<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO ________________ .
COMMISSION FILE NUMBER: 0-21044
UNIVERSAL ELECTRONICS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0204817
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
6101 GATEWAY DRIVE
CYPRESS, CALIFORNIA 90630
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 820-1000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Registrant's outstanding common stock
held by non-affiliates of the Registrant on February 26, 1999, determined using
the per share closing sale price thereof on the National Market of The Nasdaq
Stock Market of $12.125 on that date, was approximately $88,423,114.
As of February 26, 1999, 7,344,107 shares of Common Stock, par value
$.01 per share, of the Registrant were outstanding.
Pursuant to Rule 12b-25, the following items have been omitted from
this filing: Items 6, 7, 8, 14(a)(1), 14(a)(2) and Exhibits 11.1, 23.1 and 27.1.
------------------------
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's definitive Proxy Statement for its 1999
Annual Meeting of Stockholders to be held on June 8, 1999 are incorporated by
reference into Part III of this Form 10-K.
Except as otherwise stated,
the information contained in this Form 10-K is as of December 31, 1998.
Page 1 of 59
<PAGE> 2
PART I
ITEM 1. BUSINESS
BUSINESS OF UNIVERSAL ELECTRONICS INC.
Universal Electronics Inc. was incorporated under the laws of Delaware in 1986
and began operations in 1987. The principal executive offices of the Company are
located at 6101 Gateway Drive, Cypress, California 90630, and its telephone
number is (714) 820-1000. As used herein, the terms "Universal" and the
"Company" refer to Universal Electronics Inc. and its subsidiaries unless the
context indicates to the contrary.
Universal develops and markets easy-to-use, preprogrammed universal remote
controls principally for home video and audio entertainment equipment. The
Company sells and licenses its remote control products and proprietary
technologies to private label customers, original equipment manufacturers
("OEMs"), and companies involved in the subscription broadcast industry. The
Company also sells its remote control products internationally under the One For
All(R) brand name. In addition, the Company has licensed certain of its
proprietary technology and its One For All brand name to third parties who in
turn sell products directly to U.S. retailers. The Company also markets a line
of home safety and automation products under the Eversafe(R) brand name. Sales
of home safety and automation products have been primarily focused on the
domestic retail hardware, food and drug, and mass marketing distribution
channels.
GENERAL BUSINESS INFORMATION
Universal has developed a broad line of easy-to-use, preprogrammed universal
remote control products, capable of controlling from one to eight video and
audio devices, which are marketed principally for home video and audio
entertainment equipment through various channels of distribution, including
international retailers, private label customers, OEMs, cable operators and
others in the subscription broadcast industry. The Company believes that its
universal remote controls can operate virtually all infrared remote controlled
TV's, VCR's, cable converters, CD players, audio components and satellite
receivers, as well as most other infrared remote controlled devices worldwide.
The Company believes its remote control products incorporate certain significant
technological advantages. First, the Company has compiled an extensive library
of over 74,000 infrared codes, which the Company believes is larger than any
other existing library of infrared codes for the operation of home video and
audio devices sold worldwide. The Company's library is updated on a daily basis
to add infrared codes used in newly introduced video and audio devices. Second,
the Company's proprietary software and know-how permit infrared codes to be
compressed before being loaded into a Read Only Memory ("ROM"), Random Access
Memory ("RAM") or an electronically erasable ROM ("E2") chip. This provides
significant cost and space efficiencies that enable the Company to include more
codes in the limited memory space of the chip than are included in similarly
priced products of competitors. Third, the Company has developed a patented
technology that provides the capability to easily upgrade the memory of the
remote control by adding codes from its library that were not originally
included. This technology utilizes both RAM and E2 chip technologies.
PRODUCTS
Universal Remote Controls
The Company's family of universal remote controls covers a broad spectrum of
suggested prices and performance capabilities. The Company sells customized
products to retailers, consumer electronic accessory suppliers, private label
customers, OEMs, cable operators, and others in the subscription broadcast
industry for resale under their respective brand names. Prior to its
restructuring in 1997, the Company sold its
3
<PAGE> 3
remote controls through a number of retailers and service centers under the One
For All brand name and to cable operators under the Uniwand(R) brand name. The
Company's products are capable of controlling from one to eight video and audio
devices, including, but not limited to, TVs, VCRs, cable converters, CD players,
satellite receivers, laser disc players, amplifiers, tuners, turntables,
cassette players, digital audio tape players, and surround sound systems.
Each of the Company's remotes is designed to simplify the use of video and audio
devices. To appeal to the mass market, the number of buttons is minimized to
include only the most popular functions. The Company's universal remotes are
also designed for ease of initial set-up. For most of the Company's products,
the consumer simply inputs a four-digit code for each video or audio device to
be controlled. Each remote contains either a RAM, a ROM, or a combination of ROM
and E2 chips. The RAM and the ROM and E2 combination products allow the remote
to be upgraded with additional codes.
The Company introduced its first product, the One For All, in 1987. In the
International markets, One For All brand name products accounted for 23.1%,
18.4%, and 21.7% of the Company's sales for the years ended December 31, 1998,
1997 and 1996, respectively. The Company discontinued retail operations in North
America in 1997 (see also discussion at "1997 RESTRUCTURING").
Many of the Company's products include its patented and highly proprietary
"upgradable" feature. These products are capable of controlling five to eight
video and audio devices. Each of these products utilizes the Company's E2
technology and, as a result of other improvements, retains memory while changing
batteries which eliminates the inconvenience experienced by consumers of having
to set-up the remote control each time the batteries are changed.
By providing its remote control technology in many forms, including finished
remote control products, integrated circuits, or custom software packages, the
Company can meet the needs of its customers, enabling those who manufacture or
subcontract their manufacturing requirements to use existing sources of supply
and more easily incorporate the Company's technology. In addition, the Company's
products are easily customized to include the features important to cable
operators. These may include electronic program guides that enable consumers to
record programs for future viewing after identifying their selection in the
electronic program guide, the customer's unique brand name and logos as well as
special dedicated "tune-in" keys for selected premium channels such as HBO(R),
Showtime(R) and Encore(R). Such keys provide the Company's customer with the
added value of built-in advertising.
DISTRIBUTION AND CUSTOMERS
The Company's products are sold to a wide variety of customers in numerous
distribution channels. In the United States, the Company principally sells its
products and/or licenses its proprietary technology to subscription
broadcasting companies and to consumer electronics accessory manufacturers and
selected retailers for resale under their respective brand names. In addition,
the Company sells remote control products and licenses its proprietary
technologies to OEMs for packaging with their products. Internationally, the
Company sells remotes under the One For All brand name to retailers and to other
customers under private labels through its foreign subsidiaries and
distributors. The Company also sells its products to cable operators for sale or
rental to their subscribers. Finally, as a result of its 1997 restructuring, the
Company has licensed certain of its proprietary technology and its One For All
brand name and its Eversafe line of products to third parties who in turn sell
the products directly to United States retailers.
For the year ended December 31, 1998, sales to Media One accounted for
approximately 11.1% of the Company's net sales for the year. While management
considers the Company's relationships with each of its customers to be good, the
loss of any one key customer could have a material adverse effect on the
Company's results of operations.
4
<PAGE> 4
North American Retail
In December 1997, the Company announced its decision to discontinue its North
American Retail line of business. As the Company anticipated when it made its
announcement, the discontinuation occurred primarily during the first half of
1998 and was completed during the third quarter of 1998. During this transition,
the Company continued to support its retail customers by selling through its
remaining inventory of North American Retail remote control products.
Thereafter, in accordance with the Company's plan, the Company licensed certain
of its proprietary technology and its One For All trademark to a third party and
an overseas manufacturer, to enable them to supply several of these customers
with a limited number of remote control products on a direct import basis. See
also discussion at "1997 RESTRUCTURING."
International Retail
Throughout 1998, the Company continued its sales and marketing efforts in
Europe, Australia, Mexico and selected countries in East Asia and South America.
As part of these efforts, the Company has three foreign subsidiaries, One For
All B.V., a Netherlands company, One For All GmbH, established in Germany,
and One for All (UK) Ltd., in the United Kingdom. In the first quarter of 1998,
the Company, through its Netherlands subsidiary, acquired substantially all of
the remote control business of one of its distributors in the United Kingdom. In
addition to these subsidiaries, the Company utilizes third party distributors in
various European and South American countries and in Mexico. The Company's
Canadian sales have been impacted by the discontinuation discussed previously.
Private Label
As a supplier of technology to private label customers, the Company is able to
achieve greater distribution of its proprietary technology in the retail market,
both by distributing to additional retail outlets and by obtaining further
penetration in certain retail outlets also selling the Company's branded
products. During 1998, the Company continued its efforts to improve product
cycles and planning to better meet the needs of its customers.
Cable
During 1998, the Company continued to provide multiple system operators ("MSOs")
with customized remote controls to complement services offered to their
customers, such as the interactive electronic programming guide. The Company
also sells its remotes to manufacturers of cable converters for resale with
their products. The Company is continuing to expand its marketing efforts to
other MSOs providing cable services in the United States, Canada, Australia and
throughout Europe. In addition, the Company continues to improve on its
manufacturing process to increase cost savings and to provide more timely
delivery of its products to these cable customers.
The activities of the Company's existing customers can also provide additional
opportunities for the future. The Company has an existing agreement to supply
all the remotes, keyboards and other universal handheld devices to General
Instrument ("GI"), which in turn contracts with cable providers and others to
distribute these products along with its set-top boxes. The Company believes
that in 1999, GI signed a major supplier agreement with Tele-Communications,
Inc. ("TCI"), in which GI will exclusively supply remote controls, keyboards and
other devices yet to be determined to TCI through the year 2004.
OEM
During 1998, the Company continued pursuing a further penetration of the OEM
market in the Far East and Europe. Since 1993, the Company has been working with
a major Japanese supplier of dedicated remote controls to large consumer
electronics manufacturers, which the Company believes has enabled it to reach a
much larger audience of OEM customers with whom the Company does business.
5
<PAGE> 5
CONSUMER SERVICE AND SUPPORT
Throughout 1998, the Company continued its strategy to review its customer
support program and modified its service "help line" such that the majority of
calls received are directed through its automated "conversant" system. Live
agent help is still available in certain circumstances. In 1999, the Company
will continue to review these programs to determine their value in enhancing and
improving the sales of the Company's products. As a result of this continued
review, some or all of these programs may be modified or discontinued in the
future and new programs may be added.
RAW MATERIALS AND DEPENDENCE ON SUPPLIERS
The Company utilizes third-party manufacturers in the Far East, Mexico and the
United States to produce its remote control products. The number of third party
suppliers that provided the Company in excess of 10% of the Company's remote
control products were three, four and three for 1998, 1997 and 1996,
respectively. As in the past, the Company will continue to evaluate alternative
and additional sources of supply.
Commencing in 1996, the Company began a program of diversification of suppliers
and maintenance of duplicate tooling for its products. This program has allowed
the Company to stabilize its source for products and negotiate more favorable
terms with its suppliers. In addition, the Company generally uses standard parts
and components, which are available from multiple sources. The Company recently
developed a reliable second source for integrated circuit chips, the potential
for manufacturing and shipping delays and the need to maintain additional
inventory of these component parts as safety stock by purchasing some of its
chips from a variety of sources.
PATENTS, TRADEMARKS AND COPYRIGHTS
The Company owns a number of United States and foreign patents relating to its
products and technology and has filed applications for other patents that are
pending and has obtained copyright registration for various of its proprietary
software and libraries of infrared codes. The lives of the Company's patents
range from eight to 17 years. While the Company follows the practice of
obtaining patents or copyright registration on new developments whenever
advisable, in certain cases, the Company has elected common law trade secret
protection in lieu of obtaining such protection. In the Company's opinion,
engineering and production skills and experience are of more importance to its
market position than are patents and copyrights. The Company further believes
that none of its business is dependent to any material extent upon any single
patent or trade secret or group of patents or trade secrets. The names of most
of the Company's products are registered or are being registered as trademarks
in the United States Patent and Trademark Office and in most of the other
countries in which such products are sold. These registrations are valid for a
variety of terms ranging from ten to 20 years, which terms are renewable as long
as the trademarks continue to be used. Management regularly renews those
registrations deemed by them to be important to the Company's operations.
SEASONALITY
Prior to the discontinuation of the Company's North American retail line, the
majority of the Company's sales were to retailers either directly under its One
For All brand name or indirectly through its private label and OEM customers.
The Company has, accordingly, in the past, experienced stronger demand for its
products in the third and fourth calendar quarters rather than in the first
half of the year as retailers purchase remote controls prior to the holiday
selling season. Retail, private label and to a lesser degree OEM customers
generally commit to carry new and existing products for the year in the first
and second quarters and initial manufacturing and deliveries take place in the
second and third quarters. Generally, sales to private label customers peak in
the third quarter and branded product sales to retailers peak in the fourth
quarter.
With the discontinuation of the Company's North American retail line and the
increasing significance of the Company's other lines of business including
subscription broadcasting and OEM, the seasonality effect on the Company's
business has lessened. See "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - NOTE 17" for further details
regarding the quarterly results of the Company.
6
<PAGE> 6
BACKLOG
As of December 31, 1998, the Company had backlog orders representing
approximately $14.1 million in net sales compared to approximately $14.8 million
in net sales at December 31, 1997. Although the Company believes current orders
are firm and expects that substantially all of the backlog will be shipped in
1999, there can be no assurance that such orders will be shipped. The Company
believes that backlog is not a meaningful indicator of its future performance.
COMPETITION
The Company's principal competitors in the international retail and private
label markets for universal remote controls are currently Philips, RCA and Sony.
