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WNIM(R) PURCHASE AGREEMENT
THIS WNIM(R) PURCHASE AGREEMENT (the "Agreement") is made June 14,
1994 by and between Microdyne Peyton Street Corporation, a Virginia corporation
("Buyer") and a wholly owned subsidiary of Microdyne Corporation, a Maryland
corporation, and Gateway Communications, Inc., a California corporation
("Seller").
RECITAL
Buyer desires to purchase, and Seller desires to sell, the WNIM(R)
product line and certain other assets of Seller on the terms and conditions and
for the consideration hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, Buyer and Seller agree as follows:
ARTICLE I
PURCHASE AND SALE OF WNIM(R) AND OTHER ASSETS
1.1 Purchased Assets. Seller hereby sells to Buyer and Buyer
hereby purchases from Seller, for the consideration set forth in Section 1.2,
all right, title and interest of Seller in and to the following assets,
properties and rights (the "Purchased Assets"):
(a) from the list of the raw materials, work-in-process and
finished goods, supplies and stores and spare parts attached hereto as Schedule
1.1, together with any Seller merchandise returned after May 13, 1994
(collectively, the "Inventory"), such items of Inventory as Buyer may select
until the date of the Closing (as defined below), in the sole discretion of
Buyer, having a total net book value of $400,000 (the "Selected Inventory");
(b) all trade names, trademarks and service marks, patents
and patent rights (if any), copyrights, whether domestic or foreign (as well as
any applications, registrations or certificates for any of the foregoing),
inventions, trade secrets, proprietary processes, schematic drawings,
engineering diagrams, designs, board layouts, technologies, methods,
formulations, know-how and other industrial and intellectual property rights
which comprise, are necessary for or are used in connection with the WNIM(R)
product line, and all enhancements and improvements, whether existing or under
development (the "Intellectual Property");
(c) all software, and software modules and components in both
object and source code, which include all interim, experimental or
developmental codes used in the development of source code, and any
enhancements, modifications, program interfaces, current and archival versions
of patches and bug fixes,
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flow charts, input/output formats, drawings, specifications, user's manuals and
technical and other documentation, instructions, designs, data and algorithms,
whether in electronic, optical, magnetic, microfiche, hard copy or other form
(including, without limitation, encrypted on microchips), and all object code,
microcode and source code contained in or whose use is necessary in connection
with the products which comprise the WNIM(R) product line, other than "MS DOS"
and "Cosessions" (collectively, the "Software");
(d) all books and records (or true and complete copies
thereof), including computerized records and any associated software and
documentation, relating to the WNIM(R) product line (including, without
limitation, the Intellectual Property) or such of the Selected Inventory as
relates to the WNIM(R) product line including, without limitation, books and
records relating to or containing production data, manufacturing and quality
control information, engineering changes, sales or marketing information,
customer lists and information, and, if permitted by Law (as defined below),
personnel records for certain employees of Seller as may be requested by Buyer;
(e) all other tangible and intangible assets which comprise
or are necessary for or are used in connection with the WNIM(R) product line;
and
(f) all shipping materials, catalogues, brochures, art work,
photographs and advertising materials held by Seller relating to the items
listed above.
For the purposes of this Agreement, the term "WNIM(R) product line"
shall include, without limitation, the products designated as "WNIM(R)+" and
"WNIM(R)II."
1.2 Purchase Price. The consideration to be paid for the
Purchased Assets (the "Purchase Price") shall be paid as follows:
(a) upon the execution of this Agreement, Buyer shall pay to
Seller the sum of $200,000; and
(b) (i) on August 15, 1994, if the shareholders of Gateway
have not approved the transactions contemplated by that certain Asset Purchase
Agreement dated as of June 14, 1994 (the "Asset Purchase Agreement") on or
before such date, or (ii) if the Gateway shareholders have approved such
transactions on or before August 15, 1994, upon the Closing as defined in the
Asset Purchase Agreement (the "Closing"), Buyer shall pay to Seller the sum of
$200,000.
In addition to the foregoing, in the event either (A) Buyer fails to
consummate the Closing without good cause, (B) Seller
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terminates the Agreement pursuant to 9.1(c), or (C) either Buyer or Seller
terminate the Agreement pursuant to 9.1(d), then the Purchase Price shall be
increased by, and Buyer shall promptly pay to Seller the sum of $400,000.
"Good cause" shall mean any termination of the Asset Purchase Agreement by
Buyer either (X) pursuant to Sections 9.1(b) or (h) so long as such termination
is based upon the gross negligence, recklessness, intentional misrepresentation
or fraud of Seller, or (Y) pursuant to Sections 9.1(f) or (g) thereof without
qualification.
All payments required by this Section 1.2 shall be made by wire
transfer to an account designated in writing by Seller.
1.3 Additional Purchases. In the event Buyer desires from time to
time between the date hereof and Closing to purchase Inventory in addition to
the Selected Inventory, Buyer shall forward to Seller a written request setting
forth the specific items of Inventory it desires to purchase. Seller's
approval of such request shall not be unreasonably conditioned, withheld or
delayed. The price for all such additional purchases shall be no greater than
net book value of the item of Inventory purchased.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Disclosure Schedule previously delivered by
Seller to Buyer (the "Disclosure Schedule"), which Disclosure Schedule
contains, with respect to each matter disclosed therein, a specific reference
to the Section of this Agreement to which such matter relates, Seller
represents and warrants to Buyer that:
2.1 Organization; Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
California and has corporate power and authority to own all of its properties
and assets.
2.2 Authority Relative to this Agreement. Seller has corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery by
Seller of this Agreement, and the consummation by it of the transactions
contemplated by this Agreement, have been duly authorized by all necessary
corporate action on the part of Seller and no other corporate proceedings on
the part of Seller will be necessary with respect hereto. Assuming that Buyer
has duly authorized the execution and delivery of this Agreement, this
Agreement constitutes the valid and binding obligation of Seller, enforceable
in accordance with its terms except as the same may be limited by (a) any
applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting
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creditors' rights generally or (b) general principles of equity, whether
considered in a proceeding in equity or at law.
2.3 Consents and Approvals. There is no requirement applicable to
Seller to make any filing with, or to obtain any permit, authorization,
consent, waiver or approval of any Federal, state, local or foreign government,
authority, agency, department, bureau, commission, court or other body,
officer, instrumentality or entity, and any arbitrator with authority to bind a
party at law (a "Governmental Entity") as a condition to the execution and
delivery by Seller of this Agreement or the lawful consummation of the
transactions contemplated by this Agreement. There is no requirement that any
party to any agreement filed or required to be filed by Seller as an exhibit to
Seller's Annual Report on Form 10-KSB for its fiscal year ended December 31,
1993 or any subsequent report required to be filed by Seller under the
Securities Exchange Act of 1934 (a "Seller Agreement") consent to the execution
and delivery of, or the consummation of the transactions contemplated by, this
Agreement.
2.4 Non-Contravention. The execution and delivery by Seller of
this Agreement does not, and the consummation of the transactions contemplated
by this Agreement does not violate, conflict with, result in a breach of,
result in or constitute a default (or an event which, with the giving of notice
or lapse of time or both, would constitute a default) under, or result in the
cancellation or unilateral modification or amendment of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any mortgage, lien, pledge, charge, claim,
security interest or encumbrance of any kind (a "Lien") upon any of the
Purchased Assets under any of the terms, conditions or provisions of (a) the
Articles of Incorporation or Bylaws of Seller, (b) any note, bond, mortgage,
indenture, deed of trust, license, agreement, lease or other instrument,
obligation or arrangement to which Seller is a party or to which Seller or any
of the Purchased Assets may be subject, or (c) any order, writ, judgment,
injunction, decree, citation, award, ruling, law, statute, rule or regulation
(individually a "Law" and collectively, "Laws") applicable to Seller or any of
the Purchased Assets. The execution, delivery and performance of this
Agreement by Seller or Buyer, or both, do not give rise to any rights on the
part of any shareholder of Seller pursuant to Seller's shareholder rights plan.
2.5 Compliance with Laws. To Seller's knowledge, Seller has
operated in compliance in all material respects with all applicable Laws
including, without limitation, those related to antitrust and trade matters,
civil rights, public health and safety, worker health and safety and labor and
nondiscrimination. Seller has not received any written notice alleging
non-compliance with any Law, which noncompliance could have a material adverse
effect on the
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Purchased Assets or the ability of Seller to consummate the transactions
contemplated hereby.
