 the breach of any covenant or agreement by
the Seller contained in the Acquisition Documents;

 

(c)                                  any claim or cause of action of any third
party relating to any action, inaction, event, condition, liability or
obligation of the Seller occurring or existing prior to the Closing (other than
the Assumed Liabilities); and

 

(d)                                 the Excluded Liabilities.

 

To the extent that the Seller’s or Audiovox’s undertakings set forth in this
Section 8.02 may be unenforceable, the Seller or Audiovox, as the case may be,
shall contribute the maximum amount that it is permitted to contribute under
applicable Law to the payment and satisfaction of all Losses incurred by the
Purchaser Indemnified Parties, provided, that, in no event shall the Seller’s or
Audiovox’s liability exceed the amounts set forth in Section 8.04 hereof.

 

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SECTION 8.03.  Indemnification by the Purchaser.  If the Closing shall occur,
the Seller and its Affiliates, officers, directors, employees, agents,
successors and assigns (each a “Seller Indemnified Party”) shall be indemnified
and held harmless by the Purchaser for and against any and all Losses, arising
out of or resulting from:

 

(a)                                  the breach of any representation or
warranty made by the Purchaser contained in the Acquisition Documents;

 

(b)                                 the breach of any covenant or agreement by
the Purchaser contained in the Acquisition Documents;

 

(c)                                  Liabilities, whether arising before or
after the Closing, that are expressly assumed by the Purchaser pursuant to this
Agreement, including the Assumed Liabilities;

 

(d)                                 Taxes, other than the Excluded Taxes,
relating to the Purchased Assets, the Business or the Assumed Liabilities for
any Post-Closing Tax Period;

 

(e)                                  claims arising after the Closing made by
Transferred Employees relating to their employment with the Purchaser; and

 

(f)                                    any claim or cause of action by any third
party relating to any action, inaction, event, condition, liability or
obligation relating to the operation of the Business from and after the Closing.

 

To the extent that the Purchaser’s undertakings set forth in this Section 8.03
may be unenforceable, the Purchaser shall contribute the maximum amount that it
is permitted to contribute under applicable Law to the payment and satisfaction
of all Losses incurred by the Seller Indemnified Parties, provided, that, in no
event shall the Purchaser’s liability exceed the amounts set forth in Section
8.04 hereof.

 

SECTION 8.04.  Limitation on Obligation to Indemnify.  Notwithstanding anything
to the contrary contained in this Agreement:

 

(A)                                  AN INDEMNIFYING PARTY SHALL BE LIABLE FOR
ANY CLAIM FOR INDEMNIFICATION PURSUANT TO SECTION 8.02(A) OR 8.02(B) HEREOF, AS
APPLICABLE, ONLY TO THE EXTENT, AND FOR THE AMOUNT, THAT THE AGGREGATE AMOUNT OF
INDEMNIFIABLE LOSSES ARE IN EXCESS OF $500,000; PROVIDED THAT, IN DETERMINING
THE AMOUNT OF SUCH INDEMNIFIABLE LOSSES (BUT NOT THE BREACH THEREOF GIVING RISE
TO INDEMNIFICATION) EACH REPRESENTATION SHALL BE READ WITHOUT REGARD TO ANY
MATERIALITY, MATERIAL ADVERSE EFFECT OR COROLLARY QUALIFICATIONS CONTAINED
THEREIN;

 

(B)                                 IN NO EVENT SHALL THE OBLIGATIONS OF ALL
INDEMNIFYING PARTIES, IN THE AGGREGATE, TO INDEMNIFY THE INDEMNIFIED PARTY
PURSUANT TO THIS ARTICLE VIII EXCEED: (I) 30% OF THE PURCHASE PRICE WITH RESPECT
TO LOSSES ARISING FROM BREACHES OF ANY REPRESENTATION OR WARRANTY MADE BY THE
INDEMNIFYING PARTY CONTAINED IN THE ACQUISITION DOCUMENTS AND (II) 50% OF THE
PURCHASE PRICE WITH RESPECT TO ALL LOSSES (INCLUDING THOSE COVERED IN CLAUSE (I)
ABOVE); AND