The Company's primary competitors in the OEM market are the original equipment
manufacturers themselves. In the subscription broadcasting business, the Company
competes with U.S. Electronics and ICX, two privately-held remote control
manufacturers, and several of the larger set-top manufacturers, including
General Instrument Corp, and Scientific-Atlanta Inc. The Company has a small
share of the home safety and automation market, which consists of a few large
and many small competitors operating in relatively small markets. The Company
competes in its markets on the basis of product quality, product features,
price, and customer and consumer support. The Company believes that it will need
to continue to introduce new and innovative products to remain competitive and
to obtain and retain competent personnel to successfully accomplish its future
objectives. Certain of the Company's competitors have significantly larger
financial, technical, marketing and manufacturing resources than the Company,
and there can be no assurance that the Company will remain competitive in the
future.
ENGINEERING, RESEARCH AND DEVELOPMENT
During 1998, the Company's engineering efforts focused on modifying existing
products and technology to improve their features and lower their costs, and to
develop measures to protect the Company's proprietary technology and general
know-how. In addition to taking steps in an attempt to control costs by
improving the efficiency of its activities and systematizing its operations, the
Company continued to update its library of infrared codes daily to include codes
for features and devices newly introduced both in the United States and
internationally and for uncommon devices. New infrared codes are identified by
the Company through many of its activities. The Company also continually
explores ways to improve its software to preprogram more codes into its memory
chips and to ease the upgrading of its remote control products.
Also during 1998, the Company's research and development efforts continued to
focus on the development of new and innovative remotes with enhanced
capabilities, as well as new applications of remote control technology. Work on
new applications to be used in combination with personal computers and the
internet continued as the Company increased the number of customers with whom it
worked in this area.
The Company is also exploring various opportunities to supply remote controls
for the operation of additional electronic and other devices in the home using
infrared signals, as well as combinations of infrared signals, radio
frequencies, household electrical circuits and telephone lines. Company
personnel are actively involved with various industry organizations and bodies,
which are in the process of setting standards for infrared, radio frequency,
power line, telephone and cable communications and networking in the home. There
can be no assurance that any of the Company's research and development projects
will be successfully completed.
The Company's engineering, research and development departments, located in
Cypress, California, had approximately 53 full-time employees at December 31,
1998. The Company's expenditures on engineering, research and development in
1998, 1997 and 1996 were $4.0 million, $5.1 million, and $2.6 million,
respectively, of which approximately $1,230,000, $1,072,000, and $288,000,
respectively, was for research and development.
7
<PAGE> 7
ENVIRONMENTAL MATTERS
The Company believes it has materially complied with all currently existing
federal, state and local statutes and regulations regarding environmental
standards and occupational safety and health matters to which it is subject.
During the years ended December 31, 1998, 1997 and 1996, the amounts incurred in
complying with federal, state and local statutes and regulations pertaining to
environmental standards and occupational safety and health laws and regulations
did not materially affect the Company's earnings or financial condition.
However, future events, such as changes in existing laws and regulations or
enforcement policies, may give rise to additional compliance costs that could
have a material adverse effect upon the capital expenditures, earnings or
financial condition of the Company.
EMPLOYEES
At December 31, 1998, the Company employed approximately 179 employees, of whom
53 were in engineering, research and development, 34 in sales and marketing, 40
in consumer service and support, 28 in operations and warehousing and 24 in
executive and administrative staff. None of the Company's employees is subject
to a collective bargaining agreement or is represented by a union. The Company
considers its employee relations to be good.
FOREIGN OPERATIONS
Financial information relating to the Company's foreign operations for the years
ended December 31, 1998, 1997 and 1996, is included in "ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA-NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS-NOTE 14".
8
<PAGE> 8
ITEM 2. PROPERTIES
The Company's headquarters are located in Cypress, California. The Company
utilizes the following office and warehouse facilities:
<TABLE>
<CAPTION>
Square
Location Purpose or Use Feet Status
- - -------- -------------- ------ ------
<S> <C> <C> <C>
Twinsburg, Ohio Customer call center 8,509 Leased, expires July 17, 2002
Cypress, California Corporate headquarters and warehouse 30,768 Leased, expires December 31,
Engineering, research and development 2002
Enschede, Netherlands European headquarters and consumer support 9,149 Leased, expires August 2002
</TABLE>
The Company believes its existing facilities will be adequate to meet the
Company's needs for the foreseeable future. See "ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - NOTE 11"
for additional information regarding the Company's obligations under leases.
ITEM 3. LEGAL PROCEEDINGS
On December 20, 1995, Jasco Products Co., Inc. filed a breach of contract action
against the Company in the U.S. District Court for the Western District of
Oklahoma, Jasco Products Co., Inc. v. Universal Electronics Inc., Case No.
CIV-95-1988T, alleging that the Company was in breach of warranties with respect
to product delivered by the Company, failed to return certain tooling and must
continue providing telephonic customer support. On January 5, 1996, the Company
filed a breach of contract action against Jasco Products Co., Inc. in the U.S.
District Court for the Northern District of Ohio, Universal Electronics Inc. v.
Jasco Products Co., Inc., Case No. 5:96CV0029, alleging that Jasco has failed to
pay for product delivered to and received by them. In the first quarter of 1996,
these two cases were consolidated, with the Ohio matter being transferred to
Oklahoma. In January 1997, the Company amended its complaint against Jasco by
adding allegations that Jasco defrauded the Company in connection with and in
addition to breaching its agreement with the Company. Throughout this
litigation, the Company vigorously denied liability. Jasco admitted owing monies
to the Company, but it sought to offset these amounts against amounts which it
believed it was owed by the Company. During the second quarter of 1998, the
parties entered into a settlement agreement and these matters were dismissed
with prejudice to forgive a receivable owed by Jasco to the Company in the
amount of approximately $450,000, in exchange for the forgiveness of certain
debts Jasco claimed were owed to Jasco by the Company.
On March 25, 1997, Furst Energy Incorporated and David A. Benoit filed an action
against the Company in the U.S. District Court for the District of New Jersey,
Furst Energy Incorporated, et.al. v. Universal Electronics Inc., Case No.
97CV1479 (JEI) alleging, among other things, that the Company's "The Finder J"
and "Five Device Remote Control with Finder" products contain material which was
misappropriated from Furst. At all times with respect to this matter and
particularly in its answer, the Company denied these allegations. On October 12,
1998, the parties entered into a Settlement Agreement and, in the first quarter
of 1999, this matter was dismissed with prejudice.
On June 23, 1998, Circuit Solutions, Inc. filed a suit against the Company in
the Court of Common Pleas, Lorain County, Ohio, Circuit Solutions, Inc. v.
Universal Electronics Inc., Case No. 98CV121418 alleging breach of contract and
further alleging damages in the amount of $110,000. On July 20, 1998, due to a
motion by the Company, the suit was transferred to the United States District
Court for the Northern District of Ohio,
9
<PAGE> 9
Eastern Division, Circuit Solutions, Inc. v. Universal Electronics Inc., Case
No. 1:98 CV 1647. In January 1999, this matter was dismissed with prejudice
after the Company entered into a Release and Settlement Agreement with Circuit
Solutions in which all claims made by Circuit Solutions against the Company were
settled in exchange for which the Company has agreed to pay $55,000.
On June 25, 1998, a former executive officer of the Company, Bruce V. Vereecken,
filed suit against the Company in the Court of Common Pleas, Summit County,
Ohio, Bruce V. Vereecken v. Universal Electronics Inc., Case No. CV 98 06 2506,
alleging the Company has breached its Separation Agreement and General Release
with the plaintiff and, in addition, claiming promissory estoppel, unjust
enrichment and bad faith. The plaintiff is seeking damages in excess of $25,000.
This case is in the preliminary stages of pleading, with the Company filing its
answer on August 13, 1998 denying plaintiff's allegations and claims and it
intends to vigorously defend this action.
On November 8, 1998, SKR Resources, Inc. filed suit against the Company in the
United States District Court for the Northern District of Ohio, Eastern
Division, SKR Resources, Inc. v. Universal Electronics Inc., Case No. 1:98CV
2561, alleging the Company has breached a Sales Agreement alleged to have been
made in December 1997 with the plaintiff. The plaintiff is seeking damages in
excess of $630,000 and is also seeking specific performance on the Agreement. On
January 15, 1999, the Company filed its answer denying plaintiff's allegations.
In addition, the Company has filed a counterclaim asserting that SKR breached a
Sales Agreement entered into in April 1996 with the Company and in addition the
Company has claimed that SKR was unjustly enriched. The Company is seeking
damages in excess of $1,600,000. As a result of the Company's counterclaim, SKR
admitted its obligations under the April 1996 Sales Agreement, and the Company
dismissed its counterclaim without prejudice. This case is in the preliminary
stages of pleading and the Company intends to vigorously defend this action.
There are no other material pending legal proceedings, other than litigation
that is incidental to the ordinary course of business, to which the Company or
any of its subsidiaries is a party or of which any of their property is subject.
As is typical in the Company's industry and the nature and kind of business in
which the Company is engaged, from time to time, various claims, charges and
litigation are asserted or commenced by third parties against the Company
arising from or related to product liability, infringement of patent or other
intellectual property rights, breach of warranty, contractual relations, or
employee relations. The amounts claimed may be substantial but may not bear any
reasonable relationship to the merits of the claims or the extent of any real
risk of court awards. In the opinion of management, final judgments, if any,
which might be rendered against the Company in potential or pending litigation,
would not have a material adverse effect on the Company's financial condition or
results of operations. Moreover, management believes that the Company's products
do not infringe any third parties' patent or other intellectual property rights.
The Company maintains directors' and officers' liability insurance which insures
individual directors and officers of the Company against certain claims such as
those alleged in the above lawsuits, as well as attorney's fees and related
expenses incurred in connection with the defense of such claims.
10
<PAGE> 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year through the solicitation of proxies or
otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT*
The following table sets forth certain information concerning the executive
officers of the Company as of February 28, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Paul D. Arling 36 President, Chief Operating Officer, and Chief Financial Officer
Richard A. Firehammer, Jr. 41 Senior Vice President, General Counsel and Secretary
Camille Jayne 46 Chairman and Chief Executive Officer
Mark Belzowski 40 Vice President and Corporate Controller
</TABLE>
*Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
Paul D. Arling has been President, Chief Operating Officer, and Chief Financial
Officer of the Company since being rehired by the Company in September 1998. He
was the Company's Senior Vice President and Chief Financial Officer from May
1996. From 1993 through May 1996 until August 1998, he served in various
capacities at LESCO, Inc. (a manufacturer and distributor of professional turf
care products) with the most recent being Acting Chief Financial Officer. Prior
to LESCO, he worked for Imperial Wallcoverings (a manufacturer and distributor
of wallcovering products) as Director of Planning and The Michael Allen Company
(a strategic management consulting company) where he was employed as a
management consultant. He obtained a BS degree from the University of
Pennsylvania in 1985 and an MBA from the Wharton School of the University of
Pennsylvania in 1992.
Richard A. Firehammer, Jr., Esq. has been Senior Vice President of the Company
since being rehired by the Company in February 1999. He has been the Company's
General Counsel since October 1993 and Secretary since February 1994, positions
he continued to hold after his employment with the Company ceased as part of the
1997 restructuring. He was the Company's Vice President from May 1997 until
August 1998. From November 1992 to September 1993, he was associated with the
Chicago, Illinois law firm, Shefsky & Froelich, Ltd. From 1987 to 1992, he was
with the law firm, Vedder, Price, Kaufman & Kammholz in Chicago, Illinois. He is
admitted to the Bars in the State of Illinois and the State of Ohio. Mr.
Firehammer is also a certified public accountant. He received a BS degree from
Indiana University and a JD degree from Whittier College School of Law.
Camille Jayne has been Chairman of the Company since December 1998 and has been
the Company's Chief Executive Officer since August 1998. She was the Company's
President and Chief Operating Officer of the Company since February 1998. Prior
to that, she was President and CEO of The Jayne Group (a consulting firm
specializing in the development, introduction and operation of digital cable TV
products and services) and a Senior Partner at BHC Consulting (a business
management and market research firm). Prior to The Jayne Group and BHC, Ms.
Jayne was Senior Vice President in charge of the digital TV business unit at
Tele-Communications, Inc (TCI). She holds both a BA and Masters degree from
Stanford and an MBA from the University of Michigan.
Mark Belzowski has been Vice President and Corporate Controller of the Company
since May 1998 when he joined the Company. From February 1997 through April
1998, he was a financial management consultant for various companies including a
cellular reseller and a local area network switch manufacturer. From September
11
<PAGE> 11
1994 through January 1997, he was Vice President Controller for three companies
(two of which were start-up companies) in the Turner Entertainment Group, a
division of Turner Broadcasting Systems, Inc. From September 1988 through August
1994, he served in various capacities at Orion Pictures Corporation with the
most recent being Vice President Corporate Controller. Prior to that, Mr.
Belzowski was a Senior Auditor with Ernst and Young, Certified Public
Accountants. He is a certified public accountant in the State of California. Mr.
Belzowski obtained a BS degree from California State University at Fullerton.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the National Market of The Nasdaq Stock
Market under the symbol "UEIC".
The following table sets forth, for the periods indicated, the high and low last
reported sale prices for the Company's common stock, as reported on the National
Market of The Nasdaq Stock Market:
<TABLE>
<CAPTION>
1998 1997
---------------------- -----------------------
High Low High Low
------- ------- ------- -------
<S> <C> <C> <C> <C>
First Quarter $11-7/8 $9-5/8 $6-1/8 $4-1/2
Second Quarter 13-1/4 10-1/8 6-7/8 4-1/4
Third Quarter 14-1/2 10 8-11/16 6-3/16
Fourth Quarter 11-3/4 8-1/4 10-7/8 8-1/8
</TABLE>
Stockholders of record on December 31, 1998 numbered approximately 175.
The Company has never paid cash dividends on its common stock and does not
intend to pay cash dividends on its common stock in the foreseeable future. The
Company intends to retain its earnings, if any, for the future operation and
expansion of its business. In addition, the terms of the Company's revolving
credit facility limit the Company's ability to pay cash dividends on its common
stock. See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-LIQUIDITY AND CAPITAL RESOURCES" and "ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA-NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS-NOTE 6."
