**Exhibit 4.8**

 

EXECUTION VERSION

 

 

ASSET PURCHASE AND SALE AGREEMENT

 

dated as of April 11, 2005

 

between

 

DICTAPHONE CORPORATION

 

and

 

NICE SYSTEMS INC.

 

----

 

TABLE OF CONTENTS

 
| ARTICLE 1 | DEFINITIONS                                        |   |
|----------------|----------------------------------------------------|--------|
|           |                                               |   |
| ARTICLE 2 | PURCHASE AND SALE OF THE BUSINESS                  |   |
|           |                                               |   |
| 2.1            | Transfer of  Assets                                |   |
|           |                                               |   |
| 2.2            | Excluded  Assets                                   |   |
|           |                                               |   |
| 2.3            | Assumed  Liabilities                               |   |
|           |                                               |   |
| 2.4            | Retained  Liabilities                              |   |
|           |                                               |   |
| 2.5            | Consideration                                      |   |
|           |                                               |   |
| 2.6            | Closing                                            |   |
|           |                                               |   |
| 2.7            | Escrow                                             |   |
|           |                                               |   |
| 2.8            | Taxes                                              |   |
|           |                                               |   |
| 2.10           | Completion  of Transfers                           |   |
|           |                                               |   |
| 2.11           | Subsidiary Asset Purchase Agreements               |   |
|           |                                               |   |
| ARTICLE 3 | REPRESENTATIONS AND WARRANTIES OF  DICTAPHONE      |   |
|           |                                               |   |
| 3.1            | Existence and Power; Consents                      |   |
|           |                                               |   |
| 3.2            | Valid and Enforceable  Agreement; Authorization    |   |
|           |                                               |   |
| 3.3            | Ownership                                          |   |
|           |                                               |   |
| 3.4            | Financial  Statements; Other Financial Information |   |
|           |                                               |   |
| 3.5            | Absence  of Certain Developments                   |   |
|           |                                               |   |
| 3.6            | Taxes                                              |   |
|           |                                               |   |
| 3.7            | Insurance                                          |   |
|           |                                               |   |
| 3.8            | Litigation                                         |   |
|           |                                               |   |
| 3.9            | Product Liability  Claims                          |   |
|           |                                               |   |
| 3.10           | Inventory  and Accounts Receivable                 |   |
|           |                                               |   |
| 3.11           | Condition  of Personal Property                    |   |
|           |                                               |   |
| 3.12           | Property;  Title                                   |   |
|           |                                               |   |
| 3.13           | Contracts                                          |   |
|           |                                               |   |
| 3.14           | Licenses and  Permits                              |   |
|           |                                               |   |
| 3.15           | Undisclosed  Liabilities                           |   |
|           |                                               |   |
| 3.16           | Compliance  with Laws                              |   |
|           |                                               |   |
| 3.17           | Environmental  Matters                             |   |
|           |                                               |   |
| 3.18           | Intellectual Property                              |   |
|           |                                               |   |
| 3.19           | Employee Matters                                   |   |
|           |                                               |   |
| 3.20           | Employee Benefits                                  |   |
|                |                                                    |        |  |

 

----

 
| 3.21           | No Guarantees                                                                                               |   |
|----------------|-------------------------------------------------------------------------------------------------------------|--------|
|           |                                                                                                        |   |
| 3.22           | Certain Business Relationships with  the Business                                                           |   |
|           |                                                                                                        |   |
| 3.23           | Disclosure                                                                                                  |   |
|           |                                                                                                        |   |
| 3.24           | Customers and Suppliers                                                                                     |   |
|           |                                                                                                        |   |
| 3.25           | Product Backlog                                                                                             |   |
|           |                                                                                                        |   |
| 3.26           | Absence of Certain Business Practices                                                                       |   |
|           |                                                                                                        |   |
| 3.27           | Brokers, Finders                                                                                            |   |
|           |                                                                                                        |   |
| 3.28           | No Other Representations or Warranties                                                                      |   |
|           |                                                                                                        |   |
| ARTICLE 4 | REPRESENTATIONS  AND WARRANTIES OF THE BUYER                                                                |   |
|           |                                                                                                        |   |
| 4.1            | Existence and Power                                                                                         |   |
|           |                                                                                                        |   |
| 4.2            | Valid and Enforceable Agreement;  Authorization                                                             |   |
|           |                                                                                                        |   |
| 4.3            | Brokers, Finders                                                                                            |   |
|           |                                                                                                        |   |
| 4.4            | Litigation                                                                                                  |   |
|           |                                                                                                        |   |
| 4.5            | Funds                                                                                                       |   |
|           |                                                                                                        |   |
| 4.6            | No Other Representations or Warranties                                                                      |   |
|           |                                                                                                        |   |
| ARTICLE 5 | EMPLOYEES                                                                                                   |   |
|           |                                                                                                        |   |
| 5.1            | Access to Employees; Offers of  Employment to U.S. Employees                                                |   |
|           |                                                                                                        |   |
| 5.2            | Post-Closing Employment and Employee  Benefits                                                              |   |
|           |                                                                                                        |   |
| 5.3            | U.S. Employees Vacation Pay                                                                                 |   |
|           |                                                                                                        |   |
| 5.4            | Transfer of U.S. Employee Withholding                                                                       |   |
|           |                                                                                                        |   |
| 5.5            | Transfer of U.S. Unemployment  Insurance Rate and Base                                                      |   |
|           |                                                                                                        |   |
| 5.6            | Non-U.S. Employees                                                                                          |   |
|           |                                                                                                        |   |
| 5.7            | Non-Solicitation                                                                                            |   |
|           |                                                                                                        |   |
| ARTICLE 6 | ADDITIONAL  COVENANTS OF THE PARTIES                                                                        |   |
|           |                                                                                                        |   |
| 6.1            | Conduct of Business Until Closing                                                                           |   |
|           |                                                                                                        |   |
| 6.2            | Books and Records                                                                                           |   |
|           |                                                                                                        |   |
| 6.3            | Confidentiality                                                                                             |   |
|           |                                                                                                        |   |
| 6.4            | Filings; Further Assurances and  Cooperation                                                                |   |
|           |                                                                                                        |   |
| 6.5            | Covenant Not to Compete                                                                                     |   |
|           |                                                                                                        |   |
| 6.6            | Notice of Developments                                                                                      |   |
|           |                                                                                                        |   |
| 6.7            | Delivery of Audited Financial  Statements, Closing Date Balance Sheet and Interim 2005 Financial Statements |   |
|                |                                                                                                             |        |  |

 

----

 
| 6.8            | Commencement of Transition Planning and  Services; Execution and Delivery of Transition Services Agreement |   |
|----------------|------------------------------------------------------------------------------------------------------------|--------|
|           |                                                                                                       |   |
| 6.9            | Renegotiation of Certain Contracts;  Assignment of Certain Rights                                          |   |
|           |                                                                                                       |   |
| 6.10           | Certain Patents                                                                                            |   |
|           |                                                                                                       |   |
| 6.11           | Omitted IP                                                                                                 |   |
|           |                                                                                                       |   |
| 6.12           | Accounts Receivable Collections  Assistance                                                                |   |
|           |                                                                                                       |   |
| 6.13           | Accounts Payable and Accrued Expenses                                                                      |   |
|           |                                                                                                       |   |
| 6.14I          | Insurance Coverage                                                                                         |   |
|           |                                                                                                       |   |
| 6.15           | Bulk Sales Laws                                                                                            |   |
|           |                                                                                                       |   |
| ARTICLE 7 | CONDITIONS  PRECEDENT TO OBLIGATIONS OF THE BUYER                                                          |   |
|           |                                                                                                       |   |
| 7.1            | Accuracy of Representations and  Warranties and Performance of Obligations                                 |   |
|           |                                                                                                       |   |
| 7.2            | Consents and Approvals                                                                                     |   |
|           |                                                                                                       |   |
| 7.3            | No Contrary Judgment                                                                                       |   |
|           |                                                                                                       |   |
| 7.4            | No Material Adverse Effect                                                                                 |   |
|           |                                                                                                       |   |
| 7.5            | Minimum Number of Offers Accepted                                                                          |   |
|           |                                                                                                       |   |
| 7.6            | Deliveries                                                                                                 |   |
|           |                                                                                                       |   |
| ARTICLE 8 | CONDITIONS  PRECEDENT TO OBLIGATIONS OF DICTAPHONE                                                         |   |
|           |                                                                                                       |   |
| 8.1            | Accuracy of Representations and  Warranties and Performance of Obligations                                 |   |
|           |                                                                                                       |   |
| 8.2            | Consents and Approvals                                                                                     |   |
|           |                                                                                                       |   |
| 8.3            | No Contrary Judgment                                                                                       |   |
|           |                                                                                                       |   |
| 8.4            | Deliveries                                                                                                 |   |
|           |                                                                                                       |   |
| ARTICLE 9 | INDEMNIFICATION                                                                                            |   |
|           |                                                                                                       |   |
| 9.1            | Indemnification by Dictaphone                                                                              |   |
|           |                                                                                                       |   |
| 9.2            | Indemnification by the Buyer                                                                               |   |
|           |                                                                                                       |   |
| 9.3            | Notice and Payment of Losses                                                                               |   |
|           |                                                                                                       |   |
| 9.4            | Defense of Third-Party Claims                                                                              |   |
|           |                                                                                                       |   |
| 9.5            | Survival of Representations and  Warranties                                                                |   |
|           |                                                                                                       |   |
| 9.6            | Limitation on Indemnification                                                                              |   |
|           |                                                                                                       |   |
| 9.7            | Characterization of Indemnity Payments                                                                     |   |
|           |                                                                                                       |   |
| 9.8            | Exclusive Remedy                                                                                           |   |
|           |                                                                                                       |   |
| 9.9            | Other Limitations                                                                                          |   |
|                |                                                                                                            |        |  |

 

----

 
| 9.10            | No Duplicative Adjustments                        |   |
|-----------------|---------------------------------------------------|--------|
|            |                                              |   |
| 9.11            | Annex 5.6(a) Representations and  Warranties |   |
|            |                                              |   |
| ARTICLE 10 | TERMINATION;  SURVIVAL OF AGREEMENT               |   |
|            |                                              |   |
| 10.1            | Termination                                       |   |
|            |                                              |   |
| 10.2            | Survival of Agreement                             |   |
|            |                                              |   |
| ARTICLE 11 | MISCELLANEOUS  PROVISIONS                         |   |
|            |                                              |   |
| 11.1            | Expenses                                          |   |
|            |                                              |   |
| 11.2            | Notice                                            |   |
|            |                                              |   |
| 11.3            | Entire Agreement                                  |   |
|            |                                              |   |
| 11.4            | Severability                                      |   |
|            |                                              |   |
| 11.5            | Assignment; Binding Agreement                     |   |
|            |                                              |   |
| 11.6            | Counterparts                                      |   |
|            |                                              |   |
| 11.7            | Headings; Interpretation                          |   |
|            |                                              |   |
| 11.8            | Governing Law                                     |   |
|            |                                              |   |
| 11.9            | Dispute Resolution                                |   |
|            |                                              |   |
| 11.10           | Disclosure Schedule Generally                |   |
|            |                                              |   |
| 11.11           | No Third-Party Beneficiaries or Other  Rights     |   |
|            |                                              |   |
| 11.12           | Amendments; Waivers                               |   |
|                 |                                                   |        |  |

 

----

 

**ASSET PURCHASE AND SALE AGREEMENT**

 

ASSET PURCHASEAND SALE AGREEMENT, dated April 11, 2005, between Dictaphone Corporation,a Delaware corporation (“Dictaphone”), and Nice Systems Inc., a Delaware corporation (the “Buyer”).  

 

**RECITALS**

 

A.            TheBuyer desires to purchase the Purchased Assets, and assume the AssumedLiabilities, from Dictaphone, on the following terms and conditions; and

 

B.            Dictaphone desires tosell the Purchased Assets, and assign the Assumed Liabilities, to the Buyer, onthe following terms and conditions.

 

NOW, THEREFORE, in consideration of the foregoing recitals and themutual covenants, representations, warranties, conditions and agreementshereinafter expressed, the Parties agree as follows:

 

ARTICLE1

**DEFINITIONS**

 

The following words shall have the meaning given them in this Article 1:

 

1.1           “AAA”has the meaning set forth in Section 11.9(c).

 

1.2           “AAARules” has the meaning set forth in Section 11.9(c).

 

1.3           “AccountsPayable” means those accounts payable of the Business recorded or requiredto be recorded as such on financial statements of the Business prepared inaccordance with U.S. GAAP, and “accounts payable” means all accounts of theBusiness representing obligations to pay for goods or services received andother liabilities of the type customarily included as payables of a businessthat arose or arise in the Ordinary Course. 

 

1.4           “AccountsReceivable” means those accounts receivable of the Business recorded orrequired to be recorded as such on financial statements of the Businessprepared in accordance with U.S. GAAP, and “accounts receivable” means allaccounts of the Business representing moneys due for goods sold or servicesrendered, as evidenced by notes, statements, invoices or other written evidenceof a present obligation.  

 

1.5           “AccruedExpenses” means those accrued expenses of the Business recorded or requiredto be recorded as such on financial statements of the Business prepared inaccordance with U.S. GAAP, and “accrued expenses” means all liabilities of theBusiness of the type customarily included as accrued expenses of a businessthat arose or arise in the Ordinary Course. The types and categories of accrued expenses are listed on Annex 1.5.    

 

1.6           “Affiliate” means, with respect to any Person, anyother Person which is controlling, controlled by, or under common control with,directly or indirectly through any Person, the Person referred to, and, if thePerson referred to is a natural person, any member of such Person’s immediatefamily.  The term “control” (including,with correlative meaning, the

 

1

----

 

terms “controlledby” and “under common control with”), as used with respect to any Person, meansthe possession, directly or indirectly, of the power to direct or cause thedirection of the management and policies of such Person, whether through theownership of voting securities, by contract or otherwise.

 

1.7           “Agreement” means this Asset Purchaseand Sale Agreement as executed on the date hereof and as amended orsupplemented in accordance with the terms hereof, including the DisclosureSchedule and all other Schedules, Annexes and Exhibits hereto.

 

1.8           “AssignedContracts” has the meaning set forth in Section 2.1(d).

 

1.9           “AssumedLiabilities” has the meaning set forth in Section 2.3.

 

1.10         “AuditedFinancial Statements” means the auditedbalance sheet of the Business as of December 31, 2004, and the relatedaudited statement of operations and statement of cash flows for the year thenended, prepared on a “carved-out” basis in accordance with U.S. GAAP and asotherwise set forth in Section 3.4(b).

 

1.11         “Auditor”has the meaning in Section 2.5(b)(iv).

 

1.12         “Auditor’sConsent” has the meaning in Section 6.7(a).

 

1.13         “Auditor’sReport” has the meaning in Section 3.4(b).

 

1.14         “BalanceSheet Escrowed Funds” has the meaning in Section 2.5(b)(iii). 

 

1.15         “BenefitPlan” means any employee benefit plan (as defined in Section 3(3) ofERISA) and any other employee benefit plan, program or arrangement.

 

1.16         “Business” means allglobal commercial activities relating to the current or the currently planned,design, development, sale, production, marketing and servicing of hardware andsoftware for call logging systems and related replay and surveillance systemsand application software, for: (i) call centers and contact centers, withrelated software applications for quality monitoring, workforce optimization,business performance management and voice content analytics; (ii) command,control, communications and dispatch operations of public safety, firstresponders, transportation, air-traffic control organizations and othergovernment agencies, with related software applications for dispatch, resourceallocation, scenario reconstruction and evidence gathering; and (iii) financialinstitutions, with related software applications for risk management andcompliance, including anti-fraud, anti-money laundering and securitiesregulation, including Sarbanes-Oxley regulations; as such business has beenconducted as of the Closing Date by Dictaphone’s Communications RecordingSystems division, including through its channel partners and DictaphoneAffiliates; provided, however, that Business shall not include thebusiness or operations of the Healthcare Solutions Group, Integrated VoiceSystems or EMS divisions of Dictaphone.

 

1.17         “Business Day” means any daywhich is not a Saturday, Sunday or a legal holiday in the State of Connecticut,United States of America.

 

2

----

 

1.18         “BusinessUse” has the meaning set forth in Section 6.11(a).  

 

1.19         “BusinessIntellectual Property” has the meaning set forth in Section 2.1(c).  

 

1.20         “Buyer” has the meaning set forth in the title ofthis Agreement.

 

1.21         “BuyerMaximum Indemnity Amount” has the meaning set forth in Section 9.6.

 

1.22         “BuyerAffiliates” means (i) NICE CTI Systems UK Limited, organized under thelaw of the United Kingdom, (ii) NICE Systems sarl, organized under thelaws of France, and (iii) NICE Systems GmbH, organized under the laws ofGermany, each of which is an Affiliate of Buyer under common control withBuyer.

 

1.23         “Buyer’sFSA” has the meaning set forth in Section 5.2(e).

 

1.24         “Closing” means the consummation of thetransactions contemplated by this Agreement, as provided for in Section 2.6.

 

1.25         “ClosingDate” means the date on which the Closing occurs, which shall be withinfive (5) Business Days from the satisfaction or waiver of all applicableconditions to Closing set out herein, or such other date as shall be mutuallyagreed upon by the Parties, after allowing for reasonable time periods forperforming certain pre-Closing activities, including the physical inventorycount contemplated by Section 2.5(b)(i), the preparation and review of theEstimated Closing Date Balance Sheet and the release of the Encumbrancesdescribed in Section 1.83(e).

 

1.26         “ClosingDate Balance Sheet” means the audited balance sheet of the Business as ofthe Closing Date reflecting the Purchased Assets acquired and the AssumedLiabilities assumed pursuant to this Agreement, as more specifically set forthin Section 2.5(b).

 

1.27         “Code” means the United States Internal RevenueCode of 1986, as amended, and the regulations promulgated thereunder.

 

1.28         “CompetitiveActivities” has the meaning set forth in Section 6.5(a). 

 

1.29         “Contract” means any contract, lease, indenture,mortgage, license, deed of trust, evidence of indebtedness, binding commitmentor instrument to which Dictaphone or a Selling Subsidiary (in each case inrespect of the Business) is a party or by which it is bound.

 

1.30         “December 31Balance Sheet” means the balance sheet of the Business as of December 31,2004 included in the Audited Financial Statements.

 

1.31         “Dictaphone” has the meaning set forth in the title ofthis Agreement.

 

1.32         “Dictaphone’sFSA” has the meaning set forth in Section 5.2(e).

 

3

----

 

1.33         “DictaphoneMaximum Indemnity Amount” has the meaning set forth in Section 9.6(b).

 

1.34         “DisclosureSchedule” means the schedule, dated the date hereof and as it may beamended or supplemented from time to time on or prior to Closing, of exceptionsto the representation and warranties made, and the listings of informationprovided, by Dictaphone or the Buyer hereunder.

 

1.35         “DictaphoneSuccessor” means any Person who is an investor in, a successor to, orassignee of, Dictaphone or any acquirer of, successor to or assignee of amajority of the businesses or assets of Dictaphone or its Affiliates, in eachcase, pursuant to an asset acquisition, stock acquisition, merger, stockexchange, consolidation or other business combination, and any Affiliate ofsuch Person (other than Dictaphone or its Affiliates at the time of suchinvestment, succession or assignment).  

 

1.36         “Dispute”has the meaning set forth in Section 11.9(a).

 

1.37         “Effective Time” means the effective time of theClosing, which shall be deemed to be 11:59 p.m. eastern time on theClosing Date.

 

1.38         “Employees”means individuals who immediately prior to the Effective Time are employees ofDictaphone or its subsidiaries and who primarily perform services in theBusiness; “EU Employees” means those Employees based in the EuropeanUnion and whose contracts of employment are subject to the laws of a memberstate of the European Union and listed on Annex 1.38(i); “SwissEmployees” means those Employees based in the European Union and whosecontracts of employment are subject to the laws of Switzerland and listed on Annex1.38(ii); “Canadian Employees” means those Employees based in Canadaand whose contracts of employment are subject to the laws of Canada and listedon Annex 1.38(iii); “Singapore Employees” means those Employeesbased in Singapore and whose contracts of employment are subject to the laws ofSingapore and listed on Annex 1.38(iv); and “U.S. Employees”means all Employees other than the EU Employees, Swiss Employees, CanadianEmployees and Singapore Employees.   

 

1.39         “EMS”means all commercial business, operations or activities anywhere in the worldrelating to the design, development, sale, manufacture, assembly, marketing,servicing or support of electrical or electronic equipment, including printedcircuit board assembly, cable assembly, metal fabrication, machining orfinishing, final system builds, or design support, but excluding the present orcurrently planned design, development, sale, production, marketing, service orsupport of products or services of the Business (determined without regard tothe proviso at the end of Section 1.16). 

 

1.40         “Encumbrances” means mortgages, liens, charges,claims, security interests, easements or other encumbrances.

 

1.41         “Environmental Law” means any Law relating topollution or protection of the environment.

 

4

----

 

1.42         “EnvironmentalPermit” means any permit, approval, consent or other authorization pursuantto any Environmental Law.

 

1.43         “ERISA”means the Employee Retirement Income Security Act of 1974, as amended.

 

1.44         “EscrowAgent” means the escrow agent named in the Escrow Agreement.

 

1.45         “EscrowAgreement” means an agreement, in the form attached hereto as Exhibit E,by and among the Buyer, Dictaphone and the escrow agent named therein.

 

1.46         “EstimatedClosing Date Balance Sheet” means the unaudited balance sheet of theBusiness as of the Closing Date reflecting the Purchased Assets to be acquiredand the Assumed Liabilities to be assumed pursuant to this Agreement, as morespecifically set forth in Section 2.5(b).

 

1.47         “Excluded Assets” has the meaning set forth in Section 2.2.

 

1.48         “GAAP” means generally accepted accountingprinciples in the applicable specified jurisdiction (and when not specified, inthe United States) as in effect from time to time, and “U.S. GAAP” meansgenerally accepted accounting principles in the United States as in effect fromtime to time, in each case together with the procedures, practices andmethodologies of the relevant Party used in connection therewith, consistentlyapplied. For this purpose, “as in effect from time to time” when used inreference to GAAP or U.S. GAAP as applied (i) to the Audited Financial Statements, shall mean as of the dateor for the period covered by the Audited Financial Statements, (ii) to theClosing Date Balance Sheet, shall mean as of the Closing Date, and (iii) toall other references in this Agreement, shall mean as of the date or for theperiod covered by the financial statement, representation, warranty, covenantor information in respect of which the term GAAP or U.S. GAAP is used.   

 

1.49         “HealthcareSolutions Group” means all commercial business, operations or activities,other than in the call logging market and related replay and surveillancesystem market, in the healthcare market, anywhere in the world, relating to thedesign, development, sale, production, marketing or servicing of handheld, PC,networked or enterprise wide digital recording, dictation or transcriptionsystems, dictation workflow management systems, document or records managementsystems (including archiving, transmitting, receiving, indexing, analyzing orprocessing of documents or records), voice or data file management systems,natural language processing solutions or speech recognition solutions, includingspeaker verification, voice recognition, voice-activated command or control orrelated technologies.

 

1.50         “Houlihan”has the meaning set forth in Section 3.27.

 

1.51         “IndemnificationEscrowed Funds” has the meaning set forth in Section 2.5(a).

 

1.52         “Indemnifying Party” has the meaning set forth in Section 9.3.

 

1.53         “IndemnityThreshold” has the meaning set forth in Section 9.6(a).

 

5

----

 

1.54         “Injured Party” has the meaning set forth in Section 9.3.

 

1.55         “IntegratedVoice Systems” means all commercial business, operations or activities,other than in the call logging market and related replay and surveillancesystem market, anywhere in the world relating to the design, development, sale,production, marketing or servicing of handheld, PC, networked or enterprisewide systems for archiving, consolidating, transmitting, receiving or indexingaudio files, images, photographs, video or data, or dictation/transcriptionsystems, dictation workflow management systems, document or records managementsystems (including archiving, transmitting, receiving, indexing, analyzing,digesting or processing of documents or records), voice or data file managementsystems, natural language processing solutions or speech recognitionsolutions,  speaker verification, voicerecognition, voice-activated command or control or related technologies.    

 

1.56         “Intellectual Property” means patents, patentrights, inventions, designs, proprietary processes and formulae, models, knowhow, trade secrets, trademarks, trade dress, service marks, copyrights,business names, domain names, trade names, service names, logos, designs andregistrations, applications, renewals and rights to apply for any of theforegoing, and documentation and media embodying any of the foregoing(including manuals, memoranda and records), and goodwill associated with any ofthe foregoing, and rights to sue or take any other action with respect to anyinfringement, misappropriation, dilution or other violation of any rights withrespect to any of the foregoing.

 

1.57         “Interim2005 Financial Statements” has the meaning set forth in Section 6.7(c).

 

1.58         “IRS” means the U.S. Internal Revenue Service.

 

1.59         “Inventory”has the meaning set forth in Section 2.1(b).

 

1.60         “IPPolicy” has the meaning set forth in Section 3.18(k).

