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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as of March
6, 2000, by and between Xxxxxx & Xxxxx Corporation, a Tennessee corporation with
principal offices at 0000 X&X Xxxxxxxxx, Xxxxxxx, Xxxxxxxxx 00000, and Xxxxxx &
Xxxxx International, Inc., a Delaware Corporation with principal offices at 000
Xxxxxxx Xxxxx, Xxxxxx, Xxxxxx 00000 collectively, the "Seller"), and Telect,
Inc., a Washington corporation with principal offices at 0000 X. Xxxxxx Xxxx,
Xxxxxxx Xxxx, Xxxxxxxxxx 00000 (the "Buyer"). The Buyer and the Seller are
herein referred to individually as a "Party" and collectively as the "Parties."
The Seller wishes to sell or otherwise dispose of certain assets of the
Business, and the Buyer wishes to acquire certain assets of the Business.
This Agreement contemplates a transaction in which the Buyer will
purchase certain of the assets (and assume certain of the contracts) of the
Seller for cash.
Now, therefore, in consideration of the mutual promises herein made, and
in consideration of the representations, warranties, and covenants herein
contained, the Parties agree as follows.
1. Definitions. As used in this Agreement, the following capitalized
terms have the following meanings
"Accounting Firm" has the meaning set forth in Section 2(f) below.
"Acquired Assets" means all right, title, and interest in and to all
of the assets of the Seller that are utilized in the Business, including,
without limitation, those assets identified on Exhibit A. Acquired Assets shall
include: (a) tangible personal property (such as machinery, equipment,
inventories of raw materials and supplies, manufactured and purchased parts,
goods in process and finished goods, furniture, automobiles, trucks, tractors,
trailers, and tooling); (U) Intellectual Property; (c) approvals, permits,
licenses, orders, registrations, certificates, variances, and similar rights
obtained from government and governmental agencies directly related to the
Business; and, (d) books, records, and ledgers (other than financial documents
of which copies shall be provided to Buyer), files, documents, correspondence,
lists, marketing and customer data, supplier data, architectural and engineering
plans, drawings, and specifications, creative materials, advertising and
promotional materials, studies, reports, and other printed or written materials
directly related to the Business; provided, however, that notwithstanding
anything also herein to the contrary, "Acquired Assets" does not mean, and there
shall be specifically excluded therefrom, the "Excluded Inventory."
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, costs and fees, including all attorney's fees and court costs, and
includes all indirect, consequential, statutory and treble damages.
"Assumed Contracts" means the purchase orders identified on Exhibit
B.
"Business' means the Seller's Telzon(C) product line described on
Exhibit C.
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"Buyer" has the meaning set forth in the preface above, "Closing" has
the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d) below.
"Closing Date Pro Forma Asset Value List " has the meaning set forth
in Section 2(f) below.
"Confidential Information" means any information concerning the
Business that the Seller has treated as confidential and proprietary.
"Contract Manufacturing Agreement" shall mean the agreement appended
hereto as Exhibit D.
"Disclosure Schedule" has the meaning set forth in Section 3 below.
"Escrow Agent" means First Union National Bank.
"Escrow Agreement" means the agreement appended hereto as Exhibit E.
"Escrowed Funds" has the meaning set forth in Section 2(c) below.
"Excluded Inventory" means (i) all of Seller's inventory of finished
goods and piece parts associated with the Melco brand products and, (ii) all of
Seller's Inventory of finished goods and piece parts associated with its super
high-density bay products, and T0350 products and DSX-3 jacks having the
following part numbers:
TD350-02-01B, -02A, -00X, -00X, -00X, -00X, -00X, -00X, -00X, -06A,
-06B, -9A
TD350-01 -01
T0350-01 -02
X0000-00 -00
XX0X0-00-00X, -00X, -00X, -00X, -00X
100536, 100537, 100538, 100539 and 100540
but such term does not include any Intellectual Property or other category of
Acquired Asset which is related to such Telzon(R) product line.
"GAAP" means generally accepted accounting principles used in the
United States.
"Intellectual Property" means the following items which are owned or
used by the Seller in connection with the Business: (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuances, continuances-in-part,
revisions, extensions, and re-examination thereof; (b) all trademarks, service
marks, trade dress, logos, and trade names, together with all translations,
adaptations, derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith; (c) all copyrightable works, all copyrights,
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and all applications, registrations, and renewals in connection therewith; (d)
all mask works and all applications, registrations and renewals in connection
therewith, all trade secrets and confidential business information (including
ideas, research and development, know-how, formulae, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals); (e) all computer software
(including data and related documentation); (f) all other proprietary rights;
(g) all copies and tangible embodiments thereof (in whatever form or medium);
and, (h) all rights and choses in action based on or relating to any of the
foregoing, including, without limitation, the right to all past and future
damages for the infringement thereof.
"Inventory" means, as to the Acquired Assets or the Excluded
Inventory, as the case may be, all of Sellers inventories of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, wherever located.
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Objection Notice" has the meaning set forth in Section 2(f).
"Order" shall have the meaning set forth in Section 1.7 of the
Contract Manufacturing Agreement appended hereto as Exhibit D.
"Party" has the meaning set forth in the preface above.
"Pending Orders" shall mean those of Seller's customer purchase
orders identified in Exhibit B as "open sales orders".
"Pro Forma Asset Value List" means the pro forma asset value list for
the Acquired Assets as of February 27, 2000 attached hereto as Exhibit F.
"Purchase Price" has the meaning set forth in Section 2(c) below.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than: (a) mechanic's, materialman's,
and similar liens; (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings; (c)
liens arising under worker's compensation, unemployment insurance, social
security, retirement, and similar legislation; (d) liens arising in connection
with sale of foreign receivables; (e) liens on goods in transit incurred
pursuant to documentary letter of credit; (f) purchase money liens and liens
securing rental payments under capital lease arrangements; and, (g) other liens
arising in the Ordinary Course of Business and not incurred in connection with
the borrowing of money.
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"Seller" has the meaning set forth in the preface above.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholdings, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or -add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Total Value" means the amount of each line item or cumulative total
amount so captioned on the Closing Date Pro Forma Asset Value List and/or Pro
Forma Asset Value List, as applicable.
2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified in this
Section 2. Any of the Acquired Assets which are presently located outside of the
United States shall be delivered to Buyer's facility at Laredo, Texas with all
freight cost being borne by Buyer or as otherwise directed by Buyer.
(b) Assumed Contracts. As part of the Closing on the Closing Date,
Seller shall assign to Buyer and Buyer shall assume the Assumed Contracts;
provided, however, that notwithstanding anything else herein to the contrary,
the Buyer shall have no obligation under any of the Assumed Contracts to make,
sell or supply any product which is alleged to infringe the intellectual
property rights or interests of any third party, including such products as are
alleged to infringe one or more of the patents of ADO Telecommunications, Inc.
The Buyer will not assume or have any responsibility with respect to any other
obligation, Liability or Tax of the Seller. Effective as of the Closing on the
Closing Date and except as provided in the immediately preceding sentence, the
Buyer hereby agrees to indemnify and save and hold the Seller harmless from all
liabilities and obligations arising after the Closing Date under the Assumed
Contracts. Effective as of the Closing on the Closing Date, the Seller hereby
agrees to indemnify and save and hold the Buyer harmless from (i) all
liabilities and obligations arising prior to the Closing Date under the Assumed
Contracts and (ii) all liabilities and obligations, whether arising prior to, on
or following the Closing Date, under any and all contracts to which the Seller
is a party other than the Assumed Contracts.
(c) Purchase Price. The Buyer agrees to pay to the Seller at the
Closing Ten Million, Nine Hundred Forty-One Thousand, Four Hundred Eighty
Dollars ($10,941,480) in cash (the "Purchase Price"), less One Million,
Ninety-four Thousand, One Hundred Forty Eight Dollars and No Cents
($1,094,148.00) ("Escrowed Funds") which the Buyer shall deliver to the Escrow
Agent to be held pursuant to the Escrow Agreement and Section 8 hereof.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Seller, commencing
at 9:00 a.m. local time on the second business day after the satisfaction or
waiver of all conditions to the obligations to the Parties to consummate the
transactions contemplated hereby, or such other date as the Parties may mutually
determine (the "Closing Date"), but not later than March 15, 2000.
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(e) Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 6(a) below, (ii) the Buyer will deliver to the Seller the
various certificates, instruments, and documents referred to in Section 6(b)
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyer (A) assignments (including Intellectual Property transfer
documents) in the form attached hereto as Exhibit G and, (B) such other
instruments of sale, transfer, conveyance, and assignment as the Buyer and its
counsel reasonably may request; (iv)the Buyer will execute, acknowledge (if
appropriate), and deliver to the Seller (A) an assumption agreement in the form
attached hereto as Exhibit H and, (B) such other instruments of assumption as
the Seller and its counsel reasonably may request; and (v) the Buyer will
deliver to the Seller and the Escrow Agent the consideration specified in
Section 2(c) above.
(f) Purchase Price Adjustment. An adjustment to the Purchase Price
will be calculated and paid in accordance with the following provisions:
(i) On the Closing Date, Seller and the Buyer shall physically
count the Inventory then on hand, and prepare an overall asset value list of the
Acquired Assets as of the Closing Date in a manner consistent with Seller's past
practices from which the Seller shall derive a Closing Date Pro Forma Asset
Value List (the "Closing Date Pro Forma Asset Value List") utilizing the same
accounts, methods and practices as Seller used to prepare the Pro Forma Asset
Value List. The counting and costing of such Inventory shall be observed and
verified by an independent accounting firm selected by mutual agreement of the
Parties. The counting and costing of such Inventory shall also be done in a
manner consistent with Seller's past practices and in accordance with GAAP.
(ii) If the Parties agree with the proposed Closing Date Pro
Forma Asset Value List, then the Parties shall approve the proposed Closing Date
Pro Forma Asset Value List and proceed to make any payment required pursuant to
Section 2(f) (iv) below. If either Party disagrees with the proposed Closing
Date Pro Forma Asset Value List, then the other Party may deliver written notice
("Objection Notice") objecting to the proposed Closing Date Pro Forma Asset
Value List. Such Objection Notice shall: (A) be delivered within fourteen (14)
days after preparation of the proposed Closing Date Pro Forma Asset Value List;
(B) identify those items in the proposed Closing Date Pro Forma Asset Value List
to which such Party objects; and, (C) state in reasonable detail the reasons for
such objection. Any items contained in the proposed Closing Date Pro Forma Asset
Value List to which such Party does not set forth an objection in such Objection
Notice shall be deemed accepted by such Party.
(iii) During the thirty (30) day period following delivery of the
Objection Notice, each Party will deliver to the other Party any supporting
documentation reasonably requested and necessary to verify the categories on the
proposed Closing Date Pro Forma Asset Value List and calculate the Total Value
on the proposed Closing Date Pro Forma Asset Value List, and cooperate fully and
in good faith to resolve any disputes they may have with respect to the proposed
Closing Date Pro Forma Asset Value List. If the Parties cannot agree on the
proposed Closing Date Pro Forma Asset Value List within such period, any such
dispute will be resolved within sixty (60) days of submission by a Party of a
request for binding arbitration by an independent accounting firm selected by
the Parties (the "Accounting Firm"). The Accounting Firm will calculate only
those portions of the proposed Closing Date Pro Forma Asset Value List that have
not been agreed upon by the Parties and its calculation will be based solely on
the books, records and other information relevant to the resolution of such
disputes and
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available as of the Closing Date, which information shall be submitted or made
available to the Accounting Firm by the Seller or the Buyer. Any fees or
expenses payable to the Accounting Firm will be shared as equally by Seller and
Buyer.
(iv) Upon the final determination of the Closing Date Pro Forma
Asset Value List and related Total Value, whether such determination is made by
agreement of the Parties or by the Accounting Firm, in accordance with the
foregoing, the Parties will proceed to calculate the Purchase Price adjustment
as follows:
If the Total Value on the Closing Date Pro Forma Asset
Value List is greater or less than the Total Value on the Pro
Forma Asset Value List, then within five (5) days after such
final determination, the Buyer will deliver to the Seller any
excess and the Seller will deliver to the Buyer any shortfall,
on a dollar for dollar basis.
(g) Allocation. The Purchase Price shall be allocated to the
Acquired Assets according to the Schedule to be mutually agreed upon by the
parties subsequent to the Closing Date and thereafter attached to this Agreement
as Schedule 2(g), as such schedule shall be amended in writing by the Buyer and
Seller following the adjustment of the Purchase Price. The allocation shall be
binding upon both the Buyer and the Seller for purposes of reporting the sale of
the Acquired Assets to the appropriate taxing authorities. Both Buyer and Seller
recognize their mutual obligations pursuant to Section 1060 of the Internal
Revenue Code of 1986, as amended (the "Code") to timely file IRS Form 8594
("Asset Acquisition Statement") with each of their respective federal income tax
returns.
3. Representations and Warranties of the Seller. The Seller jointly and
severally represents and warrants to the Buyer that the statements contained in
this Section 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3), except as set forth in the disclosure schedule
accompanying this Agreement and initialed by the Parties (the "Disclosure
Schedule").
(a) Organization of the Seller. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Tennessee, and Delaware, respectively, and has all requisite corporate power and
authority to own and operate the Business as currently owned and operated.
(b) Subsidiaries. The Acquired Assets do not include any stock,
partnership interest, joint venture interest or any other security or ownership
interest issued by any other corporation, organization or entity.
(c) Authorization of Transaction. The Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. The consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Seller, and no other proceedings on the Seller's part
are necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement constitutes the valid and legally binding obligation
of the Seller, enforceable in accordance with its terms and conditions.
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(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which the Seller is subject or any provision of the charter or
bylaws of the Seller or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, security interest, or other
arrangements to which the Seller is a party or by which it is bound or to which
any of its assets is subject. Seller does not need to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 2 above).
(e) Acquired Assets. The Seller has good and marketable title to all
of the Acquired Assets, and the Acquired Assets are all the assets necessary for
the conduct of the Business as presently conducted. All of the Acquired Assets
are free of any Security Interest and are not subject to any lease, security
agreement, conditional sales agreement, or other title retention or security
arrangement, except as identified in Section 3(c) (e) of the Disclosure
Schedule. Each such tangible asset that is equipment or tooling has been
maintained in accordance with normal industry practice and is in good operating
condition and repair (subject to normal wear and tear). There are no defects in
such tangible assets or other conditions which, in the aggregate, materially
adversely affect the operation of such assets. Except for such of the Acquired
Assets as are located at the facilities of one or more of the Seller's suppliers
as identified in Section 3(e) of the Disclosure Schedule, all of such tangible
assets are located at the Seller's facilities in Attleboro, Massachusetts,
Sparks, Nevada, Montreal Canada or Monterey, Mexico.
(f) Intellectual Property.
(i) The Seller owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary for the
operation of the Business as presently conducted. The Seller has taken all
action reasonably necessary to protect each item of Intellectual Property that
it owns or uses in the Business.
(ii) Except as identified in Section 3(f) of the Disclosure
Schedule, with respect to the Business the Seller has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, no part of the Acquired Assets
interferes with, infringes upon, misappropriates or otherwise comes into
conflict with any Intellectual Property rights of third parties, and the Seller
has never received any charge, complaint, claim, or notice alleging any such
interference, infringement, misappropriation, or violation. The Acquired Assets
do not include or embody the Intellectual Property of any third party. To
Seller's Knowledge, with respect to the Business, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Seller. The Seller is not estopped, nor has
it waived, any right to enforce any of its Intellectual Property rights against
any third party.
(iii) Section 3(f) of the Disclosure Schedule identifies each
patent or registration which has been issued to the Seller with respect to any
of its Intellectual Property used in the Business, identifies each pending
patent application or application for registration
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which the Seller had made with respect to any of its Intellectual Property used
in the Business, and identifies each license, agreement, or other permission
which the Seller has granted to any third party with respect to any of its
Intellectual Property used in the Business (together with any exceptions). The
Seller has delivered to the Buyer correct and complete copies of all such
patents, registrations, applications, licenses, agreements, and permissions (as
amended to date) and has made available to the Buyer correct and complete copies
of all other written documentation evidencing ownership and prosecution (if
applicable) of each such item. The Seller possesses all right, title, and
interest in and to each item of Intellectual Property that the Seller owns and
uses in the Business.
(iv) Section 3(f) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and that the Seller uses
in the Business pursuant to license, sublicense, agreement, or permission. The
Seller (x) has secured the right to assign all such third party Intellectual
Property to the Buyer; (y) will, within sixty (60) days after Closing, deliver
to the Buyer written consents to all such assignments from all such third
parties and (z) has supplied the Buyer with correct and complete copies of all
such licenses, sublicenses, agreements, and permissions (as amended to date).
The license, sublicense, agreement, or permission covering each item of
Intellectual Property used in the Business is in full force and effect and to
Seller's knowledge no party to the license, sublicense, agreement, or permission
is in breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination, modification,
or acceleration thereunder.
(g) Inventory. The inventory of the Business is located at Attleboro,
Massachusetts, Sparks, Nevada, Monterrey, Mexico, and Montreal, Canada, and
consists of raw materials and supplies, manufactured and purchased parts,
work-in-process, and finished goods all of which was acquired in the Ordinary
Course of Business, and none of which is slow-moving, obsolete, damaged, or
defective. All work-in-process inventory has been constructed and assembled or
is being constructed and assembled pursuant to customer purchase orders listed
on Exhibit B, and has been constructed and assembled or is being constructed and
assembled in conformity with such customer purchase orders.
(h) Contracts. Section 3(h) of the Disclosure Schedule lists the
following contracts, agreements, and other written arrangements related to the
Business to which the Seller is a party ("Written Contracts"):
(i) any Written Contract (or group of related Written Contracts)
for the lease of personal property from or to third parties providing for lease
payments in excess of $10,000 per annum;
(ii) any Written Contract (or group of related Written Contracts)
for the purchase or sale of raw materials, commodities, supplies, products,
other personal property or for the furnishing or receipt of services which
either calls for performance over a period of more than one year or involves
more than the sum of $10,000;
(iii) any Written Contract concerning a partnership or joint
venture;
(iv) any Written Contract (or group of related Written Contracts)
under which it has created, incurred, assumed, or guaranteed (or may create,
incur, assume, or guarantee) indebtedness (including capitalized lease
obligations) involving more than $25,000 or
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under which it has imposed (or may impose) a Security Interest on any of its
assets, tangible or intangible;
(v) any Written Contract concerning confidentiality or
competition;
(vi) any Written Contract with any of its directors, officers,
and employees in the nature of a collective bargaining agreement, employment
agreement, or severance agreement;
(vii) any Written Contract under which the consequences of a
default or termination could have an adverse effect on the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Seller and its subsidiaries taken as a whole; or
(viii) any other Written Contract (or group of related Written
Contracts) either involving more then $25,000 or not entered into in the
Ordinary Course of Business.
The Seller has delivered to the Buyer a correct and complete copy of each
Written Contract. With respect to each Written Contract so listed: (A) the
Written Contract is in full force and effect; (B) the Written Contract will
continue to be in full force and effect following the Closing; (C) to Seller's
knowledge, no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under the Written Contract, and (D)
no party has repudiated any provision of the Written Contract.
The Seller has disclosed, or will disclose prior to Closing, to Buyer any verbal
contract, agreement, or other arrangement, which, if reduced to written form,
would be required to be listed in Section 3(h) of the Disclosure Schedule under
term of this Section 3(h).
(i) Compliance with Law. The Seller is not currently being charged
with, nor, to its knowledge, is it operating the Business in violation of, any
applicable foreign, federal, state or municipal laws, regulations or ordinances,
nor is the Seller relying on any exemption from or deferral of any such
applicable statute, law or regulation in effect on the Closing Date that would
not be available to Buyer after Buyer acquires the Acquired Assets from the
Seller.
(j) Changes in Suppliers and Customers. To the knowledge of the
Seller, no person or entity supplying products, components or materials to the
Seller for use in the Business intends to cease supplying such products to the
Seller or to limit or reduce such supply of products to the Seller, and no
customer of the Seller intends to terminate, limit or reduce its business
relations with the Seller.
(k) Warranty Claims. Section 3(k) of the Disclosure Schedule lists
all outstanding warranty claims against one or more products of the Business by
customers of the Seller or other third parties.
(l) Litigation. Section 3(l) of the Disclosure Schedule sets forth,
with respect to the Business or any of the Acquired Assets, each instance in
which the Seller: (i) is subject to any unsatisfied judgment, order, decree,
stipulation, injunction, or charge; or, (ii) is a party to, or is threatened to
be made a party to, any charge, complaint, action, suit, proceeding, hearing, or
investigation of or in any court or quasi-judicial or administrative agency of
any federal, state,
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local, or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 3(l) of the Disclosure Schedule could result in any adverse change in
the Acquired Assets, Business, or future prospects of the Business. The Seller
has no reason to believe that any other charge, complaint, action, suit,
proceeding, hearing, or investigation may be brought or threatened against the
Seller with respect to the Business or any of the Acquired Assets.
(m) Completion of Projects. Each of the product modifications or
projects described on Schedule 3(m) has been fully and finally completed with
satisfactory results, or Seller shall assist Buyer in completing such through
technical assistance provided pursuant to Section 7(c)(iii) below.
(n) Broker. The Seller has engaged the services of Strategic
Investments, Ltd. to serve as broker for this transaction. Other than Strategic
Investments, Ltd., Seller has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transaction
contemplated by this Agreement. The Buyer has no liability whatsoever to pay
Strategic Investments, Ltd. any fee, charge or other amount in connection with
its brokerage services involving any or all of the transactions contemplated by
this Agreement.
(o) Disclosure. To Seller's knowledge, none of the representations or
warranties of Seller contained herein, none of the information contained in the
Disclosure Schedule referred to in this Section 3 and none of the other
information or documents furnished to the Buyer pursuant to the terms of this
Agreement is or will be false or misleading in any material respect, or omits or
will omit to state a fact herein or therein necessary to make the statements
herein or therein not misleading in any material respect. The Seller has the
right, or has secured the right, to disclose to the Buyer (i) the licenses,
sublicenses, agreements and permissions of third parties which are described in
Section 3(f) (iv) above and (ii) the Written Contracts described in Section 3(h)
above.
(p) Representations and Warranties. The representations and
warranties contained in Sections 3(a) through 3(p) of this Agreement have been
made with the knowledge and expectation that the Buyer is relying thereon, shall
survive the Closing as set forth in this Agreement and shall remain operative
and in full force and effect regardless of any investigation at any time made by
or on behalf of the Buyer or any discovery or disclosure of contrary facts or
information and shall not be deemed merged in any document or instruction so
executed and/or delivered by either of the Parties hereto.
4. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 4),
except as set forth in the Disclosure Schedule.
(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of the State of Washington.
(b) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to
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perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Buyer, enforceable in accordance with its
terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above),
will: (i) violate any statute, regulation, rule, judgment, order, order, decree,
stipulation, injunction, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws; or, (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, Indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, security
interest, or other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject. The Buyer does not need to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 2 above).
(d) Brokers' Fees. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transaction contemplated by this Agreement for which the Seller could become
liable or obligated.
5. Pre-Closing Obligations.
(a) General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 6 below).
(b) Notices and Consents. The Seller shall use its best efforts to
obtain all third-party consents and approvals set forth on Exhibit I, and the
Seller shall give any and all required notices at the earliest practicable date.
(c) Operation of Business. From the date of this Agreement through
the Closing Date, the Seller will not engage in any practice, take any action,
embark on any course of inaction, or enter into any transaction outside the
Ordinary Course of Business.
(d) Preservation of Business. The Seller will keep the Business and
properties substantially intact including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
(e) Notice of Developments. Between the date of this Agreement and
the Closing Date, the Seller shall deliver to the Buyer prompt written notice of
any (i) development affecting the Acquired Assets, the Assumed Contracts, the
Business, or the financial condition, operations, results of operations, or
future prospects of the Business, and/or (ii) material changes in any portion of
the Disclosure Schedule. Each Party will give prompt written notice to the other
of any material development affecting the ability of the Parties to consummate
the transactions contemplated by this Agreement.
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(f) Exclusivity. Until March 15, 2000, the Seller will not, directly
or indirectly: (i) solicit, initiate, or encourage the submission of any
proposal or offer from any person or entity relating to any liquidation,
dissolution, re-capitalization, merger, consolidation or acquisition or purchase
of securities or assets, or other similar transaction or business combination,
involving the Business; or, (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any person or entity to
do or seek any of the foregoing.
(g) Full Access. From the date of this Agreement through the Closing
Date, the Seller will permit representatives of the Buyer to have full access at
all reasonable times upon reasonable notice, and in a manner so as not to
interfere with the normal business operations of the Seller, to all premises,
properties, books, records, contracts, and documents of or pertaining to the
Business and/or the Acquired Assets.
(h) Risk of Loss. The risk of loss shall remain with the Seller until
the Closing Date, and the Seller will continue in force any and all fire,
casualty, theft or other insurance policies relating to the Business and/or the
Acquired Assets.