RECENT SALES OF UNREGISTERED SECURITIES
On September 1, 1998, in connection with the Company's acquisition of H&S
Management Corp., the Company issued 84,211 shares of Common Stock, valued at
$10.379 per share, as well as $1.5 million in cash to H & S Management Corp. as
consideration for the purchase price. Registration under the Securities Act of
1933 was not effected with respect to the transaction described above in
reliance upon the exemption from registration contained in Section 4(2) of the
Securities Act of 1933.
On November 9, 1998, the Company issued 300,000 warrants to purchase Company
common stock to General Instrument Corporation as consideration for entering
into an exclusive supply agreement with the Company. The warrants are
contingent upon General Instrument Corporation purchasing a specified minimum
number of units of products from the Company for each of the calendar years
1999, 2000 and 2001. Assuming such minimum purchase requirements are met, the
warrants allow General Instrument Corporation to purchase up to 300,000 shares
of Company common stock at an exercise price of $12.625 per share. Registration
under the Securities Act of 1933 was not effected with respect to the warrants
in reliance upon the exemption from registration contained in Section 4(2) of
the Securities Act of 1933.
12
<PAGE> 12
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to various market risks, including interest rate and
foreign currency exchange rate fluctuations. The Company has established
policies, procedures and internal processes governing its management of market
risks and the use of financial instruments to manage its exposure to such risks.
The interest payable under the Company's revolving credit agreement with B of A
is variable and generally based on either the bank's cost of funds or the IBOR
rate, and therefore, affected by changes in market interest rates. At December
31, 1998, approximately $4.8 million was outstanding on the credit line. The
interest rate as of December 31, 1998 was 7.375%. The Company has wholly-owned
subsidiaries in the Netherlands, United Kingdom and Germany. Sales from these
operations are typically denominated in Dutch Gilders, French Francs, British
Pounds, or German Marks, respectively, thereby creating exposures to changes in
exchange rates. Changes in local currencies/U.S. Dollars exchange rate may
positively or negatively affect the Company's sales, gross margins and retained
earnings. The Company, from time to time, enters into foreign currency exchange
agreements to manage its exposure arising from fluctuating exchange rates
related to specific transactions, primarily foreign currency forward contracts
for inventory purchases. The Company does not enter into any derivative
transactions for speculative purposes. The sensitivity of earnings and cash
flows to variability in exchange rates is assessed by applying an appropriate
range of potential rate fluctuations to the Company's assets, obligations and
projected results of operations denominated in foreign currencies. Based on the
Company's overall foreign currency rate exposure at December 31, 1998, movements
in foreign currency rates would not materially affect the financial position of
the Company.
25
<PAGE> 13
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
48
<PAGE> 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by Item 401 of Regulation S-K with respect to the directors
of the Company will be contained in and is hereby incorporated by reference to
the Company's definitive Proxy Statement for its 1999 Annual Meeting of
Stockholders to be filed pursuant to Regulation 14A promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
Information regarding executive officers of the Company is set forth in Part I
of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information required by Item 402 of Regulation S-K will be contained in and is
hereby incorporated by reference to the Company's definitive Proxy Statement for
its 1999 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by Item 403 of Regulation S-K will be contained in and is
hereby incorporated by reference to the Company's definitive Proxy Statement for
its 1999 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 404 of Regulation S-K will be contained in and is
hereby incorporated by reference to the Company's definitive Proxy Statement for
its 1999 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(3) LIST OF EXHIBITS REQUIRED TO BE FILED BY ITEM 601(a) OF THE
REGULATION S-K ARE INCLUDED AS EXHIBITS TO THIS REPORT.
(b) No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 1998.
49
<PAGE> 15
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Cypress, State of
California on the 31st day of March, 1999.
UNIVERSAL ELECTRONICS INC.
By:/s/Camille Jayne
-------------------
Camille Jayne
Chairman and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Camille Jayne
and Paul D. Arling as true and lawful attorneys-in-fact and agents, each acting
alone, with full powers of substitution, for her/him and in her/his name, place
and stead, in any and all capacities, to sign any and all amendments to this
Annual Report on Form 10-K, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as she/he might or could do in person, thereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone, or
her/his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on the 31st day of March, 1999, by the following persons
in the capacities indicated.
<TABLE>
<CAPTION>
NAME & TITLE SIGNATURE
- - ------------ ---------
<S> <C>
Paul D. Arling
President and Chief Operating Officer,
Chief Financial Officer and Director /s/Paul D. Arling
(Principal Financial Officer) --------------------------------
Camille Jayne
Chairman and Chief Executive Officer
and Director /s/Camille Jayne
(Principal Executive Officer) --------------------------------
Mark Belzowski
Vice President and Corporate Controller /s/Mark Belzowski
(Principal Accounting Officer) --------------------------------
Peter L. Gartman /s/Peter L. Gartman
Director --------------------------------
Bruce A. Henderson /s/Bruce A. Henderson
Director --------------------------------
William C. Mulligan /s/William C. Mulligan
Director --------------------------------
J. C. Sparkman /s/J.C. Sparkman
Director --------------------------------
Rush McKnight /s/Rush McKnight
Director --------------------------------
</TABLE>
50
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
<S> <C>
2.1 Asset Purchase Agreement dated September 1, 1998 by and among
Universal Electronics Inc., H & S Management Corp., J.C.
Sparkman and Steven Helbig (filed herewith)
3.1 Restated Certificate of Incorporation of Universal Electronics
Inc., as amended (Incorporated by reference to Exhibit 3.1 to
the Company's Form S-1 Registration filed on or about December
24, 1992 (File No. 33-56358))
3.2 Amended and Restated By-laws of Universal Electronics Inc.
(Incorporated by reference to Exhibit 3.2 to the Company's Form
S-1 Registration filed on or about December 24, 1992 (File No.
33-56358))
3.3 Certificate of Amendment to Restated Certificate of
Incorporation of Universal Electronics Inc. (Incorporated by
reference to Exhibit 3.3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 filed on April 1, 1996
(File No. 0-21044))
*10.1 Form of Universal Electronics Inc. 1993 Stock Incentive Plan
(Incorporated by reference to Exhibit 10.13 to Amendment No. 1
to the Company's Form S-1 Registration filed on or about January
21, 1993 (File No. 33-56358))
10.2 Standard Industrial Lease dated January 24, 1992 by and between
Universal Electronics Inc. and RREEF USA Fund II, Inc.
(Incorporated by reference to Exhibit 10.24 to the Company's
Form S-1 Registration filed on or about June 25, 1993 (File No.
33-65082))
10.3 Form of Secured Promissory Note by and between Universal
Electronics Inc. and certain employees used in connection with
loans made to the employee to enable them to make open market
purchases of shares of Universal Electronics Inc. Common Stock
(Incorporated by reference to Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1994 (File No. 0-21044))
10.4 Form of Stock Pledge Agreement by and between Universal
Electronics Inc. and certain employees used in connection with
loans made to the employees to enable them to make open market
purchases of shares of Universal Electronics Inc. Common Stock
(Incorporated by reference to Exhibit 10.6 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1994 (File No. 0-21044))
10.5 Loan and Security Agreement dated November 21, 1995 by and
between Universal Electronics Inc. and The Provident Bank
(Incorporated by reference to Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995
filed on April 1, 1996 (File No. 0-21044))
10.6 Copy of Promissory Note dated November 21, 1995 by and between
Universal Electronics Inc. and The Provident Bank (Incorporated
by reference to Exhibit 10.21 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995 filed on April 1,
1996 (File No. 0-21044))
10.7 Commercial Letters of Credit Master Agreement dated November 21,
1995 by and between Universal Electronics Inc. and The Provident
Bank (Incorporated by reference to Exhibit 10.22 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1995 filed on April 1, 1996 (File No. 0-21044))
10.8 Intercreditor Agreement dated November 21, 1995 by and between
The Provident Bank and Society National Bank and acknowledged
and agreed to by Universal Electronics Inc. (Incorporated by
reference to Exhibit 10.23 to the
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
<S> <C>
Company's Annual Report on Form 10-K for the year ended December
31, 1995 filed on April 1, 1996 (File No. 0-21044))
10.9 Lockbox Service Contract dated November 10, 1995 by and between
Universal Electronics Inc. and The Provident Bank (Incorporated
by reference to Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995 filed on April 1,
1996 (File No. 0-21044))
*10.10 Form of Universal Electronics Inc. 1995 Stock Incentive Plan
(Incorporated by reference to Exhibit B to the Company's
Definitive Proxy Materials for the 1995 Annual Meeting of
Stockholders of Universal Electronics Inc. filed on May 1, 1995
(File No. 0-21044))
*10.11 Form of Stock Option Agreement by and between Universal
Electronics Inc. and certain employees used in connection with
options granted to the employees pursuant to the Universal
Electronics Inc. 1995 Stock Incentive Plan (Incorporated by
reference to Exhibit 10.20 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 filed on March
28, 1997 (File No. 0-21044))
*10.12 Form of Stock Option Agreement by and between Universal
Electronics Inc. and certain non-affiliated directors used in
connection with options granted to the non-affiliated directors
pursuant to the Universal Electronics Inc. 1995 Stock Incentive
Plan (Incorporated by reference to Exhibit 10.21 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1996 filed on March 28, 1997 (File No. 0-21044))
10.13 First Amendment to Loan and Security Agreement dated July 31,
1996 by and between Universal Electronics Inc. and The Provident
Bank (Incorporated by reference to Exhibit 10.22 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1996 filed on March 28, 1997 (File No. 0-21044))
*10.14 Form of Universal Electronics Inc. 1996 Stock Incentive Plan
(Incorporated by reference to Exhibit 4.5 to the Company's Form
S-8 Registration Statement filed on March 26, 1997 (File No.
333-23985))
*10.15 Form of Stock Option Agreement by and between Universal
Electronics Inc. and certain employers used in connection with
options granted to the employees pursuant to the Universal
Electronics Inc. 1996 Stock Incentive Plan (Incorporated by
reference to Exhibit 4.6 to the Company's Form S-8 Registration
Statement filed on March 26, 1997 (File No. 333-23985))
10.16 Sublease dated January 10, 1997 by and between Universal
Electronics Inc. and Edgemont Sales Company, a division of IKON
Office Solutions, Inc. (Incorporated by reference to Exhibit
10.25 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 filed on March 28, 1997 (File No.
0-21044))
*10.17 Form of Salary Continuation Agreement by and between Universal
Electronics Inc. and certain employees (Incorporated by
reference to Exhibit 10.25 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, filed on March
30, 1998 (File No. 0-21044))
*10.18 Form of Amendment to Salary Continuation Agreement by and
between Universal Electronics Inc. and certain employees
(Incorporated by reference to Exhibit 10.26 to the Company's
Annual Report on Form 10-K for the year ended
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
<S> <C>
December 31, 1997, filed on March 30, 1998 (File No. 0-21044))
10.19 Second Amendment to Loan and Security Agreement dated January 24,
1997 by and between Universal Electronics Inc. and The Provident
Bank (Incorporated by reference to Exhibit 10.27 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1997, filed on March 30, 1998 (File No. 0-21044))
10.20 Lease dated November 1, 1997 by and between Universal
Electronics Inc. and Warland Investments Company (Incorporated
by reference to Exhibit 10.28 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, filed on March
30, 1998 (File No. 0-21044))
10.21 Letter Agreement in Principal dated March 18, 1998 by and
between Universal Electronics Inc. and The Provident Bank
further amending that certain Loan and Security Agreement
(Incorporated by reference to Exhibit 10.29 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997,
filed on March 30, 1998 (File No. 0-21044))
*10.22 Executive Officer Employment Agreement dated January 29, 1998 by
and between Universal Electronics Inc. and Camille Jayne (filed
herewith)
*10.23 Form of Universal Electronics Inc. 1998 Stock Incentive Plan
(Incorporated by reference to Exhibit A to the Company's
Definitive Proxy Materials for the 1998 Annual Meeting of
Stockholders of Universal Electronics Inc. filed on April 20,
1998 (File No. 0-21044))
*10.24 Form of Stock Option Agreement by and between Universal
Electronics Inc. and certain employees used in connection with
options granted to the employees pursuant to the Universal
Electronics Inc. 1998 Stock Incentive Plan (filed herewith)
10.25 Agreement for Purchase and Sale of Property dated May 29, 1998
by and between Universal Electronics Inc. and Duke Realty
Limited Partnership (filed herewith)
10.26 Agreement dated August 12, 1998 by and between Universal
Electronics Inc., and David M. Gabrielsen (filed herewith)
10.27 Stock Acquisition Representations and Covenants Certificate
dated September 1, 1998 from H & S Management Corp., J.C.
Sparkman and Steven Helbig (filed herewith)
10.28 Non-Compete Agreement dated September 1, 1998 by and among
Universal Electronics Inc., H & S Management Corp., J.C.
Sparkman and Steven Helbig (filed herewith)
10.29 Consulting Agreement dated September 1, 1998 by and between
Universal Electronics Inc. and J.C. Sparkman (filed herewith)
*10.30 Form of Executive Officer Employment Agreement dated September
29, 1998 by and between Universal Electronics Inc. and Paul D.
Arling (filed herewith)
10.31 Revolving Loan and Security Agreement dated October 2, 1998 by
and between Universal Electronics Inc. and Bank of America
National Trust and
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
<S> <C>
Savings Association (filed herewith)
10.32 Copy of Revolving Note dated October 2, 1998 by and between
Universal Electronics Inc. and Bank of America National Trust
and Savings Association (filed herewith)
10.33 Patent and Trademark Collateral Assignment dated October 2, 1998
by and between Universal Electronics Inc. and Bank of America
National Trust and Savings Association (filed herewith)
10.34 Purchase Agreement dated November 8, 1998 by and between
Universal Electronics Inc. and General Instrument Corporation
(filed herewith)
10.35 Warrant dated November 9, 1998 by and between Universal
Electronics Inc. and General Instrument Corporation (filed
herewith)
10.36 Agreement dated January 30, 1998, as amended on December 30,
1998 by and among Universal Electronics BV, a wholly owned
subsidiary of Universal Electronics Inc., and Euro Quality
Assurance Ltd. and T. Macizumi (filed herewith)
10.37 Agreement dated February 3, 1998, as amended on December 30,
1998 by and among Universal Electronics BV, a wholly owned
subsidiary of Universal Electronics Inc., Strand Europe Ltd. and
Ashok Suri (filed herewith)
21.1 List of Subsidiaries of the Registrant (filed herewith)
24.1 Power of Attorney (filed as part of the signature page hereto)
</TABLE>
* Management contract or compensation plan or arrangement identified
pursuant to Item 14(c) of the Form 10-K.
