Exhibit 10.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
SCIENTIFIC-ATLANTA, INC.
AND
BLONDER TONGUE LABORATORIES, INC.
March 1, 1998
TABLE OF CONTENTS
BACKGROUND.................................................................. 1
ARTICLE I - SALE AND PURCHASE OF ASSETS..................................... 1
1.1 Agreement to Sell.................................. 1
1.2 Assets Retained by Seller.......................... 2
1.3 Agreement to Purchase.............................. 2
1.4 Assumption of Liabilities.......................... 3
1.5 Liabilities Retained by Seller..................... 3
1.6 Cross License to Seller............................ 4
ARTICLE II - PURCHASE PRICE ................................................ 4
2.1 Purchase Price..................................... 4
2.2 Escrow Agreement................................... 5
2.3 Tax Allocation of Purchase Price................... 5
2.4 Proration of Taxes................................. 5
2.5 Disclosures........................................ 5
2.6 Definitions........................................ 6
ARTICLE III - CLOSING....................................................... 6
3.1 Closing............................................ 6
3.2 Items to be Delivered at Closing................... 6
3.3 Third Party Consents............................... 8
3.4 Supply Agreement and Purchasing Arrangements....... 8
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER ...................... 9
4.1 Organization....................................... 9
4.2 Foreign Qualifications; Trade Names................ 9
4.3 Ability to Carry Out Agreement..................... 9
4.4 Validity of Agreement - Authority.................. 9
4.5 Permits and Licenses............................... 10
4.6 Compliance with Laws............................... 10
4.7 Liabilities and Obligations........................ 10
4.8 Title to and Condition of Certain Tangible
Physical Assets.................................... 10
4.9 Tax Returns and Taxes.............................. 11
4.10 Joint Venture Parties.............................. 11
4.11 Status of Contracts................................ 11
4.12 Notice of Changes or Events........................ 11
4.13 Insurance.......................................... 12
4.14 Litigation......................................... 12
4.15 Books and Records; Backlog......................... 12
4.16 Intellectual Property Rights....................... 12
4.17 Inventory.......................................... 13
4.18 Review of Documents................................ 13
4.19 Intellectual Property.............................. 14
4.20 Environmental Matters.............................. 15
4.21 Backlog............................................ 16
4.22 Warranty Claims; Warranty Reserves................. 16
4.23 Products Liability................................. 17
4.24 Other Information.................................. 17
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4.25 Customers.......................................... 18
4.26 Suppliers.......................................... 18
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER..................... 18
5.1 Organization....................................... 18
5.2 Ability to Carry Out Agreement..................... 18
5.3 Authority of Purchaser............................. 19
5.4 Litigation Affecting Purchaser..................... 19
5.5 Purchaser Securities............................... 19
5.6 Liabilities and Obligations........................ 19
ARTICLE VI - NATURE AND SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS...................................................... 19
6.1 Survival........................................... 19
ARTICLE VII - INDEMNIFICATION............................................... 19
7.1 Indemnification by Seller.......................... 19
7.2 Indemnification by Purchaser....................... 20
7.3 Claims for Indemnification......................... 21
7.4 Defense by the Indemnifying Party.................. 21
7.5 Payment of Indemnification Obligation.............. 22
7.6 Limitations on Indemnification..................... 22
7.7 Backlog Indemnification............................ 22
ARTICLE VIII - INSPECTION PERIOD; COVENANTS................................. 23
8.1 Purchaser's Inspection............................. 23
8.2 Walk-Away Right.................................... 23
8.3 No Solicitation.................................... 23
8.4 Taxes.............................................. 24
8.5 Relationships with Suppliers....................... 24
8.6 Discussions with Customers and Suppliers........... 24
ARTICLE IX - CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS ON THE
CLOSING DATE................................................... 24
9.1 Representations and Warranties..................... 24
9.2 No Changes......................................... 25
9.3 Closing Certificate................................ 25
9.4 Consents........................................... 25
9.5 No Injunction...................................... 25
9.6 Absence of Litigation.............................. 25
9.7 [Intentionally Left Blank]......................... 25
9.8 Supply Agreement................................... 25
9.9 Settlement Agreement............................... 25
9.10 Transition Services Agreement...................... 25
9.11 Other Conditions................................... 26
ARTICLE X - CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS ON THE
CLOSING DATE.................................................... 26
10.1 Closing Certificate................................. 26
10.2 Compliance with Obligations......................... 26
10.3 Consents............................................ 26
10.4 No Injunction....................................... 26
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10.5 Absence of Litigation.............................. 26
10.6 Board Approval..................................... 27
ARTICLE XI - ACTIONS AND CONDUCT PRIOR TO CLOSING........................... 27
11.1 HSR Act Compliance................................. 27
11.2 Conduct of Business................................ 27
11.3 Employee Interviews................................ 28
ARTICLE XII - POST CLOSING COOPERATION, TECHNICAL SUPPORT................... 28
12.1 Use of Seller's Name and Logo During Transition
Period........................................... 28
12.2 Customer Notification; Assistance.................. 29
12.3 Other Transition Support........................... 29
12.4 Financial Statements............................... 30
12.5 Dismissal of Pending Action........................ 30
ARTICLE XIII - PROPRIETARY RIGHTS, NON-DISCLOSURE AND NON-COMPETITION ...... 30
13.1 Non-Disclosure..................................... 30
13.2 Non-Competition.................................... 31
13.3 Remedies........................................... 31
13.4 Severability....................................... 31
ARTICLE XIV - RISK OF LOSS.................................................. 32
14.1 Risk of Loss....................................... 32
ARTICLE XV - BROKERS AND FINDERS............................................ 32
15.1 Finder's Fees...................................... 32
ARTICLE XVI - EXPENSES...................................................... 32
16.1 Expenses........................................... 32
ARTICLE XVII - BULK TRANSFER LAWS........................................... 32
17.1 Bulk Transfer Laws................................. 32
ARTICLE XVIII - FURTHER ASSURANCES.......................................... 32
18.1 Further Assurances................................. 32
ARTICLE XIX - PUBLICITY..................................................... 32
19.1 Publicity.......................................... 32
ARTICLE XX - NOTICES........................................................ 33
20.1 Notices............................................ 33
ARTICLE XXI - TERMINATION................................................... 34
21.1 Termination........................................ 34
21.2 Procedure and Effect of Termination................ 34
21.3 Limitation on Damages for Wrongful Failure
to Close ........................................ 34
21.4 Disputes........................................... 35
ARTICLE XXII - GENERAL...................................................... 35
22.1 Governing Law...................................... 35
22.2 Jurisdiction....................................... 35
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22.3 No Waiver.......................................... 35
22.4 Entire Agreement................................... 35
22.5 Counterparts....................................... 35
22.6 Definitions........................................ 35
22.7 Headings........................................... 35
22.8 Severability....................................... 35
22.9 Amendment and Modification......................... 35
22.10 Mail Received after Closing........................ 35
EXHIBITS:
Exhibit 1.2 Retained Assets........................................1.1(c), 1.2, 2.5, 3.2(a)
Exhibit 1.4 Assumption Agreement........................................................1.4
Exhibit 2.1(a) Warrant..............................................................2.1(a)(ii)
Exhibit 2.2 Escrow Agreement............................................................2.2
Exhibit 2.6(b) Adjustments.............................................2.6(b), 4.24(c), 8.2(d)
Exhibit 2.6(e) Products.................................................................2.6(e)
Exhibit 3.2(a)(i) Xxxx of Sale..........................................................3.2(a)(i)
Exhibit 3.2(a)(v) Reseller Agreement....................................................3.2(a)(v)
Exhibit 4.3 Knowledge......................................................2.5, 3.2(a), 4.3
Exhibit 4.8 Summary of Tangible Physical Assets Owned by the Seller ....................4.8
Exhibit 4.11 Status of Contracts........................................................4.11
Exhibit 4.12 Notice of Changes or Events................................................4.12
Exhibit 4.16 Intellectual Property Rights...............................................4.16
Exhibit 4.17 Summary of Inventory.......................................................4.17
Exhibit 4.20 Environmental Matters.........................................2.5, 3.2(a), 4.20
Exhibit 4.21 Summary of Backlog.................................................4.21, 8.2(b)
Exhibit 4.22 Warranties.................................................................4.22
Exhibit 4.24(a) Bookings........................................................4.24(a), 8.2(a)
Exhibit 4.24(b) Net Sales.......................................................4.24(b), 8.2(c)
Exhibit 4.24(c) Gross Profit.......................................2.5, 3.2(a), 4.24(c), 8.2(d)
Exhibit 4.24(d) Manufacturing Information..................................2.5, 3.2(a), 4.24(d)
Exhibit 4.24(e) Cost of Goods Sold.........................................2.5, 3.2(a), 4.24(e)
Exhibit 4.24(f) Sales, Bookings, and Ending Backlog Forecast............................4.24(f)
Exhibit 4.25 Customers..................................................................4.25
Exhibit 7.3 Certain Covenants...........................................................7.3
Exhibit 7.6(c) Other Remedies..............................................................7.6
Exhibit 8.5(a) Materials and Components - Five Years..........................2.5, 3.2(a), 8.5
Exhibit 8.5(b) Materials and Components - One Year............................2.5, 3.2(a), 8.5
Exhibit 9.8 Supply Agreement............................................................9.8
Exhibit 9.9 Settlement Agreement........................................................9.9
Exhibit 9.10 Transition Services Agreement ........................................9.10
Exhibit 11.2 Conduct of Business........................................................11.2
Exhibit 12.1 Licensed Marks..........................................2.5, 3.2(a), 4.19, 12.1
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DEFERRED DISCLOSURE EXHIBIT
Section 4.7-1 Current Financial Statements...................................2.5, 3.2(a), 4.7
Section 4.7-2 Historical Financial Statements................................2.5, 3.2(a), 4.7
Section 4.8 Listing of Tangible Physical Assets Owned by the Seller ....................4.8
Section 4.17 Inventory .................................................................4.17
Section 4.18(a) Contracts.......................................1.4(a), 1.4(b), 1.5(a), 4.18(a)
Section 4.18(b) Insurance...............................................................4.18(b)
Section 4.18(c) Individual Refundable Deposits and "Other Assets".......................4.18(c)
Section 4.18(d) Outstanding Loans or Advances by the Seller.............................4.18(d)
Section 4.18(f) Intellectual Property..................................1.6, 4.16, 4.18(f), 4.19
Section 4.18(g) Licenses and Permits....................................................4.18(g)
Section 4.18(h) Governmental Claims.....................................................4.18(h)
Section 4.18(i) Employees...............................................................4.18(i)
Section 4.20 Environmental Matters......................................................4.20
Section 4.21 Backlog by Product Family; Orders Comprising Backlog.......................4.21
Section 4.22 Warranty Claims............................................................4.22
Section 4.24(a) Bookings by Product Family.................................2.5, 3.2(a), 4.24(a)
Section 4.24(b) Sales With Customer Information.........................................4.24(b)
Section 4.24(e) Cost of Goods Sold by Product Family....................................4.24(e)
Section 4.24(f) Forecasting by Product Family...........................................4.24(f)
Section 4.25 Additional Customer Information............................................4.25
Section 4.26 Supplier Information..........................................2.5, 3.2(a), 4.26
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INDEX of DEFINITIONS:
Defined in
Term Section
---- ----------
Additional Documentation....................................................8.1
Addressable Transmitters.................................................1.1(c)
Agreement..............................................................Recitals
Assets...................................................................1.1(c)
Assumed Liabilities.........................................................1.4
Assumed Warranty Claims..................................................1.4(b)
Average Price........................................................2.1(b)(ii)
Backlog....................................................................4.15
Backlog Indemnification.....................................................7.7
Basket Amount............................................................7.6(a)
Bookings................................................................4.24(a)
BT Products.................................................................7.7
Bulk Transfer Laws.........................................................17.1
Business...............................................................Recitals
Catastrophic Failures....................................................1.4(b)
CERCLA..................................................................4.20(a)
Closing.....................................................................3.1
Closing Average Price................................................2.1(b)(ii)
Closing Date................................................................3.1
Contracts..................................................................4.11
Current Financial Statements ............................................1.1(b)
Deferred Disclosure Exhibit.................................................2.5
Deposit...............................................................2.1(a)(i)
Determination Date.........................................................4.15
Equipment................................................................1.1(b)
Escrow Agent................................................................2.2
Escrow Agreement............................................................2.2
Escrow Fund...........................................................2.1(a)(i)
Financial Statements........................................................4.7
Form 8-K...................................................................12.4
GAAP.....................................................................1.1(b)
Grant Date..........................................................2.1(b)(iii)
Gross Profit.............................................................2.6(a)
HCS Regulations.........................................................4.20(e)
HSR Act.....................................................................4.4
HSR Filing..................................................................4.4
Historical Cost of Goods Sold............................................2.6(b)
Historical Financial Statements.............................................4.7
Historical Gross Margin..................................................2.6(c)
Indemnification Claim Notice................................................7.3
Indemnified Party...........................................................7.3
Indemnifying Party..........................................................7.3
Initial Vesting Date.................................................2.1(a)(ii)
Inspection Period...........................................................8.1
Intangibles..............................................................1.1(c)
Intellectual Property...................................................4.19(a)
Interdiction...........................................................Recitals
Inventory................................................................1.1(a)
Knowledge...................................................................4.3
Licensed Marks..........................................................12.1(a)
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Licensed Patents............................................................1.6
Losses......................................................................7.1
MSDS....................................................................4.20(a)
Material Adverse Effect..................................................4.2(a)
Measurement Period......................................................4.24(a)
Net Sales................................................................2.6(d)
Notices....................................................................20.1
Pending Action.............................................................4.14
Permits.....................................................................4.5
Person.....................................................................22.6
Product..................................................................2.6(e)
Products.................................................................2.6(e)
Prospective Cost of Goods Sold...........................................2.6(f)
Prospective Gross Margin.................................................2.6(g)
Purchase Price..............................................................2.1
Purchaser..............................................................Recitals
Purchaser Common Stock...............................................2.1(a)(ii)
Purchaser Securities........................................................2.1
Q & A.......................................................................8.6
RCRA....................................................................4.20(a)
Retained Assets.............................................................1.2
Retained Liabilities........................................................1.5
SEC.........................................................................2.1
Securities Act..............................................................2.1
Seller.................................................................Recitals
Settlement Agreement........................................................9.9
Shipment Shortfall..........................................................7.7
Signing Average Price................................................2.1(b)(ii)
Supply Agreement............................................................9.8
Tangible Physical Assets....................................................4.8
Taxes.......................................................................4.9
Threshold Amount.........................................................7.6(a)
Training Period.........................................................12.3(a)
Transition Period.......................................................12.1(a)
Transition Services Agreement..............................................9.10
Warrant..............................................................2.1(a)(ii)
Warranty Claims..........................................................1.4(b)
Warranty Reserves........................................................1.4(b)
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, together with all of the Exhibits to be
delivered pursuant hereto (the "Agreement"), is made this 1st day of March,
1998, by and between SCIENTIFIC-ATLANTA, INC., a Georgia corporation ("Seller")
and BLONDER TONGUE LABORATORIES, INC., a Delaware corporation ("Purchaser").
BACKGROUND
Each of Purchaser and Seller is engaged in the business of manufacturing
and distributing a comprehensive line of television system electronics,
including without limitation, an Interdiction (defined hereinafter) product
line. For purposes of this Agreement, "Interdiction" means any
off-subscriber-premises signal protection and/or disconnect system which, under
head-end computer control, (i) accepts a multichannel line-up of television
channels and (ii) uses jamming oscillators or traps to provide television
service wherein authorized channels are supplied to the subscriber in the clear
(unscrambled) and unauthorized channels are supplied in an unviewable condition.
Purchaser desires to purchase and Seller desires to sell substantially all of
the assets of Seller's Interdiction product line business, including all of
Seller's rights in and to the Products (defined below) and all associated
goodwill (collectively the "Business"), and assume certain specific liabilities
thereof, as more fully set forth in this Agreement.
NOW, THEREFORE, intending to be legally bound, and in consideration of the
premises, the mutual covenants and agreements, and the representations and
warranties contained herein, the parties hereto agree as follows:
ARTICLE I - SALE AND PURCHASE OF ASSETS
1.1 Agreement to Sell. Subject to the terms and conditions contained in
this Agreement and in reliance upon the representations, warranties and
covenants contained herein, at the Closing (as defined in Section 3.1 hereof)
and except as otherwise specifically provided in Section 1.2 below, Seller will
sell, assign, transfer and deliver to Purchaser, free and clear of all liens,
pledges, security interests, charges, claims, restrictions and encumbrances of
any nature whatsoever, all of Seller's right, title and interest in and to all
of the Business' assets, properties and rights of every kind and description,
tangible and intangible, wherever situated, including without limitation:
(a) all of the inventory of raw materials, work-in-process, parts,
scrap, wrapping, supply and packaging items and finished goods used or to be
used exclusively in or held for sale by, the Business (the "Inventory");
(b) all other tangible assets of the Business reflected on Seller's
unaudited, internal books, records and financial statements relating to the
Business as of December 26, 1997 and for the six (6) month period then ended
(the "Current Financial Statements") (each as prepared in accordance with
generally accepted accounting principles applied on a consistent basis ("GAAP"))
with only such changes therein as shall have occurred in the regular and
ordinary course of the Business, consistent with past practice since such date,
including without limitation all machinery, equipment (including computer
equipment and software), furniture and fixtures (collectively, the "Equipment");
(c) all intangible property or rights of Seller relating to the
Business, accrued or contingent (the "Intangibles"), including without
limitation:
(i) all rights of Seller under all agreements, contracts,
commitments, leases, plans, bids, quotations and proposals to the extent
relating to the manufacture, sale or use of Products or the purchase, lease or
license of assets relating to the Business as of the Closing Date and all
licenses, permits, authorizations, instruments, books of account, computer
programs and software and licenses thereto, all machine readable data files and
hard copies relating thereto used primarily in the Business as of the Closing
Date and other documents to which it is a party or by which it has rights for or
on behalf of the Business;
(ii) all intellectual property rights and the goodwill associated
therewith, used exclusively or primarily in the Business, including, without
limitation, the Licensed Patents (defined below) (together with all rights to
pursue damages from third parties for infringement which occur prior to Closing)
and pending patent applications, trademarks, trade dress, service marks, trade
names and copyrights (excluding the intellectual property listed on Exhibit 1.2,
Item 8, and the trademarks which are to be licensed to the Business pursuant to
Section 12.1 hereof), and all prototypes (including production and development
stage prototypes), proprietary methods, processes and information, know-how,
inventions, schematic drawings, designs, parts lists, mechanical drawings, test
procedures, assembly procedures and test equipment lists, formulae, research and
development data, computer software (excluding (A) Seller's "System Manager"
hardware and software and Seller's Reseller Agreement covering ETI's "City
Manager Systems" software and (B) Seller's addressable transmitters, identified
as Seller's part no. 464205 ("Addressable Transmitters"), as to which
Purchaser's rights are identified with specificity in Sections 3.2(a)(v) and (x)
hereto, respectively), and all enhancements and improvements to any of the
foregoing, relating to Products or Interdiction products under development by
the Business;
(iii) the irrevocable perpetual, royalty free, worldwide right and
license to use, copy, create derivative works based upon and use the trade
secrets and know-how embodied in such other intellectual property of Seller,
which is not used primarily in, but is essential for, the conduct of the
Business as conducted on the Closing Date and the manufacture, support or sale
of Products;
(iv) all of the books, records, (including without limitation,
customer lists, supplier lists, vendor and customer files), manuals and related
documents which are used primarily in the Business, except for the litigation
files, affirmative action plans and employee records of Seller, other than the
employee records of the employees of the Business intended to be hired by
Purchaser, if any;
(v) all foreign, federal, state and local governmental and
quasi-governmental franchises, licenses, permits, consents, approvals, waivers,
and other authorizations of the Business, including, but not limited to, export
and import licenses;
(vi) all goodwill, prepaid items (other than income tax
prepayments), deposits, refunds (other than income tax refunds) and claims, all
outstanding purchase orders authorized and/or approved by Purchaser, and any
other general intangibles used in connection with the Business.
The Inventory, Equipment and Intangibles and other assets being sold hereunder,
exclusive of the Retained Assets as defined below, are herein sometimes
collectively referred to as the "Assets."
1.2 Assets Retained by Seller. Notwithstanding the foregoing, the Assets do
not include those assets listed on Exhibit 1.2 attached hereto (the "Retained
Assets"). Seller shall retain all of its right, title and interest in the
Retained Assets.
1.3 Agreement to Purchase. At the Closing hereunder, Purchaser will
purchase the Assets from Seller upon and subject to the terms and conditions of
this Agreement and in reliance on the representations and warranties of Seller
contained herein. In exchange therefor, at the Closing, Purchaser will pay the
Purchase Price, as defined in Section 2.1 hereof, and in addition, Purchaser
will assume and agree to pay, discharge or
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perform, as appropriate, certain liabilities and obligations of Seller to the
extent and as provided in Section 1.4 of this Agreement. Except as specifically
provided in Section 1.4 hereof, Purchaser shall not assume or be responsible for
any liabilities or obligations of the Business or Seller whatsoever.
1.4 Assumption of Liabilities. At the Closing hereunder and except as
otherwise specifically provided in this Section 1.4 or in Section 1.5 hereof,
Purchaser shall assume and agree to pay, discharge or perform, as appropriate,
the following liabilities and obligations of the Business (the "Assumed
Liabilities") and in furtherance thereof on the Closing Date the parties shall
execute an Assumption Agreement in the form of Exhibit 1.4 attached hereto:
(a) all liabilities and obligations of the Business for future
performance in respect of the agreements, contracts, commitments and leases
which are part of the Assets and which will be set forth and described with
particularity in Section 4.18(a) of the Deferred Disclosure Exhibit (defined in
Section 2.5), but only to the extent such liabilities are not retained by Seller
pursuant to Section 1.5 of this Agreement.
(b) all obligations, liabilities, costs and expenses related to claims
asserted after Closing in accordance with express and implied warranties and
guaranties set forth in the agreements or contracts which will be set forth on
Section 4.18(a) of the Deferred Disclosure Exhibit, related to the Products,
including, but as to implied warranties limited to, implied warranties of
merchantability or fitness for a particular purpose (collectively the "Warranty
Claims"), but only up to the amount reserved by the Seller on the books of the
Business at the time of the Closing to cover the Warranty Claims (the "Warranty
Reserves") and excluding Catastrophic Failures. Such Warranty Claims, to the
extent assumed by Purchaser pursuant hereto, are hereinafter referred to as the
"Assumed Warranty Claims." For purposes of this Agreement, "Catastrophic
Failures" means any situation where defects traceable to Seller's design or
manufacturing process which occur during a period commencing one (1) year and
ending three (3) years after the original sale of such Products by Seller cause
significant performance-degrading defects in Products comprising (i) 8% or more
against any one customer order or (ii) 8% or more (on an annualized basis) of
the total aggregate of any one Product delivered to all customers.
1.5 Liabilities Retained by Seller. Each of the following liabilities and
obligations of Seller and/or the Business (the "Retained Liabilities"), whether
known, unknown, absolute or contingent, are not being assumed by Purchaser and
shall be paid, satisfied and discharged by Seller on or after the Closing as
Seller's sole and absolute responsibility and Purchaser shall have no obligation
under this Agreement, by operation of law or otherwise to assume, pay or
discharge any of the same;
(a) all liabilities and obligations arising out of (i) oral or written
contracts not disclosed to Purchaser by Seller in Section 4.18(a) of the
Deferred Disclosure Exhibit, or which are otherwise identified in such Deferred
Disclosure Exhibit as not to be assumed by Purchaser as determined by Purchaser
during the Inspection Period and thereupon noted on such Exhibit by Purchaser
prior to Closing, or which are not validly assigned to Purchaser, or (ii)
Seller's failure to perform any agreement, contract, commitment or lease in
accordance with its terms, prior to the Closing, unless Purchaser is advised of
and consents to such non-performance;
(b) all liabilities and obligations in respect of any federal, state or
local income, payroll or other tax payable with respect to Seller or the
Business for any period through the Closing Date or incident to or arising as a
consequence of the negotiation or consummation by Seller of this Agreement and
the transactions contemplated hereby;
(c) all liabilities and obligations arising out of any and all
activities undertaken by Seller subsequent to Closing, no matter when arising or
asserted;
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(d) all obligations, liabilities, costs and expenses in respect of or
arising in connection with personal injury or property damage claims pertaining
to products manufactured and sold by, or operation of, the Business prior to
Closing, whether based on theories of tort, contract, strict liability or any
other legal theory;
(e) all liabilities and obligations in respect of any federal, state or
local law or regulation, or any right of any employee or third party, arising
out of the generation, storage, use, transportation, discharge, disposal or
cleanup of any hazardous waste or hazardous substance;
(f) all of Seller's accounts payable, accrued expenses and other
current liabilities (including any and all reserves classified as liabilities
and accrued on the books, records or Financial Statements (defined in Section
4.7, below) for the Business, such as the reserves for property taxes and
workers compensation claims, except the Warranty Reserves) with respect to the
Business as of the Closing Date;
(g) all obligations, liabilities, costs and expenses in respect of or
arising in connection with (i) Catastrophic Failures, (ii) claims for
incidental, consequential or other damages arising from or relating to Products
sold by Seller, and (iii) Warranty Claims, other than Assumed Warranty Claims;
and
(h) all other liabilities of the Business and Seller, other than those
specifically included as part of the Assumed Liabilities pursuant to Section
1.4.
1.6 Cross License to Seller. Purchaser hereby grants to Seller an
irrevocable, world-wide, paid-up, royalty free, non-assignable, non-exclusive
license (but only under the Licensed Patents and without the right to sublicense
to any Person, other than to its controlled subsidiaries), outside the field of
Interdiction, to make, have made, use, sell, have sold, import, or otherwise
dispose of any product which is covered by or uses in any way the Licensed
Patents. As used in this Agreement, the term "Licensed Patents" means those
issued and pending patents and patent applications which comprise a part of the
Intellectual Property and are used exclusively or primarily in the Business as
set forth in Part (i) of Section 4.18(f) of the Deferred Disclosure Exhibit.
ARTICLE II - PURCHASE PRICE
2.1 Purchase Price. Subject to adjustment in accordance with the terms of
this Article II, and to the other terms and conditions of this Agreement, and in
reliance upon the representations, warranties, undertakings and agreements of
Seller contained herein, Purchaser shall pay a purchase price for the Assets
("Purchase Price") as follows:
(a) upon the signing of this Agreement,
(i) Two Million Dollars ($2,000,000) in immediately available funds
as a deposit ("Deposit") into an escrow fund (the "Escrow Fund") to the Escrow
Agent (defined below); and
(ii) A warrant in the form attached hereto as Exhibit 2.1(a)
("Warrant") for up to 150,000 shares of Purchaser's common stock, $.001 par
value ("Purchaser Common Stock"). If the Closing of the transactions
contemplated hereby does not occur for any reason, the Warrant and all rights
granted thereunder shall thereupon expire as provided therein.
(b) and on the Closing Date:
(i) Seventeen Million Dollars ($17,000,000) (less the amount of any
interest earned on the Deposit through the Closing and comprising a part of the
Escrow Fund) in immediately available funds; and
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(ii) Such number of shares of Purchaser Common Stock, as has an
aggregate fair market value of One Million Dollars ($1,000,000) (based upon the
average of the high and low selling prices of such stock for each of the three
(3) consecutive full trading days in which such shares are traded on the
American Stock Exchange as reported in The Wall Street Journal (the "Average
Price") immediately preceding the date hereof (the "Signing Average Price"));
provided, however, that if the Average Price for the three (3) consecutive full
trading days immediately preceding the Closing (the "Closing Average Price")
represents a decrease of ten percent (10%) or more per share from the Signing
Average Price, the number of shares of Purchaser Common Stock to be issued
hereunder shall be the quotient of One Million Dollars ($1,000,000) divided by
the Closing Average Price. If the Closing Average Price represents a decrease of
less than ten percent (10%) per share or an increase from the Signing Average
Price, the number of shares of Purchaser Common Stock to be issued hereunder
shall be as originally calculated using the Signing Average Price.
Within ninety (90) days after the Closing, Purchaser shall file a
registration statement with the Securities and Exchange Commission (the "SEC")
for the registration of the Warrant, the shares issuable upon exercise of the
Warrant and the Purchaser Common Stock issued to Seller pursuant to Section
2.1(b)(ii) hereof (collectively the "Purchaser Securities") in accordance with
the United States Securities Act of 1933, as amended (the "Securities Act").
2.2 Escrow Agreement. Purchaser, Seller and CoreStates Bank N.A., as escrow
agent (the "Escrow Agent") will execute contemporaneously herewith an agreement
(the "Escrow Agreement") substantially in the form of Exhibit 2.2 attached
hereto, in accordance with which Purchaser shall deliver to the Escrow Agent the
Deposit upon the execution of this Agreement. Upon the Closing, Seller shall be
entitled to receive the Deposit; provided, however, that if this Agreement is
terminated at any time prior to the Closing, Article XXI hereof shall govern the
disposition of the Deposit and all interest earned thereon.
2.3 Tax Allocation of Purchase Price. The sum of the Purchase Price to be
allocated to the restrictions and covenants set forth in Article XIII hereunder
and the balance of the Purchase Price to be allocated in accordance with the
provisions of Section 1060 of the Internal Revenue Code of 1986, as amended,
shall be determined by Purchaser, provided that Purchaser shall provide Seller
with the opportunity to comment within ten (10) business days on the proposed
allocation prior to filing. Neither Seller nor Purchaser will take any position
for income tax purposes that is inconsistent with such allocation. Each of
Seller and Purchaser agrees to complete IRS Form 8594 consistently with such
allocation and to furnish each other with a copy of such form prepared in draft
form within fifteen (15) business days prior to the filing due date of such
form.
2.4 Proration of Taxes. Notwithstanding anything herein to the contrary,
any personal property taxes and any other taxes imposed on the Assets that
relate to a tax period beginning before the Closing Date and ending after the
Closing Date shall be apportioned as of the Closing Date such that Seller shall
be liable for (and shall reimburse Purchaser to the extent that Purchaser shall
have paid) that portion of such taxes relating to, or arising in respect to,
periods on or prior to the Closing Date and Purchaser shall be liable for (and
shall reimburse Seller to the extent Seller shall have paid) that portion of
such taxes relating to, or arising in respect to, periods after the Closing
Date. Should any amounts to be prorated not have been finally determined on the
Closing Date, a mutually satisfactory estimate of such amounts shall be used as
a basis for settlement at Closing and the amount finally determined shall be
prorated at the Closing Date and appropriate settlement made as soon as
practicable after such final determination.
2.5 Disclosures. The disclosure Exhibits attached hereto, with full or
partial disclosure, all as indicated herein shall have been delivered prior to
or upon the execution of this Agreement, and a deferred disclosure Exhibit (the
"Deferred Disclosure Exhibit") shall be delivered within five (5) business days
after the date hereof. All disclosure Exhibits, including the Exhibits attached
hereto and the Deferred Disclosure Exhibits are incorporated herein and made a
part hereof. All the disclosure Exhibits, including the Exhibits attached hereto
and the Deferred Disclosure Exhibit, except Exhibits 1.2, 4.3, 4.20, 4.24(c),
4.24(d), 4.24(e),
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8.5(a), 8.5(b), 12.1 and Sections 4.7-1, 4.7-2, 4.24(a) and 4.26 of the Deferred
Disclosure Exhibit, shall be updated by Seller at the Closing.