(i) Confidentiality Covenant of the Buyer. The Buyer will not, and
will not permit any of its respective representatives to, without the prior
written consent of the Seller, disclose any information furnished to the Buyer
by or on behalf of the Seller, or use any such information for any purpose
otherwise than in evaluating the Business in connection with the transactions
contemplated hereby; provided, however, that (i) such information may be
disclosed to any of the representatives of the Buyer who have a need to know
such information in connection with the transactions contemplated hereby (who
shall be instructed to keep such information confidential in accordance with the
terms of this Section 5); and (ii) the information subject to the foregoing
provisions of this sentence shall be deemed not to include any information known
generally in the industry (other than as a result of disclosure in violation
hereof) or any information received by the Buyer or any of its representatives
from a third party not bound by a duty of confidentiality to the Seller. In
addition, information may be disclosed if required by legal process or by
operation of applicable law; provided, however, that: (i) the disclosing person
shall first promptly (and, if practicable under the circumstances, prior to
disclosure) advise and consult with the Seller and its counsel concerning the
information proposed to be disclosed; (ii) the Seller shall have the right to
seek an appropriate protective order or other remedy concerning the information
proposed to be disclosed and the disclosing person will cooperate with the
Seller to obtain such protective order; and, (iii) in the event that such
protective order or other remedy is not obtained by the Seller within a
reasonable time, the disclosing person will disclose only that portion of the
information which the disclosing person is legally required to disclose, and the
disclosing person will use its best efforts to obtain assurances that
confidential treatment will be accorded to such information. In the event of any
termination of this Agreement pursuant to Section 9, the Buyer and its
respective representatives will return or destroy all copies of any written
materials in their possession furnished by or on behalf of the Seller, and shall
remain bound by the provisions of this Section 5 for a period of two (2) years
from the date of this Agreement. The foregoing provisions of this Section 5
shall: (i) supersede all prior confidentiality obligations of the Buyer; (ii)
terminate with respect to confidential information relating to the Seller upon
the consummation of the Closing; and, (iii) not prohibit any retention of
records or disclosure required by law or made in connection with the enforcement
of any right or remedy relating to this Agreement or the transactions
contemplated hereby.
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(j) Transfer Taxes. Buyer agrees to pay any documentary, transfer, or
other similar taxes, if any, imposed by reason of the transfer of the Acquired
Assets.
(k) Interim Operations. At the Closing, the Parties shall execute a
Transition Period Contract Manufacturing Agreement in the form attached hereto
as Exhibit D.
6. Conditions to Obligation to Close.
(a) For the Buyer. The obligation of the Buyer to consummate the
transactions contemplated by this Agreement is subject to satisfaction of the
following conditions on or before the Closing Date:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as of the
Closing Date as though then made;
(ii) the Seller shall have performed and complied with all of its
covenants and agreements hereunder in all material respects prior to the
Closing;
(iii) no court or quasi judicial or administrative agency of any
federal, state, local, or foreign jurisdiction shall have entered any judgment,
order, decree, ruling, or injunction which remains in force restraining,
enjoining, prohibiting or delaying consummation of the transactions contemplated
by this Agreement;
(iv) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Section 6(a)(i)-(iii) is
satisfied in all respects;
(v) all documents, instruments, and legal and corporate
proceedings in connection with the transactions contemplated by this Agreement
shall be reasonably satisfactory in form and substance to the Buyer, and the
Buyer shall have received copies of all documents that the Buyer may reasonably
have requested in connection therewith.
(v) The Seller shall have obtained, or caused to be obtained,
each consent and approval required in order to complete the transactions
contemplated hereby.
The Buyer may waive any condition specified in this Section 6(a) if it executes
a writing so stating at or prior to the Closing.
(b) For the Seller. The obligation of the Seller to consummate the
transactions to be performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction shall have entered any judgment,
order, decree, ruling, or
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injunction, which remains in force, restraining, enjoining, or prohibiting
consummation of the transaction contemplated by this Agreement;
(iv) the Buyer shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Section 6(b)(i)-(iii) is
satisfied in all respects;
(v) all documents, instruments and legal and corporate
proceedings in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to the Seller, and the Seller shall
have received copies of all documents which the Seller may reasonably have
requested in connection therewith.
The Seller may waive any condition specified in this Section 6(b) if it executes
a writing so stating at or prior to the Closing.
7. Post-Closing Agreements.
(a) General. If at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as the other Party reasonably may
request, including, without limitation, those actions necessary to put the Buyer
in possession and operating control of the Acquired Assets, all at the sole cost
and expense of the requesting Party except as otherwise provided in this
Agreement.
(b) Litigation Support. In the event and for so long as either Party
is actively contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand (not involving claims by
the Parties against each other) in connection with (i) any transaction
contemplated under this Agreement; or, (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date involving
the Seller, the other Party will cooperate with the contesting or defending
Party and its counsel in the contest or defense, make available its personnel,
and provide such testimony and access to its books and records as shall be
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party. In addition, in the event there is
any pending or future litigation with respect to the alleged infringement of any
intellectual property rights of a third party by, a product or product line
previously made or sold by Seller, and which is an Acquired Asset, the Seller
agrees not to settle or resolve the litigation, or enter into any agreements,
stipulations, consents, judgments or other arrangements, in such a fashion or
wherein the Seller, its attorneys or anyone on its behalf, agrees to any facts
or conclusions which are inconsistent with the Seller's or Buyer's unrestricted
ability to make, use, sell or offer for sale any Acquired Asset. The Seller
further agrees not to take any action which would in any way hinder or encumber
the Buyer's ability to manufacture, sell or distribute any products which are
part of the Acquired Assets or defend itself against any claims of infringement.
(c) Transition and Post-Closing Support Obligations.
(i) Seller acknowledges and agrees that the assembly, storage and
distribution services it is to perform under the Contract Manufacturing
Agreement and the other transitional and post-closing support it agrees to
provide pursuant to this Section will require a high degree of co-operation and
co-ordination between Buyer and Seller during the Term of the
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Contract Manufacturing Agreement and during the six (6) month transitional
period described below.
(ii) In exchange for and as part of the Purchase Price paid to
Seller, receipt of which is acknowledged, Seller agrees to provide to Buyer, for
up to six (6) months from the Closing Date, at no additional cost or expense to
Buyer, to devote sufficient Seller personnel, facilities and other resources as
are reasonably necessary to allow Buyer to cost-effectively, efficiently, and
expediently consummate the transactions, carry out the purposes, acquire the
Business and realize the benefits contemplated hereunder and under to the other
agreements executed by the Parties contemporaneously herewith, including without
limitation, providing the following support:
(A) Seller will not take any action that primarily is
designed or intended to have the effect of discouraging any lessor, licenser,
customer, supplier, or other business associate of the Seller from maintaining
the same business relationships with the Buyer after the Closing as it
maintained with the Seller prior to the Closing;
(B) reasonable transitional and post-closing order entry,
processing and billing support, including continuing to timely process and ship
the Pending Orders, collecting the customer receivables on the Pending Orders
and on Orders under the Contract Manufacturing Agreement, promptly transferring
funds from such collections and/or endorsing customer checks to Buyer's order,
taking and/or processing post-closing Orders from customers and/or routing
post-closing Orders to Buyer pursuant to a procedure jointly developed by the
Parties as a part of the transition process, issuing Order acknowledgements
conforming with Buyer's form and practice as soon as possible and in interim, on
same basis as Seller's pre-closing practice, providing Buyer with daily
work-in-process and finished goods reports, providing Order status information
to Buyer and/or customers, and timely invoicing customers and/or forwarding
billing information to Buyer for invoice preparation in accordance with a
procedure jointly developed by the Parties as a part of the transition process;
(C) reasonable transitional and post-closing customer service
support, including without limitation, acting as Buyer's warranty claim contact
and advising customers of Buyer's RMA number and warranty claim procedures,
arranging for and paying freight charges on warranty returns providing to
customers relevant drawings, technical bulletins, ECN's, product information,
literature and materials;
(D) reasonable transitional and post-closing engineering and
technical support, including without limitation, providing timely manufacturing
engineering or process support; providing timely product technical support;
working with Buyer's engineers on procedures;
(E) reasonable transitional and post-closing purchasing
(materials and components) support, including without limitation, coordinating
with Buyer's purchasing management to forecast, co-ordinate and manage materials
and finished product inventories maintained and/or ordered under the Contract
Manufacturing Agreement, providing information and assistance for the joint
preparation of the master production schedules described in the Contract
Manufacturing Agreement;
(F) reasonable transitional and post-closing sales and Order
delivery support;
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(G) reasonable transitional and post-closing materials,
finished product and acquired equipment relocation support, including without
limitation, making Seller's facilities available to and cooperating with Buyer
and its movers, assisting in the planning of the physical transfer of Acquired
Assets, assisting in the identification of and the marking/labeling of Acquired
Assets, and assisting in the packing of Acquired Assets for shipment;
(H) reasonable post-closing engineering and technical support
on product development and/or modification projects in accordance with Section
3(m), including without limitation, sufficient engineering support to complete
the pending HDDX printed circuit board project;
(I) reasonable on-site training of Buyer's personnel at
Seller's facilities (Mexico and U.S.), including without limitation, training
Buyer's employees and representatives on products, processes, equipment
operation, manufacturing methods, practices and procedures, and any other
training reasonably requested by Buyer to assist in the orderly transition and
transfer of the Acquired Assets and the performance by Seller of the services
described in the Contract Manufacturing Agreement; and,
(J) any other transitional and post-closing support
reasonably requested by Buyer, including without limitation, IS/database
support, providing QA/QC records, and assisting Buyer's development of its QNQC
processes and procedures.
(c) At any time or times during the one-year period following the
Closing Date, either the Seller or the Buyer may request the Accounting Firm to
conduct an audit of the Acquired Assets and their use in business following the
Closing Date so as to verify that all income and expenses attributable thereto
were received and/or paid by the proper Party as required by this Agreement
and/or the Contract Manufacturing Agreement Any fees or expenses payable to the
Accounting Firm will be shared equally by the Seller and the Buyer.
(d) Handling of Warranty Claims. Etc. Buyer and the Seller
acknowledge and agree that some or all of the Assumed Contracts contain
warranties granted by the Buyer to the other parties to the Assumed Contracts
with respect to the products sold by Seller in connection with the Business. All
such warranties are set forth or, if oral, described in attached Schedule 7(d)
(the "Warranties"). The Buyer and Seller further acknowledge and agree that,
except as provided below, Buyer is not assuming any liabilities associated with
the Warranties under this Agreement. Seller hereby indemnifies Buyer against,
and agrees to hold Buyer harmless from, any and all Adverse Consequences
incurred or suffered by Buyer arising out of the Warranties provided, and
notwithstanding anything in this Agreement to the contrary, that Seller shall
not be liable for this indemnity unless and until the aggregate amount of
Adverse Consequences exceeds $50,000.00, and then only to the extent of such
excess.
(e) Buyer's Use of Seller's Name - Seller and Buyer hereby
acknowledge and agree that both Parties will benefit if there is not appearance
of interruption of supply of the Acquired Assets to customers, Seller therefore
hereby agrees as follows:
A. For existing inventory, product or printed material (whether
fully or partly assembled) already having a trademark, logo or design owned by
Seller thereon (including parts ordered by Seller under open purchase orders
from its suppliers and any products Seller may build, assemble or convey to
Buyer bearing any of Seller's trademarks,
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logos or designs), Buyer has express permission to use and re-sell such
inventory, product or printed material without requiring additional permission
from Seller to so employ such trademark, logo or design provided such inventory,
product or printed matter remains unaltered, except as set forth in Schedule
3(m) to the Disclosure Schedule or otherwise approved by Seller; and
B. For new inventory, product or printed material not already so
marked and not covered by (A) above, Buyer shall first notify Seller of Buyer's
intent to employ such trademark, logo or design and the manner of such use so as
to obtain Seller's express consent to do so; such consent shall not be
unreasonably withheld.
Solely with respect to (B) above, it is understood that the
permission and license granted above shall extend for a period of 60 days from
the date of this Agreement and no longer. Buyer further agrees that any goodwill
associated with such use of these trademarks, logos or designs shall accrue to
the benefit of and belong to Seller. Buyer agrees not to register or seek the
registration of any trademark, logo or design identical or confusingly similar
to any of the above trademarks, logos or designs.
(f) Confidentiality. The Seller will treat and hold as such all of
the Confidential Information, refrain from using any of the Confidential
Information except (i) as required by this Agreement; or (ii) as the Seller may
need in connection with any assets or liabilities that are not Acquired Assets
or Assumed Contracts, and deliver promptly to the Buyer or destroy, at the
request and option of the Buyer, all tangible embodiments (and all copies) of
the Confidential Information which are in its possession, except that Seller may
retain one (1) copy of any Confidential Information for Seller's central records
filing. In the event that the Seller is requested or required (by oral question
or request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, the Seller will notify the Buyer promptly of the
request or requirement so that the Buyer may seek an appropriate protective
order or waive compliance with these provisions. If, in the absence of a
protective order or the receipt of a waiver hereunder, the Seller is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, the Seller may disclose the
Confidential Information to the tribunal provided, however, that the Seller
shall use its reasonable best efforts to obtain, at the reasonable request of
the Buyer, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as the Buyer shall designate. The foregoing provisions shall not apply
to any Confidential Information which is generally available to the public
immediately prior to the time of disclosure.
(g) Covenant Not to Compete. For a period of five (5) years from and
after the Closing Date, the Seller will not engage directly or indirectly in any
activities or business operations similar in nature to the Business
("Competitive Activities"); provided, however, that ownership of less than 5% of
the outstanding stock of any publicly traded corporation shall not be deemed to
engage solely by reason thereof in any Competitive Activities. The Seller agrees
that for a period of five (5) years after the Closing Date, the Seller will not,
whether alone or in conjunction with any other Person, directly or indirectly:
(i) own, manage, operate, provide financing to, or join, control
or participate in the ownership, management, operation or control of, or
provision of financing to, any business wherever located (whether in corporate,
proprietorship or partnership form or otherwise), if such business is
competitive with the Business as presently conducted; or
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(ii) do or say anything which is harmful to the reputation of the
Business, or which may lead any person, entity or governmental agency to cease
to deal with the Buyer on substantially equivalent terms to those previously
offered by such person, entity or governmental agency to the Seller, or at all.
(h) Patent Support. The Seller has patents pending in the United
States and in several foreign countries/regions, one such patent pending being
for a "Telecommunication Assembly," attorney docket no. T & B 1499, and the
other patent pending being for a "Telecommunication Module Having Edge Mounted
Xxxx and Switch Therefor," attorney docket no. T & B 1500. There are certain
features of the inventions which are not disclosed in the patent applications,
as to which features the Buyer is interested in seeking protection. As it
appears that protection is still available in the United States and Canada, the
Seller agrees, at its sole cost and expense, to file continuation-in-part patent
applications in the United States and Canada which will disclose and claim the
"module-less" feature (the back plane printed circuit boards operate without a
module being plugged in), and the "make before break" feature, including full
disclosures for each. The Seller further agrees to coordinate with the Buyer's
patent counsel in the preparation of the new applications and to file such
applications, including foreign applications before the running of any
applicable bars to patent protection.
(i) Loan to Seller: As part of the consideration for this Agreement,
Buyer agrees to lend to Seller, and Seller agrees to borrow from Buyer, One
Million, Seven Hundred Twenty-five Thousand, Five Hundred Thirty-six Dollars
($1,725,536), pursuant to the terms and conditions of the promissory note to be
executed by the Seller and delivered to Buyer at Closing in the form as attached
as Exhibit J (the "Note"). Seller agrees to repay the Note pursuant to the terms
and conditions of the Note.
8. Remedies for Breaches of This Agreement
(a) Survival. All of the representations and warranties of the Seller
contained in Section 3 of this Agreement (other then the representations and
warranties of the Seller contained in Section 3(a), Section 3(b), Section 3c)
and Section 3(f)) shall survive the Closing (even if the Buyer knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of three years
thereafter. All of the representations and warranties of the Buyer, all
covenants of the Parties and the representations and warranties of the Seller
contained in Section 3(a), Section 3(b), Section 3(c) and 3(f) (i), (iii) and
(iv) shall survive the Closing (even if the damaged Party knew or had reason to
know of any misrepresentation or breach of warranty or covenant at the time of
Closing) and continue in full force and effect forever thereafter. The
representations and warranties of the Seller contained in Section 3(f) (ii)
shall survive the Closing (even if the damaged Party knew or had reason to know
of any misrepresentation or breach of warranty or covenant at the time of
Closing and continued in full force and effect for five (5) years thereafter.
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event the Seller breaches and/or fails to perform any
of its representations, warranties, and covenants contained in this Agreement,
and provided that the Buyer makes a written claim for indemnification against
the Seller within the applicable survival period, then the Seller agrees to
fully indemnify the Buyer and hold it harmless from and against the entirety of
any Adverse Consequences the Buyer may suffer, sustain or become subject to
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through and after the date of the claim for indemnification (including any
Adverse Consequences the Buyer may suffer after the end of the applicable
survival period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach or failure.
(ii) The Seller agrees to fully indemnify the Buyer and hold it
harmless from and against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by any (x) Liability of the Seller, except those arising after the Closing Date
under the Assumed Contracts, or (y) any claim or threatened claim against the
Buyer on account of the actions or inactions of the Seller with respect to the
Acquired Assets or the Business prior to the Closing.
(c) Indemnification Provisions for Benefit of the Seller. In the
event the Buyer breaches any of its representations, warranties, and covenants
contained in this Agreement, including the obligation to assume the Assumed
Contracts, and provided that the particular representation, warranty, or
covenant survives the Closing and that the Seller makes a written claim for
indemnification against Buyer within the applicable survival period, then the
Buyer agrees to indemnify the Seller from and against the entirety of any
Adverse Consequences the Seller may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences the Seller may
suffer after the end of the applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the breach. Additionally,
Buyer agrees to fully indemnify Seller (such indemnification shall include, but
not be limited to costs, damages, attorney's fees) that arise from any legal
action or suit formally initiated and be served by ADC Telecommunications which
pertains to ADC's U.S. 4,749,968 patent, that is a result of any overt action
taken or product made or sold by Buyer after Closing: provided, however, nothing
herein shall be construed as obligating Buyer to indemnify Seller for any such
legal action or suit which is initiated or served as a result of Buyer's actions
to consummate the acquisition of the Acquired Assets as contemplated herein
and/or as a result of Buyer's mere ownership of the Acquired Assets after
Closing.
(d) Method of Asserting Claims. As used herein; an "Indemnified
Party" shall refer to either the Buyer or the Seller, as applicable, the
"Notifying Party" shall refer to the Party hereto who is entitled to
indemnification hereunder, and the "Indemnifying Party" shall refer to the Party
hereto obligated to indemnify such Notifying Party.
(i) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses of
which are Adverse Consequences (any such third party action or proceeding being
referred to as a "Claim"), the Notifying Party shall give the Indemnifying Party
notice thereof within 30 days of the date that the Indemnified Party is so made
a defendant in or a party thereto. The failure to give such notice shall not
affect any Indemnified Party's ability to seek reimbursement unless such failure
has adversely affected the Indemnifying Party's ability to defend successfully a
Claim. The Indemnifying Party shall be entitled to contest and defend such
Claim; provided, that the Indemnifying Party (i) has a reasonable basis for
concluding that such defense may be successful and (ii) diligently contests and
defends such Claim. Notice of the intention so to contest and defend shall be
given by the Indemnifying Party to the Notifying Party within 20 business days
after the Notifying Party's notice of such Claim (but, in all events, at least
five business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
selected by the Indemnifying Party. The Notifying Party shall be entitled at any
time, at its own cost and expense (which expense shall not constitute an Adverse
Consequence unless the
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Notifying Party reasonably determines that the Indemnifying Party is not
adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties, and only to the
extent that such expenses are reasonable), to participate in such contest and
defense and to be represented by attorneys of its own choosing. If the Notifying
Party elects to participate in such defense, the Notifying Party will cooperate
with the Indemnifying Party in the conduct of such defense. Neither the
Notifying Party nor the Indemnifying Party may concede, settle or compromise any
Claim without the consent of the other Party, which consents will not be
unreasonably withheld. Notwithstanding the foregoing, (I) if a Claim seeks
equitable relief or (II) if the subject matter of a Claim relates to the ongoing
business of any of the Indemnified Parties, which Claim, if decided against any
of the Indemnified Parties, would materially adversely affect the ongoing
business or reputation of any of the Indemnified Parties, then, in each such
case, the Indemnified Parties alone shall be entitled to contest, defend and
settle such Claim in the first instance and, if the Indemnified Parties do not
contest, defend or settle such Claim, the Indemnifying Party shall then have the
right to contest and defend (but not settle) such Claim.
(ii) In the event any Indemnified Party should have a claim
against any Indemnifying Party that does not involve a Claim, the Notifying
Party shall deliver a notice of such claim with reasonable promptness to the
Indemnifying Party. If the Indemnifying Party notifies the Notifying Party that
it does not dispute the claim described in such notice or fails to notify the
Notifying Party within 60 days after delivery of such notice by the Notifying
Party whether the Indemnifying Party disputes the claim described in such
notice, the Adverse Consequences in the amount specified in the Notifying
Party's notice will be conclusively deemed a liability of the Indemnifying Party
and, the Indemnifying Party shall pay the amount of such Adverse Consequences to
the Indemnified Party on demand. If the Indemnifying Party has timely disputed
its liability with respect to such claim, the Chief Executive Officers of each
of the Indemnifying Party and the Notifying Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through the
negotiations of such Chief Executive Officers within 60 days after the delivery
of the Notifying Party's notice of such claim, such dispute shall be resolved
fully and finally in Denver, Colorado by an arbitrator selected pursuant to, and
an arbitration governed by, the Commercial Arbitration Rules of the American
Arbitration Association. The arbitrator shall resolve the dispute within 30 days
after selection and judgment upon the award rendered by such arbitrator may be
entered in any court of competent jurisdiction.
(iii) After the Closing, the rights set forth in this Section 8
shall be each Party's sole and exclusive remedies against the other Party hereto
for misrepresentations or breaches of covenants contained in this Agreement.
Notwithstanding the foregoing, nothing herein shall prevent either of the
Indemnified Parties from bringing an action based upon allegations of fraud or
other intentional breach of an obligation of or with respect to either Party in
connection with this Agreement. In the event such action is brought, the
prevailing Party's attorneys' fees and costs shall be paid by the non-prevailing
Party.
(e) Determination of Adverse Consequences. The Parties shall make
appropriate adjustments for tax benefits and insurance proceeds (reasonably
certain of receipt and utility in each case) and for the time cost of money in
determining the amount of Adverse Consequences for purposes of this Section 8.
All indemnification payments under this Section 8 shall be deemed adjustments to
the Purchase Price.
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(f) Escrow. The Escrowed Funds shall be held and either released to
the Seller or returned to Buyer according to the provisions of this Section 8
and the Escrow Agreement.
(i) The Escrowed Funds shall be applied to indemnify and hold the
Buyer harmless against and in respect of any and all Adverse Consequences
specified in this Section 8 for which the Buyer is entitled to indemnification
pursuant to the provisions of this Section 8.
(ii) Following determination of the Escrowed Funds, if any, to be
delivered to the Buyer in accordance with this Agreement and the Escrow
Agreement, the Buyer may deliver a written notice to the Seller and Escrow Agent
directing that the appropriate amount of the Escrowed Funds be delivered to
Buyer in satisfaction of the Seller's obligation hereunder. Within thirty (30)
days after delivery to the Escrow Agent of the Buyer's notice to the Seller and
the Escrow Agent instructing the Escrow Agent to return a specified amount of
Escrowed Funds to Buyer, and if the Seller has not notified Escrow Agent that
the notice from Buyer was in error within said thirty (30) days, the Escrow
Agent shall return such amount of Escrowed Funds, and any interest paid prior
thereto, to the Buyer as is specified in the Buyer's notice.
(iii) The balance of the Escrowed Funds held by the Escrow Agent
as to which notice pursuant to Section 8(e)(ii) shall not have been given by the
Buyer on or prior to the Release Date (as defined in the Escrow Agreement), as
well as any interest paid prior thereto, shall be delivered by the Escrow Agent
to Seller as soon as practicable after the Release Date.
9. Termination.
(a) Termination of Agreement. This Agreement may be terminated at any
time prior to the Closing:
(i) by the mutual consent of the Buyer and the Seller;
(ii) by either the Buyer or the Seller if there has been a
material misrepresentation, breach of warranty or breach of covenant on the part
of the other in the representations, warranties and covenants set forth in this
Agreement; or
(iii) by either the Buyer or the Seller if there is outstanding
an order, ruling or decree or any other governmental action permanently
enjoining, restraining or otherwise prohibiting the consummation of any of the
material transactions contemplated by this Agreement, which order, ruling,
decree or other action shall have become final and non-appealable.
(iv) by the Buyer if, after the date hereof, there shall have
been a material adverse change in the condition of the Acquired Assets or if,
after the date hereof, an event shall have occurred which, so far as reasonably
can be foreseen, would result in any such change, except to the extent such
change is directly caused by the Buyer.
(b) Survival. In the event of termination of this Agreement pursuant
to this Section 9, all obligations of the Parties hereunder shall terminate
without any liability of either Party to the other Party (other than the
provisions of Section 5(h), Section 9(b), and Section 10, each of which shall
survive any such termination); provided, however, that no termination shall
relieve either Party from any liability arising from or relating to a willful
breach prior to termination.
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10. Miscellaneous.
(a) Press Releases and Announcements. Prior to the Closing Date,
neither Party hereto shall issue any press release (or make any other public
announcement) related to this Agreement or the transactions contemplated hereby
or make any announcement to the employees, customers or suppliers of the Seller
without prior written approval of the other Party hereto, except as may be
necessary, in the opinion of counsel to the Party seeking to make disclosure,
to comply with the requirements of this Agreement or applicable law. If any such
press release or public announcement is so required, the Party making such
disclosure shall consult with the other Party prior to making such disclosure
and that Party shall use all reasonable efforts, acting in good faith, to agree
upon a text for such disclosure which is satisfactory to both Parties.
(b) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interest, or obligations hereunder without prior written
approval of the other Party.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The 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.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if it is sent by a
nationally recognized overnight courier, and addressed to the intended recipient
as set forth below:
If to the Seller: Xxxxxx & Xxxxx Corporation
0000 X&X Xxxxxxxxx
Xxxxxxx, XX 00000
Attn: Vice-President -- Operations and Administration
Fax 901 -252-1334
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Copy to: Xxxxxx & Xxxxx Corporation
0000 X&X Xxxxxxxxx
Xxxxxxx, XX 00000
Attn: Vice President - General Counsel and Secretary
Fax 901 -252-1354
If to the Buyer: Telect, Inc.
Copy to: X.X. Xxx 000
0000 X. Xxxxxx Xx.
Xxxxxxx Xxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxxx, CEO
Fax: 000-000-0000
Copy to: Xxxxx X. Xxxxxxx
Xxxxx Xxxxxxx Xxxxxx Xxxxxx & Xxxxxx LLP
000 X. Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Fax: 000-000-0000
Either Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited mail,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Either Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts of laws) of
the State of Washington.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules are incorporated herein by reference and made a part hereof.
(k) Specific Performance. Each Party acknowledges and agrees that the
other Party would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each Party agrees that the other Party
shall be entitled to an injunction or injunctions to prevent branches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 10(l) below), in addition to any
other remedy to which they may be entitled, at law or in equity.
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(l) Submission to Jurisdiction. Each Party submits to the
jurisdiction of any state or federal court sitting in Denver, Colorado, in any
action or proceeding arising out of or relating, to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each Party waives any defense
of inconvenient forum to the maintenance of any action or proceeding so brought
and waives any bond, surety, or other security that might be required of any
other party with respect thereto. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law.
(m) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any, invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(n) Expenses. Unless otherwise provided in this Agreement, the Buyer
and the Seller will bear their own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(o) Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against either Party. Any reference
to any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the Parties hereto have executed this Asset Purchase
Agreement as of the date first above written.
XXXXXX & XXXXX CORPORATION TELECT, INC.
By: By:
------------------------------------ --------------------------------
Name: Name:
---------------------------------- ------------------------------
Title: Title:
--------------------------------- -----------------------------
XXXXXX & XXXXX INTERNATIONAL, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Exhibit A
Acquired Assets
Exhibit B Assumed Contracts
Exhibit C Business Definitions
Exhibit D Contract Manufacturing
Exhibit E Escrow Agreement
Exhibit F Pro Forma Asset Value List
Exhibit G Assignment and Xxxx of Sale
Exhibit H Assumption Agreement
Exhibit I Required Third Party Consents
Exhibit J Promissory Note
Disclosure Schedule
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EXHIBIT A
TO ASSET PURCHASE AGREEMENT
ACQUIRED ASSETS
Tangible personal property:
- All tangible personal property identified on the following
attached sheets(1):
Fixed Asset List -- Monterrey (8 pages)
Inventory as of February 27, 2000(2) (71 pages)
Intellectual Property:
- All Intellectual Property identified in 3(f) of the
Disclosure Schedule.
Contracts, agreements, Security Interests, guaranties, other similar
arrangements and rights thereunder:
- All rights under arrangements identified on the following
attached sheets:
Open Sales Orders (8 pages)
Open Purchase Orders to Vendors (15 pages)
Approvals, permits, licenses, orders registrations, certificates, variances and
similar rights obtained from government or governmental agencies directly
related to the Business:
- None
All books, records, and ledgers (other than financial documents of which copies
will be provided to Buyer), files, documents, correspondence, lists marketing
and customer data, supplier data, architectural plans, drawings, and
specifications, creative materials, advertising and promotional materials
directly related to the Business.
-------------------
(1) Tangible assets also includes certain fixed assets used in the Business and
located in Monterrey, Mexico and/or North Attleboro, Massachusetts, that will be
identified in the post closing physical inventory and included in the Pro Forma
Asset Value List.
(2) All references to DSX-3 products include the assembled and component parts
of such products, with the exception of DSX-3 jacks, which are specifically
excluded from Inventory.
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EXHIBIT B
TO ASSET PURCHASE AGREEMENT
ASSUMED CONTRACTS
Open Purchase Orders to Vendors -- (15 pages)
Open Sales Orders -- (8 pages)
28
EXHIBIT C
TO ASSET PURCHASE AGREEMENT
TELZON(R) PRODUCT LINE
Telzon(R) Price List --(30 pages)
HDDX Finished Goods Part Numbers -- (1 page)
29
EXHIBIT D
TO ASSET PURCHASE AGREEMENT
CONTRACT MANUFACTURING AGREEMENT
30
TRANSITION PERIOD
CONTRACT MANUFACTURING AGREEMENT
THIS CONTRACT MANUFACTURING AGREEMENT is between Telect, Inc., a
Washington corporation, having an office at 0000 Xxxxx Xxxxxx Xxxx, Xxxxxxx
Xxxx, Xxxxxxxxxx 00000, Xxxxxx Xxxxxx of America ("Telect") and Xxxxxx & Xxxxx,
Inc., a Tennessee corporation, having an office at 0000 X&X Xxxxxxxxx Xxxxxxx,
Xxxxxxxxx 00000 ("T&B") (the "Agreement").
Recitals
WHEREAS, Telect and Xxxxxx & Xxxxx desire to enter into this Agreement and
related, contemporaneous contracts, to ensure Telect's ability to meet
customers' needs for acquired T&B products, over the 60-day transition period
covered by the term of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the covenants, obligations
and mutual agreements set forth herein, and in such related agreements, the
parties agree as follows:
1. DEFINITIONS
1.1 "Assembly Services" shall mean the assembly labor associated with
T&B's assembly and testing of Telect's Acquired Products in accordance with this
Agreement.
1.2 "Blanket Order" shall mean an Order made for Telect Acquired
Products described in Appendix A pursuant to a Demand-Pull Program.
1.3 "Delivery Date" shall mean the date when any Telect Acquired Product
shall be delivered to the Delivery Location.
1.4 "Delivery Location" shall mean the location(s) specified in an Order
or Release to which Telect Acquired Product(s) shall be delivered.
1.5 "EDI" shall mean electronic data interchange of information related
to Orders and Releases.
1.6 "Effective Date" shall mean the Closing Date, as defined in the
Purchase Agreement.
1.7 "Order" shall mean either the "hardcopy" document or EDI used by a
Telect Company to order Telect Acquired Products under this Agreement.
1.8 "Purchase Agreement" shall mean that certain Asset Purchase
Agreement by and between Telect and T&B, dated as of March 6, 2000.
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1.9 "Release" shall mean either the document issued or the output of EDI
initiated by Telect pursuant to a Blanket Order by which the Delivery Date for
the portion of such Blanket Order stated in such Release is established.
1.10 "Shipping Date" shall mean the date when a Telect Acquired Product
shall be delivered to the carrier at the Shipping Location for shipment to the
Delivery Location.
1.11 "Shipping Location(s)" shall mean the location(s) so designated by
Telect, from which a Telect Acquired Product shall be shipped by T&B.
1.12 "Telect Acquired Product(s)" shall mean those products acquired by
Telect from T&B through the related product line acquisition transaction set
forth in the Purchase Agreement.
1.13 "Telect Acquired Product Specifications" shall mean the T&B product
specifications, technical specifications, manufacturing processes, quality
control tests, methods and criteria, drawings, schematics and other
documentation related to the Telect Acquired Products.
1.14 "Term" shall mean (2) months beginning on March 6, 2000 ("Effective
Date") plus a single two (2) month extension period, if exercised by Telect upon
not less than thirty (30) days prior written notice, in its discretion.
1.15 "Warranty Period" shall mean T&B's standard warranty period as of
the Effective Date, beginning on the date of shipment of each Telect Acquired
Product.
1.16 "Warranty Repair Period" refers to the period within which a Telect
Acquired Product covered by the warranty set forth in Article 4 must be repaired
or replaced, and then returned to Telect, which period shall be ten (10)
calendar days commencing on the date that T&B receives from a Telect Company or
Telect customer a Telect Acquired Product which does not conform to the
warranty.
2. SCOPE
This Agreement sets forth the terms and conditions applicable to the
purchase by Telect of Telect Acquired Products manufactured by T&B and the
agreement by T&B to provide those Telect Acquired Products during the Term.
3. XXXXXX & XXXXX SERVICES
3.1 T&B Demand-Pull Program.
3.1.1 For those Telect Acquired Products identified in Appendix A,
T&B will maintain a finished good ("EU") stock of such Telect Acquired Products
on-hand and in the quantities set forth in Appendix A, that will be used for
Releases against the Telect Blanket Purchase Order. T&B shall drop ship to
Telect's customer's Delivery Location from such FG
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inventories within 24 hours of its receipt of a Release so as to allow Telect to
service its customers' orders with immediate Telect Acquired Product delivery.
T&B's production and material supply plans related to this Demand-Pull Program
will be based on Telect Acquired Product forecasts derived from prior T&B and
current Telect sales history and customer received input during the Term. The
T&B production and material supply plans shall then be used: (i) to develop a
master production schedule approved by Telect for the Telect Acquired Products
subject to the Demand-Pull Program, and (ii) to establish, from time to time,
but not less frequently than weekly, the T&B Minimum EQ Stock Levels and T&B
Target EQ Stock Levels for each Telect Acquired Product set forth in Appendix A.
A target FG stock level at each T&B manufacturing or distribution location for
the Demand-Pull Program will also be established in connection with the parties'
development of the master production schedule. T&B's material supply orders
shall be in sufficient amounts and shall be placed with sufficient lead times to
assemble and stock the T&B Minimum FG Stock Levels, and the T&B Target EQ Stock
Levels at all times, even if Telect's Releases do not meet forecasted volumes.
3.1.2 Unit pricing for Telect Acquired Products subject to the
Demand-Pull Program will be the unit cost set forth in Appendix A, which unit
costs are the product of multiplying T&B's standard labor routing hours per
Telect Acquired Product, times a fixed hourly rate of US$13.94 per hour for
T&B's Monterrey plant and a fixed hourly rate of US $23.49 for T&B's North
Attleboro plant. Freight charges shall be additional.
3.2 T&B Stocking/Drop-Ship Program.
3.2.1 For those Telect Acquired Products identified in Appendix B
for which T&B maintains an EU inventory at its manufacturing and/or distribution
locations as of the Effective Date, T&B shall continue to maintain a comparable
Target EQ stock level of inventories during the Term to fill Telect's sales
demand during the Term. Telect will place Orders to T&B for this category of
Telect Acquired Products for drop shipment to Telect's customer's Delivery
Location(s). T&B's EQ stock replenishment and related subsequent materials
purchases for the Telect Acquired Products subject to the Stocking/Drop-Shipment
Program must be pre-authorized by Telect before any replenishment units are
assembled and/or materials for such units ordered.
3.2.2 Unit pricing for Telect Acquired Products subject to the
Stocking/Drop-Ship Program will be the unit cost set forth in Appendix B, which
unit costs are the product of multiplying T&B's standard labor routing hours per
Telect Acquired Product, times a fixed hourly rate of US$13.94 per hour for
T&B's Monterrey plant and a fixed hourly rate of US$23.49 for T&B's North
Attleboro plant. Freight charges shall be additional.
3.2.3 The assembly lead-times for Telect Acquired Products subject
to the Demand-Pull Program that will be used to quote delivery dates to Telect's
customers are identified in Appendix B, but will in no event be less than 5
working days or greater than 10 working days for the Telect Acquired Products
identified therein.
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3.3 T&B Build-to-Order/Drop-Ship Program.
3.3.1 For those Telect Acquired Products identified in Appendix C,
Telect will place a Purchase Order to T&B for this category of Telect Acquired
Product for drop shipment to Telect's customer's Delivery Location(s) in
accordance with this Section 3.3. Delivery lead-time for this category of Telect
Order will be determined by firm quotation by T&B upon an inquiry by a Telect
Customer Service Representative to a Customer Service Representative at T&B. All
Telect Acquired Products subject to this Section shall be assembled only after
receipt of and pursuant to an Order from Telect and subsequent materials
purchases for future Orders of such Telect Acquired Products must be
pre-approved by Telect before any materials purchase orders are initiated by
T&B.
3.3.2 Unit pricing for the Telect Acquired Products subject to the
Build-to-Order Drop-Ship Program will be the unit cost set forth in Appendix C,
which unit costs are the product of multiplying T&B's standard labor routing
hours per Telect Acquired Product, times a fixed hourly rate of US$13.94 per
hour for T&B's Monterrey plant and a fixed hourly rate of US$23.49 for T&B's
North Attleboro plant. Freight charges shall be additional.
3.4 Title to Materials: Materials Cost Reimbursement Obligation of
Telect. Pursuant to the terms of the Purchase Agreement, on the Effective
Date, title to all materials owned by T&B that are used in the assembly of
Telect Acquired Products shall transfer to Telect. All subsequent materials
purchased by T&B pursuant to the terms of Sections 3.1, 3.2 and/or 3.3 for the
assembly of Telect Acquired Products during the Term shall be for the ownership
and benefit of Telect. Telect shall reimburse T&B on a monthly basis for T&B's
actual purchase cost of such materials.