<PAGE> 1
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of September 1, 1998, by and among UNIVERSAL ELECTRONICS INC., a Delaware
corporation ("Buyer"), H & S MANAGEMENT CORP., an Colorado corporation
("Seller"), and J. C. SPARKMAN ("Sparkman") and Steven Helbig ("Helbig").
WITNESSETH:
WHEREAS, Buyer is engaged in the business of developing and
manufacturing and/or maintaining (a) certain electronic products that emit, via
infra-red and other methods, pulse codes which can be used to operate original
equipment manufacturer ("OEM") device(s) (such as televisions, video cassette
recorders, cable and satellite set-top boxes, home theater systems, and the
like), including, without limitation, a battery-operated, hand-held remote
control (the "Remote Control"), (b) software to operate the Remote Control which
can be used to operate OEM device(s), electronic device(s) for the "home bus"
market (as defined by the Electronics Industry Association) and integrated
system digital networks ("ISDN"), electronic device(s) for use in the receipt
and/or transmission of data and/or software over multiple media, and other
derivations of such device(s) (the "Software"), and (c) a library of the
devices' pulse codes and such updates, enhancements and new releases of such
library as Buyer may from time to time develop (the "Database"); and
WHEREAS, Seller is engaged in the business of designing, developing,
manufacturing, selling and distributing a battery-operated, hand-held remote
control similar to the Remote Control (the "H&S Remote Control") (the business
shall hereinafter be referred to as the "H&S Remote Control Business"); and
WHEREAS, Seller is willing to sell to Buyer and Buyer is willing to
acquire from Seller, all of the assets which are used and useful in Seller's H&S
Remote Control Business, including without limitation the H&S Remote Control,
all upon the terms and conditions as more fully set forth in this Agreement; and
WHEREAS, Buyer's acquisition of such assets is further conditioned upon
Sparkman's and Helbig's agreements to not compete with Buyer, all as more fully
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the undersigned parties agree as
follows;
1. SALE OF ASSETS. Subject to the terms and conditions of this
Agreement, Seller shall, on the Closing Date referred to below, sell, transfer,
assign, convey and deliver to Buyer, and Buyer agrees to purchase from Seller
and take possession of the following assets of the H&S Remote
<PAGE> 2
Control Business, wherever located, each of which are owned by Seller as of the
Closing Date and are used and/or useful in the H&S Remote Control Business (all
of the assets referred to below are referred to herein as the "H&S Remote
Control Assets"):
(a) INVENTORY. All inventory, including, without limitation,
that inventory listed or referred to on Schedule 1(a) attached hereto
and incorporated herein by reference (the "Inventory").
(b) ORDERS/WORK IN PROCESS. All unfilled or partly filled orders
on hand and all work in process, transferable insurance policies, and
customer contracts each of which is listed or referred to in Schedule
1(b) attached hereto and incorporated herein by reference, provided that
Buyer has prior to Closing Date, approved and accepted each of the
foregoing. In the event Buyer, in its discretion, elects not to accept
any of the foregoing, Seller shall retain them for disposition outside
the terms this Agreement.
(c) TOOLING. All of the tooling, without limitation, those
tooling listed or referred to on Schedule 1(c) attached hereto and
incorporated herein by reference (the "Tooling").
(d) EQUIPMENT. All of the equipment listed or referred to on
Schedule 1(d) attached hereto and incorporated herein by reference (the
"Equipment").
(e) ARTWORK. All original artwork used or useful in the
creation, development, or printing of pamphlets, brochures, catalogues,
or similar items, including without limitation, all paste-ups,
separations, and similar such items, (the "Artwork").
(f) SUPPLIES. All supplies including, without limitation, paper,
envelopes, boxes, invoices, purchase orders, pamphlets, brochures,
catalogues, and other supplies and sales materials (the "Supplies").
(g) CONTRACT RIGHTS. All the right, title and interest of Seller
in and to all contracts of Seller, including, without limitation, the
contract rights listed or referred to in Schedule 1(g) attached hereto
and incorporated herein by reference (the "Contract Rights").
(h) LICENSES AND PERMITS. All licenses, franchises, rights and
governmental or other permits, authorizations, consents and approvals
necessary to own and to operate the H&S Remote Control Assets and the
H&S Remote Control Business to the extent that the same are assignable
(the "Permits").
(i) RECORDS. All records and files attributable to the H&S
Remote Control Assets and the H&S Remote Control Business, including,
without limitation, records relating to customers and suppliers, payment
records and correspondence, except, however, records and files
attributable to the Excluded Assets (as defined below) and such records
and files
2
<PAGE> 3
as are required by applicable laws to be kept by Seller. Copies of all
such documents retained by Seller shall be made available to Buyer upon
request.
(j) INTANGIBLE/GOODWILL. All of the intangible assets and
intellectual property, including, without limitation, (i) all trade
secrets, proprietary or other trade rights of Seller pertaining to
ownership of the H&S Remote Control Assets and the operation of the H&S
Remote Control Business, (ii) all customer lists, (iii) all telephone
numbers to the extent assignment is permissible and yellow page
listings, and (iv) all of the goodwill of Seller in the H&S Remote
Control Business (the "Intangibles/Goodwill").
1.1 EXCLUDED ASSETS. Notwithstanding the foregoing, the right, title and
interest of Seller in and to the following properties and assets (collectively,
the "Excluded Assets") shall not be sold, transferred, conveyed or assigned
hereunder and shall not be deemed a part of the H&S Remote Control Assets:
(a) NON H&S REMOTE CONTROL ASSETS. The assets, including
inventory, equipment and supplies, wherever located which are not used
or useful in the H&S Remote Control Business and which are listed or
referred to in Schedule 1.1(a) attached hereto and incorporated herein
by reference; and
(b) CORPORATE RECORDS. The minute books, corporate seal and
stock and organizational records of Seller; and
(c) PURCHASE PRICE. The Purchase Price (as hereinafter defined)
and Seller's other rights under this Agreement.
1.2 NON-COMPETE AGREEMENT. Subject to the terms and conditions of this
Agreement, each of Seller, Sparkman and Helbig agree to deliver to Buyer and
Buyer agrees to purchase from each of them the Non-Compete Agreement in the form
attached hereto as Exhibit 1.2 and incorporated herein by reference (the
"Non-Compete Agreement").
2. PURCHASE PRICE. Subject to the adjustments described in Section 5
below, as consideration for sale by Seller of the H&S Remote Control Assets, the
Consulting/Non-Compete Agreement and the other terms and conditions set forth
herein, Buyer agrees to and shall pay to Seller and Sparkman the aggregate
amount of Two Million Three Hundred Seventy-Three Thousand Six Hundred
Eighty-Nine and 13/100 Dollars ($2,373,689.13), to be paid in accordance with
Section 3 below, (the "Purchase Price"). The Purchase Price shall be allocated
as provided in Section 8 below.
3
<PAGE> 4
3. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable as
follows:
(a) CASH PORTION AT CLOSING. One Million Five Hundred Thousand
Dollars ($1,500,000) cash paid by Seller on the Closing Date; and
(b) STOCK PORTION POST CLOSING. Eighty Four Thousand Two Hundred
and Eleven (84,211) shares of Buyer's common stock, par value $.01 per
share which had a value of Eight Hundred Seventy-Three Thousand Six
Hundred Eighty-Nine and 13/100 Dollars ($873,689.13) at the close of the
markets on August 31, 1998, a certificate of which shall be delivered to
Buyer within ten (10) business days of the Closing (the "UEI Common
Stock").
4. LIABILITIES.
4.1 ASSUMPTION OF CERTAIN LIABILITIES. In further consideration of the
sale, transfer and assignment of the H&S Remote Control Assets, and except to
the extent excluded under Section 4.2 below or otherwise provided herein, Buyer
shall assume on the Closing Date, and agree to pay and discharge when due, and
to hold Seller harmless from, the obligations and liabilities of Seller arising
from the assignment by Seller and acceptance by Buyer of unfilled or partly
filled orders on hand and all work in process in accordance with Section 1(b)
and of the Contract Rights.
4.2 EXCLUDED LIABILITIES. Buyer does not agree to assume or be liable
for, and each of Seller, Sparkman, and Helbig agrees to remain liable for and to
fully and timely discharge, and to hold Buyer harmless from, the following
debts, expenses, liabilities, obligations, contracts, commitments, and claims
(collectively, "Liabilities") of or against Seller or the H&S Remote Control
Assets, including but not limited to the following:
(a) Liabilities the existence of which, or the failure to
disclose which, constitute a breach of any representation, warranty,
covenant or agreement of Seller, Sparkman, or Helbig set forth in this
Agreement;
(b) Legal, accounting, brokerage, finder's fees, taxes or other
expenses incurred by Seller, Sparkman, Helbig, or any of Seller's
shareholders in connection with this Agreement or the consummation of
the transactions contemplated hereby;
(c) Liabilities of any nature to any past or present shareholder
of Seller;
(d) Federal, state, local and foreign tax Liabilities of any
type (including interest and penalties) imposed on Seller, Sparkman, or
Helbig;
(e) Liabilities with which any of the H&S Remote Control Assets
may be charged and which are attributable to any act or omission of
Seller, Sparkman, or Helbig prior to, on or after the Closing Date,
including without limitation any Liabilities arising
4
<PAGE> 5
under the bulk sales provisions of the Uniform Commercial Code or
similar law in any other jurisdiction;
(f) Liabilities relating to claims for injury to or disease,
sickness or death of any person or damage to property based upon or
arising out of the manufacture, sale or distribution of products or the
provision of services by Seller or for any action taken or omitted by
Seller, Sparkman, or Helbig prior to, on or after the Closing Date;
(g) Liabilities of Seller, Sparkman, or Helbig arising by reason
of any violation or alleged violation of any federal, state, local or
foreign law, including without limitation any Environmental Law (as
hereinafter defined), or any requirement of any governmental authority
or by reason of any breach or alleged breach of any agreement, contract,
lease, commitment, instrument, judgment, order or decree (regardless of
when any such violation or breach is asserted); and
(h) Liabilities under any contract, agreement or commitment
which are not specifically assumed by Buyer hereunder.
4.3 EFFECTUATION. To the extent that any of the contracts, rights,
franchises, licenses, instruments or commitments for which assignment to Buyer
is provided herein are not assignable or may not be transferred without the
consent of the other party, this Agreement shall not constitute an assignment or
an attempted assignment if such assignment or attempted assignment would
constitute a breach thereof. Each of Seller, Sparkman, and Helbig will, both
before and after the Closing Date, upon the request of Buyer, use its and his
best efforts to obtain the consent of the other party to the assignment to Buyer
of any contract, right, franchise, license, instrument or commitment in cases in
which such consent is required. Whether a consent is requested or not, each of
Seller, Sparkman, and Helbig will cooperate with Buyer in any reasonable
arrangements designed to provide for Buyer the benefits under any such contract,
right, instrument or commitment, including enforcement at the cost and for the
account of Seller, Sparkman, or Helbig of any and all rights of Seller,
Sparkman, or Helbig against the other party thereto arising out of the
cancellation by such other party or otherwise. If and to the extent that such
consent is required but is not obtained, the parties agree that as between Buyer
and each of Seller, Sparkman, and Helbig, Buyer shall nevertheless assume all of
Seller's, Sparkman's, and Helbig's responsibilities and be entitled to all of
Seller's, Sparkman's, and Helbig's benefits under any such contract, right,
instrument or commitment as if such contract, right, instrument or commitment
had in fact been assigned to Buyer. The parties hereby agree to cooperate in any
reasonable arrangement to effectuate the foregoing provision.
5. THIS SECTION INTENTIONALLY OMITTED.
6. CLOSING. Subject to the terms and conditions contained herein, the
closing ("Closing") shall take place at the office of the Buyer, 6101 Gateway
Drive, Cypress, California on September 1, 1998, or such other date and place as
Seller and Buyer shall agree in writing. The date on which closing shall take
place is referred to herein as the "Closing Date."
5
<PAGE> 6
7. DELIVERIES
7.1 DELIVERIES BY SELLER, SPARKMAN, AND HELBIG. Seller, Sparkman, and/or
Helbig as the case may be, shall deliver to Buyer at the Closing the following:
(a) Bills of sale, assignments of copyrights, trade names and
trademarks, patents and other instruments of transfer sufficient to
convey, sell, assign and transfer to and vest in Buyer good and
marketable title to all of the H&S Remote Control Assets and all rights
and interest thereto and therein, in each case free and clear of all
liens, encumbrances, charges and other exceptions (or claims thereof) to
title except the Permitted Exceptions (as hereinafter defined), such
instruments to be in form and substance satisfactory to counsel for
Buyer.
(b) A certificate of accuracy of representations and warranties
and compliance with covenants, executed by the President of Seller and
each of Sparkman and Helbig, in form and substance reasonably
satisfactory to Buyer.
(c) Opinion of counsel of Seller, Sparkman, and Helbig in the
form of Exhibit 7.1(c).
(d) Non-Compete Agreement duly executed by each of Seller,
Sparkman, and Helbig.
(e) All clearance certificates or similar types of documents
which may be required by any state taxing authority in order to relieve
Buyer of any obligation to withhold any portion of the Purchase Price.
(f) Completed and signed declarations and other forms required
to comply with any applicable stamp, transfer or transaction tax law or
ordinance.
(g) Copy, certified by the Secretary of Seller as of the Closing
Date, of the resolutions adopted by the Board of Directors and the
shareholders of Seller authorizing the transactions with Buyer set forth
herein and approving this Agreement.