2.6 Litigation.
(a) Seller has not received written notice of the filing or
commencement of (including, without limitation, service of process with respect
to) any actions, suits, claims, investigations or proceedings (legal,
administrative or arbitrative) pending or, to Seller's knowledge, threatened
against or affecting Seller or which relate to or may affect the Purchased
Assets, whether at law or in equity and whether civil or criminal in nature,
before any Governmental Entity, nor are there any valid and binding judgments,
decrees or orders of any Governmental Entity outstanding against or affecting
Seller or which relate to or may affect the Purchased Assets, or which seek
specifically to prevent, restrict or delay consummation of the transactions
contemplated by this Agreement. There are no unsatisfied valid and binding
judgments of record relating to or affecting the Purchased Assets.
(b) Seller has not admitted in writing its inability to pay
its debts generally as they become due, filed or consented to the filing
against it of a petition in bankruptcy or a petition to take advantage of any
insolvency act, made an assignment for the benefit of creditors, consented to
the appointment of a receiver for itself or for the whole or any substantial
part of its property, or had a petition in bankruptcy filed against it, been
adjudicated a bankrupt, or filed a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other similar Law of any
jurisdiction.
2.7 Title to and Condition of Properties. Seller has, and hereby
transfers to Buyer good and marketable title to all of the Purchased Assets, as
well as to any Inventory purchased by Buyer other than the Selected Inventory
(the "Additional Inventory"), free and clear of any Liens. To Seller's
knowledge, Seller has physical custody of the tangible personal property
included in the Purchased Assets. To Seller's knowledge, the tangible personal
property which is a part of the Purchased Assets or Additional Inventory is in
all material respects good condition and repair, except with respect to
ordinary wear and tear and has been properly maintained in all material
respects in the ordinary course of business with routinely scheduled
maintenance and, to Seller's knowledge, is suitable for the uses for which
intended.
2.8 Inventory. The Disclosure Schedule sets forth a list of the
Inventory as of May 13, 1994, which list is complete as of such date except for
deviations having an aggregate book value not exceeding $50,000, and a list of
locations of Inventory not located at Seller's office listed in Section 6.1.
Except for Inventory having an aggregate book value not exceeding $750,000, the
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Inventory (a) is usable or saleable in the ordinary course of Seller's business
as conducted in 1993. To Seller's knowledge, the Inventory is carried on the
books of Seller at a valuation not in excess of the lower of cost or market
determined in accordance with GAAP. Each product which comprises the WNIM(R)
product line performs in all material respects in accordance with the
documentation and other written material used in connection therewith and is
free of known defects in programming and operation.
2.9 Intellectual Property. Seller owns all of the Intellectual
Property free and clear of any Liens. No Person has the right to sell, license
or otherwise disclose the Intellectual Property other than Intellectual
Property which is unique to products described in Seller's Annual Report on
Form 10-KSB for its fiscal year ended December 31, 1993 as scheduled to be made
available in 1994 (the "Existing Products Intellectual Property") to any Person
except pursuant to an agreement listed in the Disclosure Schedule and except
pursuant to single use licenses (express or implied) granted by Seller to its
customers. To Seller's knowledge, no third party is infringing upon the rights
of Seller in the Existing Products Intellectual Property, except that Seller
has granted single use licenses (express or implied) to its customers. To
Seller's knowledge, all registrations and certificates issued by any
governmental agency relating to the Existing Products Intellectual Property are
valid and subsisting in all material respects and have been properly maintained
in all material respects.
2.10 Software.
(a) [Reserved.]
(b) To Seller's knowledge, the released Software other than
Software unique to products described in Seller's Annual Report on Form 10-KSB
for its fiscal year ended December 31, 1993 as scheduled to be made available
in 1994 (the "Existing Products Software") performs in all material respects in
accordance with the documentation and other written material used in connection
with such Software and is free of defects in programming and operation in all
material respects, is in machine-readable form, contains all current revisions
of such Software and includes all computer programs, materials, tapes,
know-how, object and source codes, other written materials, know-how and
processes related to such Software.
(c) To Seller's knowledge, no employee of Seller is in
material default under any term of any employment contract, agreement or
arrangement relating to the Existing Products Software or noncompetition
arrangement, or any other agreement or any restrictive covenant relating to the
Existing Products Software or its development or exploitation.