 

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(C)                                  THE AMOUNT OF LOSSES FOR WHICH THE
INDEMNIFYING PARTY SHALL BE OBLIGATED TO INDEMNIFY THE INDEMNIFIED PARTY
PURSUANT TO THIS ARTICLE VIII SHALL BE REDUCED BY ANY AMOUNT RECEIVED UNDER ANY
INSURANCE POLICY BY THE INDEMNIFIED PARTY WITH RESPECT TO SUCH LOSSES.

 

SECTION 8.05.  Notice of Loss; Third Party Claims.  (a)  An Indemnified Party
shall give the Indemnifying Party notice of any matter which an Indemnified
Party has determined has given or could give rise to a right of indemnification
under this Article VIII, promptly, but in any event, within 20 days of such
determination, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises; provided, however, that the failure to provide such notice shall not
release the Indemnifying Party from any of its obligations under this Article
VIII except to the extent that the Indemnifying Party is materially prejudiced
by such failure and shall not relieve the Indemnifying Party from any other
obligation or Liability that it may have to any Indemnified Party otherwise than
under this Article VIII.

 

(B)                                 IF AN INDEMNIFIED PARTY SHALL RECEIVE NOTICE
OF ANY ACTION, AUDIT, DEMAND OR ASSESSMENT (EACH, A “THIRD PARTY CLAIM”) AGAINST
IT OR WHICH MAY GIVE RISE TO A CLAIM FOR LOSS UNDER THIS ARTICLE VIII, PROMPTLY,
BUT IN ANY EVENT, WITHIN 20 DAYS OF THE RECEIPT OF SUCH NOTICE, THE INDEMNIFIED
PARTY SHALL GIVE THE INDEMNIFYING PARTY NOTICE OF SUCH THIRD PARTY CLAIM;
PROVIDED, HOWEVER, THAT THE FAILURE TO PROVIDE SUCH NOTICE SHALL NOT RELEASE THE
INDEMNIFYING PARTY FROM ANY OF ITS OBLIGATIONS UNDER THIS ARTICLE VIII EXCEPT TO
THE EXTENT THAT THE INDEMNIFYING PARTY IS MATERIALLY PREJUDICED BY SUCH FAILURE
AND SHALL NOT RELIEVE THE INDEMNIFYING PARTY FROM ANY OTHER OBLIGATION OR
LIABILITY THAT IT MAY HAVE TO ANY INDEMNIFIED PARTY OTHERWISE THAN UNDER THIS
ARTICLE VIII.  IF THE INDEMNIFYING PARTY ACKNOWLEDGES IN WRITING ITS OBLIGATION
TO INDEMNIFY THE INDEMNIFIED PARTY HEREUNDER AGAINST ANY LOSSES THAT MAY RESULT
FROM SUCH THIRD PARTY CLAIM, THEN THE INDEMNIFYING PARTY SHALL BE ENTITLED TO
ASSUME AND CONTROL THE DEFENSE OF SUCH THIRD PARTY CLAIM AT ITS EXPENSE AND
THROUGH COUNSEL OF ITS CHOICE IF IT GIVES NOTICE OF ITS INTENTION TO DO SO TO
THE INDEMNIFIED PARTY WITHIN FIVE DAYS OF THE RECEIPT OF SUCH NOTICE FROM THE
INDEMNIFIED PARTY; PROVIDED, HOWEVER, THAT IF THERE EXISTS OR IS REASONABLY
LIKELY TO EXIST A CONFLICT OF INTEREST THAT, IN THE OPINION OF THE INDEMNIFIED
PARTY’S COUNSEL (A COPY OF WHICH SHALL BE GIVEN TO THE INDEMNIFYING PARTY),
WOULD MAKE IT INAPPROPRIATE IN THE REASONABLE JUDGMENT OF THE INDEMNIFIED PARTY
FOR THE SAME COUNSEL TO REPRESENT BOTH THE INDEMNIFIED PARTY AND THE
INDEMNIFYING PARTY, THEN THE INDEMNIFIED PARTY SHALL BE ENTITLED TO RETAIN ITS
OWN COUNSEL IN EACH JURISDICTION FOR WHICH THE INDEMNIFIED PARTY DETERMINES
COUNSEL IS REQUIRED, AT THE EXPENSE OF THE INDEMNIFYING PARTY.  IN THE EVENT
THAT THE INDEMNIFYING PARTY EXERCISES THE RIGHT TO UNDERTAKE ANY SUCH DEFENSE
AGAINST ANY SUCH THIRD PARTY CLAIM AS PROVIDED ABOVE, THE INDEMNIFIED PARTY
SHALL COOPERATE WITH THE INDEMNIFYING PARTY IN SUCH DEFENSE AND MAKE AVAILABLE
TO THE INDEMNIFYING PARTY, AT THE INDEMNIFYING PARTY’S EXPENSE, ALL WITNESSES,
PERTINENT RECORDS, MATERIALS AND INFORMATION IN THE INDEMNIFIED PARTY’S
POSSESSION OR UNDER THE INDEMNIFIED PARTY’S CONTROL RELATING THERETO AS IS
REASONABLY REQUIRED BY THE INDEMNIFYING PARTY.  SIMILARLY, IN THE EVENT THE
INDEMNIFIED PARTY IS, DIRECTLY OR INDIRECTLY, CONDUCTING THE DEFENSE AGAINST ANY
SUCH THIRD PARTY CLAIM, THE INDEMNIFYING PARTY SHALL COOPERATE WITH THE
INDEMNIFIED PARTY IN SUCH DEFENSE AND MAKE AVAILABLE TO THE INDEMNIFIED PARTY,
AT THE INDEMNIFYING PARTY’S EXPENSE, ALL SUCH WITNESSES, RECORDS, MATERIALS AND
INFORMATION IN THE INDEMNIFYING PARTY’S POSSESSION OR UNDER THE INDEMNIFYING
PARTY’S CONTROL RELATING THERETO AS IS REASONABLY REQUIRED BY THE INDEMNIFIED
PARTY.  NO SUCH THIRD PARTY CLAIM MAY BE SETTLED BY THE INDEMNIFYING PARTY

 

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WITHOUT THE PRIOR WRITTEN CONSENT OF THE INDEMNIFIED PARTY WHICH SHALL NOT BE
UNREASONABLY WITHHELD UNLESS SUCH SETTLEMENT SHALL INVOLVE ONLY THE PAYMENT OF
MONEY WITH NO ADMISSION OF WRONGDOING.  IN NO EVENT MAY AN INDEMNIFIED PARTY
SETTLE ANY THIRD PARTY CLAIM WITHOUT THE PRIOR WRITTEN CONSENT OF THE
INDEMNIFYING PARTY.

 

SECTION 8.06.  Distributions from Escrow Fund.  The Escrow Agent shall deliver
to the Purchaser from the Escrow Fund any amount determined to be owed to the
Purchaser under this Article VIII in accordance with the Escrow Agreement.  For
the purposes of clarity, to the extent that there is a shortfall between the
amount owed by the Seller to the Purchaser in respect of the indemnification
amount and the Escrow Fund, the Seller and Audiovox, jointly and severally,
shall be obligated to pay the Purchaser any such shortfall from its own account,
subject to the limitations of this Article VIII.