(h) Any required consents to the assignment of any of the H&S
Remote Control Assets.
(i) All contracts, files, purchase orders, sales orders and
other data and documents pertaining to the H&S Remote Control Assets and
the H&S Remote Control Business.
(j) Such other documents as Buyer may reasonably request.
6
<PAGE> 7
7.2 DELIVERIES BY BUYER. At the Closing, Buyer will deliver to Seller,
Sparkman, and/or Helbig as the case may be, the following:
(a) The Purchase Price pursuant to Section 3(a) of this
Agreement.
(b) A certificate of accuracy of representations and warranties
and compliance with covenants, executed by the President or Chief
Financial Officer of Buyer, in form and substance reasonably
satisfactory to Seller.
(c) Copies of resolutions adopted by the Board of Directors of
Buyer approving the transactions contemplated hereby, certified by the
secretary or assistant secretary of Buyer.
(d) Such other documents as Seller may reasonably request.
7.3 BEST EFFORTS. Buyer and each of Seller, Sparkman, and Helbig will
use their respective best efforts to cause their respective representations and
warranties hereunder to be true and correct on and as of the Closing Date, to
obtain promptly all consents, approvals and agreements of other parties or
governmental authorities which are required in connection with the consummation
of the transactions provided for herein, and to close such transactions no later
than October 31, 1998.
7.4 POSSESSION. At the Closing, Seller shall deliver to Buyer possession
all of the H&S Remote Control Assets, which, in the case of all tangible assets,
shall be in the same condition in which they were on July 19, 1998, ordinary
wear and tear excepted.
8. ALLOCATIONS. The parties acknowledge and agree that the allocation of
Buyer's Purchase Price among the H&S Remote Control Assets, and the Non-Compete
Agreements shall be as set forth on Schedule 8 attached hereto, which allocation
shall be made in accordance with Section 1060 of Internal Revenue Code of 1986,
as amended and the regulations promulgated thereunder (collectively, the
"Code"). Except as required by law, neither party shall make any claims or treat
any items on their respective federal, state, or other tax returns in a manner
which is inconsistent with the agreed-upon allocations. The parties further
agree to cooperate in connection with any reporting requirements under the Code,
including, but not limited to the attachment of an asset allocation statement on
IRS Form 8594 to the respective federal income tax returns for the tax year in
which the Closing occurs and compliance with any and all other requirements
relating to filings or information to be furnished to the Internal Revenue
Service under the Code. Each party shall furnish to the other party, on request,
a copy of IRS Form 8594 being filed and with copies of any other tax forms
necessary to evidence compliance with this Section 8.
9. COVENANTS OF SELLER, SPARKMAN, AND HELBIG.
7
<PAGE> 8
9.1 INFORMATION AND ACCESS. From and after the date of this Agreement
and to the Closing, Seller, Sparkman, and Helbig will, within three (3) days of
receiving a request (whether oral or written), furnish to Buyer and its duly
authorized representatives and agents any requested information about Seller and
will give Buyer and its duly authorized representatives and agents, complete
access to Seller's officers, employees, accountants, attorneys, auditors, books,
records, tax returns, physical facilities, assets and agreements for purposes of
a complete investigation. The exercise of any rights of access or inspection by
or on behalf of Buyer under this Section 9.1 shall not affect or mitigate the
covenants, representations and warranties of Seller, Sparkman, and Helbig or
Buyer's rights to indemnity under this Agreement.
9.2 CONDUCT OF H&S REMOTE CONTROL BUSINESS. From the date hereof through
the Closing, each of Seller, Sparkman, and Helbig will conduct the H&S Remote
Control Business diligently and in the usual and ordinary course as heretofore
conducted. Each of Seller, Sparkman, and Helbig will use their respective best
efforts to preserve the H&S Remote Control Assets and the H&S Remote Control
Business intact and to preserve for Buyer the goodwill and relationship of
Seller with its suppliers, customers and others having business relations with
Seller. From the date hereof through the Closing, Seller, Sparkman, and Helbig
will not in connection with the use of the H&S Remote Control Assets and the
operation of the H&S Remote Control Business, except with the consent of Buyer
incur any obligation or liability, engage in any activity or transaction, or
enter into any contract or commitment with respect to the H&S Remote Control
Assets or the operation of the H&S Remote Control Business extending beyond the
Closing, other than sales or purchases made in the ordinary course of the H&S
Remote Control Business as heretofore conducted. Without limiting the generality
of the foregoing, neither Seller, Sparkman, nor Helbig will, without obtaining
the prior written consent of Buyer:
(a) make any change in Seller's Articles of Incorporation or
By-laws;
(b) make any changes in Seller's capital stock or grant any
option, warrant or call with respect thereto;
(c) declare or pay any dividend on Seller's capital stock nor
make any other distribution to Seller's shareholders;
(d) incur any indebtedness in excess of $1,000 in the aggregate
except for trade payables and other indebtedness in the ordinary course
of business as heretofore conducted;
(e) authorize, or engage in, any merger, consolidation, or sale
of assets outside the ordinary course of business as heretofore
conducted;
(f) make any significant organizational or personnel changes;
(g) pay any bonus, make any loan or grant any salary or wage
increase;
8
<PAGE> 9
(h) make any capital expenditures in excess of $1,000 per
expenditure or $5,000 in the aggregate;
(i) create any security interest in or any lien or encumbrance
on any property or interest of Seller or cancel or compromise any debt
or claim; or
(j) fail to record promptly, accurately and fully on the books
and records of Seller all transactions of Seller.
9.3 RISK OF LOSS/INSURANCE COVERAGE. Seller shall bear the risk of loss
on the H&S Remote Control Assets through the Closing Date. Seller, Sparkman, and
Helbig each covenant and agree that the H&S Remote Control Business and the H&S
Remote Control Assets to be purchased by Buyer hereunder will each be adequately
insured by Seller against fire and casualty and any other claims or losses
whatsoever, to the Closing Date, and will use their best efforts to maintain in
full force and effect until Closing at the same level of coverage the insurance
policies which were in effect immediately prior to Closing and that such
policies will continue after the Closing to cover and respond to all claims made
in respect of insured occurrences prior to the Closing.
9.4 ACCOUNTS RECEIVABLE. Buyer shall be entitled to all accounts
receivable arising out of business transacted in the H&S Remote Control Business
subsequent to the Closing Date. Seller shall apply collections it receives from
customers to the receivables owed it by such customer unless otherwise directed
by the customer. In the event that Seller is instructed by the customer to remit
a portion of the collection to Buyer or the amount collected is in excess of the
amount owed to Seller, Seller shall immediately comply with the instructions of
the customer or ascertain from Buyer that the customer owes amounts to Buyer and
remit the amount so instructed by the customer or the excess of the amount so
collected to Buyer.
9.5 LITIGATION, CLAIMS AND CONTINGENT LIABILITIES. Each of Seller,
Sparkman, and Helbig agree to indemnify Buyer and hold it harmless from all
Damages (as defined in Section 21 below) resulting from, relating to or arising
out of, all existing litigation and all claims and contingent, undisclosed or
unknown liabilities of Seller, including those required to be listed on Schedule
10(e), which relate to any condition existing, product produced or sold, or
action taken or omitted by Seller, Sparkman, or Helbig, whether prior to, on or
after the Closing Date, including but not limited to all such litigation, claims
and liabilities resulting from, related to or arising out of (a) injury to or
sickness, disease or death of any person who was at any time an employee or
former employee of Seller which is caused by any condition existing, product
produced or sold, or action taken or omitted by Seller, and (b) any injury to or
sickness, disease or death of any person or persons or any damage to any
property or the environment which arises from the manufacture, handling, sale or
use of any product manufactured, sold or shipped by Seller. At Buyer's election,
Buyer may choose to compromise or defend by its own counsel, at the expense of
Seller, such matters referred to in the preceding sentence or may tender such
matters to Seller, in which event Seller shall have the obligation to compromise
and defend, at its expense and by its own counsel, any such matters.
9
<PAGE> 10
9.6 EXCLUSIVITY. Each of Seller, Sparkman, and Helbig agree not to
conduct negotiations or discussions with anyone other than Buyer with respect to
the sale of any of the business, assets or capital stock of Seller.
10. REPRESENTATIONS AND WARRANTIES OF SELLER, SPARKMAN, AND HELBIG. Each
of Seller, Sparkman, and Helbig represents and warrants that as of the date
hereof, and as of the Closing Date:
(a) CORPORATE STATUS AND VALIDITY. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Colorado, and is duly qualified to do business, and is in good
standing in those states listed on Schedule 10(a), which comprise all of
the states in which Seller is legally required to be so qualified, with
full corporate power and authority to own, lease and operate its
business and properties as now owned and conducted. Seller has the
corporate power and authority to enter into and perform the transactions
contemplated by this Agreement, and all other instruments, agreements,
and other documents contemplated hereby. All necessary corporate and
shareholder action and other proceedings required to be taken by or on
behalf of Seller to authorize Seller to execute and deliver this
Agreement and to consummate the transactions contemplated herein, have
been duly authorized and properly taken. This Agreement constitutes, and
all instruments, agreements, and other documents to be delivered in
connection herewith, when executed and delivered by Seller, will
constitute the legal, valid and binding obligation of Seller,
enforceable in accordance with their respective terms.
(b) NO CONFLICT WITH OTHER INSTRUMENTS OR AGREEMENTS. Neither
the execution, delivery or performance of this Agreement and all other
instruments, agreements, and other documents in connection herewith, nor
the consummation of the transactions contemplated hereby or thereby will
violate, conflict with, or result in a breach of or constitute a default
under any contract, instrument, article of incorporation, bylaw,
agreement, indenture, or license to which either Seller, Sparkman,
Helbig, the H&S Remote Control Assets, or the H&S Remote Control
Business is or are a party or is bound or affected, or under any law,
judgment, order, decree, rule or regulation to which either Seller,
Sparkman, Helbig, the H&S Remote Control Assets, or the H&S Remote
Control Business is or are subject. No governmental, public authority,
or other agency authorization, approval, order, license, permit, or
consent, and no registration, declaration or filing with any
governmental, public authority or agency is required for the execution,
delivery or performance of this Agreement or the other instruments,
agreements, or other documents by Seller or the consummation of the
transactions hereby or thereby.
(c) TITLE TO ASSETS, ABSENCE OF LIENS. Seller has and at the
Closing will have, and the same pursuant hereto will vest in Buyer, good
and marketable title and merchantable ownership, right, title and
interest in and to all of the H&S Remote Control Assets, in each case
free and clear of all liens, encumbrances, charges, and other exceptions
(or claims
10
<PAGE> 11
thereof) except for the Permitted Exceptions. Seller owns, and has the
right to sell and convey to Buyer without interference from Seller or
others, all rights in and to the H&S Remote Control Assets, and has not
previously entered into any agreement concerning the use, sale, or
license of, or the granting of any right to or interest in, any of the
H&S Remote Control Assets.
(d) FINANCIAL RECORDS AND STATEMENTS OF SELLER. The books of
account and financial records of Seller fairly and consistently reflect
the income, expenses, assets and liabilities (i) of Seller taken as a
whole and (ii) of the H&S Remote Control Business. Attached hereto as
Schedule 10(d) is a copy of the balance sheets and related income
statements (i) of Seller taken as a whole and (ii) of the H&S Remote
Control Business as of and for the year ended , 1997 and for each
quarter ended thereafter through the Closing Date (the "Seller Financial
Statements"). Except as described in the notes to the Seller Financial
Statements, the Seller Financial Statements (a) were prepared in
accordance with GAAP applied on a basis consistent with prior periods,
(b) present fairly the financial condition (i) of Seller taken as a
whole and (ii) of the H&S Remote Control Business and the related
results of operations as of and for the periods then ended for each of
Seller and the H&S Remote Control Business, and (c) reflect all material
liabilities and commitments of each of Seller and the H&S Remote Control
Business, direct or contingent, as of said dates which under GAAP are
required to be reflected in such Financial Statements or any related
notes.
(e) LITIGATION, CLAIMS AND CONTINGENT LIABILITIES. Except as
described on Schedule 10(e), (i) there is no action, suit, arbitration
or administrative or judicial proceeding, government investigation,
judgment, order, writ, injunction or decree outstanding, pending or
threatened against Seller, Sparkman, Helbig, any person in his capacity
as an employee or agent of Seller or the assets, business or goodwill of
Seller, or any such matter to which Seller, Sparkman, Helbig, or any
such person is a party, (ii) there is no contingent liability of, and no
claim made by any party against, Seller, Sparkman, Helbig, any person in
his capacity as an employee or agent of Seller, or the assets, business
or goodwill of Seller, (iii) there is no pending or threatened labor
dispute or attempt by any union to organize or be certified as the
representative of any of Seller's employees, and (iv) to the best
knowledge of each of Seller, Sparkman, and Helbig, there is or has been
no event or occurrence which is likely to give rise to any of the
foregoing.
(f) EMPLOYEE AND RELATED CONTRACTS AND AGREEMENTS. With regard
to the H&S Remote Control Assets and the H&S Remote Control Business
sold to Buyer hereunder, Seller is not a party to any written or oral,
express or implied, (i) contract or commitment for the employment or
continued employment of any employee or agent of Seller; (ii) contract
with any labor union or other collective bargaining agreement; (iii) any
other material contract or commitment involving employees or independent
contractors, where the existence of or the absence of (i), (ii), or
(iii) above would materially and adversely
11
<PAGE> 12
affect Buyer's purchase of the H&S Remote Control Assets and the
operation of the H&S Remote Control Business.