 

1.61         “Key Employees”has the meaning set forth in Section 5.1(d). 

 

1.62         “knowledge” meansa Person’s actual knowledge (i.e., the conscious awareness of facts or otherinformation), after undertaking a customary and reasonable investigation underthe circumstances, including undertaking a reasonable inquiry of those Personswho report directly to them.  The words “know,”“knowing” and “known” shall be construed accordingly.  In the case of Dictaphone, “knowledge” meansthe actual knowledge of the Persons listed on Annex 1.62(i) (otherthan those Persons listed on Annex 1.62(i) solely for the purposeof identifying such Persons as Persons who report directly to other Personslisted on Annex 1.62(i)), after undertaking a customary and reasonableinvestigation under the circumstances, including undertaking a reasonableinquiry of those Persons who report directly to them (other than those Personsspecifically listed on Annex 1.62(i) as excluded from the requirementof making such inquiry).  In the case ofthe Buyer, “knowledge” means the actual knowledge of the Persons listed on Annex1.62(ii), after undertaking a customary and reasonable investigation underthe circumstances, including undertaking a reasonable inquiry of those Personswho report directly to them.

 

6

----

 

1.63         “Law” means a statute, law, ordinance, decree,order, injunction, rule, directive or regulation of any U.S. or non-U.S.government or governmental authority, and includes rules and regulationsof any regulatory or self-regulatory authority compliance with which isrequired by any of the foregoing.

 

1.64         “Liabilities”means claims, liabilities, obligations, losses, costs, expenses (including reasonablelegal, accounting and other expenses), Proceedings, fines, Taxes, deficiencies,assessments, charges, penalties, allegations, demands, damages (includingactual, punitive or consequential, foreseen or unforeseen, known or unknowndamages), settlements or judgments of any kind or nature whatsoever. 

 

1.65         “Loss” means a Liability, to the extent actuallypaid or incurred, but net of any proceeds, indemnities or recoveries frominsurers or other third parties received by the Injured Party with respect tosuch Liability.

 

1.66         “MajorCustomers” has the meaning set forth in Section 3.24(a).

 

1.67         “ManufacturingAgreement” means an agreement, in the form attached hereto as Exhibit A,between an Affiliate of the Buyer and Dictaphone relating to the provision ofequipment and related items to the Buyer by Dictaphone’s EMS division.

 

1.68         “Material Adverse Effect” means a material adverseeffect on the assets, liabilities, business, condition (financial or otherwise)or results of operations or prospects of the Business taken as a whole, butshall not be deemed to include (i) any changes resulting from generaleconomic, regulatory or political conditions, (ii) acts attributable to,omissions by or circumstance affecting the Buyer or any of its Affiliates, (iii) changesin foreign currency exchange rates, (iv) circumstances that affect theindustries in which the Business operates generally or (v) any changesresulting from the announcement or pendency of the transactions provided for inthis Agreement.

 

1.69         “Material Contract” has the meaning set forth in Section 3.13(a).

 

1.70         “NetAdjusted Working Capital Level” means the excess, if any, of (x) thePurchased Assets that are current assets (determined and calculated inaccordance with U.S. GAAP), over (y) the sum of (i) total AssumedLiabilities that are current liabilities (determined and calculated inaccordance with U.S. GAAP) and (ii) long-term deferred revenues(determined and calculated in accordance with U.S. GAAP).  

 

1.71         “NiceSettlement Agreement” means that certain Settlement Agreement entered intoon or about December 11, 2003 by and among Dictaphone, Nice Systems Ltd.and Nice Systems Inc. 

 

1.72         “Non-CompetePeriod” has the meaning set forth in Section 6.5(a). 

 

1.73         “Notice of Claim” has the meaning set forth in Section 9.3.

 

1.74         “OmittedIP” has the meaning set forth in Section 6.11(a).

 

7

----

 

1.75         “OmittedIP License” has the meaning set forth in Section 6.11(a).

 

1.76         “Ordinary Course” means the ordinary course ofcommercial operations customarily engaged in by the Business.

 

1.77         “OSSAgreement” means the ProfessionalServices Agreement, dated as of April 2, 2001, by and between Dictaphoneand Omnee Systems and Software Corporation. 

 

1.78         “OtherAssets” has the meaning set forth in Section 2.1(k).

 

1.79         “OtherDictaphone Businesses” means all businesses, operations and activities ofDictaphone and its Affiliates other than the Business, including thosebusinesses of Dictaphone described in the proviso to the definition of “Business”.

 

1.80         “OtherFinancial Information” has the meaning set forth in Section 3.4(a).

 

1.81         “Party” means Dictaphone or the Buyer.

 

1.82         “Permitted Encumbrances” means, collectively, (a) Encumbrancesthat are disclosed in the Disclosure Schedule, (b) Encumbrances to secureTaxes which are not yet delinquent, (c) Encumbrances in favor ofmechanics, material men, laborers, employees and suppliers and similarEncumbrances arising by operation of law, (d) Assumed Liabilities and (e) Encumbranceswhich shall be released on or prior to the Closing Date.

 

1.83         “Person”means an individual, a partnership, a corporation, a limited liability company,an association, a joint stock company, a trust, a joint venture, anunincorporated organization, a government or governmental authority (which termincludes any department, agency or political subdivision thereof) or otherentity.

 

1.84         “PrepaidExpenses” means those prepaid expenses of the Business recorded or requiredto be recorded as such on financial statements of the Business prepared inaccordance with U.S. GAAP, and “prepaid expenses” means deposits and otherprepayments of expenses of the Business and all rights in respect thereof.

 

1.85         “Proceeding”means any suit, action, proceeding or arbitration or any investigation by agovernment or governmental authority.

 

1.86         “ProductBacklog” means written orders in the form of a purchase order or contractfor products of the Business that have been placed and for which revenues havenot yet been recognized, less any cancellations of such orders.

 

1.87         “Purchase Price” has the meaning set forth in Section 2.5(a).

 

1.88         “Purchased Assets” has the meaning set forth in Section 2.1.  

 

1.89         “Records” has the meaning set forth in Section 6.2.

 

8

----

 

1.90         “RelatedAgreements” means (i) the Manufacturing Agreement, (ii) theTechnology License Agreement, (iii) the Trademark License Agreement, (iv) theTransition Services Agreement/Shared Services Agreements, (v) the EscrowAgreement and (vi) the Subsidiary Asset Purchase Agreements.

 

1.91         “RetainedEmployees” means all of the Employees who are listed on Annex 1.91or who are not Transferred U.S. Employees or Transferred ForeignEmployees.  

 

1.92         “Retained Liabilities” has the meaning set forthin the first sentence of Section 2.4.

 

1.93         “Section 6.12Schedule” has the meaning set forth in Section 6.12.

 

1.94         “Sellers”means, collectively, Dictaphone and the Selling Subsidiaries.

 

1.95         “SellingSubsidiaries” means (i) Dictaphone Canada (1995) Inc., a Canadiancorporation, (ii) Dictaphone Company Limited, a U.K. company, (iii) DictaphoneDeutschland GmbH, a German company, (iv) Dictaphone Europe AG, a Swisscompany, and (v) Dictaphone International Limited, a U.K. company.

 

1.96         “SingaporeEmployees” has the meaning set forth in Section 1.38.

 

1.97         “StraddlePeriod” means any taxable period that begins prior to and ends after theEffective Time.

 

1.98         “SubsidiaryAsset Purchase Agreements” has the meaning set forth in Section 2.11.

 

1.99         “SwissEmployees” has the meaning set forth in Section 1.38.

 

1.100       “TangibleBusiness Assets” has the meaning set forth in Section 2.1(a).

 

1.101       “Taxes”means taxes, charges, duties, imposts, fees, levies and other assessments ofany kind by any government or governmental authority, including federal,provincial, possession, state, city, county and foreign income, profits,franchise, gross receipts, sales, use, transfer, stamp, occupation, property,capital, windfall profits, customs, ad valorem, value-added and excise taxes,and penalties, additions to tax and interest relating to any of the foregoing.

 

1.102       “TechnologyLicense Agreement” means an agreement, in the form attached hereto as Exhibit B,between the Buyer and Dictaphone pursuant to which the Buyer will license toDictaphone, subject to Section 6.5, certain Business IntellectualProperty.

 

1.103       “TerminationAgreement” means the Settlement Termination and Litigation TransferAgreement related to the Nice Settlement Agreement in the form of Exhibit H.

 

1.104       “Third-PartyClaim” has the meaning set forth in Section 9.4.

 

9

----

 

1.105       “ThirdParty Intellectual Property” means any Intellectual Property to whichDictaphone does not exclusively own the entire right, title and interest.

 

1.106       “TrademarkLicense Agreement” means an agreement, in the form attached hereto as Exhibit C,between the Buyer and Dictaphone regarding the license by Dictaphone of itstrademark “Dictaphone” to the Buyer.

 

1.107       “Transferred Employees” means all Transferred U.S.Employees and Transferred Non-U.S. Employees. 

 

1.108       “TransferredNon-U.S. Employees” means those EU Employees, Swiss Employees and CanadianEmployees whose employment is transferred to, or who accept employment as ofthe Effective Time by, the Buyer or any of its Affiliates as of the EffectiveTime under Section 5.6.

 

1.109       “TransferredU.S. Employees” means those U.S. Employees who accept employment as of theEffective Time with the Buyer or any of its Affiliates under Section 5.1(c).  

 

1.110       “TransitionServices/Shared Services Agreements” means the agreements, in the formattached hereto as Exhibit D, between an Affiliate of the Buyer andDictaphone regarding services to be provided (i) by Dictaphone to theBuyer (or to third parties to which the Buyer may outsource certain assignedmaintenance and service contracts), (ii) by Dictaphone for the benefit ofcustomers of the Buyer, as a subcontractor to the Buyer, or (iii) by theBuyer to customers of Dictaphone, as a subcontractor to Dictaphone, or to beshared by the Buyer and Dictaphone.

 

Whenever required by the context hereof, all terms andpronouns, and any variations thereof, will be deemed to refer to the masculine,feminine or neuter and the singular or plural. When used in this Agreement, the term “including” means “includingbut not limited to” and the words “asset” and “property” aresynonymous.

 

ARTICLE 2

**PURCHASE AND SALE OF THE BUSINESS**

 

2.1           Transfer of Assets.  Uponthe terms and subject to the conditions of this Agreement and the RelatedAgreements, at the Closing and as of the Effective Time, Dictaphone shall, andshall cause its Selling Subsidiaries to, sell, assign, transfer and convey tothe Buyer or to a Buyer Affiliate, and the Buyer shall, and shall cause theBuyer Affiliates to, purchase, acquire and accept from Dictaphone and theSelling Subsidiaries, all of Sellers’ right, title and interest to and in thefollowing assets, properties and rights used or held for use primarily in theBusiness, whether now in use or currently under development, including suchchanges therein, additions thereto and deletions therefrom as may occur fromthe date hereof through the Closing in the Ordinary Course or as otherwisepermitted or required pursuant to the terms hereof (the “Purchased Assets”),free and clear of all Encumbrances other than Permitted Encumbrances: 

 

(a)           allequipment, machinery, supplies, vehicles, tools, personal computers,workstations, network infrastructure, laboratory equipment, testing equipmentand apparatus, mock-ups, demonstration equipment, personal property and othertangible personal

 

10

----

 

property used or held foruse primarily in the Business including that listed on Annex 2.1(a), andincluding any specialized or otherwise non-generic equipment, machinery,tooling and testing equipment used by EMS for the design, development,manufacture, assembly, servicing or support of products of the Business (collectively,the “Tangible Business Assets”);

 

(b)           allinventory, including spare parts and finished goods, but not including rawmaterials and works-in-progress, whether stored at a Business location orstored at a third-party location or other Dictaphone location, used or held foruse primarily in the Business, including that listed on Annex 2.1(b) (collectively,the “Inventory”) and, for the avoidance of doubt, Inventory shall notinclude any inventory held by EMS;

 

(c)           allIntellectual Property used or held for use, or currently under development foruse, primarily in the Business, including that listed on Annex 2.1(c),and including any designs, proprietary processes and formulae, models, and knowhow used by EMS for the design, development, manufacture, assembly, servicingor support of products of the Business (collectively, the “BusinessIntellectual Property”);

 

(d)           allContracts relating primarily to the Business or the other Purchased Assets(collectively, the “Assigned Contracts”), including those listed on Annex2.1(d), which shall be divided into the following categories on such Annex2.1(d):

 

(i)            MaintenanceContracts (Annex 2.1(d)(i));

 

(ii)           ProductPurchase Contracts (Annex 2.1(d)(ii)); 

 

(iii)          Dealer,Distributor or Reseller Agreements (Annex 2.1(d)(iii)); 

 

(iv)          SoftwareOEM Agreements (Annex 2.1(d)(iv)); 

 

(v)           LicenseAgreements (Annex 2.1(d)(v)); 

 

(vi)          ProfessionalDevelopment Services Agreements (Annex 2.1(d)(vi));

 

(vii)         ServiceProvider and Vendor Agreements (Annex 2.1(d)(vii)); and

 

(viii)        OtherAssigned Contracts (Annex 2.1(d)(viii)); 

 

(e)           allAccounts Receivable (excluding Accounts Receivable from the Other DictaphoneBusinesses) arising from products or services sold or leased by the Business;

 

(f)            all(i) customer and vendor lists relating primarily to the Business,including all files and documents (including credit information) relatingprimarily to (1) current or proposed customers and customers who werecustomers at any time after January 1, 2002 (including business proposalsto current and proposed customers and all other documents such as

 

11

----

 

businesscards and documents reflecting customer or sales “leads”) of the Business and (2) vendorsof the Business, and (ii) other business and financial records, data,files, books and documents (whether in hard copy, computer format or any otherstorage media) and any other Records relating primarily to the Business, ineach case subject to the right of Dictaphone (y) to keep and use for itself andtransfer to any of its Affiliates or any third party any of the foregoing whichdoes not relate primarily to the Business and (z) to keep and use for itselfand transfer to any Affiliates controlled by, or successors to, Dictaphonecopies of any of the Purchased Assets described in this Section 2.1(f),subject to Section 6.5; 

 

(g)           alladvertising, marketing, sales, creative and promotional materials relatingprimarily to the Business, in each case subject to the right of Dictaphone (i) tokeep and use for itself and transfer to any of its Affiliates or any thirdparty any of the foregoing which does not relate primarily to the Business and (ii) tokeep and use for itself and transfer to any of its successors for their use, ineach case, in accordance with Sections 6.2, 6.4 and 9.3, copies of any of theforegoing which relate primarily to the Business, subject to Section 6.5; 

 

(h)           subjectto Section 2.2(e), all rights and claims to deposits and prepayments thatwould be recorded as Prepaid Expenses on financial statements prepared byDictaphone in accordance with U.S. GAAP which were paid to third-parties andthat relate primarily to the Purchased Assets or the Business;

 

(i)            allwarranties from third parties and, except as set forth on Annex 2.1(i) andnot set forth on the December 31 Balance Sheet or as set forth in Section 2.2(b),refunds from and rights of set off against third-parties, in each case thatrelate primarily to the Purchased Assets or the Business; 

 

(j)            exceptas provided in Section 2.2(j), all rights toreceive any damage award or other economic benefit with respect toinfringement, misappropriation, dilution or other violation of any rightsrelated to the Business Intellectual Property arising prior to the EffectiveTime, including all rights to litigation claims brought pursuant to the NiceSettlement Agreement; and

 

(k)           the assets, rights,properties and interests listed in Annex 2.1(k) (the “Other Assets”).

 

2.2           Excluded Assets.  Notwithstanding any provision in thisAgreement to the contrary, only those assets, rights, interests and propertieswhich are expressly identified as Purchased Assets in Section 2.1 are tobe sold, assigned, transferred or conveyed to the Buyer or the Buyer Affiliateshereunder and all other assets, rights, interests and properties of Sellers arespecifically excluded from the transactions contemplated by this Agreement,including the following (collectively, the “Excluded Assets”):

 

(a)           allcash on hand, cash on deposit and cash equivalents, including bank deposits,investments in “money market” funds and commercial paper funds, certificates ofdeposit, Treasury Bills and other marketable securities and all accruedinterest thereon;

 

(b)           allrefunds, and all rights or claims to refunds, of any Taxes with respect to thePurchased Assets or the Business relating to any date or period prior to orthrough

 

12

----

 

the Effective Time andall interest thereon (regardless of whether any such refund or interest isreceived prior to or after the Effective Time), including all refunds of Taxesand interest thereon received by, or credited against Tax liability of, theBuyer or any Affiliate of the Buyer attributable to Taxes paid by Dictaphone oran Affiliate thereof for periods or portions thereof ending on or prior to theEffective Time;

 

(c)           allreal property owned by or leased to Dictaphone, including related buildings andfixtures; 

 

(d)           allintracompany and intercompany receivables of the Business; 

 

(e)           (i) allcurrent and prior insurance policies, (ii) all reimbursements for, orother benefits associated with, prepaid insurance and (iii) all rights andclaims to deposits and prepayments that would be recorded as Prepaid Expenseson financial statements prepared by Dictaphone in accordance with U.S. GAAP forwhich the Buyer will not receive the benefit after the Effective Time and (iv) insuranceproceeds with respect to events occurring prior to the Effective Time;

 

(f)            allassets of any Benefit Plan of Dictaphone;

 

(g)           allownership rights of Dictaphone in respect of Intellectual Property to belicensed to Buyer pursuant to the Trademark License Agreement;

 

(h)           subjectto Section 2.1(j), all rights, claims or causes of action that Dictaphonemay have against any Person arising from or related to the ownership or use ofthe Purchased Assets or the operation of the Business before the EffectiveTime; 

 

(i)            allraw materials and works-in-progress, whether stored at a Business location orstored at a third-party location or other Dictaphone location, used or held foruse by EMS;

 

(j)            allrights under the escrow agreement executed in connection with the NiceSettlement Agreement and any remaining payments to be made by the Buyer toDictaphone under the Nice Settlement Agreement; and

 

(k)           theassets, rights, interests and properties listed on Annex 2.2.

 

2.3           Assumed Liabilities.  Onthe Closing Date, the Buyer shall hereby, and shall cause its Buyer Affiliatesto, assume and thereafter discharge when and as due the following debts, liabilitiesand obligations of Dictaphone and the Selling Subsidiaries, but only to theextent arising out of or pertaining to the Business or the Purchased Assets(collectively, the “Assumed Liabilities”): 

 

(a)           allliabilities that would constitute accounts payable and amounts that wouldconstitute accrued expenses (but not including any accrued expenses relating toEmployees or Taxes) that remain unpaid as of the Effective Time, but only tothe extent reflected in the Estimated Closing Date Balance Sheet, as and to theextent modified by the Closing Date Balance Sheet;

 

13

----

 

(b)           all lawsuits commencedand claims made after the Effective Time to the extent resulting from theconduct of the Business or the Purchased Assets after the Effective Time,including lawsuits and claims relating to any alleged Intellectual Propertyinfringement;  

 

(c)           all Liabilities forTaxes to the extent set forth in Section 2.8(a); 

 

(d)           all Liabilities tosuppliers for materials and services relating to the Business ordered in theOrdinary Course prior to the Effective Time, but scheduled to be delivered orprovided thereafter, and all liabilities to customers under purchase orders forproducts of the Business which have not yet been shipped prior to the EffectiveTime;

 

(e)           except as provided in Section 2.4(i),all Liabilities under the Assigned Contracts, including time and materialsrelationships, (including, subject to Section 2.4(i), with respect tomaintenance, repair and warranty claims arising in the Ordinary Course);

 

(f)            all Liabilities withrespect to products or services of the Business sold after the Effective Timeand all Liabilities arising out of, or otherwise caused by, acts or omissionsof the Buyer or its Affiliates after the Effective Time;

 

(g)           all Liabilities inrespect of ordinary course trade letters of credit, bid bonds and performancebonds set forth on Annex 2.3(g) and those permitted to be enteredinto under Section 6.1(e) between the date hereof and the ClosingDate; 

 

(h)           all Liabilities relatedto the Transferred Employees with respect to periods after the Effective Time,except as otherwise provided in this Agreement; 

 

(i)            all Liabilities forwhich the Buyer or a Local Buyer (as defined in Annex 5.6) is responsibleunder Article 5, including Annex 5.6;

 

(j)            allLiabilities asserted against Dictaphone and its Affiliates in connection with thelitigation transferred pursuant to the Termination Agreement; and 

 

(k)           exceptas provided in clauses (b) through (i) of Section 2.4, all otherLiabilities arising in the Ordinary Course before or after the Effective Timerelating to the Purchased Assets or the Business.  

 

2.4           RetainedLiabilities.  Notwithstanding any provision in thisAgreement to the contrary, Dictaphone shall, and shall cause its Affiliates to,retain and be responsible for its and their respective Liabilities other thanthe Assumed Liabilities (the “Retained Liabilities”), which RetainedLiabilities include the following: 

 

(a)           except as provided in Section 2.3(j),all Liabilities resulting from all lawsuits pending as of the Effective Time tothe extent resulting from the conduct of the Business by Dictaphone and itsAffiliates prior to the Effective Time, or otherwise relating to the operationof the Business prior to the Effective Time, including any contingency legalfee relating to Business Intellectual Property;

 

14

----

 

(b)           all Liabilities for Taxes imposed by anyFederal, state or local government or other Taxing authority in the UnitedStates or in any other jurisdiction for any period through the Effective Time; 

 

(c)           all intracompany and intercompany payables ofthe Business (including corporate overhead charges, except to the extent setforth on Annex 2.4(c));

 

(d)           except as provided in Article 5,including Annex 5.6, all Liabilities related to the Benefit Plans andother employment-related matters concerning Employees;

 

(e)           except as provided in Section 2.3 (andsubject to clause (i) of this Section 2.4), all Liabilities arising otherthan in the Ordinary Course prior to the Effective Time relating to thePurchased Assets or the Business; 

 

(f)            all Liabilities arising prior to theEffective Time and relating to compensation, benefits or severance payments orexpenses with respect to the Employees and all Liabilities arising under WARN,whether arising before or after the Effective Time, as a consequence of anyEmployee layoff by, or separation from, Dictaphone;

 

(g)           except as provided in Section 2.3, allLiabilities arising prior to or after the Effective Time to the extent suchLiabilities arise from acts or omissions prior to the Effective Time and arenot related to, or do not arise out of, the operation of the Business by theBuyer and its Affiliates or the ownership or use of the Purchased Assets by theBuyer and its Affiliates; 

 

(h)           all Liabilities to third parties foraccounting, audit, tax, legal and other professional services incurred inconnection with the preparation, negotiation and execution of this Agreementand the Related Agreements; 

 

(i)            notwithstanding anything contained in Section 2.3or this Section 2.4 to the contrary, all Liabilities to third parties (includinggovernmental authorities) with respect to claims for violation of Laws(including environmental Laws) arising out of the operation of the Businessprior to the Effective Time, and all Liabilities to third parties (includinggovernmental authorities) with respect to claims for personal injury, propertydamage or business interruption (in each case, other than Liabilities in theOrdinary Course with respect to maintenance, repair or warranty claims) regardingproducts or services of the Business to the extent that such Liabilities arisefrom acts or omissions prior to the Effective Time; provided, however,that, while Dictaphone shall have initial responsibility for addressing anysuch claims, the Buyer and its Affiliates shall use commercially reasonableefforts to, as promptly as practicable, provide to Dictaphone and itsAffiliates (or to such third party at Dictaphone’s request) all maintenance,repair and other product support services, including new replacement and, ifthen existing, upgraded products (including newer product model(s)) thatDictaphone may request to seek to resolve or mitigate such Liabilities, subjectto Buyer’s available resources with respect to discontinued products orservices; and

 

(j)            all Liabilities arising from or related tothe Excluded Assets or the Other Dictaphone Businesses.

 

15

----

 

The Buyer agrees to, and to cause its Affiliates to,provide the services and products as described in Section 2.4(i) andDictaphone agrees to reimburse the Buyer (promptly upon presentation ofappropriate supporting documentation) at (y) cost with respect to products manufacturedby EMS and (z) with respect to services, the lesser of (A) fifty percent(50%) of list price or (B) prices no less favorable than those generallymade available to most-favored customers of the Business at that time.  

 

2.5           Consideration.  

 

(a)           Purchase Price.  In consideration for Dictaphone’s and theSelling Subsidiaries’ sale, assignment, transfer, conveyance and delivery ofthe Purchased Assets to the Buyer and the Buyer Affiliates, the Buyer shall:

 

(i)            pay to Dictaphone onbehalf of Dictaphone and the Selling Subsidiaries a purchase price of U.S.Thirty-Eight Million Four Hundred Ten Thousand Dollars (US$38,410,000.00) (the “PurchasePrice”), of which (x) U.S. Thirty-Five Million Four Hundred Ten ThousandDollars (US$35,410,000.00) shall be paid directly to Dictaphone, and (y) U.S.Three Million Dollars (US$3,000,000.00) shall be deposited in escrow (with anyaccrued interest earned thereon, the “Indemnification Escrowed Funds”)in accordance with Section 2.7 and the terms and conditions of the EscrowAgreement, as security for the indemnification obligations of Dictaphone setforth in Article 9; provided, however, that the PurchasePrice is subject to adjustment pursuant to Section 2.5(b); and providedfurther, however, that all amounts payable under this Section 2.5are stated exclusive of any value added or similar sales tax which shall bepayable in addition; and 

 

(ii)           assume, duly performand discharge, or cause the Buyer Affiliates to assume, duly perform anddischarge, when due all of the outstanding obligations of Dictaphone and itsAffiliates under the Assumed Liabilities in accordance with Section 2.3.  

 

(b)           CertainAdjustments.  Without limiting theBuyer’s rights under Article 9, without duplication, the Purchase Priceshall be subject to adjustment, to the extent that Net Adjusted Working CapitalLevel as of the Closing Date is less than $0.00, in accordance with theprovisions of this Section 2.5(b) as follows: 

 

(i)            At least five(5) Business Days prior to Closing, Dictaphone shall prepare and deliverto the Buyer (i) a balance sheet of the Business setting forth thePurchased Assets and Assumed Liabilities as of the then-projected Closing Date(the “Estimated Closing Date Balance Sheet”), and (ii) acalculation of Net Adjusted Working Capital Level as of the then-projectedClosing Date.  The Estimated Closing DateBalance Sheet shall (i) be derived from the books and records of theBusiness, (ii) fairly present, in all material respects, the PurchasedAssets to be acquired and the Assumed Liabilities to be assumed pursuant tothis Agreement, and (iii) be prepared in accordance with U.S. GAAP.Notwithstanding the foregoing, in no event shall the Estimated Closing DateBalance Sheet attribute any value to, include any asset or liabilities createdby, or otherwise reflect (x) the OSS Payment or any other payments made by oron behalf of Dictaphone in connection with the amendment to the OSS Agreementor (y) the transactions contemplated thereby. To the extent that any PrepaidExpense of the Business relating to services provided by Dictaphone or anyAccount Receivable owing to

 

16

----

 

Dictaphone is to beterminated or forgiven as of the Closing, such Prepaid Expense or AccountReceivable shall be recorded on the Estimated Closing Date Balance Sheet as$0.00 and any related proceeds shall be retained by Dictaphone.  The Estimated Closing Date Balance Sheetshall be prepared by Dictaphone, and reviewed by the Buyer.  Representatives of the Buyer and Dictaphoneshall jointly conduct a physical count of the Inventory and Tangible BusinessAssets as of the Closing Date pursuant to procedures reasonably designed tominimize disruption of the Business and cost to the Parties.  

 

(ii)           Subject toSection 2.5(b)(iv), the Purchase Price payable at Closing shall bedecreased on a dollar-for-dollar basis by an amount equal to the amount bywhich the Net Adjusted Working Capital Level as set forth on the EstimatedClosing Date Balance Sheet is less than $0.00. 

 

(iii)          Inthe event that the Buyer promptly, but in any event prior to any scheduledClosing Date, notifies Dictaphone that the Buyer in good faith disputes theEstimated Closing Date Balance Sheet, the Buyer and Dictaphone shall use theircommercially reasonable efforts for a period of five (5) Business Days (orsuch longer period as they may mutually agree) to resolve any disagreementswith respect to the Estimated Closing Date Balance Sheet, and any scheduledClosing Date shall be deferred up to ten (10) days to accommodate suchattempted resolution.  If the Buyer andDictaphone resolve such disagreements and agree on an Estimated Closing DateBalance Sheet, such agreed upon Estimated Closing Date Balance Sheet shall befinal and binding and references to the Estimated Closing Date Balance Sheetshall thereafter mean such agreed upon Estimated Closing Date BalanceSheet.  If, at the end of such period,the Buyer and Dictaphone are unable to resolve their disagreements with respectto the Estimated Closing Date Balance Sheet, (x) the amount in dispute shall bedeposited in escrow by the Buyer (the “Balance Sheet Escrowed Funds”) ifsuch amount equals or exceeds Two Hundred Fifty Thousand U.S. Dollars ($250,000),but only to the extent that, if the Buyer’s good faith claims in the disputewere upheld, the Net Adjusted Working Capital Level as of the Closing would beless than zero and would result in a reduction of the Purchase Price of atleast Two Hundred Fifty Thousand U.S. Dollars ($250,000) and (y) the EstimatedClosing Date Balance Sheet prepared by Dictaphone shall be used to calculatethe Purchase Price payable at Closing (and references to the Estimated ClosingDate Balance Sheet shall thereafter mean the Estimated Closing Date BalanceSheet prepared by Dictaphone), but without limiting any Party’s rights under Section 2.5(b)(iv).  The Balance Sheet Escrowed Funds shall bereleased in accordance with Section 2.5(b)(v) and the terms andprovisions of the Escrow Agreement.

 

(iv)          As soon aspracticable (but in no event later than sixty (60) days) following the ClosingDate, Dictaphone shall prepare and deliver to the Buyer (i) a balancesheet of the Business reflecting the Purchased Assets actually acquired andAssumed Liabilities actually assumed as of the Closing (the “Closing DateBalance Sheet”) and (ii) a calculation of the Net Adjusted WorkingCapital Level as of the Closing.  TheClosing Date Balance Sheet shall (i) be derived from the books and recordsof the Business, (ii) fairly present, in all material respects, thePurchased Assets actually acquired and the Assumed Liabilities actually assumedpursuant to this Agreement and (iii) be prepared in accordance with U.S.GAAP.  Notwithstanding the foregoing, inno event shall the Closing Date Balance Sheet attribute any value to, includeany asset or liabilities created by, or otherwise reflect (x) the OSS Paymentor any other payments made to OSS by or on behalf of Dictaphone in connectionwith the

 

17

----

 

amendment to the OSSAgreement or (y) the transactions contemplated thereby. For the purpose ofpreparing the Closing Date Balance Sheet and calculating Net Adjusted WorkingCapital Level as of the Closing, the Buyer shall provide Dictaphone and itsaccountants with reasonable access to (i) all the underlying documentationand records necessary for Dictaphone and its auditors to prepare the ClosingDate Balance Sheet and calculation of Net Adjusted Working Capital Level as ofthe Closing and all other records of the Buyer and its Affiliates reasonablyrelated to the preparation of the Closing Date Balance Sheet and thecalculation of Net Adjusted Working Capital Level as of the Closing and (ii) theemployees of the Buyer and its Affiliates. The Buyer may dispute any element of the Closing Date Balance Sheet orthe calculation of Net Adjusted Working Capital Level as of the Closing bynotifying Dictaphone of such disagreement in writing, setting forth in detailthe particulars of such disagreement, within sixty (60) calendar days after theBuyer’s receipt of the Closing Date Balance Sheet and the calculation of NetAdjusted Working Capital Level as of the Closing from Dictaphone.  In the event that the Buyer does not providesuch a notice of disagreement within such sixty (60) calendar day period, theBuyer shall be deemed to have accepted Dictaphone’s Closing Date Balance Sheetand calculation of Net Adjusted Working Capital Level as of the Closing, whichshall be final, binding and conclusive for all purposes hereunder.  In the event any such notice of disagreementis timely provided, the Buyer and Dictaphone shall use their commerciallyreasonable efforts for a period of thirty (30) calendar days (or such longerperiod as they may mutually agree) to resolve any disagreements with respect tothe Closing Date Balance Sheet and the calculation of Net Adjusted WorkingCapital Level as of the Closing.  If, atthe end of such period, they are unable to resolve such disagreements, thensuch dispute shall be referred to an independent accounting firm of recognizednational standing mutually selected by the Buyer and Dictaphone (the “Auditor”)which shall resolve any remaining disagreements.  The Auditor shall determine as promptly aspracticable, but in any event within thirty (30) calendar days of the date onwhich such dispute is referred to the Auditor, based solely on the writtensubmissions forwarded by the Buyer and Dictaphone, whether and to what extent(if any) the Closing Date Balance Sheet and the calculation of Net AdjustedWorking Capital Level as of the Closing require adjustment.  The fees and expenses of the Auditor shall bepaid one-half by the Buyer and one-half by Dictaphone.  The determination of the Auditor shall befinal, conclusive and binding on the Parties. The final Closing Date Balance Sheet and the final calculation of theNet Adjusted Working Capital Level as of the Closing shall be deemed to be an annexto this Agreement (the “Net Adjusted Working Capital Level Annex”).  

 

(v)           If, as aresult of the procedure set forth in Section 2.5(b)(iv), the final NetAdjusted Working Capital Level as of the Closing is determined to be:

 

(A)          Lessthan the Net Adjusted Working Capital Level determined on the basis of theEstimated Closing Date Balance Sheet, then the difference (up to but notgreater than the amount by which the final Net Adjusted Working Capital Leveldetermined in accordance with Section 2.5(b)(iv) is less than zero)between the final Net Adjusted Working Capital Level determined in accordancewith Section 2.5(b)(iv) and the Net Adjusted Working Capital Leveldetermined on the basis of the Estimated Closing Date Balance Sheet shall bepaid by Dictaphone to the Buyer (1) first, from the Balance Sheet EscrowedFunds and (2) if the Balance Sheet Escrowed Funds are insufficient to payin full any amounts due to the Buyer from Dictaphone under this Section 2.5(b)(v)(A),then from Dictaphone’s other assets;

 

18

----

 

provided,however, that any Balance Sheet Escrowed Funds remaining after paymentto the Buyer under this Section 2.5(b)(iv)(A) shall be released toDictaphone; or 

 

(B)           Equalto or greater than the Net Adjusted Working Capital Level determined on thebasis of the Estimated Closing Date Balance Sheet, then the difference (up tobut not greater than the amount by which the Net Adjusted Working Capital Leveldetermined on the basis of the Estimated Closing Date Balance Sheet is lessthan zero) between the final Net Adjusted Working Capital Level determined inaccordance with Section 2.5(b)(iv) and the Net Adjusted WorkingCapital Level determined on the basis of the Estimated Closing Dated BalanceSheet shall be paid by Buyer to Dictaphone in the following manner: (1) first,all Balance Sheet Escrowed Funds shall be released to Dictaphone and (2) ifthe Balance Sheet Escrowed Funds are insufficient to pay in full any amountsdue to Dictaphone from the Buyer under this Section 2.5(b)(v)(B), thenfrom the Buyer’s other assets.   

 

The Parties agree that the amount described in theparenthetical clause in Section 2.5(b)(v)(B) can not be less than theBalance Sheet Escrowed Funds.  Not laterthan the tenth (10th) day following the final determination of theNet Adjusted Working Capital Level Annex in accordance with Section 2.5(b)(iv),the Buyer and Dictaphone shall jointly instruct the Escrow Agent to release theBalance Sheet Escrowed Funds from escrow in accordance with this Section 2.5(b)(v) andthe terms and conditions of the Escrow Agreement.

 

2.6           Closing. The Closing shall take place at 9:00 a.m. on the Closing Date atthe offices of Kelley Drye & Warren LLP at 101 Park Avenue, New York,N.Y., or at such other place as the Parties may agree in writing.  At the Closing, Dictaphone shall deliver orcause its Affiliates to deliver to the Buyer or the Buyer Affiliates, asapplicable, the documents and other items identified in Article 7, and theBuyer shall deliver or cause its Affiliates to deliver to Dictaphone, theSelling Subsidiaries and the Escrow Agent, as applicable, (a) by wiretransfer of immediately available funds, in accordance with Section 2.5(a)(i) andthe wire transfer instructions provided by Dictaphone prior to the Closing, thePurchase Price and (b) the documents and other items identified in Article 8.

 

2.7           Escrow. 

 

(a)           Creation of Escrow.  On the Closing Date, the Buyer shall depositor cause to be deposited the Indemnification Escrowed Funds and, if applicable,the Balance Sheet Escrowed Funds with the Escrow Agent in a separate account,and such Indemnification Escrowed Funds and Balance Sheet Escrowed Funds shallbe held by the Escrow Agent in accordance with the terms and conditions of theEscrow Agreement as security for the indemnification obligations of Dictaphoneto the Buyer set forth in Article 9 and pending determination of the finalNet Adjusted Working Capital Level as of the Closing pursuant to Section 2.5(b).  

 

(b)           Set-Off.  Pursuant to the terms and conditions of theEscrow Agreement and subject to Article 9, the Buyer shall have the rightto set off, in whole or in part, any Losses arising out of a breach of anyrepresentation, warranty, agreement or covenant in this Agreement or anyRelated Agreement by Dictaphone from the Indemnification Escrowed Funds to theextent that the Buyer is entitled to indemnification under Article 9.    

 

19

----

 

(c)           Release ofIndemnification Escrowed Funds. Fifty percent (50%) of the Indemnification Escrowed Funds then held inescrow less the amount of any claims for Losses pursuant to a Notice of Claimunder Section 9.3 delivered by the Buyer to Dictaphone prior to the twelve(12) month anniversary of the Closing Date shall be released to Dictaphone onthe twelve (12) month anniversary of the Closing Date.  The remaining Indemnification Escrowed Fundsthen held in escrow less the amount of any claims for Losses pursuant to aNotice of Claim under Section 9.3 delivered by the Buyer to Dictaphoneprior to the twenty-one (21) month anniversary of the Closing Date shall bereleased to Dictaphone on the twenty-one (21) month anniversary of the ClosingDate.  Any Indemnification Escrowed Fundsremaining in escrow after the twenty-one (21) month anniversary of the ClosingDate will be released from escrow in accordance with the terms and provisionsof the Escrow Agreement.   

 

(d)           Release of BalanceSheet Escrowed Funds.  The BalanceSheet Escrowed Funds shall be released to the Buyer or Dictaphone in accordancewith the terms and provisions of the Escrow Agreement and Section 2.5(b)(v).  

 

2.8           Taxes.  

 

(a)           Allsales, use, value-added, gross receipts, registration, stamp duty and othersimilar transfer Taxes, if any, together with all recording or filing fees,notarial fees and other similar costs of Closing, that may be imposed upon, orpayable, collectible or incurred in connection with, the transfer and sale ofthe Purchased Assets as contemplated by the terms of this Agreement shall beborne one-half by the Buyer or a Buyer Affiliate and one-half by Dictaphone ora Selling Subsidiary.  The Partyresponsible for paying any such Taxes shall collect from the other Party anamount equal to fifty percent (50%) of any such Taxes it is required to withholdor pay and, to the extent that a Party receives a refund of any such Taxes, itshall reimburse the other Party for fifty percent (50%) of such refundreceived.  

 

(b)           EachParty shall and shall cause its Affiliates to, upon request, use its reasonableefforts to provide or obtain from any Taxing authority or other Person anycertificate or other document necessary to mitigate, reduce or eliminate anyTaxes described in Section 2.8(a).

 

(c)           TheBuyer shall prepare and timely file or caused to be prepared and timely filedall Tax returns for all Taxes that are not based on income or receipts (e.g.,property Taxes) relating solely to the Purchased Assets or the Business for aStraddle Period.  Such Tax returns shallbe prepared in a manner consistent with practices followed in prior years withrespect to similar Tax returns, except for changes required by applicable Law.The Buyer shall pay or cause to be paid all Taxes reflected on such Taxreturns; provided, thatDictaphone shall deliver or cause to be delivered to the Buyer Dictaphone’sportion of such Taxes that relates to the portion of such Straddle Periodending on the Closing Date no later than five (5) Business Days prior tothe date on which the Buyer proposes to pay or cause to be paid such Taxes.  For purposes of this Section 2.8(c), theportion of any such Tax allocated to Dictaphone shall be the amount of such Taxfor the entire Taxable period multiplied by a fraction, the numerator of whichis the number of days in the taxable period ending on the Closing Date and thedenominator of which is the number of days in the entire taxable period.  Any credits relating to

 

20

----

 

a Straddle Period shallbe taken into account as though the relevant Taxable period ended on theClosing Date.

 

(d)           TheBuyer and Dictaphone shall furnish or cause to be furnished to each other, uponrequest, as promptly as practicable, such information (including reasonableaccess to books and records) and assistance as is reasonably necessary for thefiling of any Tax return, the conduct of any Tax audit, and the prosecution ordefense of any Proceeding relating to any Tax matter.  Any Tax audit or other Tax Proceeding shallbe deemed to be a Third-Party Claim subject to the procedures set forth in Section 9.4.

 

2.9           Allocation ofPurchase Price.  The Buyer andDictaphone shall mutually agree to the allocation of the Purchase Price (as itmay be adjusted pursuant to Section 2.5(b)) among Dictaphone and theSelling Subsidiaries, among the Buyer and the Buyer Affiliates and among thePurchased Assets in accordance with applicable Laws, including Code Sections338 and 1060, within 90 days after the Closing Date.  The Parties hereby agree to file IRS Form 8594and file or cause to be filed all Tax returns and information reports in amanner consistent with such allocation and shall use their reasonable bestefforts to sustain such allocation in any subsequent Tax audit or Tax dispute.

 

2.10         Completion of Transfers.  

 

(a)           Theentire beneficial interest in and to, and the risk of loss with respect to, thePurchased Assets and the Assumed Liabilities, shall, regardless of when legaltitle thereto or responsibility therefor shall be transferred to or assumed bythe Buyer, pass to the Buyer at the Closing as of the Effective Time.  In the event that legal title in or to any ofthe Purchased Assets or legal responsibility for any of the Assumed Liabilitiesis not transferred or assumed at the Closing, Dictaphone and its Affiliatesshall hold such Purchased Assets or Assumed Liabilities as nominee for theBuyer and its Affiliates until completion of such transfer or assumption.  * *

 

(b)           Inthe event that legal title in or to any of the Purchased Assets or legalresponsibility for any of the Assumed Liabilities to be sold, assigned,transferred, conveyed or assumed pursuant to this Agreement, or any claim,right or benefit arising thereunder or resulting therefrom, cannot be sold,assigned, transferred, conveyed or assumed hereunder as of the Closing Datebecause any waiting or notice period required in connection therewith has notexpired or any consents, authorizations or approvals required therefor have notbeen obtained or waived, then the legal title in or to such Purchased Assets orthe legal responsibility for such Assumed Liabilities shall not be sold,assigned, transferred, conveyed or assumed unless and until such waiting ornotice period shall have expired or been waived or until such consent,authorization or approval shall have been obtained or waived.  In such event, Dictaphone shall, at itsexpense, and the Buyer shall, at its expense, use commercially reasonableefforts to cooperate in obtaining such consents, authorizations, approvals orwaivers as soon as practicable.  Subjectto Section 7.2, the failure of Dictaphone to obtain any required consents,authorizations, approval or waivers shall not affect the Buyer’s obligations toclose under this Agreement or to pay, or cause to be paid, the PurchasePrice.  Nothing in this Agreement shall beconstrued as an attempt to assign to the Buyer or its Affiliates any legaltitle or responsibility which, as a matter of Law or by the terms of anylegally binding Contract to which Dictaphone or its Affiliates is subject, is

 

21

----

 

not assignable withoutthe consent of any other Person, unless such consent shall have been given orwaived.

 

(c)           Pendingthe assignments, conveyances, transfers and assumptions referred to in Section 2.10(b),(A) Dictaphone shall (i) hold any such non-assigned, non-conveyed,non-transferred or non-assumed Purchased Assets or Assumed Liabilities for thebenefit and at the risk of the Buyer, (ii) cooperate with the Buyer in anylawful and reasonable arrangements designed to provide the benefits and burdensof ownership thereof and responsibility therefor to the Buyer and (iii) indemnifyand hold the Buyer harmless from and against any and all Losses rising solelyfrom the failure to assign, convey, transfer or assume such Purchased Assets orAssumed Liabilities or to obtain any such consent, authorization or approval ashas not been obtained or waived and (B) Buyer shall perform or cause theBuyer Affiliates to perform under any such non-assigned, non-conveyed,non-transferred or non-assumed Purchased Assets or Assumed Liabilities as ifsuch non-assigned, non-conveyed, non-transferred or non-assumed Purchased Assetor Assumed Liability had been assigned, conveyed, transferred or assumed to orby Buyer or a Buyer Affiliate, including providing services under any warrantyand recognizing, and not taking any action inconsistent with, any licensegranted under any such Purchased Asset or Assumed Liability.  

 

(d)           Allof the costs and expenses associated with the assignment to the Buyer, and therecordation by it, of the Business Intellectual Property shall be paid one-halfby the Buyer and one-half by Dictaphone.

 

2.11         SubsidiaryAsset Purchase Agreements. At or prior to the Closing, Dictaphone shall cause each of the SellingSubsidiaries to enter into a separate transfer of assets and assumption ofliabilities agreement with the applicable Buyer Affiliate, and the Buyer shallcause each such Buyer Affiliate to enter into such separate agreement with theapplicable Selling Subsidiary, each such agreement to be substantially in theform of Exhibit F, with such modifications as are necessary orappropriate as a result of (a) differences in the businesses and PurchasedAssets and Assumed Liabilities of each Selling Subsidiary, (b) differencesin local law or customs which may require changes in order to maintainsubstantially the same legal meaning and effect under local law and custom asprovided for with respect to the comparable provisions of this Agreement, and (c) theparties’ respective tax considerations to the extent that they are notinconsistent with the comparable provisions of this Agreement (such agreementsare, collectively, the “Subsidiary Asset Purchase Agreements”).  Each Subsidiary Asset Purchase Agreementshall be subject to this Agreement and shall be construed so as to beconsistent with each other and this Agreement and so as not to createduplicative rights and liabilities (although they may create additional rightsand liabilities); provided, however, that, in the event of a conflictor inconsistency between this Agreement and such Subsidiary Asset PurchaseAgreement as to any matter other than one mandatorily governed by laws ororders of the applicable jurisdiction of the Selling Subsidiary whose assetsand liabilities are subject to such Subsidiary Asset Purchase Agreement, thisAgreement shall govern and, in the event of a conflict or inconsistency as toany matter mandatorily so governed, such Subsidiary Asset Purchase Agreementshall govern.  The Parties agree to usecommercially reasonable efforts to limit the number and scope of SubsidiaryAsset Purchase Agreements to those required by local legal requirements andtheir respective tax considerations.

 

22

----

 

ARTICLE 3

**REPRESENTATIONS AND WARRANTIES OF DICTAPHONE**

 

Dictaphonehereby makes the following representations and warranties, each of which istrue and correct on the date hereof and shall survive the Closing Date and thetransactions contemplated hereby to the extent set forth herein.

 

3.1           Existence and Power; Consents.  

 

(a)           EachSeller has the corporate, partnership, limited liability company or otherorganizational power and authority, as applicable, to execute and deliver thisAgreement and any Related Agreement to which it is a party, to perform itsobligations hereunder and thereunder, and to consummate the transactionscontemplated hereby and thereby.  EachSeller has the requisite corporate, partnership, limited liability company orother organizational power and authority, as applicable, to transfer thePurchased Assets owned by such Seller, to assign the Assumed Liabilities ofsuch Seller and to consummate the transactions contemplated hereby.

 

(b)           Each Seller is validlyexisting and in good standing under the laws of its jurisdiction of formation(to the extent such concept is recognized in such jurisdiction) and eachjurisdiction in which the nature of its business makes such qualificationnecessary, except where the failure to beso qualified and in good standing would not have a Material Adverse Effect.  Dictaphone is qualified to transact businessas a foreign corporation in Florida.  

 

(c)           No Seller is a party to, subject toor bound by any Encumbrance or Law which would (i) be breached or violated inany material respect by the execution or delivery by such Seller of thisAgreement (to the extent it is a party hereto) or a Related Agreement to whichit is a party or the performance by any Seller of the transactions contemplatedby this Agreement or a Related Agreement (to the extent it is a party hereto)or (ii) prevent the carrying out of the transactions contemplated hereby (tothe extent it is a party hereto).  Exceptas set forth in Disclosure Schedule Section 3.1(c), no permit, consent,waiver, approval or authorization of, or declaration to or filing orregistration with, any governmental or regulatory authority or any lender,lessor, distributor, customer, supplier, licensor or other third-party isrequired in connection with the execution, delivery or performance of thisAgreement by any Seller or any of the Related Agreements to which such Selleris a party or the consummation by the Sellers of the transactions contemplatedhereby (to the extent it is a party hereto) and thereby (to the extent it is aparty hereto), except for any such permits, consents, waivers, approvals,authorizations, declarations, filings or registrations the failure of which toobtain would not, individually or in the aggregate, have a Material AdverseEffect.  The transactions contemplatedhereby will not result in the creation of any Encumbrance against the PurchasedAssets.  

 

(d)           TheSellers have the power and authority to own, lease and use their respectiveassets in connection with the Business. 

 

3.2           Validand Enforceable Agreement; Authorization.  This Agreement and the Related Agreementshave been duly executed and delivered by the Sellers party thereto andconstitute legal, valid and binding obligations of the Sellers, enforceableagainst the Sellers in

 

23

----

 

accordance with theirterms, except that such enforcement may be subject to (a) bankruptcy,insolvency, reorganization, moratorium or other similar laws affecting orrelating to enforcement of creditors’ rights generally and (b) generalprinciples of equity.  The execution anddelivery of this Agreement and the Related Agreements and the consummation ofthe transactions contemplated hereby and thereby have been duly authorized,approved and ratified by all necessary corporate action (including stockholderapproval to the extent required by law or contract) on the part of the Sellersparty thereto.

 

3.3           Ownership. Except for the Permitted Encumbrances, the Sellers together have goodtitle to and are the sole and exclusive owner of all right, title and interestin and to all of the Purchased Assets, free and clear of all Encumbrances.  At Closing, the Buyer and the BuyerAffiliates together will acquire all right, title and interest in and to all ofthe Purchased Assets, free and clear of all Encumbrances, other than PermittedEncumbrances and any Encumbrances created by acts or omissions of the Buyer andits Affiliates.  Except as set forth in DisclosureSchedule Section 3.3, none of the Purchased Assets is in thepossession of Persons other than a Seller or held by Dictaphone or itsAffiliates on consignment.  

 

3.4           Financial Statements; Other Financial Information.  

 

(a)           OtherFinancial Information.  Disclosure Schedule Section 3.4(a) setforth, in each case as of, or for, the twelve (12) months ended December 31,2004: (i) the aggregate dollar amount of product revenue of the Business(calculated in accordance with U.S. GAAP); (ii) the aggregate dollaramount of Product Backlog of the Business calculated in a manner consistentwith past practices and (iii) the aggregate dollar amount of Net AdjustedWorking Capital Level of the Business (collectively, the “Other FinancialInformation”).  The Other FinancialInformation (y) was derived from the books and records of the Business and (z)is true and correct in all material respects. 

 

(b)           AuditedFinancial Statements.  The AuditedFinancial Statements to be delivered prior to the Closing pursuant to Section 6.7(i) will be derived from the books and records of the Business, (ii) willfairly present, in all material respects, the financial position and results ofoperations of the Business at the dates and for the periods indicated inaccordance with U.S. GAAP and the applicable requirements of Rule 3-05 ofRegulation S-X, except as described in Disclosure Schedule Section 3.4(b) and (iii) will be accompanied by (x) anunqualified report thereon by an independent auditor (which shall be one of thefour largest independent auditing firms in the United States) (the “Auditor’s Report”). The balance sheets included in the Audited Financial Statements will notinclude any material assets or liabilities that do not constitute a part of theBusiness as currently conducted by Dictaphone, the Purchased Assets or theAssumed Liabilities.  The statements ofprofit and loss included in the Audited Financial Statements will not reflectthe operations of any Person or business that does not constitute a part of theBusiness as currently conducted by Dictaphone.

 

(c)           EstimatedClosing Date Balance Sheet. The Estimated Closing Date Balance Sheet to bedelivered prior to the Closing pursuant to Section 2.5(b) will (i) bederived from the books and records of the Business and (ii) fairlypresent, in all material respects, the financial position of the Business as ofthe Closing Date in accordance with U.S. GAAP. The Estimated Closing DateBalance Sheet will not include any material assets or

 

24

----

 

liabilitiesthat do not constitute a part of the Business as currently conducted byDictaphone, the Purchased Assets or the Assumed Liabilities, recognizing thatthe Estimated Closing Date Balance Sheet will be an estimated financialstatement.  

 

(d)           Warranties.  Except as listed in DisclosureSchedule Section 3.4(d), there are no material unresolvedwarranty and support claims (including any pending claims) related to productsor services of the Business (other than deferred revenues). 

 

3.5           Absence of Certain Developments.  Except as set forth in DisclosureSchedule Section 3.5,since September 30, 2004, neither the Business nor the Sellers in respectof the Business have:

 

(a)           sufferedany event, circumstance or condition having a Material Adverse Effect; 

 

(b)           incurredany obligation or liability, whether due or to become due, or entered into anyother transaction except in the Ordinary Course and except for liabilities andtransactions that have not, individually or in the aggregate, had a MaterialAdverse Effect; 

 

(c)           sufferedany material adverse change in its relationship with any of the suppliers,customers, distributors, lessors, licensors, licensees or other third-partieswhich are material to the Business; 

 

(d)           increasedthe rate or terms of compensation or benefits payable to or to become payableby it to any management or other key employee earning over $75,000 per year orincreased the rate or terms of any bonus or Benefit Plan covering any suchemployee, except in each case increases occurring in the Ordinary Course inaccordance with its customary practice (including normal periodic performancereviews and related compensation and benefits increases) or made any materialchanges in policies of employment; 

 

(e)           receivedany notice of termination of any contract, lease or other agreement or sufferedany damage, destruction or loss which, individually or in the aggregate, hashad or is reasonably likely to have a Material Adverse Effect;

 

(f)            transferredor granted any rights or licenses under, or entered into any settlementregarding the breach or infringement of, any Business Intellectual Property, ormodified any existing rights with respect thereto;

 

(g)           receivedany written notice by any customer or supplier material to the Business of anintention to discontinue or change the terms of its relationship;

 

(h)           madeany material change in its accounting methods or practices, policies orprinciples, or made any new tax elections or changes in existing tax electionswith respect to the Business inconsistent with past practice;

 

(i)            instituted,settled or agreed to settle any material litigation, action or proceedingbefore any court or governmental body relating to the Business or the PurchasedAssets; 

 

25

----

 

(j)            madeany material changes in policies or practices relating to selling practices,returns, discounts or other terms of sale;

 

(k)           waivedany claims or rights of material value to the Business other than in theOrdinary Course; 

 

(l)            sold,leased, licensed or otherwise disposed of any of the Purchased Assets, otherthan in the Ordinary Course; 

 

(m)          amendedor terminated any Material Contract to which it is or was a party, other thanin the Ordinary Course; 

 

(n)           mortgaged,pledged or otherwise subjected to an Encumbrance any property, business orassets, tangible or intangible, used or held for use primarily in the Business,except Permitted Encumbrances or Encumbrances that will be released prior tothe Closing Date; or 

 

(o)           committedpursuant to a legally binding agreement to do any of the things set forth inclauses (b) through (n) above.

 

3.6           Taxes. Except as set forth in Disclosure Schedule Section 3.6:

 

(a)           Allmaterial Tax returns required to be filed with respect to the Purchased Assetsor the Business have been properly filed in a timely manner (taking intoaccount all extensions of due dates) and are true, correct and complete in allmaterial respects. 

 

(b)           AllTaxes (other than Retained Liabilities) due with respect to the Business or thePurchased Assets for all periods through the Effective Time have been or willbe timely paid in full. 

 

(c)           Thereare no deficiencies for any Taxes (including penalties and interest) in respectof the Purchased Assets or the Business. To the knowledge of Dictaphone, noaudit of any Tax return with respect to the Business is currently pending orthreatened. No claim has ever been made by any governmental authority in ajurisdiction where Dictaphone does not file Tax returns that it is or may besubject to taxation by that jurisdiction.

 

(d)           Dictaphonehas not waived any statute of limitations with respect to Taxes or agreed toany extension of time with respect to a Tax assessment or deficiency that ineither case, would have a Material Adverse Effect.

 

3.7           Insurance.  

 

(a)           DisclosureSchedule Section 3.7(a) lists and describes the followinginformation with respect to each material insurance policy (including policiesproviding property, casualty, liability and workers’ compensation coverage, andbond and surety arrangements) with respect to which Dictaphone, in respect ofthe Business, is a party, a named insured, or otherwise the beneficiary ofcoverage:

 

26

----

 

(i)            The name,address and telephone number of the agent;

 

(ii)           The namesof the insurer, the policyholder and each covered insured;

 

(iii)          Thepolicy number and the period of coverage;

 

(iv)          The scope(including an indication of whether the coverage is on a claims made,occurrence or other basis) and amount (including a description of howdeductibles and ceilings are calculated and operate) of coverage; and

 

(v)           A description of anyretroactive premium adjustments or other material loss-sharing arrangements.

 

(b)           Withrespect to each such insurance policy:  (i) thepolicy is legal, valid, binding, enforceable, and in full force and effect inall material respects; (ii) neither Dictaphone, in respect of theBusiness, nor, to Dictaphone’s knowledge, any other party to the policy is inmaterial breach or default (including with respect to the payment of premiumsor the giving of notices), and no event has occurred that, with notice or thelapse of time, would constitute such a material breach or default, or permit termination,modification or acceleration, under the policy; and (iii) no party to thepolicy has repudiated any material provision thereof.  Disclosure Schedule Section 3.7(b) describesany material self-insurance arrangements affecting the Business.

 

3.8           Litigation. Except as set forth in DisclosureSchedule Section 3.8, there are no material actions, suits or proceedingspending or, to Dictaphone’s knowledge, threatened against Dictaphone or theother Sellers in respect of the Business. Neither Dictaphone nor the other Sellers in respect of the Business aresubject to any adverse order, judgment, writ, injunction or decree of any courtor governmental or regulatory authority or body (excluding any such matters ofgeneral applicability or applicable to entities situated similarly toDictaphone or the Business rather than to them specifically).

 

3.9           Product Liability Claims.  Except as set forth in Disclosure ScheduleSection 3.9, neither Dictaphone nor the other Sellers in respect of theBusiness has received notice of any unresolved claim of personal injury, death,or property or economic damages, or any unresolved claim for injunctive reliefin connection with any product or service manufactured, sold or provided byDictaphone or the other Sellers (in respect of or as part of the Business).

 

3.10         Inventoryand Accounts Receivable.  

 

(a)           Inventory.

 

(i)            Theinventory of the Business consists of supplies, manufactured and purchasedparts, and finished goods, all of which (i) is merchantable, in goodcondition, fit for use in the future operations of the Business as currentlyoperated and of a quality that is usable or saleable in the Ordinary Course, (ii) isadequate for the present needs of the Business and (iii) none of which isobsolete, damaged or defective, in the case of each clause

 

27

----

 

(i), (ii) and (iii) above,except (x) to the extent of, but only of, any reserve for inventory or otherwrite-down as adjusted for the passage of time and conduct of the Business inthe Ordinary Course in accordance with U.S. GAAP or (y) as set forth on DisclosureSchedule Section 3.10(a). All inventory of the Business conforms in all material respects withapplicable specifications and warranties, and has been produced in materialcompliance with applicable quality control procedures.  All inventory of the Business has beenmanufactured in accordance with applicable law in effect at the time of suchmanufacture, other than such noncompliance, if any, which would not,individually or in the aggregate, have a Material Adverse Effect.  The amount and mix of items in the inventoryis in all material respects consistent with past practices.

 

(ii)           TheInventory reflected on the Estimated Closing Date Balance Sheet will consist ofsupplies, manufactured and purchased parts, and finished goods, all of which (i) willbe merchantable, in good condition, fit for use in the future operations of theBusiness as currently operated and of a quality that will be usable or saleablein the Ordinary Course, (ii) will be adequate for the needs of theBusiness (as presently conducted by Dictaphone) as of the Closing Date and (iii) noneof which will be obsolete, damaged or defective, in the case of clause (i), (ii) and(iii) above, except (x) to the extent of, but only of, any reserve forinventory or other write-down as adjusted for the passage of time and conductof the Business in the Ordinary Course in accordance with U.S. GAAP, subject toadjustment by the Closing Date Balance Sheet, or (y) as set forth on DisclosureSchedule Section 3.10(a). All Inventory reflected on the Estimated Closing Date Balance Sheet willconform in all material respects with applicable specifications and warranties,and will have been produced in material compliance with applicable qualitycontrol procedures.  All Inventory reflectedon the Estimated Closing Date Balance Sheet will have been manufactured inaccordance with applicable law in effect at the time of such manufacture, otherthan such noncompliance, if any, which would not, individually or in theaggregate, have a Material Adverse Effect. The amount and mix of items in the Inventory reflected on the EstimatedClosing Date Balance Sheet will be consistent in all material respects withpast practices.

 

(b)           AccountsReceivable.

 

(i)            All notesand accounts receivable of the Business are valid receivables subject to nosetoffs or counterclaims and are current and collectible in the Ordinary Coursewithout resort to litigation, in each case, except (x) to the extent of, butonly of, any reserve for doubtful accounts and bad debts or other write-down asadjusted for the passage of time and conduct of the Business in the OrdinaryCourse in accordance with U.S. GAAP or (y) the other matters as set forth on DisclosureSchedule Section 3.10(b).

 

(ii)           AllAccounts Receivable reflected on the Estimated Closing Date Balance Sheet willbe valid receivables subject to no setoffs or counterclaims and will be currentand collectible in the Ordinary Course without resort to litigation, in eachcase, except (x) to the extent of, but only of, any reserve for doubtfulaccounts and bad debts or other write-down as adjusted for the passage of timeand conduct of the Business in the Ordinary Course in accordance with U.S.GAAP, subject to adjustment by the Closing Date Balance Sheet, or (y) as setforth on Disclosure Schedule Section 3.10(b). All orders whichare included in Accounts Receivable on the Estimated Closing Date Balance Sheetwill not, to the knowledge

 

28

----

 

of Dictaphone, as of theClosing Date, be subject to valid return (except for products returned in theOrdinary Course). 

 

3.11         Conditionof PersonalProperty.  Except as set forthin Disclosure Schedule Section 3.11, all of the TangibleBusiness Assets which are material to the conduct of the Business are in goodcondition and repair (ordinary wear and tear excepted) and are suitable for thepurposes used in the Business.

 

3.12         Property;Title.  On the Closing Date, thePurchased Assets, and the assets utilized in performing transition andmanufacturing services pursuant to the Transition Services/Shared ServicesAgreement and Manufacturing Agreement, will constitute all property, tangibleand intangible, (a) used by the Sellers to transact the Business aspresently conducted and as currently proposed to be conducted by Sellers(absent the transactions contemplated hereby) in the Ordinary Course, or (b) necessaryto operate the Business in the Ordinary Course, except, in each case, (i) forthe Excluded Assets and (ii) where the absence thereof does not have aMaterial Adverse Effect.  On the Closing Date, the assets identified inSection vi of Annex 2.1(a) and Section vi of Annex 2.1(c) constituteall of the Purchased Assets necessary to perform the Services (as defined inthe Manufacturing Agreement) under the Manufacturing Agreement, except thatsuch Purchased Assets expressly exclude any generic, commercially-availableequipment identified in Section 5 of Annex 2.2.  

 

3.13         Contracts. 

 

(a)           Disclosure Schedule Section 3.13(a) setsforth a list of all Contracts as of the date hereof that:

 

(i)            involvepayments by a Seller to another party having a value in excess of $25,000 inany 12-month period and which may not be cancelled with less than thirty (30)days’ prior written notice;

 

(ii)           involvejoint ventures;

 

(iii)          involvedistribution or reseller arrangements;

 

(iv)          are withany current employee or consultant;

 

(v)           are withany labor union or association representing any employee; 

 

(vi)          are leaseswith respect to personal property having lease payments in excess of $25,000 inany twelve (12) month period;

 

(vii)         arecustomer sales, service, maintenance or license agreements or other end useragreements under which payments exceeding $25,000 were made in the prior fiscalyear; 

 

(viii)        granta Seller the right to use Intellectual Property of third-parties in theBusiness under which payments exceeding $25,000 in the aggregate were or willbe

 

29

----

 

made in the prior,current or any single future fiscal year, but not including licenses oragreements relating to “shrink wrap” software or other software used to supportthe infrastructure or enterprise operations of the Business; 

 

(ix)           limit orotherwise restrict a Seller, the Business or any successor to a Seller asoperator of the Business in the manner or scope (including geographic ortechnological scope) of the design, development, marketing, sale, production orservice of systems and products of the Business; and

 

(x)            any othermaterial Contract of a Seller with respect to the Business entered into otherthan in the Ordinary Course.

 

Each contract described in Section 3.13 is referred to as a “MaterialContract.”

 

(b)           Exceptas set forth in Disclosure Schedule Section 3.13(b), eachMaterial Contract is a legal, valid and binding obligation of the Seller partythereto, enforceable against such Seller party thereto and, to Dictaphone’sknowledge, is in full force and effect, is a legal, valid and bindingobligation of the other parties thereto and is enforceable against the otherparties thereto.  No Seller party to anyMaterial Contract has taken any action to terminate, repudiate or disclaim suchMaterial Contract and, to the knowledge of Dictaphone, after the Closing Date,the Material Contracts will continue to be in full force and effect, be legal,valid and binding obligations of the other parties thereto and enforceableagainst the other parties thereto following delivery of any consents,waivers or approvals contemplated hereby. For purposes of this Section 3.13(b), the enforceability of any MaterialContract is subject to applicable bankruptcy, insolvency, fraudulentconveyance, reorganization, moratorium and similar laws affecting creditor’srights generally and subject to principles of equity.

 

(c)           ToDictaphone’s knowledge, no Seller nor other party thereto is in default underany Material Contract, other than such defaults, if any, which would not,individually or in the aggregate, have a Material Adverse Effect.

 

(d)           NoSeller has received any written notice of any intention to terminate, repudiateor disclaim any Material Contract from any other party thereto.

 

3.14         Licenses and Permits.  Except as set forth in Disclosure ScheduleSection 3.14, each Seller has all governmental permits, licenses andauthorizations necessary for the conduct of the Business as presently conductedby it and as currently proposed to be conducted by it in the Ordinary Course,except where the absence thereof does not have a Material Adverse Effect, andall such permits, licenses and authorizations are valid and in full force andeffect in all material respects.  EachSeller is in compliance in all material respects with such permits, licensesand authorizations.  No such permit,license or authorization has been, or to Dictaphone’s knowledge is threatenedto be, revoked, canceled, suspended or materially adversely modified.

 

3.15         Undisclosed Liabilities.  Except as set forth in DisclosureSchedule Section 3.15, theBusiness has no material known Liabilities except for (i) Liabilities setforth on the December 31 Balance Sheet and (ii) Liabilities that havearisen subsequent to the date of the December 31 Balance Sheet in theOrdinary Course.

 

30

----

 

3.16         Compliance with Laws.  Except as set forth in DisclosureSchedule Section 3.16,each Seller in respect of the Business is in compliance in all materialrespects with all applicable Laws currently in effect (including the ForeignCorrupt Practices Act), and no Seller has received any notice, report or otherinformation alleging any material conflict, violation, breach or default ofsuch Laws. 

 

3.17         Environmental Matters.  Except as set forth in Disclosure Schedule Section 3.17:

 

(a)           EachSeller in respect of the Business is in compliance in all material respectswith all Environmental Laws.  There is nocivil, criminal or administrative action, suit, investigation or proceedingpending or, to Dictaphone’s knowledge, threatened against any Seller in respectof the Business relating to or arising from any Environmental Laws which isreasonably expected to have a Material Adverse Effect.

 

(b)           NoSeller in respect of the Business has not received any written notice, reportor other information regarding any actual or alleged material violation of, orliability under, Environmental Laws relating to it or its past or currentoperations or facilities except such notices, reports or other information thathave been complied with and resolved. Neither Dictaphone in respect of the Business nor any of itspredecessors or Affiliates in respect of the Business has treated, stored,disposed of, arranged for or permitted the disposal of, transported, handled,or released any substance, including any hazardous materials, or owned oroperated the Business or any owned or leased real property in a manner that hasgiven or will give rise to any material liability under any EnvironmentalLaw.  The off-site treatment, storage ordisposal (or arrangement for off-site disposal) of hazardous materials,substances or wastes by the Sellers (in relation to the Business), includingany such materials, substances or wastes produced or generated in connectionwith operations upon any owned or leased real property, has not given and willnot give rise to any material liability under any Environmental Law.  

 

3.18         Intellectual Property.  

 

(a)           Annex 2.1(c) setsforth the Business Intellectual Property which will be transferred by theSellers to the Buyer at the Closing, including (i) all BusinessIntellectual Property comprising issued patents and patent applications(including all provisional, continuation, continuation-in-part, divisional andforeign applications) and trademarks, service marks, trade names, fictitiousnames, service marks and copyright registrations owned by or assigned or licensedexclusively to the Sellers and (ii) the jurisdictions in which each itemof such Business Intellectual Property has been issued or registered or inwhich any such application for such issuance or registration has beenfiled.  The Business IntellectualProperty that will be transferred by the Sellers to the Buyer at the Closingconstitutes all of the Intellectual Property necessary to operate the Businessin the Ordinary Course as the Business is operated as of the date of thisAgreement. 

 

(b)           Except as set forth in DisclosureSchedule Section 3.18(b), no material claims by any Personcontesting the validity or ownership of any of the Business IntellectualProperty or the other Intellectual Property listed on Annex 2.1(c) arepending or, to Dictaphone’s knowledge, threatened.

 

31

----

 

(c)           Except as set forth in DisclosureSchedule Section 3.18(c), no claims have been filed by theSellers asserting that any Person is infringing upon, misappropriating orotherwise violating the Business Intellectual Property listed on Annex2.1(c).  

 

(d)           Except as set forth in DisclosureSchedule Section 3.18(d), Dictaphone has provided to the Buyertrue and complete copies of all material contracts, licenses, sublicenses andother agreements to which any Seller is a party under which it is authorized touse any Third Party Intellectual Property related to the Business, includingany Third Party Intellectual Property related to the Business that is or isintended to be used by it in the Business, or otherwise in connection with anyproduct or service currently in use, marketed or under development for theBusiness. 

 

(e)           Except as set forth in DisclosureSchedule Section 3.18(e), no Seller is a party to any orallicense, sublicense or other agreement related to the Business IntellectualProperty which, if reduced to written form, would be required to be listed andprovided under any other section of this Agreement.

 

(f)            Except as set forth inDisclosure Schedule 3.18(f), the Business Intellectual Propertylisted in Annex 2.1(c) has been properly filed, applied for,registered and/or maintained, as applicable, and, to the knowledge ofDictaphone, is in good standing and enforceable under applicable laws andregulations, and no renewal, fee payment, filing of an affidavit of continuinguse, or any other action is or will be required to be taken with respect to anysuch application, registration, or issued patent within twelve (12) monthsafter the date of this Agreement in order to maintain its validity andenforceability.  

 

(g)           Except as set forth in DisclosureSchedule Sections 3.8 or 3.18(g), no material action, suit,proceeding or other investigation with respect to Intellectual Property to beconveyed or licensed under this Agreement or otherwise relating to the Businessis pending or, to Dictaphone’s knowledge, threatened. Dictaphone has madeavailable to the Buyer true, correct and complete copies of all suits, actionsor proceedings or written notices listed in Disclosure Schedule Section 3.18(g).  

 

(h)           Neither thedevelopment, manufacturing, marketing, licensing or sale of any of its currentproducts of the Business or the performance by any Seller of any of itsservices of the Business, nor the conduct of the Business as presentlyconducted, infringes, violates or misappropriates any Third Party IntellectualProperty in any material respect.  

 

(i)            Except as set forth inDisclosure Schedule Section 3.18(i), to the knowledge ofDictaphone, none of the Business Intellectual Property is being infringed byactivities, products or services of, or is being misappropriated by, any ThirdParty in any material respect.

 

(j)            Except as set forth inDisclosure Schedule Section 3.18(j), the execution anddelivery of this Agreement, the consummation of the transactions contemplatedby this Agreement and the compliance by any Seller with the provisions of thisAgreement do not and will not conflict with, or result in any materialviolation of, or material default (with or

 

32

----

 

without notice or lapseof time or both) under, or give rise to, any material right, license orencumbrance relating to any Intellectual Property to be conveyed or licensedunder this Agreement, and do not and will not result in any material right oftermination, cancellation or acceleration of any such Intellectual Propertyright or obligation set forth in any agreement to which any Seller is a partyor any material loss or encumbrance (other than Permitted Encumbrances) of anysuch Intellectual Property or benefit related thereto, and do not and will notresult in the creation of any Lien in or upon any such Intellectual Property,or otherwise limit or restrict the Buyer’s ability to conduct the Business ascurrently conducted or as currently proposed to be conducted by Dictaphone.

 

(k)           Dictaphone has providedto the Buyer a copy of its policy regarding the protection of its trade secretsand confidential information and regarding the assignment to it of allIntellectual Property rights arising from services provided to it by itspersonnel (the “IP Policy”). Dictaphone has used commercially reasonable efforts to safeguard andmaintain the secrecy and confidentiality of the Business Intellectual Property,and to obtain rights in and to any such Intellectual Property generated by itspersonnel.  To the knowledge ofDictaphone, none of the current officers, employees or consultants of theSellers currently claim or have claimed any material ownership interest in anyof the Business Intellectual Property as a result of that Person having beeninvolved in the development of any such Intellectual Property while employed byor providing consulting services to it, or otherwise.  To the knowledge of Dictaphone, there hasbeen no material violation of its IP Policy or any confidentiality orassignment of Intellectual Property agreement relating to the BusinessIntellectual Property.  

 

(l)            To the knowledge ofDictaphone, none of the source code related to any products or services relatedto the Business provided by the Sellers, nor any other of the trade secrets ofthe Sellers related to the Business, has been published or disclosed, exceptpursuant to a non-disclosure agreement that is in the standard form used by theSellers requiring the parties receiving such information to keep itconfidential.