 

SECTION 8.07.  Other Provisions.  The indemnification provided in this Article
VIII shall be, except in the case of fraudulent misrepresentation, the sole and
exclusive remedy for any of the matters set forth in Sections 8.02 and 8.03.  In
no event shall the Seller or the Purchaser be liable for loss of profits or
consequential damages incurred by the Purchaser or the Seller, respectively, or
any of its respective Affiliates.  Upon making any payment to an Indemnified
Party for any indemnification claim under this Agreement or any Acquisition
Document, the Indemnifying Party shall be subrogated, to the extent of such
payment, to any rights which the Indemnifying Party or its Affiliates may have
against other Persons (including under any insurance policies) with respect to
the subject matter underlying such indemnification claim.  The Indemnified Party
and its Affiliates shall cooperate with the Indemnifying Party in pursuit of
such rights and shall promptly turn over to the Indemnifying Party any payments
received in respect of such rights.

 

SECTION 8.08.  Tax Treatment.  The Seller and the Purchaser agree that all
payments made by any of the Seller and Audiovox on the one hand and the
Purchaser on the other hand to or for the benefit of the other under this
Article VIII, under other indemnity provisions of this Agreement and for any
misrepresentations or breaches of warranties or covenants shall be treated as
adjustments to the Purchase Price for Tax purposes and that such treatment shall
govern for purposes hereof except to the extent that the Laws of a particular
jurisdiction provide otherwise, in which case such payments shall be made in an
amount sufficient to indemnify the relevant party on an after-Tax basis.

 

ARTICLE IX

TERMINATION, AMENDMENT AND WAIVER

 

SECTION 9.01.  Termination.  This Agreement may be terminated at any time prior
to the Closing:

 

(A)                                  BY (I) THE PURCHASER IF BETWEEN THE DATE
HEREOF AND THE CLOSING ANY REPRESENTATIONS, WARRANTIES OR COVENANTS OF THE
SELLER CONTAINED IN THIS AGREEMENT SHALL HAVE BECOME UNTRUE OR INCORRECT SUCH
THAT SECTION 7.02(A) COULD NOT BE SATISFIED OR (II) BY THE SELLER OR AUDIOVOX
IF, BETWEEN THE DATE HEREOF AND THE CLOSING ANY REPRESENTATIONS,

 

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WARRANTIES OR COVENANTS OF THE PURCHASER CONTAINED IN THIS AGREEMENT SHALL HAVE
BECOME UNTRUE OR INCORRECT SUCH THAT SECTION 7.01(A) COULD NOT BE SATISFIED;

 

(B)                                 BY EITHER THE SELLER OR THE PURCHASER IF THE
CLOSING SHALL NOT HAVE OCCURRED BY DECEMBER 15, 2004 (AS SUCH DATE SHALL BE
EXTENDED TO JANUARY 15, 2005, SOLELY IN THE EVENT THAT THE CONDITION SET FORTH
IN SECTION 7.02(J) SHALL FAIL TO HAVE BEEN SATISFIED OR WAIVED) (EITHER SUCH
DATE BEING, AS APPLICABLE, THE “INITIAL TERMINATION DATE); PROVIDED, HOWEVER,
THAT THE RIGHT TO TERMINATE THIS AGREEMENT UNDER THIS SECTION 9.01(B) SHALL NOT
BE AVAILABLE TO ANY PARTY WHOSE FAILURE TO FULFILL ANY OBLIGATION UNDER THIS
AGREEMENT SHALL HAVE BEEN THE CAUSE OF, OR SHALL HAVE RESULTED IN, THE FAILURE
OF THE CLOSING TO OCCUR ON OR PRIOR TO SUCH DATE; PROVIDED, FURTHER, THAT AT ANY
TIME AFTER THE INITIAL TERMINATION DATE, IF THE PRC ANTITRUST APPROVALS HAVE NOT
BEEN RECEIVED, AND AT SUCH TIME THE SELLER AND AUDIOVOX HAVE SATISFIED THEIR
CONDITIONS TO CLOSING AND ARE OTHERWISE IN ALL RESPECTS PREPARED TO CLOSE THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THEN (I) THE SELLER MAY TERMINATE
THIS AGREEMENT AND WITHIN TWO BUSINESS DAYS FOLLOWING SUCH TERMINATION THE
PURCHASER SHALL PAY TO THE SELLER BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE
FUNDS $1,000,000 AS REIMBURSEMENT FOR THE SELLER’S EXPENSES (THE “EXPENSE
REIMBURSEMENT”) AND (II) THE PURCHASER MAY NOT TERMINATE THIS AGREEMENT;
PROVIDED, FURTHER, THAT, AT ANY TIME AFTER FEBRUARY 15, 2005, THE PURCHASER MAY
TERMINATE THIS AGREEMENT IF ON THE DATE OF SUCH TERMINATION THE PURCHASER SHALL
PAY TO THE SELLER BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS THE EXPENSE
REIMBURSEMENT.