(g) AUTHORITY FOR AND CONDUCT OF BUSINESS. Seller presently has
all licenses, permits, approvals, orders, and other authorizations from
governmental and regulatory offices and authorities necessary for the
conduct of its H&S Remote Control Business as now being conducted, to
own or hold under lease the properties and assets it owns or holds under
lease, and to perform the obligations under the agreements to which it
is a party, and no proceeding is pending or threatened which seeks to
revoke, limit or suspend any such authorization, approval, license,
permit or order. Seller is in compliance with all applicable laws,
contractual or legal restrictions, regulations and administrative and
executive orders of any country, state, or municipality or of any
subdivisions thereof to which its business and employment of labor or
use or occupancy of properties or any part thereof are subject, and
Seller has not received notice of any violation thereof. The laws,
regulations and administrative and executive orders referred to above
include, but are not limited to, those relating to labor relations,
employment practices, worker's compensation, communications, zoning,
building codes, copyright and patent protection, protection of the
environment, waste disposal, toxic substances, product liability,
health, occupational and other safety, transportation, employment
benefits, exports, antitrust, consumer protection, the processing,
production, advertising, sale or labeling of products, and other similar
matters.
(h) NO MATERIAL ADVERSE CONDITIONS. There are no conditions,
matters or events, which materially adversely affect, or might
reasonably be expected to materially adversely affect Seller's business
taken as a whole, the H&S Remote Control Assets, or the financial
condition, business or results of operations from that referenced on the
Financial Statements or the H&S Remote Control Business or its prospects
which are to be carried on by Buyer.
(i) TAXES AND TAX RETURNS OF SELLER. All taxes imposed by the
United States or by any other country or by any state, province,
municipality or subdivision thereof which are due or payable or which
become due or payable by Seller with respect to any period or portion
thereof up to and including the date of the Closing have been (or will
have been) paid in full. Seller has filed or will file in a timely
manner all required returns and reports with respect to income taxes and
all other taxes of any kind, such returns and reports have been prepared
accurately and in accordance with the law, and all taxes, interest and
penalties due thereon have been paid. There are no actions, suits,
proceedings, claims, or investigations or assessments now pending or
threatened against Seller in respect of taxes or governmental charges,
or any matters under discussion with any governmental authority relating
to taxes or governmental charges and there are no waivers or extensions
of any statutes of limitations in effect with respect thereto. The
Federal tax returns for Seller have been audited through
_____________________.
12
<PAGE> 13
(k) EMPLOYEE BENEFIT PLANS OF SELLER. Seller does not have any
employee benefit plans of any kind, including but not limited to, group
life insurance, medical, long-term disability, pension and profit
sharing plans.
(l) REAL ESTATE LEASES. All leases related to the operation of
the H&S Remote Control Business are in full force and effect and Seller
holds valid leasehold interests under such leases. Each of Seller,
Sparkman, Helbig have made available to Buyer complete and accurate
copies of said leases and all such leases have not been modified, except
to the extent that such modifications are disclosed by the copies
delivered to Buyer. Seller is not in default under, nor is there any
default by Landlord under, nor does either party have the right to
terminate, accelerate performance under or otherwise modify (including
upon the giving of notice or the passage of time) any such leases.
Seller does not lease any other real estate other than the leased
properties to which Seller, Sparkman, and Helbig have delivered or to
Buyer. No notice has been received by Seller of any building code, fire
code or zoning violation or problem with respect to the leased
properties.
(m) THIS SECTION INTENTIONALLY OMITTED.
(n) EXTRAORDINARY TRANSACTIONS; CAPITAL EXPENDITURES. Except as
stated in this Agreement, since May 1, 1998 (i) Seller has not entered
into any transactions or incurred any obligations or liabilities outside
of the usual and ordinary course of business, and (ii) there has been no
capital expenditure over $1,000.
(o) OWNERSHIP AND CONDITION OF PROPERTY. Seller has good and
marketable title to all of the H&S Remote Control Assets and all of the
assets reflected as owned by Seller in the Seller Financial Statements,
free and clear of any and all liens, charges and encumbrances, except
Permitted Exceptions.
(p) OTHER CONTRACTS AND COMMITMENTS. Except as described in this
Agreement or on Schedule 10(p), Seller is not currently a party to or
bound by any:
(i) written or oral contracts not made in the ordinary
course of its business;
(ii) contracts with licensors, licensees, distributors,
dealers, or sales agents or representatives;
(iii) contracts with officers, directors, managers,
legal counsel, accountants, tax advisors, advertising or public
relations agencies, or associated or affiliated companies,
except such as are terminable at will and without liability,
cost or expense;
(iv) leases for personal property;
13
<PAGE> 14
(v) commitments for capital expenditures or other
written or oral contracts wherein the total liability exceeds
One Thousand Dollars ($1,000.00);
(vi) contracts continuing for a period of three (3)
months or more from their date, other than ordinary course of
business commitments with suppliers or customers;
(vii) contracts with any labor union or organization;
(viii) contracts of guaranty or indemnity;
(ix) contracts for chemical waste disposal;
(x) government contracts subject to price renegotiation;
(xi) contracts or commitments for employee benefits;
(xii) contracts restricting the right to engage in any
business or to compete with any person;
(xiii) loans, mortgages, pledges, financing or similar
contracts or agreements under which Seller may have any
liability (contingent or otherwise); or
(xiv) any other material contract, whether or not made
in the ordinary course of business.
Copies of all written contracts, leases, commitments and
agreements listed on Schedule 10(p) have been made available to Buyer,
and such copies are true and correct copies of such documents. All such
contracts, leases, commitments and agreements are valid and binding
obligations of the parties thereto, enforceable in accordance with their
respective terms, are in full force and effect and are assignable except
as described on Schedule 10(p). Summaries of oral contracts listed on
Schedule 10(p) are correct and do not omit to state any fact necessary
to make the statements therein not incomplete or misleading. Except as
otherwise provided herein, to the knowledge of Seller and Sparkman, no
party with whom Seller has a contractual relationship is in default in
the payment of any obligation under, or in the performance of any
covenant or obligation to be performed by it pursuant to, any such
contract.
(q) INSURANCE. The assets of Seller are adequately insured
against loss or damage and Seller is adequately insured against those
forms of legal liability and losses described on Schedule 9.3. The
insurance of Seller currently in force is listed on Schedule 9.3 and
Seller shall use its best efforts to continue such insurance coverage in
full force and effect to and including the Closing Date.
14
<PAGE> 15
(r) NO DEFAULT. Neither Seller, Sparkman, nor Helbig is in
default or breach of any contract or agreement, written or oral,
indenture or other instrument or obligation, including, without
limitation the agreements assumed by Buyer hereunder, to which it is or
they are a party or to which it or they are its property is subject, and
to the best knowledge of Seller or Sparkman or Helbig, there exists no
state of facts which after notice or lapse of time or both would
constitute such a default or breach, and all such contracts, agreements,
indentures or other instruments are in good standing and in full force
and effect, enforceable in accordance with their respective terms.
(s) INVENTORY. The inventory reflected on the Seller Financial
Statements consists, and the Inventory to be sold to Buyer on the
Closing Date will consist, of a quality and quantity usable and salable
in the ordinary course of the H&S Remote Control Business and all such
inventory is valued at the lower of cost (on a first-in, first-out
basis) or net realizable value (which is the estimated selling price
less selling and distribution expenses).
(t) TOOLING, SUPPLIES AND EQUIPMENT. All Tooling, supplies, and
equipment are in good operating condition and repair and are fit for
their intended purpose. All Tooling, supplies and equipment carried at
any net value on the books of Seller or reflected at any net value on
its Financial Statements are currently used in its H&S Remote Control
Business. Such Tooling, supplies, and equipment constitute all the
tangible personal property necessary for the conduct of Seller's H&S
Remote Control Business as it is now being conducted.
(u) CURTAILMENT NOTICES. Seller has not received any notice from
any supplier (including utilities) of curtailment or intended
curtailment of services or supplies to Seller.
(v) CUSTOMER RELATIONS. Neither Seller nor Sparkman are aware of
any facts or information indicating that any customer intends to cease
doing any material amount of business with Seller or to materially alter
the amount of any such business.
(w) ENVIRONMENTAL MATTERS.
(i) Seller has obtained all permits, licenses and other
authorizations which are required with respect to the operation
of its business under any Environmental Laws (as hereinafter
defined) (such permits, licenses and authorizations being
hereinafter referred to as "Environmental Permits"), including
all federal, state and local laws relating to pollution or
protection of the environment such as laws relating to
emissions, discharges, releases or threatened releases of
hazardous, toxic or other pollutants, contaminants, chemicals or
industrial materials, substances or wastes into the environment,
including but not limited to ambient air, surface water, ground
water, land surface or subsurface strata, or otherwise relating
to the manufacture, processing, distribution, use, treatment,
storage, disposal,
15
<PAGE> 16
transport or handling of hazardous, toxic or other pollutants,
contaminants, chemicals or industrial materials, substances or
wastes (which laws, together with all regulations, rules, codes,
plans, decrees, judgments, injunctions, notices and demand
letters issued, entered, promulgated or approved thereunder
being herein referred to as "Environmental Laws"). Schedule
10(w) contains a list of all Environmental Permits which have
been obtained by Seller and complete copies of all such
Environmental Permits have been supplied to Buyer. Seller is in
full compliance with all terms and conditions of all
Environmental Permits required under the Environmental Laws, and
is also in full compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the
Environmental Laws. Schedule 10(w) contains a complete list of
all notices of whatever form received by any previous owner or
operator of the H&S Remote Control Business within the five
years preceding the date of this Agreement or by Seller alleging
noncompliance with any Environmental Law, and Seller has
provided Buyer with complete copies of all such notices.
(ii) There is no civil, criminal or administrative
action, demand, claim, investigation or proceeding pending or
threatened against Seller, under or relating in any way to the
Environmental Laws, except as identified on Schedule 10(w).
(iii) There are no past, present or known or anticipated
future events, conditions, circumstances, or plans which may
interfere with or prevent compliance or continued compliance
with the Environmental Laws, or which may give rise to any
common law or other legal liability, including, but not limited
to, liability under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or which otherwise may
form the basis of any claim, action, demand, proceeding, notice
of violation or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling or the emission, discharge,
release or threatened release into the environment, of any
pollutant, contaminant, chemical, industrial toxic or hazardous
material, substance or waste. Without in any way limiting the
foregoing, no release, emission or discharge into the
environment of any hazardous substance (as that term is
currently defined under CERCLA or any applicable similar state
law) has occurred, is currently occurring or, to the extent
known or reasonably anticipated, is probable of occurring in the
future in connection with the conduct of Seller's H&S Remote
Control Business and there is no spill, deposit, or discharge of
any hazardous substance (as that term is currently defined under
CERCLA or any applicable similar state law) at, on, into, under
or having originated from any facility or real property of
Seller. The assets of Seller do not include any equipment,
machinery, device, or other apparatus that contains
polychlorinated biphenyls (the "PCB Equipment") that is now or
ever has been leaking; any asbestos that is or reasonably may be
anticipated to become in friable condition within the next five
years; or any underground tank that contains petroleum products
or any toxic or hazardous material, substance or
16
<PAGE> 17
waste, as those terms are defined in the Environmental Laws,
which tank has not been determined by Petro Tite test or
equivalent method to be free of leaks within the last twelve
months. Schedule 10(w) contains a list of all (i) PCB Equipment,
whether leaking or not, and indicating which, if any, is now or
ever has been leaking, (ii) asbestos, whether in friable
condition or not, and (iii) underground tanks, whether tested as
described above or not, that are included within the assets of
Seller.
(x) SUBSIDIARIES. Seller does not have any equity
interest in any other corporation or in any partnership, joint
venture, association or other entity.
(y) TRUE AND COMPLETE DISCLOSURES. All information
furnished by Seller or Sparkman or its or their representatives
to Buyer or its representatives in connection with the
negotiation of this Agreement is true and complete in all
material respects. All of the statements, representations,
warranties and agreements made by Seller or Sparkman or Helbig
in this Agreement shall be true and correct in all material
respects on and as of the Closing and thereafter with the same
force and effect as if made by Seller or Sparkman or Helbig at
the Closing.
11. REPRESENTATION AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants that, as of the date hereof and as of the Closing Date:
(a) NO CONFLICT WITH OTHER INSTRUMENTS OR AGREEMENTS. Neither
the execution, delivery or performance of this Agreement and all other
instruments, agreements and other documents in connection herewith, nor
the consummation of the transactions contemplated hereby or thereby will
violate, conflict with or result in a breach of or constitute a default
under any contract, instrument, article of incorporation, by-law,
agreement, indenture or license to which Buyer is a party or by which
Buyer is bound or affected, or under any law, judgment, order, decree,
rule or regulation to which Buyer is subject. No governmental, public
authority or other agency, authorization, approval, order, license,
permit, or consent, and no registration, declaration or filing with any
governmental public authority or agency is required in connection with
the execution, delivery or performance of this Agreement or the other
instruments, agreements, or other documents by Buyer or the consummation
of the transactions hereby or thereby.
(b) CORPORATE ORGANIZATION AND AUTHORIZATION. Buyer is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has the corporate power to own and
lease its properties and carry on its business in the State of
California and otherwise as necessary for the purposes of this
Agreement. All necessary corporate action and other proceedings required
to be taken by or on behalf of Buyer to authorize Buyer to enter into
and consummate this Agreement in accordance with the terms hereof have
been duly authorized and properly taken. This Agreement constitutes, and
all instruments, agreements and other documents to be delivered in
connection herewith, when
17
<PAGE> 18
executed and delivered, will constitute legal, valid and binding
obligations of Buyer, enforceable in accordance with their terms.
(c) TRUE AND COMPLETE DISCLOSURES. All information furnished by
Buyer of its representatives to Seller or its representative in
connection with the negotiation of this Agreement is true and complete
in all material respects. All of the statements, representations,
warranties and agreements made by Buyer in this Agreement shall be true
and correct in all material respects on and as of the Closing and
thereafter with the same force and effect as if made by Buyer at the
Closing.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants,
representations and warranties of the parties contained herein and in any
exhibit, schedule or document attached hereto shall be deemed to have been
relied upon by the parties hereto, notwithstanding any investigation made by the
parties. All covenants, representations and warranties made herein shall not be
affected by any examinations or investigations conducted by Buyer or Seller
prior to Closing and shall survive the Closing and shall continue in effect
after the execution of this Agreement and the consummation of the sale
contemplated hereby unless waived in writing.
