Document:

Exhibit 4.8

 

EXECUTION VERSION

 

 

ASSET PURCHASE AND SALE AGREEMENT

 

dated as of April 11, 2005

 

between

 

DICTAPHONE CORPORATION

 

and

 

NICE SYSTEMS INC.

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  PURCHASE AND SALE OF THE BUSINESS

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Transfer of
  Assets

  	
   

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Excluded
  Assets

  	
   

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Assumed
  Liabilities

  	
   

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Retained
  Liabilities

  	
   

  
	
   

  	
   

  	
   

  
	
  2.5

  	
  Consideration

  	
   

  
	
   

  	
   

  	
   

  
	
  2.6

  	
  Closing

  	
   

  
	
   

  	
   

  	
   

  
	
  2.7

  	
  Escrow

  	
   

  
	
   

  	
   

  	
   

  
	
  2.8

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  
	
  2.10

  	
  Completion
  of Transfers

  	
   

  
	
   

  	
   

  	
   

  
	
  2.11

  	
  Subsidiary Asset Purchase Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  REPRESENTATIONS AND WARRANTIES OF
  DICTAPHONE

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Existence and Power; Consents

  	
   

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Valid and Enforceable
  Agreement; Authorization

  	
   

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Ownership

  	
   

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Financial
  Statements; Other Financial Information

  	
   

  
	
   

  	
   

  	
   

  
	
  3.5

  	
  Absence
  of Certain Developments

  	
   

  
	
   

  	
   

  	
   

  
	
  3.6

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  
	
  3.7

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  
	
  3.8

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  
	
  3.9

  	
  Product Liability
  Claims

  	
   

  
	
   

  	
   

  	
   

  
	
  3.10

  	
  Inventory
  and Accounts Receivable

  	
   

  
	
   

  	
   

  	
   

  
	
  3.11

  	
  Condition
  of Personal Property

  	
   

  
	
   

  	
   

  	
   

  
	
  3.12

  	
  Property;
  Title

  	
   

  
	
   

  	
   

  	
   

  
	
  3.13

  	
  Contracts

  	
   

  
	
   

  	
   

  	
   

  
	
  3.14

  	
  Licenses and
  Permits

  	
   

  
	
   

  	
   

  	
   

  
	
  3.15

  	
  Undisclosed
  Liabilities

  	
   

  
	
   

  	
   

  	
   

  
	
  3.16

  	
  Compliance
  with Laws

  	
   

  
	
   

  	
   

  	
   

  
	
  3.17

  	
  Environmental
  Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  3.18

  	
  Intellectual Property

  	
   

  
	
   

  	
   

  	
   

  
	
  3.19

  	
  Employee Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  3.20

  	
  Employee Benefits

  	
   

  
				

 

 

	
  3.21

  	
  No Guarantees

  	
   

  
	
   

  	
   

  	
   

  
	
  3.22

  	
  Certain Business Relationships with
  the Business

  	
   

  
	
   

  	
   

  	
   

  
	
  3.23

  	
  Disclosure

  	
   

  
	
   

  	
   

  	
   

  
	
  3.24

  	
  Customers and Suppliers

  	
   

  
	
   

  	
   

  	
   

  
	
  3.25

  	
  Product Backlog

  	
   

  
	
   

  	
   

  	
   

  
	
  3.26

  	
  Absence of Certain Business Practices

  	
   

  
	
   

  	
   

  	
   

  
	
  3.27

  	
  Brokers, Finders

  	
   

  
	
   

  	
   

  	
   

  
	
  3.28

  	
  No Other Representations or Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE BUYER

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Existence and Power

  	
   

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Valid and Enforceable Agreement;
  Authorization

  	
   

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Brokers, Finders

  	
   

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  
	
  4.5

  	
  Funds

  	
   

  
	
   

  	
   

  	
   

  
	
  4.6

  	
  No Other Representations or Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  EMPLOYEES

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Access to Employees; Offers of
  Employment to U.S. Employees

  	
   

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Post-Closing Employment and Employee
  Benefits

  	
   

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  U.S. Employees Vacation Pay

  	
   

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  Transfer of U.S. Employee Withholding

  	
   

  
	
   

  	
   

  	
   

  
	
  5.5

  	
  Transfer of U.S. Unemployment
  Insurance Rate and Base

  	
   

  
	
   

  	
   

  	
   

  
	
  5.6

  	
  Non-U.S. Employees

  	
   

  
	
   

  	
   

  	
   

  
	
  5.7

  	
  Non-Solicitation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
  ADDITIONAL
  COVENANTS OF THE PARTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Conduct of Business Until Closing

  	
   

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Books and Records

  	
   

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  Filings; Further Assurances and
  Cooperation

  	
   

  
	
   

  	
   

  	
   

  
	
  6.5

  	
  Covenant Not to Compete

  	
   

  
	
   

  	
   

  	
   

  
	
  6.6

  	
  Notice of Developments

  	
   

  
	
   

  	
   

  	
   

  
	
  6.7

  	
  Delivery of Audited Financial
  Statements, Closing Date Balance Sheet and Interim 2005 Financial Statements

  	
   

  
				

 

 

	
  6.8

  	
  Commencement of Transition Planning and
  Services; Execution and Delivery of Transition Services Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  6.9

  	
  Renegotiation of Certain Contracts;
  Assignment of Certain Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  6.10

  	
  Certain Patents

  	
   

  
	
   

  	
   

  	
   

  
	
  6.11

  	
  Omitted IP

  	
   

  
	
   

  	
   

  	
   

  
	
  6.12

  	
  Accounts Receivable Collections
  Assistance

  	
   

  
	
   

  	
   

  	
   

  
	
  6.13

  	
  Accounts Payable and Accrued Expenses

  	
   

  
	
   

  	
   

  	
   

  
	
  6.14I

  	
  Insurance Coverage

  	
   

  
	
   

  	
   

  	
   

  
	
  6.15

  	
  Bulk Sales Laws

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  CONDITIONS
  PRECEDENT TO OBLIGATIONS OF THE BUYER

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Accuracy of Representations and
  Warranties and Performance of Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Consents and Approvals

  	
   

  
	
   

  	
   

  	
   

  
	
  7.3

  	
  No Contrary Judgment

  	
   

  
	
   

  	
   

  	
   

  
	
  7.4

  	
  No Material Adverse Effect

  	
   

  
	
   

  	
   

  	
   

  
	
  7.5

  	
  Minimum Number of Offers Accepted

  	
   

  
	
   

  	
   

  	
   

  
	
  7.6

  	
  Deliveries

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  CONDITIONS
  PRECEDENT TO OBLIGATIONS OF DICTAPHONE

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Accuracy of Representations and
  Warranties and Performance of Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Consents and Approvals

  	
   

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  No Contrary Judgment

  	
   

  
	
   

  	
   

  	
   

  
	
  8.4

  	
  Deliveries

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Indemnification by Dictaphone

  	
   

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Indemnification by the Buyer

  	
   

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Notice and Payment of Losses

  	
   

  
	
   

  	
   

  	
   

  
	
  9.4

  	
  Defense of Third-Party Claims

  	
   

  
	
   

  	
   

  	
   

  
	
  9.5

  	
  Survival of Representations and
  Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  9.6

  	
  Limitation on Indemnification

  	
   

  
	
   

  	
   

  	
   

  
	
  9.7

  	
  Characterization of Indemnity Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  9.8

  	
  Exclusive Remedy

  	
   

  
	
   

  	
   

  	
   

  
	
  9.9

  	
  Other Limitations

  	
   

  
				

 

 

	
  9.10

  	
  No Duplicative Adjustments

  	
   

  
	
   

  	
   

  	
   

  
	
  9.11

  	
  Annex 5.6(a) Representations and
  Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
  TERMINATION;
  SURVIVAL OF AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  10.2

  	
  Survival of Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
  MISCELLANEOUS
  PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Expenses

  	
   

  
	
   

  	
   

  	
   

  
	
  11.2

  	
  Notice

  	
   

  
	
   

  	
   

  	
   

  
	
  11.3

  	
  Entire Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  11.4

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  11.5

  	
  Assignment; Binding Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  11.6

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  11.7

  	
  Headings; Interpretation

  	
   

  
	
   

  	
   

  	
   

  
	
  11.8

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  
	
  11.9

  	
  Dispute Resolution

  	
   

  
	
   

  	
   

  	
   

  
	
  11.10

  	
  Disclosure Schedule Generally

  	
   

  
	
   

  	
   

  	
   

  
	
  11.11

  	
  No Third-Party Beneficiaries or Other
  Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  11.12

  	
  Amendments; Waivers

  	
   

  
				

 

 

ASSET PURCHASE AND SALE AGREEMENT

 

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

 

RECITALS

 

A.            The
Buyer desires to purchase the Purchased Assets, and assume the Assumed
Liabilities, from Dictaphone, on the following terms and conditions; and

 

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

 

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

 

ARTICLE
1

DEFINITIONS

 

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

 

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

 

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

 

1.3           “Accounts
Payable” means those accounts payable of the Business recorded or required
to be recorded as such on financial statements of the Business prepared in
accordance with U.S. GAAP, and “accounts payable” means all accounts of the
Business representing obligations to pay for goods or services received and
other liabilities of the type customarily included as payables of a business
that arose or arise in the Ordinary Course. 

 

1.4           “Accounts
Receivable” means those accounts receivable of the Business recorded or
required to be recorded as such on financial statements of the Business
prepared in accordance with U.S. GAAP, and “accounts receivable” means all
accounts of the Business representing moneys due for goods sold or services
rendered, as evidenced by notes, statements, invoices or other written evidence
of a present obligation.  

 

1.5           “Accrued
Expenses” means those accrued expenses of the Business recorded or required
to be recorded as such on financial statements of the Business prepared in
accordance with U.S. GAAP, and “accrued expenses” means all liabilities of the
Business of the type customarily included as accrued expenses of a business
that arose or arise in the Ordinary Course. 
The types and categories of accrued expenses are listed on Annex 1.5.    

 

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

 

1

 

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

 

1.7           “Agreement” means this Asset Purchase
and Sale Agreement as executed on the date hereof and as amended or
supplemented in accordance with the terms hereof, including the Disclosure
Schedule and all other Schedules, Annexes and Exhibits hereto.

 

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

 

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

 

1.10         “Audited
Financial Statements” means the audited
balance sheet of the Business as of December 31, 2004, and the related
audited statement of operations and statement of cash flows for the year then
ended, prepared on a “carved-out” basis in accordance with U.S. GAAP and as
otherwise set forth in Section 3.4(b).

 

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

 

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

 

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

 

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

 

1.15         “Benefit
Plan” means any employee benefit plan (as defined in Section 3(3) of
ERISA) and any other employee benefit plan, program or arrangement. 

 

1.16         “Business” means all
global commercial activities relating to the current or the currently planned,
design, development, sale, production, marketing and servicing of hardware and
software for call logging systems and related replay and surveillance systems
and application software, for: (i) call centers and contact centers, with
related software applications for quality monitoring, workforce optimization,
business performance management and voice content analytics; (ii) command,
control, communications and dispatch operations of public safety, first
responders, transportation, air-traffic control organizations and other
government agencies, with related software applications for dispatch, resource
allocation, scenario reconstruction and evidence gathering; and (iii) financial
institutions, with related software applications for risk management and
compliance, including anti-fraud, anti-money laundering and securities
regulation, including Sarbanes-Oxley regulations; as such business has been
conducted as of the Closing Date by Dictaphone’s Communications Recording
Systems division, including through its channel partners and Dictaphone
Affiliates; provided, however, that Business shall not include the
business or operations of the Healthcare Solutions Group, Integrated Voice
Systems or EMS divisions of Dictaphone.

 

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

 

2

 

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

 

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

 

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

 

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

 

1.22         “Buyer
Affiliates” means (i) NICE CTI Systems UK Limited, organized under the
law of the United Kingdom, (ii) NICE Systems sarl, organized under the
laws of France, and (iii) NICE Systems GmbH, organized under the laws of
Germany, each of which is an Affiliate of Buyer under common control with
Buyer.

 

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

 

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

 

1.25         “Closing
Date” means the date on which the Closing occurs, which shall be within
five (5) Business Days from the satisfaction or waiver of all applicable
conditions to Closing set out herein, or such other date as shall be mutually
agreed upon by the Parties, after allowing for reasonable time periods for
performing certain pre-Closing activities, including the physical inventory
count contemplated by Section 2.5(b)(i), the preparation and review of the
Estimated Closing Date Balance Sheet and the release of the Encumbrances
described in Section 1.83(e).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

1.34         “Disclosure
Schedule” means the schedule, dated the date hereof and as it may be
amended or supplemented from time to time on or prior to Closing, of exceptions
to the representation and warranties made, and the listings of information
provided, by Dictaphone or the Buyer hereunder.

 

1.35         “Dictaphone
Successor” means any Person who is an investor in, a successor to, or
assignee of, Dictaphone or any acquirer of, successor to or assignee of a
majority of the businesses or assets of Dictaphone or its Affiliates, in each
case, pursuant to an asset acquisition, stock acquisition, merger, stock
exchange, consolidation or other business combination, and any Affiliate of
such Person (other than Dictaphone or its Affiliates at the time of such
investment, succession or assignment).  

 

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

 

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

 

1.38         “Employees”
means individuals who immediately prior to the Effective Time are employees of
Dictaphone or its subsidiaries and who primarily perform services in the
Business; “EU Employees” means those Employees based in the European
Union and whose contracts of employment are subject to the laws of a member
state of the European Union and listed on Annex 1.38(i); “Swiss
Employees” means those Employees based in the European Union and whose
contracts of employment are subject to the laws of Switzerland and listed on Annex
1.38(ii); “Canadian Employees” means those Employees based in Canada
and whose contracts of employment are subject to the laws of Canada and listed
on Annex 1.38(iii); “Singapore Employees” means those Employees
based in Singapore and whose contracts of employment are subject to the laws of
Singapore and listed on Annex 1.38(iv); and “U.S. Employees”
means all Employees other than the EU Employees, Swiss Employees, Canadian
Employees and Singapore Employees.   

 

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

 

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

 

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

 

4

 

1.42         “Environmental
Permit” means any permit, approval, consent or other authorization pursuant
to any Environmental Law.

 

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

 

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

 

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

 

1.46         “Estimated
Closing Date Balance Sheet” means the unaudited balance sheet of the
Business as of the Closing Date reflecting the Purchased Assets to be acquired
and the Assumed Liabilities to be assumed pursuant to this Agreement, as more
specifically set forth in Section 2.5(b).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

1.57         “Interim
2005 Financial Statements” has the meaning set forth in Section 6.7(c).

 

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

 

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

 

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

 

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

 

1.62         “knowledge” means
a Person’s actual knowledge (i.e., the conscious awareness of facts or other
information), after undertaking a customary and reasonable investigation under
the circumstances, including undertaking a reasonable inquiry of those Persons
who report directly to them.  The words “know,”
“knowing” and “known” shall be construed accordingly.  In the case of Dictaphone, “knowledge” means
the actual knowledge of the Persons listed on Annex 1.62(i) (other
than those Persons listed on Annex 1.62(i) solely for the purpose
of identifying such Persons as Persons who report directly to other Persons
listed on Annex 1.62(i)), after undertaking a customary and reasonable
investigation under the circumstances, including undertaking a reasonable
inquiry of those Persons who report directly to them (other than those Persons
specifically listed on Annex 1.62(i) as excluded from the requirement
of making such inquiry).  In the case of
the Buyer, “knowledge” means the actual knowledge of the Persons listed on Annex
1.62(ii), after undertaking a customary and reasonable investigation under
the circumstances, including undertaking a reasonable inquiry of those Persons
who report directly to them.

 

6

 

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

 

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

 

1.65         “Loss” means a Liability, to the extent actually
paid or incurred, but net of any proceeds, indemnities or recoveries from
insurers or other third parties received by the Injured Party with respect to
such Liability.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

1.77         “OSS
Agreement” means the Professional
Services Agreement, dated as of April 2, 2001, by and between Dictaphone
and Omnee Systems and Software Corporation. 

 

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

 

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

 

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

 

1.81         “Party” means Dictaphone or the Buyer.

 

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

 

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

 

1.84         “Prepaid
Expenses” means those prepaid expenses of the Business recorded or required
to be recorded as such on financial statements of the Business prepared in
accordance with U.S. GAAP, and “prepaid expenses” means deposits and other
prepayments of expenses of the Business and all rights in respect thereof.

 

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

 

1.86         “Product
Backlog” means written orders in the form of a purchase order or contract
for products of the Business that have been placed and for which revenues have
not yet been recognized, less any cancellations of such orders.

 

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

 

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

 

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

 

8

 

1.90         “Related
Agreements” means (i) the Manufacturing Agreement, (ii) the
Technology License Agreement, (iii) the Trademark License Agreement, (iv) the
Transition Services Agreement/Shared Services Agreements, (v) the Escrow
Agreement and (vi) the Subsidiary Asset Purchase Agreements.

 

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

 

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

 

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

 

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

 

1.95         “Selling
Subsidiaries” means (i) Dictaphone Canada (1995) Inc., a Canadian
corporation, (ii) Dictaphone Company Limited, a U.K. company, (iii) Dictaphone
Deutschland GmbH, a German company, (iv) Dictaphone Europe AG, a Swiss
company, and (v) Dictaphone International Limited, a U.K. company.

 

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

 

1.97         “Straddle
Period” means any taxable period that begins prior to and ends after the
Effective Time.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

1.105       “Third
Party Intellectual Property” means any Intellectual Property to which
Dictaphone does not exclusively own the entire right, title and interest.

 

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

 

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

 

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

 

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

 

1.110       “Transition
Services/Shared Services Agreements” means the agreements, in the form
attached hereto as Exhibit D, between an Affiliate of the Buyer and
Dictaphone regarding services to be provided (i) by Dictaphone to the
Buyer (or to third parties to which the Buyer may outsource certain assigned
maintenance and service contracts), (ii) by Dictaphone for the benefit of
customers of the Buyer, as a subcontractor to the Buyer, or (iii) by the
Buyer to customers of Dictaphone, as a subcontractor to Dictaphone, or to be
shared by the Buyer and Dictaphone.

 

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

 

ARTICLE 2

PURCHASE AND SALE OF THE BUSINESS

 

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

 

(a)           all
equipment, machinery, supplies, vehicles, tools, personal computers,
workstations, network infrastructure, laboratory equipment, testing equipment
and apparatus, mock-ups, demonstration equipment, personal property and other
tangible personal

 

10

 

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

 

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

 

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

 

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

 

(i)            Maintenance
Contracts (Annex 2.1(d)(i));

 

(ii)           Product
Purchase Contracts (Annex 2.1(d)(ii)); 

 

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

 

(iv)          Software
OEM Agreements (Annex 2.1(d)(iv)); 

 

(v)           License
Agreements (Annex 2.1(d)(v)); 

 

(vi)          Professional
Development Services Agreements (Annex 2.1(d)(vi));

 

(vii)         Service
Provider and Vendor Agreements (Annex 2.1(d)(vii)); and

 

(viii)        Other
Assigned Contracts (Annex 2.1(d)(viii)); 

 

(e)           all
Accounts Receivable (excluding Accounts Receivable from the Other Dictaphone
Businesses) arising from products or services sold or leased by the Business;

 

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

 

11

 

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

 

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

 

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

 

(i)            all
warranties from third parties and, except as set forth on Annex 2.1(i) and
not set forth on the December 31 Balance Sheet or as set forth in Section 2.2(b),
refunds from and rights of set off against third-parties, in each case that
relate primarily to the Purchased Assets or the Business; 

 

(j)            except
as provided in Section 2.2(j), all rights to
receive any damage award or other economic benefit with respect to
infringement, misappropriation, dilution or other violation of any rights
related to the Business Intellectual Property arising prior to the Effective
Time, including all rights to litigation claims brought pursuant to the Nice
Settlement Agreement; and

 

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

 

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

 

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

 

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

 

12

 

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

 

(c)           all
real property owned by or leased to Dictaphone, including related buildings and
fixtures; 

 

(d)           all
intracompany and intercompany receivables of the Business; 

 

(e)           (i) all
current and prior insurance policies, (ii) all reimbursements for, or
other benefits associated with, prepaid insurance and (iii) all rights and
claims to deposits and prepayments that would be recorded as Prepaid Expenses
on financial statements prepared by Dictaphone in accordance with U.S. GAAP for
which the Buyer will not receive the benefit after the Effective Time and (iv) insurance
proceeds with respect to events occurring prior to the Effective Time;

 

(f)            all
assets of any Benefit Plan of Dictaphone;

 

(g)           all
ownership rights of Dictaphone in respect of Intellectual Property to be
licensed to Buyer pursuant to the Trademark License Agreement;

 

(h)           subject
to Section 2.1(j), all rights, claims or causes of action that Dictaphone
may have against any Person arising from or related to the ownership or use of
the Purchased Assets or the operation of the Business before the Effective
Time; 

 

(i)            all
raw materials and works-in-progress, whether stored at a Business location or
stored at a third-party location or other Dictaphone location, used or held for
use by EMS;

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

(d)           all Liabilities to
suppliers for materials and services relating to the Business ordered in the
Ordinary Course prior to the Effective Time, but scheduled to be delivered or
provided thereafter, and all liabilities to customers under purchase orders for
products of the Business which have not yet been shipped prior to the Effective
Time;

 

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

 

(f)            all Liabilities with
respect to products or services of the Business sold after the Effective Time
and all Liabilities arising out of, or otherwise caused by, acts or omissions
of the Buyer or its Affiliates after the Effective Time;

 

(g)           all Liabilities in
respect of ordinary course trade letters of credit, bid bonds and performance
bonds set forth on Annex 2.3(g) and those permitted to be entered
into under Section 6.1(e) between the date hereof and the Closing
Date; 

 

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

 

(i)            all Liabilities for
which the Buyer or a Local Buyer (as defined in Annex 5.6) is responsible
under Article 5, including Annex 5.6;

 

(j)            all
Liabilities asserted against Dictaphone and its Affiliates in connection with the
litigation transferred pursuant to the Termination Agreement; and 

 

(k)           except
as provided in clauses (b) through (i) of Section 2.4, all other
Liabilities arising in the Ordinary Course before or after the Effective Time
relating to the Purchased Assets or the Business.  

 

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

 

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

 

14

 

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

 

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

 

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

 

(e)           except as provided in Section 2.3 (and
subject to clause (i) of this Section 2.4), all Liabilities arising other
than in the Ordinary Course prior to the Effective Time relating to the
Purchased Assets or the Business; 

 

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

 

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

 

(h)           all Liabilities to third parties for
accounting, audit, tax, legal and other professional services incurred in
connection with the preparation, negotiation and execution of this Agreement
and the Related Agreements; 

 

(i)            notwithstanding anything contained in Section 2.3
or this Section 2.4 to the contrary, all Liabilities to third parties (including
governmental authorities) with respect to claims for violation of Laws
(including environmental Laws) arising out of the operation of the Business
prior to the Effective Time, and all Liabilities to third parties (including
governmental authorities) with respect to claims for personal injury, property
damage or business interruption (in each case, other than Liabilities in the
Ordinary Course with respect to maintenance, repair or warranty claims) regarding
products or services of the Business to the extent that such Liabilities arise
from acts or omissions prior to the Effective Time; provided, however,
that, while Dictaphone shall have initial responsibility for addressing any
such claims, the Buyer and its Affiliates shall use commercially reasonable
efforts to, as promptly as practicable, provide to Dictaphone and its
Affiliates (or to such third party at Dictaphone’s request) all maintenance,
repair and other product support services, including new replacement and, if
then existing, upgraded products (including newer product model(s)) that
Dictaphone may request to seek to resolve or mitigate such Liabilities, subject
to Buyer’s available resources with respect to discontinued products or
services; and

 

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

 

15

 

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

 

2.5           Consideration.  

 

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

 

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

 

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

 

(b)           Certain
Adjustments.  Without limiting the
Buyer’s rights under Article 9, without duplication, the Purchase Price
shall be subject to adjustment, to the extent that Net Adjusted Working Capital
Level as of the Closing Date is less than $0.00, in accordance with the
provisions of this Section 2.5(b) as follows: 

 

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

 

16

 

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

 

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

 

(iii)          In
the event that the Buyer promptly, but in any event prior to any scheduled
Closing Date, notifies Dictaphone that the Buyer in good faith disputes the
Estimated Closing Date Balance Sheet, the Buyer and Dictaphone shall use their
commercially reasonable efforts for a period of five (5) Business Days (or
such longer period as they may mutually agree) to resolve any disagreements
with respect to the Estimated Closing Date Balance Sheet, and any scheduled
Closing Date shall be deferred up to ten (10) days to accommodate such
attempted resolution.  If the Buyer and
Dictaphone resolve such disagreements and agree on an Estimated Closing Date
Balance Sheet, such agreed upon Estimated Closing Date Balance Sheet shall be
final and binding and references to the Estimated Closing Date Balance Sheet
shall thereafter mean such agreed upon Estimated Closing Date Balance
Sheet.  If, at the end of such period,
the Buyer and Dictaphone are unable to resolve their disagreements with respect
to the Estimated Closing Date Balance Sheet, (x) the amount in dispute shall be
deposited in escrow by the Buyer (the “Balance Sheet Escrowed Funds”) if
such amount equals or exceeds Two Hundred Fifty Thousand U.S. Dollars ($250,000),
but only to the extent that, if the Buyer’s good faith claims in the dispute
were upheld, the Net Adjusted Working Capital Level as of the Closing would be
less than zero and would result in a reduction of the Purchase Price of at
least Two Hundred Fifty Thousand U.S. Dollars ($250,000) and (y) the Estimated
Closing Date Balance Sheet prepared by Dictaphone shall be used to calculate
the Purchase Price payable at Closing (and references to the Estimated Closing
Date Balance Sheet shall thereafter mean the Estimated Closing Date Balance
Sheet prepared by Dictaphone), but without limiting any Party’s rights under Section 2.5(b)(iv).  The Balance Sheet Escrowed Funds shall be
released in accordance with Section 2.5(b)(v) and the terms and
provisions of the Escrow Agreement.

 

(iv)          As soon as
practicable (but in no event later than sixty (60) days) following the Closing
Date, Dictaphone shall prepare and deliver to the Buyer (i) a balance
sheet of the Business reflecting the Purchased Assets actually acquired and
Assumed Liabilities actually assumed as of the Closing (the “Closing Date
Balance Sheet”) and (ii) a calculation of the Net Adjusted Working
Capital Level as of the Closing.  The
Closing Date Balance Sheet shall (i) be derived from the books and records
of the Business, (ii) fairly present, in all material respects, the
Purchased Assets actually acquired and the Assumed Liabilities actually assumed
pursuant to this Agreement and (iii) be prepared in accordance with U.S.
GAAP.  Notwithstanding the foregoing, in
no event shall the Closing Date Balance Sheet attribute any value to, include
any asset or liabilities created by, or otherwise reflect (x) the OSS Payment
or any other payments made to OSS by or on behalf of Dictaphone in connection
with the

 

17

 

amendment to the OSS
Agreement or (y) the transactions contemplated thereby. For the purpose of
preparing the Closing Date Balance Sheet and calculating Net Adjusted Working
Capital Level as of the Closing, the Buyer shall provide Dictaphone and its
accountants with reasonable access to (i) all the underlying documentation
and records necessary for Dictaphone and its auditors to prepare the Closing
Date Balance Sheet and calculation of Net Adjusted Working Capital Level as of
the Closing and all other records of the Buyer and its Affiliates reasonably
related to the preparation of the Closing Date Balance Sheet and the
calculation of Net Adjusted Working Capital Level as of the Closing and (ii) the
employees of the Buyer and its Affiliates. 
The Buyer may dispute any element of the Closing Date Balance Sheet or
the calculation of Net Adjusted Working Capital Level as of the Closing by
notifying Dictaphone of such disagreement in writing, setting forth in detail
the particulars of such disagreement, within sixty (60) calendar days after the
Buyer’s receipt of the Closing Date Balance Sheet and the calculation of Net
Adjusted Working Capital Level as of the Closing from Dictaphone.  In the event that the Buyer does not provide
such a notice of disagreement within such sixty (60) calendar day period, the
Buyer shall be deemed to have accepted Dictaphone’s Closing Date Balance Sheet
and calculation of Net Adjusted Working Capital Level as of the Closing, which
shall be final, binding and conclusive for all purposes hereunder.  In the event any such notice of disagreement
is timely provided, the Buyer and Dictaphone shall use their commercially
reasonable efforts for a period of thirty (30) calendar days (or such longer
period as they may mutually agree) to resolve any disagreements with respect to
the Closing Date Balance Sheet and the calculation of Net Adjusted Working
Capital Level as of the Closing.  If, at
the end of such period, they are unable to resolve such disagreements, then
such dispute shall be referred to an independent accounting firm of recognized
national standing mutually selected by the Buyer and Dictaphone (the “Auditor”)
which shall resolve any remaining disagreements.  The Auditor shall determine as promptly as
practicable, but in any event within thirty (30) calendar days of the date on
which such dispute is referred to the Auditor, based solely on the written
submissions forwarded by the Buyer and Dictaphone, whether and to what extent
(if any) the Closing Date Balance Sheet and the calculation of Net Adjusted
Working Capital Level as of the Closing require adjustment.  The fees and expenses of the Auditor shall be
paid one-half by the Buyer and one-half by Dictaphone.  The determination of the Auditor shall be
final, conclusive and binding on the Parties. 
The final Closing Date Balance Sheet and the final calculation of the
Net Adjusted Working Capital Level as of the Closing shall be deemed to be an annex
to this Agreement (the “Net Adjusted Working Capital Level Annex”).  

 

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

 

(A)          Less
than the Net Adjusted Working Capital Level determined on the basis of the
Estimated Closing Date Balance Sheet, then the difference (up to but not
greater than the amount by which the final Net Adjusted Working Capital Level
determined in accordance with Section 2.5(b)(iv) is less than zero)
between the final Net Adjusted Working Capital Level determined in accordance
with Section 2.5(b)(iv) and the Net Adjusted Working Capital Level
determined on the basis of the Estimated Closing Date Balance Sheet shall be
paid by Dictaphone to the Buyer (1) first, from the Balance Sheet Escrowed
Funds and (2) if the Balance Sheet Escrowed Funds are insufficient to pay
in full any amounts due to the Buyer from Dictaphone under this Section 2.5(b)(v)(A),
then from Dictaphone’s other assets;

 

18

 

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

 

(B)           Equal
to or greater than the Net Adjusted Working Capital Level determined on the
basis of the Estimated Closing Date Balance Sheet, then the difference (up to
but not greater than the amount by which the Net Adjusted Working Capital Level
determined on the basis of the Estimated Closing Date Balance Sheet is less
than zero) between the final Net Adjusted Working Capital Level determined in
accordance with Section 2.5(b)(iv) and the Net Adjusted Working
Capital Level determined on the basis of the Estimated Closing Dated Balance
Sheet shall be paid by Buyer to Dictaphone in the following manner: (1) first,
all Balance Sheet Escrowed Funds shall be released to Dictaphone and (2) if
the Balance Sheet Escrowed Funds are insufficient to pay in full any amounts
due to Dictaphone from the Buyer under this Section 2.5(b)(v)(B), then
from the Buyer’s other assets.   

 

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

 

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

 

2.7           Escrow. 

 

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

 

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

 

19

 

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

 

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

 

2.8           Taxes.  

 

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

 

(b)           Each
Party shall and shall cause its Affiliates to, upon request, use its reasonable
efforts to provide or obtain from any Taxing authority or other Person any
certificate or other document necessary to mitigate, reduce or eliminate any
Taxes described in Section 2.8(a).

 

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

 

20

 

a Straddle Period shall
be taken into account as though the relevant Taxable period ended on the
Closing Date.

 

(d)           The
Buyer and Dictaphone shall furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information (including reasonable
access to books and records) and assistance as is reasonably necessary for the
filing of any Tax return, the conduct of any Tax audit, and the prosecution or
defense of any Proceeding relating to any Tax matter.  Any Tax audit or other Tax Proceeding shall
be deemed to be a Third-Party Claim subject to the procedures set forth in Section 9.4.

 

2.9           Allocation of
Purchase Price.  The Buyer and
Dictaphone shall mutually agree to the allocation of the Purchase Price (as it
may be adjusted pursuant to Section 2.5(b)) among Dictaphone and the
Selling Subsidiaries, among the Buyer and the Buyer Affiliates and among the
Purchased Assets in accordance with applicable Laws, including Code Sections
338 and 1060, within 90 days after the Closing Date.  The Parties hereby agree to file IRS Form 8594
and file or cause to be filed all Tax returns and information reports in a
manner consistent with such allocation and shall use their reasonable best
efforts to sustain such allocation in any subsequent Tax audit or Tax dispute.

 

2.10         Completion of Transfers.  

 

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

 

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

 

21

 

not assignable without
the consent of any other Person, unless such consent shall have been given or
waived.

 

(c)           Pending
the assignments, conveyances, transfers and assumptions referred to in Section 2.10(b),
(A) Dictaphone shall (i) hold any such non-assigned, non-conveyed,
non-transferred or non-assumed Purchased Assets or Assumed Liabilities for the
benefit and at the risk of the Buyer, (ii) cooperate with the Buyer in any
lawful and reasonable arrangements designed to provide the benefits and burdens
of ownership thereof and responsibility therefor to the Buyer and (iii) indemnify
and hold the Buyer harmless from and against any and all Losses rising solely
from the failure to assign, convey, transfer or assume such Purchased Assets or
Assumed Liabilities or to obtain any such consent, authorization or approval as
has not been obtained or waived and (B) Buyer shall perform or cause the
Buyer Affiliates to perform under any such non-assigned, non-conveyed,
non-transferred or non-assumed Purchased Assets or Assumed Liabilities as if
such non-assigned, non-conveyed, non-transferred or non-assumed Purchased Asset
or Assumed Liability had been assigned, conveyed, transferred or assumed to or
by Buyer or a Buyer Affiliate, including providing services under any warranty
and recognizing, and not taking any action inconsistent with, any license
granted under any such Purchased Asset or Assumed Liability.  

 

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

 

2.11         Subsidiary
Asset Purchase Agreements. 
At or prior to the Closing, Dictaphone shall cause each of the Selling
Subsidiaries to enter into a separate transfer of assets and assumption of
liabilities agreement with the applicable Buyer Affiliate, and the Buyer shall
cause each such Buyer Affiliate to enter into such separate agreement with the
applicable Selling Subsidiary, each such agreement to be substantially in the
form of Exhibit F, with such modifications as are necessary or
appropriate as a result of (a) differences in the businesses and Purchased
Assets and Assumed Liabilities of each Selling Subsidiary, (b) differences
in local law or customs which may require changes in order to maintain
substantially the same legal meaning and effect under local law and custom as
provided for with respect to the comparable provisions of this Agreement, and (c) the
parties’ respective tax considerations to the extent that they are not
inconsistent with the comparable provisions of this Agreement (such agreements
are, collectively, the “Subsidiary Asset Purchase Agreements”).  Each Subsidiary Asset Purchase Agreement
shall be subject to this Agreement and shall be construed so as to be
consistent with each other and this Agreement and so as not to create
duplicative rights and liabilities (although they may create additional rights
and liabilities); provided, however, that, in the event of a conflict
or inconsistency between this Agreement and such Subsidiary Asset Purchase
Agreement as to any matter other than one mandatorily governed by laws or
orders of the applicable jurisdiction of the Selling Subsidiary whose assets
and liabilities are subject to such Subsidiary Asset Purchase Agreement, this
Agreement shall govern and, in the event of a conflict or inconsistency as to
any matter mandatorily so governed, such Subsidiary Asset Purchase Agreement
shall govern.  The Parties agree to use
commercially reasonable efforts to limit the number and scope of Subsidiary
Asset Purchase Agreements to those required by local legal requirements and
their respective tax considerations.

 

22

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF DICTAPHONE

 

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

 

3.1           Existence and Power; Consents.  

 

(a)           Each
Seller has the corporate, partnership, limited liability company or other
organizational power and authority, as applicable, to execute and deliver this
Agreement and any Related Agreement to which it is a party, to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby.  Each
Seller has the requisite corporate, partnership, limited liability company or
other organizational power and authority, as applicable, to transfer the
Purchased Assets owned by such Seller, to assign the Assumed Liabilities of
such Seller and to consummate the transactions contemplated hereby.

 

(b)           Each Seller is validly
existing and in good standing under the laws of its jurisdiction of formation
(to the extent such concept is recognized in such jurisdiction) and each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be
so qualified and in good standing would not have a Material Adverse Effect.  Dictaphone is qualified to transact business
as a foreign corporation in Florida.  

 

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

 

(d)           The
Sellers have the power and authority to own, lease and use their respective
assets in connection with the Business. 

 

3.2           Valid
and Enforceable Agreement; Authorization.  This Agreement and the Related Agreements
have been duly executed and delivered by the Sellers party thereto and
constitute legal, valid and binding obligations of the Sellers, enforceable
against the Sellers in

 

23

 

accordance with their
terms, except that such enforcement may be subject to (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors’ rights generally and (b) general
principles of equity.  The execution and
delivery of this Agreement and the Related Agreements and the consummation of
the transactions contemplated hereby and thereby have been duly authorized,
approved and ratified by all necessary corporate action (including stockholder
approval to the extent required by law or contract) on the part of the Sellers
party thereto.

 

3.3           Ownership. 
Except for the Permitted Encumbrances, the Sellers together have good
title to and are the sole and exclusive owner of all right, title and interest
in and to all of the Purchased Assets, free and clear of all Encumbrances.  At Closing, the Buyer and the Buyer
Affiliates together will acquire all right, title and interest in and to all of
the Purchased Assets, free and clear of all Encumbrances, other than Permitted
Encumbrances and any Encumbrances created by acts or omissions of the Buyer and
its Affiliates.  Except as set forth in Disclosure
Schedule Section 3.3, none of the Purchased Assets is in the
possession of Persons other than a Seller or held by Dictaphone or its
Affiliates on consignment.  

 

3.4           Financial Statements; Other Financial Information.  

 

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

 

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

 

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

 

24

 

liabilities
that do not constitute a part of the Business as currently conducted by
Dictaphone, the Purchased Assets or the Assumed Liabilities, recognizing that
the Estimated Closing Date Balance Sheet will be an estimated financial
statement.  

 

(d)           Warranties.  Except as listed in Disclosure
Schedule Section 3.4(d), there are no material unresolved
warranty and support claims (including any pending claims) related to products
or services of the Business (other than deferred revenues). 

 

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

 

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

 

(b)           incurred
any obligation or liability, whether due or to become due, or entered into any
other transaction except in the Ordinary Course and except for liabilities and
transactions that have not, individually or in the aggregate, had a Material
Adverse Effect; 

 

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

 

(d)           increased
the rate or terms of compensation or benefits payable to or to become payable
by it to any management or other key employee earning over $75,000 per year or
increased the rate or terms of any bonus or Benefit Plan covering any such
employee, except in each case increases occurring in the Ordinary Course in
accordance with its customary practice (including normal periodic performance
reviews and related compensation and benefits increases) or made any material
changes in policies of employment; 

 

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

 

(f)            transferred
or granted any rights or licenses under, or entered into any settlement
regarding the breach or infringement of, any Business Intellectual Property, or
modified any existing rights with respect thereto;

 

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

 

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

 

(i)            instituted,
settled or agreed to settle any material litigation, action or proceeding
before any court or governmental body relating to the Business or the Purchased
Assets; 

 

25

 

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

 

(k)           waived
any claims or rights of material value to the Business other than in the
Ordinary Course; 

 

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

 

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

 

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

 

(o)           committed
pursuant to a legally binding agreement to do any of the things set forth in
clauses (b) through (n) above.

 

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

 

(a)           All
material Tax returns required to be filed with respect to the Purchased Assets
or the Business have been properly filed in a timely manner (taking into
account all extensions of due dates) and are true, correct and complete in all
material respects. 

 

(b)           All
Taxes (other than Retained Liabilities) due with respect to the Business or the
Purchased Assets for all periods through the Effective Time have been or will
be timely paid in full. 

 

(c)           There
are no deficiencies for any Taxes (including penalties and interest) in respect
of the Purchased Assets or the Business. To the knowledge of Dictaphone, no
audit of any Tax return with respect to the Business is currently pending or
threatened. No claim has ever been made by any governmental authority in a
jurisdiction where Dictaphone does not file Tax returns that it is or may be
subject to taxation by that jurisdiction.

 

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

 

3.7           Insurance.  

 

(a)           Disclosure
Schedule Section 3.7(a) lists and describes the following
information with respect to each material insurance policy (including policies
providing property, casualty, liability and workers’ compensation coverage, and
bond and surety arrangements) with respect to which Dictaphone, in respect of
the Business, is a party, a named insured, or otherwise the beneficiary of
coverage:

 

26

 

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

 

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

 

(iii)          The
policy number and the period of coverage;

 

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

 

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

 

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

 

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

 

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

 

3.10         Inventory
and Accounts Receivable.  

 

(a)           Inventory.

 

(i)            The
inventory of the Business consists of supplies, manufactured and purchased
parts, and finished goods, all of which (i) is merchantable, in good
condition, fit for use in the future operations of the Business as currently
operated and of a quality that is usable or saleable in the Ordinary Course, (ii) is
adequate for the present needs of the Business and (iii) none of which is
obsolete, damaged or defective, in the case of each clause

 

27

 

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

 

(ii)           The
Inventory reflected on the Estimated Closing Date Balance Sheet will consist of
supplies, manufactured and purchased parts, and finished goods, all of which (i) will
be merchantable, in good condition, fit for use in the future operations of the
Business as currently operated and of a quality that will be usable or saleable
in the Ordinary Course, (ii) will be adequate for the needs of the
Business (as presently conducted by Dictaphone) as of the Closing Date and (iii) none
of which will be obsolete, damaged or defective, in the case of clause (i), (ii) and
(iii) above, except (x) to the extent of, but only of, any reserve for
inventory or other write-down as adjusted for the passage of time and conduct
of the Business in the Ordinary Course in accordance with U.S. GAAP, subject to
adjustment by the Closing Date Balance Sheet, or (y) as set forth on Disclosure
Schedule Section 3.10(a). 
All Inventory reflected on the Estimated Closing Date Balance Sheet will
conform in all material respects with applicable specifications and warranties,
and will have been produced in material compliance with applicable quality
control procedures.  All Inventory reflected
on the Estimated Closing Date Balance Sheet will have been manufactured in
accordance with applicable law in effect at the time of such manufacture, other
than such noncompliance, if any, which would not, individually or in the
aggregate, have a Material Adverse Effect. 
The amount and mix of items in the Inventory reflected on the Estimated
Closing Date Balance Sheet will be consistent in all material respects with
past practices.

 

(b)           Accounts
Receivable.

 

(i)            All notes
and accounts receivable of the Business are valid receivables subject to no
setoffs or counterclaims and are current and collectible in the Ordinary Course
without resort to litigation, in each case, except (x) to the extent of, but
only of, any reserve for doubtful accounts and bad debts or other write-down as
adjusted for the passage of time and conduct of the Business in the Ordinary
Course in accordance with U.S. GAAP or (y) the other matters as set forth on Disclosure
Schedule Section 3.10(b).

 

(ii)           All
Accounts Receivable reflected on the Estimated Closing Date Balance Sheet will
be valid receivables subject to no setoffs or counterclaims and will be current
and collectible in the Ordinary Course without resort to litigation, in each
case, except (x) to the extent of, but only of, any reserve for doubtful
accounts and bad debts or other write-down as adjusted for the passage of time
and conduct of the Business in the Ordinary Course in accordance with U.S.
GAAP, subject to adjustment by the Closing Date Balance Sheet, or (y) as set
forth on Disclosure Schedule Section 3.10(b). All orders which
are included in Accounts Receivable on the Estimated Closing Date Balance Sheet
will not, to the knowledge

 

28

 

of Dictaphone, as of the
Closing Date, be subject to valid return (except for products returned in the
Ordinary Course). 

 

3.11         Condition
of Personal
Property.  Except as set forth
in Disclosure Schedule Section 3.11, all of the Tangible
Business Assets which are material to the conduct of the Business are in good
condition and repair (ordinary wear and tear excepted) and are suitable for the
purposes used in the Business.

 

3.12         Property;
Title.  On the Closing Date, the
Purchased Assets, and the assets utilized in performing transition and
manufacturing services pursuant to the Transition Services/Shared Services
Agreement and Manufacturing Agreement, will constitute all property, tangible
and intangible, (a) used by the Sellers to transact the Business as
presently conducted and as currently proposed to be conducted by Sellers
(absent the transactions contemplated hereby) in the Ordinary Course, or (b) necessary
to operate the Business in the Ordinary Course, except, in each case, (i) for
the Excluded Assets and (ii) where the absence thereof does not have a
Material Adverse Effect.  On the Closing Date, the assets identified in
Section vi of Annex 2.1(a) and Section vi of Annex 2.1(c) constitute
all of the Purchased Assets necessary to perform the Services (as defined in
the Manufacturing Agreement) under the Manufacturing Agreement, except that
such Purchased Assets expressly exclude any generic, commercially-available
equipment identified in Section 5 of Annex 2.2.  

 

3.13         Contracts. 

 

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

 

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

 

(ii)           involve
joint ventures;

 

(iii)          involve
distribution or reseller arrangements;

 

(iv)          are with
any current employee or consultant;

 

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

 

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

 

(vii)         are
customer sales, service, maintenance or license agreements or other end user
agreements under which payments exceeding $25,000 were made in the prior fiscal
year; 

 

(viii)        grant
a Seller the right to use Intellectual Property of third-parties in the
Business under which payments exceeding $25,000 in the aggregate were or will
be

 

29

 

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

 

(ix)           limit or
otherwise restrict a Seller, the Business or any successor to a Seller as
operator of the Business in the manner or scope (including geographic or
technological scope) of the design, development, marketing, sale, production or
service of systems and products of the Business; and

 

(x)            any other
material Contract of a Seller with respect to the Business entered into other
than in the Ordinary Course.

 

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

 

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

 

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

 

(d)           No
Seller has received any written notice of any intention to terminate, repudiate
or disclaim any Material Contract from any other party thereto.

 

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

 

3.15         Undisclosed Liabilities.  Except as set forth in Disclosure
Schedule Section 3.15, the
Business has no material known Liabilities except for (i) Liabilities set
forth on the December 31 Balance Sheet and (ii) Liabilities that have
arisen subsequent to the date of the December 31 Balance Sheet in the
Ordinary Course.

 

30

 

3.16         Compliance with Laws.  Except as set forth in Disclosure
Schedule Section 3.16,
each Seller in respect of the Business is in compliance in all material
respects with all applicable Laws currently in effect (including the Foreign
Corrupt Practices Act), and no Seller has received any notice, report or other
information alleging any material conflict, violation, breach or default of
such Laws. 

 

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

 

(a)           Each
Seller in respect of the Business is in compliance in all material respects
with all Environmental Laws.  There is no
civil, criminal or administrative action, suit, investigation or proceeding
pending or, to Dictaphone’s knowledge, threatened against any Seller in respect
of the Business relating to or arising from any Environmental Laws which is
reasonably expected to have a Material Adverse Effect.

 

(b)           No
Seller in respect of the Business has not received any written notice, report
or other information regarding any actual or alleged material violation of, or
liability under, Environmental Laws relating to it or its past or current
operations or facilities except such notices, reports or other information that
have been complied with and resolved. 
Neither Dictaphone in respect of the Business nor any of its
predecessors or Affiliates in respect of the Business has treated, stored,
disposed of, arranged for or permitted the disposal of, transported, handled,
or released any substance, including any hazardous materials, or owned or
operated the Business or any owned or leased real property in a manner that has
given or will give rise to any material liability under any Environmental
Law.  The off-site treatment, storage or
disposal (or arrangement for off-site disposal) of hazardous materials,
substances or wastes by the Sellers (in relation to the Business), including
any such materials, substances or wastes produced or generated in connection
with operations upon any owned or leased real property, has not given and will
not give rise to any material liability under any Environmental Law.  

 

3.18         Intellectual Property.  

 

(a)           Annex 2.1(c) sets
forth the Business Intellectual Property which will be transferred by the
Sellers to the Buyer at the Closing, including (i) all Business
Intellectual Property comprising issued patents and patent applications
(including all provisional, continuation, continuation-in-part, divisional and
foreign applications) and trademarks, service marks, trade names, fictitious
names, service marks and copyright registrations owned by or assigned or licensed
exclusively to the Sellers and (ii) the jurisdictions in which each item
of such Business Intellectual Property has been issued or registered or in
which any such application for such issuance or registration has been
filed.  The Business Intellectual
Property that will be transferred by the Sellers to the Buyer at the Closing
constitutes all of the Intellectual Property necessary to operate the Business
in the Ordinary Course as the Business is operated as of the date of this
Agreement. 

 

(b)           Except as set forth in Disclosure
Schedule Section 3.18(b), no material claims by any Person
contesting the validity or ownership of any of the Business Intellectual
Property or the other Intellectual Property listed on Annex 2.1(c) are
pending or, to Dictaphone’s knowledge, threatened.

 

31

 

(c)           Except as set forth in Disclosure
Schedule Section 3.18(c), no claims have been filed by the
Sellers asserting that any Person is infringing upon, misappropriating or
otherwise violating the Business Intellectual Property listed on Annex
2.1(c).  

 

(d)           Except as set forth in Disclosure
Schedule Section 3.18(d), Dictaphone has provided to the Buyer
true and complete copies of all material contracts, licenses, sublicenses and
other agreements to which any Seller is a party under which it is authorized to
use any Third Party Intellectual Property related to the Business, including
any Third Party Intellectual Property related to the Business that is or is
intended to be used by it in the Business, or otherwise in connection with any
product or service currently in use, marketed or under development for the
Business. 

 

(e)           Except as set forth in Disclosure
Schedule Section 3.18(e), no Seller is a party to any oral
license, sublicense or other agreement related to the Business Intellectual
Property which, if reduced to written form, would be required to be listed and
provided under any other section of this Agreement.

 

(f)            Except as set forth in
Disclosure Schedule 3.18(f), the Business Intellectual Property
listed in Annex 2.1(c) has been properly filed, applied for,
registered and/or maintained, as applicable, and, to the knowledge of
Dictaphone, is in good standing and enforceable under applicable laws and
regulations, and no renewal, fee payment, filing of an affidavit of continuing
use, or any other action is or will be required to be taken with respect to any
such application, registration, or issued patent within twelve (12) months
after the date of this Agreement in order to maintain its validity and
enforceability.  

 

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

 

(h)           Neither the
development, manufacturing, marketing, licensing or sale of any of its current
products of the Business or the performance by any Seller of any of its
services of the Business, nor the conduct of the Business as presently
conducted, infringes, violates or misappropriates any Third Party Intellectual
Property in any material respect.  

 

(i)            Except as set forth in
Disclosure Schedule Section 3.18(i), to the knowledge of
Dictaphone, none of the Business Intellectual Property is being infringed by
activities, products or services of, or is being misappropriated by, any Third
Party in any material respect.

 

(j)            Except as set forth in
Disclosure Schedule Section 3.18(j), the execution and
delivery of this Agreement, the consummation of the transactions contemplated
by this Agreement and the compliance by any Seller with the provisions of this
Agreement do not and will not conflict with, or result in any material
violation of, or material default (with or

 

32

 

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

 

(k)           Dictaphone has provided
to the Buyer a copy of its policy regarding the protection of its trade secrets
and confidential information and regarding the assignment to it of all
Intellectual Property rights arising from services provided to it by its
personnel (the “IP Policy”). 
Dictaphone has used commercially reasonable efforts to safeguard and
maintain the secrecy and confidentiality of the Business Intellectual Property,
and to obtain rights in and to any such Intellectual Property generated by its
personnel.  To the knowledge of
Dictaphone, none of the current officers, employees or consultants of the
Sellers currently claim or have claimed any material ownership interest in any
of the Business Intellectual Property as a result of that Person having been
involved in the development of any such Intellectual Property while employed by
or providing consulting services to it, or otherwise.  To the knowledge of Dictaphone, there has
been no material violation of its IP Policy or any confidentiality or
assignment of Intellectual Property agreement relating to the Business
Intellectual Property.  

 

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

 

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

 

(n)           Dictaphone expects all
pending copyright applications worldwide to receive registration and, to the
knowledge of Dictaphone, no third party has objected or threatened to object to
registration of a Dictaphone copyright.

 

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

 

33

 

(p)           Dictaphone has no
knowledge of any prior material art or other material facts which would
jeopardize the validity or enforceability of any patent, trademark, or copyright
to be conveyed or licensed under this Agreement.

 

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

 

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

 

(s)           No
federal, state, local or other government funding or university or college
facilities were used in the development of the Business Intellectual Property
or products to be conveyed hereunder.

 

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

 

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

 

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

 

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

 

34

 

(c)           Each
such Benefit Plan that is intended to meet the requirements of a “qualified
plan” under Code Section 401(a) has received a determination letter
from the IRS to the effect that it meets the requirements of Code Section 401(a).

 

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

 

(i)            No
action, suit, proceeding, hearing or investigation with respect to the
administration or the investment of the assets of any such Benefit Plan (other
than routine claims for benefits) is pending, except where the action, suit,
proceeding, hearing or investigation would not have a Material Adverse Effect.

 

(ii)           As of the
last day of the most recent prior plan year, the market value of assets under
each Benefit Plan that is an “employee pension benefit plan” equaled or
exceeded the present value of liabilities thereunder (determined in accordance
with then current funding assumptions).

 

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

 

3.21         No
Guarantees.  None of
the Liabilities of the Business or of any Seller incurred in connection with
the operation of the Business is guaranteed by or subject to a similar
contingent obligation of any other Person. 
Except for ordinary course trade activities with respect to the sale and
servicing of products, no Seller with respect to the Business has guaranteed or
become subject to a similar contingent obligation in respect of the obligations
or Liabilities of any other Person.  Except
for trade letters of credit and other ordinary course trade activities, there
are no outstanding letters of credit, surety bonds or similar instruments of
Dictaphone or any of its Affiliates in connection with the Business or the
Purchased Assets.  

 

3.22         Certain
Business Relationships with the Business.  Neither Dictaphone nor any of its
stockholders, officers, directors or employees, including any Affiliates
thereof, (i) have been involved in any material business arrangement or
relationship with the Business within the past twelve (12) months or (ii) own
any material asset, tangible or intangible, that is used or held for use in the
Business except through the Sellers.

 

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

 

3.24         Customers and Suppliers.  

 

(a)           Disclosure
Schedule Section 3.24(a) lists
the 25 largest customers (the “Major
Customers”) of the Business based on revenues (on a consolidated basis) for
the 2004 fiscal year and sets forth opposite the name of each such Major
Customer the percentage of revenues of the Business (on a consolidated basis)
attributable to each such Major Customer. 
No

 

35

 

Seller
has received any written notice that any such Major Customer has (i) ceased,
or will cease, to use the products or services of the Business, (ii) substantially
reduced or will substantially reduce, the use of products or services of the
Business or (iii) has sought, or is seeking, to reduce the price it will
pay for products or services of the Business (other than due to announcements
of the transactions contemplated by this Agreement) or that any such Major
Customer will not purchase products or services of the Business from the Buyer
at any time after the Closing Date on terms and conditions similar to those
used in its current purchases from the Business. Disclosure Schedule Section 3.24(a) sets
forth as of February 28, 2005 any account or note receivable past ninety
(90) days due from any Major Customer.  

 

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

 

(c)           Except
has listed in Disclosure Schedule Section 3.24(c), no Seller
is a party to any exclusive distribution agreement or obligation, non-compete
agreements, or other agreements which limit the scope of its sales and
marketing activities in any geographic area or industry sector in respect of
the Business.

 

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

 

3.26         Absence of Certain Business Practices.  No Seller nor, to Dictaphone’s knowledge, any
officer, director, employee, agent or Affiliate of Dictaphone, or any other
person acting on their behalf, has, directly or indirectly, within the past
five (5) years given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other person who is or may be in a
position to help or hinder the Business in violation of any Law (i) which
subjected or would have subjected any Seller to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (ii) which if not
given in the past, would have had a Material Adverse Effect or (iii) which if
not continued in the future, would have a Material Adverse Effect or would
subject any Seller to suit or penalty in any private or governmental litigation
or proceeding.  

 

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

 

36

 

compensation in
connection with the negotiation or consummation of this Agreement or any of the
transactions contemplated hereby.

 

3.28         Amendment
to OSS Agreement.  Attached hereto as Exhibit G is a
true and correct copy of the amendment to the OSS Agreement.  The amendment to the OSS Agreement has been
duly executed and delivered by Dictaphone and Omnee Systems Software
Corporation, and the sole condition to its effectiveness and valid and
effective assignment to Buyer are (a) the payment of $1,000,000 by
Dictaphone to OSS (the “OSS Payment”), and (b) the Closing.  

 

3.29         No Other Representations
or Warranties.  Except for the
representations and warranties contained in this Article 3, neither
Dictaphone, nor any other Person, makes any other express or implied
representation or warranty on behalf of Dictaphone or any Affiliate of
Dictaphone with respect to the Business, the Purchased Assets, the Assumed
Liabilities or otherwise with respect to the subject matter of this Agreement
or the Related Agreements.

 

ARTICLE 4

REPRESENTATIONS
AND WARRANTIES OF THE BUYER

 

The
Buyer hereby makes the following representations and warranties to Dictaphone,
each of which is true and correct on the date hereof and shall survive the
Closing Date and the transactions contemplated hereby to the extent set forth
herein.

 

4.1           Existence and Power.  

 

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

 

(b)           The
Buyer and each Buyer Affiliate is validly existing and in good standing under
the laws of its jurisdiction of formation (to the extent such concept is
recognized in such jurisdiction) and each jurisdiction in which the nature of
its business makes such qualification necessary, except
where the failure to be so qualified and in good standing would not have a
material adverse effect on the Buyer or the Buyer Affiliates.  

 

(c)           Neither
the Buyer nor any Buyer Affiliate is a party to, subject to or bound by any
contract, Encumbrance or Law which would (i) be breached or violated or
the Buyer’s or any Subsidiary’s obligations thereunder accelerated or increased
(whether or not with notice or lapse of time or both) by the execution or
delivery by the Buyer or any Buyer Affiliate of this Agreement (to the extent
it is a party hereto) or any Related Agreement to which it is a party or the
performance by the Buyer or any Buyer Affiliate of the transactions contemplated
hereby (to the extent it is a party hereto) or thereby (to the extent it is a
party thereto) or (ii) prevent the carrying out of the transactions
contemplated by this Agreement (to the extent it is a party hereto) or by the
Related Agreements (to the extent it is a party thereto).  Except as provided for in Disclosure Schedule Section 4.1,
no permit, consent, waiver, approval or authorization of, or declaration to or
filing or registration with, any governmental or regulatory

 

37

 

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

 

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

 

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

 

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

 

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

 

4.6           Amendment
to OSS Agreement.  The Buyer acknowledges that (a) a true
and complete copy of the amendment to the OSS Agreement has been attached by
Dictaphone as Exhibit G to this Agreement, (b) the terms and
provisions of the amendment to the OSS Agreement attached hereto as Exhibit G
are in form and substance satisfactory to the Buyer and (c) no condition
to effectiveness of the amendment to the OSS Agreement and its valid and
effective assignment to Buyer remains unsatisfied other than the (a) the
OSS Payment, and (b) Closing. 

 

38

 

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

 

ARTICLE 5

EMPLOYEES

 

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

 

(a)           Offers
to U.S. Employees.  From and after
the date of this Agreement, Dictaphone shall make the General Manager and Vice
Presidents of the Business available to Buyer, for the purpose of evaluating
U.S. Employees and assisting Buyer in deciding to which U.S. Employees the
Buyer and/or a Buyer Affiliate shall make offers of employment.  The General Manager, Vice Presidents and Key
Employees of the Business shall cooperate with the Buyer to provide the Buyer
with reasonable access to the U.S. Employees for the purpose of the Buyer or a
Buyer Affiliate interviewing, evaluating and extending offers to certain U.S.
Employees; provided, however, that normal conduct of the Business
shall not be unreasonably disrupted thereby. 
The Buyer shall make or cause a Buyer Affiliate to make an offer of
employment to those U.S. Employees, other than the Retained Employees, it
wishes to hire and shall provide Dictaphone with a list of all such U.S.
Employees to whom it has extended offers within twenty (20) Business Days of
the date hereof, but in no event later than ten (10) Business Days prior
to Closing.  The number of U.S. Employees
of the Business to whom the Buyer shall make offers within twenty (20) Business
Days hereof shall not be less than one
hundred fifty (150) U.S. Employees. 
If any such offers of employment are rejected by any U.S. Employees, the
Buyer agrees to extend, or cause a Buyer Affiliate to extend, additional offers
of employment in lieu of such original offers of employment to other U.S.
Employees who are not Retained Employees and to whom offers of employment have
not yet been made, provided, however, that the Buyer and the
Buyer Affiliates may, but shall not be required, to extend additional offers
(x) to U.S. Employees who are not qualified for the positions with respect to
which offers have been made to other U.S. Employees and rejected or (y) to the
extent that the aggregate number at any time of offers which have been accepted
plus offers which have been extended but neither accepted nor rejected exceeds
one hundred fifty (150).  The Buyer and
the Buyer Affiliates shall extend all such offers of employment to U.S.
Employees in good faith and in collaboration with Dictaphone and shall keep
Dictaphone and its Vice President of Human Resources informed of all material
developments relating to the terms, acceptance, negotiation or rejection of
such offers.  No Seller shall make any offers
to U.S. Employees, who are not Retained Employees, for them to remain in the
employ of any Seller after the Closing Date, which offers compete with the
Buyer’s or any Buyer Affiliate’s offers of employment to such Employees. No
Seller shall make any offers to employ or engage or otherwise solicit (at any
stage) any EU Employee, Swiss Employee or Canadian Employee, in each case, who
are not Retained Employees, for them to remain in or transfer to the employ or
engagement of any Seller after the Closing Date.  

 

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

 

39

 

a leave of absence when
offered employment by the Buyer or a Buyer Affiliate, the offer of the Buyer or
a Buyer Affiliate may specify that the initial date of employment under such
offer shall be effective upon the date of the U.S. Employee’s return from the
leave of absence).   Such offers of
employment shall be on terms and conditions to be decided by the Buyer in its
sole discretion, provided only that as to each U.S. Employee such terms and
conditions may be either (i) comparable with the terms and conditions of
such offeree’s employment with Dictaphone or a Selling Subsidiary in effect as
of the date of this Agreement or (ii) consistent with the customary
employment practices of the Buyer or a Buyer Affiliate as of the Effective Time
for those of its employees having similar levels of responsibility as such
offeree.  The Buyer shall provide to
Dictaphone, prior to extending any offer of employment to any U.S. Employee and
within twenty (20) Business Days after the date hereof, but in no event later
than twenty (20) Business Days prior to Closing or with reasonable promptness
after extending an offer, the terms and conditions of any offers of employment
to any U.S. Employee and shall extend any such offers of employment in
consultation with Dictaphone, in a manner that minimizes interruption to the
Business and Dictaphone’s other businesses and in a manner that encourages U.S.
Employees to accept such offers of employment from the Buyer or a Buyer
Affiliate.  An agreement by the Buyer and Dictaphone as to what
constitutes “terms and conditions that are comparable with the terms and
conditions of each such U.S. Employee’s employment with Dictaphone or a Selling
Subsidiary in effect as of the date of this Agreement” for purposes of this Section 5.1(c) shall
be set forth in a separate letter agreement between Buyer and Dictaphone, shall
be entered into by the Parties within ten (10) Business Days of the date
of this Agreement and shall be incorporated by reference in this Section 5.1(c).

 

(c)           Transferred
Employees.  Those U.S. Employees who
accept employment as of the Effective Time with the Buyer or any of its
Affiliates are referred to as “Transferred U.S. Employees.”  Receipt by the Buyer or a Buyer Affiliate of
acceptances of employment by less than one hundred thirteen (113) U.S. Employees
as of the Effective Time shall constitute the failure of the condition to
Closing set forth in Section 7.5; provided, however, that it
shall not constitute a failure of such condition to Closing unless all U.S.
Employees (except for up to five (5) U.S. Employees) have been offered
employment by the Buyer within thirty (30) Business Days after the date of this
Agreement on terms and conditions that are comparable with the terms and
conditions of each such U.S. Employee’s employment with Dictaphone or a Selling
Subsidiary in effect as of the date of this Agreement; and provided further,
however, that the Buyer shall promptly notify Dictaphone of the receipt
by the Buyer or any Buyer Affiliate of any acceptances of employment by any
U.S. Employee.  

 

(d)           Required
Transferred Employees.  The Parties
acknowledge that, on or prior to the date hereof, the Buyer or a Buyer
Affiliate has entered into definitive employment agreements with those U.S.
Employees listed on Annex 5.1(d), on terms reasonably satisfactory to
the Buyer, which agreements shall become effective upon the Closing and,
accordingly, that any condition to Closing in respect thereof has been
satisfied.  The U.S. Employees listed on Annex
5.1(d) are collectively referred to herein as the “Key Employees.”

 

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

 

40

 

the
concurrent transfers of employment, such severance benefits and
government-required termination liabilities shall be the sole responsibility of
Dictaphone.

 

(f)            Benefits
Service, Waiting Periods and Thresholds. 
The Buyer shall have sole discretion with respect to establishing all
rights of Transferred Employees under its Benefit Plans, including credit for
service accrued, waiting periods, deductibles and similar thresholds, subject
to any Transfer Regulations (as defined at Annex 5.6(a)) applicable to
the EU Employees and the Swiss Employees.

 

5.2           Post-Closing Employment and
Employee Benefits.  

 

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

 

(b)           Dictaphone
U.S. Retirement Benefits.  

 

(i)            Dictaphone
shall, effective as of the Effective Time, cease benefit accruals for each
Transferred U.S. Employee in any tax-qualified and nonqualified defined benefit
pension plans maintained by Dictaphone in which such individual is then
participating.  Dictaphone shall remain
solely liable for only those benefits accrued and vested under such pension
plans on or prior to the Effective Time.

 

(ii)           Dictaphone
shall, effective as of the Effective Time, cease the accrual of additional
contributions in respect of each Transferred U.S. Employee to all tax-qualified
and nonqualified defined contribution plans maintained by Dictaphone in which
such individual is then participating.   

 

(c)           U.S. Welfare Benefits.

 

(i)            Dictaphone
shall be responsible in accordance with its applicable welfare plans in effect
prior to the Effective Time for all medical and dental claims for expenses
incurred prior to the Effective Time by Transferred U.S. Employees and their
spouses and dependents.  Reimbursement
for medical and dental expenses associated with such claims shall be determined
in accordance with the terms of Dictaphone’s medical and dental programs as in
effect immediately prior to the Effective Time. 
The Buyer shall be responsible for all medical and dental claims for
expenses incurred on and after the Effective Time by Transferred U.S. Employees
and their spouses and dependents pursuant to and in accordance with the terms
of plans maintained by the Buyer and in which Transferred U.S. Employees and
their spouses and dependents become enrolled following the Effective Time and
in accordance with the Buyer’s plans and practices for its current employees.

 

41

 

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

 

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

 

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

 

(e)           Flexible
Spending Accounts.  The Buyer shall
cover Transferred U.S. Employees who have elected to participate in Dictaphone’s
Flexible Spending Account (“Dictaphone’s FSA”) under the Buyer’s
Flexible Spending Account (“Buyer’s FSA”) at the same level of coverage
provided under Dictaphone’s FSA, but solely to the extent currently offered to
Buyer’s U.S. employees.  Transferred U.S.
Employees shall be treated as if their participation in Buyer’s FSA had been
continuous from the beginning of Dictaphone’s plan year in which the Effective
Time falls and their existing salary reduction elections shall be taken into
account for the remainder of the Buyer’s plan year in which the Effective Time
falls as if made under the Buyer’s FSA. 
The Buyer’s FSA shall provide reimbursement for eligible expenses
incurred by Transferred U.S. Employees at any time during Dictaphone’s plan
year in which the Effective Time falls (including, to the extent permissible
under applicable law and the terms of Buyer’s FSA, claims incurred before the
Effective Time), up to the amount of such Transferred U.S. Employees’ elections
and reduced by amounts previously reimbursed by Dictaphone’s FSA.  As soon as administratively feasible after
the end of the calendar year in which the Effective Time occurs, the Buyer and
Dictaphone shall reconcile the FSA account balances of Transferred U.S. Employees
under the Buyer’s and Dictaphone’s respective FSAs for such calendar year and
shall make payment to one another so that they share, based on the portion of
the plan year each employed the Transferred U.S. Employees who participated in
the FSA, the amount of any net loss or net surplus resulting from the aggregate
claims paid from the flexible spending accounts of the Transferred U.S.
Employees under the Buyer’s FSA and Dictaphone’s FSA, after giving

 

42

 

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

 

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

 

(g)           Responsibilities
Under WARN.  Dictaphone shall be
responsible for providing or discharging any and all notifications, benefits
and liabilities to U.S. Employees and governmental authorities required by the
Worker Adjustment and Retraining Notification Act (“WARN”) or by any
other applicable Law in the United States relating to plant closings or
employee separations or severance pay that are required to be provided as a
result of the consummation of the transactions contemplated by this Agreement,
regardless of whether such separations or layoffs occur prior to or after the
Closing Date.  

 

5.3           U.S. Employees
Vacation Pay.  No later
than sixteen (16) calendar days after the end of the Dictaphone employee
payroll period in which the Closing occurs, Dictaphone shall make a cash
payment to each Transferred U.S. Employee who, as of the Effective Time, has
any accrued but unused vacation time pursuant to the vacation policy applicable
to each such Transferred U.S. Employee immediately prior to the Effective Time.
The Buyer shall assume no liability whatsoever for any such pre-Effective Time
accrued vacation.

 

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

 

5.5           Transfer of U.S. Unemployment
Insurance Rate and Base.  Dictaphone shall execute such documents as are
necessary in order to transfer and assign to the Buyer all state
unemployment insurance wage bases and experience and tax rates in respect of
the Business with regard to the calendar year that includes the Closing Date.

 

5.6           Non-U.S.
Employees.   

 

(a)           EU
Employees and Swiss Employees.  Annex
5.6(a) sets forth the provisions in relation to any and all EU
Employees and Swiss Employees. In the event of any

 

43

 

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

 

(b)           Canadian
Employees.  Unless otherwise
specifically provided herein, the Canadian Employees will be subject to the
same terms and provisions as the U.S. Employees; provided, however,
that the Buyer shall only be required to make or cause a Buyer Affiliate to
make an offer of employment to one Canadian Employee, other than a Retained
Employee, within twenty (20) Business Days hereof. To the extent that the
payment of severance benefits or government-required termination liabilities to
any Canadian Employee is required as a result of the consummation of the
transactions contemplated by this Agreement and any concurrent or deemed
transfers of employment, such severance benefits and government-required
termination liabilities shall be the sole responsibility of Dictaphone.

 

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

 

(d)           Compliance.  The Buyer
will and will cause each of the Buyer Affiliates to extend offers of employment
to EU Employees, Swiss Employees and Canadian Employees on a basis which will
not violate non-discrimination laws applicable to the Buyer or the relevant
Buyer Affiliates, as the case may be.  

 

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

 

(a)           neither
Dictaphone nor any of its Affiliates shall directly or indirectly, endeavor to entice
away, make any offer of employment or engagement to, or otherwise solicit the
employment or engagement of, any Employee other than a Retained Employee,
without the prior written consent of the Buyer, provided that such restriction
shall terminate upon the Closing as to any Employee who is not a Transferred
Employee; 

 

(b)           Dictaphone
shall not solicit the employment of any Transferred Employee without the prior
written consent of the Buyer; and

 

(c)           neither
the Buyer nor any of its Affiliates shall directly or indirectly, endeavor to
entice away, make any offer of employment or engagement to, or otherwise
solicit the employment or engagement, in connection with the Business, of any
Retained Employee without the prior written consent of Dictaphone.  

 

For the purposes set forth in this Section 5.7, general
advertising which is not specifically directed at any Transferred Employee
shall not be considered solicitation. 

 

44

 

ARTICLE 6

ADDITIONAL COVENANTS OF THE PARTIES

 

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

 

(a)           not
enter into any discussions or effect any transactions relating to the
disposition of any material part of the Purchased Assets, other than products
or services in the Ordinary Course; provided, however, that, for
purposes of this Section 6.1(a), transactions with respect to the sale of
any product of the Business the price of which is greater than Two Hundred
Thousand U.S. Dollars ($200,000) and the product margin of which is below forty
percent (40%), customer rights to replace products of the Business with
products of Buyer either prior to or after installation or other non-standard
rights of customers of the Business, including the right to receive free
multiple-year maintenance, shall be deemed not in the Ordinary Course;

 

(b)           (i) conduct
its business, operations, activities and practices in all material respects in
the Ordinary Course and consistent with past practice, (ii) use
commercially reasonable efforts to preserve its current business organization
and existing business relationships in all material respects, and (iii) maintain
its property in substantially the condition as currently existing, normal wear
and tear excepted;

 

(c)           not
enter into, terminate or amend in any material respect any Material Contract
(except to the extent necessary to obtain the consents for assignment and
transfer contemplated by this Agreement);

 

(d)           not
sell, license or transfer any Business Intellectual Property other than as part
of a sale of products or services in the Ordinary Course; 

 

(e)           not
issue any letters of credit in excess of $50,000, individually or in the
aggregate; 

 

(f)            not
make any new tax elections or change any existing tax elections with respect to
the Business; 

 

(g)           not
enter into any new, or vary or revoke the terms of any existing, contract,
agreement, plan, program or arrangement with any EU Employee or Swiss Employee
or any trade union or other body collectively representing any EU Employee or
Swiss Employee, or make any offer of employment or engagement in the Business
to any person who would, upon acceptance thereof, be an EU Employee, a Swiss
Employee or an Employee otherwise based outside the United States; and

 

(h)           not
enter into any agreement (conditional or otherwise) to do any of the foregoing.

 

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

 

45

 

6.2           Books and Records.  From and after the Closing, the Buyer shall
provide Dictaphone and its representatives with reasonable access, during
normal business hours, to all books and records of the Business, including accounting
and Tax records, sales and purchase documents, notes, memoranda, and any other
electronic or written data (“Records”) pertaining or relating to the
period prior to the Effective Time as is reasonably necessary for (a) financial
reporting, Tax and accounting matters, and the preparation and filing of any
returns, reports or forms, (b) defending any claim or assessment against
Dictaphone or its Affiliates, (c) asserting any claims which Dictaphone or
its Affiliates may have or (d) complying with any Law or governmental or
judicial order.  To the extent deemed
necessary by Dictaphone and its Affiliates with respect to their other business
operations, Dictaphone and its Affiliates may retain copies of such Records prior
to providing the originals to the Buyer or, as soon as practicable after
Closing, the Buyer shall provide to Dictaphone and its Affiliates copies of all
or any portion of such Records as requested by Dictaphone and its
Affiliates.  Unless otherwise consented
to in writing by Dictaphone, the Buyer shall not, for a period of seven (7) years
following the date hereof or such longer period as retention thereof is
required by applicable Law, destroy, alter or otherwise dispose of (or allow
the destruction, alteration or disposal of) any of the Records without first
offering (which offer shall remain open for at least ninety (90) days) to
surrender to Dictaphone such Records.

 

6.3           Confidentiality.  

 

(a)           In
lieu of the terms, provisions and covenants of (x) the Confidentiality
Agreement dated July 12, 2004 between the Buyer and Houlihan (with
Dictaphone being a third party beneficiary) and (y) the Confidential
Non-Disclosure Agreement dated January 1, 2004 between the Buyer and
Dictaphone, which Confidentiality Agreement and Confidential Non-Disclosure
Agreement and Dictaphone’s rights thereunder are hereby terminated, the Buyer
acknowledges that, in the course of its investigations of the Business, the
Buyer and its representatives have and will become aware of confidential
information and documents of Dictaphone and its Affiliates, the Business and
the Other Dictaphone Businesses, and that its use of such confidential
information and documents, or communication of such information to third
parties, could be detrimental to Dictaphone and its Affiliates, the Business
and the Other Dictaphone Businesses.  The
Buyer covenants that (1) prior to the Closing (including after termination
of this Agreement without the Closing having taken place), all information and
documents concerning Dictaphone and its Affiliates, the Business and the Other
Dictaphone Businesses received or reviewed by the Buyer, its Affiliates or its
representatives in connection with this Agreement, any Related Agreement or the
transactions contemplated hereby and (2) following the Closing, all such
information and documents to the extent related to any of the Excluded Assets,
the Retained Liabilities or the Other Dictaphone Businesses shall be maintained
in confidence and shall not be disclosed or used by the Buyer, its Affiliates
or its representatives without Dictaphone’s prior written consent, unless such
information is (i) otherwise publicly available, (ii) required to be
disclosed pursuant to judicial order or applicable Law, (iii) required to
be disclosed by the rules of a securities exchange on which the securities
of the Buyer or a controlling Affiliate of the Buyer may from time to time be
listed or (iv) disclosed to any Person that proposes to finance, in whole
or in part, the purchase of the Purchased Assets or the operations of the Buyer
or of its controlling Affiliates, solely for the purpose of permitting such
Person to evaluate the advisability of providing such financing.  In the event that the Buyer or any of its
Affiliates or representatives becomes legally compelled to disclose any
information

 

46

 

or documents
referred to in this Section 6.3(a), the Buyer shall provide Dictaphone
with prompt written notice before such disclosure, sufficient to enable
Dictaphone, at its expense, either to seek a protective order or other
appropriate remedy preventing or limiting such disclosure or to waive
compliance with the provisions of this Section 6.3(a) or both. The Buyer shall cause its Affiliates and
representatives to comply with this Section 6.3(a) and shall be
responsible for any breach thereof by them. 

 

(b)           Following
the Closing, Dictaphone shall and shall cause its Affiliates and
representatives to maintain in confidence any information it or they may have
or receive in relation to the Business or in connection with the Related
Agreements, other than with respect to the Excluded Assets, the Retained
Liabilities and the Other Dictaphone Businesses, and not disclose or use such
information without the Buyer’s prior written consent, unless such information
is (i) otherwise publicly available, (ii) required to be disclosed
pursuant to judicial order or applicable Law or (iii) required to be
disclosed by the rules of a securities exchange on which the securities of
Dictaphone or a controlling Affiliate of Dictaphone may be from time to time
listed.  In the event that Dictaphone or
its Affiliates and representatives become legally compelled to disclose any
information or documents referred to in this Section 6.3(b), Dictaphone
shall, to the extent reasonably practicable, provide the Buyer with prompt
written notice before such disclosure, sufficient to enable the Buyer, at its
expense, either to seek a protective order or other appropriate remedy
preventing or prohibiting such disclosure or to waive compliance with the
provisions of this Section 6.3(b) or both.

 

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

 

6.4           Filings; Further
Assurances and Cooperation.  

 

(a)           Prior
to the Closing, the Parties shall proceed expeditiously and in good faith to make
such filings and take such other actions as may be reasonably necessary to
satisfy the conditions to Closing set forth in Sections 7.2 and 8.2, if any.
The Parties also acknowledge and agree that they have each independently
concluded on the basis of the information available to each Party that no
filings with respect to the transactions contemplated hereby are required to be
made pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, the competition or antitrust laws of the jurisdictions listed on Disclosure
Schedule Section 6.4(a), or Section 5021 of the Omnibus
Trade and Competitiveness Act of 1988, as amended by Section 721 of the
Defense Production Act of 1950.  The
Buyer acknowledges that it has independently concluded that no filings with
respect to the transactions contemplated hereby are required to be made by
either Party pursuant to Israeli Laws, and Dictaphone acknowledges that it is
not relying on the Buyer’s independent conclusion as it relates to any filing
obligations of Dictaphone under Israeli Laws. 

 

47

 

(b)           In
connection with each Party’s obligations under Section 6.4(a), each Party
agrees to (i) cooperate and collaborate with the other Party in preparing
and filing any submission to be made to any governmental authority and in
responding to any comments, requests for information or inquires therefrom, (ii) notify
promptly the other Party of any comments, requests or inquiries made by a
governmental authority, (iii) provide copies of all written submissions to
and communications with or from any governmental authority to the other Party
and (iv) permit the other Party and its advisors to participate in
discussions, and attend meetings, with any governmental authority.

 

(c)           On
or after the Closing Date, the Parties shall, on request, cooperate with one
another by furnishing any additional information, executing and delivering any
additional documents and instruments, including contract assignments, and doing
any and all such other things as may be reasonably required by the Parties or
their counsel to consummate or otherwise implement the transactions
contemplated by this Agreement.  In
connection with the Assumed Liabilities and the Retained Liabilities, each of
the Parties shall, and shall cause their Affiliates and employees to, aid,
cooperate with and assist the other Party in its defense thereof by, among
other things, providing such other Party with full access to pertinent records
at such times as such other Party may reasonably request.  

 

6.5           Covenant Not to Compete.  

 

(a)           For
the period beginning on the Closing Date and ending on the fifth (5th)
anniversary thereof (the “Non-Compete Period”), neither Dictaphone nor
an Affiliate of Dictaphone shall engage, directly or indirectly, in any
business or activity which competes directly or indirectly with the Business (“Competitive Activities”); provided,
however, that this covenant shall not be deemed to have been breached as
a result of the ownership by Dictaphone or an Affiliate of Dictaphone of: (i) less
than an aggregate of 5% of any class of stock of a Person engaged, directly or
indirectly, in Competitive Activities; or (ii) a Person which
engages, directly or indirectly, in Competitive Activities if such Competitive
Activities account for less than Five Million Dollars ($5,000,000) or less than
5% of such Person’s consolidated annual revenues (or, if the Competitive
Activities of a Person described in this clause (a) account for 5% or
more, but in any event no more than 20%, of such Person’s consolidated annual
revenues and such Person is acquired after the date hereof, within one (1) year
following the consummation of such acquisition by Dictaphone or one or more of
its Affiliates, Competitive Activities account for less than 5% of such Person’s
consolidated annual revenues).

 

(b)           Without
limiting the remedies otherwise available, the Parties agree that damages at
law would be an insufficient remedy in the event of breach of this Section 6.5
and that the injured party should be entitled to injunctive relief or other
equitable remedies in the event of any such breach.

 

(c)           If
any of the provisions of this Section 6.5 are held to be unenforceable in
any jurisdiction, then, as to such jurisdiction, such provision shall be
ineffective to the extent of its unenforceability in such jurisdiction, without
affecting the remaining provisions of this Section 6.5 in such
jurisdiction or affecting in any other jurisdiction the validity or
enforceability of such provision or of this Section 6.5.

 

48

 

(d)           Notwithstanding
any provision of this Agreement to the contrary, neither this Section 6.5
nor Section 5.7 will apply to a Dictaphone Successor’s businesses,
operations or activities (i) existing as of the date such Person becomes a
Dictaphone Successor, (ii) acquired after the date such Person becomes a
Dictaphone Successor or (iii) developed or expanded any time after such
Person becomes a Dictaphone Successor to the extent that such developments or
expansions are not derived from the businesses, operations or activities of
Dictaphone and its Affiliates as of the time such Person becomes a Dictaphone
Successor; provided, however, that, in the case of each of
clauses (i), (ii) and (iii) above, such Dictaphone Successor does not
use the assets or exercise any of the rights licensed under Section 2.1 of
the Manufacturing Agreement, Section 2 of the Technology License Agreement
or Section 2.8 of the Services Agreement in competition with the Business
as currently conducted or as currently proposed to be conducted by
Dictaphone.  The foregoing proviso shall
be in addition to and not in limitation of the restrictions on use of those
assets and rights licensed to Dictaphone under the Manufacturing Agreement,
Technology License Agreement and the Services Agreement.  At the Buyer’s request, a senior executive
officer of each of Dictaphone and a Dictaphone Successor, if any, shall certify
in writing to the Buyer that Dictaphone and the Dictaphone Successor, as
applicable, are in compliance with the terms and provisions of this Section 6.5;
provided, however, that neither Dictaphone nor a Dictaphone
Successor are required to provide to the Buyer such certification more often
than once within any nine (9) month period.  

 

6.6           Notice of Developments.  Dictaphone may elect at any time prior to the
Closing to notify the Buyer of any development or other information occurring
after the date hereof in the Ordinary Course which renders any representation,
warranty or statement contained in this Agreement or any Disclosure Schedule or
Annex inaccurate or incomplete at any time prior to the Closing, including any
such development or information which first becomes known to Dictaphone after
the date hereof.  The written notice
pursuant to this Section 6.6 shall be deemed to have amended the
Disclosure Schedules or Annexes, to have qualified the representations and
warranties contained in this Agreement, and to have cured any misrepresentation
or breach of warranty that otherwise might have existed hereunder by reason of
the development or information.   

 

6.7           Delivery
of Audited Financial Statements, Closing Date Balance Sheet and
Interim 2005 Financial Statements.  

 

(a)           Not
less than five (5) Business Days prior to the Closing Date, Dictaphone, at
its own expense, shall have prepared and delivered to the Buyer (i) the
Audited Financial Statements, which Audited Financial Statements shall conform
to the representations and warranties with respect thereto set forth in Section 3.4(b) and
(ii) the Auditor’s Report thereon. 
After the Closing Date, Dictaphone shall, upon request, cooperate with
the Buyer in obtaining, at any time or from time to time (with respect to no
more than six (6) separate filings with the United States Securities and
Exchange Commission) until December 31, 2006, from the independent auditor
that prepared the Audited Report a letter from such independent auditor
consenting to the use of the Auditor’s Report in future filings by the Buyer
with the U.S. Securities and Exchange Commission and Israeli Securities
Authority (the “Auditor’s Consent”). 
The Buyer shall be responsible for all fees and disbursements billed by
the auditor for its services in providing any Auditor’s Consent.   

 

49

 

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

 

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

 

(d)           The
Interim 2005 Financial Statements (a) will be derived from the books and
records of the Business and (b) will fairly present, in all material
respects, the financial position and results of operations of the Business at
the dates and for the periods indicated in accordance with U.S. GAAP and the
applicable requirements of Rule 3-05 of Regulation S-X, except as
described in Disclosure Schedule Section 3.4(a).  The balance sheets included in the Interim
2005 Financial Statements will not include any material assets or liabilities
not intended to constitute a part of the Business or the Purchased Assets after
giving effect to the transactions contemplated hereby.  The statements of profit and loss included in
the Interim 2005 Financial Statements will not reflect the operations of any
Person or business not intended to constitute a part of the Business after
giving effect to the transactions contemplated hereby.

 

6.8           Commencement
of Transition Planning and Services; Execution and Delivery of Transition
Services Agreement.  From and after
the execution of this Agreement and through the Closing Date, Dictaphone shall,
on request, cooperate with the Buyer to plan and establish the framework for
prompt and effective transition at the Effective Time of management information
systems and other information, documentation and control systems relating to
the Business in a manner consistent with Buyer’s effective operation of the
Business, effective use by Buyer of all Purchased Assets and the objectives of
the Transition Services/Shared Services Agreements.  The parties are simultaneously herewith
executing and delivering to each other a copy of the form of Transition
Services Agreement attached hereto as part of Exhibit D, with the
intent and agreement that the provisions of the Transition Services Agreement
shall be implemented from and after the date of this Agreement, except to the
extent specified in the Transition Services Agreement as being effective only
upon the Closing Date. Each Party shall bear its own expenses in connection
with any transition planning services under this Section 6.8.  

 

6.9           Renegotiation
of Certain Contracts; Assignment of Certain Rights.  From and after the execution of this
Agreement and through the Closing Date, Dictaphone and the Buyer shall use
commercially reasonable efforts to obtain consent to assignment of each of the
Contracts or other commercial understandings listed on Annex 6.9(a) and
to amend each of such Contracts or other commercial understandings on the terms
described therein or otherwise mutually agreed by the Parties.  Neither Party is required to incur any
material expenses in connection with assigning or amending any of such
Contracts pursuant to this Section 6.9. The Parties acknowledge that a
consent to assignment of each of the Contracts listed on Annex 6.9(b) has
been obtained, in each case in a form acceptable to each Party and,
accordingly, that any condition to Closing in respect thereof has been
satisfied.   

 

50

 

6.10         Certain
Patents.  Without
limiting Buyer’s rights and remedies under Section 6.5, Dictaphone agrees
that for the period beginning on the Closing Date and ending on the third (3rd)
anniversary thereof, Dictaphone shall not, and shall not permit any Affiliate
or successor in interest, to grant to Voice Print International, Inc.,
Mercom Systems, Inc., ASC Incorporated, E-Talk, Witness Systems, Inc.,
Verint Systems, Inc. or their respective known Affiliates a license or any
other rights, anywhere in the world, to make, have made, use or sell products
in competition with the Business embodying any invention described in and
claimed in the patents or patent applications listed on Annex
6.10 or any patent foreign or domestic claiming
priority therefrom.   

 

6.11         Omitted
IP.  Without limiting Buyer’s rights
and remedies under Section 6.5:  

 

(a)           In
order to address the possibility that Dictaphone may retain rights to
Intellectual Property actually used in or covering the Business as of the
Closing Date, which rights are not being transferred, assigned or licensed to
the Buyer pursuant to this Agreement (the “Omitted IP”), Dictaphone
hereby grants to the Buyer, effective from and after, and conditional upon the
consummation of, the Closing, a license to all Omitted IP solely for use in the
operation of the Business as presently conducted and as currently proposed to
be conducted by Dictaphone absent the transactions contemplated by this
Agreement (“Business Use”), such license being a perpetual, worldwide,
irrevocable, royalty-free license; provided, however, that,
subject to the remainder of this Section 6.11(a), the foregoing license
shall be exclusive solely for Business Use, even as to Dictaphone, during the
period commencing on the Closing Date and ending on the fifth (5th)
anniversary of the Closing Date, and non-exclusive thereafter (the “Omitted
IP License”).  Notwithstanding the
foregoing, neither Dictaphone nor any Dictaphone Affiliate or their respective
successors shall be in breach or violation of the exclusivity granted by the
preceding sentence, and shall have no liability, as a result of any act or
omission committed prior to Dictaphone’s (or any successor’s) receipt of notice
from the Buyer or Dictaphone’s (or any successor’s) otherwise gaining actual
knowledge that Intellectual Property retained by Dictaphone is Omitted IP.  

 

(b)           Dictaphone
further agrees that Dictaphone, its Affiliates or any successor in interest (i) shall
not file a claim, lawsuit or other action against the Buyer or any Affiliate of
the Buyer alleging that the Buyer or an Affiliate of the Buyer, in exercising
the rights expressly granted by the Omitted IP License, is infringing or
otherwise violating any rights in any Omitted IP and (ii) effective as of
the Closing Date, unconditionally release Buyer and its Affiliates from any and
all claims of infringement arising from any such Omitted IP for acts in the
conduct of the Business that occurred prior to the granting of a license under
this Section, including any and all claims which are known or unknown, absolute
or contingent, direct or indirect, in contract, tort or otherwise.  

 

(c)           The
license contemplated by this Section 6.11 is intended to be, and shall at
all times be construed by the parties as being, within the scope of the
provisions of Section 365(n) of the U.S. Bankruptcy Code. 

 

(d)           Any
dispute arising under this Section 6.11 shall be resolved in accordance
with the procedures established by Section 11.9 of this Agreement.

 

51

 

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

 

6.13         Accounts
Payable and Accrued Expenses.  Buyer
and Dictaphone will establish mutually acceptable procedures for the review and
verification of accounts payable and accrued expenses presented to Buyer by
Dictaphone for payment by Buyer as bona fide accounts payable and accrued
expenses of the Business, including review of whether and to what extent
allocation to the Business of third-party invoices addressed to Dictaphone is
appropriate, which procedures established mutually by the Parties shall be set
forth on Annex 6.13. In the absence of such agreed-upon procedures,
Dictaphone acknowledges that Buyer shall be required to discharge when due
accounts payable and accrued expenses only to the extent evidenced by an open
invoice or other appropriate documentation either reasonably satisfactory to Buyer
or consistent with generally accepted auditing standards in the United
States.  For the avoidance of doubt, the
Parties acknowledge that any such agreed-upon procedures or any payment by
Buyer shall by itself not be
determinative as to the appropriate carrying value of the Assumed Liabilities
on the Closing Date Balance Sheet, which value shall be determined in
accordance with the provisions of Section 2.5(b). 

 

6.14         Insurance
Coverage.  Dictaphone (a) represents and warrants that it has maintained since
December 1, 2003 and will maintain through the Closing Date occurrence
based product liability insurance in the amount of not less than $5 million with
respect to products of the Business sold by Dictaphone prior to the Closing
Date, and (b) agrees to maintain a
claims made errors and omissions tail policy for a period of thirty six (36)
months after the Closing Date in the amount of 
$5 million with respect to services of the Business provided by
Dictaphone prior to the Closing Date; provided, however, that the
premiums, fees and expenses incurred by Dictaphone in connection with
this Section 6.14 with respect to the tail policy insurance covering
services of the Business will be paid fifty percent (50%) by the Buyer, on the
one hand, and fifty percent (50%) by Dictaphone, on the other hand.  In addition to the Buyer’s obligations under
the last sentence of Section 2.4, the Buyer agrees to use commercially
reasonable efforts to cooperate with Dictaphone to minimize the amount of any
losses for which a claim may be made under the insurance coverage obtained and
maintained under this Section 6.14, including providing replacement
products manufactured by EMS at cost and other products

 

52

 

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

 

6.15         Bulk
Sales Laws.  The Buyer
and Dictaphone agree, on behalf of themselves and their respective Affiliates,
to waive compliance with the requirements of any bulk sales or transfer laws or
similar laws of any jurisdiction which may be applicable to the transactions
contemplated by this Agreement and the Subsidiary Asset Purchase Agreements.    

 

ARTICLE 7

CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE BUYER

 

The
obligation of the Buyer to proceed with the Closing shall be subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions precedent, any of which may be waived in whole or in part by the
Buyer:

 

7.1           Accuracy
of Representations
and Warranties and Performance of Obligations.  All representations and warranties made by
Dictaphone in this Agreement shall be true and correct in all material
respects, except for those representations and warranties that are qualified as
to materiality which shall be true and correct in all respects, on and as of
the Closing Date with the same effect as if such representations and warranties
had been made on and as of the Closing Date, except to the extent that any such
representation or warranty by its terms relates to an earlier date and except
to the extent of any change permitted by the terms of this Agreement (excluding
the delivery of a notice by Dictaphone pursuant to Section 6.6) or
consented to by the Buyer.  Dictaphone
shall have performed or complied in all material respects with all covenants,
agreements and conditions contained in this Agreement on its part required to
be performed or complied with at or prior to the Closing.  Dictaphone shall have delivered to the Buyer
at the Closing a certificate of a senior executive officer of Dictaphone
certifying that the conditions stated in this Section 7.1 have been
fulfilled.  

 

7.2           Consents
and Approvals.  All material filings required to be made by
Dictaphone or the Buyer with any government or governmental authority in
connection with the transactions contemplated in this Agreement shall have been
made and all necessary authorizations, consents or approvals required from any
government or governmental authority shall have been obtained and shall be in
full force and effect, other than those set forth on Disclosure Schedule Sections
3.1 and 4.1.  

 

7.3           No
Contrary Judgment.  On
the Closing Date, there shall exist no valid judicial or regulatory order or
directive which prohibits the consummation of the transactions contemplated by
this Agreement.

 

7.4           No
Material Adverse Effect. 
From the date of this Agreement to the Closing Date, there shall not
have been any event, condition, change, development or effect that has had, or
would, or is reasonably expected to, constitute a Material Adverse Effect.  

 

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

 

53

 

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

 

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

 

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

 

(c)           a
counterpart signature page to any assignment agreement, assumption
agreement and other applicable document of transfer and assumption necessary to
effect the sale and transfer of the Business Intellectual Property, the
Assigned Contracts, the Accounts Receivable, the Records and any other
Purchased Assets as required hereby, duly executed by each Seller party
thereto, as applicable; provided, however, that in connection
with the assignment and transfer of the Assigned Contracts, each Seller, Buyer
and Buyer Affiliate, as applicable, shall, subject to Section 2.10,
execute a single assignment and assumption agreement as to all of the Assigned
Contracts other than those listed on Annex 6.9(b) and any other
Assigned Contracts mutually agreed to;

 

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

 

(e)           copies,
certified by the Secretary or Assistant Secretary of Dictaphone, of (i) resolutions
duly adopted by the board of directors of Dictaphone approving this Agreement,
the Related Agreements and the consummation of the transactions contemplated
thereby, (ii) Dictaphone’s charter and (iii) Dictaphone’s
bylaws;   

 

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

 

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

 

(h)           the
Estimated Closing Date Balance Sheet;

 

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

 

(j)            a
counterpart signature page to the Termination Agreement, duly executed by
Dictaphone; 

 

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

 

54

 

(l)            such
other patent and trademark assignments, assignments of licenses and other
customary documents, instruments or certificates as shall be reasonably
requested by the Buyer and as shall be consistent with the terms of this
Agreement.

 

ARTICLE 8

CONDITIONS
PRECEDENT TO OBLIGATIONS OF DICTAPHONE

 

The
obligation of Dictaphone to proceed with the Closing shall be subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions precedent, any of which may be waived in whole or in part by
Dictaphone:

 

8.1           Accuracy of Representations and
Warranties and Performance of Obligations.  All representations and warranties made by
the Buyer in this Agreement shall be true and correct in all material respects,
except for those representations and warranties that are qualified as to
materiality which shall be true and correct in all respects, on and as of the
Closing Date with the same effect as if such representations and warranties had
been made on and as of the Closing Date, except to the extent that any such
representation or warranty by its terms relates to an earlier date and except
to the extent of any change permitted by the terms of this Agreement or consented
to by Dictaphone.  The Buyer shall have
performed or complied in all material respects with all covenants, agreements
and conditions contained in this Agreement on its part required to be performed
or complied with at or prior to the Closing. 
The Buyer shall have delivered to Dictaphone at the Closing a
certificate of a senior executive officer of the Buyer certifying that the
conditions stated in this Section 8.1 have been fulfilled.

 

8.2           Consents
and Approvals.  All
material filings required to be made by Dictaphone or the Buyer with any
government or governmental authority in connection with the transactions
contemplated in this Agreement shall have been made and all necessary
authorizations, consents or approvals required from any government or governmental
authority shall have been obtained and shall be in full force and effect, other
than those set forth in Disclosure Schedule Sections 3.1 and 4.1.   

 

8.3           No Contrary
Judgment.  On the Closing
Date, there shall exist no valid judicial or regulatory order or directive
which prohibits the consummation of the transactions contemplated by this
Agreement.

 

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

 

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

 

(b)           a
counterpart signature page to any assignment agreement, assumption
agreement and other applicable document of transfer and assumption to effect
the sale and transfer of the Purchased Assets and assumption of Assumed
Liabilities as required hereby, duly executed by the Buyer and each Buyer
Affiliate party thereto, as applicable; provided, however, that
in connection with the assignment and transfer of the Assigned

 

55

 

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

 

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

 

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

 

(e)           a
non-foreign person affidavit as required by Code Section 1445, duly
executed by the Buyer; 

 

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

 

(g)           such
other customary documents, instruments or certificates as shall be reasonably
requested by Dictaphone and as shall be consistent with the terms of this Agreement.

 

ARTICLE 9

INDEMNIFICATION

 

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

 

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

 

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

 

(c)           the
Retained Liabilities (other than any Liabilities or Losses arising in
connection with EU Employees or Swiss Employees which are specifically
addressed in Annex 5.6(a)).

 

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

 

56

 

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

 

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

 

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

 

9.3           Notice and Payment of Losses.  If a Person obtains knowledge of potential or
actual Loss which could reasonably be expected to give or has given rise to a
claim under Section 9.1 or 9.2, such Person shall or shall cause the Party
entitled to indemnification with whom such Person is Affiliated or otherwise
related (the “Injured Party”) to promptly notify the Party liable for
such indemnification (the “Indemnifying Party”) in writing of such Loss
(a “Notice of Claim”); provided, however, that failure of
an Injured Party timely to give a Notice of Claim to the Indemnifying Party
shall not release the Indemnifying Party from its indemnity obligations set
forth in this Article 9 except to the extent that such failure adversely
affects the ability of the Indemnifying Party to defend such Loss or increases
the amount of indemnification which the Indemnifying Party is obligated to pay
in respect of such Loss hereunder (in which event the amount of indemnification
which the Injured Party shall be entitled to receive shall be reduced to an
amount which the Injured Party would have been entitled to receive had such
Notice of Claim been timely given).  The
Injured Party shall use commercially reasonable efforts to mitigate any
continuing Losses (including use of commercially reasonable efforts to obtain
all insurance proceeds and indemnity payments available to the Injured
Party).  The amount of any Loss payable
hereunder shall be reduced to reflect any amounts (including insurance
proceeds) recovered by the Buyer or its Affiliates from third parties after
giving of a Notice of Claim and, if Dictaphone makes an indemnification payment
hereunder for a Loss before the Buyer or its Affiliates recover any such
amounts, then the Buyer shall, or shall cause its Affiliates to, reimburse
Dictaphone for the amount of any such recovery. 
If the Injured Party settles or compromises any third-party claim prior
to giving a Notice of Claim to the Indemnifying Party in respect of the Loss
relating to such third-party claim, the Indemnifying Party shall be released
from its indemnity obligation in respect of such Loss.  A Notice of Claim shall specify in reasonable
detail, to the extent known by the Injured Party, the nature and, to the extent
reasonably calculable, estimated amount of any Loss giving rise to a claim for
indemnification.  Dictaphone agrees that,
notwithstanding Section 9.9 or any review, challenge or adjustment of the
Estimated Closing Date Balance Sheet pursuant to Section 2.5(b), in the
event a Notice of Claim by an Injured Party alleges a Loss by reason of a
breach of representation or warranty by Dictaphone arising out of (a) a
deficiency (in excess of any reserve in respect thereof or in respect of the
line item on the Closing Date Balance Sheet related thereto) in the aggregate
net book value of any category included on the Closing Date Balance Sheet
(including Tangible Business Assets, Inventory or Accounts Receivable), (b) a
deficiency (in excess of any reserve in respect thereof) in the aggregate
dollar amount of the Product Backlog set forth in Section 3.25, without
duplication, (c) a deficiency (in excess of any reserve in respect
thereof) in the aggregate dollar amount of revenues of the Business set forth
on Disclosure Schedule Section 3.4(a), or (d) Assumed
Liabilities which should have been included on the Closing Date Balance Sheet
in accordance with GAAP in excess of those included on the Closing Date Balance
Sheet, then the Buyer shall be deemed to have suffered, and may claim, an
amount of Loss equal to (w) the

 

57

 

aggregate dollar amount
of the deficiency in any category described in clause (a) above, (x) $0.75
for each dollar of any deficiency in the aggregate dollar amount of the Product
Backlog described in clause (b) above, without duplication, (y) $0.55 for
each dollar of any deficiency in the aggregate dollar amount of the revenues
described in clause (c) above, and (z) $1.00 for each dollar of Assumed
Liabilities that are actually paid which should have been included on the
Closing Date Balance Sheet in accordance with GAAP in excess of those set forth
on the Closing Date Balance Sheet, as the case may be, without regard to or
limitation as a result of, in any case, any positive Net Adjusted Working
Capital Level as of the Closing Date. 
The Indemnifying Party shall satisfy its obligations under Section 9.1
or 9.2, as the case may be, in respect of a Loss within sixty (60) days after
its receipt of a Notice of Claim; provided, however, that, for so
long as the Indemnifying Party is disputing its indemnity obligation or
defending a third-party claim in respect of such Loss in good faith pursuant to
Section 9.4, its obligations to satisfy its indemnity obligations to the
Injured Party with respect thereto shall be suspended until a final
unappealable judgment of a court of competent jurisdiction is given in relation
to the claim for indemnification or the third-party claim, as the case may be,
relating to such Loss.  The Indemnifying
Party shall have thirty (30) Business Days (or such shorter period of time
within which the Injured Party may be required to respond to any Proceeding)
after receipt of a Notice of Claim to notify the Injured Party (a) whether
or not it disputes its indemnity obligation to the Injured Party with respect
to such Notice of Claim and (b) whether it elects to defend a third-party
claim in respect of the Loss described in such Notice of Claim pursuant to Section 9.4.

 

9.4           Defense of Third-Party Claims.  With respect to any third-party claim set
forth in a Notice of Claim (a “Third-Party Claim”), the Indemnifying
Party shall be obligated to assume the investigation and defense of such
Third-Party Claim in good faith and at its own expense and the Injured Party
may participate (but not control) in the defense of such Third-Party Claim and
employ separate counsel of its choosing. 
The Injured Party shall participate in any such defense at its expense
unless the Indemnifying Party and the Injured Party are both named parties to
the proceedings and the Injured Party shall have reasonably concluded that
representation of both parties by the same counsel would be inappropriate based
on a written opinion of counsel due to actual or potential material differing
interests between them.  So long as the
Indemnifying Party is defending any such Third-Party Claim in accordance with
this Section 9.4, the Injured Party shall not settle or compromise such
Third-Party Claim without the consent of the Indemnifying Party.  If such Third-Party Claim is settled by the
Injured Party without the Indemnifying Party’s consent, the Injured Party shall
be deemed to have waived all rights to indemnification and all other remedies
with respect to such Third-Party Claim, hereunder or otherwise.  The Indemnifying Party may settle or
compromise such Third-Party Claim without the consent of the Injured Party,
unless there will not be a complete release of the Injured Party in connection
therewith, in which case the Indemnifying Party may not settle or compromise
such Third-Party Claim without the consent of the Injured Party, which consent
shall not be unreasonably withheld.  The
Injured Party shall make available to the Indemnifying Party or its
representatives all records and other materials reasonably required for use in
investigating and defending any Third-Party Claim.  Subject to Sections 6.2 and 6.4, the Injured
Party shall cooperate fully with the Indemnifying Party in the investigation
and defense of all Third-Party Claims. 
If the Indemnifying Party elects not to defend any Third-Party Claim,
the Injured Party shall have no obligation to do so, but may investigate,
defend, settle or compromise such Third-Party Claim at the sole risk and
expense of the Indemnifying Party.  The
Indemnifying Party will not, however, be responsible for any Losses if and to
the extent that they

 

58

 

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

 

9.5           Survival of Representations and Warranties.  All of the representations and warranties
made by any Party in Articles 3 and 4 shall survive for a period of eighteen
(18) months following the Closing Date (and thereafter to the extent that a
Notice of Claim is made prior to the expiration of such period with respect to
a breach of any such representation or warranty occurring prior to such
expiration, but only with respect to the Loss and the breach set out in such
Notice of Claim); provided, however, that the representations and
warranties contained in (a) Sections 3.1, 3.2, 3.3, 4.1 and 4.2 shall
survive the Closing Date without any time limit, (b) Section 3.18
shall survive the Closing Date for a period of twenty-four (24) months
following the Closing Date and (c) Section 3.6 shall survive with
respect to any Tax described therein until the expiration of the statute of
limitations (before giving effect to any extension or waiver in respect
thereof) relating to such Tax.  No
Injured Party shall be entitled to indemnification for breach of any
representation and warranty set forth in Articles 3 and 4 unless a Notice of
Claim in respect of such breach has been given to the Indemnifying Party within
the period of survival of such representation and warranty as set forth herein.

 

9.6           Limitation on Indemnification.  

 

(a)           The
provisions for indemnity under Sections 9.1(b) and 9.2(b), as the case may
be, shall be effective only when the aggregate amount of all Losses for which
indemnification is sought from either Dictaphone or the Buyer, respectively,
under such Sections exceeds Two Hundred Fifty Thousand U.S. Dollars
(US$250,000) (the “Indemnity Threshold”), in which case the Injured
Party shall be entitled to indemnification in respect of the Injured Party’s
Losses only in excess thereof; provided, further, that any individual Loss for
which indemnification is sought pursuant to Sections 9.1(a) or 9.2(b), as
applicable, which is less than Ten Thousand U.S. Dollars (US$10,000) shall not
be included in calculating whether and the extent to which the Indemnity
Threshold has been reached or exceeded (other than Losses attributable to
individual breaches of the representations and warranties set forth in Section 3.10(a),
3.10(b) or 3.15 , which individual breaches of any one such Section may
be aggregated with other breaches (arising out of events or circumstances of
the same type or class) of the same such Section).  

 

(b)           The
indemnification obligations of Dictaphone pursuant to Sections 9.1(a) and
9.1(b) shall be limited to Losses which, in the aggregate, do not exceed
Four Million Five Hundred Thousand U.S. Dollars ($4,500,000) (the “Dictaphone
Maximum Indemnity Amount”).  In no
event shall Dictaphone be liable for indemnification of Losses under such
Sections in excess of the Dictaphone Maximum Indemnity Amount.  The Dictaphone Maximum Indemnity Amount shall
be reduced by the amount of Indemnification Escrowed Funds delivered to the
Buyer pursuant to Section 2.7 and the Escrow Agreement, but shall not be
reduced by any adjustment to the Purchase Price pursuant to Section 2.5(b).  Notwithstanding the foregoing, (A) Losses
based upon (y) a breach of representation or warranty made pursuant to Sections
3.1, 3.2, 3.3 and 3.6 or (z) a breach of any covenant in this Agreement (other
than a covenant made pursuant to Sections 6.1 or 6.8) shall not be limited to
the Dictaphone Maximum Indemnity Amount and (B) the Dictaphone Maximum
Indemnity Amount shall include an

 

59

 

additional
One Million U.S. Dollars ($1,000,000) for, but solely for, Losses based upon a
breach of any representation, warranty or covenant made by a Seller in the
Manufacturing Agreement.   

 

(c)           The
indemnification obligations of the Buyer pursuant to Sections 9.2(a) and
9.2(b) shall be limited to Losses which, in the aggregate, do not exceed
Four Million Five Hundred Thousand U.S. Dollars ($4,500,000) (the “Buyer
Maximum Indemnity Amount”) and in no event shall the Buyer be liable for
indemnification of Losses under such Sections in excess of the Buyer Maximum
Indemnity Amount.  Notwithstanding the
foregoing, Losses based upon (y) a breach of representation or warranty made
pursuant to Sections 4.1 and 4.2 or (z) a breach of any covenant in this
Agreement shall not be limited to the Buyer Maximum Indemnity Amount.

 

(d)           Notwithstanding
anything in this Agreement to the contrary, no Liability (other than Retained
Liabilities), Contract or other matter shall constitute a breach of any
representation or warranty of Dictaphone or entitle the Buyer to
indemnification hereunder (i) if the Liability, Contract or other matter
is specifically identified in the Disclosure Schedule, (ii) if the
Liability, Contract or other matter is specifically identified in an amendment
to the Disclosure Schedule identified as such and delivered to the Buyer and
Buyer’s counsel at least one (1) Business Day prior to the Closing, or (iii) if
Dictaphone otherwise cures such breach.

 

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

 

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

 

9.9           Other
Limitations. 
Notwithstanding anything to the contrary contained herein, no Party or
its Affiliates shall be liable to or otherwise responsible to the other Party
or its Affiliates or any Injured Party for consequential, incidental, punitive
or special damages or for diminution in value or lost profits that arise out or
relate to this Agreement or any Related Agreement or any other agreement
ancillary hereto executed pursuant to this Agreement or the performance or
breach hereof or thereof or any liability retained or assumed hereunder or
thereunder.  

 

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

 

60

 

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

 

ARTICLE 10

TERMINATION; SURVIVAL OF AGREEMENT

 

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

 

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

 

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

 

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

 

10.2         Survival
of Agreement.  If this Agreement is
terminated pursuant to Section 10.1, this Agreement, except for the
provisions of Sections 6.3(a), 6.3(c) and this Section 10.2 and Article 11,
shall become null and void and have no further force or effect and neither the
Parties nor any of their respective shareholders, directors, officers,
employees, agents, representatives, consultants, subsidiaries or Affiliates
shall have any liability in respect of such termination other than (i) as
set forth in this Section 10.2 or (ii) any Liability of the Buyer or
Dictaphone, as the case may be, for breaches of this Agreement occurring prior
to such termination.

 

ARTICLE 11

MISCELLANEOUS
PROVISIONS

 

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

 

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

 

61

 

facsimile or
email, on the date of such delivery, (ii) in the case of delivery by a
nationally-recognized overnight courier, on the next Business Day following
dispatch and (iii) in the case of mailing, by certified mail, return
receipt requested, postage prepaid, on the third Business Day following such
mailing, in each case addressed at the mailing or email address or facsimile
number shown in this Section 11.2 for, or such other address as may be
designated in writing hereafter by such, Party: 

 

	
  If to the Buyer or any Buyer Affiliate:

  
	
   

  
	
  Nice Systems Inc.

  301 Route 17, 10th Floor

  Rutherford, New Jersey 07070

  Telephone: 201-964-2600

  Fax: 201-964-2610

  Attention: David Z. Ottensoser, Esq.

  
	
   

  
	
  With copies to:

  
	
   

  
	
  Brown Raysman Millstein Felder & Steiner LLP

  900 Third Avenue

  New York, New York 10022

  Telephone: 212-895-2310

  Fax: 212-895-2900

  Email: dscherzer@brownraysman.com

  Attention: Dov H. Scherzer, Esq.

  
	
   

  
	
  And:

  
	
   

  
	
  Telephone: 212-895-2240

  Fax: 212-895-2900

  Email: dwarburg@brownraysman.com

  Attention: David M. Warburg, Esq.

  
	
   

  
	
  If to Dictaphone or any Selling Subsidiary:

  
	
   

  
	
  Dictaphone Corporation

  3191 Broadbridge Avenue

  Stratford, Connecticut 06614

  Telephone: 203-381-4555

  Fax: 203-683-3279

  Email: scott.bloom@dictaphone.com

  Attention: General Counsel

  

 

62

 

	
  With copies to:

  
	
   

  
	
  Kelley Drye & Warren LLP

  Two Stamford Plaza

  281 Tresser Boulevard

  Stamford, Connecticut 06901

  Telephone: 203-351-8032

  Fax: 203-327-2669

  Email: mrbarker@kelleydrye.com

  Attention: M. Ridgway Barker

  

 

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

 

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

 

11.5         Assignment; Binding Agreement.  This Agreement and various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the Parties and their successors and permitted assigns.  Neither this Agreement nor any of the rights
or obligations hereunder shall be transferred, delegated or assigned by either
of the Parties without the prior written consent of the other Party (which consent
shall not be unreasonably withheld), except that (a) prior to or after
Closing, Buyer shall have the right to transfer and assign its rights (and
delegate its obligations and liabilities) hereunder to any of Buyer’s
Affiliates and (b) commencing ninety (90) days after Closing, Dictaphone
shall have the right to transfer and assign its rights (and delegate its
obligations and liabilities) hereunder (i) to any Person who is the
acquiror in a sale or other disposition of a majority of Dictaphone’s
businesses or assets, (ii) as security for any financing of Dictaphone or
its Affiliates or of an acquiror of a majority of Dictaphone’s businesses or
assets, and (iii) to any of Dictaphone’s Affiliates.  No such assignment, transfer or delegation
shall relieve the Buyer or Dictaphone, as applicable, of any of their
respective liabilities or obligations hereunder.  Notwithstanding the foregoing, no assignment
or transfer shall be made of such rights unless the assignee also expressly
assumes all obligations and liabilities of the assigning Party under this
Agreement and the Related Agreements (other than the Manufacturing Agreement
and any Related Agreement that has expired or been terminated and the Trademark
License Agreement to the extent that it has otherwise been assigned), provided,
however, that the Technology License Agreement (or the appropriate parts
thereof) may be separately assigned or transferred to no more than two Persons
as part of a sale or other disposition of a majority of the businesses or
assets of Integrated Voice Systems or Healthcare Solutions Group and, for the
avoidance of doubt, a Dictaphone Successor

 

63

 

shall
assume the obligations under Sections 5.7 and 6.5 as a Dictaphone
Successor.  Any assignment in violation
of the foregoing shall be null and void.  

 

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

 

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

 

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

 

11.9         Dispute Resolution.  

 

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

 

(b)           Notice
of any Dispute must be given in writing and delivered to the other Party and
may request the other Party to meet at a mutually agreeable time and
place.  Each Party to the Dispute must
designate an executive and require him or her to meet at least once within the
first fifteen (15) days after the delivery of the written notice and attempt to
resolve the Dispute.

 

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

 

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

 

64

 

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

 

(f)            The
award of the arbitral tribunal shall be final, except as otherwise provided by
the laws of the State of New York and the federal laws of the United States to
the extent applicable.  Judgment upon
such award may be entered by the prevailing Party in any court having
jurisdiction.

 

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

 

(h)           The
cost of the arbitration proceeding, including reasonable attorney’s fees for
all Parties, if there are any, shall be paid by the non-prevailing Party as
determined by the arbitral tribunal.

 

(i)            Notwithstanding
any other provision in this Agreement, any Party may seek and obtain damages
and injunctive and other equitable relief from a court of competent
jurisdiction without resorting to negotiations or arbitration for any dispute
related to Section 6.3 or 6.5.

 

(j)            The
provisions of this Section 11.9 shall not be applicable to disputes which
are specifically designated as being subject to the dispute resolution
provisions of Section 2.5(b)(iv).

 

11.10       Disclosure
Schedule Generally. 
The information furnished in the Disclosure Schedule is arranged in
sections corresponding to the Sections of this Agreement, and the disclosures
in any section of the Disclosure Schedule shall qualify (i) the
corresponding Section of this Agreement and (ii) other Sections of
this Agreement to the extent (notwithstanding the absence of a specific
cross-reference), that it is clear from a reasonable reading of the Disclosure Schedule and
such other Sections of this Agreement that such disclosure is also applicable
to such other Sections of this Agreement. 
The Disclosure Schedule and the information and disclosures
contained in the Disclosure Schedule is intended only to qualify and limit
the representations and warranties of Dictaphone contained in this Agreement
and shall not be deemed to expand in any way the scope of any such
representation or warranties.

 

65

 

The
inclusion of any information in the Disclosure Schedule shall not be
deemed to be an admission or acknowledgment that such information is material
or outside the Ordinary Course or as to any violation of any Law or
Contract.  

 

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

 

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

 

66

 

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

 

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

 

	
   

  	
  NICE SYSTEMS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DICTAPHONE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
						

 

i

 

TABLE OF EXHIBITS,
ANNEXES AND SCHEDULES

 

	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Form of Manufacturing Agreement

  
	
  Exhibit B

  	
   

  	
  Form of Technology License Agreement

  
	
  Exhibit C

  	
   

  	
  Form of Trademark License Agreement

  
	
  Exhibit D

  	
   

  	
  Form of Transition Services/Shared Services Agreements

  
	
  Exhibit E

  	
   

  	
  Form of Escrow Agreement

  
	
  Exhibit F

  	
   

  	
  Form of Subsidiary Asset Purchase Agreement

  
	
  Exhibit G

  	
   

  	
  Amendment to OSS Agreement

  
	
  Exhibit H

  	
   

  	
  Form of Termination Agreement

  

 

Annexes

 

	
  Annex 1.5

  	
   

  	
  Types of Accrued Expenses

  
	
  Annex 1.38(i)

  	
   

  	
  EU Employees

  
	
  Annex 1.38(ii)

  	
   

  	
  Swiss Employees

  
	
  Annex 1.38(iii)

  	
   

  	
  Canadian Employees

  
	
  Annex 1.38(iv)

  	
   

  	
  Singapore Employees

  
	
  Annex 1.62(i)

  	
   

  	
  Dictaphone Knowledge Persons

  
	
  Annex 1.62(ii)

  	
   

  	
  Buyer Knowledge Persons

  
	
  Annex 1.91

  	
   

  	
  Retained Employees

  
	
  Annex 2.1(a)

  	
   

  	
  Tangible Business Assets

  
	
  Annex 2.1(b)

  	
   

  	
  Inventory

  
	
  Annex 2.1(c)

  	
   

  	
  Business Intellectual Property

  
	
  Annex 2.1(d)

  	
   

  	
  Assigned Contracts

  
	
  Annex 2.1(i)

  	
   

  	
  Retained Rights to Refunds and Set Offs

  
	
  Annex 2.1(k)

  	
   

  	
  Other Assets

  
	
  Annex 2.2

  	
   

  	
  Excluded Assets

  
	
  Annex 2.3(g)

  	
   

  	
  Letters of Credit

  
	
  Annex 2.4(c)

  	
   

  	
  Intracompany and Intercompany Payables

  
	
  Annex 5.1(d)

  	
   

  	
  Key Employees

  
	
  Annex 5.6(a)

  	
   

  	
  Provisions Relating to EU Employees and Swiss Employees

  
	
  Annex 6.9(a)

  	
   

  	
  Renegotiation of Certain Contracts

  
	
  Annex 6.9(b)

  	
   

  	
  Obtained Consents

  
	
  Annex 6.10

  	
   

  	
  Certain Patents

  
	
  Annex 6.13

  	
   

  	
  Procedures Relating to Accounts Payable and Accrued Expenses

  

 

 

Disclosure Schedules

 

	
  Section 3.1(c)

  	
   

  	
  Dictaphone Consents

  
	
  Section 3.3

  	
   

  	
  Possession of Assets

  
	
  Section 3.4(a)

  	
   

  	
  Other Financial Information

  
	
  Section 3.4(b)

  	
   

  	
  Exceptions to Audited Financial Statements

  
	
  Section 3.4(d)

  	
   

  	
  Warranties

  
	
  Section 3.5

  	
   

  	
  Absence of Certain Developments

  
	
  Section 3.6

  	
   

  	
  Taxes

  
	
  Section 3.7(a)

  	
   

  	
  Insurance Policies

  
	
  Section 3.7(b)

  	
   

  	
  Self-Insurance Arrangements

  
	
  Section 3.8

  	
   

  	
  Litigation

  
	
  Section 3.9

  	
   

  	
  Product Liability Claims

  
	
  Section 3.10(a)

  	
   

  	
  Inventory Defects

  
	
  Section 3.10(b)

  	
   

  	
  Notes and Accounts Receivable Defects

  
	
  Section 3.11

  	
   

  	
  Condition of Personal Property

  
	
  Section 3.13(a)

  	
   

  	
  Material Contracts

  
	
  Section 3.13(b)

  	
   

  	
  Unenforceable Contracts

  
	
  Section 3.14

  	
   

  	
  Licenses and Permits

  
	
  Section 3.15

  	
   

  	
  Undisclosed Liabilities

  
	
  Section 3.16

  	
   

  	
  Compliance with Laws

  
	
  Section 3.17

  	
   

  	
  Environmental Matters

  
	
  Section 3.18(b)

  	
   

  	
  Material Claims Against Validity or Ownership of Business
  Intellectual Property

  
	
  Section 3.18(c)

  	
   

  	
  Third Party
  Infringement of Business Intellectual Property

  
	
  Section 3.18(d)

  	
   

  	
  Third Party
  Intellectual Property Agreements

  
	
  Section 3.18(e)

  	
   

  	
  Oral Agreements
  Regarding Business Intellectual Property

  
	
  Section 3.18(f)(i)

  	
   

  	
  Patent Due Dates

  
	
  Section 3.18(f)(ii)

  	
   

  	
  Patent
  Application Due Dates

  
	
  Section 3.18(f)(iii)

  	
   

  	
  Design
  Patent Due Dates

  
	
  Section 3.18(f)(iv)

  	
   

  	
  Trademark
  Registration and Application Due Dates

  
	
  Section 3.18(g)

  	
   

  	
  Material
  Actions Relating to Intellectual Property

  
	
  Section 3.18(i)

  	
   

  	
  Infringed
  Intellectual Property

  
	
  Section 3.18(j)

  	
   

  	
  Infringement
  of Third Party Rights

  
	
  Section 3.18(m)

  	
   

  	
  Trademark
  Issues

  
	
  Section 3.18(r)

  	
   

  	
  Source Code Licenses

  
	
  Section 3.19

  	
   

  	
  Employee Matters

  
	
  Section 3.20

  	
   

  	
  Employee Benefit Plans

  
	
  Section 3.24(a)

  	
   

  	
  Major Customers

  
	
  Section 3.24(c)

  	
   

  	
  Restrictive Agreements

  
	
  Section 3.25

  	
   

  	
  Product Backlog

  
	
  Section 4.1

  	
   

  	
  Buyer Consents

  
	
  Section 6.4(a)

  	
   

  	
  Jurisdictions Where No Filing Required

  

 

2Exhibit 4.9

 

EXECUTION VERSION

 

AMENDMENT NO. 1 TO

ASSET PURCHASE AND SALE AGREEMENT

 

THIS AMENDMENT NO. 1 TO ASSET PURCHASE AND SALE
AGREEMENT (this “Amendment”) is made and entered into as of May 31,
2005, by and between Dictaphone Corporation, a Delaware corporation (“Dictaphone”),
and NICE Systems Inc., a Delaware corporation (“Buyer”), in connection
with that certain Asset Purchase and Sale Agreement, dated as of April 11,
2005, by and among Buyer and Dictaphone (the “Agreement”).

 

WITNESSETH:

 

WHEREAS, pursuant to Section 11.12 thereof, the
Agreement may be amended only by a written agreement signed by Buyer and
Dictaphone; and

 

WHEREAS, Buyer and Dictaphone are desirous of amending
the Agreement as set forth herein;

 

NOW, THEREFORE, in consideration of the premises, the
parties hereto, intending to be legally bound, hereby agree as follows:

 

1.                                       Defined
Terms

 

All capitalized terms used in this Amendment and not
otherwise defined herein shall have the respective meanings assigned thereto in
the Agreement.

 

2.                                       Amendments
and Modifications to the Agreement

 

(a)           Article 1
is hereby amended by adding the following definitions of “Amendment”, “Audit
Escrowed Funds”, “SEC Required Financial Statements”, “2002
Audited Financial Statements”, “2003 Audited Financial Statements”
and “2005 Audited Financial Statements” therein as follows:

 

“Amendment”
means Amendment No. 1 to Asset Purchase Agreement, between the Buyer and
Dictaphone, dated as of May 31, 2005.

 

“Audit Escrowed Funds”
has the meaning set forth in Section 2.5(a).

 

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

 

“2002
Audited Financial Statements” means the audited balance sheet of the
Business as of December 31, 2002 and the related audited statement of
operations and statement of cash flows for the nine months ended December 31,
2002, prepared on a “carved-out” basis in accordance with U.S. GAAP and as
otherwise set forth in Section 6.7(c).

 

 

“2003
Audited Financial Statements” means the audited balance sheet of the
Business as of December 31, 2003 and the related audited statement of
operations and statement of cash flows for the twelve months ended December 31,
2003, prepared on a “carved-out” basis in accordance with U.S. GAAP and as
otherwise set forth in Section 6.7(c).

 

“2005
Audited Financial Statements” means the audited balance sheet of the
Business as of May 31, 2005 and the related audited statement of
operations and statement of cash flows for the five months ended May 31,
2005, prepared on a “carved-out” basis in accordance with U.S. GAAP and as
otherwise set forth in Section 6.7(c).

 

(b)           Article 1
of the Agreement is hereby amended by amending and restating the definition of “Interim
2005 Financial Statements” therein to read in its entirety as follows:

 

“Interim
2005 Financial Statements” means the unaudited financial statements
relating to the Business, prepared on a “carved-out” basis in accordance with
U.S. GAAP and the applicable requirements of Rule 3-05 of Regulation S-X,
consisting of the adjusted balance sheet of the Business as of the end of the
fiscal quarter ending immediately prior to the Closing Date and the related
adjusted statement of operations and statement of cash flows for each of the
three-month periods then ended.

 

(c)           Section 2.5(a) of
the Agreement is hereby amended by amending and restating such section to
read in its entirety as follows:

 

“Purchase
Price.  In consideration for
Dictaphone’s and the Selling Subsidiaries’ sale, assignment, transfer,
conveyance and delivery of the Purchased Assets to the Buyer and the Buyer
Affiliates, the Buyer shall pay to Dictaphone on behalf of Dictaphone and the
Selling Subsidiaries a purchase price of U.S. Thirty-Eight Million Five Hundred
Thousand Dollars (US$38,500,000.00) (the “Purchase Price”) (provided,
however, that the Purchase Price is subject to adjustment pursuant to Section 2.5(b))
and assume, duly perform and discharge, or cause the Buyer Affiliates to
assume, duly perform and discharge, when due all of the outstanding obligations
of Dictaphone and its Affiliates under the Assumed Liabilities in accordance
with Section 2.3.  At the Closing,
the Purchase Price shall be paid as follows: (x) U.S. Thirty-One Million Six
Hundred Fifty Thousand Dollars (US$31,650,000.00) shall be paid directly to
Dictaphone, (y) U.S. Three Million Dollars (US$3,000,000.00) shall be deposited
in escrow (with any accrued interest earned thereon, the “Indemnification
Escrowed Funds”) in accordance with Section 2.7 and the terms and
conditions of the Escrow Agreement, as security for the indemnification
obligations of Dictaphone set forth in Article 9 and (z) U.S. Three
Million Eight Hundred Fifty Thousand Dollars (US$3,850,000) shall be deposited
in escrow (with any accrued interest earned thereon, the “Audit Escrowed
Funds”) in accordance with Section 2.7 and the terms and conditions of
the Escrow Agreement, as security for the obligations of

 

2

 

Dictaphone set forth in Section 6.7(c).  All amounts payable under this Section 2.5
are stated exclusive of any value added or similar sales tax which shall be
payable in addition.”

 

(d)           Section 2.5(b)(iv) of
the Agreement is hereby amended by replacing “sixty (60) days” in the first
sentence thereof with “September 15, 2005”.

 

(e)           Section 2.6
of the Agreement is hereby amended by replacing “Section 2.5(a)(i)” in the
last sentence thereof with “Section 2.5(a)”.

 

(f)            Section 2.7(a) of
the Agreement is hereby amended by amending and restating such section to
read in its entirety as follows:

 

“Creation
of Escrow.  On the Closing Date, the
Buyer shall deposit or cause to be deposited the Indemnification Escrowed
Funds, the Audit Escrowed Funds and, if applicable, the Balance Sheet Escrowed
Funds with the Escrow Agent in a separate account, and such Indemnification
Escrowed Funds, Audit Escrowed Funds and Balance Sheet Escrowed Funds shall be
held by the Escrow Agent in accordance with the terms and conditions of the
Escrow Agreement as security solely for the indemnification obligations of
Dictaphone to the Buyer set forth in Article 9 (in the case of the
Indemnification Escrowed Funds), as security solely for Dictaphone’s
obligations to the Buyer set forth in Section 6.7(c) (in the case of
the Audit Escrowed Funds) and pending determination of the final Net Adjusted
Working Capital Level as of the Closing pursuant to Section 2.5(b) (in
the case of the Balance Sheet Escrowed Funds), respectively.”

 

(g)           Section 2.7
of the Agreement is hereby amended by adding the following clause (e) therein:

 

“(e) 
Release of Audit Escrowed Funds. 
The Audit Escrowed Funds shall be released to Dictaphone in accordance
with the terms and provisions of the Escrow Agreement upon delivery of (i) the
2003 Audited Financial Statements and the Interim 2005 Financial Statements and
(ii) either (A) the 2002 Audited Financial Statements or (B) the
2005 Audited Financial Statements by Dictaphone to the Buyer in accordance with
the terms and provisions, including applicable delivery dates, of Section 6.7(c).  If Dictaphone has not delivered to the Buyer (i) the
2003 Audited Financial Statements and the Interim 2005 Financial Statements and
(ii) either (A) the 2002 Audited Financial Statements or (B) the
2005 Audited Financial Statements in accordance with the terms and provisions,
including applicable delivery dates, of Section 6.7(c), some or all of the
Audit Escrowed Funds shall be released to the Buyer and the balance, if any,
shall be released to Dictaphone, in each case in accordance with Section 6.7(c).”

 

(h)           Section 5.6(b) of
the Agreement is hereby amended by amending and restating such section to
read in its entirety as follows:

 

“Canadian
Employees.  Unless otherwise
specifically provided herein, the Canadian Employees will be subject to the
same terms and provisions as the U.S.

 

3

 

Employees, except to the
extent otherwise required to comply with Canadian law; provided, however,
that the Buyer shall only be required to make or cause a Buyer Affiliate to make
an offer of employment to ten (10) Canadian Employees at least three (3)
Business Days prior to the Closing. 
Notwithstanding any statutory or other rights that any Canadian Employee
may have, to the extent that the payment of any claims with respect to
termination of his or her employment or severance benefits or government
required termination liabilities to any transferred Canadian Employee who
received and accepted an offer from the Buyer or a Buyer Affiliate is required
as a result of (i) the consummation of the transactions contemplated by this
Agreement and any concurrent or deemed transfers of employment or (ii)
termination of the employment of any Canadian Employee who is a Transferred
Employee by the Buyer after the Closing Date, such claims, severance benefits
and government-required termination liabilities shall be the sole
responsibility of the Buyer.  The Buyer
shall, and shall cause its Affiliates to, recognize all service of each
transferred Canadian Employee with Dictaphone or any other Seller or
predecessor thereof for all purposes, including eligibility to participate,
vesting credit, entitlement for benefits and benefit accrual, except to the
extent such treatment would result in duplicative benefits.”

 

(i)            The
heading of Section 6.7 of the Agreement is hereby amended by amending and
restating such heading to read in its entirety as follows:

 

“Delivery
of Audited Financial Statements, Closing Date Balance Sheet, Interim 2005
Financial Statements and Other Audited Financial Statements.”

 

(j)            Section 6.7
of the Agreement is hereby amended by deleting clauses (c) and (d) thereof
and replacing such clauses with the following clause (c):

 

“(c) (i) 
The Parties agree that audited financial statements of the Business covering a
thirty-three (33) month period and, to the extent not included in such period,
the Interim 2005 Financial Statements, are required by the Buyer to enable the
Buyer’s parent to be able to file with the Securities and Exchange Commission,
as part of such periodic or other reports and registration statements as it may
desire to file under the U.S. federal securities laws, consolidated financial
statements of the Business in accordance with Rule 3-05 of Regulation S-X
(collectively, the “SEC Required Financial Statements”).  The Parties also agree that such thirty-three
(33) month period may consist of the 2003 and 2004 calendar years together with
either the nine months ended December 31, 2002 or the nine months ended September 30,
2005 (of which the first five months ended May 31, 2005 would be addressed
by the 2005 Audited Financial Statements). 
The Parties hereby acknowledge that neither Party could have known or
anticipated prior to receipt of the Audited Financial Statements that the Buyer
requires the 2003 Audited Financial Statements and either (i) the 2002
Audited Financial Statements or (ii) the 2005 Audited Financial Statements
as part of the SEC Required Financial Statements.

 

4

 

(ii)           Dictaphone, at its own expense, shall
have prepared and delivered to the Buyer, on or prior to August 16, 2005, the
2002 Audited Financial Statements and the 2003 Audited Financial Statements, in
each case together with the Auditor’s Reports thereon, and the Interim 2005
Financial Statements, and in each case except to the extent Buyer’s parent has
received waivers (or similar actions) in writing from the Securities and
Exchange Commission (or its staff) or other appropriate governmental authority
prior to August 16, 2005 with respect to requirements otherwise applicable to
the SEC Required Financial Statements. 
If Dictaphone fails to deliver the 2002 Audited Financial Statements to
the Buyer by September 20, 2005, Dictaphone shall deliver, instead of the 2002
Audited Financial Statements, the 2005 Audited Financial Statements, together
with the Auditor’s Report thereon and except to the extent Buyer’s parent has
received waivers (or similar actions) in writing from the Securities and
Exchange Commission (or its staff) or other appropriate governmental authority
prior to August 16, 2005 with respect to requirements otherwise applicable to
the SEC Required Financial Statements. 
Except as otherwise specifically permitted by such waivers (or other
actions), (a) the 2003 Audited Financial Statements, the 2002 Audited Financial
Statements, the Interim 2005 Financial Statements and the 2005 Audited
Financial Statements, as applicable, (i) will be derived from the books and
records of the Business, (ii) will fairly present, in all material respects, the
financial position and results of operations of the Business at the dates and
for the periods indicated in accordance with U.S. GAAP and the applicable
requirements of Rule 3 05 of Regulation S-X, and (iii) will (other than the
Interim 2005 Financial Statements) be accompanied by Auditor’s Reports, (b) the
statements of profit and loss included in the 2002 Audited Financial
Statements, the 2003 Audited Financial Statements, the Interim 2005 Financial
Statements and the 2005 Audited Financial Statements, as applicable, will not
reflect any material operations of any Person or business that did not
constitute a part of the Business as then conducted by Dictaphone and its
subsidiaries (but will include allocations of corporate overhead and other
expenses based on estimates prepared in good faith by Dictaphone to the extent
permitted by U.S. GAAP and the applicable requirements of Rule 3 05 of
Regulation S-X with respect to “carve-out” financial statements) and (c) the
balance sheets included in the 2002 Audited Financial Statements, the 2003
Audited Financial Statements, the Interim 2005 Financial Statements and the
2005 Audited Financial Statements, as applicable, will not include any material
assets or liabilities that did not constitute a part of the Business as then
conducted by Dictaphone and its subsidiaries.

 

(iii)          After the delivery of the 2002 Audited
Financial Statements, the 2003 Audited Financial Statements, the Interim 2005
Financial Statements and the 2005 Audited Financial Statements, as applicable,
Dictaphone shall, upon request, cooperate with the Buyer in obtaining, at any
time or from time to time (with respect to no more than six (6) separate
filings with the Securities and Exchange Commission) until December 31,
2006, from the independent auditor that prepared the Audited Reports an Auditor’s
Consent.  The Buyer shall be responsible
for all fees and disbursements billed by the auditor for its services in
providing any Auditor’s Consent, including any costs incurred with respect to

 

5

 

responding to any inquiries
from the Securities and Exchange Commission (or its staff) or any other
governmental authority (excluding any costs incurred in connection with seeking
or obtaining any waiver referred to above).

 

(iv)          In connection with the obligations
under this Section 6.7(c), each Party agrees to cooperate and collaborate
at its own expense with the other Party in (A) preparing the 2002 Audited
Financial Statements, 2003 Audited Financial Statements, the Interim 2005
Financial Statements and 2005 Audited Financial Statements, as applicable, (B) preparing
and filing any submission to be made to the Securities and Exchange Commission
(or its staff) or any other governmental authority, including any requests for
waivers or extensions made by Buyer’s parent with respect to the 2003 Audited
Financial Statements (and the Buyer shall cause Buyer’s parent to pursue
waivers and extensions with respect to the 2003 Audited Financial Statements
when and as requested by Dictaphone unless pursuing such waivers or extension
would be unreasonable), and (C) responding to any comments, requests for
information or inquires therefrom.  In
addition, each Party shall (i) notify promptly the other Party of any
comments, requests or inquiries made by the Securities and Exchange Commission
(or its staff) or other governmental authority relating thereto, (ii) provide
copies of all written submissions to and communications with or from the
Securities and Exchange Commission (or its staff) or any other governmental
authority to the other Party relating thereto and (iii) permit the other
Party and its advisors to participate in discussions, and attend meetings, with
any the Securities and Exchange Commission (or its staff) or any other governmental
authority relating thereto.

 

(v)           If Dictaphone fails to deliver the
2002 Audited Financial Statements to the Buyer on or prior to August 16,
2005, U.S. One Hundred Thousand Dollars (US$100,000) per week shall be released
from the Audit Escrowed Funds to the Buyer for each full week that Dictaphone
has not delivered the 2002 Audited Financial Statements to the Buyer through September 6,
2005 and U.S. Two Hundred Thousand Dollars (US$200,000) per week shall be
released from the Audit Escrowed Funds to the Buyer for each full week
thereafter through September 20, 2005 that Dictaphone has not delivered
the 2002 Audited Financial Statements to the Buyer.  If Dictaphone fails to deliver the 2003
Audited Financial Statements and the Interim 2005 Financial Statements to the
Buyer on or prior to August 16, 2005, U.S. One Hundred Thousand Dollars
(US$100,000) per week shall be released from the Audit Escrowed Funds to the
Buyer for each full week that Dictaphone has not delivered the 2003 Audited
Financial Statements and the Interim 2005 Financial Statements to the Buyer
through September 6, 2005 and U.S. Two Hundred Thousand Dollars
(US$200,000) per week shall be released from the Audit Escrowed Funds to the
Buyer for each full week thereafter that Dictaphone has not delivered the 2003
Audited Financial Statements and the Interim 2005 Financial Statements to the
Buyer.  If Dictaphone has failed to
deliver the 2002 Audited Financial Statements and fails to deliver the 2005
Audited Financial Statements to the Buyer on or prior to September 20,
2005, U.S. One Hundred Thousand Dollars (US$100,000) per week shall be released
from the Audit Escrowed Funds to the Buyer for each full

 

6

 

week that Dictaphone has not
delivered the 2005 Audited Financial Statements to the Buyer through October 6,
2005 and U.S. Two Hundred Thousand Dollars (US$200,000) per week shall be
released from the Audit Escrowed Funds to the Buyer for each full week
thereafter that Dictaphone has not delivered the 2005 Audited Financial
Statements to the Buyer.  Any amounts to
be released from the Audit Escrowed Funds for failure to deliver the 2005
Audited Financial Statements shall be in addition to and not in substitution
for any amounts to be released from the Audit Escrowed Funds for failure to
deliver the 2003 Audited Financial Statements or the Interim 2005 Financial
Statements.  Notwithstanding anything
contained herein to the contrary, upon delivery of (a) the 2003 Audited
Financial Statements and the Interim 2005 Financial Statements and (b) either
(i) the 2002 Audited Financial Statements or (ii) the 2005 Audited
Financial Statements, the Audit Escrowed Funds or remaining balance shall be
released to Dictaphone.

 

(vii)         To the extent that Dictaphone is unable
to prepare and have audited any of the 2002 Audited Financial Statements, the
2003 Audited Financial Statements, the Interim 2005 Financial Statements or the
2005 Audited Financial Statements due to a failure by the Buyer to provide access
to information regarding the Business or to former Dictaphone personnel, and
Dictaphone has promptly after the occurrence of any alleged lack of cooperation
given the Buyer written notice specifically identifying the alleged lack of
cooperation, the dates set forth above shall be extended to reflect any delay
reasonably and directly arising therefrom.

 

(viii)        Notwithstanding anything contained
herein to the contrary, the aggregate amounts payable to the Buyer with respect
to Dictaphone’s failure to deliver the 2002 Audited Financial Statements, the
2003 Audited Financial Statements, the Interim 2005 Financial Statements and
the 2005 Audited Financial Statements, as applicable, pursuant to this Section 6.7(c) shall
not exceed the Audit Escrowed Funds, any failure of Dictaphone to perform its
obligations under this Section 6.7(c) shall not be subject to any
indemnity obligations under Article 9 of this Agreement and Dictaphone’s
liabilities under this Section 6.7(c) shall in no event exceed the
Audit Escrowed Funds.”

 

(k)           Section 11.5
of the Agreement is hereby amended by amending and restating such section to
read in its entirety as follows:

 

“Assignment; Binding Agreement.  This Agreement and various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the Parties and their successors and permitted assigns.  Neither this Agreement nor any of the rights
or obligations hereunder shall be transferred, delegated or assigned by either
of the Parties without the prior written consent of the other Party (which
consent shall not be unreasonably withheld), except that (a) prior to or
after Closing, Buyer shall have the right to transfer and assign its rights
(and delegate its obligations and liabilities) hereunder to any of Buyer’s
Affiliates and (b) commencing ninety (90) days after Closing, Dictaphone
shall have the right to

 

7

 

transfer and assign its
rights (and delegate its obligations and liabilities) hereunder (i) to any
Person who is the acquiror in a sale or other disposition of a majority of
Dictaphone’s businesses or assets, (ii) as security for any financing of
Dictaphone or its Affiliates or of an acquiror of a majority of Dictaphone’s
businesses or assets, and (iii) to any of Dictaphone’s Affiliates.  No such assignment, transfer or delegation
shall relieve the Buyer or Dictaphone, as applicable, of any of their
respective liabilities or obligations hereunder.  Notwithstanding the foregoing, no assignment
or transfer shall be made of such rights unless the assignee also expressly
assumes all obligations and liabilities of the assigning Party under this
Agreement and the Related Agreements (other than the Manufacturing Agreement
and any Related Agreement that has expired or been terminated and the Trademark
License Agreement to the extent that it has otherwise been assigned); provided,
however, that the Technology License Agreement (or the appropriate parts
thereof) may be separately assigned or transferred to no more than one Person
as part of a sale or other disposition of a majority of the domestic businesses
or assets of Integrated Voice Systems, to no more than one Person as part of a
sale or other disposition of a majority of the international businesses or
assets of Integrated Voice Systems, to no more than one Person as part of a
sale or other disposition of a majority of the domestic businesses or assets of
Healthcare Solutions Group and to no more than one Person as part of a sale or
other disposition of a majority of the international businesses or assets of
Healthcare Solutions Group and, for the avoidance of doubt, a Dictaphone
Successor shall assume the obligations under Sections 5.7 and 6.5 as a
Dictaphone Successor.  Notwithstanding
anything contained in this Agreement or any Related Agreement to the contrary,
Dictaphone and its Affiliates shall have the right to sell, transfer or
otherwise dispose of the international business of Integrated Voice Systems
separate from the domestic business of Integrated Voice Systems and the
international business of Healthcare Solutions Group separate from the domestic
business of Healthcare Solutions Group, through an asset sale, stock sale,
merger or other form of business divestiture or combination, without Buyer’s
consent and without any assignment or delegation to or assumption by the
purchaser, transferee or recipient of the international business of (and
without the purchaser, transferee or recipient of the international business
becoming or continuing to be subject to) any of the liabilities or obligations
of Dictaphone or its Affiliates under this Agreement or any Related Agreement,
provided that the total revenue of such international business being sold or
otherwise transferred does not exceed twenty percent (20%) of total Dictaphone
revenue, excluding EMS, based on Dictaphone’s most recent regularly prepared
quarterly financial statements available at such time and that the purchaser,
transferee or recipient of such international business assumes or continues to
be subject to Sections 5.7 and 6.5 of this Agreement as a Dictaphone
Successor.  For the purpose of this Section 11.5,
the words “purchaser, transferee or recipient” include any Affiliate or
subsidiary of Dictaphone engaged in the international business which is sold,
transferred or otherwise disposed of in connection with, or is the successor
of, any such transaction. 
Notwithstanding anything contained in this Agreement to the contrary,
the Parties agree that such purchaser, transferee or recipient of such

 

8

 

international business
that is an assignee of the Technology License Agreement will assume the
respective obligations pertaining to Integrated Voice Systems or Healthcare
Solutions Group, as applicable, thereunder. 
Any assignment in violation of the foregoing shall be null and void.”

 

(l)            The
Escrow Agreement attached to the Agreement as Exhibit E is hereby
amended by amending and restating the Escrow Agreement to read in its entirety
as attached hereto as Exhibit A.

 

3.             Insurance. 
Pursuant to Section 6.14 of the Agreement, the Buyer will pay to
Dictaphone fifty percent (50%) of the Seventy-Seven Thousand Nine Hundred
Ninety-Five Dollar (U.S.$77,995.00) tail insurance policy premium concurrently
with its payment by Dictaphone, upon submission of the invoice for such
premium.

 

4.             Delivery of Audited Financial Statements.  Buyer acknowledges that the Audited Financial
Statements have been timely delivered to Buyer by Dictaphone pursuant to the
Agreement.  

 

5.             Effective Time. 
The Parties acknowledge that, if the Closing occurs from May 31, 2005
through June 1, 2005, the Effective Time of the Closing shall be deemed to be
11:59 eastern time at the end of the day on May 31, 2005.  The Parties acknowledge that Dictaphone shall
own the Business through May 31, 2005 and that the Buyer shall own the Business
as of June 1, 2005.

 

6.                                       Miscellaneous

 

This Amendment may not be modified or amended, or any
of its terms or provisions (or the breach thereof) waived, except by an agreement
in writing executed by the parties to this Amendment.  This Amendment shall be governed by, and
construed in accordance with, the law of the State of New York applicable to
contracts to be carried out wholly within such State.  The headings of the paragraphs of this
Amendment are inserted for convenience of reference only and shall not be
deemed to constitute a part nor to affect the meaning or interpretation of any
provisions of this Amendment.  This
Amendment may be executed in counterparts, each of which shall be an original,
and all of which together shall be one and the same instrument.  Delivery of a counterpart by facsimile shall
be as effective as delivery of an original counterpart.

 

*   *   *

 

9

 

IN WITNESS WHEREOF, Buyer and Dictaphone have caused
this Amendment to be duly executed and delivered, all as of the day and year
first above written.

 

	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
  NICE
  SYSTEMS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  DICTAPHONE:

  
	
   

  	
   

  
	
   

  	
  DICTAPHONE
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  
				

 

 

Exhibit A

 

Escrow Agreement

 

See attached.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}]]