 

(C)                                  BY EITHER THE SELLER OR THE PURCHASER IN
THE EVENT THAT ANY GOVERNMENTAL AUTHORITY SHALL HAVE ISSUED AN ORDER, DECREE OR
RULING OR TAKEN ANY OTHER ACTION RESTRAINING, ENJOINING OR OTHERWISE PROHIBITING
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND SUCH ORDER, DECREE, RULING
OR OTHER ACTION SHALL HAVE BECOME FINAL AND NONAPPEALABLE;

 

(D)                                 BY THE PURCHASER IF AN AUDIOVOX TRIGGERING
EVENT (AS DEFINED BELOW) SHALL HAVE OCCURRED;

 

(E)                                  BY THE PURCHASER OR AUDIOVOX OR THE SELLER
IF THIS AGREEMENT SHALL FAIL TO RECEIVE THE REQUISITE VOTE FOR APPROVAL AT THE
AUDIOVOX STOCKHOLDERS’ MEETING; PROVIDED, THAT NEITHER AUDIOVOX NOR THE SELLER
SHALL BE ENTITLED TO TERMINATE THIS AGREEMENT PURSUANT TO THIS CLAUSE (E) IF THE
STOCKHOLDER SHALL HAVE BREACHED THE VOTING AGREEMENT; OR

 

(F)                                    BY AUDIOVOX OR THE SELLER IF THE AUDIOVOX
BOARD SHALL HAVE RECOMMENDED A SUPERIOR PROPOSAL IN ACCORDANCE WITH SECTION
5.06(C) OR IN ORDER TO ENTER INTO A DEFINITIVE AGREEMENT RELATING TO A SUPERIOR
PROPOSAL; OR

 

(G)                                 BY THE MUTUAL WRITTEN CONSENT OF THE SELLER
AND THE PURCHASER.

 

For purposes of this Agreement, an “Audiovox Triggering Event” shall be deemed
to have occurred if:  (i) the Audiovox Board makes a Change in the Audiovox
Recommendation; (ii) the Audiovox Board shall have recommended to the
stockholders of Audiovox a Competing Transaction or shall have resolved to do
so; (iii) Audiovox shall have failed to include in the

 

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Proxy Statement the Audiovox Recommendation; (iv) the Audiovox Board fails to
reaffirm the Audiovox Recommendation within seven Business Days after the
Purchaser reasonably requests in writing that such recommendation be
reaffirmed;  or (v) Audiovox shall have intentionally breached its obligations
under Section 5.06.

 

SECTION 9.02.  Effect of Termination.  In the event of termination of this
Agreement as provided in Section 9.01, this Agreement shall forthwith become
void and there shall be no liability on the part of either party hereto except
(a) as set forth in Sections 5.03 and 9.03, (b) that nothing herein shall
relieve any party from liability for any breach of this Agreement and (c) the
Purchaser shall promptly return or destroy (and cause its agents and
representatives to return or destroy) all documents (and copies thereof)
relating to the Business that were furnished to the Purchaser and all excerpts
therefrom and notes related thereto.