13. CONDITIONS OF OBLIGATIONS OF BUYER. The obligations of Buyer,
including but not limited to the obligation to close the transaction
contemplated hereunder, are, at the option of Buyer, subject to satisfaction of
the following conditions on or prior to the Closing, all of which may be waived
by Buyer in whole or in part:
(a) The representations and warranties of Seller, Sparkman, and
Helbig contained herein shall be true, correct and complete in all
material respects on and as of the Closing Date and Buyer shall have
received at the Closing a certificate to that effect, dated the Closing
Date and executed by the President of Seller and Sparkman and Helbig;
provided that the receipt of such certificate and the closing of the
sale herein provided shall not be deemed to be a waiver of any
representation or warranty contained in this Agreement, which
representations and warranties shall continue in full force and effect
for the benefit of the parties as provided in Section 13 hereof.
(b) Each of Seller, and Sparkman, and Helbig shall have
performed and observed, in all material respects, all covenants,
agreements, acts, undertakings and conditions of Seller, Sparkman, and
Helbig herein to be performed or observed by it on or before the Closing
Date.
(c) Seller, Sparkman, and Helbig shall have delivered to Buyer
the documents to be delivered at Closing under Section 7.1 in form
satisfactory to counsel for Buyer.
(d) Seller shall not have suffered any loss from fire, flood,
explosion or other casualty which materially and adversely affects the
conduct of the H&S Remote Control
18
<PAGE> 19
Business, financial condition or, irrespective of insurance, the value
of its assets, including, without limitation, the H&S Remote Control
Assets.
(e) No action, suit or proceeding by or before any court,
administrative agency or other governmental authority shall have been
instituted or threatened which may restrain, prohibit or invalidate any
transactions contemplated by this Agreement or which may materially and
adversely affect Seller, or Seller's or Sparkman's or Helbig's ability
to perform its or their obligations hereunder or the right of Buyer to
own, operate or control after the Closing the H&S Remote Control Assets
or to engage in the H&S Remote Control Business.
(f) There shall not have been, in the reasonable judgment of
Buyer, any material adverse change in the assets, liabilities, financial
condition, business or results of operations of Seller from that
reflected in the Financial Statements. Neither Sparkman nor Helbig shall
have died or become disabled.
(g) Buyer shall have obtained, at its expense, inspection
reports satisfactory to Buyer concerning all aspects of the H&S Remote
Control Business, legal, financial, accounting and corporate condition
and property as Buyer deems appropriate.
(h) The execution, delivery and performance of this Agreement
and the other instruments, documents, and agreements contemplated hereby
shall have been approved by the Board of Directors of Buyer.
(i) Buyer shall have obtained such financing as it deems
necessary and in such form satisfactory to it for purposes of payment of
the Purchase Price.
(j) Buyer shall have entered into an enforceable agreement to be
the exclusive supplier of remote controls to General Instrument
Corporation.
In the event any of the foregoing conditions shall not have been
fulfilled on or before Closing, this Agreement may, at the option of Buyer, be
declared null and void.
14. CONDITIONS OF OBLIGATIONS OF SELLER, SPARKMAN and Helbig. The
obligations of Seller, Sparkman and Helbig, including but not limited to the
obligation to close the transactions contemplated hereunder, are, at the
respective options of the Seller, Sparkman, and Helbig subject to the
satisfaction of the following conditions on or prior to the Closing all of which
may be waived by either Seller, Sparkman, or Helbig in whole or in part:
(a) The representations and warranties of Buyer contained herein
shall be true, correct and complete in all material respects on and as
of the Closing Date and Seller, Sparkman and Helbig shall have received
at the Closing a certificate to that effect, dated the Closing Date, and
executed on behalf of Buyer by its president or chief financial officer.
19
<PAGE> 20
(b) Buyer shall have performed and observed, in all material
respects, all covenants, agreements and conditions herein to be
performed or complied with by Buyer on or before the Closing Date.
(c) Buyer shall have delivered the documents and funds to be
delivered at Closing under Section 7.2 in form reasonably satisfactory
to counsel for Seller.
In the event any of the foregoing conditions shall not have been
fulfilled on or before Closing, this Agreement may, at the option of Seller be
declared null and void.
15. THIS SECTION INTENTIONALLY OMITTED.
16. FURTHER ASSURANCES. Each party hereto shall from time to time at the
reasonable request of the other party hereto, whether on or after the Closing,
do, make, execute, acknowledge, and deliver all such further acts and
instruments of conveyance, assignment, transfer and consent, in form and
substance reasonably satisfactory to the requesting party, concerning compliance
with the terms and conditions of this Agreement as such requesting party may
reasonably require for the more effective performance of their respective
obligations hereunder and the completion of the transactions contemplated
hereby.
17. TAXES. The cost of all sales and use and any other transfer taxes,
if any, arising out of the transfer and sale of the assets described herein,
shall be determined prior to Closing by Seller and Buyer, and shall be paid by
Seller. Seller shall at Closing deliver to Buyer a sales tax resale certificate
for all applicable states for the properties purchased hereunder which will be
resold to customers in the ordinary course of business after Closing.
18. THIS SECTION INTENTIONALLY OMITTED.
19. POST CLOSING MATTERS. On the fifth (5th) business day prior to the
Closing Date, Seller shall provide to Buyer a complete and accurate list of all
creditors of Seller (including those creditors whose claims are disputed)
together with the current balance of amounts owed such creditor (including
disputed amounts). The amount due creditors, as reflected on the list, shall be
held back by Buyer from the Purchase Price until such time as such creditors
shall have been paid in full.
20. CONTINUING OBLIGATIONS. Seller and Buyer agree that any and all
confidential financial data, customer lists and data, and any confidential books
and records or other materials provided or made available to the other party
prior to or after Closing (collectively, "Confidential Information"), which is
not otherwise available to the public, shall be held strictly confidential and
shall not be provided or made available to any other party than the parties to
this Agreement. Confidential Information shall not include (a) information,
whether or not a true "trade secret", which at the time concerned is generally
known to other persons engaged in business similar to Buyer's or Seller's
business, (b) information which was previously known to the party receiving it,
(c) information which was in the public domain at the time such party received
it or thereafter
20
<PAGE> 21
entered the public domain through no fault of such party, or (d) information
which is required to be disclosed in legal proceedings.
21. INDEMNIFICATIONS.
21.1 BY SELLER, SPARKMAN AND HELBIG. Each of Seller, Sparkman and
Helbig, jointly and severally, hereby agrees to indemnify Buyer and its
successors, assigns and affiliates, and present and future directors, officers,
employees, and agents against, and hold them harmless from and against all
damages, losses, liens, claims, deficiencies, liabilities, fines, penalties,
costs and expenses, including but not limited to reasonable legal fees and costs
of litigation (collectively referred to as "Damages") resulting from, caused by
or arising out of any of the following:
(i) The inaccuracy of any statement or representation or the
breach of any warranty, covenant, or Agreement of Seller or Sparkman or
Helbig made herein, or the failure of Seller or Sparkman or Helbig to
perform any covenant or agreement made herein;
(ii) Any claim against any of the H&S Remote Control Assets or
against Buyer by a creditor of Seller arising out of a breach of this
Agreement by Seller or Sparkman or Helbig;
(iii) Any transaction, occurrence or action by Seller or
Sparkman or Helbig in connection with the operation of the H&S Remote
Control Business by Seller or Sparkman or Helbig prior to the Closing
Date;
(iv) Any claim contained in any pending litigation against
Seller or Sparkman or Helbig; and
(v) Any claim asserted against Buyer by reason of any
noncompliance of any applicable bulk sales laws under the provisions of
the Uniform Commercial Code or similar law in any jurisdiction.
21.2 BY BUYER. Buyer hereby agrees to indemnify and hold Seller and its
successors, assigns and affiliates, and present and future directors, officers,
employees, and agents against, and hold them harmless from and against all
Damages resulting from, caused by or arising out of the following:
(i) The inaccuracy of any statement or representation or the
breach of any warranty, covenant, or agreement of Buyer made herein, or
the failure of Buyer to perform any covenant or agreement made by it
herein;
(ii) Any transaction, occurrence, action or omission in
connection with the operation of the H&S Remote Control Business by
Buyer after the Closing Date; and
(iii) Any claim contained in any pending litigation against
Buyer.
21
<PAGE> 22
21.3 NOTICE AND PROCEDURES.
(a) Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any
claim by a person not a party to this Agreement ("third person") or the
commencement of any action or proceeding by a third person, the
Indemnified Party shall, if a claim with respect thereto is to be made
against any party obligated to provide indemnification pursuant hereto
(hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or
proceeding. Such notice shall state the nature and basis of such claim
and, if ascertainable, the amount thereof. In each such case the
Indemnified Party agrees to give such notice to the Indemnifying Party
promptly; provided, however, that the failure of the Indemnified Party
to give such notice shall not excuse the Indemnifying Party's obligation
to indemnify except to the extent the Indemnifying Party has suffered
damage or prejudice by reason of the Indemnified Party's failure to give
or delay in giving such notice. The Indemnified Party shall have the
right to compromise or defend such third person claim, at the expense of
the Indemnifying Party. After receipt of such notice from the
Indemnified Party, the Indemnifying Party shall acknowledge in writing
its obligation to indemnify in respect of such third person claim.
Provided that the Indemnifying Party shall have so acknowledged its
obligation to indemnify in respect of such claim, the Indemnifying Party
may, at its expense, have the right to participate in the defense of
such third person claim and no such third person claim shall be settled
by the Indemnified Party without the consent of the Indemnifying Party,
which consent shall not be unreasonably withheld. At any time after
notice of any third person claim, the Indemnifying Party may request the
Indemnified Party to agree in writing to the payment or compromise of
the third person claim, whereupon such action shall be taken unless the
Indemnified Party determines that the contest should be continued, and
so notifies the Indemnifying Party in writing within fifteen (15) days
of such request from the Indemnifying Party. In the event that the
Indemnified Party determines that the contest should be continued, the
Indemnifying Party shall be liable pursuant to this Section 21 with
respect to such claim only to the extent of the lesser of (i) the amount
which the other party to the contested third person claim had agreed to
accept in complete payment or compromise as of the time the Indemnifying
Party made its request therefor to the Indemnified Party plus other
Damages incurred to such date with respect to such claim, or (ii) such
amount for which the Indemnifying Party may be liable with respect to
such third person claim by reason of the provisions of this Section 21.
(b) If an Indemnified Party shall have any claim pursuant to
this Section 21, including but not limited to a claim for Damages as the
result of the Indemnifying Party's failure to acknowledge its obligation
to indemnify, the Indemnified Party shall deliver to the Indemnifying
Party written notice explaining the nature and amount of such claim
promptly after the Indemnified Party shall know the amount of such
claim. The Indemnified Party and Indemnifying Party shall thereafter
attempt in good faith for a period of not less than thirty (30) days to
agree upon whether the Indemnified Party is entitled to be indemnified
and held
22
<PAGE> 23
harmless under this Section 21 and the extent to which it is entitled to
be indemnified and held harmless hereunder. If the parties cannot so
agree within said period, the Indemnified Party may thereafter commence
litigation in a court of competent jurisdiction for a determination of
its claim. Upon resolution of any claim pursuant to this Section 21,
whether by agreement between the parties or the rendering of a final
judgment in any litigation, the Indemnifying Party shall within ten (10)
of such resolution pay over and deliver to the Indemnified Party funds
in the amount of any claim as resolved, and any fees, including
reasonable attorneys' fees, incurred by the Indemnified Party with
respect to any such litigation.
21.4 SET OFF. Notwithstanding anything to the contrary herein, in the
event Buyer has a claim for indemnification pursuant to this Section 21, Buyer
may set off Damages against any portion of the Purchase Price, if any.
22. THIS SECTION INTENTIONALLY OMITTED.
23. EXPENSES. Except to the extent otherwise provided by this Agreement
or as specifically authorized in writing by the parties hereto, each party shall
pay for its own legal, accounting and other similar expenses incurred in
connection with the transactions contemplated by this Agreement, whether or not
such transactions are consummated.
24. NO BROKERAGE COMMISSIONS. Each party represents and warrants that
this Agreement is the result of direct negotiations between them and that there
are no claims for brokerage commissions or finders fees in connection with the
transactions contemplated by this Agreement. Each of the parties agrees to
indemnify and hold harmless the other as a result of liability to any broker or
finder on the basis of any arrangement or agreement made by or on behalf of such
party.
25. ENTIRE AGREEMENT AND BINDING EFFECT. This Agreement and the exhibits
and schedules attached hereto contain the entire agreement between the parties
hereto with respect to the transactions contemplated herein, and supersede all
prior agreements or understandings between the parties relating to the subject
matter hereof. This Agreement, and all questions concerning its construction,
validity, and interpretation, and the performance of the obligations imposed by
this Agreement, shall be governed, interpreted and enforced according to the
internal law, not the law of conflicts, of the State of California. All
exhibits, schedules and attachments attached hereto are incorporated herein by
this reference.
26. ASSIGNABILITY. This Agreement shall not be assignable by any of the
parties hereto, except that it may be assigned by Buyer to any corporation
controlled by, or under direct or indirect common control with, Buyer. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, representatives, successors and permitted assigns.
23
<PAGE> 24
27. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions of this Agreement and any other application thereof
shall not in any way be affected or impaired thereby (except if such partial
invalidity may frustrate the basic intents and purposes hereof).
28. TERMINATION. This Agreement may be terminated or abandoned any time
prior to the consummation hereof by (a) the mutual consent of the parties
hereto; (b) either Buyer or Seller, respectively, if there has been a material
misrepresentation or breach on the part of Seller or Buyer, respectively, of any
representation, warranty or covenant set forth in or made pursuant to this
Agreement; or (c) Buyer or Seller if the Closing has not occurred by October 31,
1998; provided, however, that any termination pursuant to clause (b) above shall
not be deemed to be a waiver of any rights and remedies otherwise available
under this Agreement, by operation of law or otherwise to the party who so
terminates.