 

(m)          Disclosure Schedule Section 3.18(m)lists all worldwide opposition or cancellation proceedings pending or, to theknowledge of Dictaphone, threatened relating to a trademark registration ortrademark application listed on Annex 2.1(c).  Except for those pending or threatenedopposition or cancellation proceedings so listed, to the knowledge ofDictaphone, no trademark office worldwide has put forth a substantive objectionto a Dictaphone trademark application that should prevent registration of apending trademark application. 

 

(n)           Dictaphone expects allpending copyright applications worldwide to receive registration and, to theknowledge of Dictaphone, no third party has objected or threatened to object toregistration of a Dictaphone copyright.

 

(o)           To the knowledge ofDictaphone, no issued patent or patent application to be conveyed or licensedunder this Agreement has been declared or adjudicated invalid, null or void, orits subject matter declared unpatentable or finally rejected as unpatentable,in any judicial or administrative proceeding, nor has any foreign patent orapplication corresponding in whole or in part to the patent been declaredinvalid, null or void, or its subject matter declared unpatentable or finallyrejected as unpatentable in any judicial or administrative proceeding.  

 

33

----

 

(p)           Dictaphone has noknowledge of any prior material art or other material facts which wouldjeopardize the validity or enforceability of any patent, trademark, or copyrightto be conveyed or licensed under this Agreement.

 

(q)           Dictaphone has dulyrecorded all assignments and transfers affecting title to any patent, trademarkor copyright related to the Business to be conveyed or licensed under thisAgreement in the U.S. Patent and Trademark Office or appropriate foreign patentoffice or other governmental agency and, to the knowledge of Dictaphone,Dictaphone is the sole owner of such patents, trademarks and copyrights free ofany lien or encumbrance (other than Permitted Encumbrances).

 

(r)            To the knowledge ofDictaphone, except as listed in Disclosure Schedule Section 3.18(r),no licenses or rights related to the Business have been granted to any thirdparty to distribute or copy any of Dictaphone’s source code for, or to use anyof its source code to create Derivative Works (as defined by US copyright law)related to the Business from, any products embodying any Business IntellectualProperty to be conveyed hereunder. 

 

(s)           Nofederal, state, local or other government funding or university or collegefacilities were used in the development of the Business Intellectual Propertyor products to be conveyed hereunder.

 

3.19         Employee Matters.  Except as set forth in Disclosure Schedule Section 3.19,(i) no Seller in respect of the Business is delinquent in payments to anyof the Employees for any wages or other compensation for any services performedby them or amounts required to be reimbursed to such Employees, (ii) subjectto Article 5, including Annex 5.6(a), upon termination of theemployment of any Transferred Employees, the Buyer will not by reason of anyaction taken or not taken by the Sellers prior to the Closing be liable to anyof such Employees for severance pay or any other payments and (iii) toDictaphone’s knowledge, no management or Key Employee engaged primarily in theoperations of the Business and earning a base salary over $75,000 per yearintends to terminate his or her employment with the Sellers. 

 

3.20         Employee Benefits.  Disclosure Schedule Section 3.20lists each Benefit Plan that a Seller maintains, or to which it contributes, inrespect of the Business.  

 

(a)           ToDictaphone’s knowledge, each such Benefit Plan (and each related trust,insurance contract or fund) has been maintained, funded and administered inaccordance with the terms thereof and complies in form and in operation in allrespects with the applicable requirements of ERISA and the Code, except wherethe failure to so comply would not have a Material Adverse Effect.

 

(b)           Allcontributions (including all employer contributions and employee salaryreduction contributions) that are due have been made to each such Benefit Planthat is an “employee pension benefit plan” (as defined in Section 3(2) ofERISA).  All premiums or other paymentsthat are due have been paid with respect to each such Benefit Plan that is an “employeewelfare benefit plan” (as defined in Section 3(1) of ERISA).

 

34

----

 

(c)           Eachsuch Benefit Plan that is intended to meet the requirements of a “qualifiedplan” under Code Section 401(a) has received a determination letterfrom the IRS to the effect that it meets the requirements of Code Section 401(a).

 

(d)           Withrespect to each Benefit Plan that Dictaphone, in respect of the Business,maintains or has maintained, or to which it contributes or has been required tocontribute, during the prior six (6) years:

 

(i)            Noaction, suit, proceeding, hearing or investigation with respect to theadministration or the investment of the assets of any such Benefit Plan (otherthan routine claims for benefits) is pending, except where the action, suit,proceeding, hearing or investigation would not have a Material Adverse Effect.

 

(ii)           As of thelast day of the most recent prior plan year, the market value of assets undereach Benefit Plan that is an “employee pension benefit plan” equaled orexceeded the present value of liabilities thereunder (determined in accordancewith then current funding assumptions).

 

(iii)          Dictaphone,in respect of the Business, has not incurred any Liability to the PensionBenefit Guaranty Corporation (other than premium payments thereto) or otherwiseunder Title IV of ERISA (including any withdrawal liability) with respect toany such Benefit Plan that is an “employee pension benefit plan.”

 

3.21         NoGuarantees.  None ofthe Liabilities of the Business or of any Seller incurred in connection withthe operation of the Business is guaranteed by or subject to a similarcontingent obligation of any other Person. Except for ordinary course trade activities with respect to the sale andservicing of products, no Seller with respect to the Business has guaranteed orbecome subject to a similar contingent obligation in respect of the obligationsor Liabilities of any other Person.  Exceptfor trade letters of credit and other ordinary course trade activities, thereare no outstanding letters of credit, surety bonds or similar instruments ofDictaphone or any of its Affiliates in connection with the Business or thePurchased Assets.  

 

3.22         CertainBusiness Relationships with the Business.  Neither Dictaphone nor any of itsstockholders, officers, directors or employees, including any Affiliatesthereof, (i) have been involved in any material business arrangement orrelationship with the Business within the past twelve (12) months or (ii) ownany material asset, tangible or intangible, that is used or held for use in theBusiness except through the Sellers.

 

3.23         Disclosure.  The representations and warranties containedin Article 3 do not contain any untrue statement of a material fact oromit to state any material fact necessary in order to make the statements andinformation contained therein not misleading. 

 

3.24         Customers and Suppliers.  

 

(a)           DisclosureSchedule Section 3.24(a) liststhe 25 largest customers (the “MajorCustomers”) of the Business based on revenues (on a consolidated basis) forthe 2004 fiscal year and sets forth opposite the name of each such MajorCustomer the percentage of revenues of the Business (on a consolidated basis)attributable to each such Major Customer. No

 

35

----

 

Sellerhas received any written notice that any such Major Customer has (i) ceased,or will cease, to use the products or services of the Business, (ii) substantiallyreduced or will substantially reduce, the use of products or services of theBusiness or (iii) has sought, or is seeking, to reduce the price it willpay for products or services of the Business (other than due to announcementsof the transactions contemplated by this Agreement) or that any such MajorCustomer will not purchase products or services of the Business from the Buyerat any time after the Closing Date on terms and conditions similar to thoseused in its current purchases from the Business. Disclosure Schedule Section 3.24(a) setsforth as of February 28, 2005 any account or note receivable past ninety(90) days due from any Major Customer.  

 

(b)           Sincethe date of the December 31 Balance Sheet, to the knowledge of Dictaphone,no Seller has received any written or oral notice that there has been anymaterial adverse change in the price of software development services, softwareproducts, hardware, raw materials, supplies, merchandise or other goods orservices provided by any material supplier of or licensor to the Business orthat any such supplier will not sell or license software development services,software products, hardware, raw materials, supplies, merchandise or othergoods or services for use in the Business to the Buyer at any time after theClosing Date on terms and conditions similar to those used in its current salesor licenses to the Business. 

 

(c)           Excepthas listed in Disclosure Schedule Section 3.24(c), no Selleris a party to any exclusive distribution agreement or obligation, non-competeagreements, or other agreements which limit the scope of its sales andmarketing activities in any geographic area or industry sector in respect ofthe Business.

 

3.25         ProductBacklog.  As of March 31, 2005,the aggregate Product Backlog was Nine Million One Hundred Thousand U.S.Dollars (U.S.$9,100,000).  Disclosure Schedule Section 3.25sets forth, for each order included in Product Backlog, the customer name,product/service description and dollar amount of the revenue associated withsuch order and the date such order was received.  Except as set forth on Disclosure Schedule Section 3.25,all such Product Backlog has been determined on a basis consistent with theBusiness’s historical practices. 

 

3.26         Absence of Certain Business Practices.  No Seller nor, to Dictaphone’s knowledge, anyofficer, director, employee, agent or Affiliate of Dictaphone, or any otherperson acting on their behalf, has, directly or indirectly, within the pastfive (5) years given or agreed to give any gift or similar benefit to anycustomer, supplier, governmental employee or other person who is or may be in aposition to help or hinder the Business in violation of any Law (i) whichsubjected or would have subjected any Seller to any damage or penalty in anycivil, criminal or governmental litigation or proceeding, (ii) which if notgiven in the past, would have had a Material Adverse Effect or (iii) which ifnot continued in the future, would have a Material Adverse Effect or wouldsubject any Seller to suit or penalty in any private or governmental litigationor proceeding.  

 

3.27         Brokers, Finders.  Other than Houlihan Lokey Howard &Zukin (“Houlihan”), whose fee may be paid by Dictaphone, no finder,broker, agent or other intermediary acting on behalf of Dictaphone is entitledto a commission, fee or other

 

36

----

 

compensation inconnection with the negotiation or consummation of this Agreement or any of thetransactions contemplated hereby.

 

3.28         Amendmentto OSS Agreement.  Attached hereto as Exhibit G is atrue and correct copy of the amendment to the OSS Agreement.  The amendment to the OSS Agreement has beenduly executed and delivered by Dictaphone and Omnee Systems SoftwareCorporation, and the sole condition to its effectiveness and valid andeffective assignment to Buyer are (a) the payment of $1,000,000 byDictaphone to OSS (the “OSS Payment”), and (b) the Closing.  

 

3.29         No Other Representationsor Warranties.  Except for therepresentations and warranties contained in this Article 3, neitherDictaphone, nor any other Person, makes any other express or impliedrepresentation or warranty on behalf of Dictaphone or any Affiliate ofDictaphone with respect to the Business, the Purchased Assets, the AssumedLiabilities or otherwise with respect to the subject matter of this Agreementor the Related Agreements.

 

ARTICLE 4

**REPRESENTATIONSAND WARRANTIES OF THE BUYER**

 

TheBuyer hereby makes the following representations and warranties to Dictaphone,each of which is true and correct on the date hereof and shall survive theClosing Date and the transactions contemplated hereby to the extent set forthherein.

 

4.1           Existence and Power.  

 

(a)           TheBuyer and each Buyer Affiliate has the corporate, partnership, limitedliability company or other organizational power and authority, as applicable,to execute and deliver this Agreement and each Related Agreement to which it isa party, to perform its obligations hereunder and thereunder, and to consummatethe transactions contemplated hereby and thereby. 

 

(b)           TheBuyer and each Buyer Affiliate is validly existing and in good standing underthe laws of its jurisdiction of formation (to the extent such concept isrecognized in such jurisdiction) and each jurisdiction in which the nature ofits business makes such qualification necessary, exceptwhere the failure to be so qualified and in good standing would not have amaterial adverse effect on the Buyer or the Buyer Affiliates.  

 

(c)           Neitherthe Buyer nor any Buyer Affiliate is a party to, subject to or bound by anycontract, Encumbrance or Law which would (i) be breached or violated orthe Buyer’s or any Subsidiary’s obligations thereunder accelerated or increased(whether or not with notice or lapse of time or both) by the execution ordelivery by the Buyer or any Buyer Affiliate of this Agreement (to the extentit is a party hereto) or any Related Agreement to which it is a party or theperformance by the Buyer or any Buyer Affiliate of the transactions contemplatedhereby (to the extent it is a party hereto) or thereby (to the extent it is aparty thereto) or (ii) prevent the carrying out of the transactionscontemplated by this Agreement (to the extent it is a party hereto) or by theRelated Agreements (to the extent it is a party thereto).  Except as provided for in Disclosure Schedule Section 4.1,no permit, consent, waiver, approval or authorization of, or declaration to orfiling or registration with, any governmental or regulatory

 

37

----

 

authority or third-partyis required in connection with the execution, delivery or performance of thisAgreement or any of the Related Agreements by the Buyer or any Buyer Affiliateor the consummation by the Buyer or any Buyer Affiliate of the transactionscontemplated by this Agreement (to the extent it is a party hereto) or anyRelated Agreement to which it is a party, except for any such permits,consents, waivers, approvals, authorizations, declarations, filings orregistrations the failure of which to obtain would not have a material adverse effect on the Buyer or upon theconsummation of the transactions contemplated by this Agreement or by theRelated Agreements.

 

4.2           Valid and Enforceable Agreement; Authorization.  This Agreement and the Related Agreementshave been duly executed and delivered by the Buyer and the Buyer Affiliatesparty thereto and constitute legal, valid and binding obligations of the Buyerand the Buyer Affiliates party thereto, enforceable against the Buyer and theBuyer Affiliates in accordance with their terms, except that such enforcementmay be subject to (i) bankruptcy, insolvency, reorganization, moratoriumor other similar laws affecting or relating to enforcement of creditors’ rightsgenerally and (ii) general principles of equity.  The execution and delivery of this Agreementand the consummation of the transactions contemplated hereby have been dulyauthorized, approved and ratified by all necessary action on the part of theBuyer and the Buyer Affiliates.

 

4.3           Brokers, Finders. The Buyer shall pay all commissions, fees or other compensation incurredby any finder, broker, agent or other intermediary retained by the Buyer andacting on behalf of the Buyer in connection with the negotiation or consummationof this Agreement or any of the transactions contemplated hereby. 

 

4.4           Litigation.  Thereare no actions, suits, proceedings, orders or investigations pending or, to theBuyer’s knowledge, threatened against the Buyer or any of the Buyer Affiliates,at law or in equity, which if adversely determined would have a materialadverse effect on the Buyer’s or any Buyer Affiliate’s performance under thisAgreement or any Related Agreement to which it is a party or the consummationof the transactions contemplated hereby or thereby.  There are no injunctions, decrees orunsatisfied judgments outstanding against or related to the Buyer or any BuyerAffiliate which could interfere with the Buyer’s or any Buyer Affiliate’sability to consummate the transactions contemplated by this Agreement.

 

4.5           Funds.  The Buyer has, and at all times will have,sufficient funds on hand or available pursuant to unconditional commitments topay the Purchase Price and any Adjustment. 

 

4.6           Amendmentto OSS Agreement.  The Buyer acknowledges that (a) a trueand complete copy of the amendment to the OSS Agreement has been attached byDictaphone as Exhibit G to this Agreement, (b) the terms andprovisions of the amendment to the OSS Agreement attached hereto as Exhibit Gare in form and substance satisfactory to the Buyer and (c) no conditionto effectiveness of the amendment to the OSS Agreement and its valid andeffective assignment to Buyer remains unsatisfied other than the (a) theOSS Payment, and (b) Closing. 

 

38

----

 

4.7           No Other Representationsor Warranties.  Except for therepresentations and warranties contained in this Article 4, neither theBuyer, nor any other Person, makes any other express or implied representationor warranty on behalf of the Buyer. By entering into this Agreement, the Buyeracknowledges that it has not relied on, and is not relying on, projections,predictions, forecasts or similar forward-looking statements which were made orprepared by or on behalf of Dictaphone or its Affiliates.

 

ARTICLE 5

**EMPLOYEES**

 

5.1           Accessto Employees;Offers of Employment to U.S. Employees.  

 

(a)           Offersto U.S. Employees.  From and afterthe date of this Agreement, Dictaphone shall make the General Manager and VicePresidents of the Business available to Buyer, for the purpose of evaluatingU.S. Employees and assisting Buyer in deciding to which U.S. Employees theBuyer and/or a Buyer Affiliate shall make offers of employment.  The General Manager, Vice Presidents and KeyEmployees of the Business shall cooperate with the Buyer to provide the Buyerwith reasonable access to the U.S. Employees for the purpose of the Buyer or aBuyer Affiliate interviewing, evaluating and extending offers to certain U.S.Employees; provided, however, that normal conduct of the Businessshall not be unreasonably disrupted thereby. The Buyer shall make or cause a Buyer Affiliate to make an offer ofemployment to those U.S. Employees, other than the Retained Employees, itwishes to hire and shall provide Dictaphone with a list of all such U.S.Employees to whom it has extended offers within twenty (20) Business Days ofthe date hereof, but in no event later than ten (10) Business Days priorto Closing.  The number of U.S. Employeesof the Business to whom the Buyer shall make offers within twenty (20) BusinessDays hereof shall not be less than onehundred fifty (150) U.S. Employees. If any such offers of employment are rejected by any U.S. Employees, theBuyer agrees to extend, or cause a Buyer Affiliate to extend, additional offersof employment in lieu of such original offers of employment to other U.S.Employees who are not Retained Employees and to whom offers of employment havenot yet been made, provided, however, that the Buyer and theBuyer Affiliates may, but shall not be required, to extend additional offers(x) to U.S. Employees who are not qualified for the positions with respect towhich offers have been made to other U.S. Employees and rejected or (y) to theextent that the aggregate number at any time of offers which have been acceptedplus offers which have been extended but neither accepted nor rejected exceedsone hundred fifty (150).  The Buyer andthe Buyer Affiliates shall extend all such offers of employment to U.S.Employees in good faith and in collaboration with Dictaphone and shall keepDictaphone and its Vice President of Human Resources informed of all materialdevelopments relating to the terms, acceptance, negotiation or rejection ofsuch offers.  No Seller shall make any offersto U.S. Employees, who are not Retained Employees, for them to remain in theemploy of any Seller after the Closing Date, which offers compete with theBuyer’s or any Buyer Affiliate’s offers of employment to such Employees. NoSeller shall make any offers to employ or engage or otherwise solicit (at anystage) any EU Employee, Swiss Employee or Canadian Employee, in each case, whoare not Retained Employees, for them to remain in or transfer to the employ orengagement of any Seller after the Closing Date.  

 

(b)           Terms of Offers.  The offers of employment referred to in Section 5.1(a) shallbe conditioned and effective upon the Effective Time (or, for any U.S. Employeeon

 

39

----

 

a leave of absence whenoffered employment by the Buyer or a Buyer Affiliate, the offer of the Buyer ora Buyer Affiliate may specify that the initial date of employment under suchoffer shall be effective upon the date of the U.S. Employee’s return from theleave of absence).   Such offers ofemployment shall be on terms and conditions to be decided by the Buyer in itssole discretion, provided only that as to each U.S. Employee such terms andconditions may be either (i) comparable with the terms and conditions ofsuch offeree’s employment with Dictaphone or a Selling Subsidiary in effect asof the date of this Agreement or (ii) consistent with the customaryemployment practices of the Buyer or a Buyer Affiliate as of the Effective Timefor those of its employees having similar levels of responsibility as suchofferee.  The Buyer shall provide toDictaphone, prior to extending any offer of employment to any U.S. Employee andwithin twenty (20) Business Days after the date hereof, but in no event laterthan twenty (20) Business Days prior to Closing or with reasonable promptnessafter extending an offer, the terms and conditions of any offers of employmentto any U.S. Employee and shall extend any such offers of employment inconsultation with Dictaphone, in a manner that minimizes interruption to theBusiness and Dictaphone’s other businesses and in a manner that encourages U.S.Employees to accept such offers of employment from the Buyer or a BuyerAffiliate. ** **An****agreement by the Buyer and Dictaphone as to whatconstitutes “terms and conditions that are comparable with the terms andconditions of each such U.S. Employee’s employment with Dictaphone or a SellingSubsidiary in effect as of the date of this Agreement” for purposes of this Section 5.1(c) shallbe set forth in a separate letter agreement between Buyer and Dictaphone, shallbe entered into by the Parties within ten (10) Business Days of the dateof this Agreement and shall be incorporated by reference in this Section 5.1(c).

 

(c)           TransferredEmployees.  Those U.S. Employees whoaccept employment as of the Effective Time with the Buyer or any of itsAffiliates are referred to as “Transferred U.S. Employees.”  Receipt by the Buyer or a Buyer Affiliate ofacceptances of employment by less than one hundred thirteen (113) U.S. Employeesas of the Effective Time shall constitute the failure of the condition toClosing set forth in Section 7.5; provided, however, that itshall not constitute a failure of such condition to Closing unless all U.S.Employees (except for up to five (5) U.S. Employees) have been offeredemployment by the Buyer within thirty (30) Business Days after the date of thisAgreement on terms and conditions that are comparable with the terms andconditions of each such U.S. Employee’s employment with Dictaphone or a SellingSubsidiary in effect as of the date of this Agreement; and provided further,however, that the Buyer shall promptly notify Dictaphone of the receiptby the Buyer or any Buyer Affiliate of any acceptances of employment by anyU.S. Employee.  

 

(d)           RequiredTransferred Employees.  The Partiesacknowledge that, on or prior to the date hereof, the Buyer or a BuyerAffiliate has entered into definitive employment agreements with those U.S.Employees listed on Annex 5.1(d), on terms reasonably satisfactory tothe Buyer, which agreements shall become effective upon the Closing and,accordingly, that any condition to Closing in respect thereof has beensatisfied.  The U.S. Employees listed on Annex5.1(d) are collectively referred to herein as the “Key Employees.”

 

(e)           U.S.Severance.  To the extent that thepayment of severance benefits or government-required termination liabilities toany Transferred U.S. Employee is required as a result of the consummation ofthe transactions contemplated by this Agreement and

 

40

----

 

theconcurrent transfers of employment, such severance benefits andgovernment-required termination liabilities shall be the sole responsibility ofDictaphone.

 

(f)            BenefitsService, Waiting Periods and Thresholds. The Buyer shall have sole discretion with respect to establishing allrights of Transferred Employees under its Benefit Plans, including credit forservice accrued, waiting periods, deductibles and similar thresholds, subjectto any Transfer Regulations (as defined at Annex 5.6(a)) applicable tothe EU Employees and the Swiss Employees.

 

5.2           Post-Closing Employment andEmployee Benefits.  

 

(a)           Transferof Employment.  Effective as of theEffective Time, in accordance with the principles set forth in Sections 5.1(a) and5.6, the Buyer shall hire each Transferred Employee.  In addition, following the Effective Time,the Buyer shall maintain employee benefit plans, programs, policies andarrangements for Transferred Employees (other than the features of any plans orarrangements based on employer equity securities) that are reasonablycomparable, in the aggregate, with respect to those Benefit Plans that theBuyer has in effect for its similarly situated employees, subject to anyTransfer Regulations (as defined at Annex 5.6(a) applicable to theEU Employees and the Swiss Employees.

 

(b)           DictaphoneU.S. Retirement Benefits.  

 

(i)            Dictaphoneshall, effective as of the Effective Time, cease benefit accruals for eachTransferred U.S. Employee in any tax-qualified and nonqualified defined benefitpension plans maintained by Dictaphone in which such individual is thenparticipating.  Dictaphone shall remainsolely liable for only those benefits accrued and vested under such pensionplans on or prior to the Effective Time.

 

(ii)           Dictaphoneshall, effective as of the Effective Time, cease the accrual of additionalcontributions in respect of each Transferred U.S. Employee to all tax-qualifiedand nonqualified defined contribution plans maintained by Dictaphone in whichsuch individual is then participating.   

 

(c)           U.S. Welfare Benefits.

 

(i)            Dictaphoneshall be responsible in accordance with its applicable welfare plans in effectprior to the Effective Time for all medical and dental claims for expensesincurred prior to the Effective Time by Transferred U.S. Employees and theirspouses and dependents.  Reimbursementfor medical and dental expenses associated with such claims shall be determinedin accordance with the terms of Dictaphone’s medical and dental programs as ineffect immediately prior to the Effective Time. The Buyer shall be responsible for all medical and dental claims forexpenses incurred on and after the Effective Time by Transferred U.S. Employeesand their spouses and dependents pursuant to and in accordance with the termsof plans maintained by the Buyer and in which Transferred U.S. Employees andtheir spouses and dependents become enrolled following the Effective Time andin accordance with the Buyer’s plans and practices for its current employees.

 

41

----

 

(ii)           The Buyershall be responsible for all other insurance and disability benefit coverageclaims of Transferred U.S. Employees and their beneficiaries for claimsincurred by such Transferred U.S. Employees on and after the Effective Timeunder group life, travel, disability accident, and accidental death anddismemberment insurance policies or programs of the Buyer in which TransferredU.S. Employees become enrolled. Dictaphone shall be responsible for claims incurred under policies orprograms of Dictaphone by Transferred U.S. Employees prior to the EffectiveTime. Dictaphone shall also remain responsible for any claims incurred underpolicies or programs of Dictaphone by Employees who are not Transferred U.S.Employees, whether incurred prior to or after the Effective Time, and Buyershall have no responsibility or liability for any such claims.

 

(iii)          Forpurposes of this Section 5.2, the following claims and liabilities shallbe deemed to be incurred as follows: (A) life, accidental death anddismemberment and business travel accident insurance benefits, upon the deathor accident giving rise to such benefits; (B) hospital-provided health,dental, prescription drug or other benefits that become payable with respect toany hospital confinement shall be allocated between Dictaphone and the Buyer inproportion to the number of days of such hospital confinement that occur beforeand after the Effective Time; and (C) non-hospital-provided health, dentalor prescription drug benefits, upon provision of the related services,materials or supplies.