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(d) All right, title and interest in and to the Software is
owned by Seller, free and clear of all Liens, and no Person other than Seller
has any interest in the Software including, without limitation, any security
interest, license, contingent interest or otherwise, except pursuant to single
use licenses granted by Seller to its customers. To Seller's knowledge, no
event has occurred which would require the material release or disclosure of
source code relating to any Existing Products Software pursuant to the terms of
any escrow agreement. To Seller's knowledge, Seller's development, use, sale
or exploitation of the Existing Products Software does not violate any material
rights of any other Person. To Seller's knowledge, Seller does not have any
obligation to compensate any Person for the development, use, sale or
exploitation of the Existing Products Software nor has Seller granted to any
Person other than the Persons listed in the Disclosure Schedule any license,
option or other rights to develop, use, sell or exploit in any manner the
Existing Products Software, whether requiring the payment of royalties or not,
except that Seller has granted single use licenses to its customers.
(e) To Seller's knowledge, Seller has kept secret and has not
made any material disclosure of the source code for the Existing Products
Software to any Person other than certain employees and subcontractors of
Seller who are subject to the terms of a binding confidentiality agreement with
respect thereto.
2.11 Finders. No broker, finder or investment banker, other than
Houlihan, Lokey, Xxxxxx & Xxxxx Capital is entitled to any fee or commission
from Seller for services rendered on behalf of Seller in connection with the
transactions contemplated by this Agreement. Seller shall be solely
responsible for any fees or commission payable to Houlihan, Lokey, Xxxxxx &
Zukin Capital.
2.12 Full Disclosure. None of the representations and warranties
of Seller made in this Agreement, the Disclosure Schedule, any exhibit or
schedule attached to this Agreement, or any certificate delivered by or on
behalf of Seller to Buyer pursuant to this Agreement, contains any untrue
statement of a material fact or, to Seller's knowledge, omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.1 Organization; Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of the
Commonwealth of Virginia and has corporate power and authority
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to own all of its properties and assets and carry on its business as it is
presently being conducted.
3.2 Authority Relative to this Agreement. Buyer has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated to be
consummated by it. The execution and delivery of this Agreement by Buyer and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Buyer (including, without limitation, proceedings of the Board
of Directors or shareholders of Buyer) are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Buyer and, assuming the due
authorization, execution and delivery hereof by Seller, constitutes the legal,
valid and binding obligation of Buyer enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the enforceability of
creditors' rights generally and by equitable principles of general
applicability.
3.3 Consents and Approvals. There is no requirement that any
party to any contract, agreement or other commitment, whether written or oral,
into which Buyer has entered or by which it is bound or to which any of its
assets is subject, consent to the execution and delivery of, or the
consummation of the transactions contemplated by this Agreement.
3.4 Non-Contravention. The execution and delivery of this
Agreement by Buyer does not, and the performance of this Agreement by Buyer
will not (a) conflict with or violate the Articles of Incorporation or Bylaws,
in each case as amended or restated, of Buyer, (b) conflict with or violate any
federal, state, foreign or local Law applicable to Buyer, or by which any of
Buyer's properties is bound or to which any of its properties is subject, or
(c) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
or require payment under, or result in the creation of a Lien on any of the
properties or assets of Buyer pursuant to any contract, agreement or other
commitment, whether written or oral, into which Buyer has entered or by which
it is bound or to which any of its assets is subject.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Facilities. Seller grants to Buyer, at Seller's expense,
unrestricted access to and a license to use its facilities located
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at 0000 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx and such other real property normally
used by Seller in conducting its business from the date hereof until 30 days
after the earlier to occur of (a) the date of Closing or (b) the termination of
the Asset Purchase Agreement but, in any event, such right shall not terminate
before August 26, 1994 (the "License Termination Date"). Seller shall obtain,
at its sole expense, any landlord consents necessary to effectuate the
foregoing. Seller shall bear the cost of utilities for such real property;
provided, however, that the cost of utilities shall be within normal and
customary amounts and that Buyer shall bear the cost of telephone calls made
after the date hereof by employees or agents of Buyer in connection with
Buyer's efforts to sell the Inventory. Seller acknowledges and agrees that
Buyer is not assuming any liabilities or obligations under any lease or other
agreement affecting or relating to any such real property. Seller represents
and warrants to Buyer that Buyer shall have the right to possession and quiet
enjoyment of the facilities described in this Section 4.1 through the License
Termination Date.
4.2 Certain Licenses. Seller hereby grants to Buyer a
royalty-free, perpetual and unlimited license to use:
(a) the name "Gateway" and any other trademarks, trade names,
service marks, insignias or logos associated with the Selected Inventory and
the Additional Inventory. Seller grants to Buyer a royalty-free, perpetual and
unlimited license to reproduce and distribute any user manuals, product
brochures, product applications and any and all other documentation relating to
the Selected Inventory and the Additional Inventory (the "Documentation") and
the right to make derivative versions of any Documentation; provided, however,
that Buyer shall not have the right to use the "Gateway" name with respect to
stationery, checks, contracts, purchase orders, product labels, service
identifications, customer agreements and other business forms which could
result in a legal commitment of Seller or any of its affiliates, unless Buyer
sticks Buyer's name over the "Gateway" designation or uses another comparable
method it may select to negate the suggestion of affiliation between Buyer and
Seller or eliminate the possibility of confusion of source;
(b) all software, and software modules and components in both
object and source code, which include all interim, experimental or
developmental codes used in the development of source code, and any
enhancements, modifications, program interfaces, current and archival versions
of patches and bug fixes, flow charts, input/output formats, drawings,
specifications, user's manuals and technical and other documentation,
instructions, designs, data and algorithms, whether in electronic, optical,
magnetic, microfiche, hard copy or other form (including, without limitation,
encrypted on microchips), and all object code, microcode and source code
contained in or whose use is necessary in
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connection with the Selected Inventory and the Additional Inventory; and
(c) all of the intellectual property of Seller useful in
connection with servicing, repairing, refurbishing and remanufacturing each
item of Additional Inventory and each component thereof.
4.3 Public Announcements. The parties will consult with one
another before issuing any press releases or otherwise making any public
statements with respect to this Agreement and the transactions contemplated
hereby and will not issue any such press release or make any such public
statement without the written consent of the other; provided, however, that
Buyer or Seller may make such disclosure as it determines, in its sole
discretion, is required by Law or by the National Association of Securities
Dealers, Inc.
4.4 Further Assurances. Seller will use its reasonable best
efforts to implement the provisions of this Agreement, and for such purpose, at
the request of Buyer will, at or after the date hereof, without further
consideration and at Buyer's expense, promptly execute and deliver such
additional documents as Buyer may reasonably deem necessary or desirable in
order to consummate more effectively the transactions contemplated hereby and
to vest in Buyer title to the Purchased Assets free and clear of any Liens.
4.5 Noncompetition and Nonsolicitation Covenants.
(a) For a period of three years after the date hereof, Seller
shall not, directly or indirectly, own, manage, operate or control or
participate in the ownership, management, operation or control of any business,
regardless of legal form, engaged in a business regarding the design,
manufacture or sale of products that compete, directly or indirectly, with the
WNIM(R) product line.
(b) From and after the date hereof, Seller shall not sell,
license or otherwise disclose the customer list for the WNIM(R) product line to
any Person.
(c) For a period of three years after the date hereof,
neither Seller nor any of its affiliates will, directly or indirectly, employ
or solicit or offer employment to any employee or independent contractor of
Buyer who has terminated his or her employment or contract without the consent
of Buyer within 180 days of such solicitation or offer.
(d) Seller acknowledges and agrees that the remedy at law for
any breach of this Section will be inadequate and that Buyer, in addition to
any other relief available to it, shall be entitled to temporary and permanent
injunctive relief without the
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necessity of proving actual damage. In the event the provisions of this
Section are deemed to exceed the limitation provided by applicable Law, the
parties agree that such provisions shall be reformed to set forth the maximum
limitations permitted. In the event Seller breaches any provision of this
Section or acts or fails to act in any manner which causes Buyer to seek
judicial relief or a judicial remedy and Buyer is the prevailing party (in
whole or in part), Buyer shall be entitled to the payment upon demand of all
costs, including reasonable legal fees and expenses, from Seller.
4.6 Taxes and Recording Fees. All sales taxes incurred in
connection with this Agreement and the transactions contemplated by this
Agreement will be borne by Buyer. All other transfer taxes and fees, if any,
incurred in connection with this Agreement and the transactions contemplated by
this Agreement will be borne by the party obligated by law to pay such expense,
or if there is no law obligating a party to pay such, by Seller and Buyer
equally. Buyer will file all necessary tax returns and other documents
required to be filed with respect to all such taxes and filing fees. Seller
will cooperate with Buyer to the extent necessary to enable it to make such
filings and join in the execution of any tax returns or other documents as may
be necessary to enable Buyer to comply with the provisions of this Section.
4.7 Proration of Payments. Any personal property taxes and other
similar payment obligations shall be prorated between the parties hereto on the
basis of the actual number of days of applicable use.
4.8 Allocation of Purchase Price. Seller and Buyer agree that in
reporting the transactions contemplated by this Agreement to the Internal
Revenue Service, as is required by Section 1060 of the Internal Revenue Code,
they will cooperate with each other in meeting the requirements of the Internal
Revenue Code and the regulations promulgated thereunder.
4.9 Materials Received After Closing. Following the date hereof
Seller promptly shall deliver to Buyer all mail, telegrams and other
communications it receives relating to the Purchased Assets.
4.10 Confidentiality. In the event the Closing does not occur,
Buyer agrees to keep confidential all information (including, but not limited
to, all technical data and business reports) concerning the Purchased Assets
(as defined in the Asset Purchase Agreement), and all documents and materials
which contain or reflect such information (herein collectively referred to as
the "Evaluation Material"). The term "Evaluation Material" shall not include
information which (i) was or becomes generally available to the public other
than as a result of a disclosure by the Buyer, or
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by Buyer's employees, agents or advisors (collectively, "Related Persons") or
(ii) was or becomes available to Buyer on a non-confidential basis from a
source other than Seller or its Related Persons, provided that such source
lawfully possessed such information and was under no confidentiality obligation
to Seller.
4.11 Certain Returns. In the event the fulfillment of a warranty
obligation of Seller necessitates its purchase of a product from Buyer, Buyer
shall sell such product to Seller at a price equal to (i) the net book value
thereof if such product is part of the Inventory, or (ii) Buyer's actual cost
of such product if not part of the Inventory.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification. Seller hereby indemnifies and holds Buyer,
its affiliates, directors and officers, and the respective heirs,
administrators, successors and assigns of each of the foregoing, harmless from
any damage, loss, liability, judgment, fine, penalty, assessment, settlement,
cost or expense including, without limitation, reasonable expenses of
investigation, reasonable attorneys' fees and other reasonable legal costs and
expenses incident to any of the foregoing or to the enforcement of this
Section, whether or not suit is brought or, if brought, whether or not such
suit is successful, in whole or in part arising out of or relating to:
(a) any misrepresentation or breach of a representation or
warranty made by Seller in this Agreement, the Disclosure Schedule, any exhibit
or schedule attached to this Agreement, or any certificate delivered by or on
behalf of Seller to Buyer pursuant to this Agreement;
(b) the breach of any covenant or agreement of Seller
contained in this Agreement;
(c) any liability of Seller;
(d) the conduct of the business of Seller prior to the date
hereof;
(e) any and all claims made relating to provisions of the
"bulk sales laws" of any state or other jurisdiction which may be applicable to
the transactions contemplated hereby;
(f) any claim for injury to person or property, regardless of
when made or asserted, which arises out of or is based upon any express or
implied representation, warranty, agreement or guarantee made by Seller, or
alleged to have been made
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by Seller, or which is imposed or asserted to be imposed by operation of Law in
connection with any prior sales of goods or services by Seller;
(g) any claim for implied warranty arising out of the sale of
any Purchased Assets by Buyer; and
(h) any Legal Action by a shareholder of Seller (either
brought derivatively, on behalf of Seller or on behalf of said shareholder) for
relief based upon the entry by Seller into this Agreement or the WNIM Agreement
or otherwise affecting the Purchased Assets or the transactions contemplated by
this Agreement.
5.2 Limitations on Liabilities.
(a) Except as provided in this Article V, Buyer shall not be
entitled to any monetary recovery or remedy under any law or principle of law
with respect to any breach of any representation or warranty of Seller
contained in this Agreement, the Disclosure Schedule, and exhibit or schedule
attached to this Agreement. Notwithstanding the provisions of Section 5.1,
Buyer shall not be entitled to be indemnified thereunder:
(i) until such time as the sum of the amounts to
which Buyer is entitled under Section 5.1 hereof and under Article VIII of the
Asset Purchase Agreement exceeds $25,000;
(ii) with respect to each provision of this
Agreement other than the first sentence of Section 2.10(b), in an amount in
excess of the aggregate amount paid by Buyer under Sections 1.2 and 1.3 hereof;
and
(iii) with respect to the first sentence of Section
2.10(b), in an amount in excess of $150,000.
Notwithstanding any other provision of this Agreement to the contrary, the
total indemnification to which Buyer shall be entitled pursuant to Section 5.1
shall not exceed the total amount paid to Seller pursuant to Section 1.2 of
this Agreement.