3.5 T&B's Duty to Co-Operate and Co-Ordinate With Telect. T&B
acknowledges and agrees that the assembly, storage and distribution services it
is to perform hereunder relate to a key new product line of Telect. Moreover,
T&B acknowledges and agrees that the need for co-operation and co-ordination
between Telect and T&B will be high during the transitional period described in
the Recitals. In addition, the relationship set forth in this Agreement, in
which:
(i) T&B will procure the materials and components for the Telect
Acquired Products on Telect's behalf with invoices payable by
Telect in accordance with Section 3.4,
(ii) T&B will perform the intake of those materials and components
and store them in T&B's facility,
(iii) Telect and T&B will jointly develop and schedule the master
production plan for the assembly of the Telect Acquired Products
subject to the Demand-Pull Program and other joint efforts
described herein,
(iv) T&B will utilize its workforce to assemble Telect's Telect
Acquired Products,
(v) T&B will package and ship the Telect Acquired Products to Telect
and/or the Telect customers that ordered them, and
(vi) Telect will own and carry on its books the materials and
components, the work-in-process and the finished Telect Acquired
Products,
will require an ongoing need for co-operation and co-ordination between the
parties. T&B agrees to use its commercially reasonable efforts to co-operate and
co-ordinate its performance of the
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services described herein with Telect and the Telect personnel assigned to
perform Telect's activities under this Agreement, including any on-site Telect
personnel assigned to T&B's facilities.
3.6 Telect's Duty to Co-Operate and Co-Ordinate With T&B. Telect
acknowledges and agrees that the need for co-operation and co-ordination between
Telect and T&B will be high during the transitional period described in the
Recitals. In addition, the relationship set forth in this Agreement, in which
Telect and T&B will perform their joint and respective activities and duties as
set forth in Section 3.5, above, will require an ongoing need for co-operation
and co-ordination between the parties. Telect agrees to use its commercially
reasonable efforts to co-operate and co-ordinate its performance of its
activities with T&B and the T&B personnel assigned to perform T&B's services
under this Agreement.
3.7 Telect Not Bound by Forecasts or Estimates. If Telect provides T&B
with a forecast or an estimate of the quantity of Telect Acquired Products that
it expects to order, whether such forecast or estimate is incorporated into or
set forth in Appendix A, Appendix B, Appendix C or otherwise, T&B acknowledges
that Telect shall not be obligated to submit an Order or Release for any portion
of such forecast or estimate.
3.8 Removal of T&B DSX-3 Jacks and Use of Telect Jacks on DSX-3 Telect
Acquired Products.
3.8.1 In order to ensure that the DSX-3 category of Telect Acquired
Products identified in the Appendices to this Agreement and in Exhibit A of the
Purchase Agreement (T&B Part Nos.DSX-3MR-BDM, DSX-3MR-BSM, DSX-3SR-BDM,
DSX3-sr-BSM, DSX-3ACSI-BSM, DSX-3MPOP-BSM) ("DSX-3 Products") do not come within
the scope of pending litigation T&B is involved in, T&B agrees to remove its
DSX-3 jacks (T&B Part Numbers 100536, 100537, 100538, 100539 and 100540) on all
finished DSX-3 Products in its inventory as of the Effective Date at no cost to
Telect.
3.8.2 All DSX-3 Products assembled by T&B after the Effective Date
under this Agreement shall contain standard Telect jacks, which will be supplied
to T&B upon request at no cost to T&B. and the Telect Acquired Product
Specifications for such DSX-3 Products shall be changed accordingly.
4. ACCEPTANCE AND TELECT PRODUCTS WARRANTY
4.1 Warranty of Title. T&B warrants to Telect that every Telect Acquired
Product will at the time of delivery be new and free and clear of all liens,
security interests and encumbrances created by T&B.
4.2 Warranty of Quality. T&B further warrants that during the Warranty
Period each Telect Acquired Product shall be free from defects in material and
workmanship and shall conform to the Telect Acquired Product Specifications.
This warranty shall not apply to any defect which has been caused by Telect or
its customer and arises from mishandling, misuse,
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neglect or improper testing, maintenance or repair. This warranty shall survive
inspection, acceptance and payment.
4.3 Warranty Services and Remedies. Any Telect Acquired Product
which does not conform to the warranty described in Section 4.2, during the
Warranty Period, shall be returned to T&B. T&B shall repair or replace such
defective Telect Acquired Product and ship the repaired or replacement Telect
Acquired Product to Telect or, at Telect's direction in its sole discretion, to
Telect's customer, within the Warranty Repair Period. If T&B does not so perform
within the Warranty Repair Period, upon Telect's election and request, and in
addition to any other right available to Telect at law or in equity, T&B shall:
(a) refund to Telect the price of such defective Telect Acquired Product paid by
Telect's customer and (b) be entitled to retain such defective Telect Acquired
Product. T&B shall make all arrangements and pay all expenses arising from
shipping the defective Telect Acquired Product to T&B's designated warranty
repair facility, and shipping the repaired or replacement Telect Acquired
Product from the Shipping Location to the Telect or Telect customer Delivery
Location designated by Telect.
4.4 Warranty Applicable to Repaired or Replacement Items. Repairs or
replacements of defective Telect Acquired Products during the Warranty Period
shall be warranted, as above provided, for the applicable Telect Acquired
Product Warranty Period. This warranty shall survive inspection, acceptance and
payment.
4.5 Acceptance. The acceptance of a Telect Acquired Product is
subject to inspection at the Delivery Location. Acceptance shall be deemed not
to have occurred until the earlier of: (a) the acceptance period set forth in
Telect's contract with the Telect customer to which the Telect Acquired Product
is shipped, or (b) at least 14 days after delivery. If a Telect Acquired Product
does not conform to the requirements of an Order or to the warranties set forth
in this Article, the entire quantity of Telect Acquired Products delivered with
such non-conforming or defective Telect Acquired Product may be returned, at
Telect's sole discretion, to T&B, at T&B's expense. Payment shall neither be
deemed to constitute acceptance, nor be a waiver of Telect's right to cancel any
Order or Release.
4.6 Disclaimer of Implied Warranties. THE ABOVE WARRANTIES AND OTHER
WARRANTIES CONTAINED IN THIS AGREEMENT REPLACE ALL OTHER WARRANTIES. EXPRESS OR
IMPLIED. INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
4.7 Extent of Liability. In no event shall Telect be liable to T&B
hereunder for any special, punitive, incidental or consequential damages, loss
of data, or commercial losses even if Telect has been advised thereof. In no
event shall T&B be liable to Telect hereunder for any special, punitive,
incidental or consequential damages, loss of data, or commercial losses even if
T&B has been advised thereof.
4.8 Extent of Authority. No agent, distributor or representative of
Telect is authorized to make any warranties on behalf of T&B.
4.9 Warranty Return Procedures.
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4.9.1 No defective or non-conforming Telect Acquired Product may be
returned to T&B without a Return Material Authorization ("RMA") number assigned
by Telect. The RMA is to be assigned by a Telect customer representative by
calling (___) __ - _____.
4.9.2 Where a defective or non-conforming Telect Acquired Product is
sought to be returned to T&B, such Telect Acquired Product: (a) must be returned
by Telect or, at Telect's discretion, by Telect's customer within 30 days of
issuance of the corresponding RMA number; (b) is eligible for return only if the
Telect Product Warranty Period has not yet expired; (c) must be returned in
original or appropriate containers, and all freight charges are to be paid by
T&B; and, (d) credit for, or repair or replacement of, returned Telect Acquired
Products pursuant to the provisions of Section 4.3 will be issued by T&B once
the Telect Acquired Product is received at T&B's warranty repair facility and
all conditions of the return policy set forth herein are satisfied.
4.9.3 In the event T&B reasonably determines that a returned Telect
Acquired Product is in conformance with the warranties set forth in Article 4,
such product shall be: (a) returned to Telect or, at Telect's discretion,
Telect's customer, within 14 days of such determination; (b) freight charges for
such re-delivery shall be borne by Telect or Telect's customer; and (c) Telect
or Telect's customer shall reimburse T&B for the freight charges it paid
pursuant to Section 4.9.2 (c); provided, however, that in the event T&B has
shipped a replacement Telect Acquired Product before it determined the returned
Telect Acquired Product was not defective, Telect or its customer shall pay a
fifteen percent (15%) restocking fee to T&B, based on the unit price paid by
Telect for such returned Telect Acquired Product.
5. QUALITY CONTROL
5.1 Telect Acquired Product Quality. T&B shall, within seven (7)
days of detection, report to Telect by technical bulletin concerning any
potential, suspected or actual: (a) defect in design and/or manufacturing of the
materials and/or components for any Telect Acquired Product; (b) defect in
assembly of any Telect Acquired Product, (c) malfunction of any Telect Acquired
Product, (d) failure of any Telect Acquired Product to conform to the Telect
Acquired Product Specifications or (e) knowledge of uses of any Telect Acquired
Product in combination with other product(s) or services which cause or have the
potential of causing disruption in the business or services provided by
end-users using any Telect Acquired Product. All Telect Acquired Products
delivered by T&B shall comply with Telect's product quality standards.
5.2 Inspection and Testing. T&B shall make available the assembly,
storage and distribution locations at which any of the Telect Acquired Products
are assembled or stored for inspection by Telect of materials, work-in-process
and EQ Telect Acquired Products, as well as the related assembly, shipping
and/or storage processes and procedures. Telect shall request inspection no more
frequently than required by good commercial practice. Such inspection shall be
conducted so as to not cause a delay in any scheduled ship date for any
inspected Telect Acquired Product, unless the inspection concludes a there is a
defect in or other problem exists with such Telect Acquired Product.
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37
5.2.1 In addition, T&B shall provide at no additional cost such
facilities, labor, data, specifications, manuals and information as Telect
reasonably requires to allow Telect to perform a full range of quality assurance
and quality control functions consistent with Telect's current practices in its
own assembly, storage and distribution facilities. Inspection of Telect Acquired
Products and/or related processes and procedures may be performed in whole or in
part prior to final assembly and/or completion of repair processes. Any exercise
of, or failure to exercise, the foregoing rights shall not relieve T&B of its
obligation to furnish all Telect Acquired Products in strict conformance with
this Agreement and the applicable Order or Release.
5.3 Communication. Telect agrees to keep T&B informed as to any problems
encountered with the Telect Acquired Products and to communicate promptly to T&B
any and all Telect modifications or improvements to the Telect Acquired
Products. T&B agrees to keep Telect informed as to any problems encountered wit
the Telect Products, the assembly services to be provided by T&B hereunder
and/or any T&B storage or distribution facility or procedure.
6. TELECT ACQUIRED PRODUCT CHANGES; ASSEMBLY PROCESS CHANGES
6.4 Form and Content of Change Notifications. Telect's written
engineering and/or Telect Acquired Product Specification change notifications
shall be numbered in a single sequential numbering scheme and shall include
sufficient information for T&B to assess the proposed change, including, but not
limited to, the following information: a detailed list of the Telect Acquired
Products and/or the T&B assembly, storage or distribution processes or
procedures affected and associated changes that must be implemented in
conjunction with or prior to the notified change; the compatibility of the
change with the Telect Acquired Products and T&B's then-existing assembly,
storage or distribution processes or procedures currently deployed; a detailed
description of the reason for the change; the effect on the Telect Acquired
Products and T&B's assembly, storage or distribution processes or procedures
once the change is implemented; and, the timing and method of implementation of
any such change.
6.5 Test Data and Telect Products for Verification. Telect reserves the
right to request test data, demonstrations, samples, and any other information
reasonably required by Telect associated with any proposed change to any
materials or materials supplier used by T&B as of the Effective Date or any
proposed change to any T&B assembly, storage or distribution process or
procedure related to the Telect Acquired Products, that, in Telect's sole
determination, may affect Telect Acquired Product quality. Furthermore, in the
event Telect determines it is necessary to verify the any such proposed change
prior to acceptance, T&B shall supply access to T&B's facilities and, if
applicable, on loan and without charge, sufficient production level quality
Telect Acquired Products Incorporating the changed material, or assembled,
stored or distributed in the changed manner for such verification, or offer some
other alternative arrangement satisfactory to Telect, for such verification.
6.6 Approval of Changes. Telect shall not implement any change in the
nature of those contemplated above without prior written notice to T&B and T&B
shall not implement any change in the nature of those contemplated above without
the prior written consent of Telect, which consent may not be unreasonably
withheld. Should either party fail to respond within a
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38
period often (10) calendar days from the date it has received a notice forwarded
by the other party under this Article, then party sending the notice shall have
the right to implement the change identified in the notice.
7. FORCE MAJEURE
If the performance of this Agreement is interfered with by reason of any
circumstance beyond the reasonable control of the party affected as a result of
an act of God or labor dispute then the party affected shall be excused from
such performance on a day-for-day basis to the extent of such interference (and
the other party shall likewise be excused from performance on a day-for-day
basis to the extent such party's obligations relate to the performance so
interfered with); provided that the party so affected shall use reasonable
efforts to remove such causes of non-performance; provided, further, that if any
such interference extends for more than thirty (30) days, Telect shall have the
right, without liability, obligation or charge, to cancel this Agreement and/or
any Order or Release affected by such interference.
8. ASSIGNMENT AND SUBCONTRACTS
8.1 Assignment and Subcontracts by T&B Prohibited. Except as provided
below, T&B's rights and obligations under this Agreement are not assignable,
directly, indirectly, by operation of law or otherwise, and T&B shall not
subcontract any portion of its rights, duties or obligations under any Order or
Release. In the event T&B nevertheless seeks Telect's consent to the assignment
of all or a part of its interest in or performance under this Agreement,
including a request to enter into a subcontract with a third-party, Telect may
reasonably or unreasonably withhold such consent at its sole discretion.
Notwithstanding any such consent granted by Telect, T&B shall continue to be
hilly responsible and liable for full performance of the Services and the
fulfillment of any such Order or Release.
8.2 Assignment to Affiliates Permitted. Either party may assign or
subcontract its rights and obligations under this Agreement to an Affiliate
without the consent of the other party. Either party may also assign this
Agreement and its rights and obligations hereunder by contract or operation of
law in connection with a merger, acquisition or reorganization, with the consent
of the other party, which consent will not be unreasonably withheld.
9. GENERAL
9.1 Notices. All notices to be given under this Agreement, except for
notices under Section 5.6 or 5.8, shall be sent by certified mail, postage
prepaid, or by facsimile or hand delivery to the other party at the following
addresses:
Telect:
T&B:
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Notices shall be deemed to have been received four (4) days after mailing if
given by mail, and one business day after sending if given by cable, telegram,
facsimile, telex and upon delivery if given by hand.
9.2 Failure to Enforce Not to Constitute Waiver. The failure of a party
to enforce any provision of this Agreement shall not constitute a waiver of such
provision or the right of such party to enforce such and every other provision.
9.3 Governing law. The validity, interpretation and performance of this
Agreement, the rights and obligations arising hereunder and any purchase made
hereunder shall be governed by the laws of the State of Washington.
9.4 Headings. Article and section headings are inserted for convenience
only and shall not be used to interpret this Agreement.
9.5 Survival. All obligations and liabilities (including warranties)
which by their nature are intended to survive the expiration or termination of
this Agreement shall remain in effect beyond any expiration or termination of
this Agreement.
9.6 Severability. If any provision of this Agreement is or becomes
illegal or unenforceable in whole or in part in a country, the remaining
provisions shall nevertheless be valid and binding with respect to that country
so long as they continue to express the original intent of the parties. If not,
this Agreement shall not apply in that country, but the parties shall negotiate
in good faith to extend the benefit of this Agreement to that country in some
other manner.
9.7 Entire Agreement. This Agreement, including the Appendices to it,
constitute the entire agreement between the parties on the subject matter hereof
and supersede all prior agreements and communications with respect thereto.
Except for the information which must be set forth in an Order or Release in
accordance with Article 3 hereof, any additional or different terms set forth in
any Order, Release, T&B acknowledgment form or other document hereafter issued
shall be void. This Agreement may not be modified or any right of a party
waived, except by means of an amendment which expressly references this
Agreement and which is duly executed by each of the parties.
9.8 Worker's Compensation Defense Waiver. In the event of a claim for
indemnity arising out of a claim by an employee of a Party against the other
Party for personal injury, including death, or property damage, each Party
hereby waives any workers' compensation defense it would otherwise be entitled
to. IN ACCORDANCE WITH TITLE 51, REVISED CODE OF WASHINGTON, THE WORKERS'
COMPENSATION EMPLOYER DEFENSE WAIVER CONTAINED HEREIN HAS BEEN SPECIFICALLY
NEGOTIATED BY THE PARTIES TO THIS AGREEMENT.
9.9 Accounting and Records: Telect Inspection and Audit Rights. In
addition to any other rights to obtain, inspect, test or audit information or
records of T&B set forth in Sections
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5.2, 6.5, 10.3 or otherwise in this Agreement and/or the Purchase Agreement,
Telect shall have the rights and T&B shall have the obligations set forth below:
9.9.1 T&B shall keep accurate and complete records with respect
to its activities under this Agreement, including without limitation, records
related to: materials acquisitions and related invoices, Orders and Releases,
customer receivable and payment information, warranty and other returns, freight
and shipment information, assembly workforce, standard labor routing hours, and
production cost and overhead information.
9.9.2 Telect shall have the right, at its own expense, during the
Term and for three (3) years thereafter, to inspect, examine and/or audit, or to
have its independent public accountants inspect, examine and/or audit, any and
all information, records, financial books and records of account of T&B which
arise out of or relate to T&B's performance hereunder, during normal business
hours, upon reasonable notice, to determine or verify such records and
information. As a condition of to allowing such inspection, examination and/or
audit by Telect's independent public accountants, such independent accountants
shall execute a written agreement, reasonably satisfactory in form and substance
to T&B, to maintain in confidence all information obtained in the course of such
inspection, examination or audit, except for disclosure to Telect.
10. PROPERTY FURNISHED BY TELECT
10.1 Loaned Equipment. All Telect equipment and other tangible personal
property purchased by Telect in connection with the Purchase Agreement which
will be loaned to T&B, without charge to T&B, and used by T&B to perform the
Telect Acquired Product assembly, storage and distribution services described
herein, is and shall remain the property of Telect (the "Loaned Equipment"). All
Loaned Equipment and, whenever applicable, each individual item thereof, shall
be plainly marked and otherwise adequately identified by T&B as property of
Telect, and shall, at T&B's expense, be safely stored, properly maintained, and
kept free of all liens, claims, encumbrances and interests of third parties.
Upon Telect's request, before and after the Effective Date, T&B shall sign and
file or record in the records of the appropriate governmental entity or
entities, any and all requested notices, supplemental agreements, memoranda of
agreement, financing statements or other informational filing documents, and any
amendments, extensions or continuations thereof, deemed necessary or prudent by
Telect, in its sole discretion, in order to provide notice to any such
third-party of Telect's ownership of the Loaned Equipment.
10.2 Notice to Landlord. Prior to the Effective Date, and thereafter
before locating Telect Loaned Equipment, FG stocks of Telect Acquired Products
and/or the materials for such Telect Acquired Products on leased premises, T&B
shall cause its landlord, if any, to acknowledge in writing to Telect that it
shall assert no interest in such Loaned Equipment, Telect Acquired Products
and/or materials, and shall not impede Telect from removing the any such
property from the premises or using it on T&B's premises after an Event of
Default pursuant to the licenses granted in this Agreement.
10.3 Risk of Loss: Use of Loaned Equipment: Telect Inspection Rights.
All Telect Loaned Equipment, Telect Acquired Products, materials for the
assembly of Telect Acquired
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Products and other Telect property in T&B's custody or control shall be held at
T&B's risk and be kept insured by T&B at T&B's expense in an amount no less than
the replacement cost, with loss payable to Telect. Within 10 days of the
Effective Date, and thereafter upon Telect's reasonable request, T&B shall
promptly deliver to Telect reasonable certificates of insurance or other
evidence of such insurance naming Telect as an "additional insured" to the
extent of its interest in the assets sold under the Purchase Agreement and/or
assembled and/or purchased hereunder. T&B shall use such property solely in the
performance of its obligations hereunder. Upon the expiration or termination of
this Agreement, or at any time upon the written request of Telect, T&B shall
deliver such property to Telect. Telect shall have the right, at all reasonable
times, upon prior notice, to enter T&B's premises to inspect any and all of its
property, including the Loaned Equipment, any Telect Acquired Products
assembled, stored or in the process of being assembled, and any Telect Acquired
Product materials.
10.4 Identification of Specific Loaned Equipment: Valuation. Specific
equipment comprising the Loaned Equipment are shown in Appendix H - LOANED
EQUIPMENT DESCRIPTION.
10.5 Marking Loaned Equipment. Loaned Equipment shall be marked by T&B
"Property of Telect" and, may be revised, upgraded and otherwise improved as
determined by both parties. No changes shall be made to Loaned Equipment during
the Term except at the express instruction of Telect. The value of the Loaned
Equipment for insurance purposes shall be the amount shown in [Exhibit ___] of
the Purchase Agreement, plus the amortized portion of any improvements. T&B will
obtain insurance coverage against any loss of the Loaned Equipment in an amount
at least equal to the replacement value with Telect as named beneficiary. For
the purpose of this Agreement, the agreed value as shown in [Exhibit ___] to the
Purchase Agreement shall be considered the replacement value.
10.6 Accessions. Replacements and Improvements: Return Upon Expiration
or Termination. If upon the expiration or termination of this Agreement, or at
any time upon the written request of Telect, the Loaned Equipment is returned to
Telect, T&B agrees to transfer, for no fee to Telect, all right, title and
interest it may have in any and all accessions, replacements and improvements in
or to the Loaned Equipment added after the Effective Date.
10.7 Maintenance and Repairs to Loaned Equipment. T&B agrees, at its own
expense, to repair and maintain the Loaned Equipment, in good working order
while it is being used for the performance of T&B's obligations under this
Agreement, and technical support for repair and overhaul services related to
Loaned Equipment will be provided by T&B, at its own expense.
11. LICENSE TO ACCESS T&B'S FACILITY AND USE LOANED EQUIPMENT UPON A T&B
DEFAULT.
11.1 License for Telect and/or its Subcontractor to Access T&B's
Facility.
11.1.1 Upon the occurrence of an event of default of this
Agreement or under the Purchase Agreement which remains uncured under any
relevant cure period described therein, Telect shall have the right to access to
T&B's facility or facilities at which any of the assembly,
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storage and/or distribution services were being performed or where any of the
Loaned Equipment, Telect Acquired Products and/or work-in-process or materials
for such Telect Acquired Products are located, in order to take possession of
such Loaned Equipment, Telect Acquired Products and/or material, hereunder so
that the negative Impact of such event of default on Telect and its customers
are minimized and mitigated.
11.1.2 In furtherance of this Telect right, T&B hereby grants to
Telect an irrevocable license, coupled with an interest, to access T&B's
facilities in order to exercise the rights set forth in this Article 11.
Notwithstanding anything to the contrary in this Agreement, Telect's license
hereunder shall be transferable or sublicensed to a subcontractor retained by
Telect to perform any act or action it would be entitled to carry out or perform
in its own right hereunder. Notwithstanding the generality of the foregoing,
Telect's license rights hereunder shall specifically include the right to take
possession and control of the Loaned Equipment, oust T&B and its employees from
possession of such Loaned Equipment, to secure, inspect, inventory and relocate
any and all materials, components, work-in-process and FG Telect Acquired
Products owned by Telect, to shipment Telect Acquired Products from such T&B
facilities, use and consume electricity and other utilities, access to restrooms
by Telect and/or Telect subcontractor employees and agents, and to otherwise
obtain the full and complete benefit of the licenses granted pursuant to this
Article 11.
11.2 Breach of License Rights. T&B acknowledges and agrees that any
refusal to honor or obstruction of Telect's license rights granted hereunder
could cause Telect irreparable injury and that monetary damages may not be
adequate in the event of a default of this Article 11 by T&B, and Telect shall
be entitled to seek injunctive or other affirmative relief or to give notice of
default, or both, in the event of such breach. T&B hereby waives to the fullest
extent allowed by law any right to require or apply for a bond to be posted by
Telect in the event such injunctive or affirmative relief is sought or obtained
by Telect. In the event Telect deems it necessary or advisable to seek, and in
fact receives such injunctive or affirmative relief as a result of T&B's
threatened or actual breach of Telect's license rights hereunder and/or Telect's
ability to freely and fully exercise them, T&B shall be liable for all of
Telect's costs and expenses associated with seeking and/or obtaining any such
relief, including filing costs, attorneys' fees, expert witness fees,
interpreter or translation fees and any other cost or increased cost directly or
indirectly caused by or attributable to such breach by T&B or to Telect's effort
to obtain such relief.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement by their duly
authorized representatives.
Telect, Inc. Xxxxxx & Xxxxx Corporation
By: By:
Name: Name:
Title: Title:
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APPENDIX A
T&B DEMAND-PULL PROGRAM
T&B will provide Telect Acquired Products, as referenced below, in their most
current form. This list may be amended from time to time by Telect to delete any
Telect Acquired Product or to change the T&B Target FG Stock Levels, or the T&B
Minimum FG Stock Levels.
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T&B Minimum T&B Target FG
T&B Part No. Telect Part No. Std. Unit Cost FG Stock Levels Stock Levels
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00
XXXXXXXX X
T&B STOCKING/DROP SHIP PROGRAM
T&B will provide Telect Acquired Products, as referenced below, in their most
current form. This list of Telect Acquired Products subject to the
Stocking/Drop-Ship Program may be amended from time to time by Telect to delete
any Telect Acquired Product or to change the T&B Target FG Stock Levels.
Levels.
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T&B Target FG T&B Delivery
T&B Part No. Telect Part No. Std. Unit Cost Stock Levels Date Lead-time
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>5 days, <10 days
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APPENDIX C
T&B BUILD-TO-ORDER/DROP SHIP PROGRAM
T&B will provide Telect Acquired Products, as referenced below, in their most
current form. This list may be amended from time to time by Telect to delete any
Telect Acquired Product.
Levels.
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T&B Delivery
T&B Part No. Telect Part No. Std. Unit Cost Date Lead-time Notes
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46
EXHIBIT E
TO ASSET PURCHASE AGREEMENT ESCROW AGREEMENT
ESCROW AGREEMENT
47
ESCROW AGREEMENT
This Escrow Agreement ("Agreement"), dated March 6, 2000 (the "Closing
Date") is entered into by and among Xxxxxx & Xxxxx Corporation, a Tennessee
corporation, Xxxxxx & Belts International, Inc. a Delaware corporation
(collectively referred to herein as "Seller), Telect, Inc. ("Buyer), a
Washington corporation, and First Union National Bank, 000 Xxxxxx Xxxxxx Xxxxx,
Xxxxxxxxx, Xxxxxxxxx 00000, as escrow agent ("Escrow Agent").
The parties intending to be legally bound, hereby agree as follows:
1. ESTABLISHMENT OF ESCROW
(a) Buyer is depositing with Escrow Agent One Million, Ninety-Eight
Thousand and Fifty-One Dollars and Sixty Cents ($1,098,051.60) in immediately
available funds (as increased by any earnings thereon and as reduced by any
disbursement or losses on investments, the "Escrow Fund"). Escrow Agent
acknowledges receipt Thereof. The Escrow Fund is established as security for the
performance of Seller's obligations under the Asset Purchase Agreement dated
March 6, 2000, between the Seller and Buyer.
(b) Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard and disburse the Escrow Fund pursuant to the terms and conditions
hereof.
2. INVESTMENT OF FUNDS
Escrow Agent shall invest The Escrow Fund in the First Union Jumbo Money
Market Account, or in such other savings accounts, certificates of deposit and
money market accounts (including without limitation government and other
short-term corporate obligations) as Seller and Buyer shall mutually agree and
instruct.
3. DISPOSITION OF FUNDS; TERMINATION OF ESCROW
(a) From time to time on or before March 5, 2001 (the Release Date"),
Buyer may give notice (a "Notice") to Seller and Escrow Agent specifying in
reasonable detail the nature and dollar amount of any claim (a "Claim") for
breach of contract, including without limitation, any breach of Sellers
representations, warranties, and/or covenants, it may have under the Asset
Purchase Agreement or the Transition Period Contract Manufacturing Agreement
described in Section 5(k) of the Asset Purchase Agreement. If Seller gives
notice to Buyer and Escrow Agent disputing any Claim (a "Counter Notice") within
thirty (30) days following receipt by Escrow Agent of the Notice regarding such
Claim, such Claim shall be resolved as provided in Section 3(b). If no Counter
Notice is received by Escrow Agent within such 30-day period, then the dollar
amount of damages claimed by Buyer as set forth in its Notice shall be deemed
established for purposes of this Agreement and the Asset Purchase Agreement and,
at the end of such 30-day period, Escrow Agent shall pay to Buyer the dollar
amount claimed in the Notice from (and only to the extent of) the then existing
balance in the Escrow Fund. Escrow Agent shall not inquire into or consider
whether a Claim complies with the requirements of the Asset Purchase Agreement.
Receipt of Notice or Counter Notice by Escrow Agent shall be sufficient proof to
Escrow Agent that any other notice required under this sub-paragraph 3(a) has
likewise been sent and received.
(b) If a Counter Notice is given with respect to a claim, Escrow Agent
shall make payment with respect thereto only in accordance with (i) joint
written instructions of Buyer and
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Seller or (ii) a final non-appealable order of a court of competent
jurisdiction. Any court order shall be accompanied by a legal opinion by counsel
for the presenting party satisfactory to Escrow Agent to the effect that the
order is final and non-appealable. Escrow Agent shall act on such court order
and legal opinion without further question or liability to Escrow Agent.
(c) The balance of the Escrow Fund held by Escrow Agent which is not the
subject of a pending Notice, joint instructions, or an order, shall be delivered
promptly to Seller on the Release Date, in accordance with a written direction
jointly signed by a duly authorized representative of each of Buyer and Seller
and delivered to Escrow Agent on or after the Release Date.
4. DUTIES OF ESCROW AGENT
(a) Escrow Agent shall not be under any duty to give the Escrow Fund
held by it hereunder any greater degree of care than it gives its own similar
property and shall not be required to invest any funds except as directed by
herein.
(b) Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless Escrow Agent (and any successor Escrow Agent) from
and against any and all losses, liabilities, claims, actions, damages and
expenses, including reasonable attorneys' fees and disbursements, arising out of
and in connection with this Agreement. Without limiting The foregoing, Escrow
Agent shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in accordance with
The terms hereof, including, without limitation, any liability for any delays
(not resulting from Its gross negligence or willful misconduct) in the
investment or reinvestment of the Escrow Fund, or any loss of interest incident
to any such delays.
(c) Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the person purporting
to give receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so. Escrow
Agent may conclusively presume that the undersigned representative of any party
hereto which is an entity other than a natural person has full power and
authority to instruct Escrow Agent on behalf of that party unless written notice
to the contrary is delivered to Escrow Agent.
(d) Escrow Agent may act pursuant to the advice of counsel with respect
to any matter relating to this Agreement and shall not be liable for any action
taken or omitted by it in good faith in accordance with such advice.
(e) Escrow Agent does not have any interest in the Escrow Fund deposited
hereunder but is serving as escrow holder only and having only possession
thereof Any payments of income from this Escrow Fund shall be subject to
withholding regulations then in force with respect to United States income
taxes. The parties hereto will provide Escrow Agent with appropriate Internal
Revenue Service Forms W-9 for tax identification number certification, or
non-resident alien certifications. This Section 5(e) and Section 5(b) shall
survive notwithstanding any termination of this Agreement or the resignation of
Escrow Agent.
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(f) Escrow Agent makes no representation as to the validity, value,
genuineness or the collectability of any security or other document or
instrument held by or delivered to it.
(g) Escrow Agent shall not be called upon to advise any party as to the
wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
(h) Escrow Agent (and any successor Escrow Agent) may at any time resign
as such by delivering the Escrow Fund to any successor Escrow Agent jointly
designated by Buyer and Seller in writing, or to any court of competent
jurisdiction, whereupon Escrow agent shall be discharged of and from any and all
further obligations arising in connection with this Agreement The resignation of
Escrow Agent will take effect on the earlier of (a) the appointment of a
successor (including a court of competent jurisdiction) or (b) the day which is
thirty (30) days after the date of delivery of its written notice of resignation
to the other parties hereto. If at That time Escrow Agent has not received a
designation of a successor Escrow Agent, Escrow Agents sole responsibility after
That time shall be to retain and safeguard the Escrow Fund until receipt of a
designation of successor Escrow Agent or a joint written disposition instruction
by Buyer and Seller or a final non-appealable order of a court of competent
jurisdiction.
(i) In the event of any disagreement between Buyer and Seller resulting
in adverse claims or demands being made in connection with the Escrow Fund or In
the event that Escrow Agent is in doubt as to what action it should take
hereunder, Escrow Agent shall be entitled to retain the amount in dispute in the
Escrow Fund until Escrow Agent shall have received (i) a final non-appealable
order of a court of competent jurisdiction directing the delivery of the Escrow
Fund or (ii) a written agreement executed by Buyer and Seller directing delivery
of the Escrow Fund, in which event Escrow Agent shall disburse the Escrow Fund
in accordance with such order or agreement. My court order shall be accompanied
by a legal opinion by counsel for the presenting party satisfactory to Escrow
Agent to the effect that the order is final and non-appealable. Escrow Agent
shall act on such court order and legal opinion without further question or
liability to Escrow Agent.
(j) The parties hereto authorize Escrow Agent, for any securities held
hereunder, to use the services of any United States central securities
depository it reasonably deems appropriate, including, without limitation, the
Depositary Trust Company and the Federal Reserve Book Entry System or X. X.
Xxxxx & Co., as nominee of the Escrow Agent.
(k) The Escrow Agent shall be entitled to receive such fees as set forth
on Annex A hereto, and shall be reimbursed for all reasonable out-of-pocket
expenses incurred by the Escrow Agent in the performance of its duties
hereunder. Any such fees and reimbursements shall be paid one-half by Buyer and
one-half by Seller.
6. LIMITED RESPONSIBILITY
This Agreement expressly sets forth all the duties of Escrow Agent with
respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this Agreement against Escrow Agent. Escrow Agent
shall not be bound by the provisions of any agreement among the other parties
hereto except this Agreement.
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7. OWNERSHIP FOR TAX PURPOSES
The parties agree that, for purposes of federal and other taxes based on
income, Seller will be treated as the owner of the Escrow Fund, and that Seller
will report all income, if any, that is earned on, or derived from, the Escrow
Fund as his income, in the taxable year or years in which such income is
properly includible, and will pay any taxes attributable thereto. Escrow Agent
shall prepare 1099-Int for all interest earnings.
8. NOTICES
All notices, counter notices, consents, waivers and other communications
under this Agreement must be in writing and xxxx be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt) provided That a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service, in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
Seller: Xxxxxx & Xxxxx Corporation
0000 X&X Xxxxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
ATTN: Vice President and General
Counsel and Secretary
(000) 000-0000
Fax No.: (000) 000-0000
Copy to: Xxxxxx & Xxxxx Corporation
0000 X&X Xxxxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
ATTN: Vice-President, Operations & Administration
Fax No.: (000) 000-0000
Buyer: Telect, Inc.
X.X. Xxx 000
0000 X. Xxxxxx Xx.
Xxxxxxx Xxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxxx, CEO
Fax: 000-000-0000
with copy to: Xxxxx X. Xxxxxxx
Xxxxx Xxxxxxx Law Offices
W 717 Xxxxxxx, Suite 1200
Xxxxxxx, XX 00000
Fax No. 000-000-0000
Office No. 000-000-0000
or
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Escrow Agent: Xxxxx X. Xxxxx
First Union National Bank
Corporate Trust Operations -- 2nd Floor
000 Xxxxxx Xxx. Xxxxx
Xxxxxxxxx, XX 00000
Fax No. (000)-000-0000
9. JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of the
parties in the State or federal court sitting in Denver, Colorado, and each of
The parties consents to The jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid Therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
10. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original and all of which, when taken together,
will be deemed to constitute one and the same agreement.
11. SECTION HEADINGS
The headings of sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation.
12. WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party In
exercising any right, power or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement a complete and exclusive statement of the terms of the
agreement between the parties with respect to Its subject matter. This Agreement
may not be amended except by a written agreement executed by Buyer, Seller and
the Escrow Agent.
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14. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Washington,
without regard to conflicts of law principles.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
XXXXXX & XXXXX CORPORATION
By:
------------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: Vice-President, General Counsel & Secretary
XXXXXX & XXXXX INTERNATIONAL, INC.
By:
------------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: Vice-President, General Counsel & Secretary
TELECT, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
FIRST-UNION NATIONAL BANK
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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ANNEX A
FIRST UNION NATIONAL BANK
CORPORATE TRUST GROUP
SCHEDULE OF FEES
ESCROW AGENT SERVICES
I. ACCEPTANCE FEE $500 Payable at Closing
Initial fee for reviewing documents, setting up accounts and
administration of records.
II. ESCROW AGENT FEE $2,500 Annually in Advance
Day-to-day administration of governing documents, maintenance of
investments, communications and providing statements, and other duties
defined in the Agreement.
III. OUT-OF-POCKET EXPENSES
All out-of-pocket expenses, including attorney review, travel expenses,
postage, insurance, courier expenses and telephone, will be billed in
addition to the fees listed herein.
IV. ACTIVITY CHARGES, if applicable
Wire Transfers $25 per transfer
Check Disbursements $10 per disbursement
Claim Notice Charges will be assessed based upon
time spent processing claim notice
Automatic Cash Investment Management 35 Basis Points Annualized
(AAA rated U.S. Treasury daily money market fund) Net of Income
Counsel fees, if ever retained as a result of default or other Billed at cost
extraordinary occurrence on behalf of Escrow Agent
Our proposal is subject in all aspects to First Union's review and
acceptance of those final financing documents which set forth our
duties and responsibilities.
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EXHIBIT F
TO ASSET PURCHASE AGREEMENT
PRO FORMA ASSET VALUE SUMMARY
Inventory $ 6,646,866
Fixed Assets 283,614
Intellectual Property 4,011,000
-----------
Total Purchase Price $10,941,480
56
EXHIBIT G
TO ASSET PURCHASE AGREEMENT
XXXX OF SALE AND ASSIGNMENT
57
EXHIBIT H
TO ASSET PURCHASE AGREEMENT
ASSUMPTION AGREEMENT
58
EXHIBIT I
TO ASSET PURCHASE AGREEMENT
REQUIRED THIRD PARTY CONSENTS
None.
59
EXHIBIT J
TO ASSET PURCHASE AGREEMENT
PROMISSORY NOTE