 

SECTION 9.03.  Expenses.  (a)  Except as otherwise specified in this Agreement,
all costs and expenses, including fees and disbursements of counsel, financial
advisors and accountants, incurred in connection with this Agreement
(“Expenses”) and the transactions contemplated by this Agreement shall be paid
by the party incurring such Expenses, whether or not the Closing shall have
occurred.

 

(b)                                 Audiovox agrees that:

 

(I)                                     IF THE PURCHASER SHALL TERMINATE THIS
AGREEMENT PURSUANT TO SECTION 9.01(D); OR

 

(II)                                  IF AUDIOVOX OR THE SELLER SHALL TERMINATE
THIS AGREEMENT PURSUANT TO SECTION 9.01(F).

 

then Audiovox shall pay to the Purchaser promptly (but in any event no later
than one business day after the first of such events shall have occurred) a fee
of 3.5% of the Purchase Price (the “Fee”), which amount shall be payable in
immediately available funds, plus an amount equal to the amount of the
Purchaser’s Expenses, up to a maximum of $1,000,000.

 

(c)                                  Audiovox acknowledges that the agreements
contained in this Section 9.03 are an integral part of the transactions
contemplated by this Agreement.  In the event that Audiovox shall fail to pay
the Fee or any Expenses when due, the term “Expenses” shall be deemed to include
the costs and expenses actually incurred or accrued by the Purchaser (including,
without limitation, fees and expenses of counsel) in connection with the
collection under and enforcement of this Section 9.03, together with interest on
such unpaid Fee and Expenses, commencing on the date that the Fee or such
Expenses became due, at a rate equal to the rate of interest publicly announced
by Citibank, N.A., from time to time, in The City of New York, as such bank’s
Prime Rate plus 1.00 %.  Payment of the fees and expenses described in this
Section 9.03 shall not be in lieu of any damages incurred in the event of
willful or intentional breach of this Agreement.

 

SECTION 9.04.  Amendment.  This Agreement may not be amended or modified except
(a) by an instrument in writing signed by, or on behalf of, the Seller, Audiovox
and the Purchaser or (b) by a waiver in accordance with Section 9.05.

 

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SECTION 9.05.  Waiver.  Any term or condition to this Agreement may be waived,
or the time for the performance of any of the obligations may be extended, at
any time by the party that is entitled to the benefit thereof.  Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party to be bound thereby.  Any waiver of any term or condition
shall not be construed as a waiver of any subsequent breach or a subsequent
waiver of the same term or condition, or a waiver of any other term or condition
of this Agreement.  The failure of any party hereto to assert any of its rights
hereunder shall not constitute a waiver of any of such rights.  Except as
otherwise set forth in this Agreement, all rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

 

ARTICLE X

 

GENERAL PROVISIONS

 

SECTION 10.01.  Notices.  All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by an internationally recognized overnight courier service, by facsimile
or registered or certified mail (postage prepaid, return receipt requested) to
the respective parties hereto at the following addresses (or at such other
address for a party as shall be specified in a notice given in accordance with
this Section 10.01):

 

(a)

 

if to the Seller:

 

 

 

 

 

Audiovox Communications Corp.

 

 

555 Wireless Blvd.

 

 

Hauppauge, NY  11788

 

 

Attention:  Philip Christopher

 

 

 

 

 

with a copy to:

 

 

 

 

 

Levy, Stopol & Camelo, LLP

 

 

190 EAB Plaza

 

 

East Tower-14th fl.

 

 

Uniondale, NY 11556

 

 

Attention:  Robert S. Levy

 

 

 

 

 

 

(b)

 

if to Audiovox:

 

 

 

 

 

Audiovox Corporation

 

 

150 Marcus Blvd.

 

 

Hauppauge, NY 11788

 

 

Attention:  Charles M. Stoehr

 

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with a copy to:

 

 

 

 

 

 

 

Levy, Stopol & Camelo, LLP

 

 

 

190 EAB Plaza

 

 

 

East Tower-14th fl.