2.6 Definitions. The following meanings shall apply to the following
respective terms wherever the same are used in this Agreement:
(a) "Gross Profit" determined for any specific period of time, shall be
equal to Net Sales less cost of goods sold, as determined in accordance with
GAAP.
(b) "Historical Cost of Goods Sold" shall mean actual cost of goods
sold (determined in accordance with GAAP), after adjustments for certain
one-time nonrecurring expenditures identified on Exhibit 2.6(b) hereto, on a
product by product basis, incurred by Seller during the two fiscal quarters of
the Business ending September 26, and December 26, 1997.
(c) "Historical Gross Margin" shall mean the difference between Net
Sales of Products during the two fiscal quarters of the Business ending
September 26, and December 26, 1997 and Historical Cost of Goods Sold, expressed
as a percentage of such Net Sales.
(d) "Net Sales" shall mean gross sales revenues derived from sales of
Products, less shipping costs, insurance costs, sales returns and allowances,
trade and volume discounts, sales taxes and other items, all as determined in
accordance with GAAP.
(e) "Products" shall mean Interdiction products, or any of their
predecessors, of the Business which were within the list of products held out or
made available for sale to customers by Seller, and "Product" shall mean any one
of such Products, a true and complete schedule and description of all of which
is set forth on Exhibit 2.6(e) hereof.
(f) "Prospective Cost of Goods Sold" shall mean those amounts computed
by costing out the Backlog as of the date of this Agreement, using per unit cost
from the Historical Cost of Goods Sold.
(g) "Prospective Gross Margin" shall mean the difference between
Backlog as of the date of this Agreement and Prospective Cost of Goods Sold,
expressed as a percentage of such Backlog.
ARTICLE III - CLOSING
3.1 Closing. The closing of the sale and purchase of the Assets and
assumption of specific liabilities (the "Closing") shall take place at the
offices of Stradley, Ronon, Xxxxxxx & Xxxxx, LLP in Philadelphia, Pennsylvania
on March 26, 1998 at 10:00 a.m. (local time), or at such other date, time and
place thereafter occurring within ten (10) business days following expiration of
the applicable waiting period following the HSR Filing (defined below) as may be
mutually agreed upon by the parties hereto. (The date and time of Closing are
hereinafter referred to as the "Closing Date.") The Closing shall be deemed to
take place effective as of 12:01 a.m. local time on the date of Closing,
regardless of the time when the Closing actually occurs on the Closing Date.
3.2 Items to be Delivered at Closing. At the Closing and subject to the
terms and conditions herein contained:
(a) Seller will deliver or otherwise make available to Purchaser the
following:
(i) a xxxx of sale in the form of Exhibit 3.2(a)(i) attached hereto
and other good and sufficient instruments and documents of conveyance and
transfer, in form and substance reasonably
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satisfactory to Purchaser and its counsel, as shall be necessary and effective
to convey, transfer and assign to, and vest in, Purchaser all of Seller's right,
title and interest in and to the Assets, including without limitation (A) good,
valid and marketable title in and to all of the Assets free and clear of all
liens, charges, and encumbrances of every nature, (B) subject to Section 3.3
herein, all of Seller's rights under all agreements, contracts, commitments,
leases, plans, bids, quotations, proposals, licenses, permits, authorizations,
instruments and other documents being acquired or assumed hereunder, to which
Seller is a party or by which it has rights on the Closing Date and (C) transfer
of the Backlog at Closing;
(ii) a certificate of Seller's Vice President and General Manager,
Analog Video Systems dated the Closing Date, certifying that Seller has
performed and complied with all agreements and conditions required by this
Agreement to be performed and complied with by Seller in all material respects
prior to or at the Closing;
(iii) [Intentionally Left Blank];
(iv) an incumbency certificate for Seller dated the Closing Date,
including specimen signatures of the officers of Seller executing this Agreement
and the other certificates and agreements delivered by Seller at the Closing;
(v) all agreements, contracts, commitments, leases, plans, bids,
quotations and proposals to the extent relating to the manufacture, sale or use
of Products or the purchase, lease or license of assets relating to the Business
as of the Closing Date; all licenses, permits, authorizations, instruments,
books of account, computer programs and software and licenses thereto (including
without limitation, the ability to resell Seller's "System Manager" software
pursuant to a Reseller Agreement in the form attached hereto as Exhibit
3.2(a)(v) and all protocols, interface specifications and other information of
the Business which was provided to ETI by Seller in connection with the
development and any modifications of the "City Manager Systems" software); all
machine readable data files and hard copies relating thereto to the extent used
in or relating to the Business as of the Closing Date; and all of the books,
records, (including without limitation, customer lists, supplier lists, vendor
and customer files), all copies of details on sales and purchases general
ledgers detail, sales registers and journals and associated data and purchase
registers and journals and associated data, manuals and related documents which
are used primarily in the Business, except for the litigation files, affirmative
action plans and employee records of Seller, other than the employee records of
the employees of the Business intended to be hired by Purchaser, if any; and
simultaneously with such delivery, all such steps will be taken as may be
required to put the Purchaser in actual possession and operating control of the
Assets; provided, however, that during the term of the Supply Agreement,
Purchaser shall keep such Assets at Seller's premises in Atlanta, Georgia,
Tempe, Arizona or Juarez, Mexico as are necessary to enable Seller to fulfill
its obligations under the Supply Agreement. As to the foregoing where available,
Seller will make available the original executed documentation to Purchaser
where the same relates to the Assets or obligations assumed by Purchaser
hereunder and in connection with those items set forth above where materials are
being provided to Purchaser solely as reference materials, such as certain
correspondence of Seller, photocopies instead of originals will be made
available.
(vi) a copy of all of the resolutions adopted by Seller's board of
directors or any authorized committee thereof authorizing the transactions
contemplated by this Agreement, certified on the Closing Date to be complete and
correct by the Secretary or Assistant Secretary of Seller;
(vii) good standing certificate for Seller dated not more than
thirty (30) days prior to the Closing Date from the Secretaries of State of the
States of Georgia and Arizona;
(viii) a closing statement reflecting the proration of taxes as
provided in Section 2.5;
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(ix) a copy of all disclosure Exhibits hereto and the Deferred
Disclosure Exhibit, each updated through the Closing Date except for Exhibits
1.2, 4.3, 4.20, 4.24(c), 4.24(d), 4.24(e), 8.5(a), 8.5(b), 12.1 and Sections
4.7-1, 4.7-2, 4.24(a) and 4.26 of the Deferred Disclosure Exhibit, and certified
on the Closing Date to be true and correct in all material respects by the
Seller's Vice President and General Manager, Analog Video Systems;
(x) the designs and drawings, manufacture and assembly procedures,
parts lists and other relevant materials and Intellectual Property in order to
enable Purchaser to make or to have made Addressable Transmitters following the
Closing; and
(xi) all other documents, instruments and other things required to
be delivered pursuant to this Agreement including, without limitation, all of
the items required by Article IX hereof.
(b) The Purchaser will deliver to Seller the following:
(i) the Assumption Agreement and other documents as shall be
necessary and effective to evidence Purchaser's assumption of the Assumed
Liabilities;
(ii) a certificate of the President of Purchaser, dated the Closing
Date, certifying that Purchaser has performed and complied with all agreements
and conditions required by this Agreement to be performed and complied with by
Purchaser in all material respects prior to or at the Closing;
(iii) an incumbency certificate for Purchaser dated the Closing
Date, including specimen signatures;
(iv) a copy of all of the resolutions adopted by Purchaser's board
of directors relating to the transactions contemplated by this Agreement,
certified on the Closing Date to be complete and correct by the Secretary of
Purchaser;
(v) good standing certificate for Purchaser dated not more than
thirty (30) days prior to the Closing Date from the Secretary of State of the
State of Delaware.
3.3 Third Party Consents. To the extent that Seller's rights under any
agreement, contract, commitment, lease, license, permit, authorization or other
Asset to be assigned to Purchaser hereunder may not be assigned without the
consent of another person which has not been obtained, this Agreement shall not
constitute an agreement to assign the same if an attempted assignment would
constitute a breach thereof or be unlawful, and Seller shall use all reasonable
efforts to obtain any such required consent as promptly as possible after the
Closing. If any such consent shall not be obtained or if any attempted
assignment would be ineffective or would impair Purchaser's rights under the
instrument or document in question so that Purchaser would not in effect acquire
the benefit of all such rights, Seller shall act as Purchaser's agent in order
to obtain for it the benefits thereunder and shall cooperate, to the maximum
extent permitted by law and the instrument or document, with Purchaser in any
other reasonable arrangement designed to provide such benefits exclusively to
Purchaser.
3.4 Supply Agreement and Purchasing Arrangements. Contemporaneously with
the Closing, Seller and Purchaser shall enter into the Supply Agreement (as
defined in Section 9.8 hereof) pursuant to which (i) Purchaser shall lease to
Seller certain manufacturing equipment purchased by Purchaser hereunder, (ii)
Purchaser shall consign to Seller certain raw materials, work-in-process and
other inventory purchased by Purchaser hereunder, and (iii) at the request of
Purchaser, Seller shall continue for a limited time to manufacture for and
supply to and/or procure for Purchaser, Products or sub-assemblies thereof in
order for Purchaser to fulfill the estimated sales orders of the Business for
the transition period following the Closing, and
8
such products shall be produced on a purchase order basis at a price per unit,
all as more fully set forth in the Supply Agreement.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
4.1 Organization. Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Georgia. Seller has
full corporate power and authority to own its assets and to carry on its
business as and where such business is now conducted.
4.2 Foreign Qualifications; Trade Names.
(a) Seller is duly qualified or licensed to do business and is in good
standing in all jurisdictions in the United States in which the nature of its
business or the character of its properties or assets requires such
qualification or license (including Georgia and Arizona), except where the
failure to be so qualified is not having and could not be reasonably expected to
have a Material Adverse Effect. As used in this Agreement, "Material Adverse
Effect" means any change in, or effect on, the Business, as currently conducted
by Seller that is or is reasonably likely to be materially adverse to the Assets
or the results of operations or financial condition of the Business, taken as a
whole.
(b) Seller has not operated the Business under any fictitious names or
trade names for the past five (5) years.
4.3 Ability to Carry Out Agreement. The consummation of the transactions
contemplated hereby, including, but not limited to, the execution, delivery and
performance of this Agreement and all other documents collateral hereto or
thereto, contemplated hereby or thereby, or required to effect the transactions
contemplated hereby and thereby, does not and will not: (a) constitute a
violation of or default under, conflict with or result in a breach of (i) the
articles of incorporation or bylaws of Seller, (ii) any terms of any mortgage,
indenture, lease, agreement, license, permit, trust or instrument to which the
Business and/or Seller are or may be bound or constitute a default thereunder
(either immediately or upon notice, lapse of time or both), which is not having
or could not reasonably be expected to have a Material Adverse Effect, (iii) any
judgment, order, award, decree, or (iv) to the best knowledge of Seller, any
federal, state or local statute, law, ordinance, rule or regulation, except for
violations or defaults which are not having or could not reasonably be expected
to have a Material Adverse Effect; (b) result in the creation or imposition of
any lien, security interest, encumbrance, pledge, charge, claim or liability of
any nature whatsoever, or give to any person any interest or right in any of the
assets of Seller pertaining to the Business; or (c) accelerate the maturity of,
or otherwise modify, any debt, liability or obligation of Seller pertaining to
the Business. Knowledge as used in the phrase "to the best knowledge of Seller",
or similar references to the knowledge of Seller, means the actual knowledge of
those persons listed in Exhibit 4.3 attached hereto after inquiry by such
persons reasonable under the circumstances.
4.4 Validity of Agreement - Authority. The execution, delivery and
performance of this Agreement and all other documents required to effect the
transactions contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized and
approved by all necessary action on the part of Seller. This Agreement and any
other document or instrument contemplated by this Agreement, after execution and
delivery by Seller to Purchaser, will constitute valid and binding obligations
of Seller, enforceable in accordance with their terms. Except for the filing
(the "HSR Filing") required by the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder ("HSR
Act"), no consent of or filing with or notice to any foreign, federal, state or
local governmental agency, authority, regulatory body or court is required with
respect to Seller in connection with the execution, delivery and performance of
this Agreement or any other agreement collateral
9
hereto or contemplated hereby. Neither the execution and delivery of this
Agreement by Seller nor the consummation of the transactions contemplated hereby
will require the consent of any other Person.
4.5 Permits and Licenses. Seller holds all foreign, federal, state and
local governmental and quasi-governmental franchises, licenses, permits,
consents, approvals, waivers and other authorizations, including but not limited
to export and import licenses (collectively the "Permits"), which are necessary
for the operation of the Business, except for Permits, the lack of which would
not reasonably be expected to have a Material Adverse Effect. To the best
knowledge of Seller, Seller is not in default, nor has it received any written
notice of any claim of default or notice of termination with respect to any of
the Permits. The transactions contemplated by this Agreement shall not result in
the cancellation or termination of any of the Permits.
4.6 Compliance with Laws. The operation of the Business conforms to and is
not in violation, nor has Seller received notice of any violation, of any
restrictive covenant, statute, law (federal, state or local), or any other
ordinance, code or regulation, the failure of compliance with which is having or
could have a Material Adverse Effect.
4.7 Liabilities and Obligations. On the Closing Date no debts, liabilities
or obligations of the Business of any nature whatsoever, whether liquidated,
unliquidated, accrued, fixed, absolute, contingent, ascertained, unascertained
or otherwise shall be imposed on Purchaser by virtue of Seller's transfer of the
Business to Purchaser except for the Assumed Liabilities. The Current Financial
Statements, copies of which will be set forth as Section 4.7-1 of the Deferred
Disclosure Exhibit, are consistent with and confirm the financial information
previously provided by Seller to Purchaser. Set forth as Section 4.7-2 of the
Deferred Disclosure Exhibit will be unaudited internal statements of earnings of
the Business for each of the past three (3) years ended June 30, 1995, June 30,
1996 and June 30, 1997, and net assets of the Business being transferred as of
June 30, 1995, June 30, 1996 and June 30, 1997, for each of the past three (3)
fiscal years of the Business (together with details thereof as of December 26,
1997) (the "Historical Financial Statements"). Collectively, the Current
Financial Statements and the Historical Financial Statements are referred to
herein as the "Financial Statements". The Financial Statements were prepared in
accordance with the books and records of Seller and in accordance with GAAP, and
present the financial condition and results of operations of the Business at the
dates and for the period indicated in a manner which fairly and accurately
reflects the financial condition and status of the Business which actually
existed for the date and period indicated.
4.8 Title to and Condition of Certain Tangible Physical Assets. Seller has
delivered to Purchaser a summary of all business, personal property and tangible
physical assets of the Business being transferred pursuant to this Agreement
which it owns or purports to own including, without limitation, the assets set
forth on the Current Financial Statements and the Assets (collectively, the
"Tangible Physical Assets"), broken down by classification and location and
providing the gross and net values thereof, which summary is attached hereto as
Exhibit 4.8. Within five (5) business days after the date hereof, Seller shall
deliver to Purchaser, a true, correct and complete list of each item of the
Tangible Physical Assets as Section 4.8 of the Deferred Disclosure Exhibit,
which Section shall be updated through the Closing Date, setting forth on a tax
basis and on a GAAP basis the cost and accumulated depreciation, and setting
forth date acquired and location for each such item (including the street
addresses for any of the vendors of the Business which hold any Tangible
Physical Assets). Seller has, shall have at the Closing Date, and shall transfer
to Purchaser good, valid and marketable title to all the Tangible Physical
Assets, wherever located, free and clear of all title defects, liens,
encumbrances, mortgages, leases, pledges, liabilities, options, security
interests, conditional sale and other title retention agreements, assessments,
covenants, restrictions, reservations and other burdens or charges of every
nature. All such Tangible Physical Assets are and shall on the Closing Date be,
in good operating condition and repair, reasonable wear and tear excepted, and
adequate and sufficient for the operation of the Business and there are no
material defects in such Tangible Physical Assets. Seller has substantially
complied with all applicable preventive and remedial maintenance with respect to
the Equipment. During the
10
past twelve (12) months there has not been any significant interruption of the
operations of the Business due to inadequate maintenance of such Tangible
Physical Assets.
4.9 Tax Returns and Taxes. Seller has duly and timely filed with the
appropriate governmental agencies (foreign, federal, state and local) all tax
and other returns and reports required to be filed in respect of the Business
and the Assets, all of which have been accurately prepared. All federal, state,
local and foreign income, franchise, sales, use, occupation, property,
accumulated earnings, personal holding company, excise payroll withholding or
other taxes, assessments, interest, penalties, deficiencies, fees, rents and
other governmental charges and impositions (collectively "Taxes") due, owing and
payable, or which may be due, owing and payable, arising out of all operations
of Seller as of the date hereof, have been and through the Closing Date shall be
fully paid or duly provided for by Seller in Seller's official books of account
as of all of such dates. Adequate provisions have been and will through the
Closing Date be made by Seller in its official books of account for Taxes not
required to be paid prior to the respective due dates therefor. Seller has not
received notice from any foreign, federal, state or local governmental agency or
authority of any deficiency or other adjustment which has not been satisfied.
4.10 Joint Venture Parties. Seller does not have any joint venture
affiliates relating to the Business or any of the Assets.
4.11 Status of Contracts. Except as set forth in Exhibit 4.11 attached
hereto, which Exhibit shall be updated through the Closing Date, to the best
knowledge of Seller, Seller is not in default and Seller has not received any
notice of cancellation or termination, under any written or oral contract,
agreement, or commitment (collectively "Contracts") which are material and are
required to be provided to Purchaser for review during the Inspection Period (as
defined in Section 8.1 hereof). All of the foregoing Contracts, agreements and
commitments which are material are, and to the best knowledge will remain
through the Closing Date, in accordance with their terms, in full force and
effect and shall be made available for review and copying by Purchaser during
the Inspection Period.
4.12 Notice of Changes or Events. From the date hereof through the Closing
Date, Seller shall notify Purchaser immediately of the occurrence of any of the
following with respect to the Business or the Assets, none of which have
occurred during the period from December 26, 1997 through the date hereof,
except as otherwise provided in Exhibit 4.12 attached hereto, which Exhibit
shall be updated through the Closing Date:
(a) any material adverse change in the financial condition, assets,
liabilities, business, prospects or operation of Seller other than changes in
the ordinary course of business;
(b) any material damage, destruction or loss, as a result of fire,
storm casualty, other acts of God or theft of a substantial amount of property,
whether or not covered by insurance, adversely affecting Seller or any of its
assets;
(c) any disposition of or encumbrance or agreement to dispose of,
encumber, lease, pledge or grant a security interest in, any material asset of
Seller other than sales of inventory in the ordinary course of business;
(d) any transaction relating to Seller entered into by it other than in
the ordinary course of business;
(e) any material change in the accounting methods or practices of
Seller or any material change in the depreciation or amortization policies or
rates adopted by Seller;
11
(f) any liability or obligation (whether absolute or contingent)
incurred by Seller except liabilities incurred, and obligations under agreements
entered into, in the ordinary course of Seller's business;
(g) any capital expenditure or commitment for addition to property,
plant or equipment of Seller other than capital expenditures in an amount less
than $10,000 arising in the ordinary course of business;
(h) any action prohibited by Article XI hereof; or
(i) any agreement or commitment by Seller to do or take any of the
actions referred to in paragraphs (a) through (h) of this Subsection 4.12.
4.13 Insurance. From the date hereof through the Closing Date, Seller shall
continuously maintain insurance policies fully covering the Assets and the
Business (including, without limitation, public liability, general liability,
products liability, comprehensive, automobile, property damage, theft and other
coverage). Seller has not received any notice of cancellation or termination in
respect of any insurance policy currently owned or held by Seller pertaining to
the Assets or the Business and is not in default thereunder. Seller has not
received notice that any insurer under any such policy is denying liability with
respect to a claim thereunder.
4.14 Litigation. Other than that certain case captioned Scientific-Atlanta,
Inc. x. Xxxxxxx Tongue Laboratories, Inc., Civil Action File Number
1:96-CV-1943-ODE, which was pending in the United States District Court for the
Northern District of Georgia, Atlanta Division (the "Pending Action"), there is
no outstanding order, writ, injunction, fine, citation, penalty, decree or
unsatisfied judgment of any court, governmental agency or arbitration tribunal
against Seller pertaining to the Business nor is there any suit, action,
arbitration, charge, governmental investigation, claim, litigation, or
proceeding pending, or overtly threatened in writing, against Seller pertaining
to the Business by any employee, creditor, customer, claimant or other Person.
4.15 Books and Records; Backlog. The books and records of the Business
including without limitation the information therein pertaining to the Backlog
(defined below), fairly and accurately reflect in all material respects the
transactions to which Seller is and was a party or by which its properties were
affected and such books and records have been properly kept and maintained and
will continue to be so kept and maintained through the Closing Date. On the
Closing Date such books and records will be correct and complete and will fairly
and accurately present Seller's operations of the Business in all material
respects. "Backlog" determined as of any specific date (a "Determination Date"),
shall mean the aggregate amount (at net invoice price) of orders from
credit-worthy customers, issued or accepted by the purchasers thereof, for the
purchase of Products from Seller at fixed prices with fixed delivery dates
scheduled to occur not more than three hundred sixty-five (365) days after a
Determination Date.
4.16 Intellectual Property Rights. Except as disclosed on Exhibit 4.16
attached hereto, which Exhibit shall be updated through the Closing Date, to the
best knowledge of Seller, (i) none of the Products manufactured, distributed or
sold by Seller, or processes, equipment or technology used by Seller in the
Business, or the trademarks, trade dress, trade names, labels or other marks or
copyrights used by Seller in the Business and transferred hereunder, infringe
the patent, proprietary rights, trademark, trade name, other xxxx or copyright
of any other Person, or require the payment of any royalty, license fee, or
other charge or fee of any kind to any Person, and Seller has not received any
notice of adverse claim by any third party with respect thereto, (ii) Seller has
license agreements in force to the extent necessary to permit its full use of
all of the Intellectual Property (as defined in Section 4.19(a) hereof) used by
it in its operations in accordance with present and planned practices; and (iii)
Seller owns or has, and after the Closing Date Purchaser will own or have, the
right to use pursuant to the licenses which will be disclosed on Section 4.18(f)
of the Deferred Disclosure Exhibit all Intellectual Property used in the
Business.
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4.17 Inventory. Seller has delivered to Purchaser a true and correct
inventory summary as of December 26, 1997, broken down by categories of raw
materials, work-in-process and finished goods, by location (including all
warehouses or other facilities where Inventory is stored and the street
addresses of such facilities) and providing the reserves relating thereto all of
which is attached hereto as Exhibit 4.17. Within five (5) business days after
the date hereof, Seller will deliver to Purchaser, set forth as Section 4.17 of
the Deferred Disclosure Exhibit, which Section shall be updated through the
Closing Date, a true and correct list of all of the Inventory items broken down
by categories of raw materials, work-in-process and finished goods, setting
forth with particularity the location of same (including all warehouses or other
facilities where Inventory is stored), and the book value of each item on a GAAP
basis. The Inventory of raw materials, work in-process and finished goods of the
Business are and will on the Closing Date and on the termination date of the
Supply Agreement be, in good condition, conform in all material respects with
Seller's applicable specifications and warranties, are not obsolete, are usable
or saleable in the ordinary course of business and, if saleable, are saleable at
values not less than the book value amounts thereof; all work in-process and
finished goods in the Inventory have been produced in compliance with Seller's
applicable quality control procedures. The value of all items of obsolete
materials and of materials of below standard quality has been written down to
net realizable value or adequate reserves have been provided therefor. The
values at which the Inventory are carried are in accordance with GAAP
consistently applied. The amount and mix of items in the Inventory of supplies,
raw materials, work in-process and finished goods is, and will be at the Closing
Date, consistent with Seller's historical materials utilization and sales
practices. Seller is not under any obligation or liability with respect to
accepting returns of items of inventory in the possession of its customers other
than in the ordinary course of the Business consistent with past practice.
4.18 Review of Documents. Within five (5) business days after the date
hereof, Seller shall make available a true, correct and complete copy to
Purchaser for Purchaser's review and copying (including Purchaser's attorneys,
accountants, and appraisers) each Section of the Deferred Disclosure Exhibit
referred to below with respect to the Business and the Assets (all of which
Sections shall be updated through the Closing Date):
(a) (i) Presently outstanding written or oral material Contracts of the
Business involving future obligations on the part of Seller which individually
exceed $1,000 (provided, that the individual Contracts involving future
obligations of less than $1,000 which are not scheduled thereon, in the
aggregate do not exceed $10,000), including without limitation such of the
foregoing as comprises the Backlog, segregated and identified as such on Section
4.18(a) of the Deferred Disclosure Exhibit; (ii) written and oral leases; (iii)
licenses; (iv) franchises; and (v) dealership, service, agency, guarantee,
suretyship and other agreements, a schedule of all of which will be set forth on
Section 4.18(a) of the Deferred Disclosure Exhibit. Section 4.18(a) of the
Deferred Disclosure Exhibit also will specify which of the above-described
agreements, licenses and franchises require consents to assignment and which
require novations.
(b) (i) A summary of policies of primary general liability, automobile
and workers' compensation insurance presently in force covering Seller's Assets,
and public and product liability and operations of the Business, specifying with
respect to each such policy, the name of the insurer, type of coverage, term of
policy and limits of liability and (ii) all outstanding insurance claims
pertaining to the Business by Seller for damage to or loss of property or income
or against Seller which have been referred to insurers or which Seller believes
to be covered by commercial insurance, a schedule of all of which claims will be
set forth on Section 4.18(b) of the Deferred Disclosure Exhibit.
(c) Schedule identifying all individual refundable deposits, security
deposits under leases, prepaid expenses, deferred charges and "other assets" as
of December 26, 1997, a schedule of all of which will be set forth on Section
4.18(c) of the Deferred Disclosure Exhibit.
13
(d) All loans or advances made by Seller to any Person for or on behalf
of the Business, setting forth the name of such Person, their position with or
relationship to Seller, the amount of such loan or advance, the date of the loan
and the terms for repayment, except (i) normal travel advances or other
reasonable expense advances to an officer or employee of Seller, or (ii)
pursuant to normal business dealings with the customers of the Business, a
schedule of all of which will be set forth on Section 4.18(d) of the Deferred
Disclosure Exhibit.
(e) [Intentionally Left Blank]
(f) (i) All Licensed Patents held by Seller and all reissues,
divisions, continuations, continuations in part and extensions thereof and all
pending patent applications by Seller, including for each such patent the serial
or patent number, country, filing and expiration date and title; (ii) all
registered trademarks, trade dress and service marks of Seller and pending
registrations by Seller of trademarks, trade dress and service marks to be sold
and transferred to Purchaser hereunder, including for each such trademark, trade
dress or service xxxx, the registration number, country, registration, renewal
and expiration dates, xxxx and class; (iii) registered copyrights of Seller and
applications by Seller for registration of copyrights, including the
registration number, country and filing and expiration date of each such
copyright; (iv) all trade names and common law marks of Seller to be sold and
transferred to Purchaser hereunder, including a statement of and evidence
supporting the date of first use and length of use of such names and marks and
the jurisdictions of such use; and (v) all trademark licenses, trade dress
licenses, service xxxx licenses, copyright licenses, royalty agreements, patent
licenses, assignments, grants and Contracts with employees or others relating in
whole or in part to disclosure, assignment, registering or patenting of any
trademarks, trade dress, service marks, copyrights, inventions, discoveries,
improvements, processes, formulae, trade secrets or other know-how of Seller, a
schedule of all of which will be set forth on Section 4.18(f) of the Deferred
Disclosure Exhibit.
(g) All Permits (as defined in Section 4.5 herein) which are necessary
for the operation of Seller's Business, a true and correct schedule of which
will be set forth on Section 4.18(g) of the Deferred Disclosure Exhibit.
(h) All notices served upon or threatened to be served upon Seller from
any governmental agency or authority claiming that Seller, its assets,
properties, leaseholds, inventory, equipment or the operation of its business
are in violation of any material restrictive covenant, statute, law (federal,
state or local), ordinance, code or regulation or asserting any liability of or
claiming any expense to be paid by Seller on account of or arising out of any
such material restrictive covenant, statute, law, ordinance, code or regulation,
a schedule of all of which will be set forth on Section 4.18(h) of the Deferred
Disclosure Exhibit.
(i) (i) Employment, managerial, advisory or consulting agreements; (ii)
confidentiality or other agreements protecting proprietary processes, formulae
or information (including without limitation any works-for-hire or inventions
agreements and Seller's form Employee Invention Assignment and Non-Disclosure
Agreement together with a list of those employees of the Business who have
entered into and delivered such agreement to Seller); (iii) all other Contracts,
obligations or liabilities between Seller and any employee; and (iv) a numerical
breakdown of all employees in the Business, by job classification and
responsibilities, indicating as well the facility at which such employees are
employed, a schedule of all of which will be set forth on Section 4.18(i) of the
Deferred Disclosure Exhibit.
4.19 Intellectual Property.
(a) Seller owns all right, title and interest in the patents,
trademarks, trade dress, service marks, copyrights, trade names, licenses,
assignments, grants and Contracts which are set forth in Exhibit 12.1 hereto and
will be set forth on Section 4.18(f) of the Deferred Disclosure Exhibit and all
other intellectual property of the Business, including without limitation,
prototypes (including production and development stage
14
prototypes), proprietary methods, processes and information, know-how,
inventions, schematic drawings, designs, parts lists, mechanical drawings, test
procedures, assembly procedures and test equipment lists, formulae, research and
development data, computer software, and all enhancements and improvements to
any of the foregoing, relating to products that are currently made, have been
made or are under development by the Business (including exclusive rights to use
and license the same) (the "Intellectual Property") free and clear of any
encumbrances;
(b) Seller has not granted any other party rights with respect to the
Intellectual Property;
(c) Seller has not engaged in behavior currently defined by published
decisions of the Court of Appeals for the Federal Circuit to constitute
inequitable conduct in connection with obtaining any of the Licensed Patents;
(d) to the best knowledge of Seller, the patents, trademarks, trade
dress, service marks and copyrights which will be set forth in Section 4.18(f)
of the Deferred Disclosure Exhibit are not invalid;
(e) the trademark registrations, trade dress registrations, service
xxxx registrations, copyright registrations and patents set forth in Exhibit
12.1 hereto and which will be set forth in Section 4.18(f) of the Deferred
Disclosure Exhibit have been duly issued and have not been canceled, abandoned
or otherwise terminated;
(f) the trademark applications, trade dress applications, service xxxx
applications, copyright applications and patent applications set forth in
Exhibit 12.1 hereto and which will be set forth in Section 4.18(f) of the
Deferred Disclosure Exhibit have been duly filed;
(g) Seller is not in default under any of the foregoing licenses,
assignments, grants and Contracts, and, to the best knowledge of Seller, no
other party is in default thereunder; and
(h) All rights of Seller in each item of Intellectual Property are
transferrable to Purchaser as herein contemplated. As a result of the
transactions contemplated hereby, upon the Closing, Purchaser shall own or
possess adequate and enforceable licenses, sublicenses or other rights to use,
without payment of any royalties or other fees, all the Intellectual Property of
the Business.
4.20 Environmental Matters. With respect to the Business or the Assets, and
except as disclosed on Exhibit 4.20 attached hereto:
(a) To the best knowledge of Seller, Seller has had no on-site spills,
leaks or releases of "Hazardous Wastes", as defined in the Resource Conservation
and Recovery Act, as amended ("RCRA"), 42 U.S.C. ss.6901, et seq., or "Hazardous
Substances", as defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), 42 U.S.C.
ss.9601, et seq. in reportable quantities as listed at 40 C.F.R. ss.302.4.
Seller shall also include in Section 4.20 of the Deferred Disclosure Exhibit a
list of raw materials, chemicals, and products it maintains and shall make
available for Purchaser's inspection Materials Safety Data Sheets ("MSDS") for
these substances which disclose the components or ingredients of the substances.
(b) There is no material pending or to the best knowledge of Seller,
material threatened (in writing) proceeding, investigation or inquiry, against
Seller, by any governmental authority or third party arising under any
environmental law, rule or regulation relating to the Business or the Assets.
(c) To the best knowledge of Seller, Seller has not operated or
maintained at any of the premises where the Business is presently or has been
conducted any treatment, storage or disposal facilities for
15
Hazardous Wastes. For the purpose of this agreement, Hazardous Wastes shall be
those wastes listed or identified by characteristic at 40 C.F.R. part 261.
(d) Seller is in compliance and has been in compliance for the twelve
(12) months prior to Closing, with all material environmental laws, rules and
regulations with respect to the Business and the Assets.
(e) Seller represents that the premises where the Business is presently
or has been conducted have been maintained in a condition such that such
premises are in compliance in all material respects with applicable Federal or
state environmental, health, fire and safety laws or regulations, including the
Occupational Safety and Health Administration Hazard Communication regulations,
29 C.F.R. ss.1910.1200 ("HCS Regulations"). In connection with the HCS
Regulations, Seller represents the following in connection with the Business:
(i) MSDS have been compiled and maintained for all hazardous
chemicals (as defined in the HCS Regulations) used in Seller's operations at any
of the premises where the Business is presently or has been conducted, and said
MSDS are maintained in compliance with HCS Regulations in all material respects;
(ii) MSDS have been prepared, as required, for hazardous chemicals
which it sells to customers and have been supplied to customers as required by
HCS Regulations;
(iii) MSDS prepared by Seller are true, correct, and complete in
all material respects, and that a copy of each such MSDS has been provided to
Purchaser;
(iv) employees have been properly trained and provided information
concerning possible exposure to hazardous chemicals in the work area, pursuant
to a training and information program established by Seller;
(v) containers of hazardous chemicals used in or leaving the work
place have been properly labelled with an "appropriate hazard warning" (as such
phrase is defined in the HCS Regulations); and
(vi) a written hazard communications program summarizing Seller's
plan for compliance with HCS Regulations was prepared and a copy of said program
shall be provided to Purchaser during the Inspection Period.
4.21 Backlog. Seller has delivered to Purchaser a true and correct summary
of the Backlog as of the last day of each of the last four (4) fiscal quarters
of the Business, all of which is attached hereto as Exhibit 4.21. The price and
mix of Products comprising the Backlog as of the date of this Agreement will not
be materially different from the price and mix comprising the Backlog as of the
last day of each of the last two (2) fiscal quarters of the Business, ending
September 26, and December 26, 1997. The Prospective Gross Margin will not be
materially less than the Historical Gross Margin. Within five (5) business days
after the date hereof, Seller shall deliver to Purchaser a true and correct
listing of the Backlog as of the last day of each of the last four (4) fiscal
quarters of the Business, broken down by Product family (e.g., 4 port modules, 8
port modules, 750 MHz and other MHz) and by quarter, and copies of the
outstanding orders from customers of the Business for the sale of Products of
the Seller which are open as of December 26, 1997, all of which shall be set
forth on Section 4.21 of the Deferred Disclosure Exhibit and shall be updated on
the Closing Date.
4.22 Warranty Claims; Warranty Reserves. Exhibit 4.22 contains a copy of
Seller's standard product warranty for the Products of the Business issued by
Seller during the past three (3) years. Within five (5) business days after the
date hereof, Seller will provide a true and correct summary, set forth as
Section 4.22
16
of the Deferred Disclosure Exhibit, which Section shall be updated through the
Closing Date, of Seller's Warranty Claims loss experience for the last three (3)
years and the dispositions thereof, together with a schedule identifying all
material deviations from Seller's standard warranty and the identity of the
affected customers. The Warranty Reserves for the Warranty Claims now pending or
threatened have been adequately reserved in accordance with GAAP and are
sufficient to cover such claims, and fairly and accurately reflect Seller's
historical loss experience in connection with such claims. To the best knowledge
of Seller, Seller has not experienced a material increase in its Warranty Claims
since the introduction of the 750 MHz Product.
4.23 Products Liability. Seller has not received any notice of any
outstanding present or future action, suit, proceeding, hearing, investigation,
complaint, claim or demand against Seller giving rise to any liability, arising
out of any injury to person or property of its employees or any third parties
suffered as a result of the manufacture, sale, lease or delivery of any Product.
4.24 Other Information. Seller has delivered to Purchaser a true, correct
and complete list of each of the following items of other information:
(a) the Bookings (defined below) for each of the last four (4) fiscal
quarters of the Business, which is attached hereto as Exhibit 4.24(a).
"Bookings" determined for any specific period of time (a "Measurement Period"),
shall mean the aggregate amount (at net invoice price) of orders from
credit-worthy customers, issued or accepted by purchasers thereof and delivered
to Seller during the Measurement Period, for the purchase of Products from
Seller at fixed prices with fixed delivery dates scheduled to occur not more
than one year after the date of the order. Within five (5) days after the date
hereof, Seller shall provide the Bookings for each of the last four (4) fiscal
quarters of the Business, broken down by Product family (e.g., 4 port modules, 8
port modules, 750 MHz and other MHz) and by quarter, in Section 4.24(a) of the
Deferred Disclosure Exhibit.
(b) Net Sales of the Business, for each of the last four (4) fiscal
quarters of the Business, broken down by Product family (e.g., 4 port modules, 8
port modules, 750 MHz and other MHz), which is attached hereto as Exhibit
4.24(b). The names, addresses and identities of customers may be omitted from
this Exhibit delivered prior to the execution of this Agreement; however, within
five (5) business days after the date hereof, Seller shall provide full and
complete information of the identity of the customers omitted from Exhibit
4.24(b) in Section 4.24(b) of the Deferred Disclosure Exhibit. Section 4.24(b)
of the Deferred Disclosure Exhibit shall be updated through the Closing Date
with full and complete information.
(c) Gross Profit, after adjustments for certain one-time nonrecurring
expenditures identified on Exhibit 2.6(b) hereto, for each of the last four (4)
fiscal quarters of the Business, which is attached hereto as Exhibit 4.24(c).
(d) manufacturing information as to (i) the manufacturing area of the
Business measured by square footage broken down by engineering, quality control
and testing, manufacturing, and warehouse, and (ii) the manufacturing personnel,
setting forth the number, job classification and the facility at which such
employees are employed, a schedule of all of which is attached hereto as Exhibit
4.24(d).
(e) a summary of cost of goods sold, breaking out from such calculation
each of the direct costs of raw materials and labor costs, expressed in dollars,
for the six (6) month period ended December 26, 1997, a schedule of all of which
is attached hereto as Exhibit 4.24(e). Within five (5) days after the date
hereof, Seller shall provide in Section 4.24(e) of the Deferred Disclosure
Exhibit a summary of cost of goods sold, by Product family (e.g., 4 port
modules, 8 port modules, 750 MHz and other MHz), breaking out the direct costs
of raw materials and labor costs, each expressed in dollars per product and the
variances associated with the Interdiction product line.
17
(f) a sales, Bookings and ending Backlog forecast for the twelve (12)
month period following December 26, 1997, which is attached hereto as Exhibit
4.24(f). Within five (5) days after the date hereof, Seller shall provide in
Section 4.24(f) of the Deferred Disclosure Exhibit a sales forecast, broken down
by Product family (e.g., 4 port modules, 8 port modules, 750 MHz and other MHz)
for the twelve (12) month period following December 26, 1997. Section 4.24(f) of
the Deferred Disclosure Exhibit shall be updated for the most recent practicable
date prior to the Closing Date with full and complete information.
4.25 Customers. Listed in Exhibit 4.25 attached hereto are the customers of
the Business (whose names, addresses and identities may be omitted from this
Exhibit delivered prior to the execution of this Agreement), sorted from highest
to lowest by and setting forth Net Sales of Products of the Business broken down
by fiscal quarter for the last four (4) fiscal quarters. Within five (5)
business days after the date hereof, Seller shall provide full and complete
information in Section 4.25 of the Deferred Disclosure Exhibit on the identity
of the customers omitted from Exhibit 4.25, customer information similar to that
provided in Exhibit 4.25 for the interim period from December 26, 1997 through
the date hereof, the average selling price of the Products purchased by each
such customer and a summary of all requests open as of the date hereof for
material returns, rework and upgrades as well as the disposition of all of such
requests. Exhibit 4.25 and Section 4.25 of the Deferred Disclosure Exhibit shall
be updated through the Closing Date with full and complete information.
4.26 Suppliers. Within five (5) business days of the date hereof, Seller
shall list in Section 4.26 of the Deferred Disclosure Exhibit all of the
material suppliers of raw materials, supplies, inventory and other goods of the
Business sorted from highest to lowest according to the amount each such
supplier has invoiced the Seller, and identifying with respect to each such
supplier the products purchased, the terms of the purchase, gross prices and
prices per item paid to such suppliers, broken down by fiscal quarter for the
last four (4) fiscal quarters and for the interim period from December 27, 1996
through the date hereof. Except as disclosed in Section 4.26 of the Deferred
Disclosure Exhibit, the Seller has not received any notice and has no reason to
believe that any such supplier will not sell raw materials, supplies,
merchandise and other goods to the Seller or the Purchaser at any time after the
Closing Date on terms and conditions similar to those imposed on current sales
to the Business.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
5.1 Organization. Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Purchaser
has full corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby upon the terms and conditions
herein provided.
5.2 Ability to Carry Out Agreement. The consummation of the transactions
contemplated hereby, including, but not limited to, the execution, delivery and
performance of this Agreement and all other documents collateral hereto or
thereto, contemplated hereby or thereby, or required to effect the transactions
contemplated hereby and thereby, will not as of the Closing: (a) constitute a
violation of or default under, or result in a breach of (i) the Articles of
Incorporation and Bylaws of the Purchaser, (ii) any terms of any mortgage,
indenture, lease, agreement, license, permit, trust or instrument to which the
Purchaser is or may be bound or constitute a default thereunder (either
immediately or upon notice, lapse of time or both) and which would have a
material adverse effect on Purchaser's business, (iii) any judgment, order,
award, decree, or (iv) to the knowledge of Purchaser, any federal, state or
local statute, law, ordinance, rule or regulation, except for violations or
defaults which are not having or could not reasonably be expected to have a
material adverse effect on Purchaser's business; (b) result in the creation or
imposition of any lien, security interest, encumbrance, pledge, charge, claim or
liability of any nature whatsoever, or give to any person any interest or right
in any of the assets of the Purchaser, except as contemplated by this Agreement
and except for security interests and other
18
right in favor of Purchaser's lenders; or (c) accelerate the maturity of, or
otherwise modify, any debt, liability or obligation of the Purchaser.
5.3 Authority of Purchaser. The execution, delivery and performance of this
Agreement and all other documents required to effect the transactions
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized and approved by all
necessary action on the part of the Purchaser and its shareholders, including,
without limitation, the approval of the Board of Directors of the Purchaser.
This Agreement and any other document or instrument contemplated by this
Agreement, after execution and delivery by the Purchaser, will constitute valid
and binding obligations of the Purchaser, enforceable in accordance with their
terms. Except for the HSR Filing, no consent of or filing with or notice to any
foreign, federal, state or local governmental or quasi-governmental agency,
authority, regulatory body or court is required with respect to the Purchaser
and its shareholders in connection with the execution, delivery and performance
of this Agreement or any other agreement collateral hereto or contemplated
hereby.
5.4 Litigation Affecting Purchaser. Except for the Pending Action, there is
no claim, action, proceeding or investigation pending, or to the best knowledge
of Purchaser, threatened in writing, nor is there outstanding any writ, order,
decree or injunction that (a) calls into question Purchaser's authority or right
to enter into this Agreement and consummate the transactions contemplated hereby
or (b) would otherwise prevent or delay the transactions contemplated by this
Agreement.
5.5 Purchaser Securities. All of the shares of Purchaser Common Stock to be
issued pursuant to Section 2.1(b)(ii) hereof and the shares of Purchaser Common
Stock issuable upon exercise of the Warrant and payment of the exercise price
set forth therein shall be validly issued, fully paid and non-assessable at the
time of their issuance. Upon the effective date of a registration statement
filed with the SEC for the registration of the Purchaser Securities, the
Purchaser Securities shall be freely transferrable by Seller in accordance with
the provisions of the Securities Act and Purchaser shall take all actions
necessary or advisable (including without limitation to make available
information) under the Securities Act or the Securities Exchange Act of 1934 to
ensure Seller may transfer such securities freely and without restriction.
5.6 Liabilities and Obligations. From the date of this Agreement until the
Closing Date, Purchaser shall not incur any debts, liabilities or obligations of
the Business of any nature whatsoever, whether liquidated, unliquidated,
accrued, fixed, absolute, contingent, ascertained, unascertained or otherwise.
ARTICLE VI - NATURE AND SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS
6.1 Survival. The covenants as contained in this Agreement shall survive
the Closing Date as specified in Section 7.3 hereof. All representations and
warranties contained in this Agreement shall survive as follows: (i) Sections
4.1, 4.2, 4.4, 4.5, 4.10, 4.13, 5.1 and 5.3 shall survive for a period of one
(1) year following the Closing Date; (ii) Sections 4.3, 4.6, 4.7, 4.8, 4.11,
4.12, 4.14, 4.15, 4.17, 4.20, 4.21, 4.22, 4.23, 4.24, 4.25, 4.26, 4.27, 5.2 and
5.4 shall survive for a period of eighteen (18) months following the Closing
Date; and (iii) Sections 4.9, 4.16, 4.19, 5.5 and 5.6 shall survive for a period
of two (2) years following the Closing Date.
ARTICLE VII - INDEMNIFICATION
7.1 Indemnification by Seller. Seller hereby indemnifies and agrees to
defend and hold harmless Purchaser, from and against all claims, damages,
losses, liabilities, costs and expenses actually suffered or incurred by
Purchaser (including, without limitation, settlement costs and any legal,
accounting or other expenses for investigating or defending any actions or
threatened actions) (collectively, the "Losses") offset by (i) any insurance
proceeds actually received (notwithstanding Purchaser's responsibility to use
all reasonable efforts to pursue insurance recovery) or any other proceeds
received from a third-party by the Indemnified Party
19
(defined below) as a result of such Losses, and (ii) any reduction in tax
liability and refunds realized against taxes due for the then-current year by
the Indemnified Party as a result of any such Losses (but such reductions and
refunds may be offset by any tax detriment resulting from the indemnification
provided hereunder) as a result of each and all of the following:
(a) any misrepresentation or breach of any representation or warranty
by Seller in this Agreement;
(b) any breach of any covenant, agreement or obligation of Seller
contained in this Agreement (including any disclosure Exhibits or the Deferred
Disclosure Exhibit), the Escrow Agreement, the Xxxx of Sale, the Supply
Agreement, the Reseller Agreement, or the Transition Services Agreement;
(c) any misrepresentation contained in any statement, certificate or
schedule furnished by Seller pursuant to this Agreement (including any
disclosure Exhibits or the Deferred Disclosure Exhibit), the Escrow Agreement,
the Xxxx of Sale, the Supply Agreement, the Reseller Agreement or the Transition
Services Agreement;
(d) all liabilities of Seller and/or the Business not expressly assumed
by Purchaser, including without limitation the Retained Liabilities;
(e) all liabilities for the conduct of Seller's business or other
actions of Seller after the Closing Date;
(f) non-compliance by the parties with Article 6 - Bulk Transfers of
the Uniform Commercial Code; and
(g) any Backlog Indemnification (defined in Section 7.7) as
contemplated by Section 7.7 hereof.
7.2 Indemnification by Purchaser. Purchaser hereby indemnifies and agrees
to defend and hold harmless Seller from and against all Losses actually suffered
or incurred by Seller offset by (i) any insurance proceeds actually received or
any other proceeds received from a third-party by the Indemnified Party (defined
below) as a result of such Losses, and (ii) any reduction in tax liability and
refunds realized against taxes due for the then-current year by the Indemnified
Party as a result of any such Losses (but such reductions and refunds may be
offset by any tax detriment resulting from the indemnification provided
hereunder), as a result of each and all of the following:
(a) any misrepresentation or breach of any representation or warranty
made by Purchaser in this Agreement;
(b) any breach of any covenant, agreement or obligation of Purchaser
contained in this Agreement (including any disclosure Exhibits or the Deferred
Disclosure Exhibit), the Escrow Agreement, the Warrant, the Assumption
Agreement, the Supply Agreement, the Reseller Agreement or the Transition
Services Agreement;
(c) any misrepresentation contained in any statement, certificate or
schedule furnished by Purchaser pursuant to this Agreement (including any
disclosure Exhibits or the Deferred Disclosure Exhibit), the Escrow Agreement,
the Warrant, the Assumption Agreement, the Supply Agreement, the Reseller
Agreement or the Transition Services Agreement;
(d) the Assumed Liabilities; and
20
(e) liabilities of Purchaser for the conduct of its business or other
actions after Closing or for Purchaser's hiring, interviewing or employment
practices, policies or decisions regarding any employee of the Business whether
before or after the Closing Date;
7.3 Claims for Indemnification. Whenever any claim shall arise for
indemnification under this Article 7, Seller or the Purchaser, as the case may
be, seeking indemnification (the "Indemnified Party"), shall notify in writing
the party from whom indemnification is sought (the "Indemnifying Party") of the
claim and, when known, the facts constituting the basis for such claim (an
"Indemnification Claim Notice"). In the event of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the Indemnification Claim Notice shall
specify, if known, the amount or an estimate of the amount of the liability
arising therefrom. The Indemnified Party shall not settle or compromise any
claim by a third party for which it is entitled to indemnification hereunder
without the prior written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld, provided, however, that if suit shall have been
instituted against the Indemnified Party and the Indemnifying Party shall not
have taken control of such suit after notification thereof as provided in
Section 7.4 of this Agreement, the Indemnified Party shall have the right to
settle or compromise such claim upon giving reasonable and timely notice to the
Indemnifying Party, as provided in Section 7.4. In connection with any claim for
indemnification hereunder, in order to be effective, such Indemnification Claim
Notice must be given (i) in the cases of claims arising under Sections 7.1(a)
and 7.2(a), within the survival period for each of such representations and
warranties as set forth in Section 6.1 hereof; (ii) in the case of claims
arising under Sections 7.1(b), 7.1(c), 7.1(g), 7.2(b) and 7.2(c), within two (2)
years after the Closing Date (or such later date which is (x) not more than
sixty (60) days following expiration of the period for performance of the
covenants or obligations specified on Exhibit 7.3 hereto or (y) not more than
four (4) years after the Closing Date for any claims arising from covenants or
obligations which are not set forth on Exhibit 7.3 hereto but as to which the
period of performance exceeds two (2) years; and (iii) in the case of claims
arising under Section 7.1(d), 7.1(e), 7.1(f), 7.2(d) and 7.2(e), within the
applicable statue of limitations for such claims.
7.4 Defense by the Indemnifying Party. In connection with any claim which
may give rise to indemnity hereunder resulting from or arising out of any claim
or legal proceeding, the Indemnifying Party, at its sole cost and expense may,
upon written notice to the Indemnified Party, assume the defense of any such
claim or legal proceeding and shall thereby assume the costs for any Losses
actually suffered or incurred by the Indemnified Party in regard thereto. If the
Indemnifying Party assumes the defense of any such claim or legal proceeding,
the Indemnifying Party shall select counsel of its choice to conduct the defense
of such claims or legal proceedings and at the sole cost and expense of the
Indemnifying Party shall take all steps necessary in the defense or settlement
thereof. The Indemnifying Party shall not consent to a settlement of, or the
entry of any judgment arising from, any such claim or legal proceeding, without
the prior written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed). If the Indemnified Party shall withhold its
consent to an economic settlement tendered to it by the Indemnifying Party (the
expense of which would be borne solely by the Indemnifying Party), then the
amount of any indemnification liability of the Indemnifying Party specific to
the claim which was the subject of the proffered and reported settlement shall
not exceed the amount of such proffered and reported settlement, plus costs and
expenses applicable to consummating such settlement. The Indemnified Party shall
be entitled to participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. If the Indemnifying Party does not
assume the defense of any such claim or litigation resulting therefrom within
fifteen (15) days after the date of the Indemnification Claim Notice:
(a) the Indemnified Party may defend against such claim or litigation
in such manner as it may deem appropriate, including, but not limited to,
settling such claim or litigation, after giving notice of the same to the
Indemnifying Party, on such terms as the Indemnified Party may reasonably deem
appropriate and all costs of investigation and/or litigation incurred by the
Indemnified Party shall be included in the calculation of the Indemnified
Party's Losses; and
21
(b) the Indemnifying Party shall be entitled to participate in (but not
control) the defense of such action, with its counsel and at its own expense. If
the Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third party claim or the amount or nature of any
such settlement, the Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend or
settle such third party claim in a reasonably prudent manner.
7.5 Payment of Indemnification Obligation. All indemnification by the
Indemnifying Party hereunder shall be effected by payment in immediately
available funds in the amount of the indemnification liability promptly upon the
determination thereof.
7.6 Limitations on Indemnification.
(a) An Indemnified Party shall not assert any claim for indemnity
pursuant to this Agreement unless and until the amount of Losses incurred or
sustained by such party with respect to any individual matter exceeds $10,000
(the "Threshold Amount") and the aggregate amount of indemnification so asserted
exceeds $50,000 (the "Basket Amount"), provided, however, that once the Basket
Amount has been reached, the Indemnified Party may claim and shall be entitled
to receive the amount of any and all individual Losses, regardless of whether
such Losses are below or in excess of the Threshold Amount. The Indemnified
Party shall be entitled to indemnity from the Indemnifying Party hereunder only
with respect to any amounts in excess of the Basket Amount. Notwithstanding
anything in this Agreement to the contrary, an Indemnifying Party's maximum
aggregate indemnification obligations hereunder shall not exceed $4,000,000.
(b) An Indemnified Party shall take all reasonable steps to mitigate
the Losses involved upon and after becoming aware of such matter, including
using all reasonable efforts in connection with obtaining recovery on insured
claims.
(c) Except with respect to (i) claims to compel compliance with the
undertakings and agreements set forth in Sections 1.1(c) and 1.6 hereof, and
(ii) those Sections set forth on Exhibit 7.6(c) hereto, the indemnification
provisions of Sections 7.1 through 7.6 hereof shall be the sole and exclusive
post-Closing remedy available, under contract, tort or any other legal theory,
to the Indemnified Party for any breach of any representation, warranty,
covenant or agreement by the Indemnifying Party contained in this Agreement
(including any disclosure Exhibits or the Deferred Disclosure Exhibit), the
Supply Agreement, the Transition Services Agreement, the Reseller Agreement, the
Xxxx of Sale or the Assumption Agreement or any misrepresentation by the
Indemnifying Party contained in any of the foregoing agreements or documents.
7.7 Backlog Indemnification. The Purchase Price was determined in reliance
upon, and based upon, among other things, an assumption that the specific orders
comprising Backlog as of the Closing Date would be converted into Net Sales
within 12 months after the Closing Date. To the extent that all or a portion of
such Backlog is not converted into Net Sales within such period (hereinafter
referred to as a "Shipment Shortfall"), Seller shall pay to Purchaser an amount
computed by multiplying the Shipment Shortfall by 28.3% (the "Backlog
Indemnification"); provided, however, that notwithstanding anything herein to
the contrary, Purchaser shall only be entitled to receive Backlog
Indemnification to the extent that such amount exceeds $283,000. If Purchaser
substitutes any of its products ("BT Products") for any Products when filling
the purchase orders comprising Backlog as of the Closing Date, such BT Products
shall count toward Backlog which has been converted into Net Sales for purposes
of this provision. The procedures for making an indemnification claim and
payment thereof shall be as specified in Sections 7.3, 7.4 and 7.5 above;
however, the limitations set forth in Section 7.6 shall not apply to the Backlog
Indemnification. The Backlog Indemnification shall be the sole and exclusive
remedy available to Purchaser for recovery of Shipment Shortfall Losses.
22
ARTICLE VIII - INSPECTION PERIOD; COVENANTS
8.1 Purchaser's Inspection. From the date hereof until the Closing Date
(the "Inspection Period"), Seller agrees to permit Purchaser and Purchaser's
counsel, accountants, lenders and other representatives access to the
properties, documents, business records, employee records (including without
limitation information on the name, compensation and job description of each
managerial level employee, the five senior engineering employees, and the five
senior line/assembly level employees of the Business), Contracts and assets of
the Business and to key employees of the Business at any time or from time to
time during regular business hours as Purchaser shall determine for the purpose
of performing confirmatory due diligence of the representations and warranties
of Seller in this Agreement, any Exhibits hereto, the Deferred Disclosure
Exhibit or any underlying documents, agreements and information relating thereto
("Additional Documentation"). Seller will promptly make available for
Purchaser's inspection and copying true and correct copies of such documentation
together with Seller's financial statements, internal financial records, and all
documents and materials underlying or relating to all items and other materials
required pursuant to this Agreement. Seller also agrees to cooperate and respond
promptly to all of Purchaser's questions regarding the management and operation
of the Business and the employees of the Business. Any information provided to
or obtained by Purchaser or its representatives pursuant to this Agreement shall
be held by Purchaser and its representatives in confidence as confidential
information in accordance with the terms of that certain non-disclosure
agreement between Seller and Purchaser dated November 17, 1997. Notwithstanding
any due diligence which may be performed by Purchaser hereunder, Seller
acknowledges and agrees that such due diligence shall not in any manner impair
or abrogate the representations and warranties of Seller made to Purchaser
herein or otherwise, or the indemnifications set forth herein.
8.2 Walk-Away Right. Purchaser shall have the right to terminate this
Agreement at any time prior to the Closing immediately upon notice to Seller if
Purchaser discovers as a result of the above inspection or otherwise that any
one of the following material misrepresentations has occurred:
(a) if there is a shortfall of $200,000 or more between the actual
Bookings for the two (2) fiscal quarters of the Business, ending September 26,
and December 26, 1997, compared against the Bookings for the same period
represented by Seller on Exhibit 4.24(a) hereof;
(b) if there is a shortfall of $200,000 or more between the actual
Backlog at December 26, 1997, compared against the Backlog at December 26, 1997
represented by Seller on Exhibit 4.21 hereof;
(c) if there is a shortfall of $200,000 or more between the actual Net
Sales for the two (2) fiscal quarters of the Business, ending September 26, and
December 26, 1997, compared against the Net Sales for the same period
represented by Seller on Exhibit 4.24(b) hereof; or
(d) if there is a shortfall of $150,000 or more between the actual
aggregate Gross Profit for the two (2) fiscal quarters of the Business, ending
September 26, and December 26, 1997, after adjustments for certain one-time
nonrecurring expenditures identified on Exhibit 2.6(b) hereto, compared against
the Gross Profit for the same period represented by Seller on Exhibit 4.24(c)
hereof.
Upon such termination, Purchaser shall be entitled to an immediate return of the
Deposit, including all interest earned thereon and shall have no further
liability or obligation hereunder or otherwise to Seller.
8.3 No Solicitation. Seller shall not, and shall direct each of its
affiliates, officers, employees, representatives or agents not to, directly or
indirectly, encourage, solicit or initiate discussions or negotiations with, or
provide any non-public information to, any corporation, partnership, person or
other entity or group concerning any merger, sales of substantial assets, sales
of share of capital stock or similar transactions involving the Business or any
subsidiary or enter into any agreement with respect thereto. Seller will
promptly
23
communicate to Purchaser the terms of any proposal which it may receive in
respect of all such transactions prohibited by the foregoing.
8.4 Taxes. Seller shall pay when due, any transfer, gains, documentary,
sales, use, registration, stamp, value added or other similar Taxes payable by
reason of the transactions contemplated by this Agreement or attributable to the
sale, transfer or delivery of the Assets hereunder, and Seller shall, at its own
expense, file all necessary Tax return and other documentation with respect to
all such Taxes. The party liable by law shall be responsible for funding such
tax payment. Purchaser shall provide Seller with such resale certificates and
other documentation as reasonably necessary in connection herewith.
8.5 Relationships with Suppliers. Seller shall use all reasonable
commercial efforts to assist Purchaser in obtaining the raw materials and other
components identified on Exhibit 8.5(a) for a period of five years and on
Exhibit 8.5(b) for a period of one year after expiration of the Supply Agreement
on terms no less favorable than the terms upon which such items are purchased by
Seller.
8.6 Discussions with Customers and Suppliers. Purchaser acknowledges the
importance during the Inspection Period of coordinating communications among
Purchaser, Seller and the customers and suppliers of the Business.
(a) Accordingly, Purchaser shall not initiate any contact with customers or
suppliers of the Business (which are not existing customers or suppliers of
Purchaser) without the prior consent and participation of Xxxxx Xxxxxxxxx of
Seller. With respect to unsolicited customer or supplier inquiries only,
Purchaser may respond using only the questions and answers developed pursuant to
paragraph (c) hereof. All other contact, discussions or inquiries are hereby
prohibited unless previously approved by Xx. Xxxxxxxxx or such other person
recommended by Seller.
(b) [Intentionally Left Blank]
(c) Xxxxxx Xxxxx of Purchaser and Xxxxx Xxxxxxxxx of Seller shall develop a
set of critical questions likely to be asked by customers and suppliers and
mutually agreed upon answers thereto, as may be modified from time to time by
Messrs. Palle and Xxxxxxxxx ("Q & A"). If questions from customers and suppliers
fall within the scope of the Q & A, Purchaser is free to communicate directly
and immediately with the inquiring customer or supplier according to the
parameters and responses on the Q & A. If the question is outside of the
parameters of the Q & A, Purchaser shall defer comment until a coordinated
response has been agreed upon by Messrs. Palle and Xxxxxxxxx or their designees.
ARTICLE IX - CONDITIONS PRECEDENT TO
PURCHASER'S OBLIGATIONS ON THE CLOSING DATE
Each and every obligation of Purchaser to be performed on or after the
Closing Date shall be subject to the satisfaction, prior to or concurrently with
the performance of such obligation, of the following conditions precedent:
9.1 Representations and Warranties. The representations and warranties made
by Seller in this Agreement taken as a whole shall be true and correct in all
material respects on, as of, and with respect to, the Closing Date with the same
force and effect as though they had been made or given on, as of, and with
respect to the Closing Date (except for representation and warranties that speak
as of a specific date or time, which need only be true and correct in all
material respects as of such date or time) and no breach of any of Seller's
24
representations and warranties herein shall be having or be reasonably expected
to have a Material Adverse Effect.
9.2 No Changes. From the date hereof through the Closing Date, the Business
shall have been conducted in accordance with the requirements of Article XI
hereof, Seller shall not subsequent to the date hereof have suffered any loss or
damage to the Assets or the Business which would have a Material Adverse Effect
and none of the events described in Section 4.12 hereof shall have occurred nor
shall Seller have entered into any agreement or commitment to do or take any of
the actions referred to in Section 4.12.
9.3 Closing Certificate. Purchaser shall not have discovered any material
misrepresentation or inaccuracy in any of the representations and warranties
made herein as of the date given hereunder and as of the Closing Date as
provided in Section 9.1 hereof. Seller shall have performed and complied in all
material respects with all its agreements, undertakings and conditions required
by this Agreement to be performed or complied with by Seller prior to or on the
Closing Date, and Purchaser shall have been furnished with a certificate of
Seller dated the Closing Date, certifying to that effect.
9.4 Consents. Seller shall have obtained all necessary consents to the
transactions contemplated by this Agreement pursuant to (i) law, regulation,
rule or ordinance of any federal, state or local governmental or
quasi-governmental authority or agency or (ii) the terms of any agreement,
contract, document or other instrument to which Seller is a party or by which it
is bound, and all waiting periods applicable under the HSR Act, if any, shall
have expired or been terminated without adverse comment.
9.5 No Injunction. At the Closing Date, there shall be no injunction,
restraining order or decree of any nature of any court or governmental agency or
body of competent jurisdiction that is in effect that restrains or prohibits the
consummation of the transactions contemplated hereunder or imposes conditions on
such consummation not otherwise provided for herein.
9.6 Absence of Litigation. (i) No claim, action, suit, arbitration,
investigation, inquiry or other proceeding by any United States federal or state
governmental, regulatory or administrative agency or authority or any other
Person shall be pending or threatened on the Closing Date, and (ii) prior to the
Closing Date, no party to this Agreement shall have been advised by any United
States federal or state governmental, regulatory or administrative agency or
authority (which advisory has not been officially withdrawn by such agency or
authority on or prior to the Closing Date) that such agency or authority is
investigating the transactions contemplated by this Agreement to determine
whether to file or commence any litigation, which, in the case of (i) or (ii)
above, seeks or would seek to enjoin, restrain or prohibit the consummation of
the transactions contemplated by this Agreement or to impose limitations on the
ability of Purchaser to continue the Business as presently conducted with the
Assets or to require the divestiture by Purchaser of any of the Assets.
9.7 [Intentionally Left Blank]
9.8 Supply Agreement. Seller shall have executed and delivered a supply
agreement in the form and substance attached hereto as Exhibit 9.8 (the "Supply
Agreement").
9.9 Settlement Agreement. Seller shall have executed and delivered a
settlement agreement for the Pending Action in form and substance attached
hereto as Exhibit 9.9 (the "Settlement Agreement").
9.10 Transition Services Agreement. Seller shall have executed and
delivered a certain transition services agreement in the form and substance
attached hereto as Exhibit 9.10 (the "Transition Services Agreement").
25
9.11 Other Conditions. If any of the conditions precedent to Purchaser's
obligations hereunder shall not be satisfied as of the Closing Date, Purchaser
may, in addition to its other rights and remedies, (i) terminate this Agreement,
or (ii) waive such default and proceed with performance of this Agreement.
Except as otherwise provided herein, any such termination or waiver shall be
without prejudice to Purchaser's other rights and remedies arising from the
default, including without limitation Purchaser's indemnification rights
hereunder.
ARTICLE X - CONDITIONS PRECEDENT TO SELLER'S
OBLIGATIONS ON THE CLOSING DATE
Each and every obligation of Seller to be performed on the Closing Date
shall be subject to the satisfaction, prior to or concurrently with the
performance of such obligation, of the following conditions precedent:
10.1 Closing Certificate. The representations and warranties made by
Purchaser in this Agreement taken as a whole shall each be true and correct in
all material respects on, as of, and with respect to the Closing Date with the
same force and effect as though they had been made or given on, as of, and with
respect to the Closing Date (except for representations and warranties that
speak as of a specific date or time, which need only be true and correct in all
material respects as of such date and time) and Purchaser shall have performed
and complied in all material respect with all of its agreements, undertakings
and conditions required by this Agreement to be performed or complied with prior
to or on the Closing Date, and Seller shall have been furnished with a
certificate of the appropriate officers of Purchaser, dated the Closing Date,
certifying to that effect.
10.2 Compliance with Obligations. Purchaser shall have performed and
complied with all of its obligations under this Agreement which are to be
performed or complied with by it prior to or on the Closing Date, as the case
may be, including, without limitation, delivery of documents and funds
contemplated by Section 3.2(b) hereof.
10.3 Consents. Purchaser shall have obtained all necessary consents to the
transactions contemplated by this Agreement pursuant to (i) law, regulation,
rule or ordinance of any federal, state or local governmental or
quasi-governmental authority or agency or (ii) the terms of any agreement,
contract, document or other instrument to which Purchaser is a party or by which
it is bound, and all waiting periods applicable under the HSR Act, if any, shall
have expired or been terminated without adverse comment.
10.4 No Injunction. At the Closing Date, there shall be no injunction,
restraining order or decree of any nature of any court or governmental agency or
body of competent jurisdiction that is in effect that restrains or prohibits the
consummation of the transactions contemplated hereunder or imposes conditions on
such consummation not otherwise provided for herein.
10.5 Absence of Litigation. (i) No claim, action, suit, arbitration,
investigation, inquiry or other proceeding by any United States federal or state
governmental, regulatory or administrative agency or authority or any other
Person shall be pending or threatened on the Closing Date, and (ii) prior to the
Closing Date, no party to this Agreement shall have been advised by any United
States federal or state governmental, regulatory or administrative agency or
authority (which advisory has not been officially withdrawn by such agency or
authority on or prior to the Closing Date) that such agency or authority is
investigating the transactions contemplated by this Agreement to determine
whether to file or commence any litigation, which, in the case of (i) or (ii)
above, seeks or would seek to enjoin, restrain or prohibit the consummation of
the transactions contemplated by this Agreement or to impose limitations on the
ability of Purchaser to continue the Business as presently conducted with the
Assets or to require the divestiture by Purchaser of any of the Assets.
26
10.6 Board Approval. Seller shall have obtained approval of the
transactions contemplated hereby from its Board of Directors or any authorized
subcommittees thereof.
ARTICLE XI - ACTIONS AND CONDUCT PRIOR TO CLOSING
11.1 HSR Act Compliance. Seller and Purchaser shall each file or cause to
be filed with the Federal Trade Commission and the United State Department of
Justice within five (5) business days of the date of this Agreement, the
notifications, if any, required to be filed by its respective "ultimate parents"
under the HSR Act with respect to the transactions contemplated herein. Each of
the parties will use its best efforts to, or to cause its affiliates to, make
such filings promptly, to respond to any requests for additional information
made by either of such agencies, to cause the waiting periods under the HSR Act
to terminate or expire at the earliest possible date, and to resist vigorously
any assertion that the transactions contemplated hereby constitute a violation
of the antitrust laws, all to the end of expediting consummation of the
transactions contemplated hereby; provided, however, that if Seller or Purchaser
or the respective "ultimate parent" of either of them shall determine in good
faith that continuing such resistance is contrary to its best interest, Seller
or Purchaser may, by written notice to the other party, terminate this
Agreement.
11.2 Conduct of Business.
(a) Except as otherwise disclosed on Exhibit 11.2, which Exhibit shall
be updated through the Closing Date, from December 26, 1997 through the date
hereof Seller has done the following related to the Business:
(i) operated the Business in the normal course and has not taken
any action or permitted any event to occur, and no such events have occurred
which have had or would have a Material Adverse Effect;
(ii) used all reasonable efforts to preserve the business
relationship with each of its suppliers, customers and others and to keep
available the services of its employees;
(iii) replaced and replenished its inventories, supplies, raw
materials and other stock items, consistent with existing business practice and
with a view to maintaining the operations of the Business as a going concern and
causing no interruption of such operations;
(iv) not entered into any new commitments, modified any material
existing contract rights or made any other material changes in the Business
except as deemed reasonably necessary in the ordinary course of business;
(v) not disposed of any assets or created any liens of the Business
except in the ordinary course of business;
(vi) not changed the accounting methods or practices of Seller;
(vii) continuously maintained insurance coverage fully covering the
Assets and the Business through the date hereof; and
(viii) performed normal maintenance and repairs to the assets and
properties of the Business.
(b) From the date hereof through the Closing Date Seller shall perform
the following related to the Business:
27
(i) pay, satisfy and discharge the liabilities of Seller in a
manner consistent with past practice;
(ii) operate the Business in the normal course and shall not take
any action or permit any event to occur, nor shall any event have occurred which
would have a Material Adverse Effect;
(iii) use all reasonable efforts to preserve the business
relationship with each of its suppliers, customers and others and to keep
available the services of its employees;
(iv) continue to replace and replenish its inventories, supplies,
raw materials and other stock items, consistent with existing business practice
and with a view to maintaining the operations of Seller as a going concern and,
except for the least amount of interruption practicable caused by the transfer
of the Business from the Tempe, Arizona facility to the Juarez, Mexico facility,
causing no interruption of Seller's operations through the Closing Date;
(v) not dispose of any assets or create any liens except in the
ordinary course of business;
(vi) not change the accounting methods or practices of Seller;
(vii) continuously maintain insurance coverage fully covering the
Assets and the Business through the Closing Date; and
(viii) perform normal maintenance and repairs to the Assets.
11.3 Employee Interviews. Seller hereby agrees to use all reasonable
efforts to assist Purchaser in arranging, scheduling and conducting interviews
with the current employees of the Business in order for Purchaser to evaluate
and extend potential employment offers by Purchaser to such employees.
ARTICLE XII - POST CLOSING COOPERATION, TECHNICAL SUPPORT
12.1 Use of Seller's Name and Logo During Transition Period.
(a) Trademark License. Exhibit 12.1 sets forth a list of Seller's
trademarks and trade names used in the Business which are not being sold and
transferred to Purchaser hereunder. For a term of six (6) months from the
Closing Date or such longer period as may be reasonably necessary to allow for
the full utilization of all inventory and supplies bearing Licensed Marks and to
allow for the modification of all machine tools bearing such Licensed Marks in a
manner which is not disruptive to the continued operation of the Business (the
"Transition Period"), Seller grants to Purchaser the right to use Seller's
trademarks shown in Exhibit 12.1 hereof (the "Licensed Marks") in conjunction
with the products made or distributed by the Business, for (i) displaying the
Licensed Marks on packaging transferred by Seller to Purchaser at the Closing,
(ii) displaying the Licensed Marks on finished goods in the inventory of the
Business as of the Closing and on products constructed with parts in such
inventory as of the Closing or parts produced by Purchaser after the Closing
with tooling containing the Licensed Marks, and (iii) displaying the Licensed
Marks on advertising materials (including brochures and catalogs) transferred to
Purchaser by Seller at the Closing. Purchaser agrees not to sublicense its right
to use the Licensed Marks, without the prior written consent of Seller. During
the Transition Period, Purchaser shall have the right to reference, verbally and
in the text of letters, the fact that Seller was the former owner of the
Business.
(b) Use of Other Marks. During the Transition Period, Purchaser may
affix any xxxx owned or claimed by Purchaser to any product or services rendered
by or through Purchaser, but Purchaser
28
shall not combine any other xxxx with any Licensed Xxxx. This section however,
shall not preclude Purchaser from using its own xxxx(s) in advertising, which
includes advertising for the products and services rendered by or through it,
provided that appropriate footnotes or other notations are displayed to indicate
Seller's ownership of the Licensed Marks.
(c) No Use of Marks in Purchaser's Name. Except as permitted in Section
12.1(a) above Purchaser shall not use any Licensed Marks or any xxxx or label
confusingly similar to the Licensed Marks in Purchaser's firm name or in any
trade name, trademark or service xxxx of Purchaser; and (ii) Purchaser shall not
use, in its stationery, letterhead, advertising, or otherwise, any Licensed
Marks in such a way as may cause any confusion between Purchaser and Seller in
respect to third parties.
(d) Ownership of the Licensed Marks. Purchaser acknowledges the
validity of Seller's right, title and interest in and to the use of the Licensed
Marks. Apart from its license rights under this Article XII Purchaser shall not
be deemed to acquire any right, title or interest in or any right to use any
Licensed Marks during or after the Transition Period. In connection with the use
of the Licensed Marks, Purchaser shall not in any manner represent that it has
any ownership in the Licensed Marks or registrations thereof, and Purchaser
acknowledges that use of the Licensed Marks shall inure to the benefit of
Seller. Purchaser will not at any time adopt or use without Seller's prior
written consent, any word or xxxx which is likely to be similar to or confused
with the Licensed Xxxx.
12.2 Customer Notification; Assistance. During the Transition Period,
Seller and Purchaser shall also cooperate in the notification to all of Seller's
existing Interdiction accounts and prospects that Purchaser has acquired the
business and Seller shall assist Purchaser in the transfer of existing
Interdiction accounts and prospects from Seller to Purchaser. Seller hereby
agrees to assist Purchaser in arranging meetings with suppliers, customers and
sales distributors and otherwise to use all reasonable efforts to assist
Purchaser in obtaining reasonable assurances that such business relationships
between the Business and its suppliers, customers and sales distributors will
continue intact, including without limitation, joint customer visits, jointly
defined written notification and expression of Seller's confidence in and
recommendation of Purchaser for the continued operation of the Business. For a
period of one (1) year after the Closing Date, Seller will promptly refer all
requests for quotations and leads relating to the Business and the Products to
Purchaser.
12.3 Other Transition Support.
(a) Training. For a period of six (6) months following the Closing Date
(the "Training Period"), Seller agrees to make qualified technical personnel
available to Purchaser, at Purchaser's election, at Seller's Atlanta, Georgia,
Tempe, Arizona or Juarez, Mexico facilities or at Purchaser's Old Bridge, New
Jersey facility, or at another mutually acceptable location, as Purchaser shall
reasonably require, for up to the aggregate amount of one thousand (1,000) hours
during the Training Period. The purpose of the Training Period will be to train
employees of the Purchaser in all technical aspects of the Products as well as
to assist in the implementation and transfer to Old Bridge of the manufacturing
lines for the Products, including all aspects of the manufacturing processes and
the use of the know-how and other technology acquired from Seller to manufacture
the Products and the implementation and integration of all related computer
hardware and software. Purchaser shall be responsible for all costs and expenses
associated with the use of its facility and for its employees in connection with
such training. If Purchaser's requests for training exceed the levels agreed to
above, Seller will so inform Purchaser, and Seller then reserves the right to
charge Purchaser for additional training at Seller's rate of $100 per
person-hour. Additionally, Purchaser shall reimburse Seller for reasonable costs
for travel, board and lodging incurred by Seller's technical personnel in
connection with training other than at Seller's facility. In furtherance of and
in addition to the training contemplated by this Section, throughout the term of
the Supply Agreement, Purchaser shall be permitted to have up to six (6) of its
employees at any one time present at each of Seller's facilities where the
Business is conducted to observe the manufacturing, testing and quality control
procedures used by Seller in connection with the Products.
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(b) Technical Assistance. During the six (6) month period commencing at
the conclusion of the Training Period, Purchaser may request and Seller shall
provide, at no cost to Purchaser other than reimbursement for reasonable costs
for travel, board and lodging, up to forty (40) hours per month of technical
assistance from Seller relating to manufacture of the Products and the
Addressable Transmitters or operation of the Business, including without
limitation, the operation of the Business at Purchaser's facility. All technical
assistance shall be rendered at times and locations mutually agreeable to
Purchaser and Seller. Whenever practical, Seller shall provide technical
assistance by telephone or at Seller's facility. If Seller's personnel must
travel to Purchaser's Old Bridge, New Jersey facility or other locations to
provide technical assistance, Purchaser understands and acknowledges that such
technical assistance provided by Seller is subject to the availability of
Seller's employees to travel to and perform the technical assistance. If
Purchaser's requests for technical assistance exceed the levels agreed to above,
Seller will so inform Purchaser, and Seller then reserves the right to charge
Purchaser for additional technical assistance at Seller's rate of $100 per
person-hour. In any event, Purchaser will reimburse Seller upon invoice,
supported by receipts and other appropriate documentary evidence, for the
reasonable costs of travel, board and lodging incurred by Seller's technical
personnel in connection with technical assistance other than at Seller's
facility.
(c) Customers. From and after the Closing, Purchaser shall use all
reasonable efforts to service the Interdiction accounts and prospects
transferred from Seller to Purchaser to each such customer's reasonable
satisfaction, consistent with industry standards.
12.4 Financial Statements. If Purchaser determines that it is required to
file a Form 8-K with the SEC pursuant to Item 2 of such Form 8-K (the "Form
8-K") as a result of the consummation of the transactions contemplated in this
Agreement (which determination shall be made as soon as practicable after
Purchaser receives the information reasonably requested by it from Seller in
order to make such determination), Seller agrees to deliver to Purchaser such
consolidated financial statements for the Business, audited by Seller's
independent public accountants in accordance with generally accepted auditing
standards and prepared in accordance with GAAP, as required pursuant to Item 7
of the Form 8-K, within thirty (30) days after the Closing Date to allow
sufficient time for Purchaser to timely file the Form 8-K with the SEC.
12.5 Dismissal of Pending Action. Upon consummation of the Closing, the
parties shall cause the Pending Action to be dismissed with prejudice.
ARTICLE XIII - PROPRIETARY RIGHTS, NON-DISCLOSURE AND NON-COMPETITION
13.1 Non-Disclosure. Seller agrees that at all times prior to and for ten
(10) years following the Closing Date, it shall keep confidential and shall not,
except with the express prior written consent of Purchaser, directly or
indirectly, voluntarily or involuntarily communicate, disclose or divulge to any
Person or use for the benefit of any Person, other than Purchaser or other than
Seller to the extent used in Seller's business in the ordinary course of
business, any and all knowledge or information concerning the conduct and
details of the Business including, but not limited to, trade secrets,
technology, know-how, methods, contracts, costs, policies, sales methods,
financial condition, operations, statistics, and suppliers. In addition,
Purchaser agrees that it shall keep confidential and shall not, except with the
express prior written consent of Seller, directly or indirectly, voluntarily or
involuntarily communicate, disclose or divulge to any Person or use for the
benefit of any Person other than Purchaser (i) at all times prior to the Closing
Date (other than to use as is necessary to evaluate the transactions
contemplated hereby), any and all knowledge or information concerning the
conduct and details of the Business including, but not limited to, trade
secrets, technology, know-how, methods, contracts, costs, policies, sales
methods, financial condition, operations, statistics, and suppliers or any
confidential information disclosed in any of the disclosure Exhibits attached
hereto, the Deferred Disclosure Exhibit or any Additional Documentation or (ii)
at all times prior to and for ten (10) years following the Closing Date, any
confidential information of Seller not purchased or licensed to Purchaser
hereunder or in connection
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with the transactions contemplated by this Agreement. The provisions of this
Section shall not apply to any confidential information of Seller or Purchaser
which:
(a) becomes generally know to the public, either before or after the
date of its disclosure to the receiving party, through no fault or omission on
the part of the receiving party;
(b) is lawfully disclosed to the receiving party, either before or
after the date of its disclosure to the receiving party, by an independent third
party rightfully in possession of such confidential information;
(c) is lawfully in the possession of the receiving party at the time of
its disclosure, as evidence by the prior written records of such receiving
party;
(d) is required to be disclosed by the receiving party to comply (after
all reasonable efforts to protect the confidentiality thereof) with applicable
securities or other laws; or
(e) is the subject of a valid patent or copy right registration.
13.2 Non-Competition. For a period of five (5) years from the Closing Date,
Seller will not, directly or indirectly, in any capacity, whether as employer,
owner, investor, lender, partner, agent, director, officer, shareholder, or in
other capacity, for their own benefit or for the benefit of any Person other
than Purchaser:
(a) establish or engage in any business which designs, develops,
manufactures or sells Interdiction products;
(b) request or advise any customers whose business then comprises a
part of the Backlog to withdraw, curtail or cancel their business with Purchaser
or to otherwise tortiously interfere with Purchaser's operation of the Business
after the Closing; provided, however, that Seller is not prevented hereby from
offering non-Interdiction products which may compete with Interdiction products;
or
(c) solicit, divert or induce or attempt to solicit, divert or induce
any employee of Purchaser (or its affiliates) to terminate their employment with
Purchaser or to work for Seller or any Person with whom Seller is connected.
13.3 Remedies. Any breach by Seller or Purchaser of the covenants and
agreements contained in this Article XIII will result in irreparable injury to
the other party hereto for which money damages could not adequately compensate
the aggrieved party, and in the event of any such breach, the aggrieved party
shall be entitled (in addition to any other rights and remedies which it may
have at law or in equity) to have an injunction issued by any competent court of
equity enjoining and restraining the breaching party involved therein from
continuing such breach. The existence of any claim or cause of action which the
aggrieved party may have against the breaching party or any other Person shall
not constitute a defense or bar to the enforcement of such covenants contained
in this Article XIII.
13.4 Severability. If any portion of the covenants or agreements contained
herein, or the application thereof, is construed to be invalid or unenforceable,
then the other portions of such covenant(s) or agreement(s) or the application
thereof shall not be affected and shall be given full force and effect without
regard to the invalid or unenforceable portions. If any covenant or agreement
herein is held to be unenforceable because of the area covered, the duration
thereof, or the scope thereof, then the court making such determination shall
have the power to reduce the area and/or duration and/or limit the scope
thereof, and the covenant or agreement shall then be enforceable in its reduced
form.
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ARTICLE XIV - RISK OF LOSS
14.1 Risk of Loss. All risk of loss to the Assets or Business from the date
hereof through the Closing Date as a result of fire, storm, casualty, other acts
of God, or theft of a substantial amount of property shall remain with Seller.
Purchaser shall have the option to cancel this Agreement without further
obligation in the event of any material loss, destruction or damage to the
Assets or Business prior to the Closing Date, whether or not such loss is
covered by insurance.
ARTICLE XV - BROKERS AND FINDERS
15.1 Finder's Fees. No agent, broker, consultant or other person or firm
acting on behalf of Seller will be entitled to any commission or broker's,
finder's, investment banker's or similar fee or commission from any of the
parties hereto in connection with the transactions contemplated herein. Each
party agrees to indemnify and hold the other harmless from and against any claim
for a broker's or finder's fee relative to this Agreement arising by, through or
under such party.
ARTICLE XVI - EXPENSES
16.1 Expenses. Seller and Purchaser will each pay all costs and expenses of
their performance of and compliance with all agreements and conditions contained
in this Agreement on their part to be performed or complied with including
without limitation, Seller's expenses otherwise included in any of the Assumed
Liabilities.
ARTICLE XVII - BULK TRANSFER LAWS
17.1 Bulk Transfer Laws. The parties hereto agree to waive compliance with
the applicable requirements of the Uniform Commercial Code-Bulk Transfers laws
("Bulk Transfer Laws"). Seller agrees to and does hereby defend, indemnify and
hold Purchaser harmless from and against any claims, loss, liability or expense
threatened against or incurred by Purchaser, including without limitation,
reasonable attorney's fees and out-of-pocket costs by reason of or arising out
of or in connection with the non-compliance with the Bulk Transfer Laws.
ARTICLE XVIII - FURTHER ASSURANCES
18.1 Further Assurances. From the date hereof through the Closing Date and
thereafter Seller and Purchaser will execute and deliver to one another such
further instruments of transfer and conveyance and take such action and deliver
such other documents, certifications and further assurances as may reasonably be
required to carry out more effectively the sale and transfer of the Assets and
to better enable Purchaser to complete, perform and discharge the Assumed
Liabilities. In addition, following Closing, each of Seller and Purchaser will
continue to provide Purchaser or Seller, as the case may be, and the respective
authorized accountants, attorneys and appraisers of each of them with access to
the financial records (including accountant's work papers), and the tax returns
of Seller or Purchaser, as the case may be, to the extent reasonably necessary,
during regular business hours.
ARTICLE XIX - PUBLICITY
19.1 Publicity. Within two (2) days after the execution of this Agreement,
each of the parties hereto shall cause a press release mutually acceptable to
the other party to be published in order to announce the transactions hereunder.
Neither Purchaser nor Seller shall cause or permit, nor shall their respective
agents, employees or representatives cause or permit any other press release or
other announcement concerning the
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transactions contemplated by this Agreement or disclose the existence or
contents hereof, without the prior written consent of the other party, except as
may be required by law.
ARTICLE XX - NOTICES
20.1 Notices. All notices, requests and other communications hereunder
("Notices") shall be in writing and shall be deemed to have been duly given on
the date delivered by hand, or on the second day after mailed, certified or
registered mail, return receipt requested, with postage prepaid, or upon
electronic confirmation of receipt after delivery by telecopy or telefax,
A. if to Seller:
Scientific-Atlanta, Inc.
X.X. Xxx 0000
0000 Xxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxxx X. Necessary
Telephone: 000-000-0000
Telecopier: 000-000-0000
With a copy to:
Scientific-Atlanta, Inc.
Xxx Xxxxxxxxxx Xxxxxxx, Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Attn: General Counsel
Telephone: 000-000-0000
Telecopier: 000-000-0000
B. if to Purchaser to:
Blonder Tongue Laboratories, Inc.
Xxx Xxxx Xxxxx Xxxx
Xxx Xxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxx X. Xxxxxx, President
Telephone: 000-000-0000
Telecopier: 000-000-0000
With a copy to:
Stradley, Ronon, Xxxxxxx & Xxxxx, LLP
0000 Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxxx, Esquire
Telephone: 000-000-0000
Telecopier: 000-000-0000
Such names and addresses may be changed by a party by written notice to the
other parties listed above.
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ARTICLE XXI - TERMINATION
21.1 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Closing:
(a) by the mutual written agreement of Seller and Purchaser;
(b) by Purchaser pursuant to Section 8.2 hereof;
(c) by Purchaser, if the conditions specified in Article IX have not
been satisfied or waived by Purchaser as of the Closing Date;
(d) by Seller, if the conditions specified in Article X have not been
satisfied or waived by Seller as of the Closing Date;
(e) by either Seller or Purchaser, if the condition specified in
Section 10.6 has not been satisfied or waived by Seller before or by the close
of business on March 2, 1998;
(f) by either Seller or Purchaser, if either of them determines in
accordance with Section 11.1 hereof that resisting any assertion that the
transactions contemplated hereby violate the anti-trust laws is contrary to its
best interests; or
(g) by either Seller or Purchaser, if the Closing has not occurred
within twenty (20) business days after all waiting periods applicable under the
HSR Act have expired or terminated, so long as the failure to consummate the
transaction on or before such date did not result solely from the failure by the
party seeking termination of this Agreement to fulfill any undertaking or
commitment on its part provided for herein prior to the Closing.
21.2 Procedure and Effect of Termination. In the event of termination of
this Agreement pursuant to Sections 21.1(b) through (g), written notice thereof
shall forthwith be given by the terminating party to the other party hereto.
Upon any such notice or upon the mutual written agreement of the parties hereto,
this Agreement shall thereupon terminate and become void and have no effect, and
the transactions contemplated hereby shall be abandoned without further action
by the parties hereto, except that the provisions of Sections 13.1, 13.3, 16.1,
22.1, and 22.2 shall survive the termination of this Agreement. For all valid
terminations other than termination by Seller pursuant to Sections 21.1(d) and
21.1(g), the Deposit and all interest earned thereon shall be promptly refunded
to Purchaser. If this Agreement is validly terminated by Seller pursuant to
Sections 21.1(d) or 21.1(g), Seller shall be entitled to retain the Deposit,
including any interest earned thereon.
21.3 Limitation on Damages for Wrongful Failure to Close. If either Seller
or Purchaser wrongfully fails to consummate the transactions contemplated by
this Agreement, the other party may recover damages therefor as determined by
the agreement of the parties hereto or by the award of an arbitration panel in
accordance with the procedures provided in Section 21.4 below. Notwithstanding
the foregoing and anything herein to the contrary, the maximum liability
hereunder of either party for wrongful failure to close (whether determined by
arbitration, litigation or otherwise) shall not exceed $7,000,000. Such payments
shall be the sole and exclusive remedy available to either party for wrongful
failure to close. In furtherance of the foregoing, each of Seller and Purchaser
hereby waives, to the fullest extent permitted under applicable law, any and all
rights, claims and causes of action it may have against Purchaser or Seller, as
the case may be, arising under or based upon any federal, state or local
statute, law, ordinance, rule or regulation (including without limitation any
such rights, claims or causes of action arising under or based upon common law
or otherwise) with respect to such failure to close, other than to enforce this
Section 21.3.
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21.4 Disputes. In the event that any disputes arise out of this Article XXI
between the parties hereto, the parties shall attempt in good faith to resolve
any such disputes promptly by negotiation between executives of the parties who
have authority to settle the controversy. If the parties are unable to reach a
satisfactory settlement within thirty (30) days after the commencement of such
negotiations, then either party shall have the right to initiate legal
proceedings with a court of competent jurisdiction.
ARTICLE XXII - GENERAL
22.1 Governing Law. This Agreement shall be governed by the substantive
laws of the State of Delaware without giving effect to the conflict of law
principles thereof.
22.2 Jurisdiction. The parties hereto hereby irrevocably consent to the
exclusive jurisdiction and venue of the courts of the State of Delaware and of
the United States District Court for the District of Delaware for the purpose of
any judicial proceedings which may be instituted in relation to any matter
arising under this Agreement and consent to service of process by United States
Certified Mail to the address set forth in Section 20.1, above.
22.3 No Waiver. No failure or delay on the part of any party to exercise
any right, power or remedy shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or remedy preclude any other or
further exercise thereof or of any other right, power, or remedy.
22.4 Entire Agreement. This Agreement, including the Exhibits hereto and
the Deferred Disclosure Exhibit, sets forth the entire understanding of the
parties relating to the subject matter hereof and supersedes all prior oral or
written understandings relating hereto. This Agreement shall not be modified,
supplemented or terminated orally and shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
permitted assigns including without limitation any successor to a party hereto
by merger, consolidation or otherwise by operation of law. Neither this
Agreement nor any rights, interests or obligations hereunder may be assigned by
Seller or Purchaser, without the prior written consent of the other party
hereto.
22.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original instrument, but
all such counterparts together shall constitute one and the same instrument.
22.6 Definitions. "Person" shall mean a natural person, joint venture,
corporation, partnership, trust, estate, sole proprietorship, governmental
agency or authority or other juridical entity.
22.7 Headings. The headings of the several articles and sections of this
Agreement are inserted for convenience of reference only and shall not
constitute a part of this Agreement.
22.8 Severability. If any portion of this Agreement is construed to be
invalid or unenforceable, the remaining portions hereof shall not be affected
thereby and shall be enforceable without regard to the invalid or unenforceable
portions.
22.9 Amendment and Modification. This Agreement may be amended or modified
only by written agreement of the parties hereto.
22.10 Mail Received after Closing. Following the Closing, Purchaser may
receive and open all mail addressed to Seller and deal with the contents thereof
in its discretion to the extent that such mail and the contents thereof relate
to the Business.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered on the date first above written.
SCIENTIFIC-ATLANTA, INC.
By: /s/ H. Xxxxx Xxxxx
-------------------------------------
H. Xxxxx Xxxxx, Senior Vice President
BLONDER TONGUE LABORATORIES, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Xxxxx X. Xxxxxx, President
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