5.3 Third Party Claims. The obligations and liabilities of Seller
to a party seeking indemnification (an "Indemnified Party") under this Article
V with respect to claims resulting from the assertion of liability by third
parties shall be subject to the following conditions:
(a) The Indemnified Party shall give prompt written notice to
Seller of the nature of the assertion of liability by a third party and the
amount thereof to the extent known; provided, however, that the failure of the
Indemnified Party to give notice
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as provided herein shall not relieve Seller of such party's obligations under
this Article V.
(b) Except as provided in Section 5.3(c), if any action, suit
or proceeding (a "Legal Action") is brought by a third party against an
Indemnified Party, and if Seller has acknowledged in writing its obligation to
indemnify the Indemnified Party hereunder and given notice, within 30 days
after receipt of a notice given pursuant to Section 5.3(a) of its intention to
assume such defense, Seller shall be entitled to defend such Legal Action by
counsel reasonably acceptable to the Indemnified Party, and such defense shall
include all appeals or reviews which counsel for Seller shall deem appropriate.
Until Seller shall have assumed the defense of any such Legal Action, all legal
or other expenses reasonably incurred by the Indemnified Party shall be borne
by Seller. If there exists or is reasonably likely to exist a conflict of
interest that would make it inappropriate in the reasonable judgement of the
Indemnified Party for the same counsel to represent both the Indemnified Party
and Seller, then the Indemnified Party shall be entitled to retain its own
counsel, in each jurisdiction for which the Indemnified Party determines
counsel is required, at the expense of Seller.
(c) In addition to the Indemnified Party's right to
assume the defense of a Legal Action under Section 5.3(b), where Seller is
obligated to assume the defense of a Legal Action and has not breached such
obligation, the Indemnified Party may nonetheless at any time elect, by written
notice, to assume the defense of such Legal Action by counsel reasonably
acceptable to Seller. In such event, the Indemnified Party shall bear all
expenses thereafter incurred by it in defending such Legal Action but Seller
shall bear the cost of any damage, loss, liability, judgment, fine, penalty,
assessment or settlement arising out of such Legal Action.
(d) In any Legal Action initiated by a third party and
defended by Seller (i) the Indemnified Party shall have the right to be
represented by advisory counsel and accountants, at its own expense, (ii)
Seller shall keep the Indemnified Party fully informed as to the status of such
Legal Action at all stages thereof, whether or not the Indemnified Party is
represented by its own counsel, (iii) the Indemnified Party shall make
available to Seller, and its attorneys and accountants, all books and records
of the Indemnified Party relating to such Legal Action, (iv) the parties shall
render to each other such assistance as may be reasonably required in order to
ensure the proper and adequate defense of such Legal Action, and (v) Seller
shall not make any settlement of any claim without the written consent of the
Indemnified Party. Without limiting the generality of the foregoing, it shall
not be deemed unreasonable to withhold consent to a settlement involving
injunctive or other equitable relief against the Indemnified Party or its
assets, employees or business.
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(e) In any Legal Action initiated by a third party and
defended by the Indemnified Party pursuant to Section 5.3(b) or (c), (i) Seller
shall have the right to be represented by advisory counsel and accountants, at
its own expense, (ii) the Indemnified Party shall keep Seller fully informed as
to the status of such Legal Action at all stages thereof, whether or not Seller
is represented by its own counsel, (iii) Seller shall make available to the
Indemnified Party, and its attorneys and accountants, all books and records of
Seller relating to such Legal Action, (iv) the parties shall render to each
other such assistance as may be reasonably required in order to ensure the
proper and adequate defense of such Legal Action, and (v) the Indemnified Party
shall not make any settlement of any claim without the written consent of
Seller, which shall not be unreasonably withheld. Without limiting the
generality of the foregoing, it shall not be deemed unreasonable to withhold
consent to a settlement involving injunctive or other equitable relief against
Seller or its assets, employees or business.
5.3 Survival; Investigations. The representations, warranties,
covenants and agreements of Seller contained in this Agreement, the Disclosure
Schedule, any exhibit or schedule attached to this Agreement, or any
certificate delivered by or on behalf of Seller to Buyer pursuant to this
Agreement shall survive the consummation of the transactions contemplated
hereby (i) with respect to the first sentence of Section 2.7, the first
sentence of Section 2.9 and the first sentence of Section 2.10(d), until the
second anniversary of the Closing (or, if the Closing does not occur, the
second anniversary of the date hereof), and (ii) with respect to all other
representations, warranties, covenants and agreements, until the date which is
six months after the Closing (or, if the Closing does not occur, the date which
is six months after the date hereof) (each such date referred to in clauses (i)
and (ii), a "Survival Date"), at which time they shall lapse; provided,
however, that Buyer shall be entitled to indemnification with respect to a
claim only if a Legal Action with respect to such claim is commenced on or
before the applicable Survival Date; and, provided, further, that the rights
and obligations of the parties set forth in Sections 1.2, 1.3, 4.1 through
4.11, inclusive shall survive the consummation of the transactions contemplated
hereby. Except as provided in the "however" clause of the previous sentence,
the representations and warranties of Buyer hereunder shall terminate on the
date of Buyer's payment pursuant to Section 1.2(b). No investigation by Buyer,
heretofore or hereafter made, shall affect the survival of any representation
and warranty of Seller contained herein.
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ARTICLE VI
GENERAL PROVISIONS
6.1 Notices. All notices and other communications required or
permitted to be given by this Agreement shall be in writing and shall be deemed
duly given (a) one day after delivery, if delivered personally, (b) seven days
after posting, if mailed by registered or certified first class air mail
(return receipt requested) or (c) one day after dispatch, if sent by telex or
telefax (with an answer back from the receiving party and a confirmatory
mailing as provided in (b) by the sender) to the parties at the following
addresses (or at such other address for the party as shall be specified by like
notice):
(i) If to Buyer:
Microdyne Peyton Street Corporation
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx
President
(ii) If to Seller:
Gateway Communications, Inc.
0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Ph.D.
Chairman of the Board,
Chief Executive Officer
and President
with a copy to:
Steel Partners II, L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, X.X. 00000
Attention: Xx. Xxxxxx X. Xxxxxxxxxxxx
Rejection or other refusal to accept, or the inability to deliver
because of a changed address of which no notice was given, shall not affect the
date of such notice sent in accordance with the foregoing provisions.
6.2 Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement. Unless the context otherwise requires as used herein, words
in the singular shall include words
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in the plural and vice versa, words in one gender shall include words in the
other gender and the word "Person" shall include individuals, trusts, estates,
partnerships, corporations and other business entities. Time is of the essence
of this Agreement.
6.3 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
6.4 Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, and their respective successors and
permitted assigns, and the provisions of Article V shall inure to the benefit
of the indemnified parties referred to therein; provided, however, that neither
this Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any of the parties hereto without the prior written consent of the
other parties.
6.5 Entire Agreement. This Agreement (including all exhibits and
schedules hereto and the Disclosure Schedule) constitutes the entire agreement
and supersede all other prior agreements and understandings, both written and
oral, between the parties with respect to the transactions contemplated by this
Agreement. There are no restrictions, agreements, promises, warranties,
covenants or undertakings with respect to the transactions contemplated by this
Agreement other than those expressly set forth therein.
6.6 Governing Law. This Agreement and the relationship between the
parties shall be governed in all respects by the Laws of the Commonwealth of
Virginia without regard to its Laws or regulations relating to conflicts of
Laws.
6.7 Benefits. Except as provided in Article V, this Agreement is not
intended to and shall not confer upon any other Person, other than the parties
hereto, any rights or remedies with respect to the subject matter hereof.
6.8 Severability. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not be affected thereby. To the extent permitted by applicable Law, each party
waives any provision of Law which renders any provision of this Agreement
invalid, illegal or unenforceable.
6.9 Relationship of the Parties. Nothing in this Agreement shall be
deemed to constitute a partnership, joint venture or other form of entity.
6.10 Knowledge. Whenever a representation or warranty is made herein
to Seller's knowledge, it means all facts and
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18
conditions referred to in such representation or warranty which are known by
the following individuals: Xxxxxxx X. Xxxxxxx, Xx X. Xxxxxxxxx, Xxxxxx X.
Xxxxxxxxxxxx, Xxxxxx X. Xxxxx, Xxxx Xxxxxx and each other present director,
officer or employee of Seller.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers.
GATEWAY COMMUNICATIONS, INC.
By: /S/ Xxxxxxx X. Xxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxx, Ph.D.
Chairman of the Board,
Chief Executive Officer
and President
MICRODYNE PEYTON STREET CORPORATION
By: /S/ Xxxxxxx X. Xxxxxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxxxxx
President