 

 

 

Uniondale, NY 11556

 

 

 

Attention:  Robert S. Levy

 

 

 

 

 

(c)

 

if to the Purchaser:

 

 

 

 

 

 

 

UTStarcom Inc.

 

 

 

1275 Harbor Bay Parkway

 

 

 

Alameda, CA  94502

 

 

 

Telecopy:  (510) 864-8802

 

 

 

Attention:  General Counsel

 

 

 

 

 

 

 

 

 

 

 

with a copy to:

 

 

 

 

 

 

 

Shearman & Sterling LLP

 

 

 

1080 Marsh Road

 

 

 

Menlo Park, CA  94025

 

 

 

Telecopy:  (650) 838-3699

 

 

 

Attention:  Carmen Chang, Esq.

 

 

SECTION 10.02.  Public Announcements.  Unless otherwise required by securities
exchange rule or regulation or the rules and regulations of any national stock
exchange, none of the parties hereto shall make, or cause to be made, any press
release or public announcement in respect of the Acquisition Documents,
including this Agreement and the Ancillary Agreements, or the transactions
contemplated hereby and thereby or otherwise communicate with any news media
without prior written consent of the other parties, and the parties hereto shall
cooperate as to the timing and contents of any such press release, public
announcement or communication.

 

SECTION 10.03.  Severability.  If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any Law or public policy,
all other terms and provisions of this Agreement shall nevertheless remain in
full force and effect for so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to either party hereto.  Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.

 

SECTION 10.04.  Entire Agreement.  This Agreement and the Ancillary Agreements
constitute the entire agreement of the parties hereto with respect to the
subject

 

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matter hereof and thereof and supersede all prior agreements and undertakings,
both written and oral, among the parties with respect to the subject matter
hereof and thereof.

 

SECTION 10.05.  Assignment.  This Agreement may not be assigned by operation of
law or otherwise without the express written consent of the Seller and the
Purchaser (which consent may be granted or withheld in the sole discretion of
the Seller or the Purchaser); provided, however, that the Purchaser may assign
this Agreement or any of its rights and obligations hereunder to one or more
Affiliates of the Purchaser without the consent of the Seller but,
notwithstanding such assignment, the Purchaser shall remain fully liable
hereunder.

 

SECTION 10.06.  No Third Party Beneficiaries.  Except for the provisions of
Article VIII relating to indemnified parties, this Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their respective
successors and permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person, including any union or any
employee or former employee of the Seller, any legal or equitable right, benefit
or remedy of any nature whatsoever, including any rights of employment for any
specified period, under or by reason of this Agreement.

 

SECTION 10.07.  Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.

 

SECTION 10.08.  Waiver of Jury Trial.  Each of the parties hereto hereby waives
to the fullest extent permitted by applicable law any right it may have to a
trial by jury with respect to any litigation directly or indirectly arising out
of, under or in connection with this Agreement or the transactions contemplated
by this Agreement.  Each of the parties hereto hereby (a) certifies that no
representative, agent or attorney of the other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it has been induced to
enter into this Agreement and the transactions contemplated by this Agreement
and the Acquisition Agreements, as applicable, by, among other things, the
mutual waivers and certifications in this Section 10.08.

 

SECTION 10.09.  Arbitration.  All disputes arising out of or in connection with
this Agreement, the Acquisition Documents, and the transactions contemplated
hereby and thereby, which cannot be resolved through the procedures described
herein or therein shall be finally resolved solely and exclusively by means of
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association (“AAA”) to be conducted in English in the City of New York.  The
arbitration shall be conducted by three (3) arbitrators appointed by agreement
of the parties, or failing such agreement, under the Commercial Arbitration
Rules of the American Arbitration Association.  The arbitration will proceed in
accordance with the AAA’s Commercial Arbitration Rules.  The decision of the
arbitrator shall be final, conclusive, and binding upon the parties, and a
judgment upon the award may be obtained and entered in any federal or state
court of competent jurisdiction.  The parties agree that any arbitration shall
be kept confidential and any element of such arbitration (including but not
limited to any pleadings, briefs or other documents submitted or exchanged, any
testimony or other oral submissions, and any awards) shall not be disclosed
beyond the arbitral tribunal, the parties, their counsel and any person
necessary to conduct the arbitration, except as may be required in recognition
and

 

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enforcement proceedings, if any, or in order to satisfy disclosure obligations
imposed by any applicable Law.  The parties agree to cooperate in providing each
other with all discovery, including but not limited to the exchange of documents
and depositions of parties and non-parties, reasonably related to the issues in
the arbitration.  If the parties are unable to agree on any matter relating to
such discovery, any such difference shall be determined by the arbitrator.  The
award of the arbitrator shall be final and binding upon the parties, and shall
not be subject to any appeal or review.  The parties agree that such award may
be recognized and enforced in any court of competent jurisdiction.  The parties
also agree to submit to the non-exclusive personal jurisdiction of the federal
and state courts sitting in New York, New York, for the limited purpose of
enforcing this arbitration agreement (including, where appropriate, issuing
injunctive relief) or any award resulting from arbitration pursuant to this
Section 10.09.  The parties agree that the arbitration proceeding described in
this Section 10.09 is the sole and exclusive manner in which the parties may
resolve disputes arising out of or in connection with this Agreement and the
Acquisition Documents.  The arbitrator has the discretion to grant the
prevailing party in any arbitration attorneys’ fees and costs and make the
non-prevailing party responsible for all expenses of the arbitration.

 

SECTION 10.10.  Currency.  Unless otherwise specified in this Agreement, all
references to currency, monetary values and dollars set forth herein shall mean
United States (U.S.) dollars and all payments hereunder shall be made in United
States dollars.

 

SECTION 10.11.  Counterparts.  This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.

 

 

AUDIOVOX COMMUNICATIONS
CORP.

 

 

 

 

 

By:

/s/ Charles M. Stoehr

 

 

 

Name:  Charles M. Stoehr

 

 

 

Title:  Vice President

 

 

 

 

 

 

 

 

 

 

QUINTEX MOBILE COMMUNICATIONS
CORPORATION

 

 

 

 

 

 

 

 

 

By:

/s/ Charles M. Stoehr

 

 

 

Name:  Charles M. Stoehr

 

 

 

Title:  Vice President

 

 

 

 

 

 

 

 

 

 

AUDIOVOX COMMUNICATIONS
CANADA CO.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Charles M. Stoehr

 

 

 

Name:  Charles M. Stoehr

 

 

 

Title:  Vice President

 

 

 

 

 

 

 

 

 

 

UTSTARCOM, INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Michael J. Sophie

 

 

 

Name:  Michael J. Sophie

 

 

 

Title:

Chief Financial Officer and
Senior Vice President

 

 

 

 

 

 

 

 

 

 

UTSTARCOM CANADA COMPANY

 

 

 

 

 

 

By:

/s/ Michael J. Sophie

 

 

 

Name:  Michael J. Sophie

 

 

 

Title:

Chief Financial Officer and
Senior Vice President

 

 

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(With respect to Sections 2.05, 2.07, 2.09, 3.01, 3.02, 3.11(b), 3.30, 5.06,
5.08, 5.19, 5.20, 5.21, 5.22, 5.24 and Articles VII – X only)

 

 

 

AUDIOVOX CORPORATION

 

 

 

 

 

By:

/s/ John J. Shalam

 

 

 

Name:  John J. Shalam

 

 

 

Title:  Chief Executive Officer

 

 

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