 

(d)           401(k)Plan.  Transferred U.S. Employeesshall be eligible to authorize a direct rollover of their account balances inthe Dictaphone 401(k) Plan, including plan loans, to the defined contributionplan maintained by the Buyer, to the extent permitted by the terms andconditions of the defined contribution plan maintained by the Buyer and subjectto the Buyer’s receipt as of the Closing Date of a copy of an up-to-datefavorable determination letter issued by the IRS with respect to the Dictaphone401(k) Plan (so long as it is favorable). 

 

(e)           FlexibleSpending Accounts.  The Buyer shallcover Transferred U.S. Employees who have elected to participate in Dictaphone’sFlexible Spending Account (“Dictaphone’s FSA”) under the Buyer’sFlexible Spending Account (“Buyer’s FSA”) at the same level of coverageprovided under Dictaphone’s FSA, but solely to the extent currently offered toBuyer’s U.S. employees.  Transferred U.S.Employees shall be treated as if their participation in Buyer’s FSA had beencontinuous from the beginning of Dictaphone’s plan year in which the EffectiveTime falls and their existing salary reduction elections shall be taken intoaccount for the remainder of the Buyer’s plan year in which the Effective Timefalls as if made under the Buyer’s FSA. The Buyer’s FSA shall provide reimbursement for eligible expensesincurred by Transferred U.S. Employees at any time during Dictaphone’s planyear in which the Effective Time falls (including, to the extent permissibleunder applicable law and the terms of Buyer’s FSA, claims incurred before theEffective Time), up to the amount of such Transferred U.S. Employees’ electionsand reduced by amounts previously reimbursed by Dictaphone’s FSA.  As soon as administratively feasible afterthe end of the calendar year in which the Effective Time occurs, the Buyer andDictaphone shall reconcile the FSA account balances of Transferred U.S. Employeesunder the Buyer’s and Dictaphone’s respective FSAs for such calendar year andshall make payment to one another so that they share, based on the portion ofthe plan year each employed the Transferred U.S. Employees who participated inthe FSA, the amount of any net loss or net surplus resulting from the aggregateclaims paid from the flexible spending accounts of the Transferred U.S.Employees under the Buyer’s FSA and Dictaphone’s FSA, after giving

 

42

----

 

effectto the aggregate amount of the contributions received by the Buyer andDictaphone from such Transferred U.S. Employees under the Buyer’s andDictaphone’s FSA, respectively.  Withinfifteen (15) Business Days after the Closing Date, Dictaphone shall provide toBuyer a detailed summary of the amounts of employee contributions to, and allclaims filed and paid under, Dictaphone’s FSA between January 1, 2005 andthe day before the Closing Date.  

 

(f)            U.S.Workers’ Compensation. The Buyer’s workers’ compensation program shall beresponsible for all claims for workers’ compensation benefits which areincurred after the Effective Time by participating Transferred U.S.Employees.  Subject to Section 5.6,Dictaphone shall remain responsible for all claims for such benefits that areincurred prior to the Effective Time by Employees, regardless of when suchclaims are submitted.

 

(g)           ResponsibilitiesUnder WARN.  Dictaphone shall beresponsible for providing or discharging any and all notifications, benefitsand liabilities to U.S. Employees and governmental authorities required by theWorker Adjustment and Retraining Notification Act (“WARN”) or by anyother applicable Law in the United States relating to plant closings oremployee separations or severance pay that are required to be provided as aresult of the consummation of the transactions contemplated by this Agreement,regardless of whether such separations or layoffs occur prior to or after theClosing Date.  

 

5.3           U.S. EmployeesVacation Pay.  No laterthan sixteen (16) calendar days after the end of the Dictaphone employeepayroll period in which the Closing occurs, Dictaphone shall make a cashpayment to each Transferred U.S. Employee who, as of the Effective Time, hasany accrued but unused vacation time pursuant to the vacation policy applicableto each such Transferred U.S. Employee immediately prior to the Effective Time.The Buyer shall assume no liability whatsoever for any such pre-Effective Timeaccrued vacation.

 

5.4           Transfer of U.S. Employee Withholding.  Dictaphone and the Buyer agree to comply withthe alternate procedure described in Section 5 of Revenue Procedure 2004-53.  With respect to wages paid after the ClosingDate by the Buyer to the Transferred U.S. Employees, the Buyer shall, in accordancewith Revenue Procedure 2004-53, assume all responsibility for preparing andfiling: Form W-2, Wage and Tax Statements; Form W-3, Transmittal ofIncome and Tax Statements; Form 941, Employer’s Quarterly Federal TaxReturns; Form W-4, Employee’s Withholding Allowance Certificates; and Form W-5,Earned Income Credit Advance Payment Certificates.  Dictaphone and the Buyer shall cooperate ingood faith to the extent necessary to permit each of them to comply with thealternate procedure. 

 

5.5           Transfer of U.S. UnemploymentInsurance Rate and Base.  Dictaphone shall execute such documents as arenecessary in order to transfer and assign to the Buyer all stateunemployment insurance wage bases and experience and tax rates in respect ofthe Business with regard to the calendar year that includes the Closing Date.

 

5.6           Non-U.S.Employees.   

 

(a)           EUEmployees and Swiss Employees.  Annex5.6(a) sets forth the provisions in relation to any and all EUEmployees and Swiss Employees. In the event of any

 

43

----

 

conflict between the provisions of Sections 5.1through 5.5 and the provisions of Annex 5.6(a), the provisions of Annex5.6(a) shall prevail.

 

(b)           CanadianEmployees.  Unless otherwisespecifically provided herein, the Canadian Employees will be subject to thesame terms and provisions as the U.S. Employees; provided, however,that the Buyer shall only be required to make or cause a Buyer Affiliate tomake an offer of employment to one Canadian Employee, other than a RetainedEmployee, within twenty (20) Business Days hereof. To the extent that thepayment of severance benefits or government-required termination liabilities toany Canadian Employee is required as a result of the consummation of thetransactions contemplated by this Agreement and any concurrent or deemedtransfers of employment, such severance benefits and government-requiredtermination liabilities shall be the sole responsibility of Dictaphone.

 

(c)           SingaporeEmployees.  The Buyer shall not berequired to make or cause a Buyer Affiliate to make an offer of employment toany Singapore Employee. To the extent that the payment of compensation,severance benefits or government-required termination liabilities to anySingapore Employee is required as a result of the consummation of thetransactions contemplated by this Agreement and any deemed transfers ofemployment, such severance benefits and government-required terminationliabilities shall be the sole responsibility of Dictaphone.

 

(d)           Compliance.  The Buyerwill and will cause each of the Buyer Affiliates to extend offers of employmentto EU Employees, Swiss Employees and Canadian Employees on a basis which willnot violate non-discrimination laws applicable to the Buyer or the relevantBuyer Affiliates, as the case may be.  

 

5.7           Non-Solicitation.  From the date of this Agreement through theend of the twelve (12) month period commencing with the Effective Time: 

 

(a)           neitherDictaphone nor any of its Affiliates shall directly or indirectly, endeavor to enticeaway, make any offer of employment or engagement to, or otherwise solicit theemployment or engagement of, any Employee other than a Retained Employee,without the prior written consent of the Buyer, provided that such restrictionshall terminate upon the Closing as to any Employee who is not a TransferredEmployee; 

 

(b)           Dictaphoneshall not solicit the employment of any Transferred Employee without the priorwritten consent of the Buyer; and

 

(c)           neitherthe Buyer nor any of its Affiliates shall directly or indirectly, endeavor toentice away, make any offer of employment or engagement to, or otherwisesolicit the employment or engagement, in connection with the Business, of anyRetained Employee without the prior written consent of Dictaphone.  

 

For the purposes set forth in this Section 5.7, generaladvertising which is not specifically directed at any Transferred Employeeshall not be considered solicitation. 

 

44

----

 

ARTICLE 6

**ADDITIONAL COVENANTS OF THE PARTIES**

 

6.1           Conduct of BusinessUntil Closing.  Except asotherwise provided in this Agreement or as the Buyer may otherwise consent toor approve in writing on and after the date hereof and prior to the ClosingDate (which consent shall not be unreasonably withheld) Dictaphone shall, andshall cause the Selling Subsidiaries to, in respect of the Business:

 

(a)           notenter into any discussions or effect any transactions relating to thedisposition of any material part of the Purchased Assets, other than productsor services in the Ordinary Course; provided, however, that, forpurposes of this Section 6.1(a), transactions with respect to the sale ofany product of the Business the price of which is greater than Two HundredThousand U.S. Dollars ($200,000) and the product margin of which is below fortypercent (40%), customer rights to replace products of the Business withproducts of Buyer either prior to or after installation or other non-standardrights of customers of the Business, including the right to receive freemultiple-year maintenance, shall be deemed not in the Ordinary Course;

 

(b)           (i) conductits business, operations, activities and practices in all material respects inthe Ordinary Course and consistent with past practice, (ii) usecommercially reasonable efforts to preserve its current business organizationand existing business relationships in all material respects, and (iii) maintainits property in substantially the condition as currently existing, normal wearand tear excepted;

 

(c)           notenter into, terminate or amend in any material respect any Material Contract(except to the extent necessary to obtain the consents for assignment andtransfer contemplated by this Agreement);

 

(d)           notsell, license or transfer any Business Intellectual Property other than as partof a sale of products or services in the Ordinary Course; 

 

(e)           notissue any letters of credit in excess of $50,000, individually or in theaggregate; 

 

(f)            notmake any new tax elections or change any existing tax elections with respect tothe Business; 

 

(g)           notenter into any new, or vary or revoke the terms of any existing, contract,agreement, plan, program or arrangement with any EU Employee or Swiss Employeeor any trade union or other body collectively representing any EU Employee orSwiss Employee, or make any offer of employment or engagement in the Businessto any person who would, upon acceptance thereof, be an EU Employee, a SwissEmployee or an Employee otherwise based outside the United States; and

 

(h)           notenter into any agreement (conditional or otherwise) to do any of the foregoing.

 

For purposes of this Section 6.1, consent or approval in writingof the Buyer shall be evidenced only by a written consent or approval signed bythe Buyer’s President.

 

45

----

 

6.2           Books and Records.  From and after the Closing, the Buyer shallprovide Dictaphone and its representatives with reasonable access, duringnormal business hours, to all books and records of the Business, including accountingand Tax records, sales and purchase documents, notes, memoranda, and any otherelectronic or written data (“Records”) pertaining or relating to theperiod prior to the Effective Time as is reasonably necessary for (a) financialreporting, Tax and accounting matters, and the preparation and filing of anyreturns, reports or forms, (b) defending any claim or assessment againstDictaphone or its Affiliates, (c) asserting any claims which Dictaphone orits Affiliates may have or (d) complying with any Law or governmental orjudicial order.  To the extent deemednecessary by Dictaphone and its Affiliates with respect to their other businessoperations, Dictaphone and its Affiliates may retain copies of such Records priorto providing the originals to the Buyer or, as soon as practicable afterClosing, the Buyer shall provide to Dictaphone and its Affiliates copies of allor any portion of such Records as requested by Dictaphone and itsAffiliates.  Unless otherwise consentedto in writing by Dictaphone, the Buyer shall not, for a period of seven (7) yearsfollowing the date hereof or such longer period as retention thereof isrequired by applicable Law, destroy, alter or otherwise dispose of (or allowthe destruction, alteration or disposal of) any of the Records without firstoffering (which offer shall remain open for at least ninety (90) days) tosurrender to Dictaphone such Records.

 

6.3           Confidentiality.  

 

(a)           Inlieu of the terms, provisions and covenants of (x) the ConfidentialityAgreement dated July 12, 2004 between the Buyer and Houlihan (withDictaphone being a third party beneficiary) and (y) the ConfidentialNon-Disclosure Agreement dated January 1, 2004 between the Buyer andDictaphone, which Confidentiality Agreement and Confidential Non-DisclosureAgreement and Dictaphone’s rights thereunder are hereby terminated, the Buyeracknowledges that, in the course of its investigations of the Business, theBuyer and its representatives have and will become aware of confidentialinformation and documents of Dictaphone and its Affiliates, the Business andthe Other Dictaphone Businesses, and that its use of such confidentialinformation and documents, or communication of such information to thirdparties, could be detrimental to Dictaphone and its Affiliates, the Businessand the Other Dictaphone Businesses.  TheBuyer covenants that (1) prior to the Closing (including after terminationof this Agreement without the Closing having taken place), all information anddocuments concerning Dictaphone and its Affiliates, the Business and the OtherDictaphone Businesses received or reviewed by the Buyer, its Affiliates or itsrepresentatives in connection with this Agreement, any Related Agreement or thetransactions contemplated hereby and (2) following the Closing, all suchinformation and documents to the extent related to any of the Excluded Assets,the Retained Liabilities or the Other Dictaphone Businesses shall be maintainedin confidence and shall not be disclosed or used by the Buyer, its Affiliatesor its representatives without Dictaphone’s prior written consent, unless suchinformation is (i) otherwise publicly available, (ii) required to bedisclosed pursuant to judicial order or applicable Law, (iii) required tobe disclosed by the rules of a securities exchange on which the securitiesof the Buyer or a controlling Affiliate of the Buyer may from time to time belisted or (iv) disclosed to any Person that proposes to finance, in wholeor in part, the purchase of the Purchased Assets or the operations of the Buyeror of its controlling Affiliates, solely for the purpose of permitting suchPerson to evaluate the advisability of providing such financing.  In the event that the Buyer or any of itsAffiliates or representatives becomes legally compelled to disclose anyinformation

 

46

----

 

or documentsreferred to in this Section 6.3(a), the Buyer shall provide Dictaphonewith prompt written notice before such disclosure, sufficient to enableDictaphone, at its expense, either to seek a protective order or otherappropriate remedy preventing or limiting such disclosure or to waivecompliance with the provisions of this Section 6.3(a) or both. The Buyer shall cause its Affiliates andrepresentatives to comply with this Section 6.3(a) and shall beresponsible for any breach thereof by them. 

 

(b)           Followingthe Closing, Dictaphone shall and shall cause its Affiliates andrepresentatives to maintain in confidence any information it or they may haveor receive in relation to the Business or in connection with the RelatedAgreements, other than with respect to the Excluded Assets, the RetainedLiabilities and the Other Dictaphone Businesses, and not disclose or use suchinformation without the Buyer’s prior written consent, unless such informationis (i) otherwise publicly available, (ii) required to be disclosedpursuant to judicial order or applicable Law or (iii) required to bedisclosed by the rules of a securities exchange on which the securities ofDictaphone or a controlling Affiliate of Dictaphone may be from time to timelisted.  In the event that Dictaphone orits Affiliates and representatives become legally compelled to disclose anyinformation or documents referred to in this Section 6.3(b), Dictaphoneshall, to the extent reasonably practicable, provide the Buyer with promptwritten notice before such disclosure, sufficient to enable the Buyer, at itsexpense, either to seek a protective order or other appropriate remedypreventing or prohibiting such disclosure or to waive compliance with theprovisions of this Section 6.3(b) or both.

 

(c)           Untilafter the Effective Time, no press release or other public statement concerningthe negotiation, execution and delivery of this Agreement or the transactionscontemplated hereby shall be issued or made without the prior approval of bothDictaphone and the Buyer (which approval shall not be unreasonably withheld),except to the extent necessary or advisable to comply with accounting rules, rules ofthe Securities and Exchange Commission or the National Association ofSecurities Dealers, Inc., or other disclosure obligations imposed by Law.

 

6.4           Filings; FurtherAssurances and Cooperation.  

 

(a)           Priorto the Closing, the Parties shall proceed expeditiously and in good faith to makesuch filings and take such other actions as may be reasonably necessary tosatisfy the conditions to Closing set forth in Sections 7.2 and 8.2, if any.The Parties also acknowledge and agree that they have each independentlyconcluded on the basis of the information available to each Party that nofilings with respect to the transactions contemplated hereby are required to bemade pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, asamended, the competition or antitrust laws of the jurisdictions listed on DisclosureSchedule Section 6.4(a), or Section 5021 of the OmnibusTrade and Competitiveness Act of 1988, as amended by Section 721 of theDefense Production Act of 1950.  TheBuyer acknowledges that it has independently concluded that no filings withrespect to the transactions contemplated hereby are required to be made byeither Party pursuant to Israeli Laws, and Dictaphone acknowledges that it isnot relying on the Buyer’s independent conclusion as it relates to any filingobligations of Dictaphone under Israeli Laws. 

 

47

----

 

(b)           Inconnection with each Party’s obligations under Section 6.4(a), each Partyagrees to (i) cooperate and collaborate with the other Party in preparingand filing any submission to be made to any governmental authority and inresponding to any comments, requests for information or inquires therefrom, (ii) notifypromptly the other Party of any comments, requests or inquiries made by agovernmental authority, (iii) provide copies of all written submissions toand communications with or from any governmental authority to the other Partyand (iv) permit the other Party and its advisors to participate indiscussions, and attend meetings, with any governmental authority.

 

(c)           Onor after the Closing Date, the Parties shall, on request, cooperate with oneanother by furnishing any additional information, executing and delivering anyadditional documents and instruments, including contract assignments, and doingany and all such other things as may be reasonably required by the Parties ortheir counsel to consummate or otherwise implement the transactionscontemplated by this Agreement.  Inconnection with the Assumed Liabilities and the Retained Liabilities, each ofthe Parties shall, and shall cause their Affiliates and employees to, aid,cooperate with and assist the other Party in its defense thereof by, amongother things, providing such other Party with full access to pertinent recordsat such times as such other Party may reasonably request.  

 

6.5           Covenant Not to Compete.  

 

(a)           Forthe period beginning on the Closing Date and ending on the fifth (5th)anniversary thereof (the “Non-Compete Period”), neither Dictaphone noran Affiliate of Dictaphone shall engage, directly or indirectly, in anybusiness or activity which competes directly or indirectly with the Business (“Competitive Activities”); provided,however, that this covenant shall not be deemed to have been breached asa result of the ownership by Dictaphone or an Affiliate of Dictaphone of: (i) lessthan an aggregate of 5% of any class of stock of a Person engaged, directly orindirectly, in Competitive Activities; or (ii) a Person whichengages, directly or indirectly, in Competitive Activities if such CompetitiveActivities account for less than Five Million Dollars ($5,000,000) or less than5% of such Person’s consolidated annual revenues (or, if the CompetitiveActivities of a Person described in this clause (a) account for 5% ormore, but in any event no more than 20%, of such Person’s consolidated annualrevenues and such Person is acquired after the date hereof, within one (1) yearfollowing the consummation of such acquisition by Dictaphone or one or more ofits Affiliates, Competitive Activities account for less than 5% of such Person’sconsolidated annual revenues).

 

(b)           Withoutlimiting the remedies otherwise available, the Parties agree that damages atlaw would be an insufficient remedy in the event of breach of this Section 6.5and that the injured party should be entitled to injunctive relief or otherequitable remedies in the event of any such breach.

 

(c)           Ifany of the provisions of this Section 6.5 are held to be unenforceable inany jurisdiction, then, as to such jurisdiction, such provision shall beineffective to the extent of its unenforceability in such jurisdiction, withoutaffecting the remaining provisions of this Section 6.5 in suchjurisdiction or affecting in any other jurisdiction the validity orenforceability of such provision or of this Section 6.5.

 

48

----

 

(d)           Notwithstandingany provision of this Agreement to the contrary, neither this Section 6.5nor Section 5.7 will apply to a Dictaphone Successor’s businesses,operations or activities (i) existing as of the date such Person becomes aDictaphone Successor, (ii) acquired after the date such Person becomes aDictaphone Successor or (iii) developed or expanded any time after suchPerson becomes a Dictaphone Successor to the extent that such developments orexpansions are not derived from the businesses, operations or activities ofDictaphone and its Affiliates as of the time such Person becomes a DictaphoneSuccessor; provided, however, that, in the case of each ofclauses (i), (ii) and (iii) above, such Dictaphone Successor does notuse the assets or exercise any of the rights licensed under Section 2.1 ofthe Manufacturing Agreement, Section 2 of the Technology License Agreementor Section 2.8 of the Services Agreement in competition with the Businessas currently conducted or as currently proposed to be conducted byDictaphone.  The foregoing proviso shallbe in addition to and not in limitation of the restrictions on use of thoseassets and rights licensed to Dictaphone under the Manufacturing Agreement,Technology License Agreement and the Services Agreement.  At the Buyer’s request, a senior executiveofficer of each of Dictaphone and a Dictaphone Successor, if any, shall certifyin writing to the Buyer that Dictaphone and the Dictaphone Successor, asapplicable, are in compliance with the terms and provisions of this Section 6.5;provided, however, that neither Dictaphone nor a DictaphoneSuccessor are required to provide to the Buyer such certification more oftenthan once within any nine (9) month period.  

 

6.6           Notice of Developments.  Dictaphone may elect at any time prior to theClosing to notify the Buyer of any development or other information occurringafter the date hereof in the Ordinary Course which renders any representation,warranty or statement contained in this Agreement or any Disclosure Schedule orAnnex inaccurate or incomplete at any time prior to the Closing, including anysuch development or information which first becomes known to Dictaphone afterthe date hereof.  The written noticepursuant to this Section 6.6 shall be deemed to have amended theDisclosure Schedules or Annexes, to have qualified the representations andwarranties contained in this Agreement, and to have cured any misrepresentationor breach of warranty that otherwise might have existed hereunder by reason ofthe development or information.   

 

6.7           Deliveryof Audited Financial Statements, Closing Date Balance Sheet andInterim 2005 Financial Statements.  

 

(a)           Notless than five (5) Business Days prior to the Closing Date, Dictaphone, atits own expense, shall have prepared and delivered to the Buyer (i) theAudited Financial Statements, which Audited Financial Statements shall conformto the representations and warranties with respect thereto set forth in Section 3.4(b) and(ii) the Auditor’s Report thereon. After the Closing Date, Dictaphone shall, upon request, cooperate withthe Buyer in obtaining, at any time or from time to time (with respect to nomore than six (6) separate filings with the United States Securities andExchange Commission) until December 31, 2006, from the independent auditorthat prepared the Audited Report a letter from such independent auditorconsenting to the use of the Auditor’s Report in future filings by the Buyerwith the U.S. Securities and Exchange Commission and Israeli SecuritiesAuthority (the “Auditor’s Consent”). The Buyer shall be responsible for all fees and disbursements billed bythe auditor for its services in providing any Auditor’s Consent.   

 

49

----

 

(b)           Dictaphoneshall deliver the Estimated Closing Date Balance Sheet and Closing Date BalanceSheet as specified in Section 2.5(b).

 

(c)           Withinsixty (60) calendar days of the Closing Date, Dictaphone, at its own expense,shall have prepare and deliver to the Buyer unaudited financial statementsrelating to the Business, prepared in accordance with U.S. GAAP and theapplicable requirements of Rule 3-05 of Regulation S-X, consisting of theadjusted balance sheet of the Business as of the end of the fiscal quarterending immediately prior to the Closing Date and the related adjusted statementof operations and statement of cash flows for each of the three-month periodsthen ended (the “Interim 2005 Financial Statements”).  

 

(d)           TheInterim 2005 Financial Statements (a) will be derived from the books andrecords of the Business and (b) will fairly present, in all materialrespects, the financial position and results of operations of the Business atthe dates and for the periods indicated in accordance with U.S. GAAP and theapplicable requirements of Rule 3-05 of Regulation S-X, except asdescribed in Disclosure Schedule Section 3.4(a).  The balance sheets included in the Interim2005 Financial Statements will not include any material assets or liabilitiesnot intended to constitute a part of the Business or the Purchased Assets aftergiving effect to the transactions contemplated hereby.  The statements of profit and loss included inthe Interim 2005 Financial Statements will not reflect the operations of anyPerson or business not intended to constitute a part of the Business aftergiving effect to the transactions contemplated hereby.

 

6.8           Commencementof Transition Planning and Services; Execution and Delivery of TransitionServices Agreement.  From and afterthe execution of this Agreement and through the Closing Date, Dictaphone shall,on request, cooperate with the Buyer to plan and establish the framework forprompt and effective transition at the Effective Time of management informationsystems and other information, documentation and control systems relating tothe Business in a manner consistent with Buyer’s effective operation of theBusiness, effective use by Buyer of all Purchased Assets and the objectives ofthe Transition Services/Shared Services Agreements.  The parties are simultaneously herewithexecuting and delivering to each other a copy of the form of TransitionServices Agreement attached hereto as part of Exhibit D, with theintent and agreement that the provisions of the Transition Services Agreementshall be implemented from and after the date of this Agreement, except to theextent specified in the Transition Services Agreement as being effective onlyupon the Closing Date. Each Party shall bear its own expenses in connectionwith any transition planning services under this Section 6.8.  

 

6.9           Renegotiationof Certain Contracts; Assignment of Certain Rights.  From and after the execution of thisAgreement and through the Closing Date, Dictaphone and the Buyer shall usecommercially reasonable efforts to obtain consent to assignment of each of theContracts or other commercial understandings listed on Annex 6.9(a) andto amend each of such Contracts or other commercial understandings on the termsdescribed therein or otherwise mutually agreed by the Parties.  Neither Party is required to incur anymaterial expenses in connection with assigning or amending any of suchContracts pursuant to this Section 6.9. The Parties acknowledge that aconsent to assignment of each of the Contracts listed on Annex 6.9(b) hasbeen obtained, in each case in a form acceptable to each Party and,accordingly, that any condition to Closing in respect thereof has beensatisfied**.******  

 

50

----

 

6.10         CertainPatents.  Withoutlimiting Buyer’s rights and remedies under Section 6.5, Dictaphone agreesthat for the period beginning on the Closing Date and ending on the third (3rd)anniversary thereof, Dictaphone shall not, and shall not permit any Affiliateor successor in interest, to grant to Voice Print International, Inc.,Mercom Systems, Inc., ASC Incorporated, E-Talk, Witness Systems, Inc.,Verint Systems, Inc. or their respective known Affiliates a license or anyother rights, anywhere in the world, to make, have made, use or sell productsin competition with the Business embodying any invention described in andclaimed in the patents or patent applications listed on **Annex6.10** or any patent foreign or domestic claimingpriority therefrom.   

 

6.11         OmittedIP.  Without limiting Buyer’s rightsand remedies under Section 6.5:  

 

(a)           Inorder to address the possibility that Dictaphone may retain rights toIntellectual Property actually used in or covering the Business as of theClosing Date, which rights are not being transferred, assigned or licensed tothe Buyer pursuant to this Agreement (the “Omitted IP”), Dictaphonehereby grants to the Buyer, effective from and after, and conditional upon theconsummation of, the Closing, a license to all Omitted IP solely for use in theoperation of the Business as presently conducted and as currently proposed tobe conducted by Dictaphone absent the transactions contemplated by thisAgreement (“Business Use”), such license being a perpetual, worldwide,irrevocable, royalty-free license; provided, however, that,subject to the remainder of this Section 6.11(a), the foregoing licenseshall be exclusive solely for Business Use, even as to Dictaphone, during theperiod commencing on the Closing Date and ending on the fifth (5th)anniversary of the Closing Date, and non-exclusive thereafter (the “OmittedIP License”).  Notwithstanding theforegoing, neither Dictaphone nor any Dictaphone Affiliate or their respectivesuccessors shall be in breach or violation of the exclusivity granted by thepreceding sentence, and shall have no liability, as a result of any act oromission committed prior to Dictaphone’s (or any successor’s) receipt of noticefrom the Buyer or Dictaphone’s (or any successor’s) otherwise gaining actualknowledge that Intellectual Property retained by Dictaphone is Omitted IP.  

 

(b)           Dictaphonefurther agrees that Dictaphone, its Affiliates or any successor in interest (i) shallnot file a claim, lawsuit or other action against the Buyer or any Affiliate ofthe Buyer alleging that the Buyer or an Affiliate of the Buyer, in exercisingthe rights expressly granted by the Omitted IP License, is infringing orotherwise violating any rights in any Omitted IP and (ii) effective as ofthe Closing Date, unconditionally release Buyer and its Affiliates from any andall claims of infringement arising from any such Omitted IP for acts in theconduct of the Business that occurred prior to the granting of a license underthis Section, including any and all claims which are known or unknown, absoluteor contingent, direct or indirect, in contract, tort or otherwise.  

 

(c)           Thelicense contemplated by this Section 6.11 is intended to be, and shall atall times be construed by the parties as being, within the scope of theprovisions of Section 365(n) of the U.S. Bankruptcy Code. 

 

(d)           Anydispute arising under this Section 6.11 shall be resolved in accordancewith the procedures established by Section 11.9 of this Agreement.

 

51

----

 

6.12         AccountsReceivable Collections Assistance.  Commencing from the date hereof, Dictaphoneshall promptly forward to the Buyer copies of any communications or otherinformation received by Dictaphone in respect of any Accounts Receivable orAccounts Payable related to the Business. Any amounts received by Dictaphone in respect of any Accounts Receivablerelated to the Business shall be held in trust for the Buyer.  No later than thirty (30) calendar daysfollowing the end of each calendar month in which Dictaphone has receivedamounts in respect of Accounts Receivable related to the Business, Dictaphoneshall provide to the Buyer a schedule setting forth such amounts (the “Section 6.12Schedule”) and remit such amounts to the Buyer.  Dictaphone shall, as promptly as practicable,forward to the Buyer any telephone calls, orders, notices, requests, inquiriesand other communications relating to the Business that Dictaphone may receivefollowing the Closing.  Dictaphone shallprovide the Buyer with reasonable access to (i) all the underlyingdocumentation and records used by Dictaphone and its auditors in preparing the Section 6.12Schedule and all other records of the Sellers reasonably related to thepreparation of the Section 6.12 Schedule, (ii) the employees of theSellers who assisted in preparation of the Section 6.12 Schedule and (iii) thework papers of Dictaphone’s accountants or auditor related to their review ofthe Section 6.12 Schedule.  

 

6.13         AccountsPayable and Accrued Expenses.  Buyerand Dictaphone will establish mutually acceptable procedures for the review andverification of accounts payable and accrued expenses presented to Buyer byDictaphone for payment by Buyer as bona fide accounts payable and accruedexpenses of the Business, including review of whether and to what extentallocation to the Business of third-party invoices addressed to Dictaphone isappropriate, which procedures established mutually by the Parties shall be setforth on Annex 6.13. In the absence of such agreed-upon procedures,Dictaphone acknowledges that Buyer shall be required to discharge when dueaccounts payable and accrued expenses only to the extent evidenced by an openinvoice or other appropriate documentation either reasonably satisfactory to Buyeror consistent with generally accepted auditing standards in the UnitedStates.  For the avoidance of doubt, theParties acknowledge that any such agreed-upon procedures or any payment byBuyer shall by itself not bedeterminative as to the appropriate carrying value of the Assumed Liabilitieson the Closing Date Balance Sheet, which value shall be determined inaccordance with the provisions of Section 2.5(b). 

 

6.14         InsuranceCoverage.  Dictaphone (a) represents and warrants that it has maintained sinceDecember 1, 2003 and will maintain through the Closing Date occurrencebased product liability insurance in the amount of not less than $5 million withrespect to products of the Business sold by Dictaphone prior to the ClosingDate, and (b) agrees to maintain aclaims made errors and omissions tail policy for a period of thirty six (36)months after the Closing Date in the amount of $5 million with respect to services of the Business provided byDictaphone prior to the Closing Date; provided, however, that thepremiums, fees and expenses incurred by Dictaphone in connection withthis Section 6.14 with respect to the tail policy insurance coveringservices of the Business will be paid fifty percent (50%) by the Buyer, on theone hand, and fifty percent (50%) by Dictaphone, on the other hand.  In addition to the Buyer’s obligations underthe last sentence of Section 2.4, the Buyer agrees to use commerciallyreasonable efforts to cooperate with Dictaphone to minimize the amount of anylosses for which a claim may be made under the insurance coverage obtained andmaintained under this Section 6.14, including providing replacementproducts manufactured by EMS at cost and other products

 

52

----

 

and servicesat the lesser of (y) fifty percent (50%) of list price or (z) prices no lessfavorable than those generally made available to most-favored customers of theBusiness at that time.   

 

6.15         BulkSales Laws.  The Buyerand Dictaphone agree, on behalf of themselves and their respective Affiliates,to waive compliance with the requirements of any bulk sales or transfer laws orsimilar laws of any jurisdiction which may be applicable to the transactionscontemplated by this Agreement and the Subsidiary Asset Purchase Agreements.    

 

ARTICLE 7

**CONDITIONSPRECEDENT TO OBLIGATIONS OF THE BUYER**

 

Theobligation of the Buyer to proceed with the Closing shall be subject to thesatisfaction, on or prior to the Closing Date, of each of the followingconditions precedent, any of which may be waived in whole or in part by theBuyer:

 

7.1           Accuracyof Representationsand Warranties and Performance of Obligations.  All representations and warranties made byDictaphone in this Agreement shall be true and correct in all materialrespects, except for those representations and warranties that are qualified asto materiality which shall be true and correct in all respects, on and as ofthe Closing Date with the same effect as if such representations and warrantieshad been made on and as of the Closing Date, except to the extent that any suchrepresentation or warranty by its terms relates to an earlier date and exceptto the extent of any change permitted by the terms of this Agreement (excludingthe delivery of a notice by Dictaphone pursuant to Section 6.6) orconsented to by the Buyer.  Dictaphoneshall have performed or complied in all material respects with all covenants,agreements and conditions contained in this Agreement on its part required tobe performed or complied with at or prior to the Closing.  Dictaphone shall have delivered to the Buyerat the Closing a certificate of a senior executive officer of Dictaphonecertifying that the conditions stated in this Section 7.1 have beenfulfilled.  

 

7.2           Consentsand Approvals.  All material filings required to be made byDictaphone or the Buyer with any government or governmental authority inconnection with the transactions contemplated in this Agreement shall have beenmade and all necessary authorizations, consents or approvals required from anygovernment or governmental authority shall have been obtained and shall be infull force and effect, other than those set forth on Disclosure Schedule Sections3.1 and 4.1.  

 

7.3           NoContrary Judgment.  Onthe Closing Date, there shall exist no valid judicial or regulatory order ordirective which prohibits the consummation of the transactions contemplated bythis Agreement.

 

7.4           NoMaterial Adverse Effect. From the date of this Agreement to the Closing Date, there shall nothave been any event, condition, change, development or effect that has had, orwould, or is reasonably expected to, constitute a Material Adverse Effect.  

 

7.5           MinimumNumber of Offers Accepted. Buyer and any Buyer Affiliate shall have received, in the aggregate,acceptances of employment by not less than one hundred thirteen (113) U.S.Employees as of the Effective Time, subject to the provisions of Section 5.1(c) withrespect to the satisfaction of this condition. 

 

53

----

 

7.6           Deliveries.  Dictaphone shall have made or tendered, orcaused to be made or tendered, delivery to the Buyer or a Buyer Affiliate, asappropriate, of the following documents:

 

(a)           acounterpart signature page to each Related Agreement (other than the TransitionServices Agreement), duly executed by each Seller party thereto, as applicable;

 

(b)           billsof sale or other applicable documents of transfer necessary to effect the saleand transfer of the Tangible Business Assets, the Inventory and any otherPurchased Assets that are tangible property as required hereby, duly executedby each Seller party thereto, as applicable;

 

(c)           acounterpart signature page to any assignment agreement, assumptionagreement and other applicable document of transfer and assumption necessary toeffect the sale and transfer of the Business Intellectual Property, theAssigned Contracts, the Accounts Receivable, the Records and any otherPurchased Assets as required hereby, duly executed by each Seller partythereto, as applicable; provided, however, that in connectionwith the assignment and transfer of the Assigned Contracts, each Seller, Buyerand Buyer Affiliate, as applicable, shall, subject to Section 2.10,execute a single assignment and assumption agreement as to all of the AssignedContracts other than those listed on Annex 6.9(b) and any otherAssigned Contracts mutually agreed to;

 

(d)           UCC-3termination statements and releases and consents of all lenders to the Sellerswho hold an Encumbrance with respect to any of the Purchased Assets;

 

(e)           copies,certified by the Secretary or Assistant Secretary of Dictaphone, of (i) resolutionsduly adopted by the board of directors of Dictaphone approving this Agreement,the Related Agreements and the consummation of the transactions contemplatedthereby, (ii) Dictaphone’s charter and (iii) Dictaphone’sbylaws;   

 

(f)            acertificate of a senior executive officer of Dictaphone pursuant to Section 7.1;

 

(g)           theAudited Financial Statements and Auditor’s Report thereon; 

 

(h)           theEstimated Closing Date Balance Sheet;

 

(i)            tothe extent required by Section 6.7, the Interim 2005 Financial Statements;

 

(j)            acounterpart signature page to the Termination Agreement, duly executed byDictaphone; 

 

(k)           evidence,reasonably satisfactory to Buyer, of receipt by OSS of the OSS Payment (Buyeracknowledging that this condition may be alternatively satisfied by anappropriate attorney or other escrow arrangement with respect to the OSSPayment and the Purchase Price reasonably satisfactory to both Buyer andDictaphone); and 

 

54

----

 

(l)            suchother patent and trademark assignments, assignments of licenses and othercustomary documents, instruments or certificates as shall be reasonablyrequested by the Buyer and as shall be consistent with the terms of thisAgreement.

 

ARTICLE 8

**CONDITIONSPRECEDENT TO OBLIGATIONS OF DICTAPHONE**

 

Theobligation of Dictaphone to proceed with the Closing shall be subject to thesatisfaction, on or prior to the Closing Date, of each of the followingconditions precedent, any of which may be waived in whole or in part byDictaphone:

 

8.1           Accuracy of Representations andWarranties and Performance of Obligations.  All representations and warranties made bythe Buyer in this Agreement shall be true and correct in all material respects,except for those representations and warranties that are qualified as tomateriality which shall be true and correct in all respects, on and as of theClosing Date with the same effect as if such representations and warranties hadbeen made on and as of the Closing Date, except to the extent that any suchrepresentation or warranty by its terms relates to an earlier date and exceptto the extent of any change permitted by the terms of this Agreement or consentedto by Dictaphone.  The Buyer shall haveperformed or complied in all material respects with all covenants, agreementsand conditions contained in this Agreement on its part required to be performedor complied with at or prior to the Closing. The Buyer shall have delivered to Dictaphone at the Closing acertificate of a senior executive officer of the Buyer certifying that theconditions stated in this Section 8.1 have been fulfilled.

 

8.2           Consentsand Approvals.  Allmaterial filings required to be made by Dictaphone or the Buyer with anygovernment or governmental authority in connection with the transactionscontemplated in this Agreement shall have been made and all necessaryauthorizations, consents or approvals required from any government or governmentalauthority shall have been obtained and shall be in full force and effect, otherthan those set forth in Disclosure Schedule Sections 3.1 and 4.1.   

 

8.3           No ContraryJudgment.  On the ClosingDate, there shall exist no valid judicial or regulatory order or directivewhich prohibits the consummation of the transactions contemplated by thisAgreement.

 

8.4           Deliveries.  The Buyer shall have made or tendered, orcaused to be made or tendered, delivery to Dictaphone of the Purchase Price inaccordance with Section 2.5 and the following documents:

 

(a)           acounterpart signature page to each Related Agreement (other than theTransition Services Agreement), duly executed by the Buyer and each BuyerAffiliate party thereto, as applicable;

 

(b)           acounterpart signature page to any assignment agreement, assumptionagreement and other applicable document of transfer and assumption to effectthe sale and transfer of the Purchased Assets and assumption of AssumedLiabilities as required hereby, duly executed by the Buyer and each BuyerAffiliate party thereto, as applicable; provided, however, thatin connection with the assignment and transfer of the Assigned

 

55

----

 

Contracts,each Seller, Buyer and Buyer Affiliate, as applicable, shall, subject to Section 2.10,execute a single assignment and assumption agreement as to all of the AssignedContracts other than those listed on Annex 6.9(b) and any otherAssigned Contracts mutually agreed to;

 

(c)           copies,certified by the Secretary or Assistant Secretary of the Buyer, of (i) resolutionsduly adopted by the board of directors of the Buyer approving this Agreement,the Related Agreements and the consummation of the transactions contemplatedthereby, (ii) the Buyer’s charter and (iii) the Buyer’s bylaws; 

 

(d)           acertificate of a senior executive officer of the Buyer pursuant to Section 8.1;

 

(e)           anon-foreign person affidavit as required by Code Section 1445, dulyexecuted by the Buyer; 

 

(f)            acounterpart signature page to the Termination Agreement, duly executed bythe Buyer and any of its Affiliates party thereto; and

 

(g)           suchother customary documents, instruments or certificates as shall be reasonablyrequested by Dictaphone and as shall be consistent with the terms of this Agreement.

 

ARTICLE 9

**INDEMNIFICATION**

 

9.1           Indemnification by Dictaphone.  Subject to the limitations set forth in this Article 9,Dictaphone shall indemnify the Buyer, its Affiliates and its and theirrespective directors, officers, employees, stockholders, members, partners,agents, attorneys, representatives, successors and permitted assigns, for andhold them harmless against any and all Losses arising from:

 

(a)           any breach or violationof the covenants made in this Agreement or any Related Agreement by a Seller;

 

(b)           any breach of any ofthe representations and warranties made in Article 3 or in any of theRelated Agreements by Dictaphone or a Selling Subsidiary; or

 

(c)           theRetained Liabilities (other than any Liabilities or Losses arising inconnection with EU Employees or Swiss Employees which are specificallyaddressed in Annex 5.6(a)).

 

9.2           Indemnification by the Buyer.  Subject to the limitations set forth in this Article 9,the Buyer shall indemnify Dictaphone, its Affiliates and its and their respectivedirectors, officers, employees, stockholders, members, partners, agents,attorneys, representatives, successors and permitted assigns, for and hold themharmless against any and all Losses arising from:

 

56

----

 

(a)           anybreach or violation of the covenants made in this Agreement or any RelatedAgreement by the Buyer or a Buyer Affiliate;

 

(b)           anybreach of any of the representations or warranties made in Article 4 or inany of the Related Agreements by the Buyer or a Buyer Affiliate; or

 

(c)           theAssumed Liabilities, except to the extent that the Buyer is entitled to beindemnified in respect thereof pursuant to Section 9.1.

 

9.3           Notice and Payment of Losses.  If a Person obtains knowledge of potential oractual Loss which could reasonably be expected to give or has given rise to aclaim under Section 9.1 or 9.2, such Person shall or shall cause the Partyentitled to indemnification with whom such Person is Affiliated or otherwiserelated (the “Injured Party”) to promptly notify the Party liable forsuch indemnification (the “Indemnifying Party”) in writing of such Loss(a “Notice of Claim”); provided, however, that failure ofan Injured Party timely to give a Notice of Claim to the Indemnifying Partyshall not release the Indemnifying Party from its indemnity obligations setforth in this Article 9 except to the extent that such failure adverselyaffects the ability of the Indemnifying Party to defend such Loss or increasesthe amount of indemnification which the Indemnifying Party is obligated to payin respect of such Loss hereunder (in which event the amount of indemnificationwhich the Injured Party shall be entitled to receive shall be reduced to anamount which the Injured Party would have been entitled to receive had suchNotice of Claim been timely given).  TheInjured Party shall use commercially reasonable efforts to mitigate anycontinuing Losses (including use of commercially reasonable efforts to obtainall insurance proceeds and indemnity payments available to the InjuredParty).  The amount of any Loss payablehereunder shall be reduced to reflect any amounts (including insuranceproceeds) recovered by the Buyer or its Affiliates from third parties aftergiving of a Notice of Claim and, if Dictaphone makes an indemnification paymenthereunder for a Loss before the Buyer or its Affiliates recover any suchamounts, then the Buyer shall, or shall cause its Affiliates to, reimburseDictaphone for the amount of any such recovery. If the Injured Party settles or compromises any third-party claim priorto giving a Notice of Claim to the Indemnifying Party in respect of the Lossrelating to such third-party claim, the Indemnifying Party shall be releasedfrom its indemnity obligation in respect of such Loss.  A Notice of Claim shall specify in reasonabledetail, to the extent known by the Injured Party, the nature and, to the extentreasonably calculable, estimated amount of any Loss giving rise to a claim forindemnification.  Dictaphone agrees that,notwithstanding Section 9.9 or any review, challenge or adjustment of theEstimated Closing Date Balance Sheet pursuant to Section 2.5(b), in theevent a Notice of Claim by an Injured Party alleges a Loss by reason of abreach of representation or warranty by Dictaphone arising out of (a) adeficiency (in excess of any reserve in respect thereof or in respect of theline item on the Closing Date Balance Sheet related thereto) in the aggregatenet book value of any category included on the Closing Date Balance Sheet(including Tangible Business Assets, Inventory or Accounts Receivable), (b) adeficiency (in excess of any reserve in respect thereof) in the aggregatedollar amount of the Product Backlog set forth in Section 3.25, withoutduplication, (c) a deficiency (in excess of any reserve in respectthereof) in the aggregate dollar amount of revenues of the Business set forthon Disclosure Schedule Section 3.4(a), or (d) AssumedLiabilities which should have been included on the Closing Date Balance Sheetin accordance with GAAP in excess of those included on the Closing Date BalanceSheet, then the Buyer shall be deemed to have suffered, and may claim, anamount of Loss equal to (w) the

 

57

----

 

aggregate dollar amountof the deficiency in any category described in clause (a) above, (x) $0.75for each dollar of any deficiency in the aggregate dollar amount of the ProductBacklog described in clause (b) above, without duplication, (y) $0.55 foreach dollar of any deficiency in the aggregate dollar amount of the revenuesdescribed in clause (c) above, and (z) $1.00 for each dollar of AssumedLiabilities that are actually paid which should have been included on theClosing Date Balance Sheet in accordance with GAAP in excess of those set forthon the Closing Date Balance Sheet, as the case may be, without regard to orlimitation as a result of, in any case, any positive Net Adjusted WorkingCapital Level as of the Closing Date. The Indemnifying Party shall satisfy its obligations under Section 9.1or 9.2, as the case may be, in respect of a Loss within sixty (60) days afterits receipt of a Notice of Claim; provided, however, that, for solong as the Indemnifying Party is disputing its indemnity obligation ordefending a third-party claim in respect of such Loss in good faith pursuant toSection 9.4, its obligations to satisfy its indemnity obligations to theInjured Party with respect thereto shall be suspended until a finalunappealable judgment of a court of competent jurisdiction is given in relationto the claim for indemnification or the third-party claim, as the case may be,relating to such Loss.  The IndemnifyingParty shall have thirty (30) Business Days (or such shorter period of timewithin which the Injured Party may be required to respond to any Proceeding)after receipt of a Notice of Claim to notify the Injured Party (a) whetheror not it disputes its indemnity obligation to the Injured Party with respectto such Notice of Claim and (b) whether it elects to defend a third-partyclaim in respect of the Loss described in such Notice of Claim pursuant to Section 9.4.

 

9.4           Defense of Third-Party Claims.  With respect to any third-party claim setforth in a Notice of Claim (a “Third-Party Claim”), the IndemnifyingParty shall be obligated to assume the investigation and defense of suchThird-Party Claim in good faith and at its own expense and the Injured Partymay participate (but not control) in the defense of such Third-Party Claim andemploy separate counsel of its choosing. The Injured Party shall participate in any such defense at its expenseunless the Indemnifying Party and the Injured Party are both named parties tothe proceedings and the Injured Party shall have reasonably concluded thatrepresentation of both parties by the same counsel would be inappropriate basedon a written opinion of counsel due to actual or potential material differinginterests between them.  So long as theIndemnifying Party is defending any such Third-Party Claim in accordance withthis Section 9.4, the Injured Party shall not settle or compromise suchThird-Party Claim without the consent of the Indemnifying Party.  If such Third-Party Claim is settled by theInjured Party without the Indemnifying Party’s consent, the Injured Party shallbe deemed to have waived all rights to indemnification and all other remedieswith respect to such Third-Party Claim, hereunder or otherwise.  The Indemnifying Party may settle orcompromise such Third-Party Claim without the consent of the Injured Party,unless there will not be a complete release of the Injured Party in connectiontherewith, in which case the Indemnifying Party may not settle or compromisesuch Third-Party Claim without the consent of the Injured Party, which consentshall not be unreasonably withheld.  TheInjured Party shall make available to the Indemnifying Party or itsrepresentatives all records and other materials reasonably required for use ininvestigating and defending any Third-Party Claim.  Subject to Sections 6.2 and 6.4, the InjuredParty shall cooperate fully with the Indemnifying Party in the investigationand defense of all Third-Party Claims. If the Indemnifying Party elects not to defend any Third-Party Claim,the Injured Party shall have no obligation to do so, but may investigate,defend, settle or compromise such Third-Party Claim at the sole risk andexpense of the Indemnifying Party.  TheIndemnifying Party will not, however, be responsible for any Losses if and tothe extent that they

 

58

----

 

arise from action takenor omitted to be taken by the Injured Party in bad faith, fraudulently,negligently or in breach of this Agreement by the Injured Party.

 

9.5           Survival of Representations and Warranties.  All of the representations and warrantiesmade by any Party in Articles 3 and 4 shall survive for a period of eighteen(18) months following the Closing Date (and thereafter to the extent that aNotice of Claim is made prior to the expiration of such period with respect toa breach of any such representation or warranty occurring prior to suchexpiration, but only with respect to the Loss and the breach set out in suchNotice of Claim); provided, however, that the representations andwarranties contained in (a) Sections 3.1, 3.2, 3.3, 4.1 and 4.2 shallsurvive the Closing Date without any time limit, (b) Section 3.18shall survive the Closing Date for a period of twenty-four (24) monthsfollowing the Closing Date and (c) Section 3.6 shall survive withrespect to any Tax described therein until the expiration of the statute oflimitations (before giving effect to any extension or waiver in respectthereof) relating to such Tax.  NoInjured Party shall be entitled to indemnification for breach of anyrepresentation and warranty set forth in Articles 3 and 4 unless a Notice ofClaim in respect of such breach has been given to the Indemnifying Party withinthe period of survival of such representation and warranty as set forth herein.

 

9.6           Limitation on Indemnification.  

 

(a)           Theprovisions for indemnity under Sections 9.1(b) and 9.2(b), as the case maybe, shall be effective only when the aggregate amount of all Losses for whichindemnification is sought from either Dictaphone or the Buyer, respectively,under such Sections exceeds Two Hundred Fifty Thousand U.S. Dollars(US$250,000) (the “Indemnity Threshold”), in which case the InjuredParty shall be entitled to indemnification in respect of the Injured Party’sLosses only in excess thereof; provided, further, that any individual Loss forwhich indemnification is sought pursuant to Sections 9.1(a) or 9.2(b), asapplicable, which is less than Ten Thousand U.S. Dollars (US$10,000) shall notbe included in calculating whether and the extent to which the IndemnityThreshold has been reached or exceeded (other than Losses attributable toindividual breaches of the representations and warranties set forth in Section 3.10(a),3.10(b) or 3.15 , which individual breaches of any one such Section maybe aggregated with other breaches (arising out of events or circumstances ofthe same type or class) of the same such Section).  

 

(b)           Theindemnification obligations of Dictaphone pursuant to Sections 9.1(a) and9.1(b) shall be limited to Losses which, in the aggregate, do not exceedFour Million Five Hundred Thousand U.S. Dollars ($4,500,000) (the “DictaphoneMaximum Indemnity Amount”).  In noevent shall Dictaphone be liable for indemnification of Losses under suchSections in excess of the Dictaphone Maximum Indemnity Amount.  The Dictaphone Maximum Indemnity Amount shallbe reduced by the amount of Indemnification Escrowed Funds delivered to theBuyer pursuant to Section 2.7 and the Escrow Agreement, but shall not bereduced by any adjustment to the Purchase Price pursuant to Section 2.5(b).  Notwithstanding the foregoing, (A) Lossesbased upon (y) a breach of representation or warranty made pursuant to Sections3.1, 3.2, 3.3 and 3.6 or (z) a breach of any covenant in this Agreement (otherthan a covenant made pursuant to Sections 6.1 or 6.8) shall not be limited tothe Dictaphone Maximum Indemnity Amount and (B) the Dictaphone MaximumIndemnity Amount shall include an

 

59

----

 

additionalOne Million U.S. Dollars ($1,000,000) for, but solely for, Losses based upon abreach of any representation, warranty or covenant made by a Seller in theManufacturing Agreement.   

 

(c)           Theindemnification obligations of the Buyer pursuant to Sections 9.2(a) and9.2(b) shall be limited to Losses which, in the aggregate, do not exceedFour Million Five Hundred Thousand U.S. Dollars ($4,500,000) (the “BuyerMaximum Indemnity Amount”) and in no event shall the Buyer be liable forindemnification of Losses under such Sections in excess of the Buyer MaximumIndemnity Amount.  Notwithstanding theforegoing, Losses based upon (y) a breach of representation or warranty madepursuant to Sections 4.1 and 4.2 or (z) a breach of any covenant in thisAgreement shall not be limited to the Buyer Maximum Indemnity Amount.

 

(d)           Notwithstandinganything in this Agreement to the contrary, no Liability (other than RetainedLiabilities), Contract or other matter shall constitute a breach of anyrepresentation or warranty of Dictaphone or entitle the Buyer toindemnification hereunder (i) if the Liability, Contract or other matteris specifically identified in the Disclosure Schedule, (ii) if theLiability, Contract or other matter is specifically identified in an amendmentto the Disclosure Schedule identified as such and delivered to the Buyer andBuyer’s counsel at least one (1) Business Day prior to the Closing, or (iii) ifDictaphone otherwise cures such breach.

 

9.7           Characterization of Indemnity Payments.  Any indemnification payments made pursuant tothis Agreement shall be considered, to the extent permissible under applicableLaw, as adjustments to the Purchase Price for all Tax purposes.

 

9.8           Exclusive Remedy.  The indemnification provisions set forth inthis Article 9 shall provide the sole and exclusive remedy for breachesof, or inaccuracies in, any covenant, agreement, representation or warranty setforth in this Agreement or any Related Agreement or any other agreementancillary hereto executed pursuant to this Agreement and each Party on behalfof itself and its Affiliates hereby waives all statutory, common law and otherclaims with respect thereto, other than claims for indemnification pursuant tothis Article 9.  Notwithstanding theforegoing, each Party and its Affiliates shall be entitled to such equitableremedies to which such Party or its Affiliates may otherwise be entitled,including the ability to apply to any court of competent jurisdiction forspecific performance or injunctive relief.

 

9.9           OtherLimitations. Notwithstanding anything to the contrary contained herein, no Party orits Affiliates shall be liable to or otherwise responsible to the other Partyor its Affiliates or any Injured Party for consequential, incidental, punitiveor special damages or for diminution in value or lost profits that arise out orrelate to this Agreement or any Related Agreement or any other agreementancillary hereto executed pursuant to this Agreement or the performance orbreach hereof or thereof or any liability retained or assumed hereunder orthereunder.  

 

9.10         No Duplicative Adjustments. Notwithstanding anything to the contrary contained in this Agreement, tothe extent that an adjustment has been made to the Purchase Price or any otherpayments hereunder for any matter hereunder, such matter shall, to the extentof such adjustment or other payment, not constitute a breach of any term orprovision of this Agreement.  

 

60

----

 

9.11         Annex5.6(a) Representationsand Warranties.  The representationsand warranties set forth in clauses 12 through 20 of Annex 5.6(a) shallbe treated as if they were representations and warranties of Dictaphone made inArticle 3 for the purposes of this Agreement, including this Article 9.  

 

ARTICLE 10

**TERMINATION; SURVIVAL OF AGREEMENT**

 

10.1         Termination.  Notwithstanding anything contained herein tothe contrary, this Agreement may be terminated:

 

(a)           atthe Closing or at any time prior thereto, by mutual written consent ofDictaphone and the Buyer;

 

(b)           byDictaphone or the Buyer, as the case may be, if the other Party shall havebreached any material provision of this Agreement and shall not have cured suchbreach within thirty (30) days of receiving notice of such breach from thenon-breaching Party; and

 

(c)           atany time after the six month anniversary of the date of this Agreement (the “TerminationDate”) and prior to the Closing, by Dictaphone or the Buyer, as the casemay be, if (i) the Closing shall not have been consummated on or beforethe Termination Date and (ii) the failure to consummate the Closing on or beforethe Termination Date did not result from the failure by the Party seeking toexercise its right to terminate this Agreement to perform, satisfy or complywith any agreement, covenant or condition contained in this Agreement requiredto be performed, satisfied or complied with prior to the Closing by such Party.

 

10.2         Survivalof Agreement.  If this Agreement isterminated pursuant to Section 10.1, this Agreement, except for theprovisions of Sections 6.3(a), 6.3(c) and this Section 10.2 and Article 11,shall become null and void and have no further force or effect and neither theParties nor any of their respective shareholders, directors, officers,employees, agents, representatives, consultants, subsidiaries or Affiliatesshall have any liability in respect of such termination other than (i) asset forth in this Section 10.2 or (ii) any Liability of the Buyer orDictaphone, as the case may be, for breaches of this Agreement occurring priorto such termination.

 

ARTICLE 11

**MISCELLANEOUSPROVISIONS**

 

11.1         Expenses.  Except as otherwise provided in thisAgreement and regardless of whether the transactions contemplated by thisAgreement are consummated, each Party agrees to pay all expenses, fees andcosts (including, without limitation, legal, accounting and consultingexpenses) incurred by it in connection with the transactions contemplatedhereby.

 

11.2         Notice.  All notices, requests, demands and othercommunications required or permitted under this Agreement shall be given ormade in writing and shall be deemed to have been duly given and made (i) inthe case of personal delivery or delivery by

 

61

----

 

facsimile oremail, on the date of such delivery, (ii) in the case of delivery by anationally-recognized overnight courier, on the next Business Day followingdispatch and (iii) in the case of mailing, by certified mail, returnreceipt requested, postage prepaid, on the third Business Day following suchmailing, in each case addressed at the mailing or email address or facsimilenumber shown in this Section 11.2 for, or such other address as may bedesignated in writing hereafter by such, Party:

 
| If to the Buyer or any Buyer Affiliate:                                                                                                                                                                                 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                    |
| Nice Systems Inc.  301 Route 17, 10th Floor  Rutherford, New Jersey 07070  Telephone: 201-964-2600  Fax: 201-964-2610  Attention: David Z. Ottensoser, Esq.                                                        |
|                                                                                                                                                                                                                    |
| With copies to:                                                                                                                                                                                                         |
|                                                                                                                                                                                                                    |
| Brown Raysman Millstein Felder & Steiner LLP  900 Third Avenue  New York, New York 10022  Telephone: 212-895-2310  Fax: 212-895-2900  Email: dscherzer@brownraysman.com  Attention: Dov H. Scherzer, Esq. |
|                                                                                                                                                                                                                    |
| And:                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                    |
| Telephone: 212-895-2240  Fax: 212-895-2900  Email: dwarburg@brownraysman.com  Attention: David M. Warburg, Esq.                                                                                                    |
|                                                                                                                                                                                                                    |
| If to Dictaphone or any Selling Subsidiary:                                                                                                                                                                             |
|                                                                                                                                                                                                                    |
| Dictaphone Corporation  3191 Broadbridge Avenue  Stratford, Connecticut 06614  Telephone: 203-381-4555  Fax: 203-683-3279  Email: scott.bloom@dictaphone.com  Attention: General Counsel                                |

 

62

----

 
| With copies to:                                                                                                                                                                                                     |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                |
| Kelley Drye & Warren LLP  Two Stamford Plaza  281 Tresser Boulevard  Stamford, Connecticut 06901  Telephone: 203-351-8032  Fax: 203-327-2669  Email: mrbarker@kelleydrye.com  Attention: M. Ridgway Barker |

 

11.3         Entire Agreement.  This Agreement, the letter agreement, datedas of the date hereof, regarding certain costs, between the Buyer andDictaphone, and the letter agreement referenced in Section 5.1(c) embodythe entire agreement and understanding of the Parties with respect to thesubject matter hereof and supersede all prior and contemporaneous agreementsand understandings relative to such subject matter.

 

11.4         Severability.  Except as otherwise provided in Section 6.5(c),if any provision hereof shall be held invalid or unenforceable by any court ofcompetent jurisdiction or shall become invalid or unenforceable as a result offuture legislative action, such holding or action shall be strictly construedand shall not affect the validity or effect of any other provision hereof, aslong as the remaining provisions, taken together, are sufficient to carry out theoverall intentions of the Parties as evidenced hereby.

 

11.5         Assignment; Binding Agreement.  This Agreement and various rights andobligations arising hereunder shall inure to the benefit of and be binding uponthe Parties and their successors and permitted assigns.  Neither this Agreement nor any of the rightsor obligations hereunder shall be transferred, delegated or assigned by eitherof the Parties without the prior written consent of the other Party (which consentshall not be unreasonably withheld), except that (a) prior to or afterClosing, Buyer shall have the right to transfer and assign its rights (anddelegate its obligations and liabilities) hereunder to any of Buyer’sAffiliates and (b) commencing ninety (90) days after Closing, Dictaphoneshall have the right to transfer and assign its rights (and delegate itsobligations and liabilities) hereunder (i) to any Person who is theacquiror in a sale or other disposition of a majority of Dictaphone’sbusinesses or assets, (ii) as security for any financing of Dictaphone orits Affiliates or of an acquiror of a majority of Dictaphone’s businesses orassets, and (iii) to any of Dictaphone’s Affiliates.  No such assignment, transfer or delegationshall relieve the Buyer or Dictaphone, as applicable, of any of theirrespective liabilities or obligations hereunder.  Notwithstanding the foregoing, no assignmentor transfer shall be made of such rights unless the assignee also expresslyassumes all obligations and liabilities of the assigning Party under thisAgreement and the Related Agreements (other than the Manufacturing Agreementand any Related Agreement that has expired or been terminated and the TrademarkLicense Agreement to the extent that it has otherwise been assigned), provided,however, that the Technology License Agreement (or the appropriate partsthereof) may be separately assigned or transferred to no more than two Personsas part of a sale or other disposition of a majority of the businesses orassets of Integrated Voice Systems or Healthcare Solutions Group and, for theavoidance of doubt, a Dictaphone Successor

 

63

----

 

shallassume the obligations under Sections 5.7 and 6.5 as a DictaphoneSuccessor.  Any assignment in violationof the foregoing shall be null and void.  

 

11.6         Counterparts.  This Agreement may be executed simultaneouslyin multiple counterparts, and in separate counterparts, each of which shall bedeemed an original, but all of which taken together shall constitute one andthe same instrument.

 

11.7         Headings;Interpretation.  The Article andSection headings contained in this Agreement are inserted for convenienceonly and shall not affect in any way the meaning or interpretation of thisAgreement.  Each reference in this Agreementto an Article, Section, Disclosure Schedule, Annex or Exhibit, unless otherwiseindicated, shall mean an Article or a Section of this Agreement or aDisclosure Schedule, Annex or Exhibit attached to this Agreement,respectively.  References herein to “days”,unless otherwise indicated, shall mean consecutive calendar days.  All Parties have participated substantiallyin the negotiation and drafting of this Agreement and no ambiguity hereinshould be construed against the draftsman. 

 

11.8         Governing Law.  This Agreement shall be governed by, andconstrued in accordance with, the law of the State of New York applicable tocontracts to be carried out wholly within such State.

 

11.9         Dispute Resolution.  

 

(a)           Exceptas otherwise provided in this Section 11.9, the Parties will attempt ingood faith to resolve any controversy or claim between them arising out of orrelating to this Agreement, including any dispute relating to the negotiation,formation, execution or delivery of this Agreement (a “Dispute”), promptlyby negotiations.  

 

(b)           Noticeof any Dispute must be given in writing and delivered to the other Party andmay request the other Party to meet at a mutually agreeable time andplace.  Each Party to the Dispute mustdesignate an executive and require him or her to meet at least once within thefirst fifteen (15) days after the delivery of the written notice and attempt toresolve the Dispute.

 

(c)           Ifthe matter has not been resolved within fifteen (15) days of delivery of thewritten notice described in this Section 11.9, the Dispute shall besettled by arbitration in accordance within the commercial arbitration rules (the“AAA Rules”) of the American Arbitration Association (“AAA”).  The arbitration proceeding, including therendering of an award, shall take place in New York County, New York, and shallbe administered by the nearest AAA office.

 

(d)           Thearbitral tribunal shall be appointed within thirty (30) days of the notice ofthe Dispute and shall consist of three (3) arbitrators, one of whom shallbe appointed by the Buyer, one by Dictaphone, and the third, jointly, by boththe Buyer and Dictaphone; provided, however, if the Buyer andDictaphone do not select the third arbitrator within such thirty-day period,such arbitrator shall be chosen by the AAA as soon as practicable followingnotice to the AAA by either of the Parties of their inability to choose thethird arbitrator.

 

64

----

 

(e)           Notwithstandinganything contained in the AAA Rules to the contrary: (i) each Partyshall be allowed to conduct discovery through written requests for information,document requests, requests for stipulations of fact, and depositions; (ii) thenature and extent of such discovery shall be determined by the arbitration panel,taking into account the needs of the Parties and the desirability of makingdiscovery expeditious and cost-effective; (iii) the arbitration panel mayissue orders to protect the confidentiality of information to be disclosed indiscovery; and (iv) the arbitration panel’s discovery rulings may beenforced in any court of competent jurisdiction.  All hearings shall be conducted on anexpedited schedule, and all proceedings shall be confidential.  Either Party may at its expense make astenographic record thereof.

 

(f)            Theaward of the arbitral tribunal shall be final, except as otherwise provided bythe laws of the State of New York and the federal laws of the United States tothe extent applicable.  Judgment uponsuch award may be entered by the prevailing Party in any court havingjurisdiction.

 

(g)           Theaward of the arbitral tribunal may be alternatively or cumulatively formonetary damages, an order requiring the performance of non-mandatoryobligations or any other appropriate order or remedy, including injunction andspecific performance.  The arbitraltribunal may issue interim awards and order any provisional measures whichshould be taken to preserve the respective rights of either Party.  Notwithstanding anything contained in this Section 11.9or the AAA Rules to the contrary, the arbitrators shall not make any awardin breach of or inconsistent with Article 9 and Section 2.5.

 

(h)           Thecost of the arbitration proceeding, including reasonable attorney’s fees forall Parties, if there are any, shall be paid by the non-prevailing Party asdetermined by the arbitral tribunal.

 

(i)            Notwithstandingany other provision in this Agreement, any Party may seek and obtain damagesand injunctive and other equitable relief from a court of competentjurisdiction without resorting to negotiations or arbitration for any disputerelated to Section 6.3 or 6.5.

 

(j)            Theprovisions of this Section 11.9 shall not be applicable to disputes whichare specifically designated as being subject to the dispute resolutionprovisions of Section 2.5(b)(iv).

 

11.10       DisclosureSchedule Generally. The information furnished in the Disclosure Schedule is arranged insections corresponding to the Sections of this Agreement, and the disclosuresin any section of the Disclosure Schedule shall qualify (i) thecorresponding Section of this Agreement and (ii) other Sections ofthis Agreement to the extent (notwithstanding the absence of a specificcross-reference), that it is clear from a reasonable reading of the Disclosure Schedule andsuch other Sections of this Agreement that such disclosure is also applicableto such other Sections of this Agreement. The Disclosure Schedule and the information and disclosurescontained in the Disclosure Schedule is intended only to qualify and limitthe representations and warranties of Dictaphone contained in this Agreementand shall not be deemed to expand in any way the scope of any suchrepresentation or warranties.

 

65

----

 

Theinclusion of any information in the Disclosure Schedule shall not bedeemed to be an admission or acknowledgment that such information is materialor outside the Ordinary Course or as to any violation of any Law orContract.  

 

11.11       No Third-Party Beneficiaries or Other Rights.  Nothing herein shall grant to or create inany Person not a party hereto (other than an Injured Party and other than anAffiliate where expressly provided), including an employee of Dictaphone or theBuyer, any right to any benefits hereunder, and no such Person shall beentitled to sue either Party with respect thereto.  The representations and warranties containedin this Agreement are made for purposes of this Agreement only and shall not beconstrued to confer any additional rights on the Parties under applicablestate, federal or foreign securities laws.

 

11.12       Amendments;Waivers.  Any of the provisions ofthis Agreement may be amended, modified or waived only by a written instrumentsigned by an authorized executive officer of each of the Parties.  The failure of any Party to enforce at anytime any of the provisions of this Agreement shall in no way be construed to bea waiver of any such provision, nor in any way to affect the validity of thisAgreement or any part hereof or the right of such Party thereafter to enforceeach and every such provision.  No waiverof any breach of, or noncompliance with, this Agreement shall be held to be awaiver of any other or subsequent breach or noncompliance.  

 

66

----

 

THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BEENFORCED BY THE PARTIES.

 

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to beexecuted as of the date first above written.

 
|   | NICE SYSTEMS INC.      |
|--------|------------------------|
|   |                   |
|   |                   |
|   | By:                    |   |
|   | Name:                  |   |
|   | Title:                 |   |
|   |                   |   |
|   |                   |
|   |                   |
|   | DICTAPHONE CORPORATION |
|   |                   |
|   |                   |
|   | By:                    |   |
|   | Name:                  |   |
|   | Title:                 |   |
|        |                        |  |  |  |  |

 

i

----

 

**TABLE OF EXHIBITS,ANNEXES AND SCHEDULES**

 
| Exhibits       |   |                                                        |
|----------------|--------|-------------------------------------------------------------|
|           |   |                                                        |
| Exhibit A |   | Form of Manufacturing Agreement                        |
| Exhibit B |   | Form of Technology License Agreement                   |
| Exhibit C |   | Form of Trademark License Agreement                    |
| Exhibit D |   | Form of Transition Services/Shared Services Agreements |
| Exhibit E |   | Form of Escrow Agreement                               |
| Exhibit F |   | Form of Subsidiary Asset Purchase Agreement            |
| Exhibit G |   | Amendment to OSS Agreement                                  |
| Exhibit H |   | Form of Termination Agreement                          |

 

Annexes

 
| Annex 1.5       |   | Types of Accrued Expenses                                    |
|-----------------|--------|--------------------------------------------------------------|
| Annex 1.38(i)   |   | EU Employees                                                 |
| Annex 1.38(ii)  |   | Swiss Employees                                              |
| Annex 1.38(iii) |   | Canadian Employees                                           |
| Annex 1.38(iv)  |   | Singapore Employees                                          |
| Annex 1.62(i)   |   | Dictaphone Knowledge Persons                                 |
| Annex 1.62(ii)  |   | Buyer Knowledge Persons                                      |
| Annex 1.91      |   | Retained Employees                                           |
| Annex 2.1(a)    |   | Tangible Business Assets                                     |
| Annex 2.1(b)    |   | Inventory                                                    |
| Annex 2.1(c)    |   | Business Intellectual Property                               |
| Annex 2.1(d)    |   | Assigned Contracts                                           |
| Annex 2.1(i)    |   | Retained Rights to Refunds and Set Offs                      |
| Annex 2.1(k)    |   | Other Assets                                                 |
| Annex 2.2       |   | Excluded Assets                                              |
| Annex 2.3(g)    |   | Letters of Credit                                            |
| Annex 2.4(c)    |   | Intracompany and Intercompany Payables                       |
| Annex 5.1(d)    |   | Key Employees                                                |
| Annex 5.6(a)    |   | Provisions Relating to EU Employees and Swiss Employees      |
| Annex 6.9(a)    |   | Renegotiation of Certain Contracts                           |
| Annex 6.9(b)    |   | Obtained Consents                                            |
| Annex 6.10      |   | Certain Patents                                              |
| Annex 6.13      |   | Procedures Relating to Accounts Payable and Accrued Expenses |

 

----

 

Disclosure Schedules

 
| Section 3.1(c)       |   | Dictaphone Consents                                                              |
|---------------------------|--------|----------------------------------------------------------------------------------|
| Section 3.3          |   | Possession of Assets                                                             |
| Section 3.4(a)       |   | Other Financial Information                                                      |
| Section 3.4(b)       |   | Exceptions to Audited Financial Statements                                       |
| Section 3.4(d)       |   | Warranties                                                                       |
| Section 3.5          |   | Absence of Certain Developments                                                  |
| Section 3.6          |   | Taxes                                                                            |
| Section 3.7(a)       |   | Insurance Policies                                                               |
| Section 3.7(b)       |   | Self-Insurance Arrangements                                                      |
| Section 3.8          |   | Litigation                                                                       |
| Section 3.9          |   | Product Liability Claims                                                         |
| Section 3.10(a)      |   | Inventory Defects                                                                |
| Section 3.10(b)      |   | Notes and Accounts Receivable Defects                                            |
| Section 3.11         |   | Condition of Personal Property                                                   |
| Section 3.13(a)      |   | Material Contracts                                                               |
| Section 3.13(b)      |   | Unenforceable Contracts                                                          |
| Section 3.14         |   | Licenses and Permits                                                             |
| Section 3.15         |   | Undisclosed Liabilities                                                          |
| Section 3.16         |   | Compliance with Laws                                                             |
| Section 3.17         |   | Environmental Matters                                                            |
| Section 3.18(b)      |   | Material Claims Against Validity or Ownership of Business  Intellectual Property |
| Section 3.18(c)      |   | Third Party  Infringement of Business Intellectual Property                      |
| Section 3.18(d)      |   | Third Party  Intellectual Property Agreements                                    |
| Section 3.18(e)      |   | Oral Agreements  Regarding Business Intellectual Property                        |
| Section 3.18(f)(i)   |   | Patent Due Dates                                                                 |
| Section 3.18(f)(ii)  |   | Patent  Application Due Dates                                                    |
| Section 3.18(f)(iii) |   | Design  Patent Due Dates                                                         |
| Section 3.18(f)(iv)  |   | Trademark  Registration and Application Due Dates                                |
| Section 3.18(g)      |   | Material  Actions Relating to Intellectual Property                              |
| Section 3.18(i)      |   | Infringed  Intellectual Property                                                 |
| Section 3.18(j)      |   | Infringement  of Third Party Rights                                              |
| Section 3.18(m)      |   | Trademark  Issues                                                                |
| Section 3.18(r)      |   | Source Code Licenses                                                             |
| Section 3.19         |   | Employee Matters                                                                 |
| Section 3.20         |   | Employee Benefit Plans                                                           |
| Section 3.24(a)      |   | Major Customers                                                                  |
| Section 3.24(c)      |   | Restrictive Agreements                                                           |
| Section 3.25         |   | Product Backlog                                                                  |
| Section 4.1          |   | Buyer Consents                                                                   |
| Section 6.4(a)       |   | Jurisdictions Where No Filing Required                                           |

 

2

----