29. WAIVERS AND NOTICES. Any term or condition of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument. No delay or failure on the part of any party in exercising any
rights hereunder, and no partial or single exercise thereof, will constitute a
waiver of such rights or of any other rights hereunder nor shall operate as a
waiver of, or estoppel with respect to, any subsequent or other exercise of any
rights hereunder. All notices, waivers, consents, requests, instructions,
approvals, and other communications provided for herein shall be in writing and
shall be validly given, made or served (a) upon delivery to the address of such
party specified below if delivered personally or by courier, or sent by
certified or registered mail, return receipt requested, postage prepaid, or (b)
upon dispatch if transmitted by telecopy or other means of facsimile, in any
case to the parties at the following addresses or facsimile number, as the case
may be:
(a) If to Seller or Sparkman or Helbig:
Mr. J. C. Sparkman
2530 South Dudley Street
Lakewood, Colorado 80227
Facsimile No. (303) 984-1427
Telephone No.: (303) 980-5497
(b) If to Buyer:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attention: President
Facsimile No.: (714) 820-1010
Telephone No.: (714) 820-1000
With a Required Copy to: Universal Electronics Inc.
24
<PAGE> 25
6101 Gateway Drive
Cypress, California 90630
Attention: General Counsel
Facsimile No.: (714) 820-1010
Telephone No.: (714) 820-1000
or to such other address or facsimile number as either party may have furnished
to the other in writing in accordance herewith, except that notices of change of
address shall only be effective upon receipt.
30. AMENDMENT. This Agreement may be amended, modified, or supplemented
only by written agreement of the parties hereto.
31. REMEDIES CUMULATIVE. All remedies of the parties provided herein
shall, to the extent permitted by law, be deemed cumulative and not exclusive of
any thereof or of any other remedies available to the parties, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained herein, and every remedy given herein or by
law to any party hereto may be exercised from time to time, and as often as
shall be deemed expedient, by such party.
32. SPECIFIC PERFORMANCE. Each of Seller and Sparkman and Helbig
acknowledges and agrees that the H&S Remote Control Assets are unique, that
damages for any failure of Seller to transfer the H&S Remote Control Assets
pursuant to this Agreement would be an inadequate remedy, and that Buyer shall
be entitled to enforcement by judgment for specific performance.
33. HEADINGS. The section and other headings contained in this Agreement
are for reference purposes only and shall not affect the interpretation or
meaning of this Agreement.
34. COUNTERPARTS. This Agreement shall be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
35. NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent and no rule of strict construction will be applied against any party.
36. AGREEMENT CONFIDENTIAL. Prior to Closing, no public announcement
will be made by any party hereto relating to any of the transactions
contemplated by this Agreement without the consent of any other party hereto and
all parties will use their best efforts to keep such transactions confidential
until Closing, except to the extent disclosure is required by law.
[SIGNATURES CONTAINED ON THE FOLLOWING PAGE]
25
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
UNIVERSAL ELECTRONICS INC.,
a Delaware corporation
By:
--------------------------------------
Camille Jayne, President
ATTEST:
- - ----------------------------------
Its Secretary
H & S Management Corp.,
a Colorado corporation
By:
--------------------------------------
J.C. Sparkman,
------------------------
ATTEST:
- - ----------------------------------
Its Secretary
-----------------------------------------
J.C. Sparkman, Individually
-----------------------------------------
Steven Helbig, Individually
26
<PAGE> 27
EXHIBIT 1.2
PURSUANT TO SECTION 1.2
OF THE
ASSET PURCHASE AGREEMENT
NON-COMPETE AGREEMENT
This NON-COMPETE AGREEMENT made this ____ day of August, 1998 by and
among H & S [Management Corp.], a Colorado corporation ("H&S"), J. C. Sparkman,
a Colorado resident ("Sparkman"), and Steven Helbig, a Colorado resident
("Helbig") (individually, each of H&S, Sparkman and Helbig is referred to herein
as a "Covenantee", and collectively, the "Covenantees"), and Universal
Electronics Inc., a Delaware corporation ("UEI").
W I T N E S S E T H:
WHEREAS, Covenantees and UEI have entered into a certain Asset Purchase
Agreement dated August ___ 1998 ("Purchase Agreement") (unless otherwise defined
herein, capitalized terms shall be used herein as defined in the Purchase
Agreement) pursuant to which UEI will purchase from H&S the H&S Remote Control
Business and the H&S Remote Control Assets; and
WHEREAS, pursuant to the terms of the Purchase Agreement, UEI has agreed
to pay Covenantees a total of $__________ for this Non-Compete Agreement, with
such payment allocated among the Covenantees as set forth on the allocation
schedule attached to the Purchase Agreement; and
WHEREAS, it is a condition to the Closing under the Purchase Agreement
that this Non-Compete Agreement be entered into by each of the Covenantees and
by UEI;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. NON-COMPETE; NON-SOLICITATION. In consideration of the consideration
paid to each of the Covenantees for this Agreement as described above and in the
Purchase Agreement, each Covenantee covenants and agrees that, for a period of
seven (7) years from the date hereof (the "Non-Compete Period") Covenantee shall
not, directly or indirectly, either alone or in partnership or jointly or in
conjunction with any person or persons, firm, association, syndicate, company or
corporation as principal, agent, employee, director, shareholder or in any other
manner whatsoever (i) carry on or be engaged in the H&S Remote Control Business
or any other business which is in competition with the H&S Remote Control
Business as existing on the date hereof, (ii) solicit business from or transact
business with any person, firm or corporation to whom UEI or any
<PAGE> 28
Covenantee has sold products where such solicitation would involve the sale of
products competitive with those of the H&S Remote Control Business, or (iii)
directly or indirectly solicit for employment, offer employment to, or hire any
person (as an employee or consultant), or other engage in business any person or
persons who is or or are employed by UEI immediately after the consummation of
the transactions contemplated by the Purchase Agreement or during the
Non-Compete Period, except with the prior written consent of UEI.
1.1 EXCEPTIONS TO NON-COMPETE; NON-SOLICITATION. Nothing within Section
1, above shall prohibit any Covenantee from (i) carrying on or being engaged in
any type of business, which is not competitive with the H&S Remote Control
Business in any area whatsoever, or (ii) being an owner of not more than 5% of
the outstanding stock of any class of a corporation which is publicly traded
whose principal business is competitive with the H&S Remote Control Business, so
long as Covenantee has no active participation in the business of such
corporation.
2. REMEDIES. Each Covenantee acknowledges that the covenants and
agreements which it has made in this Agreement are reasonable and are required
for the reasonable protection of UEI's investment in the H&S Remote Control
Assets and the H&S Remote Control Business. Each Covenantee agrees that the
breach of any covenant or agreement contained herein will result in irreparable
injury to UEI, and that in addition to all other remedies provided by law or in
equity with respect to the breach by Covenantee of any provision of this
Agreement, UEI and its successors and assigns will be entitled to enforce the
specific performance by Covenantee of Covenantee's obligations hereunder and to
enjoin Covenantee from engaging in any activity in violation hereof, all without
the need of posting bond or any other security, and that no claim by Covenantee
against UEI or its successors or assigns will constitute a defense or bar to the
specific enforcement of such obligations. Each Covenantee agrees that UEI and
any successor or assign shall be entitled to recover all costs of successfully
enforcing any provision of this Agreement, including reasonable attorneys' fees
and costs of litigation (including incurred in connection with any
administrative, alternative dispute resolution or appellate proceeding) and any
interest. In the event of a breach or a violation by any Covenantee of any of
the provisions of this Agreement, the running of the Non-Compete Period, shall
be tolled during the period of the continuance of any actual breach or
violation.
3. PARTIAL INVALIDITY. The various covenants and provisions of this
Agreement are intended to be severable and to constitute independent and
distinct binding obligations and of each of the Covenantees. Should any covenant
or provision of this Agreement be determined to be void and unenforceable, in
whole or in part, it shall not be deemed to affect or impair the validity of any
other covenant or provision or part thereof, and such covenant or provision or
part thereof shall be deemed modified to the extent required to permit
enforcement. Without limiting the generality of the foregoing, if the scope of
any covenant contained in this Agreement is too broad to permit enforcement to
its full extent, such covenant shall be enforced to the maximum extent permitted
by law, and the Covenantees hereby agree that such scope may be judicially
modified accordingly.
4. ASSIGNMENT. Each Covenantee agrees that this Agreement may be
assigned by UEI
<PAGE> 29
to any entity controlled by, or under direct or indirect common control with,
UEI and to any person to whom UEI sells its business or assets, and that upon
any such assignment, such assignee shall acquire all of UEI's rights under this
Agreement, including without limitation the right of assignment set out in this
Section 4.
5. NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.
6. NOTICE. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been duly given
to any party (i) upon delivery to the address of such party specified below if
delivered in person or by courier, or if sent by certified or registered mail
(return receipt requested), postage prepaid, (ii) upon dispatch if transmitted
by telecopy or other means of facsimile, in any case to the parties at the
following address(es) or telecopy number(s), as the case may be:
If to any Covenantees:
Mr. J. C. Sparkman
2530 South Dudley Street
Lakewood, Colorado 80227
Facsimile No.: (303) 984-1427
Telephone No.: (303) 980-5497
If to UEI:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attn.: President
Facsimile No.: (714) 820-1010
Telephone No.: (714) 820-1000
With required copies to:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attn.: General Counsel
Facsimile No.: (714) 820-1010
Telephone No.: (714) 820-1000
or to such address(es) or telecopy number(s) as any party may designate by
written notice in the
<PAGE> 30
aforesaid manner.
7. WAIVER OF BREACH. The waiver by any party hereto of a breach of any
provision of this Agreement by any other party shall not operate or be construed
as a waiver of any subsequent breach.
8. ENTIRE UNDERSTANDING. This Agreement and the agreements referred to
herein constitute the entire understanding and shall not be changed, altered,
modified or discharged, except in writing consented to by all parties.
9. BINDING EFFECT. This Agreement shall be binding upon the
administrators, legal representatives, heirs and legatees and the successors and
assigns of each Covenantee and UEI.
10. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of California, without regard to its
conflicts of laws provisions.
11. COUNTERPARTS. This Agreement shall be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one in the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
COVENANTEES: UEI:
H & S [MANAGEMENT CORP.] UNIVERSAL ELECTRONICS INC.
By: By:
------------------------------- --------------------------------------
Its: Camille Jayne, President & CEO
-----------------------------
- - ---------------------------------
J. C. SPARKMAN
- - ---------------------------------
STEVEN HELBIG
<PAGE> 31
EXHIBIT 7.1(c)
PURSUANT TO SECTION 7.1(c)
OF THE
ASSET PURCHASE AGREEMENT
[FORM OF OPINION OF COUNSEL TO SELLER, SPARKMAN AND HELBIG]
August ___, 1998
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Re: Asset Purchase dated August __, 1998 (the "Agreement"),
by Universal Electronics Inc. ("Purchaser"), H & S
[Management Corp.] ("Seller"), J. C. Sparkman
("Sparkman"), and Steven Helbig ("Helbig")
Gentlemen:
We are counsel to each of Seller, Sparkman and Helbig in connection with
the sale by Seller to Purchaser of H&S Remote Control Assets used or useful in
the H&S Remote Control Business. All capitalized terms used herein and not
otherwise defined herein, shall have the meanings ascribed to them in the
Agreement. We are rendering this opinion pursuant to Section 7.1(c) of the
Agreement.
It is our opinion that:
1. (a) Seller is a corporation duly organized, validly
existing, and in good standing under the laws of
the State of Colorado; is duly qualified to do
business, and is in good standing in those
states in which Seller is legally required to be
so qualified; has full corporate power and
authority to own, lease and operate its business
and properties as now owned and conducted; and
has full corporate power and authority to
execute and deliver the Agreement and all other
agreements, documents and instruments to be
executed and delivered pursuant thereto and to
perform its obligations thereunder.
(b) Each of Sparkman and Helbig is a citizen of the
State of Colorado; locates his place of
residence in the State of Colorado; has the
legal capacity to execute and deliver the
Agreement and all other agreements, documents
and instruments to be executed and delivered
pursuant thereto and to perform his obligations
thereunder.
<PAGE> 32
2. The execution and delivery of the Agreement and the other agreements,
documents and instruments to be executed and delivered pursuant thereto, and the
performance of the transactions provided for therein have been duly authorized
and approved by all requisite corporate action on the part of Seller and no
other corporate action on the part of Seller is required in connection with the
execution and delivery of the Agreement and the other agreements, documents and
instruments executed and delivered pursuant thereto and the performance by
Seller of its obligations thereunder.
3. Each of the Agreement and other agreements, documents and instruments
which have been executed by Seller, Sparkman, and/or Helbig pursuant thereto,
have been duly executed and delivered by Seller, Sparkman, and/or Helbig and
constitute legal, valid and binding obligations of and are enforceable against
each of Seller, Sparkman, and Helbig in accordance with their terms, except to
the extent that the enforcement thereof may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally or by equitable principals (whether
considered to be an action at law or in equity).
4. Neither the execution and delivery of the Agreement and other
agreements, documents and instruments executed and delivered pursuant thereto by
Seller, Sparkman, and/or Helbig, nor the consummation of the transactions
contemplated thereby will (a) violate the [Articles/Certificate] of
Incorporation or By-Laws of Seller, (b) violate, conflict with, or constitute a
default under, or cause the acceleration of the maturity of any debt or
obligation pursuant to, or result in the creation or imposition of any security
interest, lien or other encumbrance upon any of the H&S Remote Control Assets
under, any agreement or commitment to which Seller, Sparkman, and/or Helbig are
parties or by which either of them or any of the H&S Remote Control Assets may
be bound or affected, (c) violate any statute or law or any regulation or rule
of governmental authority, or (d) violate any judgment, decree, injunction, writ
or order known to us to be applicable to Seller, Sparkman, Helbig, or any of the
H&S Remote Control Assets.
5. