Document:

EXHIBIT
10.88

 

 

$402,500,000

 

UTSTARCOM,
INC.

 

7/8%
Convertible Subordinated Notes Due 2008

 

REGISTRATION
RIGHTS AGREEMENT

 

	
  March 12,
  2003

  
	
  Banc of America Securities LLC

  
	
  9 West 57th Street, 40th Floor

  
	
  New York, New York 10019

  
	
  and

  
	
  Credit Suisse First Boston LLC

  
	
  Eleven Madison Avenue

  
	
  New York, New York 10010-3629

  
	
  and

  
	
  Merrill Lynch, Pierce, Fenner & Smith
  Incorporated

  
	
  North Tower

  
	
  World Financial Center

  
	
  New York, New York 10281-1201

  

 

Ladies and Gentlemen:

 

UTStarcom, Inc., a
Delaware corporation (the “Company”),
proposes to issue and sell to the Initial Purchasers (as defined herein), upon
the terms set forth in a purchase agreement dated March 7, 2003 (the “Purchase Agreement”), $402,500,000
aggregate principal amount of its 7/8% Convertible Subordinated Notes Due 2008
(the “Notes”).  The Notes will be issued pursuant to an
Indenture, dated as of March 12, 2003 (the “Indenture”), between the Company and U.S. Bank National
Association, as trustee (the “Trustee”).  The Notes will be convertible into shares of
Common Stock at the Conversion Price. 
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement, the Company agrees with the Initial Purchasers, for the benefit of
the beneficial owners (including the Initial Purchasers) from time to time of
the Notes and of the Underlying Common Stock (as defined herein) issued upon
conversion of the Notes (each of the foregoing, a “Holder” and, collectively, the “Holders”), as follows:

 

1.                                       Shelf Registration.

 

(a)                                  The
Company shall prepare and file with the Securities and Exchange Commission (the
“Commission”) not later than 120
days (such 120th day being a “Filing Deadline”)
after the first date on which the Initial Purchasers purchase the Notes
pursuant to the Purchase Agreement (the “Closing
Date”), a Shelf Registration Statement for an offering to be made on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act
of 1933, as amended (the “Securities Act”),
registering the resale from time to time by Holders thereof (who satisfy
certain conditions relating to the provision of information in connection with
the Shelf Registration Statement) of all of the Registrable Securities (defined
herein) (the “Shelf Registration Statement”).  The Shelf Registration Statement shall be filed
on Form S-3, or its successor, under the Securities Act permitting registration
of such Registrable Securities for resale by such Holders from time to time in
accordance with the methods of distribution elected by the Holders and set
forth in the Shelf Registration Statement. 
The Company shall use its reasonable efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act not
later than 210 days after the Closing Date (the “Effectiveness Deadline Date”); provided, however,
that the Company may, upon written notice to all Holders, postpone having the
Shelf Registration Statement declared effective for a reasonable period not to
exceed 90 days if the Company possesses material non-public information, the
disclosure of which would have a material adverse effect on the Company and its
subsidiaries taken as a whole.  The
Company shall also use its reasonable efforts to keep the Shelf

 

 

Registration Statement continuously effective under the Securities Act
in order to permit the prospectus included therein to be lawfully delivered by
the Holders of the Registrable Securities for a period of two years from the
last date on which the Initial Purchasers purchase Notes pursuant to the
Purchase Agreement or such shorter period that will terminate when all the
Registrable Securities covered by the Shelf Registration Statement
(i) have been sold pursuant thereto or (ii) are, with respect to such
securities held by non-affiliates, eligible to be sold to the public pursuant
to Rule 144(k) under the Securities Act (“Rule 144”), or any successor rule thereof (such period, the “Effectiveness Period”).  Subject to Section 2(b)(vi), the Company
shall be deemed not to have used its reasonable efforts to keep the Shelf
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Registrable Securities covered
thereby not being able to offer and sell such Registrable Securities during
that period, unless such action is (i) required by applicable law or (ii) taken
by the Company in good faith and contemplated by Section 2(b)(v) below, and the
Company thereafter complies with the requirements of Section 2(i).  At the time the Shelf Registration Statement
is declared effective, each Holder who has provided the Company with an
appropriately completed Notice and Questionnaire (as defined herein) on or
prior to the deadline for response set forth therein and who holds Registrable
Securities, shall be named as a selling securityholder in the Shelf
Registration Statement and the related prospectus in such a manner as to permit
such Holder to deliver such prospectus to purchasers of Registrable Securities
in accordance with applicable law.  None
of the Company’s securityholders (other than the Holders of Registrable
Securities) shall have the right to include any of the Company’s securities in
the Shelf Registration Statement.

 

(b)                                 The
Company may suspend the use of the prospectus for a period not to exceed 45
days in any 90-day period or an aggregate of 90 days in any 365-day period if
the Board of Directors of the Company, or the Chief Executive Officer or the
Chief Financial Officer of the Company, shall have determined in good faith
that because of valid business reasons (not including avoidance of the
Company’s obligations hereunder), including, without limitations, the
acquisition or divestiture of assets, pending corporate developments, public
filings with the Commission and similar events, it is in the interest of the
Company to suspend such use, and prior to suspending such use the Company
provides the Notice Holders with written notice of such suspension, which
notice need not specify the nature of the event giving rise to such suspension.

 

(c)                                  Notwithstanding
any other provisions of this Agreement to the contrary, the Company shall cause
the Shelf Registration Statement and the prospectus and any amendment or
supplement thereto, as of the effective date of the Shelf Registration
Statement, amendment or supplement, (i) to comply in all material respects with
the applicable requirements of the Securities Act and the rules and regulations
of the Commission and (ii) not to contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

 

(d)                                 As
used in this Agreement, the following terms shall have the following meanings:

 

“Applicable Conversion Price” as of any date
of determination means the Conversion Price in effect as of such date of
determination or, if no Notes are then outstanding, the Conversion Price that
would be in effect were Notes then outstanding.

 

“Business Day” means each Monday, Tuesday,
Wednesday, Thursday and Friday that is not a day on which banking institutions
in The City of New York are authorized or obligated by law or executive order
to close.

 

“Common Stock” means the shares of common
stock, $0.00125 par value per share, of the Company and any other shares of
common stock as may constitute “Common Stock” for purposes of the Indenture,
including the Underlying Common Stock.

 

“Conversion Price” has the meaning assigned
to such term in the Indenture.

 

“Exchange Act” means the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the SEC promulgated
thereunder.

 

“Effective Date” means the date the Shelf
Registration Statement is declared effective.

 

2

 

“Initial Purchasers” means Banc of America
Securities LLC, Credit Suisse First Boston LLC and Merrill Lynch, Pierce,
Fenner & Smith Incorporated.

 

“Notice and Questionnaire” means a Selling
Securityholder Notice and Questionnaire substantially in the form of Appendix
A hereto.

 

“Notice Holder” means any Holder that has
delivered a properly completed and signed Notice and Questionnaire to the
Company in accordance with this Agreement and holds Registrable Securities as
of such date.

 

“Registrable Securities” means the Notes, until
such Notes have been converted into or exchanged for the Underlying Common
Stock and, at all times subsequent to any such conversion or exchange, the
Underlying Common Stock and any securities into or for which such Underlying
Common Stock have been converted or exchanged, and any security issued with
respect thereto upon any stock dividend, split or similar event until, in the
case of any such security, the earliest of (i) its effective registration
under the Securities Act and resale in accordance with the Shelf Registration
Statement covering it, (ii) expiration of the holding period that would be
applicable thereto under Rule 144(k) under the Securities Act were it not
held by an Affiliate of the Company, or (iii) it has been transferred
pursuant to Rule 144.

 

“Underlying Common Stock” means the shares
of Common Stock into which the Notes are convertible or issued upon any such
conversion.

 

2.                                       Registration Procedures.  In connection with the Shelf Registration
Statement contemplated by Section 1 hereof, the following provisions shall
apply:

 

(a)                                  Not
less than 30 calendar days prior to the Effective Date, the Company shall mail
the Notice and Questionnaire to the Holders of Registrable Securities.  No Holder shall be entitled to be named as a
selling securityholder in the Shelf Registration Statement as of the Effective
Date, and no Holder shall be entitled to use the prospectus forming a part
thereof for offers and resales of Registrable Securities at any time, unless
such Holder has returned a completed and signed Notice and Questionnaire to the
Company by the deadline for response set forth therein; provided, however,
Holders of Registrable Securities shall have at least 28 calendar days from the
date on which the Notice and Questionnaire is first mailed to such Holders to
return a completed and signed Notice and Questionnaire to the Company.  Notwithstanding the foregoing, upon the
request of any Holder of Registrable Securities that did not return a Notice and
Questionnaire on a timely basis or did not receive a Notice and Questionnaire
because it was a subsequent transferee of Registrable Securities after the
Company mailed the Notice and Questionnaire, (x) the Company shall distribute a
Notice and Questionnaire to such Holders at the address set forth in the
request and (y) upon receipt of a properly completed Notice and Questionnaire
from such Holder, the Company shall use its reasonable efforts to name such
Holder as a selling securityholder in the Shelf Registration Statement by means
of a pre-effective amendment or, if permitted by the Commission, by means of a
prospectus supplement to the Shelf Registration Statement; provided, however,
that the Company shall have no obligation to pay Additional Interest to such
Holder for its failure to file a pre-effective amendment or prospectus
supplement and; provided, further, that the Company will have no
obligation to add a Holder to the Shelf Registration Statement if a
post-effective amendment would be necessary to name such Holder as a selling
securityholder.

 

(b)                                 The
Company shall (i) furnish to the Initial Purchasers, prior to the filing
of the Shelf Registration Statement, a copy of the Shelf Registration Statement
as proposed to be filed and each amendment thereto and, after the filing of any
prospectus supplement, if any, and upon the request of an Initial Purchaser, a
copy of such prospectus supplement.  The
Company shall use its reasonable efforts to take into account and reflect in
the Shelf Registration Statement, when so filed with the Commission, such
comments as the Initial Purchasers reasonably may propose; and
(ii) subject to the conditions set forth in Section 2(a) hereof include
the names of the Holders who propose to sell Registrable Securities pursuant to
the Shelf Registration Statement as selling securityholders.

 

3

 

(c)                                  The
Company shall give written notice to the Initial Purchasers and the Notice
Holders (which notice pursuant to clauses (ii) through (vi) hereof shall be
accompanied by an instruction to suspend the use of the prospectus until the
requisite changes have been made, if applicable):

 

(i)                                     when
the Shelf Registration Statement or any amendment thereto has been filed with
the Commission and when the Shelf Registration Statement or any post-effective
amendment thereto has become effective;

 

(ii)                                  of
any request by the Commission for amendments or supplements to the Shelf
Registration Statement or the prospectus included therein or for additional
information;

 

(iii)                               of the issuance by the
Commission of any stop order suspending the effectiveness of the Shelf
Registration Statement or the initiation of any proceedings for that purpose;

 

(iv)                              of
the receipt by the Company or its counsel of any notification with respect to
the suspension of the qualification of the Registrable Securities included in
the Shelf Registration Statement for sale in any jurisdiction or the initiation
of any proceeding for such purpose;

 

(v)                                 of
the happening of any event (but not as to the substance of any such event) that
requires the Company to make changes in the Shelf Registration Statement or the
prospectus in order that the Shelf Registration Statement or the prospectus
does not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein (in the case of the prospectus, in light of the circumstances under
which they were made) not misleading; and

 

(vi)                              of
the occurrence or existence of any pending corporate development with respect
to the Company that the Company believes may be material and that, in the
determination of the Company, makes it inadvisable and not in the best interest
of the Company to allow continued availability of the Shelf Registration
Statement and the related prospectus.

 

(d)                                 The
Company shall use its reasonable efforts to obtain the withdrawal at the
earliest possible time, of any order suspending the effectiveness of the Shelf
Registration Statement or the lifting of any suspension of the qualification
(or exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction in which they have been qualified for sale.

 

(e)                                  The
Company shall furnish to each Notice Holder, without charge, at least one copy
of the Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).

 

(f)                                    The
Company shall, during the Effectiveness Period, deliver to each Notice Holder,
without charge, as many copies of the prospectus (including each preliminary
prospectus) included in the Shelf Registration Statement and any amendment or
supplement thereto as such Notice Holder may reasonably request.  The Company consents, subject to the
provisions of this Agreement, to the use of the prospectus or any amendment or
supplement thereto by each Notice Holders in connection with the offering and
sale of the Registrable Securities covered by the prospectus, or any amendment
or supplement thereto, during the Effectiveness Period.

 

(g)                                 Prior
to any public offering of the Registrable Securities pursuant to any Shelf
Registration Statement, the Company shall register or qualify or cooperate with
the Notice Holders and their respective counsel in connection with the
registration or qualification of the Registrable Securities for offer and sale
under the securities or “blue sky” laws of such states of the United States as
any Notice Holder reasonably requests in writing and do any and all other acts
or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Registrable Securities covered by such Shelf Registration
Statement; provided, however, that the Company shall not be
required to (i) qualify generally to do business or as a dealer in
securities in any jurisdiction where it is not then so qualified or would not
otherwise be required to qualify but for this Section 2(g) or (ii) take
any action which would subject it to general service of process or to taxation
in any jurisdiction where it is not then so subject.

 

4

 

(h)                                 Unless
any Registrable Securities shall be in book-entry only form, the Company shall
cooperate with the Notice Holders to facilitate the timely preparation and
delivery of certificates representing the Registrable Securities to be sold
pursuant to any Shelf Registration Statement free of any restrictive legends
and in such permitted denominations and registered in such names as the Notice
Holders may request a reasonable period of time prior to sales of the
Registrable Securities pursuant to such Shelf Registration Statement.

 

(i)                                     Upon
the occurrence of any event contemplated by paragraphs (ii) through (v) of
Section 2(c) above during the period for which the Company is required to
maintain an effective Shelf Registration Statement, the Company shall, as
promptly as reasonably practicable, prepare and file a post-effective amendment
to the Shelf Registration Statement or a supplement to the related prospectus
and any other required document so that, as thereafter delivered to Holders or
purchasers of Registrable Securities, the prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading ; provided, however,
that the Company shall not be required to file such amendment, supplement or
document if the Board of Directors of the Company (or the Chief Executive
Officer or the Chief Financial Officer of the Company) has made a determination
pursuant to Section 1(b), for so long as the suspension pursuant to
Section 1(b) is continuing.  If the
Company notifies the Initial Purchasers and the Holders of Registrable
Securities in accordance with paragraphs (ii) through (v) of
Section 2(c) above to suspend the use of the prospectus until the
requisite changes to the prospectus have been made, then the Initial Purchasers
and the Holders of Registrable Securities shall suspend use of such prospectus
(such period during which the availability of the Shelf Registration Statement
and any related prospectus is suspended being a “Deferral Period”).  The
Company will use its reasonable efforts to ensure that the use of the
prospectus may be resumed as promptly as is reasonably practicable, except that
in the case of suspension of the availability of the Shelf Registration
Statement and related prospectus pursuant to Section 2(b)(vi) above, the
Company shall not be required to take such action until such time as it shall
no longer determine that continued availability of the Shelf Registration
Statement and the related prospectus is inadvisable and not in the best
interests of the Company.

 

(j)                                     Not
later than the effective date of the Shelf Registration Statement, the Company
will provide a CUSIP number for the Registrable Securities that are debt
securities and provide the applicable trustee with printed certificates for the
Notes in a form eligible for deposit with The Depository Trust Company.

 

(k)                                  The
Company will use its reasonable efforts to comply with all rules and
regulations of the Commission to the extent and so long as they are applicable
to the Shelf Registration Statement and will make generally available to its
securityholders (or otherwise provide in accordance with Section 11(a) of
the Securities Act) an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act, no later than 45 days after the end
of a 12-month period (or 90 days, if such period is a fiscal year) beginning
with the first month of the Company’s first fiscal quarter commencing after the
effective date of the Shelf Registration Statement, which statement shall cover
such 12-month period.

 

(l)                                     Not
later than the effective date of the Shelf Registration Statement, the Company
shall cause the Indenture to be qualified under the Trust Indenture Act of
1939, as amended (the “Trust Indenture Act”),
and to contain such changes, if any, as shall be necessary for such
qualification.  In the event that such
qualification would require the appointment of a new trustee under the
Indenture, the Company shall appoint a new trustee thereunder pursuant to the
applicable provisions of the Indenture.

 

(m)                               The
Company may require each Notice Holder to furnish to the Company such
information regarding the such Holder and the distribution of the Registrable
Securities as the Company may from time to time reasonably require for
inclusion in the Shelf Registration Statement, and the Company may exclude from
such registration the Registrable Securities of any Holder that unreasonably
fails to furnish such information within a reasonable time after receiving such
request.

 

(n)                                 The
Company shall use its reasonable efforts to cause the Underlying Common Stock
to be listed on any securities exchange or any automated quotation system on
which similar securities issued by the Company are then listed, to the extent
the Underlying Common Stock satisfies applicable listing requirements.

 

5

 

(o)                                 The
Company shall enter into such customary agreements (including, if requested, an
underwriting agreement in customary form) and take all such other actions, if
any, as any Holder shall reasonably request in order to facilitate the
disposition of the Registrable Securities pursuant to the Shelf Registration
Statement.

 

(p)                                 The
Company shall (i) make reasonably available for inspection by the Holders,
any underwriter participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other agent retained by
the Holders or any such underwriter, all relevant financial and other records,
pertinent corporate documents and properties of the Company and (ii) cause
the Company’s officers, directors, employees, accountants and auditors to
supply all relevant information reasonably requested by the Holders or any such
underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably necessary to
enable such persons, to conduct a reasonable investigation within the meaning
of Section 11 of the Securities Act; provided, however, that
the foregoing inspection and information gathering shall be coordinated on
behalf of the Initial Purchasers by you and on behalf of the other parties, by
one counsel designated by and on behalf of such other parties as described in
Section 3 hereof.

 

(q)                                 The
Company, if requested by any Holder of Securities covered by the Shelf
Registration Statement, shall cause (i) its counsel to deliver an opinion and
updates thereof relating to the Registrable Securities in customary form
addressed to such Holders and the managing underwriters, if any, thereof, and
dated, in the case of the initial opinion, the effective date of such Shelf
Registration Statement (it being agreed that the matters to be covered by such
opinion shall include, without limitation, the due incorporation and good
standing of the Company and its subsidiaries; the qualification of the Company
and its subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery of the relevant agreement of the type
referred to in Section 2(p) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of the Notes;
the absence of material legal or governmental proceedings involving the Company
and its subsidiaries; the absence of governmental approvals required to be
obtained in connection with the Shelf Registration Statement, the offering and
sale of the Registrable Securities, or any agreement of the type referred to in
Section 2(p) hereof; the compliance as to form of the Shelf Registration
Statement and any documents incorporated by reference therein and of the
Indenture with the requirements of the Securities Act and the Trust Indenture
Act, respectively; and, as of the date of the opinion and as of the effective
date of the Shelf Registration Statement or most recent post-effective
amendment thereto, as the case may be, the absence from the Shelf Registration
Statement and the prospectus included therein, as then amended or supplemented,
and from any documents incorporated by reference therein of an untrue statement
of a material fact or the omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading
(in the case of any such documents, in the light of the circumstances existing
at the time that such documents were filed with the Commission under the
Exchange Act of 1934, as amended (the “Exchange
Act”)); (ii) its officers to execute and deliver all customary
documents and certificates and updates thereof requested by any underwriters of
the Registrable Securities and (iii) its independent public accountants and the
independent public accountants with respect to any other entity for which
financial information is provided in the Shelf Registration Statement to provide
to the selling Holders of the applicable Registrable Securities and any
underwriter therefor a comfort letter in customary form and covering matters of
the type customarily covered in comfort letters in connection with primary
underwritten offerings, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing Standards No. 72.

 

(r)                                    In
the event that any broker-dealer registered under the Exchange Act shall
underwrite any Securities or participate as a member of an underwriting
syndicate of selling group or “assist in the distribution” (within the meaning
of the Conduct Rules (the “Rules”)
of the National Association of Securities Dealers, Inc. (“NASD”)) thereof, whether as a Holder of
such Securities or as an underwriter, a placement or sales agent or a broker or
dealer in respect thereof, or otherwise, the Company will assist such
broker-dealer in complying with the requirement of such Rules, including,
without limitation, by (i) if such Rules, including Rule 2720, shall so
require, engaging a “qualified independent underwriter” (as defined in Rule
2720) to participate in the preparation of the Shelf Registration Statement
relating to such Registrable Securities, to exercise usual standards of due
diligence in respect thereto and, if any portion of the offering contemplated
by such Registration Statement is an underwritten offering or is made through a
placement or sales agent, to recommend the yield of such Registrable
Securities, (ii) indemnifying any such qualified independent underwriter to the
extent of the indemnification of underwriters provided in Section 5 hereof and
(iii) providing such

 

6

 

information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules.

 

(s)                                  The
Company shall use its reasonable efforts to take all other steps necessary to
effect the registration of the Registrable Securities covered by a Registration
Statement contemplated hereby.

 

3.                                       Registration Expenses.

 

Except as
otherwise provided herein, the Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
and 2 hereof and shall bear or reimburse the Notice Holders for the reasonable
fees and disbursements of a single counsel selected by at least 25% in
principal amount of the Notes covered by the Shelf Registration Statement
(provided that Holders of Underlying Common Stock issued upon the conversion of
the Notes shall be deemed to be Holders of the aggregate principal amount of
Notes from which such Common Stock was converted) to act as counsel for the
Holders in connection therewith.  Each
Notice Holder shall pay all underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of such Notice Holder’s
Registrable Securities pursuant to the Shelf Registration Statement.

 

4.                                       Indemnification.

 

(a)                                  The
Company agrees to indemnify and hold harmless each Notice Holder and each
person, if any, who controls such Holder within the meaning of the Securities
Act or the Exchange Act (each Notice Holder and such controlling persons are
referred to collectively as the “Indemnified
Parties”) from and against any losses, claims, damages or
liabilities, joint or several, or any actions in respect thereof (including,
but not limited to, any losses, claims, damages, liabilities or actions
relating to purchases and sales of the Registrable Securities) to which each
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Shelf Registration Statement or
prospectus, including any document incorporated by reference therein, or in any
amendment or supplement thereto or in any preliminary prospectus relating to
the Shelf Registration Statement, or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse, as incurred, the Indemnified Parties for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action in respect thereof;
provided, however, that the Company shall not be liable in any
such case to the extent that such loss, claim, damage or liability arises out
of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in a Shelf Registration Statement or
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus relating to a Shelf Registration in reliance upon and in conformity
with written information pertaining to such Holder and furnished to the Company
by or on behalf of such Holder specifically for inclusion therein; provided,
further, however, that this indemnity agreement will be in
addition to any liability which the Company may otherwise have to such
Indemnified Party.  The Company shall
also indemnify any underwriters, their officers and directors and each person
who controls such underwriters within the meaning of the Securities Act or the
Exchange Act to the same extent as provided above with respect to the
indemnification of the Notice Holders if requested by such Holders.

 

(b)                                 Each
Notice Holder of Registrable Securities, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act from
and against any losses, claims, damages or liabilities or any actions in
respect thereof, to which the Company or any such controlling person may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as
such losses, claims, damages, liabilities or actions arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in a Shelf Registration Statement or prospectus or in any amendment
or supplement thereto or in any preliminary prospectus relating to the Shelf
Registration Statement, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary to make the
statements therein not misleading, but in each case only to the extent that the
untrue statement or omission or alleged untrue statement or omission was made
in reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company for any legal
or

 

7

 

other expenses reasonably incurred by the Company or any such
controlling person in connection with investigating or defending any loss,
claim, damage, liability or action in respect thereof.  This indemnity agreement will be in addition
to any liability which such Notice Holder may otherwise have to the Company or
any of its controlling persons.

 

(c)                                  Promptly
after receipt by an indemnified party under this Section 4 of notice of
the commencement of any action or proceeding (including a governmental
investigation), such indemnified party will, if a claim in respect thereof is
to be made against the indemnifying party under this Section 4, notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above.  In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party (who shall not, except with
the consent of the indemnified party, be counsel to the indemnifying party),
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof the indemnifying party will not be
liable to such indemnified party under this Section 4 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof.  Notwithstanding the indemnifying party’s
election to assume the defense of the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel) and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel (and local counsel) if (i) the use
of counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of the
institution of such action or (iv) the indemnifying party shall authorize
the indemnified party to employ separate counsel at the expense of the indemnifying
party.  No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action, and does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.

 

(d)                                 If
the indemnification provided for in this Section 4 is unavailable or
insufficient to hold harmless an indemnified party under subsections (a)
or (b) above, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of the losses, claims, damages
or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above in such proportion as is appropriate to
reflect the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof) as well as any other relevant equitable
considerations.  The relative fault of
the parties shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party on the one hand or such indemnified party, as the case
may be, on the other, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.  The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which
is the subject of this subsection (d). 
Notwithstanding any other provision of this Section 4(d), the
Holders of Registrable Securities shall not be required to contribute any
amount in excess of the amount by which the net proceeds received by such
Holders from the sale of the Registrable Securities pursuant to the Shelf
Registration Statement exceeds the amount of damages which such Holders of
Registrable Securities have otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.  For
purposes of this subsection (d), each person, if any, who controls such
indemnified party within the meaning of the Securities Act or the Exchange Act
shall have the same

 

8

 

rights to contribution as such indemnified party and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act shall have the same rights to contribution as the Company.

 

(e)                                  The
agreements contained in this Section 4 shall survive the sale of the
Registrable Securities pursuant to a Shelf Registration Statement and shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of any indemnified
party.

 

5.                                       Additional Interest Under Certain Circumstances.

 

(a)                                  Additional
interest (the “Additional Interest”)
with respect to the Registrable Securities shall be assessed as follows if any
of the following events occur (each such event in clauses (i) through
(iii) below being herein called a “Registration
Default”):

 

(i)                                     the
Shelf Registration Statement required by this Agreement is not filed with the
Commission on or prior to the Filing Deadline;

 

(ii)                                  the
Shelf Registration Statement required by this Agreement is not declared
effective by the Commission on or prior to the Effectiveness Deadline Date; or

 

(iii)                               any Shelf Registration
Statement required by this Agreement that has been declared effective by the
Commission thereafter ceases to be effective or useable (subject to the
Company’s right to suspend the use of the Shelf Registration Statement and the
prospectus as set forth in Section 1(b)) in connection with the resale of
the Registrable Securities and the Common Stock issuable upon the conversion of
the Notes in accordance with and during the periods specified herein and
(A) the Company does not cause the Shelf Registration Statement to become
effective within five (5) Business Days (which shall not be deemed to extend
the incurrence and accrual of any obligation to pay Additional Interest beyond
the time provided for in the last sentence of Section 1(b)) after it
ceases to be effective or useable by a post-effective amendment or additional
Shelf Registration Statement being filed and declared effective or a report
filed pursuant to the Exchange Act or (B) if applicable, the Company does
not terminate any Deferral Period within the time provided for in
Section 1(b).

 

Each of the
foregoing will constitute a Registration Default whatever the reason for any
such event and whether it is voluntary or involuntary or is beyond the control
of the Company or pursuant to operation of law or as a result of any action or
inaction by the Commission.

 

Additional
Interest shall accrue on the Registrable Securities over and above the interest
set forth in the title of the Registrable Securities from and including the
date on which any such Registration Default shall occur to but excluding, the
date on which all such Registration Defaults have been cured at a rate of 0.50%
of the principal amount per annum.

 

In the case of
Notes that have been converted into or exchanged for Underlying Common Stock,
Additional Interest shall accrue at the rate described above, applied to the
Applicable Conversion Price of such shares of Underlying Common Stock that are
Registrable Securities.  In the case of
a Registration Default described in clause (iii) above, the Company’s obligation
to pay Additional Interest extends only to Registrable Securities of Notice
Holders.  Any Additional Interest
accrued with respect to any Note or portion thereof converted into Underlying
Common Stock on a conversion date prior to the interest payment date with
respect to the Notes under the Indenture, shall, in any such event, be paid
instead to the Holder who submitted such Note or portion thereof for conversion
on the applicable conversion date, as the case may be, on such date.  Notwithstanding the foregoing, no Additional
Interest shall accrue as to any Registrable Security from and after the earlier
of (x) the date such security is no longer a Registrable Security and
(y) the expiration of the Effectiveness Period.  The rate of accrual of the Additional Interest with respect to
any period shall not exceed the rate provided for in this paragraph
notwithstanding the occurrence of multiple concurrent Registration
Defaults.  Following the cure of all
Registration Defaults requiring the payment by the Company of Additional
Interest to the Holders of Registrable Securities pursuant to this Section, the
accrual of Additional Interest will cease (without in any way limiting the
effect of any subsequent Registration Default requiring the payment of Additional
Interest by the Company).

 

9

 

The Trustee shall
be entitled, on behalf of Holders of Notes or Underlying Common Stock, to seek
any available remedy for the enforcement of this Agreement, including for the
payment of any Additional Interest.

 

All of the
Company’s obligations set forth in this Section 5 that are outstanding
with respect to any Registrable Security at the time such security ceases to be
a Registrable Security shall survive until such time as all such obligations
with respect to such security have been satisfied in full.

 

The parties hereto
agree that the Additional Interest provided for in this Section 5
constitutes a reasonable estimate of the damages that may be incurred by
Holders of Registrable Securities by reason of the failure of the Shelf
Registration Statement to be filed or declared effective or available for
effecting resales of Registrable Securities in accordance with the provisions
hereof, and that the Additional Interest shall be the exclusive remedy at law
or in equity or otherwise available to the Holders of Registrable Securities
for such Registration Default.

 

(b)                                 Any
amounts of Additional Interest due pursuant to Section 5(a) will be
payable in cash on the regular interest payment dates with respect to the
Registrable Securities.  The amount of
Additional Interest will be determined by multiplying the applicable Additional
Interest Rate by the principal amount of the Registrable Securities or the
Applicable Conversion Price of the Registrable Securities, as applicable, and
further multiplied by a fraction, the numerator of which is the number of days
such Additional Interest Rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months), and the
denominator of which is 360.  The
Registrable Securities entitled to payment of Additional Interest shall be
determined as of the Business Day immediately preceding the next regular
interest payment date with respect to the Registrable Securities.

 

6.                                       Rules 144 and 144A.  The Company shall use its reasonable efforts
to file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder, make publicly
available other information so long as necessary to permit sales of their
securities pursuant to Rules 144 and 144A.  The Company covenants that it will take such further action as
any Holder may reasonably request, all to the extent required from time to time
to enable such Holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by
Rules 144 and 144A (including the requirements of
Rule 144A(d)(4)).  The Company will
provide a copy of this Agreement to prospective purchasers of Notes identified
to the Company by the Initial Purchasers upon request.  Notwithstanding the foregoing, nothing in
this Section 6 shall be deemed to require the Company to register any of
its securities pursuant to the Exchange Act.

 

7.                                       Underwritten Registrations.  No person may participate in any
underwritten registration hereunder unless such person (i) agrees to sell
such person’s Registrable Securities on the basis reasonably provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.

 

If any of the
Registrable Securities covered by any Shelf Registration are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering (“Managing Underwriters”) will be selected by the Holders of a
majority in aggregate principal amount of such Registrable Securities to be
included in such offering (provided that Holders of Common Stock issued upon
conversion of the Notes shall not be deemed holders of Common Stock, but shall
be deemed to be holders of the aggregate principal amount of Notes from which
such Common Stock was converted), provided, however, that such
Managing Underwriters will be reasonably acceptable to the Company.

 

8.                                       Miscellaneous.

 

(a)                                  Remedies. 
Except as provided in Section 5, the Company acknowledges and agrees
that any failure by the Company to comply with its obligations under
Section 1 and 2 hereof may result in material irreparable injury to the
Initial Purchasers or the Holders for which there is no adequate remedy at law,
that it will not be possible to measure damages for such injuries precisely and
that, in the event of any such failure, the Initial Purchasers or any Holder
may obtain such relief as may be required to specifically enforce the Company’s
obligations under Sections 1 and

 

10

 

2 hereof.  The Company further
agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.

 

(b)                                 No Inconsistent Agreements.  The Company will not on or after the date of
this Agreement enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof.  The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders
of the Company’s securities under any agreement in effect on the date hereof.

 

(c)                                  Amendments and Waivers.  The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Registrable
Securities affected by such amendment, modification, supplement, waiver or
consents (provided that Holders of Common Stock issued upon conversion of Notes
shall not be deemed holders of Common Stock, but shall be deemed to be holders
of the aggregate principal amount of Notes from which such Common Stock was
converted).  Without the consent of the
Holder of each Registrable Security, however, no modification may change the
provisions relating to the payment of Additional Interest.

 

(d)                                 Notices. 
All notices and other communications provided for or permitted hereunder
shall be made in writing by hand delivery, first-class mail, facsimile
transmission, or air courier that guarantees overnight delivery:

 

(i)                                     if
to a Holder of the Registrable Securities, at the most current address given in
writing by such Holder to the Company.

 

(ii)                                  if
to the Initial Purchasers:

 

Banc of America Securities LLC

9 West 57th Street, 40th Floor

New York, New York 10019

Fax No.: (212) 847-5124

Attention: Eric Hambleton

 

 

Credit Suisse First Boston LLC

Eleven Madison Avenue

New York, NY 10010-3629

Fax No.:  (212) 325-8278

Attention:  Transactions Advisory Group

 

 

Merrill Lynch, Pierce, Fenner & Smith Incorporated

North Towers

World Financial Center

New York, New York 10281-1201

Fax No.: (212) 449-3207

Attention: Legal Department

 

 

with a copy to:

 

 

Davis Polk & Wardwell

1600 El Camino Real

Menlo Park, CA 94025

Attention:  Alan F. Denenberg, Esq.

 

11

 

(iii)                               if to the Company, at
its address as follows:

 

UTStarcom, Inc.

1275 Harbor Bay Parkway

Alameda, CA 94502

Fax No.: (510) 864-8802

Attention:  Michael J. Sophie, Vice
President of Finance and Chief Financial Officer

 

 

with a copy to:

 

 

Wilson Sonsini Goodrich & Rosati, Professional
Corporation

650 Page Mill Road

Palo Alto, CA 94304-1050

Attention:  Carmen Chang, Esq.

 

All such notices and communications shall be deemed to
have been duly given:  (i) at the time
delivered by hand, if personally delivered, (ii) three business days after
being deposited in the mail, (iii) postage prepaid, if mailed; when receipt is
acknowledged by recipient’s facsimile machine operator, if sent by facsimile transmission
and (iv) on the day delivered, if sent by overnight air courier guaranteeing
next day delivery.

 

(e)                                  Third-Party Beneficiaries.  The Holders shall be third-party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right
to enforce such agreements directly to the extent they may deem such
enforcement necessary or advisable to protect their rights or the rights of
Holders hereunder.  Any Notice Holder
shall be bound by the terms and provisions of this Agreement by reason of its
election with respect to the Registrable Securities to have its Registrable
Securities included in a Shelf Registration Statement.  All the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of and shall be enforceable
by the respective successors and assigns of the parties hereto and any Holder
from time to time of the Registrable Securities to the aforesaid extent.  In the event that any transferee of any
Holder of Registrable Securities shall acquire Registrable Securities, in any
manner, whether by gift, bequest, purchase, operation of law or otherwise, such
transferee shall, without any further writing or action of any kind, be entitled
to receive the benefits of and, if a Notice Holder, be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement to the aforesaid extent.

 

(f)                                    Successors and Assigns.  This Agreement shall be binding upon the
Company and its successors and assigns.

 

(g)                                 Counterparts.  This Agreement may be executed in any number of counterparts and
by the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.

 

(h)                                 Headings. 
The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.

 

(i)                                     Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

 

(j)                                     Severability.  If any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.

 

(k)                                  Securities Held by the Company.  Whenever the consent or approval of Holders
of a specified percentage of principal amount of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its
affiliates (other than subsequent Holders of Registrable Securities if such
subsequent Holders are deemed

 

12

 

to be affiliates solely by reason of their holdings of such Registrable
Securities) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.

 

[Remainder of page
intentionally left blank].

 

13

 

If the foregoing is in accordance with your
understanding of our agreement, please sign and return a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Initial Purchasers and the Company in accordance with its
terms.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  UTStarcom, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Michael J. Sophie

  
	
   

  	
   

  	
  Michael J. Sophie

  
	
   

  	
   

  	
  Vice President of Finance
  and Chief Financial

  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  The foregoing
  Registration

  Rights Agreement is hereby confirmed

  and accepted as of the date first

  above written.

  	
   

  
	
   

  	
   

  
	
  Banc
  Of America Securities LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Derek Dillon

  	
   

  	
   

  
	
   

  	
    Name: 

  	
  Derek Dillon

  	
   

  
	
   

  	
    Title: 

  	
  Managing Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Credit
  Suisse First Boston LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ John C. Hodge

  	
   

  	
   

  
	
   

  	
    Name: 

  	
  John C. Hodge

  	
   

  
	
   

  	
    Title: 

  	
  Managing Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Merrill
  Lynch, Pierce, Fenner & Smith Incorporated

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Gary Kirkham

  	
   

  	
   

  
	
   

  	
    Name: 

  	
  Gary Kirkham

  	
   

  
	
   

  	
    Title: 

  	
  Managing Director

  	
   

  
						

 

 

[Signature page to
Registration Rights Agreement]

 

14

 

ANNEX A

 

FORM OF SELLING
SECURITYHOLDER NOTICE AND QUESTIONNAIRE

 

The undersigned
beneficial holder of 7/8% Convertible Subordinated Notes due 2008 (the “Notes”)
of UTStarcom, Inc. (“UTStarcom”), convertible into shares of UTStarcom’s common
stock, par value $0.00125 (the “Common Stock” and together with the Notes, the
“Registrable Securities”), understands that UTStarcom has filed or intends to
file with the Securities and Exchange Commission (the “SEC”) a registration
statement on Form S-3 (the “Shelf Registration Statement”) for the
registration and resale under Rule 415 of the Securities Act of 1933, as
amended (the “Securities Act”), of the Registrable Securities in accordance
with the terms of the Registration Rights Agreement (the “Registration Rights
Agreement”) dated March 12, 2003 between UTStarcom and the initial purchasers
named therein.  The Registration Rights
Agreement is available from UTStarcom upon request at the address set forth
below.  All capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the
Registration Rights Agreement.

 

Each beneficial
owner of Registrable Securities is entitled to the benefits of the Registration
Rights Agreement.  In order to sell or
otherwise dispose of any Registrable Securities pursuant to the Shelf
Registration Statement, a beneficial owner of Registrable Securities generally
will be required to be named as a selling security holder in the related
prospectus, deliver a prospectus to purchasers of Registrable Securities and be
bound by those provisions of the Registration Rights Agreement applicable to
such beneficial owner (including certain indemnification provisions as
described below).  In order to have
Registrable Securities included in the Shelf Registration Statement (or a
supplement or amendment thereto), this Notice of Registration Statement and
Selling Securityholder Questionnaire (“Notice
and Questionnaire”) must be completed, executed and delivered to the
Company at the address set forth herein for receipt ON OR BEFORE [insert date
that is 28 days from the date of the Notice and Questionnaire].  Beneficial owners of Registrable Securities
who do not complete, execute and return this Notice and Questionnaire by such
date (i) will not be named as selling securityholders in the Shelf
Registration Statement and (ii) may not use the Prospectus forming a part
thereof for resales of Registrable Securities.

 

Notwithstanding
the foregoing, upon the request of any Holder of Registrable Securities that
did not return a Notice and Questionnaire on a timely basis or did not receive
a Notice and Questionnaire because it was a subsequent transferee of
Registrable Securities after the Company mailed the Notice and Questionnaire,
(x) the Company shall distribute a Notice and Questionnaire to such Holders at
the address set forth in the request and (y) upon receipt of a properly
completed Notice and Questionnaire from such Holder, the Company shall use its
reasonable efforts to name such Holder as a selling securityholder in the Shelf
Registration Statement by means of a pre-effective amendment or, if permitted
by the Commission, by means of a Prospectus supplement to the Shelf
Registration Statement; provided,
however, that the Company shall
have no obligation to pay Liquidated Damages to such Holder for its failure to
file a pre-effective amendment or Prospectus supplement and; provided, further,
that the Company will have no obligation to add a Holder to the Shelf
Registration Statement if a post-effective amendment would be necessary to name
such Holder as a selling securityholder.

 

Certain legal
consequences arise from being named as selling security holders in the Shelf
Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners of Registrable
Securities are advised to consult their own securities law counsel regarding
the consequences of being named or not being named as a selling security holder
in the Shelf Registration Statement and the related prospectus.

 

 

NOTICE

 

The undersigned
beneficial owner (the “Selling Securityholder”) of Registrable Securities
hereby gives notice to UTStarcom of its intention to sell or otherwise dispose
of Registrable Securities beneficially owned by it and listed below in
Item 3 (unless otherwise specified under Item 3) pursuant to the
Shelf Registration Statement.  The undersigned,
by signing and returning this Notice and Questionnaire, agrees to be bound by
the terms and conditions of

 

 

15

 

this Notice and Questionnaire and the Registration Rights Agreement as
if the undersigned Selling Securityholder were an original party thereto.

 

Upon
any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the
Company and the Trustee the Notice of Transfer (completed and signed) set forth
in Exhibit 1 to this Notice and Questionnaire.

 

The undersigned hereby
provides the following information to UTStarcom and represents and warrants
that such information is accurate and complete:

 

16

 

QUESTIONNAIRE

 

	
  1.

  	
  (a)

  	
  Full Legal Name of
  Selling Securityholder:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Full Legal Name of
  Registered Holder (if not the same as (a) above) through which Registrable
  Securities listed in (3) below are held:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Full Legal Name of DTC
  Participant (if applicable and if not the same as (b) above) through which
  Registrable Securities listed in (3) below are held:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Address for Notices to
  Selling Securityholder: 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fax:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Contact Person:

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Beneficial Ownership of
  Registrable Securities:

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Type and principal
  amount of Registrable Securities beneficially owned: 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  CUSIP No(s). of such
  Registrable Securities beneficially owned:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Beneficial Ownership of UTStarcom Securities Owned
  by the Selling Securityholder

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Except as set forth below in this
  item (4), the undersigned is not the beneficial or registered owner of any
  securities of UTStarcom other than the Registrable Securities listed above in
  Item (3).

  
	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Type and amount of
  other securities beneficially owned by the Selling Securityholder: 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
						

 

17

 

	
   

  	
  (b)

  	
  CUSIP No(s). of such
  Registrable Securities beneficially owned:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Relationship with UTStarcom

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Except as set forth below, neither
  the undersigned nor any of its affiliates, directors or principal equity
  holder (5% or more) has held any position or office or has had any other
  material relationship with UTStarcom (or its predecessors or affiliates)
  during the past three years.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  State any exceptions here:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Plan of Distribution

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Except as set forth below, the
  undersigned (including its donees or pledgees) intends to distribute the
  Registrable Securities listed above in Item (3) pursuant to the Shelf
  Registration Statement only as follows (if at all): Such Registrable
  Securities may be sold from time to time directly by the undersigned or
  alternatively through initial purchasers or broker-dealers or agents.  If the Registrable Securities are sold
  through initial purchasers or broker-dealers, the Selling Securityholder will
  be responsible for underwriting discounts or commissions or agent’s
  commissions.  Such Registrable Securities
  may be sold in one or more transactions at fixed prices, at prevailing market
  prices at the time of sale, at varying prices determined at the time of sale,
  or at negotiated prices.  Such sales
  may be effected in transactions (which may involve block transactions)
  (i) on any national securities exchange or quotation service on which
  the Registrable Securities may be listed or quoted at the time of sale,
  (ii) in the over-the-counter market, (iii) in transactions
  otherwise than on such exchanges or services or in the over-the-counter market
  or (iv) through the writing of options. 
  In connection with sales of the Registrable Securities or otherwise,
  the undersigned may enter into hedging transactions with broker-dealers,
  which may in turn engage in short sales of the Registrable Securities, short
  and deliver Registrable Securities to close out such short positions, or loan
  or pledge Registrable Securities to broker-dealers that in turn may sell such
  securities.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  State any exceptions here:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Note:  In no event may such method(s) of
  distribution take the form of an underwritten offering of the Registrable
  Securities without the prior agreement of UTStarcom.

  

 

The undersigned
acknowledges that it understands its obligation to comply with the provisions
of the Securities Exchange Act of 1934, as amended, and the rules thereunder
relating to stock manipulation, particularly Regulation M thereunder (or
any successor rules or regulations), in connection with any offering of
Registrable Securities pursuant to the Shelf Registration Statement.  The undersigned agrees that neither it nor
any person acting on its behalf will engage in any transaction in violation of
such provisions.

 

18

 

The Selling
Securityholder hereby acknowledges its obligations under the Registration
Rights Agreement to indemnify and hold harmless certain persons set forth
therein.

 

Pursuant to the
Registration Rights Agreement, UTStarcom has agreed under certain circumstances
to indemnify the Selling Securityholders against certain liabilities.

 

In the event that
the Selling Securityholder transfers all or any portion of the Registrable
Securities listed in Item (3) above after the date on which such information is
provided to the Company, the Selling Securityholder agrees to notify the
transferee(s) at the time of the transfer of its rights and obligations under
this Notice and Questionnaire and the Registration Rights Agreement.

 

In accordance with
the undersigned’s obligation under the Registration Rights Agreement to provide
such information as may be required by law for inclusion in the Shelf
Registration Statement, the undersigned agrees to promptly notify UTStarcom of
any inaccuracies or changes in the information provided herein that may occur
subsequent to the date hereof at any time while the Shelf Registration
Statement remains effective.  All
notices hereunder and pursuant to the Registration Rights Agreement shall be
made in writing at the address set forth below.

 

By signing this
Notice and Questionnaire, the undersigned consents to the disclosure of the
information contained herein in its answers to Items (1) through (6) above
and the inclusion of such information in the Shelf Registration Statement and
the related prospectus.  The undersigned
understands that such information will be relied upon by UTStarcom in
connection with the preparation or amendment of the Shelf Registration
Statement and the related prospectus.

 

IN WITNESS
WHEREOF, the undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by its duly
authorized agent.

 

	
   

  	
  Dated:

  	
   

  
	
   

  	
   

  	
  Beneficial Owner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
						

 

PLEASE RETURN THE
COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE TO:

 

UTStarcom Inc.

1275 Harbor Bay Parkway

Alameda, California 94502

Attention:  Russell L. Boltwood,

General Counsel

(510) 864-8800

 

19

 

Exhibit
1

to Annex A

 

NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT

 

UTStarcom, Inc.

1275 Harbor Bay Parkway

Alameda, California 94502

Attention: Russell L.
Boltwood

General Counsel

 

U.S. Bank National
Association

550 S. Hope Street, Suite
500

Los Angeles, California
90071

Attention:  Corporate Trust Services

 

Re:                               UTStarcom,
Inc. (the “Company”) 7/8% Convertible Subordinated Notes due 2008 (the  “Notes”)

 

Dear Sirs:

 

Please be advised that
                                   has
transferred $                         aggregate
principal amount of the above-referenced Notes or shares of the Company’s common
stock, issued upon conversion or repurchase of the Notes, pursuant to an
effective Registration Statement on Form S-3 (File No.
333-            )
filed by the Company.

 

We hereby certify that the prospectus delivery
requirements, if any, of the Securities Act of 1933, as amended, have been
satisfied with respect to the transfer described above and that the above-named
beneficial owner of the Notes or common stock is named as a selling
securityholder in the Prospectus dated                  ,
or in amendments or supplements thereto, and that the aggregate principal
amount of the Notes or number of shares of common stock transferred are [a
portion of] the Notes or shares of common stock listed in such Prospectus as
amended or supplemented opposite such owner’s name.

 

	
  Dated:

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  (Authorized Signature)

  
				

 

20Exhibit
10.89

 

 

 

ASSET
PURCHASE AGREEMENT

 

by and between

 

UTSTARCOM, INC.

 

and

 

3COM CORPORATION

 

Dated as of March 4,
2003

 

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I TRANSFER OF ASSETS AND LIABILITIES

  
	
   

  	
   

  
	
  Section
  1.1

  	
  Assets
  to be Sold; Assumption of Liabilities

  
	
  Section 1.2

  	
  Purchase Price

  
	
  Section
  1.3

  	
  Closing

  
	
  Section 1.4

  	
  Deliveries by Seller

  
	
  Section 1.5

  	
  Deliveries by Buyer

  
	
  Section 1.6

  	
  Post-Closing
  Arrangements

  
	
  Section
  1.7

  	
  Post-Closing
  Purchase Price Adjustment

  
	
   

  	
   

  
	
  ARTICLE II RELATED MATTERS

  
	
   

  	
   

  
	
  Section
  2.1

  	
  Books and
  Records of Seller Group

  
	
  Section 2.2

  	
  Mail and Check
  Handling

  
	
  Section 2.3

  	
  Employees
  and Employee Benefits

  
	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS AND WARRANTIES
  OF SELLER GROUP

  
	
   

  	
   

  
	
  Section 3.1

  	
  Organization

  
	
  Section 3.2

  	
  Authorization

  
	
  Section
  3.3

  	
  Consents
  and Approvals; No Violations

  
	
  Section 3.4

  	
  Financial Statements

  
	
  Section
  3.5

  	
  Absence
  of Undisclosed Liabilities

  
	
  Section 3.6

  	
  Absence of
  Certain Changes

  
	
  Section 3.7

  	
  Intellectual Property

  
	
  Section 3.8

  	
  Title, Ownership and Related Matters

  
	
  Section 3.9

  	
  Subsidiaries

  
	
  Section 3.10

  	
  Litigation;
  Product Liability

  
	
  Section
  3.11

  	
  Compliance
  with Applicable Law

  
	
  Section
  3.12

  	
  Certain
  Contracts and Arrangements

  
	
  Section
  3.13

  	
  Taxes

  
	
  Section
  3.14

  	
  Employee
  Benefit Plans; ERISA; Employees

  
	
  Section 3.15

  	
  Environmental
  Matters

  
	
  Section 3.16

  	
  Insurance

  
	
  Section 3.17

  	
  Labor Matters

  
	
  Section 3.18

  	
  Suppliers

  
	
  Section 3.19

  	
  Customers

  
	
  Section
  3.20

  	
  Assets
  and Permits Necessary to the Business; Equipment

  
	
  Section 3.21

  	
  Transactions
  with Affiliates

  
	
  Section 3.22

  	
  Certain Fees

  
	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
  BUYER

  
	
   

  	
   

  
	
  Section 4.1

  	
  Organization

  
	
  Section 4.2

  	
  Authorization

  
	
  Section
  4.3

  	
  Consents
  and Approvals; No Violations

  
	
  Section 4.4

  	
  Certain Fees

  
	
  Section
  4.5

  	
  Funding

  
	
   

  	
   

  
	
  ARTICLE V COVENANTS

  
	
   

  	
   

  
	
  Section 5.1

  	
  Conduct of the
  Business

  
	
  Section 5.2

  	
  Access to Information

  

 

i

 

	
  Section 5.3

  	
  Consents and
  Approvals

  
	
  Section 5.4

  	
  Reasonable Efforts

  
	
  Section 5.5

  	
  Public Announcements

  
	
  Section 5.6

  	
  Covenant to
  Satisfy Conditions

  
	
  Section 5.7

  	
  Supplemental
  Disclosure

  
	
  Section
  5.8

  	
  Transfers
  Not Effected as of Closing

  
	
  Section
  5.9

  	
  Employment
  of Eligible Employees

  
	
  Section
  5.10

  	
  Prohibition
  on Solicitation and Hiring

  
	
  Section 5.11

  	
  No Negotiation

  
	
  Section 5.12

  	
  Confidentiality

  
	
  Section
  5.13

  	
  Agreements
  Related to Certain Business Real Property

  
	
  Section 5.14

  	
  Insurance Claims

  
	
  Section 5.15

  	
  Tax Matters

  
	
  Section 5.16

  	
  Further Actions

  
	
  Section
  5.17

  	
  Compliance
  with Bulk Sales Laws; Payment of Retained Liabilities

  
	
  Section 5.18

  	
  Standards
  Organizations

  
	
  Section 5.19

  	
  Compilers, etc.

  
	
  Section 5.20

  	
  Buyer Acknowledgment

  
	
  Section
  5.21

  	
  Conduct
  Relating to Receivable and Payables

  
	
  Section 5.22

  	
  Non-U.S. Agreements

  
	
  Section
  5.23

  	
  Agreements
  Related to Certain Warranty and Service Obligations

  
	
  Section
  5.24

  	
  Assistance
  Relating to Retained Agreements

  
	
  Section
  5.25

  	
  Agreements
  Related to Certain Liabilities

  
	
   

  	
   

  
	
  ARTICLE VI CONDITIONS TO OBLIGATIONS OF THE
  PARTIES

  
	
   

  	
   

  
	
  Section
  6.1

  	
  Conditions
  to Each Party’s Obligations

  
	
  Section
  6.2

  	
  Conditions
  to Obligations of Seller Group

  
	
  Section
  6.3

  	
  Conditions
  to Obligations of Buyer

  
	
   

  	
   

  
	
  ARTICLE VII SURVIVAL OF REPRESENTATIONS;
  INDEMNIFICATIONS

  
	
   

  	
   

  
	
  Section 7.1

  	
  Survival of
  Representations

  
	
  Section
  7.2

  	
  Seller
  Group’s Agreement to Indemnify

  
	
  Section 7.3

  	
  Buyer’s
  Agreement to Indemnify

  
	
  Section 7.4

  	
  Third Party
  Indemnification

  
	
  Section 7.5

  	
  Sole Remedy

  
	
   

  	
   

  
	
  ARTICLE VIII TERMINATION, AMENDMENT AND
  WAIVER

  
	
   

  	
   

  
	
  Section 8.1

  	
  Termination of
  Agreement

  
	
  Section
  8.2

  	
  Procedure
  for and Effect of Termination

  
	
  Section 8.3

  	
  Amendment, Extension and Waiver

  
	
  Section 8.4

  	
  Termination Fee

  
	
   

  	
   

  
	
  ARTICLE IX MISCELLANEOUS

  
	
   

  	
   

  
	
  Section 9.1

  	
  Fees and Expenses

  
	
  Section 9.2

  	
  Further
  Assurances; Guarantee

  
	
  Section
  9.3

  	
  Notices

  
	
  Section 9.4

  	
  Severability

  
	
  Section 9.5

  	
  Binding Effect;
  Assignment

  

 

ii

 

	
  Section 9.6

  	
  No Third Party
  Beneficiaries

  
	
  Section 9.7

  	
  Interpretation

  
	
  Section
  9.8

  	
  Jurisdiction
  and Consent to Service; Expenses Related to Legal Proceedings

  
	
  Section 9.9

  	
  Entire Agreement

  
	
  Section 9.10

  	
  Descriptive Headings

  
	
  Section 9.11

  	
  Governing Law

  
	
  Section 9.12

  	
  Counterparts

  
	
  Section 9.13

  	
  Specific Performance

  

 

iii

 

EXHIBITS:

 

	
  Exhibit A

  	
   

  	
  Reference Balance Sheet
  (see Schedule 3.4(i))

  
	
  Exhibit B

  	
   

  	
  Bill of Sale

  
	
  Exhibit
  C

  	
   

  	
  Form
  of Assignment of Patent Rights

  
	
  Exhibit
  D

  	
   

  	
  Form
  of Assignment of Copyrights

  
	
  Exhibit
  E

  	
   

  	
  Form
  of Assignment of Trademarks

  
	
  Exhibit
  F

  	
   

  	
  Instrument
  of Assumption

  
	
  Exhibit G

  	
   

  	
  Rolling Meadows Lease Agreement

  
	
  Exhibit
  H

  	
   

  	
  Multiple
  Site License Agreement

  
	
  Exhibit
  I

  	
   

  	
  Consulting
  Services Agreement

  
	
  Exhibit
  J

  	
   

  	
  Intellectual
  Property License Agreement

  
	
  Exhibit
  K

  	
   

  	
  Form
  of Lease Assignment Agreement

  

 

iv

 

ASSET PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT, dated as of
March 4, 2003 (the “Agreement”), is by and between UTStarcom, Inc., a Delaware corporation, and
its designated subsidiaries or affiliates (“Buyer”), and 3Com
Corporation, a Delaware corporation (“Seller”).

 

WHEREAS, Seller by itself and through the entities set
forth on Schedule 3.9 of the Disclosure Schedules (collectively, the “Seller Group”) is currently engaged in
developing, manufacturing, having manufactured, selling, marketing, supporting
and providing professional services with respect to the Products (as defined in
Section 3.7(n)(iv)) (the “Business”); and

 

WHEREAS, Buyer desires to purchase and assume from
Seller, and Seller desires to, or desires to cause other members of the Seller
Group to, sell, assign, transfer, convey and deliver to Buyer, certain
specified assets and properties of the Seller Group related to the Business
together with certain specified obligations and liabilities relating thereto,
all in the manner and subject to the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants, agreements and
conditions hereinafter set forth, and intending to be legally bound hereby, the
parties hereto agree as follows:

 

ARTICLE I

 

TRANSFER
OF ASSETS AND LIABILITIES

 

Section
1.1                                   Assets
to be Sold; Assumption of Liabilities

 

(a)                                  Subject
to the terms and conditions of this Agreement, at the Closing (as defined in
Section 1.3), Seller Group will sell, convey, assign, transfer and
deliver, or will cause to be sold, conveyed, assigned, transferred and
delivered, to Buyer, and Buyer agrees to purchase and acquire, or will cause to
be purchased and acquired, from Seller Group, free and clear of any Liens (as
defined in Section 3.8(a)), except for Permitted Encumbrances (as defined
in Section 3.8(a)), all of Seller Group’s right, title and interest
in and to the following assets (collectively, the “Assets”):

 

(i)                                     the
following Product-related items:

 

(A)                              all
marketing, sales and promotional literature relating primarily to the Business
owned by or in the possession of any member of the Seller Group;

 

(B)                                in
accordance with and to the extent not prohibited by applicable law, all lists,
files, bills and correspondence of or related to customers and suppliers in
possession or under control of a Business Employee as of the date hereof or as
of the Closing Date and (x) related to the Business and located in the
Rolling Meadows facility of Seller or (y) primarily related to the
Business and located in the locations set forth on Schedule 1.1(a)(i)(B)
of the Disclosure Schedules (the “Business
Real Property”);

 

(C)                                the
tangible embodiments of Transferred Intellectual Property or tangible
embodiments of Intellectual Property licensed pursuant to an Intellectual
Property Contract, in both cases, related to the Business (subject to Seller’s
right to retain copies pursuant to the Intellectual Property License
Agreement);

 

 

(D)                               all
inventory (consisting of raw materials, work in process and finished goods) of
Products;

 

(E)                                 all
transferable licenses, permits and authorizations relating to governmental
authorization for the manufacture and distribution of Products (excluding any
general business licenses to conduct business in a particular jurisdiction and
the like) (the “Permits”), and
copies of all reports and certifications related to the Permits or to other
similar licenses, permits and authorizations that are not transferrable;

 

(F)                                 all
specifications, schematics, designs, drawings, blue prints, models, sketches,
technical manuals, operating manuals, flow charts and related files for the
Products owned by or in possession of any member of the Seller Group (subject
to Seller’s right to retain copies pursuant to the Intellectual Property
License Agreement);

 

(G)                                the
following intangible assets:

 

(I)            the
Transferred Intellectual Property;

 

(II)           all
claims for past infringement of Transferred Intellectual Property;

 

(III)         all goodwill of the Business; and

 

(IV)         all
other intangible assets, if any, listed on Schedule 1.1(a)(i)(G)(IV) of the
Disclosure Schedules;

 

(ii)                                  the
following balance sheet items:

 

(A)                              prepaid
expenses and security deposits reflected in the balance sheet of the Business
dated as of November 29, 2002 attached hereto as Exhibit A (the “Reference Balance Sheet”), with such
changes thereto that occur in the ordinary course of business prior to the
Closing Date;

 

(B)                                the
furniture, fixtures, equipment, furnishings and office supplies and other
tangible personal property of the Business reflected in the Reference Balance
Sheet, including, but not limited to, the items listed on Schedule 3.20(c) of
the Disclosure Schedules and the one-time setup equipment contemplated by the
Transition Services Agreement between Buyer and Seller dated the date hereof
(subject to completion of payment of such amounts due by Buyer thereunder),
with such changes thereto that occur in the ordinary course of business prior
to the Closing Date; and

 

(C)                                all
other assets reflected on the Reference Balance Sheet (other than accounts
receivable, which shall be retained by the Seller) with such changes thereto
that occur in the ordinary course of business prior to the Closing Date;

 

(iii)                               the following
contractual items:

 

(A)                              subject
to Section 5.8, the contracts for the sale, distribution or manufacture of
the Products or relating to technology embodied in the Products, including
amendments and supplements, modifications or side letters related thereto, set
forth on Schedule 1.1(a)(iii)(A) of the Disclosure Schedules and (1) any
such contracts entered into in compliance with the terms hereof during the
period commencing on the date hereof and through the Closing Date (as defined
in Section 1.3) and (2) any other contracts that the parties mutually
agree to include in the Assets prior to the Closing Date, as evidenced by an
amendment to

 

2

 

Schedule
1.1(a)(iii)(A) to be acknowledged by the parties and delivered at the Closing
(collectively, the “Contracts”). Notwithstanding the foregoing, to the extent Seller has not
provided Buyer with executed copies of any of the Contracts for review prior to
the date hereof (each an “Unproduced Contract”),
Seller shall, within 45 days of the date hereof, provide any such Unproduced
Contracts to Buyer for its review. Buyer may, in its sole discretion, refuse to
accept transfer of any such Unproduced Contracts (and such Unproduced Contracts
shall immediately cease to be Contracts for all purposes of this Agreement) if
and to the extent (i) any such Unproduced Contracts contain materially
different or adverse terms as compared to the Contracts provided to Buyer for
review, or (ii) Seller fails to produce any such Unproduced Contracts within 45
days of the date hereof. Buyer and Seller agree to cooperate to reconcile their
lists of Unproduced Contracts within two days of the date hereof, with the
objective of minimizing the number of Unproduced Contracts; and

 

(B)                                to
the extent transferable, all rights of the Seller Group under all warranties,
representations and guarantees made by suppliers, manufacturers or contractors
in connection with the Business;

 

(iv)                              in
accordance with and to the extent not prohibited by applicable law, all
personnel and payroll records of the Affected Employees located in the Rolling
Meadows facility or in the Business Real Property and copies of all such
records located in the Seller’s facility; and

 

(v)                                 copies
of all other books, records or correspondence related to the Business
(excluding tax returns not related exclusively to the Business).

 

(b)                                 Such
sale, conveyance, assignment, transfer and delivery of the Assets will be
effected by delivery by Seller and/or other members of the Seller Group to
Buyer of (i) duly executed bills of sale (each, a “Bill of Sale”) in the form attached hereto as
Exhibit B, (ii) instruments of assignment assigning each member of
the Seller Group’s interest in and to the Transferred Intellectual Property (as
defined in Section 3.7(p)), including all Registered Intellectual Property
(as defined in Section 3.7(p)) relating thereto, pursuant to the form of
Assignment of Patent Rights attached hereto as Exhibit C, Form of
Assignment of Copyrights attached hereto as Exhibit D and form of
Assignment of Trademarks obtained hereto as Exhibit E (each, an “Intellectual
Property Assignment”),
(iii) a copy of the patents and patent applications and the registrations
and pending applications included in the Transferred Intellectual Property and
(iv) such other good and sufficient instruments of sale, conveyance,
transfer and assignment  as shall be
necessary to vest in Buyer good and valid title to the other Assets free
and clear of all Liens, except for Permitted Encumbrances (collectively, the “Other
Instruments”).

 

(c)                                  At
the Closing, Buyer will deliver to Seller Group an instrument of assumption
substantially in the form of Exhibit F hereto (the “Instrument of Assumption”),
whereby Buyer will undertake, assume and agree to perform, pay and discharge
when due, and hold Seller Group harmless from and indemnify Seller Group
against, the following debts, liabilities and obligations of Seller Group
related to the Business: (i) liabilities and obligations associated with
the Contracts, (ii) all warranty obligations relating to the Products or
services performed in connection with the Products, except for these warranty
obligations set forth on Schedule 1.1(c) hereto (the “Excluded Warranty Obligations”)  and (iii) other liabilities reflected
on the Reference Balance Sheet, with such changes thereto that occur in the
ordinary course of business prior to the Closing Date other than accounts
payable, which shall be retained by Seller (collectively, the “Assumed
Liabilities”).  Buyer expressly is not assuming any
obligations or liabilities, whether accrued, absolute, contingent, matured,
unmatured or other, of Seller Group or any other person or entity, except for
the Assumed Liabilities (the “Excluded Liabilities”).  Without limiting the foregoing, it is expressly agreed that Buyer
shall not assume or have any responsibility with respect to any of the
following liabilities or obligations, and the following liabilities and
obligations shall not constitute Assumed Liabilities: (1) any

 

3

 

liability
or obligation for Taxes (as defined in Section 3.13) for which Seller is
responsible pursuant to Section 5.15(c) hereof; (2) any liability or
obligation of Seller Group as a result of any legal or equitable action or
judicial or administrative proceeding initiated at any time in respect of
anything done, suffered to be done, or omitted to be done by the Seller Group
or any of its directors, officers, employees, or agents, except for Assumed
Liabilities, or (3) related to the employment by any member of the Seller
Group of any employee of any member of the Seller Group, including, without
limitation, Employment Liabilities (unless specifically included in the
Reference Balance Sheet and except as specifically set forth herein or to the
extent related to their activities as employees of Buyer following the
Closing), and severance payments to employees of any member of the Seller Group
that are not Affected Employees (as defined below).  For these purposes, “Employment
Liabilities” means any and all claims, debts, liabilities,
commitments and obligations, whether fixed, contingent or absolute, matured or
unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown,
whenever or however arising, including all costs and expenses relating to the
satisfaction thereof, arising under applicable federal, state, county, local, provincial or foreign
statute, law, ordinance, regulation, rule, code, treaty or rule of common law
(collectively, “Law”),
permits, action or proceeding before any governmental authority, order or
consent decree or any award of any arbitrator of any kind relating to any
Seller Employee Plan, Employment Agreement or otherwise to an Employee while
employed by Seller Group.

 

(d)                                 Notwithstanding
the foregoing, the assets identified on Schedule 1.1(d) are expressly
excluded from the Assets and shall be retained by the Seller Group.

 

Section
1.2                                   Purchase
Price

 

Subject to the terms and conditions of this Agreement,
in reliance on the Seller Group’s representations, warranties and agreements
contained herein and in any Non-U.S. Agreements (as defined in
Section 5.22), and in consideration of the sale, conveyance, assignment,
transfer and delivery of the Assets, Buyer will deliver or cause to be
delivered, in full payment for the sale, conveyance, assignment, transfer and
delivery of the Assets, payment at the Closing by wire transfer to such bank
account or bank accounts as shall be specified by Seller, in immediately
available funds, of an aggregate of U.S. $100,000,000 (the “Closing Cash
Purchase Price”), which shall be subject to subsequent adjustment
pursuant to Section 1.7(d).

 

Section
1.3                                   Closing

 

The closing of the transactions contemplated by this
Agreement (the “Closing”) shall take place not later than 10:00 A.M.,
local time, at the offices of Wilson Sonsini Goodrich & Rosati PC, 650
Page Mill Road, Palo Alto, California 94304-1050 on the second business day
following the satisfaction or waiver of all of the conditions set forth in
Article VI hereof or at such other time or place as to which the parties
shall agree.  As provided in
Section 5.4, the parties shall use reasonable best efforts to cause the
Closing to occur on or prior to May 3, 2003. 
The effective time of the Closing is sometimes referred to herein as the
“Closing
Date.”

 

Section
1.4                                   Deliveries
by Seller

 

At the Closing, Seller Group will deliver or cause to
be delivered to Buyer (unless previously delivered or waived in writing by
Buyer) the following:

 

(a)                                  duly
executed Bills of Sale

 

(b)                                 duly
executed counterparts of the Intellectual Property Assignments;

 

4

 

(c)                                  the
Other Instruments

 

(d)                                 the
officer’s certificates referred to in Section 6.3(d);

 

(e)                                  the
consents referred to in Section 6.3(c);

 

(f)                                    certificates
of each member of the Seller Group complying with the requirements of
Section 1445 of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations
promulgated thereunder, to the effect that no withholding of federal income tax
is required (the “1445 Certificates”);

 

(g)                                 duly
executed counterpart of the Rolling Meadows, Illinois Lease Agreement,
substantially in the form of Exhibit G (the “Rolling Meadows Lease Agreement”);

 

(h)                                 duly executed counterpart of
the Multiple Site License Agreement, substantially in the form of
Exhibit H, with respect to the Business Real Property identified therein
(the “Multiple Site License Agreement”);

 

(i)                                     duly
executed counterpart of the Consulting Services Agreement, substantially in the
form of Exhibit I (the “Consulting
Services Agreement”);

 

(j)                                     duly
executed counterpart of the Intellectual Property License Agreement,
substantially in the form of Exhibit J (the “Intellectual Property License Agreement”);

 

(k)                                  duly
executed counterparts of two separate Lease Assignment Agreements,
substantially in the form of Exhibit K, with respect to a lease for each of the
following two Business Real Properties (i) 100 Davidson Avenue, Somerset, New
Jersey and (ii) 420 ST Kilda Road, Suite 3, Level 2, Melbourne, Australia (“Lease Assignment Agreements”);

 

(l)                                     all
other documents, instruments, declarations, affidavits and writings as may (in
the judgment of Buyer) be necessary or appropriate to assign, convey, transfer
and deliver to Buyer good and valid title to the Assets free and clear of
all Liens except for Permitted Encumbrances or as may be required to be
delivered by Seller Group at or prior to the Closing Date pursuant to this
Agreement (the agreements referred to in this Section 1.4, as well as
similar agreements required elsewhere in the Agreement, being referred to
herein as the “Ancillary Agreements”);
and

 

(m)                               (i) all
copies of all tangible materials in the possession of Seller Group embodying
the Transferred Intellectual Property (subject to Seller’s right to retain
copies pursuant to the Intellectual Property License Agreement), and
(ii) a copy of all tangible materials in the possession of Seller Group
embodying the Licensed Intellectual Property, in each case including without
limitation specifications, documentation, invention disclosures, laboratory
notebooks, source code listings, technical manuals, flow charts, and files
related thereto.

 

Section
1.5                                   Deliveries
by Buyer

 

At the Closing, Buyer will deliver or cause to be
delivered to Seller, or, in the case of clause (a) below, to the
affiliates of Seller who are parties to any Non-U.S. Agreements, if applicable
(unless previously delivered), the following:

 

5

 

(a)                                  the
Closing Cash Purchase Price referred to in Section 1.2; provided,
that if Seller Group shall fail to deliver the 1445 Certificates, Buyer may
(but shall not be required to) withhold from the cash payable at the Closing
and pay over to the appropriate taxing authority an amount equal to ten percent
(10%) of the total “amount realized” (as defined in Internal Revenue Service
Treasury Regulation 1.1445 - 1(g)(5)) by any member of the
Seller Group for the transfer of any “U.S. real property interests” (as defined
in Section 1445 of the Code).  A
portion of the Closing Cash Purchase Price shall be paid in accordance with the
terms of the Non-U.S. Agreements, with the remainder paid to Seller;

 

(b)                                 duly
executed counterparts of the Intellectual Property Assignments;

 

(c)                                  duly
executed Instruments of Assumption;

 

(d)                                 the
officer’s certificate referred to in Section 6.2(c);

 

(e)                                  duly
executed counterpart of the Multiple Site License Agreement;

 

(f)                                    duly
executed counterpart of the Rolling Meadows Lease Agreement;

 

(g)                                 duly
executed counterpart of the Consulting Services Agreement;

 

(h)                                 duly
executed counterpart of the Intellectual Property License Agreement;

 

(i)                                     duly
executed counterparts of the Lease Assignment Agreements;

 

(j)                                     a
list of any proceedings or actions known to any member of the Seller Group
before any governmental authority (including, without limitation, the U.S.
P.T.O. or equivalent authority anywhere in the world) related to Registered
Intellectual Property included in the Transferred Intellectual Property, and
all actions that must be taken before the date sixty (60) days after the
Closing Date, including without limitation the payment of any registration,
maintenance or renewal fees or the filing of any documents, applications or
certificates, for the purposes of maintaining, perfecting or preserving the
Registered Intellectual Property included within the Transferred Intellectual
Property; and

 

(k)                                  all
other documents, instruments and writings required to be delivered by Buyer at
or prior to the Closing Date pursuant to this Agreement or the Ancillary
Agreements.

 

Section
1.6                                   Post-Closing
Arrangements

 

Except as set forth in any other agreement between the
parties hereto, at the Closing all data processing, accounting, insurance,
banking, personnel, legal, communications and other products and services
provided to the Business by Seller Group or its affiliates, including any
agreements or understandings (written or oral) with respect thereto, will
terminate without any further action or liability on the part of the parties
thereto.

 

Section 1.7                                   Post-Closing
Purchase Price Adjustment

 

(a)                                  On
the tenth (10th) business day following the completion and acceptance by each
party hereto of a statement (the “Final Statement”) of the Working Capital of the Business (as defined below) as of
the close of business on the Closing Date (unless the Closing Date does not
fall on the end of a monthly fiscal period of the Seller Group, in which case
the Final Statement shall be as of the last day of Seller Group’s preceding
monthly fiscal period), either (i) Buyer shall pay to Seller the amount
(together with interest as

 

6

 

described
below) by which the Working Capital of the Business as set forth in the Final
Statement is greater than $7,771,000, which is equal to the Working Capital of
the Business as of the date of the Reference Balance Sheet (the “Opening
Statement”) plus
$1,000,000, or (ii) Seller shall pay to Buyer the amount (together with
interest as described below) by which the Working Capital of the Business as
set forth in the Final Statement is less than $5,771,000, which is equal to the
Opening Statement less $1,000,000.00. 
In the event of a payment pursuant to the immediately preceding
sentence, such amount shall bear simple interest at an annual rate equal to the
minimum Applicable Federal Rate in effect as of the Closing Date, accruing from
the Closing Date to the date of payment.

 

(b)                                 The
Final Statement shall be prepared by Seller in the following manner:

 

(i)                           within
seventy-five (75) days after the Closing Date, Seller shall deliver to Buyer
the Final Statement, fairly presenting the Working Capital of the Business as
of the close of business on the Closing Date. 
The Final Statement shall be accompanied by a report setting forth
(i) the Working Capital of the Business, as reflected in the Final
Statement, and (ii) the amount of any adjustment to the Closing Cash
Purchase Price to be paid and by whom pursuant to Section 1.7(a) and the
basis therefor;

 

(ii)                        following
the Closing, each party shall give the other party hereto and any independent
auditors and authorized representatives of such other party full access at all
reasonable times to the properties, books, records and personnel of the
Business in their possession, custody or control relating to periods prior to
the Closing Date for purposes of preparing, reviewing and resolving any
disputes concerning the Final Statement. 
Within thirty (30) days following the delivery to Buyer of the Final
Statement, Buyer shall notify Seller of any dispute of any item contained in
the Final Statement, which notice shall set forth in reasonable detail the
basis for such dispute.  If Buyer fails
to notify Seller of any such dispute within such thirty (30)-day period, the
Final Statement shall be deemed to be accepted by Buyer.  In the event that Buyer shall so notify
Seller of any dispute, Buyer and Seller shall cooperate in good faith to
resolve such dispute as promptly as possible; and

 

(iii)                     if
Buyer and Seller Group are unable to resolve any such dispute within fifteen
(15) days of Seller’s delivery of such notice (the “Resolution Period”), then all amounts remaining in
dispute shall be submitted to a “big four” independent accounting firm (the “Independent
Accounting Firm”) selected by Seller Group and Buyer within ten (10)
days after the expiration of the Resolution Period.  If Seller Group and Buyer are unable to agree on the Independent
Accounting Firm, then Buyer and Seller Group shall each have the right to
request the American Arbitration Association to appoint the Independent
Accounting Firm, which shall not have had a material relationship with Seller
Group or Buyer within the past two (2) years. 
Each party agrees to execute, if requested by the Independent Accounting
Firm, an engagement letter containing customary terms.  All fees and expenses relating to the work,
if any, to be performed by the Independent Accounting Firm shall be borne
equally by Seller Group and Buyer.  The
Independent Accounting Firm shall act as an arbitrator to determine, based
solely on presentations by Seller Group and Buyer, and not by independent
review, only those issues still in dispute and shall be limited to those
adjustments, if any, that need be made to the Final Statement to comply with
the standards referred to in Section 1.7(a).  The Independent Accounting Firm’s determination shall be
requested to be made within thirty (30) days of its selection, shall be set
forth in a written statement delivered to Seller and Buyer and shall be final,
binding and conclusive.  The Final Statement,
as modified by resolution of any disputes by Buyer and Seller Group or by the
Independent Accounting Firm, shall be the “Final Statement.”

 

(c)                                  The
term “Working
Capital of the Business”
means the Current Assets (as reflected on the Reference Balance Sheet) and
Inventory (as reflected on the Reference Balance Sheet) less the Accrued
Liabilities and Other (as reflected on the Reference Balance Sheet) (excluding
Deferred Cost of Goods Sold, Deferred Revenue and Employee Liabilities (as such
items are reflected on the Reference Balance Sheet)), as

 

7

 

calculated
in accordance with U.S. GAAP and prepared on a basis consistent with the
Reference Balance Sheet; provided, however, that assets and
properties (other than current assets and current liabilities that are Assumed
Liabilities) that were not reflected in the Opening Statement shall not be
reflected in the Final Statement.

 

(d)                                 The
amounts, if any, referred to in Section 1.7(a) shall be paid by the paying
party under Section 1.7(a) by wire transfer in immediately available funds
to an account designated by the other party.

 

ARTICLE II

 

RELATED
MATTERS

 

Section
2.1                                   Books
and Records of Seller Group

 

Any books and records that are related to the Business
that are not delivered to Buyer hereunder will be preserved by Seller until at
least the third anniversary of the Closing Date and will be made available (for
review and copying at Buyer’s expense of those portions of such books and
records related to the Business) to Buyer and its authorized representatives
upon reasonable notice during normal business hours to the extent reasonably
required by Buyer, including, without limitation, to the extent reasonably
required in connection with audit, accounting, tax, litigation, federal
securities disclosure or other similar needs. 
Any books and records that are transferred to Buyer hereunder will be
preserved by Buyer until at least the third anniversary of the Closing Date and
will be made available (for review and copying at Seller’s expense) to Seller
and its authorized representatives upon reasonable notice during normal
business hours to the extent reasonably required by Seller, including, without
limitation, to the extent reasonably required in connection with audit,
accounting, tax litigation, federal securities disclosure or other similar
needs.

 

Section
2.2                                   Mail
and Check Handling

 

(a)                                  Effective
as of the Closing Date, Buyer shall have the right to open all mail and
packages received by Buyer and addressed to Seller related to the
Business.  Buyer shall promptly forward
to Seller any mail or packages not related to the Business.  Buyer and Seller agree to promptly notify
each other of any phone calls they receive that relate to the other’s business.

 

(b)                                 After
the Closing Date, Buyer may deliver to Seller any checks or drafts payable to
Seller or its affiliates that are properly payable to Buyer or its affiliates,
and Seller shall reimburse Buyer on a monthly basis for the amounts collected
from such checks or drafts.  Seller
agrees that it will promptly transfer or deliver or cause to be promptly
transferred or delivered to Buyer or its designee any cash or other property
received directly or indirectly by it or any of its affiliates after the
Closing that are properly the property of Buyer or its affiliates.

 

(c)                                  From
and after the Closing Date, Seller Group shall promptly remit to Buyer any
funds that are received by Seller Group and that are included in or that
represent the Assets.  Seller Group:
(i) hereby irrevocably nominates, constitutes and appoints Buyer as the
true and lawful attorney-in-fact of Seller (with full power of
substitution) effective as of the Closing Date, and hereby authorizes Buyer, in
the name of and on behalf of each member of the Seller Group, to execute,
deliver, acknowledge, certify, file and record any document, to institute and
prosecute any legal proceeding and to take any other action (on or at any time
after the Closing Date) that Buyer may deem appropriate for the purpose of
(i) collecting, asserting, enforcing or perfecting any claim, right or
interest of any kind that is included in any of the Assets, (ii) defending
or compromising any Claim or legal proceeding relating to any of the Assets, or
(iii) otherwise carrying out or facilitating any of the transactions
contemplated in this Agreement. The power of attorney referred to in the

 

8

 

preceding
sentence is and shall be coupled with an interest and shall be irrevocable, and
shall survive the dissolution or insolvency of any member of the Seller
Group.  Seller agrees to take all
actions necessary to obtain board and stockholder approval of the transactions
contemplated by this Agreement for each member of the Seller Group, as applicable.

 

Section
2.3                                   Employees
and Employee Benefits

 

(a)                                  Prior
to the Closing, Buyer may, in its sole discretion, offer to employ any Business
Employee (as defined in Section 3.14(b)) on an at-will basis and pursuant
to the terms of the offer presented by Buyer, which may vary from the terms of
employment with Seller.  If requested by
Seller, Buyer shall provide Seller with such information relating to the terms
of Buyer’s offer of employment to the Eligible Employees as is reasonably
necessary to allow Seller to determine whether or not the Eligible Employees
may be entitled to severance benefits from Seller.  Buyer shall communicate in writing to Seller as soon as
practicable the names of those Business Employees to whom Buyer determines it
will not make offers of employment. 
Buyer shall finalize its list of Business Employees to which it will
make offers of employment (the “Eligible
Employees”) and communicate that list to Seller no later than the
earlier to occur of: (i) Closing or (ii) the forty-fifth day after
the date of this Agreement.  When the
Buyer communicates to Seller in writing that it will not offer employment to an
Eligible Employee, such person shall cease to be an Eligible Employee but shall
continue to be a Business Employee. 
Buyer shall make good faith offers of employment to at least 300
Business Employees.  Such Eligible
Employees who become employees of Buyer following the Closing are referred to
herein as the “Affected Employees.” 
Prior to Closing, Seller Group shall provide Buyer with a list of all
independent contractors currently providing services primarily related to the
Business.  Seller Group shall be
responsible, except as otherwise specifically provided herein, for all
obligations and Employment Liabilities of Business Employees up to and
including the Closing Date, including any severance payments of such employees
arising in connection with the termination of their employment with the Seller
Group, the Ancillary Agreements and any Employment Liabilities.  Seller Group shall be responsible for all
obligations to and Employment Liabilities of all Business Employees up to and
following the Closing, except for Affected Employees, with respect to whom
Seller Group shall be responsible for all obligations and Employment Liabilities
up to the Closing.  Following the
Closing, the Affected Employees shall become participants in the employee
benefit plans of Buyer as the Affected Employees become eligible to participate
in such plans pursuant to their terms. 
For purposes of this Agreement, Buyer’s employee benefit plans include,
but are not limited to, all “employee benefit plans” within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), and employee fringe benefit
programs of Buyer.  Seller Group shall
use commercially reasonable efforts, upon Buyer’s request, and at Buyer’s
expense to assist in the transition of Affected Employees to Buyer.  From and after the Closing, Seller Group
shall (i) sponsor, (ii) assume or (iii) retain, as the case may
be, and be solely responsible for all Employment Liabilities whether incurred
before, on or after the Closing.

 

As soon as practicable following the Closing Date,
Seller Group shall provide Buyer with such documents as Buyer shall reasonably
request to assure itself that the accounts of the Affected Employees under the
3Com Corporation 401(k) Plan (“Seller Savings Plan”) if distributed to such Affected Employees, would be eligible
rollover distributions and with such documents and other information as Buyer
shall reasonably request to assure itself that the Seller Savings Plan and the
trust established pursuant thereto are qualified and tax-exempt under
Sections 401(a) and 501(a) of the Code. 
Effective as of the Closing Date, each Affected Employee who was a
participant in the Seller Savings Plan shall cease to have any contributions
made on his or her behalf, except for contributions attributable to
compensation earned on or before such date under such Seller Savings Plan.  Each Affected Employee who is a participant
in a Seller Savings Plan shall be given the opportunity to “roll over” such
account balance by way of an eligible rollover distribution to the UTStarcom,
Inc. 401(k) Plan (the “Buyer
401(k) Plan”), subject to the approval of the administrator of
the Buyer 401(k) Plan and in accordance with the provisions of such Plan
and applicable

 

9

 

Law.  Notwithstanding anything
in this Agreement to the contrary, each Affected Employee who was eligible to
participate in a Seller Savings Plan will first become eligible to participate
in the Buyer 401(k) Plan as soon as reasonably practicable after the
Closing Date and pursuant to the terms of such plan.

 

(b)                                 Seller
Group agrees and acknowledges that the selling group (as defined in Treasury
Regulation Section 54.4980B-9, Q&A-3(a)) of which it is a part (the “Selling Group”) will continue to offer a
group health plan to its employees after the Closing Date to the extent
required by Law and, accordingly, that Seller and the Selling Group shall be
solely responsible for providing continuation coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) to those individuals who are
M&A qualified beneficiaries (as defined in Treasury Regulation
Section 54.4980B-9, Q&A-4(a)) with respect to the transactions
contemplated by this Agreement (collectively, the “M&A Qualified Beneficiaries”).  The members of the Seller Group shall be responsible for all
COBRA obligations, liabilities and claims related to M&A Qualified
Beneficiaries and all other qualified beneficiaries (as defined in Code
Section 4980B(g)(1)) with respect to Seller Group’s health plans.

 

(c)                                  Buyer
shall provide each Affected Employee credit, for purposes of any service
requirements for participation or vesting (and not for benefit accrual
purposes), under each employee benefit plan, program, or arrangement of the
Buyer or its affiliates in which such employee is eligible to participate, for
his or her periods of service with the Seller or any Subsidiary, as
appropriate, credited under a similar plan, program or arrangement prior to the
Closing Date or as reflected in Seller’s or any Subsidiary’s records, as
applicable, which method of crediting service shall be at Buyer’s discretion,
subject to appropriate break-in-service rules (or other applicable legal
restrictions) and the applicable provisions of the Buyer’s employee benefit
plan, program or arrangement and applicable tax qualification requirements.  Notwithstanding any of the foregoing to the
contrary, none of the provisions contained herein shall operate to duplicate
any benefit provided to any Affected Employee or the funding of any such
benefit.

 

(d)                                 Nothing
contained herein, expressed or implied, is intended to confer upon any Affected
Employee any right to continued employment for any period by reason of this
Agreement.  Nothing contained herein is
intended to confer upon any Affected Employee any particular term or condition
of employment other than with respect to the particular employee benefit plans
or severance plans, policies or arrangements expressly referred to in this
Agreement.

 

(e)                                  Buyer
shall neither assume nor substitute for any outstanding options to purchase
Seller common stock or any other equity-based compensation award held by
Affected Employees.  Affected Employees
shall only be eligible to participate in the Buyer’s equity plans (including
the Buyer’s Employee Stock Purchase Plan) pursuant to the terms and conditions
of such plans.

 

(f)                                    Seller
agrees to use commercially reasonable efforts to encourage the Eligible
Employees to accept any offers of employment extended by Buyer pursuant to
Buyer’s standard form of employment offer letter.  Buyer shall have the right, within forty-five (45) days of the
date of this Agreement, to designate twenty (20) Business Employees with
expertise related to “voice over Internet protocol” technology, products and
services as “Designated Employees.”  In the event any Designated Employee rejects
Buyer’s offer of employment, such Designated Employee shall become an “Ineligible Employee.”  Seller may elect to retain or hire up to six
Ineligible Employees without any obligation to Buyer.  However, to the extent Seller retains or hires more than six
Ineligible Employees at any time through the one-year anniversary of the
Closing Date, Seller shall be obligated to pay to Buyer a sum equal to twelve
(12) months of salary then paid by Seller of each such retained or hired
employee (in excess of six).

 

10

 

ARTICLE III

 

REPRESENTATIONS
AND WARRANTIES OF SELLER GROUP

 

The Seller, on behalf of itself and each member of the
Seller Group, represents and warrants to Buyer as follows subject to such
exceptions as are disclosed in a disclosure schedule supplied by Seller to
Buyer (the “Disclosure Schedules”):

 

Section
3.1                                   Organization

 

Each member of the Seller Group is a corporation duly organized,
validly existing and in good standing under the Laws of its jurisdiction of incorporation.  Each member of the Seller Group is duly
qualified or licensed to do business in each jurisdiction in which the
ownership or leasing of property, the operation of the Business, the nature of
the Business or the conduct of Seller Group’s employees makes such
qualification necessary.  The members of
the Seller Group are all of the entities of Seller that are engaged in the
Business or that hold title to the Assets.

 

Section
3.2                                   Authorization

 

(a)                                  Seller
has the corporate power and authority to execute and deliver this Agreement and
the Ancillary Agreements (to which it is a party) and consummate or cause to be
consummated the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement
and the Ancillary Agreements (to which Seller is a party) by Seller and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the Board of Directors of Seller and no other
corporate proceedings including, without limitation, a vote of Seller’s
stockholders, on the part of Seller is necessary to authorize the execution,
delivery and performance of this Agreement, the Ancillary Agreements (to which
it is a party) or the consummation of the transactions contemplated hereby and
thereby.  This Agreement and the
Ancillary Agreements (to which Seller is a party) have been duly executed and
delivered by Seller and constitute, and when executed and delivered, each of
the other agreements, documents and instruments to be executed and delivered by
Seller pursuant hereto will constitute, a valid and binding agreement of Seller
enforceable against Seller in accordance with their respective terms.

 

(b)                                 Each
other member of the Seller Group has, or will have prior to the Closing, the
corporate power and authority to execute and deliver the Ancillary Agreements
and/or other documents and instruments required to be delivered by such party
at the Closing pursuant to the terms of this Agreement (the “Required Documents”) and consummate or
cause to be consummated the transactions contemplated hereby and thereby.  The execution and delivery of the Required
Documents by each member of the Seller Group (other than Seller) has been, or
will be prior to the Closing, duly and validly authorized by the Board of Directors
of such member and has been, or will be prior to the Closing, approved by
requisite votes of the stockholders of such member, as necessary, and no other
corporate proceedings on the part of the members of the Seller Group (other
than Seller) will be necessary as of the Closing to authorize the execution,
delivery and performance of any of the Required Documents or the consummation
of the transactions contemplated hereby and thereby. The Required Documents
will be duly executed and delivered at the Closing by each member of the Seller
Group, and when executed and delivered, will constitute, valid and binding
agreements or obligations of such member enforceable against such member, as
applicable, in accordance with their respective terms.

 

11

 

Section
3.3                                   Consents
and Approvals; No Violations

 

(a)                                  Except
for applicable requirements of the Hart-Scott-Rodino Act Antitrust
Improvements Act of 1976, as amended (the “HSR
Act”), or antitrust or other competition Law of other jurisdictions,
there are no governmental approvals or consents required for the execution,
delivery or performance of this Agreement or the consummation by each member of
the Seller Group of the transactions contemplated hereby or by the Ancillary
Agreements.

 

(b)                                 Except
as set forth on Schedule 3.3 of the Disclosure Schedules, the execution,
delivery and performance of this Agreement and the Ancillary Agreements and the
consummation by each member of the Seller Group of the transactions contemplated
hereby and thereby will not (i) conflict with or result in any breach or
violation of any provision of the certificate of incorporation, bylaws or other
comparable charter documents of any member of the Seller Group;
(ii) require any member of the Seller Group to file or register with, or
give notice to, or obtain the authorization, consent or approval of any person
(other than a governmental entity contemplated in clause (a) above)
whether within or outside the United States; (iii) violate, conflict with
or result in a default (or any event that, with notice or lapse of time or
both, would constitute a default) under, or result in any termination,
cancellation, modification or acceleration or give rise to any such right of
termination, cancellation, modification or acceleration under, any of the
terms, conditions or provisions of any note, mortgage, other evidence of
indebtedness, guarantee, license, agreement, lease or other contract or
instrument or obligation to which any member of the Seller Group is a party or
by which any member of the Seller Group or any of their Assets are subject or
by which any member of the Seller Group may be bound (the “Seller Conflicting Agreements”);
(iv) violate any order, injunction, decree, statute, rule or regulation
applicable to any member of the Seller Group or any of their assets or
properties, or (v) result in the creation or imposition of any Lien upon
any properties, assets or business of the Business. As used in this
Section 3.3, references to members of the Seller Group shall refer only to
members of the Seller Group in connection with the conduct of the Business.

 

Section
3.4                                   Financial
Statements

 

Attached as Schedule 3.4 of the Disclosure
Schedules are (i) the Reference Balance Sheet, (ii) the unaudited balance
sheet of the Business as of the end of its fiscal year on or about May 31,
2002, (iii) the related unaudited statements of income of the Business for
the six months ended November 29, 2002, and (iv) the related
unaudited statements of income of the Business for the fiscal year ended on or
about May 31, 2002  (the financial
statements referred to in clauses (i) through (iv) above and the
accompanying notes thereto, if any, are referred to herein collectively as the
“Financial
Statements”), which
have been extracted from the books and records of Seller Group, which books and
records are the basis for Seller’s audited consolidated financial statements.
Except as disclosed in the Financial Statements or on Schedule 3.4 of the
Disclosure Schedules, the Financial Statements have been prepared in accordance
with U.S. generally accepted accounting principles (“GAAP”), consistently applied, and the rules and regulations of
the Securities and Exchange Commission and fairly present in all material
respects the financial condition of the Business as of such date and the
results of operations of the Business for such periods.

 

Section
3.5                                   Absence
of Undisclosed Liabilities

 

Except for liabilities and contingent claims
(i) incurred in the ordinary course of business and (ii) as otherwise
disclosed herein or on Schedule 3.5 of the Disclosure Schedules or any
other schedule of the Disclosure Schedules or the Financial Statements (or
Notes thereto), the Business does not have any liabilities or contingent claims
(whether direct, indirect, accrued or contingent).

 

12

 

Section
3.6                                   Absence
of Certain Changes

 

Except as set forth on Schedule 3.6 of the
Disclosure Schedules or as otherwise contemplated by this Agreement, since November 29,
2002:

 

(a)                                  Each
member of the Seller Group has carried on the Business in the ordinary course
consistent with past practice and there has not been any Material Adverse
Effect (as defined below); and

 

(b)                                 No
member of the Seller Group has:

 

(i)                                     sold,
assigned, licensed, transferred, conveyed or otherwise disposed of any of the
Assets with a fair market value in the aggregate in excess of $100,000, except
in connection with the sale or license of Products to customers in the ordinary
course of business;

 

(ii)                                  made
any loans, advances (other than advances in the ordinary course of business) or
capital contributions to, or investments in, any other person on behalf of the
Business;

 

(iii)                               terminated, modified,
transferred or amended any of the Permits (including Environmental Permits) or
Contracts, except in the ordinary course of business;

 

(iv)                              entered
into any new agreement related to the Business other than renewals of existing
agreements or otherwise in the ordinary course of business;

 

(v)                                 increased
in any manner the compensation (cash, equity or otherwise) of, or paid any
bonus to or increased any bonus level of, any of the Eligible Employees, except
for such increases as are granted in the ordinary course of business consistent
with past practice in accordance with the terms of any employment contract or
collective bargaining agreement as currently in effect;

 

(vi)                              adopted,
granted, extended or increased in any material manner the rate or terms of any
insurance, pension or other employee benefit plan, payment or arrangement made
to, for or with any Eligible Employees, except increases required by any
applicable Law;

 

(vii)                           terminated the employment of
any Eligible Employee, except for cause;

 

(viii)                        made any change in any of the
Business’ present accounting methods and practices;

 

(ix)                                licensed
any intellectual property rights of the Business to or from any third party
pursuant to an arrangement other than in the ordinary course of business;

 

(x)                                   made
or authorized any capital expenditures on behalf of the Business other than in
accordance with the Business’ annual plan or other than capital expenditures
not exceeding $50,000 individually or $200,000 in the aggregate;

 

(xi)                                incurred
any indebtedness for borrowed money, issued any debt securities or assumed,
guaranteed or endorsed the obligations of any other persons on behalf of the
Business or subjected any of the Assets to any Liens;

 

(xii)                             canceled or compromised
any material debt or claim or waived or released any material rights of the
Business; or

 

13

 

(xiii)                          entered into any agreement on
behalf of the Business to do any of the foregoing.

 

(c)                                  Other
than claims made in the ordinary course of business, there are no claims
against any member of the Seller Group to return Products by reason of alleged
overshipments, defective Products or otherwise.  There are no Products of the Business in the hands of customers
under an understanding that such Products would be returnable other than in the
ordinary course of business or pursuant to written contractual provisions which
have been made available to Buyer.

 

As used in this Agreement, “Material Adverse Effect” shall mean any change, circumstance
or effect which, individually or in the aggregate, has had or would reasonably
be expected to have a material adverse change in, or effect on the Assets taken
as a whole or the business, financial condition or results of operations of the
Business taken as a whole or on the ability of any member of the Seller Group
to consummate the transactions contemplated hereby or by the Ancillary
Agreements; provided, however, that none of the following shall
be a Material Adverse Effect: (i) changes in industry or markets in which
the Business operates, (ii) changes resulting from the permitted
disclosure of this Agreement or the transactions contemplated hereby,
(iii) changes in the U.S. or world economy or business condition or (iv)
not satisfying any estimated or projected results of the Business.

 

Section
3.7                                   Intellectual
Property

 

(a)                                  Schedule 3.7(a)
of the Disclosure Schedules lists all Registered Intellectual Property within
the Transferred Intellectual Property. 
To the Knowledge of Seller, each such item of the Registered
Intellectual Property is valid, all necessary registration, maintenance and
renewal fees due prior to the date of this Agreement in connection with such
Registered Intellectual Property have been paid, and all necessary documents
and certificates required to be filed prior to the date of this Agreement in
connection with such Registered Intellectual Property have been filed with the
relevant authorities in the United States or other foreign jurisdictions for
the purposes of maintaining such Registered Intellectual Property.

 

(b)                                 Except
as set forth on Schedule 3.7(b) of the Disclosure Schedules, Seller or
another member of the Seller Group is the exclusive owner of each item of
Transferred Intellectual Property, and no Transferred Intellectual Property is
jointly owned.

 

(c)                                  Except
as set forth on Schedule 3.7(c) of the Disclosure Schedules, (i) each
item of Transferred Intellectual Property, including without limitation all
Registered Intellectual Property which is listed on Schedule 3.7(a) of the
Disclosure Schedules, is free and clear of any Liens and (ii) there are no
agreements between any person and Seller or any member of the Seller Group
encumbering or restricting the transfer or sale of the Transferred Intellectual
Property to Buyer in the manner contemplated by this Agreement.

 

(d)                                 Except
as set forth on Schedule 3.7(d) of the Disclosure Schedules, no
Transferred Intellectual Property is subject to any proceeding (other than
prosecution by Seller of applications and registrations before the U.S.P.T.O.
and relevant authorities of foreign jurisdictions) or other outstanding decree,
order, judgment, agreement or stipulation that restricts in any manner the
transfer thereof by any member of the Seller Group at the Closing or that
affects the validity, use or enforceability of the Transferred Intellectual
Property.

 

(e)                                  Except
as set forth on Schedule 3.7(e) of the Disclosure Schedules and except for
(i) potential license grant obligations resulting from participation in
standards organizations (whether official or de facto), and (ii) implied
licenses to manufacturers, service providers and customers, no member of the
Seller Group has granted any license or right, that is still in effect, in or
to any Transferred Intellectual Property to any

 

14

 

other
person and no member of the Seller Group has transferred or licensed any
Intellectual Property prior to the Closing in contemplation of this
transaction.

 

(f)                                    Except
as set forth on Schedule 3.7(f) of the Disclosure Schedules, off-the-shelf
packaged software, internal software tools and potential licenses pursuant to
participation in standards organizations (whether official or de facto):
(i) to the Knowledge of Seller, the Transferred Intellectual Property and
the Licensed Intellectual Property, along with the rights in Third Party
Intellectual Property granted to Seller under the Intellectual Property
Contracts transferred to Buyer hereunder and the rights licensed under the
Intellectual Property License Agreement, constitute all Intellectual Property
that is used in or necessary for the Business; and (ii) the use and
exploitation of the Assets in the manner such Assets are used prior to the
Closing, including without limitation the operation of the Business, including
the manufacture, use and sale of the Products, by Buyer following the Closing
will not infringe any Intellectual Property owned by the Seller Group and not
otherwise licensed to Buyer under the Intellectual Property License Agreement.

 

(g)                                 Except
as set forth on Schedule 3.7(g) of the Disclosure Schedules, to the
Knowledge of Seller, the operation of the Business, including the manufacture,
use and sale of the Products, does not infringe or misappropriate the
Intellectual Property of any person, or constitute unfair competition or trade
practices under the Laws of any jurisdiction; and (ii) the Seller Group
has not received written notice claiming that the operation of the Business,
including the manufacture, use and sale of the Products, or the use or sale of
any Assets, infringes or misappropriates the Intellectual Property of any
person or constitutes unfair competition or trade practices under the Laws of
any jurisdiction.

 

(h)                                 Schedule 3.7(h)
of the Disclosure Schedules includes all contracts related to the Business, to
which any member of the Seller Group is a party with respect to any Third Party
Intellectual Property and that are being transferred to Buyer under this
Agreement.  Except as disclosed on
Section 3.7(h) of the Disclosure Schedules, no person other than Seller
has by virtue of any agreement which a member of the Seller Group is a party,
ownership rights to improvements in Transferred Intellectual Property, which
improvements are made by any member of the Seller Group.

 

(i)                                     Except
as disclosed on Schedule 3.7(i) of the Disclosure Schedules, to the
Knowledge of Seller, no person is infringing or misappropriating any of the
Transferred Intellectual Property.  Each
member of the Seller Group has taken such reasonable steps as are required to
protect rights in confidential information and Trade Secrets constituting the
Transferred Intellectual Property, Licensed Intellectual Property and Third
Party Intellectual Property.

 

(j)                                     Schedule 3.7(j)
of the Disclosure Schedules lists all Trademark applications and registrations,
including intent to use applications, that are used by any member of the Seller
Group in connection with the Business.

 

(k)                                  Schedule 3.7(k)
of the Disclosure Schedules lists all Products.

 

(l)                                     Neither
this Agreement nor the transactions contemplated by this Agreement, including
the assignment to Buyer, by operation of Law or otherwise, of any contracts or
agreements to which the Seller or its subsidiaries is a party, will result in
(i) any third party being granted rights or access to, or the placement in
or release from escrow, of any software source code or other technology
included in the Transferred Intellectual Property, (ii) to Seller’s
Knowledge, Buyer granting to any third party any right in any Intellectual
Property other than those granted by Seller or its subsidiaries prior to the
Closing, (iii) Buyer being bound by, or subject to, any non-compete
or other restriction on the operation or scope of its businesses, other than
those imposed on Seller or its subsidiaries prior to the Closing, or
(iv) Buyer being obligated to pay any royalties or other amounts to any
third party with respect to the Business in excess of those payable by the
Seller or its

 

15

 

subsidiaries
prior to the Closing under any Contracts other than pursuant to any agreement
that Buyer may need to execute after the Closing Date in connection with the
consummation of the transactions contemplated hereby.

 

(m)                               Schedule 3.7(m)
of the Disclosure Schedule lists all material compilers, development tools, library
functions and files, and the like that, to the Knowledge of Seller, are
currently in use by the Seller Group in connection with the Transferred
Intellectual Property or Licensed Intellectual Property, and that are not
included in the Transferred Intellectual Property or Licensed Intellectual
Property, other than generally commercially available products.  Except as set forth on Schedule 3.7(m) of
the Disclosure Schedules, to the Knowledge of Seller, no open source or public
library software, including any version of any software licensed pursuant to
any GNU public license, is, in whole or in part, embodied or incorporated into
any Product.  Schedule 3.7(m) of
the Disclosure Schedules lists all licenses of Products in source code format
of software incorporated into Products (other than Products that are written in
non-compiled programming languages).  Each
Product conforms in all material respects to the specifications and
documentation therefor and is otherwise in compliance with applicable Law.  Without limiting the foregoing, (1) the
Products (i) will record, store, process, calculate and present calendar
dates falling on and after (and if applicable, spans of time including)
January 1, 2000, and will calculate any information dependent on or
relating to such dates in the same manner, and with the same functionality,
data integrity and performance, as the products record, store, process,
calculate and present calendar dates on or before December 31, 1999, or
calculate any information dependent on or relating to such dates, and
(ii) lose no functionality with respect to the introduction of records
containing dates falling on or after January 1, 2000; (2) the Seller
has secured any export licenses that were necessary for the distribution by
Seller or its subsidiaries of the Products outside the United States; and
(3) the Products do not contain any virus, Trojan horse, worm, or other
software routines or hardware components designed to permit unauthorized
access, or to disable, erase, or otherwise harm software, hardware or data in
an unauthorized manner.

 

(n)                                 For
purposes of this Agreement:

 

(i)                                     “Intellectual
Property” means any
and all rights in, arising out of, or associated with: (A) all United
States and foreign patents and utility models and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, and equivalent or similar rights anywhere in the
world in inventions and discoveries (“Patents”); (B) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists which have not been publicly
disclosed, and all documentation embodying or evidencing any of the foregoing (“Trade
Secrets”);
(C) all copyrights, copyrights registrations and applications therefor and
all other rights corresponding thereto throughout the world (“Copyrights”); (D) all mask works, mask work
registrations and applications therefor, and any equivalent or similar rights
in semiconductor masks, layouts, architectures or topology (“Maskworks”); (E) all industrial designs
and any registrations and applications therefor throughout the world;
(F) all trade names, logos, common law trademarks and service marks,
trademark and service mark registrations and applications therefor and all
goodwill associated therewith throughout the world (“Trademarks”); (G) all World Wide Web
addresses, Uniform Resource Locators, and domain names; and (H) any
similar, corresponding or equivalent rights to any of the foregoing anywhere in
the world.

 

(ii)                                  “Intellectual Property Contract” means any and all Contracts to which
any member of the Seller Group is a party, pursuant to which a member of the
Seller Group obtained any right to use or otherwise exploit any Third Party
Intellectual Property.

 

(iii)                               “Licensed Intellectual Property” has the meaning set forth in the
Intellectual Property License Agreement.

 

16

 

(iv)                              “Products”
means (A) any existing product or product in development listed in
Schedule 3.7(n)(iv) of the Disclosure Schedules.

 

(v)                                 “Registered
Intellectual Property”
means all United States, international and foreign: (A) Patents and
applications therefor, (B) Trademark registrations and applications,
intent-to-use applications; (C) Copyright registrations and applications;
(D) any registrations and applications to register Maskworks;
(E) registrations for Uniform Resource Locators, worldwide web site addresses
and domain names; and (F) any other application, certificate, filing,
registration or other document issued by, filed with, or recorded by, any
state, government or other public legal authority claiming, evidencing, or
recording any Intellectual Property.

 

(vi)                              “Third Party Intellectual Property” means any Intellectual Property used
by the Seller Group in the Business not owned by any member of the Seller
Group, but to which a member of the Seller Group has a right to use or
otherwise exploit pursuant to a written agreement.

 

(vii)                           “Transferred Intellectual Property” means the Intellectual Property
owned, in whole or in part, by any member of the Seller Group and is:
(a) used in the Business; and (b) not used by any member of the
Seller Group other than related to the Business.  Notwithstanding the foregoing, “Transferred Intellectual
Property” shall also include all Intellectual Property embodied in the Products
and all Registered Intellectual Property, in each case that is set forth on
Schedule 3.7(n)(vii)(A) of the Disclosure Schedules.

 

(o)                                 The
Products include all products currently sold under the COMMWORKS trademark.

 

(p)                                 Schedule 3.7(p)
of the Disclosure Schedules sets forth a list of all standards agreements and
organizations which any member of the Seller Group or any of their officers,
directors or employees are members and which may by virtue of such membership
have rights in, or the other members of which may have rights in, the
Transferred Intellectual Property, provided that Seller shall have the right to
update such Schedule 3.7(p) of the Disclosure Schedule prior to the
Closing Date pursuant to Section 5.18 hereof.

 

Section
3.8                                   Title,
Ownership and Related Matters

 

(a)                                  As
used in this Agreement, the term “Liens” shall mean any pledge, mortgage, charge, claim, title defect,
security interest, conditional and installment sales agreement, encumbrance or
other lien.  As used herein, the term “Permitted
Encumbrances” shall
mean (i) Liens for current Taxes not yet due or Taxes being contested in
good faith, (ii) mechanics’, materialmen’s, warehousemen’s, contractors’,
workmens’, repairmens’, carriers’ and similar Liens attaching by operation of
law, incurred in the ordinary course of business and securing payments not
delinquent or payments which are being contested in good faith, which are not,
individually or in the aggregate, material, (iii) the rights, if any, of
third-party suppliers or other vendors having possession of equipment of the
Business, (iv) imperfections of title, easements and zoning restrictions
on real property, if any, which do not materially impair the use of such real
property or the operations of the Business thereon and (v) those items
listed on Schedule 3.8(a) of the Disclosure Schedules.

 

(b)                                 Schedule 3.8(b)
of the Disclosure Schedules contains a complete and correct list, as of the
date hereof, of all Business Real Property subject to a lease or sublease (the
“Leased Real Property”).  Schedule 3.8(b) sets forth, for each of the
Leased Real Property, the address, landlord and tenant for each such lease or
sublease (the “Leases”).  A member of the Seller Group holds a valid
leasehold interest in the Leased Real Property, in each case, subject only to
the terms, covenants and conditions of the applicable Lease or any Liens or
other encumbrances created by the landlord or predecessors to the
landlord.  Seller has delivered true,
correct and complete copies of all Leases with respect to the Leased Real
Property, including all amendments, assignments and agreements relating thereto
to Buyer.  As of the date hereof, all
Leases

 

17

 

relating
to the Leased Real Property are in full force and effect and constitute legal,
valid and binding obligations of Seller or other members of the Seller
Group.  There exist no defaults or
conditions which with the giving of notice or the passage of time, or both,
would constitute a default by any member of the Seller Group, or to the
Knowledge of Seller, the other party or parties thereto with respect to the
Leases for the Leased Real Property.  No
member of the Seller Group (i) has transferred any portion of its
leasehold interest in any of the Leases (including, without limitation, by
sublease, assignment or otherwise); nor (ii) is permitting any unrelated
third parties to occupy any premises subject to any of the Leases other than
pursuant to the written terms of such Leases.

 

(c)                                  (i) To
the Knowledge of Seller, the use and operation by Seller Group of the Business
Real Property does not violate any instrument of record or agreement affecting
the Business Real Property; (ii) to the Knowledge of Seller, there is no
violation of any covenant, condition, restriction, or easement relating to the
Business Real Property; (iii) no member of the Seller Group has received
notice of violations of any applicable building, zoning, subdivision, land use
and other similar applicable Laws affecting the Business Real Property (“Real
Property Laws”);
(iv) to the Knowledge of Seller, none of the Business Real Property is
subject to any pending or threatened suit for condemnation or other taking by
any governmental authority; and (v) all utilities (including, without
limitation, electricity, water, heat, ventilation and air conditioning)
necessary for the use of the Business Real Property for its current use by the
Business are available to the Business Real Property.

 

(d)                                 To
the Knowledge of Seller, all Inventory of the Business, whether reflected on
the Reference Balance Sheet or subsequently acquired or manufactured, consists
of a quality and quantity expected to be usable and/or salable in the ordinary
course of business, except for inventory that is considered by the Seller to be
excess or obsolete and which has been written down in accordance with Seller’s
normal accounting practices and in accordance with GAAP applied consistent with
the Reference Balance Sheet.

 

(e)                                  Except
as set forth on Schedule 3.8(e) of the Disclosure Schedules, Seller Group
has, and at the Closing Seller Group will deliver to Buyer, good and valid
title to the Assets (other than such real property subject to leases, which is
addressed in subsection (b)), free and clear of all Liens except for
Permitted Encumbrances.

 

Section
3.9                                   Subsidiaries

 

Set forth on Schedule 3.9 of the Disclosure
Schedules is an organizational chart and a complete and accurate list of all of
the subsidiaries of Seller that hold any of the Assets, specifying opposite
each such subsidiary (i) the jurisdiction in which such entity is
incorporated or organized, (ii) the jurisdictions in which such entity is
required to be registered for the Business to be conducted as conducted
immediately prior to the Closing, (iii) a description of the Assets held
or the operations related to the Business conducted by such entity and
(iv) the number of Eligible Employees employed by such subsidiary.  Except as set forth on Schedule 3.9, no
subsidiary of Seller holds any right in an asset or property, tangible or
intangible, related to the Business or conducts any operations related to the
Business.

 

Section
3.10                            Litigation;
Product Liability

 

(a)                                  Except
as set forth on Schedule 3.10(a) of the Disclosure Schedules, there are no
claims, actions, suits, administrative, arbitration or other inquiries,
investigations or proceedings (collectively, “Cases”) pending, or, to the Knowledge of Seller, threatened, against
any member of the Seller Group or any of its properties, assets and business
operations, as of the date hereof, by or before any court, governmental or
regulatory authority or by any third party, in each case related to the
Business.  No member of the Seller

 

18

 

Group is
subject to any judgments, orders or decrees entered in any lawsuits or
proceedings related to the Business.

 

(b)                                 Except
as set forth on Schedule 3.10(b) of the Disclosure Schedules, as of the
date hereof, there are no pending, or, to the Knowledge of Seller, threatened
civil, criminal or administrative actions, suits, demands, claims, notices of
violation, investigations, proceedings or demand letters against any member of
the Seller Group relating to any alleged hazard or alleged defect in design,
manufacture, materials or workmanship, including any failure to warn or alleged
breach of express or implied warranty or representation, relating to any
product manufactured, distributed or sold by or on behalf of any member of the
Seller Group with respect to the Business. 
Seller has provided Buyer with true and complete copies of (or forms of)
all written warranties, indemnifications or guarantees with respect to Products
that Seller Group has extended to any of its customers.

 

Section
3.11                            Compliance
with Applicable Law

 

(a)                                  Except
as set forth on Schedule 3.11(a) of the Disclosure Schedules, each member
of the Seller Group has conducted and conducts the Business in compliance in
all material respects with all applicable Laws, orders, ordinances, rules and
regulations of any federal, state, local or foreign governmental authority
applicable to the Business (other than Environmental Laws, which are governed
by Section 3.15).

 

(b)                                 Except
as disclosed on Schedule 3.11(b) of the Disclosure Schedules:

 

(i)                                     the
members of the Seller Group hold all governmental licenses necessary for the
operation of the Business as presently conducted by Seller Group (the “Licenses”) (as used in this Agreement, the
term “Licenses” shall not be deemed to include any Environmental Permits or
Environmental Laws, referred to in Section 3.15);

 

(ii)                                  to
the Knowledge of Seller each License is valid, binding and in full force and
effect; and

 

(iii)                               no member of the Seller
Group is, nor has it received any written or, to the Knowledge of Seller, oral
notice that it is, in default (or with the giving of notice or lapse of time or
both, would be in default) under any License.

 

Section
3.12                            Certain
Contracts and Arrangements

 

Except as set forth on Schedule 3.12 of the
Disclosure Schedules, as of the date hereof and as related to the Business, no
member of the Seller Group is a party to contracts in any of the following
categories that remain executory:

 

(a)                                  collective
bargaining agreement covering Business Employees;

 

(b)                                 employment
or consulting agreement (for an individual consultant) related to the Business
providing for total annual payments in excess of $200,000;

 

(c)                                  indenture,
mortgage, note, installment obligation, agreement or other instrument related
to the Business, in each case relating to the borrowing of money (other than
intercompany accounts, which shall be governed by Section 1.9 hereof), or
the guaranty of any obligation for the borrowing of money, except any such
agreement with an aggregate outstanding principal amount not exceeding
$200,000;

 

19

 

(d)                                 partnership,
joint venture or other similar agreement or arrangement related to the Business
requiring the commitment of capital in excess of $200,000;

 

(e)                                  material
license or other similar agreement related to the Business (other than
(i) governmental permits or licenses used in connection with the operation
of the Business and (ii) off-the-shelf software licenses) not already
disclosed pursuant to Section 3.7;

 

(f)                                    agency,
sales representation, distribution or other similar agreement related to the
Business under which the Seller Group paid sales fees or commissions in excess
of $200,000 for the 12 months ended November 29, 2002 (each, a “Distribution Agreement”);

 

(g)                                 agreement
for the purchase of supplies or materials related to the Business other than in
the ordinary course of business providing for annual payments in excess of
$200,000;

 

(h)                                 agreement
for the sale of goods or services related to the Business other than in the
ordinary course of business providing for annual payments in excess of
$200,000;

 

(i)                                     agreement
(non-compete or otherwise) or commitment that is binding upon any member of the
Seller Group or any of its officers, directors or employees which has or may
have the effect of prohibiting or impairing any material business practice, any
acquisition of material property (tangible or intangible) or the conduct of the
Business as presently conducted by Seller Group or, to the Knowledge of Seller,
by Buyer;

 

(j)                                     agreement
under which any member of the Seller Group or, in each case, its officer,
director, or employee is restricted from selling, licensing or otherwise
distributing any Products or services related to the Products to, customers or
potential customers or any class of customers in any geographic area, during
any period of time or in any segment of the market;

 

(k)                                  any
agreement included in the Assets which is not terminable without penalty on
three (3) months’ or fewer days’ notice, providing for payments individually or
in the aggregate in excess of $200,000;

 

(l)                                     other
than this Agreement, any agreement for the acquisition or disposition of assets
related to the Business entered into in the last three (3) years, other than in
the ordinary course of business; and

 

(m)                               agreement
(except as otherwise set forth in (a) through (l) above), other than in the
ordinary course of business that is material to the Business.

 

Except as set forth on Schedule 3.12 of the Disclosure Schedules,
all such agreements are valid, binding and enforceable in accordance with their
terms and Seller Group is not in default under any of the aforesaid agreements
(to the extent any such default could reasonably be expected to have a material
effect on the Seller Groups’ rights, obligations or remedies pursuant to such
agreement), and, to the Knowledge of Seller, no other party is in default under
any of the aforesaid agreements.  Seller
Group has provided Buyer with access to true and complete copies of each
agreement, contract and commitment identified on Schedule 3.12 of the
Disclosure Schedules that is not subject to a confidentiality agreement
limiting its disclosure.

 

Section
3.13                            Taxes

 

Except as set forth on Schedule 3.13:

 

(a)                                  The
members of the Seller Group have duly filed all Tax Returns related to the
Business that are required to be filed and have duly paid or caused to be duly
paid in full or made provision in accordance

 

20

 

with
GAAP (or there has been paid or provision has been made on their behalf) for
the payment of all Taxes (as hereinafter defined) related to the Business that
are owed (whether or not shown on any Tax Returns) for all periods or portions
thereof ending on or prior to the Closing Date.  All such Tax Returns are correct and complete in all material
respects and accurately reflect all liability for Taxes for the periods covered
thereby.

 

(b)                                 There
are no Liens for Taxes on the Assets or the Business other than Permitted
Encumbrances.  To the Knowledge of
Seller, there is no basis for the assertion of any claim relating to or
attributable to the Taxes which, if adversely determined, would result in any
lien upon any of the Assets or the Business.

 

(c)                                  Since
the date of the Reference Balance Sheet, the members of the Seller Group have
not made any change in accounting methods, received a ruling from any taxing
authority or signed an agreement with respect thereto or signed any closing
agreement with respect to any Taxes that are related to the Business for any
period ending on or before the Closing that could have any effect upon Buyer,
the Assets or the Business after the Closing.

 

(d)                                 The
members of the Seller Group have complied in all material respects with all
applicable Laws, rules and regulations relating to the payment and withholding
of Taxes related to the Business within the time and the manner prescribed by
Law, and have withheld and paid over to the proper taxing authorities all
amounts required to be so withheld and paid over under applicable Laws.

 

(e)                                  No
federal, state, local or foreign audits, examinations, investigations or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the members of the Seller Group that are
related to the Business.

 

(f)                                    All
deficiencies for Tax related to the Business that have been claimed, proposed
or asserted have been fully paid or finally settled, and no issue has been
raised in any examination by any taxing authority that, by application of
similar principles, could reasonably be expected to result in the proposal or
assertion of such a Tax deficiency for another year not so examined and have
any effect upon Buyer, the Assets or the Business after the Closing.

 

(g)                                 There
are no outstanding requests, agreements, consents or waivers to extend the
statutory period of limitations applicable to the assessment of any Taxes or
deficiencies for Taxes related to the Business against any member of the Seller
Group.

 

(h)                                 Other
than any Tax Returns that have not yet been required to be filed (taking into
account all proper extensions), the Seller Group has made available to Buyer
true, correct and complete copies of all Tax Returns or portions thereof
related to the Business.

 

(i)                                     Schedule 3.13(i)
of the Disclosure Schedules sets forth all material elections with respect to
Taxes related to the Business made by each member of the Seller Group to the
extent such elections would be binding upon the Buyer after the Closing.

 

(j)                                     No
member of the Seller Group has received written notice of any claim made by an
authority in a jurisdiction where such member of the Seller Group does not file
Tax Returns, that the Seller Group is or may be subject to taxation by that
jurisdiction in respect of the Assets or the Business.

 

(k)                                  “Tax” or, collectively, “Taxes,”
shall mean (i) any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem,

 

21

 

transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts; (ii) any liability for the payment of any amounts of the
type described in clause (i) as a result of being or ceasing to be a
member of an affiliated, consolidated, combined or unitary group for any period
(including, without limitation, any liability under Treas. Reg.
Section 1.1502-6 or any comparable provision of applicable Law); and
(iii) any liability for the payment of any amounts of the type described
in clause (i) or (ii) as a result of any express or implied
obligation to indemnify any other person or as a result of any obligations
under any agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor entity.

 

(l)                                     “Tax Return” shall mean any report, return
(including any information return), statement or other document with respect to
Taxes including, without limitation, any amendments thereto.

 

Section
3.14                            Employee
Benefit Plans; ERISA; Employees

 

(a)                                  With
the exception of the definition of “Affiliate” set forth in
Section 3.14(a)(i) below (which definition shall apply only to this
Section 3.14) for purposes of this Agreement, the following terms shall
have the meanings set forth below:

 

(i)                                     “Affiliate” shall mean any other person or
entity under common control with the Seller within the meaning of
Section 414(b), (c), (m) or (o) of the Code and the regulations issued
thereunder;

 

(ii)                                  “COBRA” shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended;

 

(iii)                               “Code” shall mean the Internal Revenue Code
of 1986, as amended;

 

(iv)                              “Employee” shall mean any current or former
or retired employee, consultant or director of the Seller or any Affiliate;

 

(v)                                 “Employment
Agreement” shall mean each management, employment, severance,
consulting, relocation, repatriation, expatriation, visas, work permit or other
agreement, contract or understanding between the Seller Group and any Affected
Employee;

 

(vi)                              “ERISA” shall mean the Employee Retirement
Income Security Act of 1974, as amended;

 

(vii)                           “FMLA” shall mean the Family Medical Leave Act of 1993, as
amended;

 

(viii)                        “International Employee Plan”
shall mean each Seller Employee Plan that has been adopted or maintained by the
Seller or any Affiliate, whether informally or formally, or with respect to
which the Seller or any Affiliate will or may have any liability,
for the benefit of Employees who perform services outside the United States;

 

(ix)                                “IRS”
shall mean the Internal Revenue Service;

 

(x)                                   “Pension Plan” shall mean each Seller
Employee Plan which is an “employee pension benefit plan,” within the meaning
of Section 3(2) of ERISA;

 

22

 

(xi)                                “Qualified Beneficiary” shall mean an
individual that is identified in Section 4980B(g)(1) of the Code; and

 

(xii)                             “Seller Employee Plan” shall
mean any plan, program, policy, practice, contract, agreement or other
arrangement providing for compensation, severance, termination pay, deferred
compensation, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits or remuneration of any kind, whether
written or unwritten or otherwise, funded or unfunded, including without
limitation, each “employee benefit plan,” within the meaning of
Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by the Seller or any Affiliate for the benefit
of any Affected Employee.

 

(b)                                 Schedule 3.14(b)
of the Disclosure Schedules (i) contains an accurate and complete list of
each Seller Employee Plan, International Employee Plan and Employment Agreement
related to the Business or any current Business Employee.  Schedule 3.14(b) of the Disclosure
Schedules contains a complete and accurate list of all the names of the full-time
employees of the Business (the “Business
Employees”), each Business Employee’s position and the entity that
employs such Business Employee.

 

(c)                                  Seller
and each of its Affiliates has performed in all material respects all
obligations required to be performed by them under, are not in default or
violation of, and have no knowledge of any default or violation by any other
party to each Seller Employee Plan, and each Seller Employee Plan has been
established and maintained in all material respects in accordance with its
terms and in compliance with all applicable Laws, including but not limited to
ERISA or the Code.

 

(d)                                 Neither
the Seller nor any of its Affiliates has ever maintained, established,
sponsored, participated in, contributed to, or has been required to contribute
to any Pension Plan that is subject to Title IV of ERISA or
Section 412 or 413 of the Code related to the Business or Business Employees.

 

(e)                                  No
Seller Employee Plan provides, or reflects or represents any liability to
provide retiree benefits (including health, life insurance or otherwise) to any
person for any reason, except as may be required by COBRA or other applicable
statute, and no member of the Seller Group has represented, promised or
contracted (whether in oral or written form) to any Eligible Employee (either
individually or to Business Employees as a group) that such Employee(s) would
be provided with retiree health, except to the extent required by statute.

 

(f)                                    Neither
the Seller nor any of its Affiliates has, prior to the Closing Date and in any
material respect, violated any of the health care continuation requirements of
COBRA, the requirements of FMLA, the requirements of the Health Insurance
Portability and Accountability Act of 1996, the requirements of the Women’s
Health and Cancer Rights Act of 1998, the requirements of the Newborns’ and
Mothers’ Health Protection Act of 1996, or any amendment to each such act, or
any similar provisions of state Law applicable to Eligible Employees.

 

(g)                                 Each
member of the Seller Group (i) is in compliance in all material respects
with all applicable Law respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Eligible Employees, (ii) has withheld and reported all amounts required by
applicable Law or by contract to be withheld and reported with respect to
wages, salaries and other payments to Eligible Employees, (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing, and (iv) is not liable for any payment
to any trust or other fund governed by or maintained by or on behalf of any
governmental authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Eligible Employees (other
than routine payments to be made in the normal course of business and
consistent with past practice).

 

23

 

There
are no pending, or to the Knowledge of Seller, threatened claims or actions
against any member of the Seller Group under any worker’s compensation policy
or long-term disability policy, or similar policies in foreign jurisdictions.

 

(h)                                 No
work stoppage or labor strike by the Eligible Employees is pending, or, to the
Knowledge of Seller, threatened.  To the
Knowledge of Seller there are no activities or proceedings of any labor union
to organize any Eligible Employees. 
Except as set forth on Schedule 3.14(h) of the Disclosure
Schedules, there are no actions, suits, claims, labor disputes or grievances
pending, or, to the Knowledge of Seller, threatened relating to any labor,
safety or discrimination matters involving any Eligible Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to the Seller Group.  The Seller Group has not engaged in any
unfair labor practices within the meaning of the National Labor Relations Act
with respect to Eligible Employees.  No
member of the Seller Group is presently, nor has any such member been in the
past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to Eligible Employees and no collective bargaining
agreement is being negotiated by any member of the Seller Group with respect to
Eligible Employees.

 

(i)                                     No
member of the Seller Group is, nor has any such member ever had the obligation
to, maintain, establish, sponsor, participate in, or contribute to any Seller
Employee Plan, whether a Seller Employee Plan by adoption of a member of the
Seller Group or by imposition or application pursuant to applicable Law, with
respect to which any member of the Seller Group will or may have any liability
or Employment Liabilities for the benefit of Eligible Employees who perform
services outside the United States.

 

Section
3.15                            Environmental
Matters

 

(a)                                  For
purposes of this Agreement, the following terms shall have the meanings
ascribed to them below:

 

(i)                                     “Business Facility” is any Business Real
Property and any other property including the land, the improvements thereon,
the groundwater thereunder and the surface water thereon, that is or at any
time has been owned, operated, occupied, controlled or leased by any member of
the Seller Group in connection with the operation of the Business.

 

(ii)                                  “Disposal Site” is a landfill, disposal
site, disposal agent, waste hauler or recycler of Hazardous Substances, or any
real property other than a Business Facility receiving Hazardous Substances
used or generated by the Business.

 

(iii)                               “Environmental Laws” are all applicable
Laws, directives, guidance having the force of Laws, or orders promulgated by
any governmental authority which prohibit, regulate or control any Hazardous
Substance or any Hazardous Substance Activity, including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, the Resource Recovery and Conservation Act of 1976, the Federal Water
Pollution Control Act, the Clean Air Act, the Hazardous Substances
Transportation Act, the Occupational Safety and Health Act, the Toxic
Substances Control Act and the Clean Water Act, all as amended at any time.

 

(iv)                              “Environmental Permit” is any approval,
permit, registration, certification, license, clearance or consent required to
be obtained from any private person or any governmental authority with respect
to a Hazardous Substances Activity which is or was conducted by any member of
the Seller Group in connection with the Business.

 

24

 

(v)                                 “Hazardous Substance” is any material or
substance, whether gaseous, liquid, solid or in other form that has been
designated by any governmental authority to be radioactive, toxic, hazardous or
otherwise a danger to health, reproduction or the environment.

 

(vi)                              “Hazardous Substances Activity” is the
transportation, transfer, recycling, storage, use, treatment, manufacture,
removal, remediation, release, exposure of others to, sale, or distribution of
any Hazardous Substances or any product or waste containing a Hazardous
Substance, or regulated manufacture of a product with ozone depleting
substances, in each case relating to the Business.

 

(b)                                 Except
as set forth on Schedule 3.15(b) of the Disclosure Schedule:

 

(i)                                     Except
in compliance with Environmental Laws, no Hazardous Substances are present as
of the Closing on any Business Facility currently owned, operated, occupied,
controlled or leased by any member of the Seller Group or were present on any
other Business Facility at the time it ceased to be owned, operated, occupied,
controlled or leased by any member of the Seller Group.  To the Knowledge of Seller, there are no
underground storage tanks, asbestos which is friable (other than asbestos that
has been encapsulated in accordance with Environmental Laws) or likely to
become friable or PCBs present on any Business Facility currently owned,
operated, occupied, controlled or leased by any member of the Seller Group.

 

(ii)                                  Each
member of the Seller Group has conducted all Hazardous Substances Activities
related to the Business in compliance in all material respects with all
applicable Environmental Laws.  To the
Knowledge of Seller, the Hazardous Substances Activities of the members of the
Seller Group prior to the Closing have not resulted in the exposure of any
person to a Hazardous Substance in a manner which has caused or could reasonably
be expected to cause an adverse health effect to any such person.

 

(iii)                               No Environmental Permits
are required for the operation of the Business as presently conducted.

 

(iv)                              No
member of the Seller Group has received written notice of any action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or threatened, concerning or relating to any Hazardous Substances
Activity of any member of the Seller Group related to the Business.

 

(v)                                 No
member of the Seller Group has received written notice of any action,
proceeding, liability or claim exists or is threatened against any Disposal
Site or against any member of the Seller Group with respect to any transfer or
release of Hazardous Substances related to the Business to a Disposal Site
which could reasonably be expected to subject any member of the Seller Group to
liability.

 

(vi)                              To
the Knowledge of Seller, there is no fact or circumstance that could result in
any environmental liability that could reasonably be expected to result in a
Material Adverse Effect on the Business.

 

(vii)                           Each member of the Seller
Group has delivered to Buyer or made available for inspection by Buyer all
environmental audits and environmental assessments conducted within the last
five years of any Business Facility conducted at the request of, or otherwise
in the possession of any member of the Seller Group.  Each member of the Seller Group has complied with all
environmental disclosure obligations imposed by applicable Law with respect to
this transaction.

 

25

 

Section
3.16                            Insurance

 

(a)                                  All
insurance policies related to the Business currently maintained by any member
of the Seller Group on which any member of the Seller Group is a named insured
or beneficiary, as are current, are in full force and effect, all premiums due
thereon have been paid, and each member of the Seller Group has complied in all
material respects with the provisions of such policies, and all such policies
either specifically include Seller or one of the other members of the Seller
Group as a named insured or include omnibus named insured language which
generally includes Seller or one of the other members of the Seller Group.

 

(b)                                 No
Proceeding is pending or, to the Knowledge of Seller, threatened, to revoke,
cancel or limit such policies and no notice of cancellation of any policies
related to the Business has been received by any member of the Seller Group.

 

(c)                                  Except
as set forth on Schedule 3.16(c) of the Disclosure Schedules, the members
of the Seller Group are in compliance with all warranties contained in all
insurance policies related to the Business.

 

(d)                                 No
member of the Seller Group has taken or failed to take any action that would
enable the insurers under policies related to the Business to avoid liability
for claims arising out of occurrences prior to the Closing Date.

 

Section
3.17                            Labor
Matters

 

Except as set forth on Schedule 3.17 of the
Disclosure Schedules, (i) no member of the Seller Group is a party to any
labor agreement with any labor organization, group or association with respect
to Eligible Employees; (ii) there is no labor strike, dispute, slowdown,
stoppage or lockout actually pending (for which notice has been provided), or
to the Knowledge of Seller, threatened against the Business; (iii) there
is no unfair labor practice charge or complaint against any member of the
Seller Group related to the Business pending (for which notice has been
provided) or, to the Knowledge of Seller, threatened before the National Labor
Relations Board or any similar foreign agency; (iv) there is no pending
grievance nor any pending arbitration proceeding arising out of or under any
collective bargaining agreements related to the Business; (v) no material
charges with respect to or relating to any member of the Seller Group are
pending before the Equal Employment Opportunity Commission or any state, local
or foreign agency responsible for the prevention of unlawful employment
practices; and (vi) no member of the Seller Group has received notice of
the intent of any federal, state or foreign governmental authority responsible
for the enforcement of labor or employment laws to conduct an investigation
with respect to or related to the Business and no such investigation is in
progress. A copy of the material written personnel policies of the Business
currently in effect has been delivered to Buyer.

 

Section
3.18                            Suppliers

 

Schedule 3.18 of the Disclosure Schedules sets
forth a list of all the Business’ 20 most significant suppliers (in terms of
anticipated significance for manufacturing in the next 12 months) for Products
or any component or service necessary or significant for the Products and all
suppliers who are the only available source for Products or any component or
service necessary or significant for the Products (collectively, the “Key
Suppliers”), showing
the approximate total purchases by or on behalf of the Business from each such
Key Supplier during such period and all open commitments to such Key Suppliers as
of the date hereof.  Since November 29,
2002, no Key Supplier has declined to renew any contract with any member of the
Seller Group related to the Business or notified any member of the Seller Group
in writing or, to the Knowledge of the Seller, orally that such Key Supplier
will no longer provide any component or service necessary for the Products or
for which such Key Supplier is the only available source for Products or any
component or

 

26

 

service necessary for the Products. 
To the Knowledge of Seller, since November 29, 2002, no Key Supplier has
(i) been abnormally late in the delivery of any component or service
necessary for the Products or for which such Key Supplier is the only available
source for Products or any component or service necessary for the Products,
(ii) suffered a material adverse change in its financial condition or
business operations likely to affect its ability to continue to provide the
services or products it supplies for the Business, including the consummation
or contemplation of any bankruptcy filing, or (iii) suffered any
threatened or actual material labor dispute that is ongoing as of the date of
this Agreement and is likely to impact its ability to deliver products or services
for the Business.

 

Section
3.19                            Customers

 

Schedule 3.19 of the Disclosure Schedules sets
forth a true and complete list of the customers accounting for at least 75% of
the Business’ revenue during calendar year 2002 (the “Significant Customers”), showing the
approximate total sales by or on behalf of the Business to each such customer
during such period.  Since November 29,
2002, no Significant Customer has declined to renew any contract with any
member of the Seller Group in connection with the Business or notified any
member of the Seller Group in writing or, to the Knowledge of the Seller,
orally that such Significant Customer will no longer purchase Products or
services relating to Products from the Seller Group.  To the Knowledge of Seller, since November 29, 2002, no
Significant Customer has (i) been abnormally late in making any payments to the
Seller Group, (ii) suffered a material adverse change in its financial
condition or business operations likely to affect its ability to continue to purchase
Products or services from the Seller Group, including the consummation or
contemplation of any bankruptcy filing, or (iii) suffered any threatened or
actual material labor dispute that is ongoing as of the date of this Agreement
and is likely to impact its ability to purchase Products or services from the
Seller Group.

 

Section
3.20                            Assets
and Permits Necessary to the Business; Equipment

 

(a)                                  Except
as set forth on Schedule 3.20(a) of the Disclosure Schedules, following
the Closing, the Assets will represent all assets reasonably necessary to carry
on the Business in substantially the same manner as presently conducted.

 

(b)                                 Schedule 3.20(b)
of the Disclosure Schedules lists all material Permits.  Except as set forth on
Schedule 3.20(b), all Permits are in full force and effect and are
transferable to Buyer (except for any Permit the failure of which to be in a
full force and effect or to be transferable to Buyer would not prevent Buyer
from operating the Business after the Closing in the same manner as operated by
Seller prior to the Closing).

 

(c)                                  Schedule 3.20(c)
of the Disclosure Schedules lists all items of equipment (the “Equipment”) owned or leased by any member of
the Seller Group used primarily in the Business or reflected in the Reference
Balance Sheet (except for Equipment which individually has a net book value not
exceeding $5,000). The Reference Balance Sheet includes sufficient personal
computers for each Affected Employee that has a personal computer as of the
date hereof for use related to the Business to have a personal computer for use
related to the Business following the Closing.

 

Section
3.21                            Transactions
with Affiliates

 

Except as set forth on Schedule 3.21 of the
Disclosure Schedules, neither Seller nor any of its subsidiaries is a Key
Supplier, Significant Customer or distributor under any Distribution
Agreement.  There are no Contracts with
any member of the Seller Group that survive the Closing.

 

27

 

Section
3.22                            Certain
Fees

 

Except for any broker, finder or investment banker,
whose fee and commission is the sole responsibility of Seller Group, there is
no broker, finder or investment banker entitled to any brokerage, finder’s or
other fee or commission, or to the reimbursement of any of its expenses, in
connection with the transactions contemplated hereby based upon arrangements
made by Seller Group or on Seller Group’s behalf.

 

ARTICLE IV

 

REPRESENTATIONS
AND WARRANTIES OF BUYER

 

Buyer hereby represents and warrants to Seller Group as
follows:

 

Section
4.1                                   Organization

 

Buyer is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation.

 

Section
4.2                                   Authorization

 

Buyer has the corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements and consummate the
transactions contemplated hereby and thereby. 
The execution and delivery of this Agreement and the Ancillary
Agreements by Buyer and the consummation of the transactions contemplated
hereby has been approved by the Board of Directors of Buyer, and no other
corporate proceedings on the part of Buyer are necessary to authorize the
execution, delivery and performance of this Agreement and the Ancillary
Agreements or the consummation of the transactions contemplated hereby or
thereby.  This Agreement and the
Ancillary Agreements have been duly executed and delivered by Buyer and
constitute, and when executed and delivered, other agreements, documents and
instruments to be executed and delivered by Buyer, as applicable, pursuant
hereto will constitute, a valid and binding agreement of Buyer, enforceable
against Buyer in accordance with their respective terms.

 

Section
4.3                                   Consents
and Approvals; No Violations

 

Except for applicable requirements of the HSR Act or
antitrust or other competition Law of other jurisdictions, neither the
execution, delivery or performance of this Agreement nor the consummation by
Buyer of the transactions contemplated hereby will (a) conflict with or
result in any breach or violation of any provision of the articles of
association of Buyer or the certificate of incorporation or bylaws of Buyer;
(b) require any filing or registration with, or notice or declaration to,
or the obtaining of any permit, license, authorization, consent or approval of,
any governmental or regulatory authority whether within or outside the United
States; (c) violate, conflict with or result in a default (or any event
which, with notice or lapse of time or both, would constitute a default) under,
or result in any termination, cancellation or acceleration, or give rise to any
such right of termination, cancellation or acceleration under, any of the
terms, conditions or provisions of any note, mortgage, other evidence of
indebtedness, guarantee, license, agreement, lease or other instrument or
obligation to which Buyer is a party or by which Buyer or any of its assets is
subject or by which any of them may be bound; (d) violate any order,
injunction, decree, statute, rule or regulation applicable to Buyer; or
excluding from the foregoing clauses (b), (c) and (d) such requirements,
conflicts, defaults, rights or violations that would not adversely affect the
ability of Buyer to consummate the transactions contemplated by this Agreement
or that become applicable as a result of any acts or omissions by, or the
status of or any facts pertaining to, the Business or Seller Group.

 

28

 

Section
4.4                                   Certain
Fees

 

Except for any broker, finder or investment banker,
whose fee and commission is the sole responsibility of Buyer, there is no
broker, finder or investment banker entitled to any brokerage, finder’s or
other fee or commission, or to the reimbursement of any of its expenses, in
connection with the transactions contemplated hereby based upon arrangements
made by Buyer or on Buyer’s behalf.

 

Section
4.5                                   Funding

 

The Buyer has adequate funds on hand and will have
adequate funds at Closing to fund the entire Purchase Price.

 

ARTICLE V

 

COVENANTS

 

Section
5.1                                   Conduct
of the Business

 

Seller agrees that, during the period from the date of
this Agreement to the Closing Date, except (i) as otherwise expressly
contemplated by this Agreement or the transactions contemplated hereby, or
(ii) as consented to by Buyer in writing, it shall (and Seller shall cause
the other members of the Seller Group to):

 

(a)                                  conduct
the Business in the ordinary course consistent with past practice; use
commercially reasonable efforts to preserve intact the Business’ organization;
use commercially reasonable efforts to keep available the services of the
Business’ current officers and employees, and preserve relationships with those
persons having business dealings with the Business to the end that its goodwill
and ongoing business shall be unimpaired at the time of the Closing, including
the payment of any necessary registration, maintenance and renewal fees due
prior to the Closing Date in connection with the Registered Intellectual
Property included within the Transferred Intellectual Property; and

 

(b)                                 not:

 

(i)                                     sell,
assign, sublease, license, transfer, convey or otherwise dispose of any of the
Assets other than in connection with sales of Products to customers in the
ordinary course of business;

 

(ii)                                  make
any loans, advances (other than advances in the ordinary course of business) or
capital contributions to, or investments in, any other person on behalf of the
Business;

 

(iii)                               terminate, modify,
transfer or amend any of the Permits (including Environmental Permits) or
Contracts or except in the ordinary course of business;

 

(iv)                              enter
into any new agreement related to the Business other than renewals of existing
agreements or otherwise in the ordinary course of business;

 

(v)                                 increase
in any manner the compensation (cash, equity or otherwise) of any of the
Eligible Employees, except for such increases as are granted in the ordinary
course of business consistent with past practice in accordance with the terms
of any employment contract or collective bargaining agreement as currently in
effect;

 

29

 

(vi)                              grant
any severance or termination pay (cash, equity or otherwise) to any Eligible
Employee, except pursuant to written agreements outstanding, or policies
existing, on the date hereof or pay any special bonus or remuneration (cash,
equity or otherwise) to any Eligible Employee;

 

(vii)                           adopt, grant, extend or
increase the rate or terms of any bonus, insurance pension or other employee
benefit plan, payment or arrangement made to, for or with any Eligible
Employee, except increases required by any applicable Law;

 

(viii)                        terminate the employment of any
Eligible Employee, except for cause, provided Seller provides notice to
Buyer prior to any such termination;

 

(ix)                                make
or change any material Tax election or method or practice of Tax accounting,
settle or compromise any claim for Taxes, or consent to the extension or waiver
of the statutory period of limitations applicable to any claim for Taxes, in
each case, related to the Business that could have any effect upon Buyer, the
Assets or the Business after the Closing;

 

(x)                                   license
any intellectual property rights of the Business to or from any third party
pursuant to an arrangement other than in the ordinary course of business
consistent with past practice;

 

(xi)                                make
or authorize any capital expenditures on behalf of the Business other than in
accordance with the Business’ annual plan or other than capital expenditures
not exceeding $50,000 individually or $200,000 in the aggregate;

 

(xii)                             incur any indebtedness for
borrowed money other than from Buyer or any affiliate of Buyer, issue any debt
securities or assume, guarantee or endorse the obligations of any other persons
or subject any of the Assets to any Liens;

 

(xiii)                          cancel or compromise any
material debt or claim or waive or release any material rights of the Business;
or

 

(xiv)                         enter into any agreement on
behalf of the Business to do any of the foregoing.

 

Section
5.2                                   Access
to Information

 

(a)                                  Between
the date of this Agreement and the Closing Date, Seller Group shall, subject to
any restrictions as to confidentiality applicable to Seller Group whether by
Law, agreement or contract, (i) give Buyer and its authorized
representatives reasonable access to all books, records, work papers, personnel,
offices and other facilities and properties of the Business and its
accountants; (ii) permit Buyer and its authorized representatives to make
such copies and inspections thereof as any of them may reasonably request;
(iii) permit Buyer and its authorized representatives to conduct an
environmental inspection of the Business Real Property (including a
“Phase I” site assessment which may also include interior wipe sampling),
provided that Buyer and its representatives shall have no right to undertake
any soil or groundwater investigation; and (iv) cause the officers of
Seller Group to furnish Buyer and its authorized representatives with such
financial and operating data and other information with respect to the business
and properties of the Business as any of them may from time to time reasonably
request; provided, however, that any such access shall be
conducted during normal business hours under the supervision of Seller Group’s
personnel and in such a manner as to maintain the confidentiality of this
Agreement and the transactions contemplated hereby and not interfere
unreasonably with the normal operations of the Business, except as otherwise
contemplated by this Agreement.

 

30

 

(b)                                 From
and after the date of this Agreement and continuing until the Buyer Survival
Date, all Seller Group Confidential Information (as hereinafter defined) shall
(i) be held by Buyer with the same degree of skill and care that it would
exercise in similar circumstances in carrying out its own business to prevent
the disclosure or accessibility to others of such information and
(ii) shall not be revealed, reported, published, disclosed or transferred
to any person or entity (other than the Seller Group).  For purposes of this Agreement, “Seller
Group Confidential Information” means any non-public information related to the
Business furnished or provided by Seller Group or its affiliates to Buyer; provided,
however, that Seller Group Confidential Information shall not be deemed
to include (A) information related to the Business that was already publicly
known and in the public domain prior to the time of its initial disclosure to
Buyer or (B) any information related to the Seller Group that is or becomes
available to Buyer or its affiliates after the Closing from a source that Buyer
reasonably believes not to be under an obligation of confidentiality with
respect to such information; provided, further, Buyer may reveal,
report, disclose or transfer any Seller Group Confidential Information pursuant
to a subpoena or order issued by a court of competent jurisdiction or by a
judicial or administrative or legislative bodies or committee.  For purposes of this Agreement, the “Buyer
Survival Date” means (x) the Closing Date in respect of all Seller Group
Confidential Information relating to Transferred Intellectual Property; (y) two
(2) years following the Closing Date in respect of all other Seller Group
Confidential Information other than Seller Group Confidential Information
relating to Intellectual Property; and (z) five (5) years following the
Closing Date for Seller Group Confidential Information relating to Intellectual
Property other than Transferred Intellectual Property; or in any case, the date
on which such Seller Group Confidential Information becomes publicly known
through no action or inaction of Buyer or any of its Affiliates.

 

(c)                                  On
the Closing Date, Seller Group shall assign to Buyer all of its rights under
any confidentiality agreement entered into by Seller Group with any person in
connection with a potential sale of the Business (a “Confidentiality Agreement”), to the extent such Confidentiality
Agreement is assignable pursuant to its terms.

 

Section
5.3                                   Consents
and Approvals

 

(a)                                  As
soon as practicable after the execution of this Agreement, each of Seller and
Buyer (or each of their ultimate parent entities as defined in the rules
promulgated under the HSR Act) will file, or cause to be filed, with the
Federal Trade Commission and the Antitrust Division of the United States Department
of Justice pursuant to the HSR Act, the notification and documentary material
required in connection with the consummation of the transactions contemplated
by this Agreement.  In addition, each of
Seller Group and Buyer shall promptly take all action necessary to make any
filings reasonably determined in good faith to be required by the Buyer under
any other antitrust or competition Law.

 

(b)                                 Seller
Group and Buyer shall promptly file any additional information requested as
soon as practicable after receipt of any request for additional
information.  Buyer and Seller Group
shall use their commercially reasonable efforts to obtain early termination of
the applicable waiting period, to the extent required, with the applicable
regulatory authorities, including under the HSR Act.  The parties hereto will coordinate and cooperate with one another
in exchanging such information and providing such reasonable assistance as may
be requested in connection with such filings.

 

(c)                                  Seller
shall obtain, prior to Closing, all consents required in conjunction with the
Real Estate Agreements at no cost to Buyer or shall deliver the benefit of the
Real Estate Agreements to Buyer at the Closing and remain responsible for such
consents (and any risks associated with the failure to obtain such consents)
post-Closing (and shall indemnify Buyer therefrom).

 

31

 

Section
5.4                                   Reasonable
Efforts

 

(a)                                  Each
member of the Seller Group and Buyer shall cooperate, and use its reasonable commercial
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable Law to
consummate the transactions contemplated by this Agreement.

 

(b)                                 As
soon as practicable after the date hereof, Seller shall, at its expense (except
as set forth below), cause to be prepared all financial information of the
Business required by the United States Securities and Exchange Commission (the
“SEC”) to be filed by Buyer
following the Closing as part of a Current Report on Form 8-K (the “Form 8-K”) (including the preparation of
audited financial statements, if necessary) and the pro forma financial
information of the Business with respect to the transactions contemplated by
this Agreement (the “Audited and Other
Required Financial Information”). 
The cost of preparation of any required audited financial statements
shall be borne by the Seller; provided, however, that to the extent the cost of
preparation of such audited financial statements exceeds $500,000, Seller and
Buyer shall split any such excess costs up to $1,500,000, such that Buyer shall
be responsible for up to a maximum of $500,000 in costs associated with such
audit.  Any costs beyond $1,500,000
shall be borne by Seller.  Seller hereby
represents that all the information necessary to permit Buyer to comply with
its obligations pursuant to Form 8-K will be made available in a timely
manner to enable Buyer to satisfy its public reporting obligations under
applicable law.

 

(c)                                  Buyer
and Seller shall cooperate and use good faith efforts to promptly obtain a
waiver from the SEC limiting the time period and scope of the audit set forth
in subsection (b) above. Buyer and Seller shall agree upon the form of request
to be submitted to the SEC.

 

(d)                                 Buyer
and its advisors will apprise Seller of any concerns regarding the conduct,
scope or outcome of the audit required pursuant to subsection (b) above that
they have as of the date hereof within five business days of the date hereof.

 

Section
5.5                                   Public
Announcements

 

Following the execution hereof, each of Buyer and
Seller will consult with each other regarding the language of and issue a press
release or press releases disclosing such action.  Thereafter, prior to the Closing, except as otherwise agreed to
by the parties, no party shall issue any report, statement or press release or
otherwise make any public statements with respect to this Agreement and the
transactions contemplated hereby, except (i) to the extent reasonably
required in connection with the operation of the Business or (ii) as in
the reasonable judgment of Buyer or Seller may be required by Law or in
connection with the obligations of a publicly-held company, in which case
Seller and Buyer will use their commercially reasonable efforts to reach mutual
agreement as to the language of any such report, statement or press
release.  Each party shall give the
other party a reasonable opportunity to review and comment on any proposed
press release before issuing any such press release.

 

Section
5.6                                   Covenant
to Satisfy Conditions

 

Seller Group will use its reasonable commercial
efforts to ensure that the conditions set forth in Article VI hereof are
satisfied, insofar as such matters are within the control of Seller Group, and
Buyer will use its reasonable commercial efforts to ensure that the conditions
set forth in Article VI hereof are satisfied, insofar as such matters are
within the control of either of them.

 

32

 

Section
5.7                                   Supplemental
Disclosure

 

Seller Group, on the one hand, and Buyer, on the other
hand, shall supplement or amend its Disclosure Schedules prior to the Closing
Date as required to make the representations and warranties true and
correct.  Any such supplemental or
amended disclosure will not be deemed to have cured any breach made in this
Agreement and to have been disclosed as of the date of this Agreement for
purposes of Articles VI and VII hereof.

 

Section
5.8                                   Transfers
Not Effected as of Closing

 

Nothing herein shall be deemed to require the
conveyance, assignment or transfer of any Asset that by its terms or by
operation of Law cannot be freely conveyed, assigned, transferred or
assumed.  To the extent the parties
hereto have been unable to obtain any governmental or any third party consents
or approvals required for the transfer of any Asset and to the extent not
otherwise prohibited by the terms of any Asset, Seller Group shall continue to
be bound by the terms of such applicable Asset and Buyer shall pay, perform and
discharge fully all of the obligations of Seller Group or any of its affiliates
thereunder from and after the Closing. 
Seller Group shall, without consideration therefor, promptly pay, assign
and remit to Buyer all monies, rights and other consideration received in
respect of such performance, and Buyer shall promptly pay and/or remit to
Seller expenses reasonably incurred by Seller Group related thereto.  Seller Group shall exercise or exploit its
rights in respect of such Assets only as reasonably directed by Buyer and at
Buyer’s expense.  Subject to and in
accordance with Section 5.3, for not more than a hundred and eighty (180)
days following the Closing Date, the parties hereto shall continue to use their
commercially reasonable efforts to obtain all such consents or approvals that
have not been obtained at the earliest practicable date.  If and when any such consents or approvals
shall be obtained, then Seller Group shall promptly assign its rights and
obligations thereunder to Buyer without payment of consideration and Buyer
shall, without the payment of any consideration therefor, assume such rights
and obligations.  The parties shall
execute such good and sufficient instruments as may be necessary to evidence such
assignment and assumption.  If any such
consent shall not be obtained, Seller Group shall cooperate with Buyer in any
reasonable arrangement designed to provide for Buyer the benefits intended to
be assigned to Buyer from the Assets, including enforcement at the cost and for
the account of Buyer of any and all rights of Seller Group against the other
party thereto arising out of the breach or cancellation thereof by such other
party or otherwise.  If and to the
extent such arrangement cannot be made, (i) Seller shall retain any such
Assets, (ii) such Assets shall be deemed to be “Rejected Assets,” and (iii) Buyer shall have no obligation
pursuant to Section 1.1(c) or otherwise with respect to any Assumed
Liabilities or other obligations attributable to any such Rejected Assets.  The provisions of this Section 5.8
shall not affect the right of Buyer not to consummate the transactions
contemplated by this Agreement if the conditions to its obligations hereunder
contained in Article VI have not been fulfilled.

 

Section
5.9                                   Employment
of Eligible Employees

 

The Seller Group shall, and shall cause its
representatives to, cooperate with Buyer in connection with Buyer’s
commercially reasonable efforts contemplated in Section 2.3 for Eligible
Employees, and, in furtherance thereof, shall permit, and shall cause their
representatives to permit, the representatives of Buyer to meet with Eligible
Employees of the Seller Group and to distribute to such Eligible Employees such
forms and other documents relating to their employment with Buyer as Buyer may
reasonably determine; provided, however, that any such access
shall be conducted in such a manner as not to interfere unreasonably with the
normal operations of the Business.

 

33

 

Section
5.10                            Prohibition
on Solicitation and Hiring

 

During the period prior to the Closing, no member of
the Seller Group shall hire or retain as an employee or consultant, or offer to
hire or retain as an employee or consultant, or solicit the services of, any
Eligible Employee for any position unrelated to the Business unless and until
an Eligible Employee has rejected the offer of employment by Buyer.  During the two (2)-year period immediately
following the Closing Date, no member of the Seller Group shall hire or retain
as an employee or consultant, or offer to hire or retain as an employee or
consultant, or solicit the services of, any Affected Employee; provided,
however, that nothing in this Section 5.10 shall prevent the Seller
Group after the Closing Date from publishing any general advertisement or
similar notice in any newspaper or other publication of general circulation and
hiring or retaining as a consultant any Affected Employee who responds to such
general advertisement without any solicitation by any member of the Seller
Group or any of its respective directors or officers; provided, further,
however, that after the one-year anniversary of the Closing Date, the
foregoing restrictions shall not apply with respect to any Affected Employee
beginning 90 days after such Affected Employee’s employment terminates with
Buyer.

 

Section
5.11                            No
Negotiation

 

Seller shall ensure that, during the period prior to
the Closing, neither it nor any member of Seller Group nor any of its or their
representatives, directly or indirectly: (a) solicits or encourages the
initiation of any inquiry, proposal or offer from any person (other than Buyer)
relating to any Acquisition Transaction (as defined below); or
(b) participates in any discussions or negotiations with, or provides any
non-public information to, any person (other than Buyer) relating to any
proposed Acquisition Transaction. 
Seller Group shall provide notice to Buyer within two (2) business days
of the receipt of any proposed Acquisition Transaction.  For purposes of this Section 5.11,
“Acquisition Transaction” shall mean any transaction involving the sale or
other disposition of all or any portion of the Business or Assets (other than
as permitted pursuant to Section 5.1); provided, however,
that nothing in this Section 5.11 shall prohibit any transaction,
discussions, negotiations or sharing of information (including with respect to
the Assets or the Business) regarding (i) the acquisition of ownership or
control of all or any portion of the capital stock or other securities of Seller,
(ii) the acquisition of all or substantially all of the assets of Seller,
or (iii) any merger, consolidation, business combination, share exchange,
reorganization or similar transaction involving Seller as long as in connection
with any such transaction the buyer or acquiring person agrees in writing to
(in the case of an asset transaction), or agrees in writing to cause the
members of the Seller Group so acquired to, comply with their obligations
hereunder.

 

Section
5.12                            Confidentiality

 

From and after the date of this Agreement (including
from and after the Closing Date) and continuing until the Seller Survival Date
(as hereinafter defined), the Seller Group shall hold all Confidential
Information with the same degree of skill and care that it would exercise in
similar circumstances in carrying out its own business to prevent the
disclosure or accessibility to others (including to any entity that controls
Seller Group) of the Confidential Information and agree not to reveal, report,
publish, disclose or transfer any Confidential Information to any person or
entity (other than Buyer) except prior to Closing in the ordinary course of
business consistent with past practice and further agrees that, except as
otherwise permitted under the Intellectual Property License Agreement, Seller
will not, and it will ensure that none of the other members of the Seller Group
will, at any time use any Confidential Information that relates exclusively to
the Business or that will be transferred to Buyer pursuant to this Agreement
for any purpose other than for purposes of carrying out the Business prior to
the Closing. For the purposes of this Agreement, “Confidential Information” means any non-public information
related to the Business or any of the Assets; provided, however,
that Confidential Information shall not be deemed to include
(i) information related to the Business

 

34

 

that was already publicly known and in the public domain prior to the
time of its initial disclosure to any member of the Seller Group or
(ii) information related to the Business that is or becomes available to
any member of the Seller Group after the Closing from a source which, to the
Knowledge of Seller, is not under an obligation of confidentiality with respect
to such information; provided, further, the members of the Seller
Group may reveal, report, publish, disclose or transfer any Confidential
Information pursuant to a subpoena or order issued by a court of competent
jurisdiction or by a judicial or administrative or legislative body or
committee. For purposes of this Agreement, the “Seller Survival Date” means (x) two (2) years
following the Closing Date in respect of all Confidential Information other
than Confidential Information relating to Transferred Intellectual Property;
and (y) in respect of Confidential Information relating to Intellectual
Property, five (5) years following the Closing Date, or in either case, the
date on which such Confidential Information becomes publicly known through no
action or inaction of the Seller Group or any of its affiliates. Buyer shall
notify all Affected Employees not to retain, disclose or use improperly any
confidential information of the Seller Group other than that transferred or
licensed to Buyer hereunder.

 

Section
5.13                            Agreements
Related to Certain Business Real Property

 

Buyer and Seller acknowledge that between the date
hereof and the Closing Buyer shall, in accordance with Section 2.3(a) hereof,
be making offers to certain Business Employees and evaluating the need for
certain of the Business Real Property listed on Exhibit A to the Multiple Site
License Agreement. Buyer, no later than thirty (30) days following the date
hereof, shall have the right to eliminate any or all of the Business Real Properties
listed on Exhibit A to the Multiple Site License by written notice to
Seller.  Buyer and Seller also
acknowledge that leases for two properties currently occupied by Business
Employees, those located in Tokyo, Japan and Vienna, Virginia listed on Schedule
1.1(a)(i)(B) of the Disclosure Schedules, may terminate prior to the
Closing.  Buyer and Seller agree to
cooperate with respect to the disposition of those Business Real Properties and
the Business Employees located therein, which disposition may include the
relocation of such employees to other premises in the immediate vicinity or
elsewhere, or the extension of such leases on terms mutually agreeable to Buyer
and Seller.

 

Section
5.14                            Insurance
Claims

 

Following the Closing, and with respect only to Assets
not transferred at the Closing and Assumed Liabilities, Seller Group will use
commercially reasonable efforts to pursue claims under its insurance policies
related to the Business which have been made prior to the Closing or, if
occurrence type policies, even if made after the Closing, and will remit
amounts recovered to Buyer to the extent of Buyer’s interests, if any.  In the event of damage to or destruction of
any property constituting the Assets prior to the Closing, Buyer, with the
assistance of Seller Group, at Seller Group’s expense, shall pursue any claims
available under Seller Group’s insurance policies and Seller Group will remit
amounts recovered to Buyer to the extent of Buyer’s interests, if any.  In addition, in the event that any property
employed in the Business is condemned by a governmental authority prior to
Closing, Seller Group (effective as of the Closing) shall appoint Buyer, as its
agent, to pursue any claims it may have against such governmental authority
with respect to such property.

 

Section
5.15                            Tax
Matters

 

(a)                                  Allocation
of Purchase Price.  As soon as
practicable following the Closing, the Closing Cash Purchase Price and the
value of the Assumed Liabilities, each to the extent properly taken into
account under Section 1060 of the Code and the regulations promulgated
thereunder, (the “Section 1060 Purchase Price”) shall be allocated as
determined jointly by Buyer and Seller among the Assets being sold hereunder
(the “Allocation”). 
Such Allocation shall be subject to appropriate adjustment in the event
of an adjustment to the purchase price pursuant to Section 1.7 hereof or if
Buyer successfully asserts a claim for indemnification pursuant to
Section 7.2 hereof.  Seller Group and
Buyer (i) shall be bound by the Allocation, and any

 

35

 

amendments
thereto, (ii) shall prepare and file all Tax Returns (including, without
limitation, Federal Form 8883) and financial statements in a manner
consistent with the Allocation, and any amendments thereto, and
(iii) shall take no position, and shall cause its subsidiaries to take no
position, inconsistent with the Allocation, or any amendment thereto, on any
Tax Return, in any proceeding before any taxing authority or otherwise. In the
event that the Allocation, or any amendment thereto, is disputed by any taxing
authority, the party receiving notice of such dispute shall promptly notify and
consult with the other party concerning resolution of such dispute.  If Buyer and Seller are unable to agree upon
the Allocation within sixty (60) days following the Closing Date, each of Buyer
and the Seller Group may file IRS Form 8594 and any other Tax Returns
allocating the Section 1060 Purchase Price among the Assets in the manner
each believes appropriate, provided such allocations are reasonable and in
accordance with Section 1060 of the Code and the regulations thereunder.

 

(b)                                 Transfer
Taxes.  The Seller and Buyer shall
be equally responsible for and shall each pay one half of all sales, use, transfer,
stamp duty, recording, value added, and other similar taxes and fees,
including, without limitation, all bulk sales taxes, in each case including
interest, penalties or additions attributable thereto (“Transfer Taxes”), arising out of or in
connection with the transactions contemplated by this Agreement.  The parties shall cooperate with each other
to the extent reasonably requested and legally permitted to minimize any
Transfer Taxes, including reasonable cooperation with respect to the place and
method of transfer and delivery of the Assets.

 

(c)                                  Responsibility
for Tax Returns and Taxes.

 

(i)                                     Subject
to Section 5.15(c)(iii) below, Seller will be responsible for the
preparation and filing of all Tax Returns of Seller (including Tax Returns
required to be filed after the Closing Date) to the extent such Tax Returns
include or relate to the Seller’s operation of the Business or Seller’s use or
ownership of the Assets.  Seller’s Tax
Returns to the extent they relate to the Business or Assets shall be true,
complete and correct and prepared in accordance with applicable Law in all
respects.  Seller will be responsible
for and make all payments of Taxes shown to be due on such Tax Returns to the
extent they relate to the Assets or the Business.

 

(ii)                                  Buyer
will be responsible for the preparation and filing of all Tax Returns it is
required to file with respect to Buyer’s ownership or use of the Assets or its
operation of the Business attributable to taxable periods (or portions thereof)
commencing after the Closing Date. 
Buyer’s Tax Returns, to the extent they relate to the Assets or the
Business, shall be true, complete and correct and prepared in accordance with
applicable Law in all respects.  Buyer
will make all payments of Taxes shown to be due on such Tax Returns to the
extent they relate to the Assets or the Business.

 

(iii)                               In the case of any real
or personal property taxes (or other similar Taxes) attributable to the Assets
for which Tax Returns cover a taxable period commencing before the Closing Date
and ending thereafter, Buyer shall, in consultation with Seller, prepare such
returns and make all payments required with respect to any such Tax Return; provided, however, that Seller will promptly reimburse Buyer upon
receipt of a copy of the filed Tax Return to the extent any payment made by
Buyer relates to that portion of the taxable period ending on or before the
Closing Date, which amount shall be determined and prorated on a per diem
basis.

 

(d)                                 Cooperation.  To the extent relevant to the Business or
the Assets, each party shall (i) provide the other with such assistance as
may reasonably be required in connection with the preparation of any Tax Return
and the conduct of any audit or other examination by any taxing authority or in
connection with judicial or administrative proceedings relating to any
liability for Taxes and (ii) retain and provide the other with all records
or other information that may be relevant to the preparation of any Tax
Returns, or the

 

36

 

conduct
of any audit or examination, or other proceeding relating to Taxes.  Seller shall retain all documents, including
prior years’ Tax Returns, supporting work schedules and other records or
information with respect to all sales, use and employment Tax Returns and,
absent the receipt by Seller of the relevant Tax clearance certificates, shall
not destroy or otherwise dispose of any such records for seven (7) years after
the Closing Date without the prior written consent of Buyer.

 

(e)                                  Employee
Withholding.  Buyer shall prepare
and furnish to continuing employees of the Business who were employees of the
Business prior to the Closing Date (“continuing employees”) Form W-2 which
shall reflect all wages and compensation paid to continuing employees for that
portion of the calendar year in which the Closing Date occurs during which the
continuing employees were employed by the Seller Group and were employed in
connection with the operation of the Business. 
The Seller Group shall furnish to Buyer the Forms W-4 and W-5 of
each continuing employee.  Buyer shall
send to the appropriate Social Security Administration office a duly completed
Form W-3 and accompanying copies of the duly completed Forms W-2.  It is the intent of the parties hereunder that
the obligations of Buyer and the Seller Group under this Section 5.15
shall be carried out in accordance with Section 5 of Revenue Procedure
96-60.

 

Section
5.16                            Further
Actions

 

(a)                                  From
and after the Closing Date, each party shall cooperate with the other party and
their representatives, and shall execute and deliver such documents and take
such other actions as the other party may reasonably request, for the purpose
of evidencing the transactions contemplated by this Agreement.

 

(b)                                 From
and after the Closing Date, Buyer shall cooperate with Seller and its
representatives, and shall execute and deliver such documents and take such
other actions as Seller may reasonably request, for the purposes of evidencing
the transactions contemplated by this Agreement and having Buyer assume the
Assumed Liabilities.

 

Section
5.17                            Compliance
with Bulk Sales Laws; Payment of Retained Liabilities

 

The parties hereby waive compliance with the bulk
sales act or comparable statutory provisions of each applicable jurisdiction in
respect of the transactions contemplated by this Agreement, provided, that Seller Group agrees to
indemnify Buyer with respect to any noncompliance with such laws and Buyer’s
waiver with respect thereto.

 

Section
5.18                            Standards
Organizations

 

Buyer and Seller acknowledge that Schedule 3.7(p)
is incomplete and agree that Seller may update Schedule 3.7(p) prior to
the Closing.  The exclusion of any items
on Schedule 3.7(p) as of the date of this Agreement which are subsequently
added shall not be deemed a breach of the representation in Section 3.7(p).

 

Section
5.19                            Compilers,
etc.

 

Seller agrees to cooperate with Buyer in good faith to
help identify prior to Closing any additional compilers, development tools,
library functions and files and the like that should be listed on Schedule
3.7(m) or that the Buyer may otherwise need after the Closing for operation of
the Business.  The exclusion of any
items on Schedule 3.7(m) as of the date of this Agreement which are
subsequently added shall not be deemed a breach of the representation in
Section 3.7(m).

 

37

 

Section
5.20                            Buyer
Acknowledgment

 

Buyer acknowledges that it will have to purchase
licenses for the third party software installed on the personal computers
included in the Assets and other off-the-shelf third-party software used in
connection with the Business, unless the Buyer already has licenses in place
that cover such software.

 

Section
5.21                            Conduct
Relating to Receivable and Payables

 

At all times after the date hereof, the Seller Group
shall collect any receivables and satisfy any payables relating to the Business
to which Seller Group is entitled or obligated in the ordinary course of
business, consistent with past practice. 
In connection therewith, the Seller Group shall use commercially
reasonable efforts to preserve relationship with those persons having business
dealings with the Business to the end that its goodwill and ongoing
relationship with the Business shall not be impaired as a result of Seller
Group’s actions.  Seller shall notify
Buyer of any problems or changes from historic practices that arise relating to
Seller’s collections and payments efforts involving Key Suppliers and
Significant Customers.

 

Section
5.22                            Non-U.S.
Agreements

 

The Seller Group and Buyer and their respective
affiliates, as appropriate, may enter documentation as mutually agreed upon
(any such agreement, a “Non-U.S. Agreement”)
in order to effect the transfer of certain Assets.

 

Section
5.23                            Agreements Related to Certain Warranty and
Service Obligations

 

If Seller shall have any
warranty or service obligation pursuant to an Excluded Warranty Obligation or
pursuant to any Rejected Asset pursuant to Section 5.8 hereof, then (a) Buyer
shall perform such warranty or service obligation and (b) Seller and Buyer
shall agree upon reasonable compensation to Buyer for performing such warranty
or service obligation.

 

Section
5.24                            Assistance Relating to Retained Agreements

 

Prior to the Closing, Seller agrees to use its commercially
reasonable efforts to replicate and transfer to Buyer at the Closing such
portions of agreements set forth on Schedule 1.1(d) of the Disclosure Schedules
and other agreements to which a member of the Seller Group is a party (a) that
are used in the Business but not included in Schedule 1.1(a)(iii)(A) of the
Disclosure Schedules and (b) that Buyer notifies Seller it desires to be
replicated (the “Retained Agreements”),
on the same terms and conditions as are enjoyed by Seller or as close thereto
as practicable; provided that Seller shall be under no obligation to pay any
fees to such third parties in order to have such contracts replicated.  After the Closing, Seller agrees to
cooperate and use its commercially reasonable efforts to assist Buyer in obtaining,
at Buyer’s cost, agreements from the third parties who are parties to the
Retained Agreements to the extent not obtained prior to Closing and to the
extent requested by Buyer. Notwithstanding the foregoing, Buyer and Seller
agree that the Seller shall have no obligation to attempt to obtain replication
of any of the agreements listed on Schedule 1.1(d) under the header “Retained
Patent Licenses” or the cross-licenses or covenants not to sue listed on
Schedule 3.7(f) of the Disclosure Schedules under the header “Cross-License and
Covenant Not to Sue Agreements.”

 

Section
5.25                            Agreements Related to Certain Liabilities

 

As to any of the Assumed Liabilities specifically set
forth on the Reference Balance Sheet that relate to employee benefits, the
parties will work cooperatively to provide for the assumption by Buyer of such
liabilities, and if any such Assumed Liabilities can not be formally assumed by
Buyer and Seller is obligated

 

38

 

to and makes payment to satisfy such Assumed Liabilities, Seller shall
so advise Buyer, and Buyer shall reimburse Seller for any such payments made.

 

ARTICLE VI

 

CONDITIONS
TO OBLIGATIONS OF THE PARTIES

 

Section
6.1                                   Conditions
to Each Party’s Obligations

 

The respective obligation of each party to consummate
the transactions contemplated herein is subject to the satisfaction at or prior
to the Closing of the following conditions precedent:

 

(a)                                  No
statute, rule or regulation shall have been enacted, entered, promulgated or enforced
by any court or governmental authority that prohibits or restricts in a
material manner the consummation of the transactions contemplated hereby;

 

(b)                                 There
shall not be in effect any judgment, order, injunction or decree of any court
of competent jurisdiction enjoining the consummation of the transactions
contemplated hereby; and

 

(c)                                  Any
waiting periods, including any extension thereof, applicable to the
transactions contemplated by this Agreement under the HSR Act and the
applicable antitrust or trade regulation Law of the other jurisdictions listed
on Schedule 6.1(c) of the Disclosure Schedules (to the extent that Buyer
determines in good faith that a filing in any such jurisdiction is necessary or
advisable), shall have expired or been terminated and all governmental
authorizations or approvals required in connection with the transactions
contemplated by this Agreement, shall have been obtained or given.

 

Section
6.2                                   Conditions
to Obligations of Seller Group

 

The obligations of Seller Group to consummate the
transactions contemplated hereby are further subject to the satisfaction (or
waiver) at or prior to the Closing of the following conditions:

 

(a)                                  The
representations and warranties of Buyer contained herein that are qualified as
to materiality shall be true in all respects on and as of the Closing Date
(except for the representations and warranties made as of a specific date which
shall be true in all material respects as of such date) with the same force and
effect as though made on and as of such date, and each of the representations
and warranties of Buyer that are not so qualified shall be true in all material
respects;

 

(b)                                 Buyer
shall have performed and complied with in all material respects their
agreements, obligations and covenants under this Agreement required to be
performed or complied with by them at or prior to the Closing pursuant to the
terms hereof;

 

(c)                                  Buyer
shall have delivered to Seller a certificate as to the satisfaction of the
conditions set forth in Sections 6.2(a) and 6.2(b), dated as of the
Closing and executed by an officer of each entity;

 

(d)                                 Buyer
shall have delivered to Seller those items set forth in Section 1.5; and

 

(e)                                  Each
of the documents referred to in Section 1.5 shall have been executed by
Buyer and delivered to Seller.

 

39

 

Section
6.3                                   Conditions
to Obligations of Buyer

 

The obligations of Buyer to consummate the
transactions contemplated hereby are further subject to the satisfaction (or
waiver) at or prior to the Closing of the following conditions:

 

(a)                                  The
representations and warranties of Seller Group contained herein that are
qualified as to materiality shall be true in all respects on and as of the
Closing Date (except for the representations and warranties made as of a
specific date which shall be true in all material respects as of such date)
with the same force and effect as though made on and as of such date, and each
of the representations and warranties of Seller that are not so qualified shall
be true in all material respects;

 

(b)                                 Seller
Group shall have performed and complied with in all material respects its
agreements, obligations and covenants under this Agreement required to be
performed or complied with by it at or prior to the Closing pursuant to the
terms hereof;

 

(c)                                  The
requisite consents and approvals listed on Schedule 6.3(c) of the
Disclosure Schedules shall have been obtained, and a copy of each such consent
or approval shall have been provided to Buyer, at or prior to Closing;

 

(d)                                 Seller
shall have delivered to Buyer a certificate as to the satisfaction of the
conditions contained in Sections 6.3(a) and 6.3(b), dated as of the
Closing and executed by an officer of Seller or such Selling Subsidiary, as the
case may be;

 

(e)                                  Each
of the documents referred to in Section 1.4 shall have been executed by
the appropriate member(s) of the Seller Group and delivered to Buyer;

 

(f)                                    Provision
satisfactory to Buyer shall have been made for the release of any security
interests which encumber any of the Assets other than Permitted Encumbrances;

 

(g)                                 There
shall not be any suit, action, or other proceeding pending or overtly
threatened by any governmental authority or administrative agency or commission
that seeks to enjoin or otherwise prevent consummation of the transactions
contemplated hereby or that would have a Material Adverse Effect, other than
suits, actions or proceedings that, in the reasonable opinion of Buyer’s
counsel, are unlikely to prevail;

 

(h)                                 Seller Group shall have provided to Buyer all
Audited and Other Required Financial Information of the Business required by
the SEC to be filed by Buyer following the Closing as part of the Form 8-K with
respect to the transactions contemplated by this Agreement; and

 

(i)                                     No
event shall have occurred since the date of this Agreement and no condition or
circumstance shall exist that would reasonably be expected to give rise to any
Material Adverse Effect.

 

ARTICLE VII

 

SURVIVAL
OF REPRESENTATIONS; INDEMNIFICATIONS

 

Section
7.1                                   Survival
of Representations

 

All representations and warranties made in this
Agreement shall survive the Closing for a period of twelve (12) months, but,
except as provided in Section 8.2, shall not survive any termination of
this Agreement; provided, however, that notwithstanding the
foregoing, (i) the representations and warranties

 

40

 

contained in Sections 3.2 and 4.2 shall survive the Closing
indefinitely (subject to any applicable statutes of limitations) and
(ii) the representations and warranties contained in Sections 3.13
and 3.15 shall survive until sixty (60) days after the expiration of the
applicable statute of limitations (as the same may be extended).  The applicable time periods specified in the
preceding provisions of this Section 7.1 are each referred to as an “Indemnity Period.”  This Section 7.1 shall not limit any
covenant or agreement of the parties that contemplates performance after the
Closing.

 

Section
7.2                                   Seller
Group’s Agreement to Indemnify

 

(a)                                  Subject
to the terms and conditions set forth herein, from and after the Closing,
Seller Group shall indemnify and hold harmless Buyer and its respective
directors, officers, employees, affiliates, controlling persons, agents and
representatives and their successors and assigns (collectively, “Buyer
Indemnitees”) from
and against all liability, demands, claims actions or causes of action,
assessments, losses, damages, costs and expenses (including, without
limitation, attorneys’ fees and expenses reasonably incurred) asserted against
or incurred by any Buyer Indemnitee as a result of or arising out of (i) a
breach of any representation or warranty contained in Article III,
(ii) Excluded Liabilities, or (iii) a breach of any agreement or covenant
of Seller in this Agreement (collectively, “Buyer
Damages”).  Notwithstanding
anything to the contrary, if a representation or warranty is breached in
accordance with its terms (including any materiality standard contained
therein), Buyer Damages for such a breach shall be determined without giving
effect to any materiality standard contained therein.

 

(b)                                 Seller
Group’s obligations to indemnify Buyer Indemnitees pursuant to
Section 7.2(a) hereof with respect to a breach of a representation or
warranty contained in this Agreement are subject to the following limitations:

 

(i)                                     The
amount of any Buyer Damages shall be reduced by any amount actually received by
a Buyer Indemnitee with respect thereto under any insurance coverage (other
than self insurance) or from any other party alleged to be responsible
therefor.  Buyer Indemnitees shall use
commercially reasonable efforts to collect any amounts available under such
insurance coverage and from such other party alleged to have responsibility.  If a Buyer Indemnitee receives an amount
under insurance coverage or from such other party with respect to Buyer Damages
at any time subsequent to any indemnification provided by Seller Group pursuant
to this Section 7.2, then such Buyer Indemnitee shall promptly reimburse
Seller, as the case may be, for any payment made or expense incurred by Seller
in connection with providing such indemnification up to such amount received by
Buyer Indemnitee, but net of any expenses incurred by such Buyer Indemnitee in
collecting such amount;

 

(ii)                                  Seller
Group shall be obligated to indemnify Buyer Indemnitees only for those claims
with respect to a breach of a representation or warranty giving rise to Buyer
Damages as to which Buyer Indemnitees have given Seller written notice thereof
prior to the end of any applicable Indemnity Period; and

 

(iii)                               In the absence of fraud
or willful misconduct, and except with respect to Excluded Liabilities, Seller
Group shall not be obligated to indemnify Buyer Indemnitees with respect to
claims for indemnification pursuant to this Section 7.2 with respect to a
breach of a representation or warranty until such claims exceed $1,000,000 in
the aggregate, at which point Seller Group shall indemnify Buyer Indemnitees
for all claims in excess of such amount. 
Notwithstanding the foregoing, in no event shall the obligation of the
Seller to indemnify the Buyer Indemnitees hereunder with respect to a breach a
representation or warranty exceed $16.0 million (the “Seller Indemnity Cap”) (less the amount of
any payments made pursuant to the Additional Agreement between Buyer and Seller
dated the date hereof (the “Additional
Agreement”), other than in connection with (A) fraud or willful
misconduct, (B) Excluded Liabilities, or (C) the breach of the
representations and warranties contained in Sections 3.13 or 3.15, in each
case for which Seller shall be

 

41

 

obligated
to indemnify Buyer Indemnitees for the full extent of Buyer Damages. Payments
made by Seller Group in respect of Excluded Liabilities shall not be counted
against the Seller Indemnity Cap.

 

Section
7.3                                   Buyer’s
Agreement to Indemnify

 

(a)                                  Subject
to the terms and conditions set forth herein, from and after the Closing, Buyer
shall indemnify and hold harmless Seller and its directors, officers,
employees, affiliates, controlling persons, agents and representatives and
their successors and assigns (collectively, the “Seller Indemnitees”) from and against all liability,
demands, claims, actions or causes of action, assessments, losses, damages,
costs and expenses (including, without limitation, attorneys’ fees and expenses
reasonably incurred) (collectively, “Seller Damages”) asserted against or incurred by any Seller Indemnitee as a
result of or arising out of (i) the Assumed Liabilities, (ii) a
breach of any representation or warranty contained in Article IV of this
Agreement or (iii) a breach of any agreement or covenant of Buyer in this
Agreement or otherwise.

 

(b)                                 Buyer’s
obligations to indemnify Seller Indemnitees pursuant to clause (ii) of
Section 7.3(a) hereof with respect to a breach of a representation or
warranty contained in this Agreement are subject to the following limitations:

 

(i)                                     In
the absence of fraud or willful misconduct, no indemnification pursuant to this
Section 7.3 shall be made by Buyer with respect to any claim for
indemnification with respect to a breach of a representation or warranty until
the aggregate amount of Seller Damages under such claims exceeds an amount
equal to $1,000,000 in the aggregate and, in such event, indemnification shall
be made by Buyer for all claims in excess of such amount, up to a maximum of
$16.0 million;

 

(ii)                                  The
amount of any Seller Damages shall be reduced by any amount actually received
by a Seller Indemnitee with respect thereto under any insurance coverage (other
than self insurance) or from any other party alleged to be responsible
therefor.  Seller Indemnitees shall use
commercially reasonable efforts to collect any amounts available under such
insurance coverage and from such other party alleged to have
responsibility.  If a Seller Indemnitee
receives an amount under insurance coverage or from such other party with
respect to Seller Damages at any time subsequent to any indemnification
provided by Buyer pursuant to this Section 7.3, then such Seller
Indemnitee shall promptly reimburse Buyer for any payment made or expense
incurred by Buyer in connection with providing such indemnification up to such
amount received by the Seller Indemnitee, but net of any expenses incurred by
such Seller Indemnitee in collecting such amount; and

 

(iii)                               Buyer shall be obligated
to indemnify the Seller Indemnitees only for those claims with respect to a
breach of a representation or warranty giving rise to Seller Damages and to
which the Seller Indemnitees have given Buyer written notice thereof prior to
the end of any applicable Indemnity Period.

 

Section
7.4                                   Third
Party Indemnification

 

The obligations of any indemnifying party to indemnify
any indemnified party under this Article VII with respect to Buyer Damages
or Seller Damages, as the case may be, resulting from the assertion of
liability by third parties (a “Claim”), will be subject to the following terms and conditions:

 

(a)                                  Any
party against whom any Claim is asserted will give the party required to
provide indemnity hereunder written notice of, and copies of correspondence and
documentation relating to, any such Claim promptly after learning of such
Claim, and the indemnifying party may at its option undertake the defense
thereof by representatives of its own choosing.  Notwithstanding the foregoing, to the extent that any party seeks
equitable relief against Buyer with respect to any Claim, Buyer shall have the
option to undertake

 

42

 

the
defense thereof by representatives of its own choosing and at its own expense,
and the parties shall agree upon an arrangement to protect the rights of Buyer,
with respect to the equitable relief claim, and Seller with respect to the
remaining claims, provided that if after good faith negotiations the parties
are unable to reach such an arrangement, Buyer may elect to either (i) tender
the defense of all claims by such third party to Seller, or (ii) assume the
defense of all claims by such third party, in which case Seller shall have no
further obligation with respect to the Claim or indemnity therefore.  Failure to give prompt notice of, or copies
of correspondence and documentation relating to, a Claim hereunder shall not
affect the indemnifying party’s obligations under this Section 7.4, except
to the extent that the indemnifying party is materially prejudiced by such
failure to give prompt notice or copies of such correspondence and
documentation.  If the indemnifying
party, within thirty (30) days after notice of any such Claim, fails to assume
the defense of such Claim, the indemnified party against whom such claim has
been made will (upon further notice to the indemnifying party) have the right
to undertake the defense, compromise or settlement of such claim on behalf of
and for the account and risk, and at the expense, of the indemnifying party,
subject to the right of the indemnifying party to assume the defense of such
Claim at any time prior to settlement, compromise or final determination thereof.

 

(b)                                 Notwithstanding
anything in this Section 7.4 to the contrary, (i) the indemnified
party shall not settle a claim for which it is indemnified without the prior
written consent of the indemnifying party, and (ii) the indemnifying party
shall not enter into any settlement or compromise of any action, suit or
proceeding or consent to the entry of any judgment to be borne by the
indemnifying party without the prior written consent of the indemnified party,
which consent shall not be unreasonably withheld.

 

Section
7.5                                   Sole
Remedy

 

After the Closing,
(a) the indemnification provisions set forth in this Article VII,
(b) the specific performance provisions of Section 9.13 and (c) the
provisions set forth in Sections 2.3(b), 2.3(f), 5.3(c), 5.4(b), 5.8, 5.17,
9.1 and 9.8 are the sole and exclusive remedy of the Buyer Indemnitees and the
Seller Indemnitees with respect to any of the matters described in
Section 7.2(a) or Section 7.3(a).

 

ARTICLE VIII

 

TERMINATION,
AMENDMENT AND WAIVER

 

Section
8.1                                   Termination
of Agreement

 

This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date:

 

(a)                                  by
mutual written consent of Seller and Buyer;

 

(b)                                 by
any party hereto if the Closing shall not have occurred on or before 120 days
after date of this Agreement, July 2, 2003; provided, however,
that the right to terminate this Agreement pursuant to this Section 8.1(b)
shall not be available to (i) Seller Group, if any member of the Seller
Group has breached any of its representations, warranties or covenants
hereunder in any material respect and such breach has been the cause or
resulted in the failure of the Closing to occur on or before July 2, 2003
or (ii) Buyer, if Buyer has breached any of its representations,
warranties or covenants hereunder in any material respect and such breach has
been the cause of or resulted in the failure of the Closing to occur on or
before July 2, 2003; and

 

(c)                                  by
Seller or Buyer if any court of competent jurisdiction or other competent
governmental authority shall have issued a statute, rule, regulation, order,
decree or injunction or taken any other action

 

43

 

permanently
restraining, enjoining or otherwise prohibit the transactions contemplated by
this Agreement and (i) such statute, rule, regulation, order, decree or
injunction or other action shall have become final and nonappealable or
(ii) in the case of an injunction, either Seller or Buyer reasonably
believes that the time required to resolve the suit and the related uncertainty
is reasonably likely to have a Material Adverse Effect, or (in the case of
termination by Buyer) a material adverse effect on the business of Buyer.

 

Section
8.2                                   Procedure
for and Effect of Termination

 

(a)                                  In
the event of termination of this Agreement and abandonment of the transactions
contemplated hereby by the parties hereto pursuant to Section 8.1 hereof,
written notice thereof shall be given by a party so terminating to the other
party and this Agreement shall forthwith terminate and be of no further effect,
and the transactions contemplated hereby shall be abandoned without further
action by Seller Group or Buyer.

 

(b)                                 In
the event of termination of this Agreement by Buyer or Seller Group as provided
above in Section 8.1(b), this Agreement shall forthwith become void and,
subject to Section 8.4, there shall be no liability on the part of Buyer or
Seller Group (or their respective officers or directors), except based upon
obligations set forth in Section 9.1 hereof and in the immediately
preceding sentence, and except that Buyer shall thereupon promptly return or
destroy (and cause its agents and representatives to return or destroy) to
Seller all documents (and copies thereof) furnished to Buyer by Seller Group
and all excerpts therefrom and notes related thereto, and Buyer shall continue
to adhere to the confidentiality obligations set forth in Section 5.2
hereof.  Notwithstanding the foregoing,
termination of this Agreement and abandonment of the transactions contemplated
hereby by the parties pursuant to Section 8.1(b) shall not in any way
limit or restrict the rights and remedies of any party hereto against any other
party hereto that has violated or breached any of the representations, warranties,
agreements or other provisions of this Agreement prior to termination hereof.

 

Section
8.3                                   Amendment,
Extension and Waiver

 

At any time prior to the Closing Date, the parties
hereto may (a) amend this Agreement, (b) extend the time for the
performance of any of the obligations or other acts of the parties hereto,
(c) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (d) waive
compliance with any of the agreements or conditions contained herein.  Except as provided in Section 5.8, this
Agreement may not be amended except by an instrument in writing signed on
behalf of all of the parties hereto. 
Any agreement on the part of a party hereto to any extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf
of such party.

 

Section
8.4                                   Termination
Fee

 

In the event all conditions set forth in Sections 6.1
and 6.3 of this Agreement have been satisfied prior to July 2, 2003 and Buyer
does not or cannot consummate the transactions contemplated by this Agreement
by July 2, 2003, then Buyer shall pay to Seller a one-time termination fee of
$10,000,000. Buyer and Seller agree that the payment of such fee shall not be a
cap on the damages that Seller Group may have based upon Buyer’s failure to
close and Seller Group is not waiving any other rights or remedies they may
have in connection therewith.

 

44

 

ARTICLE IX

 

MISCELLANEOUS

 

Section
9.1                                   Fees
and Expenses

 

Whether or not the transactions contemplated herein
are consummated pursuant hereto, except as otherwise provided herein, each of
Seller and Buyer shall pay its own fees and expenses in connection with, or in
anticipation of, this Agreement and the consummation of the transactions
contemplated hereby.  Notwithstanding
the foregoing, the parties shall share equally the filing fee required pursuant
to the HSR Act and other comparable regulatory fees of other jurisdictions.  Each of Seller Group, on the one hand, and
Buyer, on the other hand, shall indemnify and hold harmless the other party
from and against any and all claims or liabilities for financial advisory and
finders’ fees incurred by reason of any action taken by such party or otherwise
arising out of the transactions contemplated by this Agreement by any person
claiming to have been engaged by such party.

 

Section
9.2                                   Further
Assurances; Guarantee

 

(a)                                  From
time to time after the Closing Date, at the request of either party hereto and
at the expense of the party so requesting, each of the parties hereto shall
execute and deliver to such requesting party such documents and take such other
action as such requesting party may reasonably request in order to consummate
more effectively the transactions contemplated hereby.

 

(b)                                 Each
of Seller and Buyer hereby guarantees the timely performance by any subsidiary
of Seller and Buyer, respectively, of all obligations of Seller Group and Buyer
hereunder, respectively, including without limitation, the execution and
performance of their respective obligations under this Agreement and the
Ancillary Agreements.

 

Section
9.3                                   Notices

 

All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and may be given by any of the following methods: (a) personal
delivery; (b) facsimile transmission with telephone confirmation of
receipt; (c) registered or certified mail, postage prepaid, return receipt
requested; or (d) overnight delivery service with receipt confirmed by
signature.  Notices shall be sent to the
appropriate party at its address or facsimile number given below (or at such
other address or facsimile number for such party as shall be specified by
notice given hereunder):

 

(a)                                  If
to Buyer to:

 

UTStarcom, Inc.

1275 Harbor
Bay Parkway

Alameda,
California 94502

Fax: (510)
864-8802

Attention: General Counsel

 

45

 

with a copy to:

 

Wilson
Sonsini Goodrich & Rosati, P.C.

650
Page Mill Road

Palo
Alto, California 94304-1050

Fax
No.: (650) 493-6811

Attention: Carmen Chang

 

(b)                                 If
to Seller Group to:

 

3Com Corporation

5400 Bayfront
Plaza

Santa Clara,
California 95052

Fax: (408)
326-5001

Attention: General Counsel

 

with
a copy to:

 

Gray Cary
Ware & Freidenrich LLP

153 Townsend
Street, Suite 800

San Francisco,
California 94107

Fax:  (415) 836-2501

Attention: Howard Clowes

 

All such notices, requests, demands, waivers and
communications shall be deemed received (i) in the case of personal
delivery, upon actual receipt thereof by the addressee, (ii) in the case
of overnight delivery, on the day following delivery to the overnight delivery
service, (iii) in the case of mail, upon receipt of the return receipt, or
(iv) in the case of a facsimile transmission, upon transmission thereof by
the sender and issuance by the transmitting machine of a confirmation slip that
the number of pages constituting the notice have been transmitted without
error. In the case of notices sent by facsimile transmission, the sender shall
contemporaneously mail a copy of the notice to the addressee at the address
provided for above.  However, such
mailing shall in no way alter the time at which the facsimile notice is deemed
received.

 

Section
9.4                                   Severability

 

Should any provision of this Agreement for any reason
be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any of the other provisions of this Agreement,
which remaining provisions shall remain in full force and effect and the
application of such invalid or unenforceable provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall be valid and enforced to the fullest extent permitted by Law.

 

Section
9.5                                   Binding
Effect; Assignment

 

This Agreement and all of the provisions hereof shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. 
Prior to the Closing, neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned, directly or indirectly, including,
without limitation, by operation of Law, by any party hereto without the prior
written consent of the other parties hereto.

 

46

 

Section
9.6                                   No
Third Party Beneficiaries

 

Except as provided in Section 9.5, this Agreement
is solely for the benefit of Seller Group, and its successors and permitted
assigns, with respect to the obligations of Buyer under this Agreement, and for
the benefit of Buyer, and their respective successors and permitted assigns,
with respect to the obligations of Seller Group under this Agreement, and this
Agreement shall not be deemed to confer upon or give to any other third party
any remedy, claim liability, reimbursement, cause of action or other right.

 

Section
9.7                                   Interpretation

 

(a)                                  The
article and Section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the parties and shall
not in any way affect the meaning or interpretation of this Agreement.

 

(b)                                 As
used in this Agreement, a “governmental authority” shall mean any governmental or
regulatory authority, domestic or foreign.

 

(c)                                  As
used in this Agreement, the term “person” shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.

 

(d)                                 As
used in this Agreement, the term “subsidiary” shall mean with respect to the referenced entity, any other
entity (i) of which fifty (50) percent or more of either the equity
interests in, or the voting control of, such entity is, directly or indirectly,
beneficially owned by the referenced entity, or (ii) of which the referenced
entity has the ability to (A) elect fifty (50) percent or more of the
directors or members of the governing board of such entity or (B) appoint
either the general partner of a general partnership or limited partnership or
the managing member of a limited liability company.

 

Section
9.8                                   Jurisdiction
and Consent to Service; Expenses Related to Legal Proceedings

 

Each of Seller and Buyer (a) agrees that any
suit, action or proceeding arising out of or relating to this Agreement shall
be brought solely in the state or federal courts of California;
(b) consents to the exclusive jurisdiction of each such court in any suit,
action or proceeding relating to or arising out of this Agreement, the
Ancillary Agreements or the Additional Agreement; (c) waives any objection
that it may have to the laying of venue in any such suit, action or proceeding
in any such court; (d) agrees that service of any court paper may be made
in such manner as may be provided under applicable Law or court rules governing
service of process; and (e) agrees that the losing party in any suit, action or
proceeding between the parties relating to or arising out of this Agreement,
the Ancillary Agreements or the Additional Agreement shall indemnify and hold
harmless the prevailing party for all costs incurred by such party in
connection with such suit, action or proceeding.

 

Section
9.9                                   Entire
Agreement

 

This Agreement, the Disclosure Schedules, the
Ancillary Agreements, the Additional Agreement, the Transition Services
Agreement between Buyer and Seller dated the date hereof and the exhibits and
other writings referred to herein or therein or delivered pursuant hereto or
thereto that form a part hereof or thereof constitute the entire agreement
among the parties with respect to their subject matter and supersede all other
prior agreements and understandings, both written and oral, between the parties
or any of them with respect to their subject matter (including the memorandum
of understanding).

 

47

 

Section
9.10                            Descriptive
Headings

 

The descriptive headings herein are inserted for
convenience of reference only and shall in no way be construed to define,
limit, describe, explain, modify, amplify, or add to the interpretation,
construction or meaning of any provision of, or scope or intent of, this
Agreement nor in any way affect this Agreement.

 

Section
9.11                            Governing
Law

 

This Agreement will be governed by, and construed and
enforced in accordance with, the laws of the State of California (regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.

 

Section
9.12                            Counterparts

 

This Agreement may be executed simultaneously in
counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.

 

Section
9.13                            Specific
Performance

 

The parties hereto agree that if any of the provisions
of this Agreement were not performed in accordance with their specific terms or
were otherwise breached, irreparable damage would occur, no adequate remedy at
law would exist and damages would be difficult to determine, and that the
parties shall be entitled to specific performance of the terms hereof and
immediate injunctive relief, without the necessity of proving the inadequacy of
money damages as a remedy and without the necessity of posting any bond or
other security, in addition to any other remedy at law or equity.

 

48

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the date first above written.

 

	
   

  	
  BUYER:

  	 

	
   

  	
   

  	 

	
   

  	
  UTSTARCOM, INC.

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/  Hong Liang Lu

  	
   

  	 

	
   

  	
   

  	
  Name:  Hong Liang Lu

  	 

	
   

  	
   

  	
  Title:    President/CEO

  	 

	
   

  	
   

  	 

	
   

  	
  SELLER:

  	 

	
   

  	
   

  	 

	
   

  	
  3COM CORPORATION

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/  Bruce L. Claflin

  	
   

  	 

	
   

  	
   

  	
  Name:  Bruce L. Claflin

  
	
   

  	
   

  	
  Title:    President & CEO

  
						

 

49

 

Glossary

 

“1445 Certificates” shall
have the meaning set forth in Section 1.4(f).

 

 “Additional Agreement” shall have the meaning set forth in
Section 7.2(b)(iii).

 

“Affected
Employees” shall have the meaning set forth in Section 2.3(a).

 

“Affiliate”
shall have the meaning set forth in Section 3.14(a)(i) for purposes of
Section 3.14.

 

“Agreement”
shall have the meaning set forth in the opening paragraph hereto.

 

“Allocation”
shall have the meaning set forth in Section 5.15(a).

 

“Ancillary
Agreements” shall have the meaning set forth in Section 1.4(n).

 

“Assets”
shall have the meaning set forth in Section 1.1(a).

 

“Assignment
of Leases” shall have the meaning set forth in Section 1.1(b).

 

“Assumed
Liabilities” shall have the meaning set forth in
Section 1.1(c).

 

“Bill
of Sale” shall have the meaning set forth in Section 1.1(b).

 

“Books
and Records” shall have the meaning set forth in
Section 1.1(a)(iii).

 

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

 

“Business
Employees” shall have the meaning set forth in Section 3.14(b).

 

“Business Facility” shall
have the meaning set forth in Section 3.15(a)(i).

 

“Business Real Property”
shall have the meaning set forth in Section 1.1(a)(i)(B).

 

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

 

“Buyer
401(k) Plan” shall have the meaning set forth in
Section 2.3(a).

 

“Buyer Audit Expense”
shall have the meaning set forth in Section 5.4(b).

 

“Buyer
Damages” shall have the meaning set forth in Section 7.2(a).

 

“Buyer
Indemnitees” shall have the meaning set forth in
Section 7.2(a).

 

“Cases”
shall have the meaning set forth in Section 3.10(a).

 

“Claim”
shall have the meaning set forth in Section 7.4.

 

“Closing”
shall have the meaning set forth in Section 1.3.

 

 

“Closing
Cash Purchase Price” shall have the meaning set forth in
Section 1.2.

 

“Closing
Date” shall have the meaning set forth in Section 1.3.

 

“COBRA”
shall have the meaning set forth in Section 2.3(b)).

 

“Code”
shall have the meaning set forth in Section 1.4(f).

 

“Confidential
Information” shall have the meaning set forth in Section 5.12.

 

“Confidentiality
Agreement” shall have the meaning set forth in Section 5.2(c).

 

“Consulting Services Agreement”
shall have the meaning set forth in Section 1.4(j).

 

“Contracts”
shall have the meaning set forth in Section 1.1(a)(iii)(A).

 

“Copyrights”
shall have the meaning set forth in Section 3.7(n)(i).

 

“Disclosure
Schedules” shall have the meaning set forth in the first paragraph
of Article III.

 

“Disposal Site” shall have
the meaning set forth in Section 3.15(a)(ii).

 

“Distribution Agreement”
shall have the meaning set forth in Section 3.12(f).

 

“Eligible Employees” shall
have the meaning set forth in Section 2.3(a).

 

“Employee”
shall have the meaning set forth in Section 3.14(a)(iv).

 

“Employee
Agreement” shall have the meaning set forth in
Section 3.14(a)(v).

 

“Employment Liabilities”
shall have the meaning set forth in Section 1.1(c).

 

“Environmental
Laws” shall have the meaning set forth in Section 3.15(a)(iii).

 

“Environmental Permit”
shall have the meaning set forth in Section 3.15(a)(iv).

 

“Equipment”
shall have the meaning set forth in Section 3.20(c).

 

“ERISA”
shall have the meaning set forth in Section 2.3(a).

 

“Excluded
Liabilities” shall have the meaning set forth in
Section 1.1(c).

 

“Final Statement” shall
have the meaning set forth in Section 1.7(a).

 

“Financial
Statements” shall have the meaning set forth in Section 3.4.

 

“FMLA”
shall have the meaning set forth in Section 3.14(a)(vii).

 

“Form 8-K” shall have
the meaning set forth in Section 5.4(b).

 

“GAAP”
shall have the meaning set forth in Section 3.4.

 

2

 

“Governmental
authority” shall have the meaning set forth in Section 9.7(b).

 

“Hazardous
Substance” shall have the meaning set forth in
Section 3.15(a)(v).

 

“Hazardous Substance Activity”
shall have the meaning set forth in Section 3.15(a)(vi).

 

 “HSR Act” shall have the meaning set forth in
Section 3.3(a).

 

“Indemnity
Period” shall have the meaning set forth in Section 7.1.

 

“Independent Accounting Firm”
shall have the meaning set forth in Section 1.7(b)(iii).

 

“Instrument
of Assumption” shall have the meaning set forth in
Section 1.1(c).

 

“Intellectual
Property” shall have the meaning set forth in
Section 3.7(n)(i).

 

“Intellectual
Property Assignment” shall have the meaning set forth in
Section 1.1(b).

 

“Intellectual
Property Contract” shall have the meaning set forth in
Section 3.7(n)(ii).

 

“Intellectual Property License
Agreement” shall have the meaning set forth in Section 1.4(k).

 

“International
Employee Plan” shall have the meaning set forth in
Section 3.14(a)(viii).

 

“IRS”
shall have the meaning set forth in Section 3.14(a)(ix).

 

“Key
Suppliers” shall have the meaning set forth in Section 3.18.

 

“Knowledge
of Seller” shall mean the actual knowledge of the persons listed in
Schedule I of the Disclosure Schedules.

 

“Law” shall have the
meaning set forth in Section 1.1(c).

 

“Leased
Real Property” shall have the meaning set forth in
Section 3.8(b).

 

“Leases”
shall have the meaning set forth in Section 3.8(b).

 

“Lease Assignment Agreements”
shall have the meaning set forth in Section 1.4(l).

 

“Licensed
Intellectual Property” shall have the meaning set forth in
Section 3.7(n)(iii).

 

“Licenses”
shall have the meaning set forth in Section 3.11(b)(i).

 

“Liens”
shall have the meaning set forth in Section 3.8(a).

 

“M&A Qualified Beneficiaries”
shall have the meaning set forth in Section 2.3(b).

 

“Maskworks”
shall have the meaning set forth in Section 3.7(n)(i).

 

“Material
Adverse Effect” shall have the meaning set forth in
Section 3.6(c).

 

3

 

“Multiple Site License Agreement”
shall have the meaning set forth in Section 1.4(h).

 

“Non-U.S. Agreements”
shall have the meaning set forth in Section 5.22.

 

“Opening Statement” shall
have the meaning set forth in Section 1.7(a).

 

“Other
Instruments” shall have the meaning set forth in
Section 1.1(b).

 

“Patents”
shall have the meaning set forth in Section 3.7(n)(i).

 

“Pension Plan” shall have
the meaning set forth in Section 3.14(a)(x).

 

“Permits”
shall have the meaning set forth in Section 1.1(a)(i)(G).

 

“Permitted
Encumbrances” shall have the meaning set forth in
Section 3.8(a).

 

“Person”
shall have the meaning set forth in Section 9.7(c).

 

“Product” shall have the
meaning set forth in Section 3.7(n)(iv).

 

“Qualified
Beneficiary” shall have the meaning set forth in
Section 3.14(a)(xi).

 

“Real Estate Agreements”
shall mean the Rolling Meadows Lease Agreement, the Multiple Site License
Agreement and the Lease Assignment Agreements.

 

“Real
Property Laws” shall have the meaning set forth in
Section 3.8(c).

 

“Reference
Balance Sheet” shall have the meaning set forth in
Section 1.1(a)(ii)(A).

 

“Registered
Intellectual Property” shall have the meaning set forth in Section 3.7(n)(v).

 

“Resolution Period” shall
have the meaning set forth in Section 1.7(b)(iii).

 

 “Required Documents” shall have the meaning set forth in
Section 3.2(b).

 

“Required Financial Information”
shall have the meaning set forth in Section 5.4(b).

 

“Rolling Meadows Lease Agreement”
shall have the meaning set forth in Section 1.4(g).

 

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

 

“Seller
Conflicting Agreements” shall have the meaning set forth in
Section 3.3(b).

 

“Seller
Damages” shall have the meaning set forth in Section 7.3(a).

 

“Seller
Employee Plan” shall have the meaning set forth in
Section 3.14(a)(xii).

 

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

 

“Seller
Indemnitees” shall have the meaning set forth in
Section 7.3(a).

 

4

 

“Seller Indemnity Cap”
shall have the meaning set forth in Section 7.2(b)(iii).

 

“Seller
Savings Plan” shall have the meaning set forth in Section 2.3(a).

 

“Seller
Survival Date” shall have the meaning set forth in
Section 5.13.

 

“Selling Group” shall have
the meaning set forth in Section 2.3(b).

 

“Significant Customers”
shall have the meaning set forth in Section 3.19.

 

“Subsidiary”
shall have the meaning set forth in Section 9.7(d).

 

“Tax
Return” shall have the meaning set forth in Section 3.13(l).

 

“Tax”
or collectively “Taxes” shall have the meaning set forth in
Section 3.13(k).

 

“Third
Party Intellectual Property” shall have the meaning set forth in
Section 3.7(n)(vi).

 

“Trade
Secrets” shall have the meaning set forth in Section 3.7(n)(i).

 

“Trademarks”
shall have the meaning set forth in Section 3.7(n)(i).

 

“Transfer
Taxes” shall have the meaning set forth in Section 5.15(b).

 

“Transferred
Intellectual Property” shall have the meaning set forth in
Section 3.7(n)(vii).

 

 “Working Capital of the Business” shall have the meaning set
forth in Section 1.7(c).

 

5

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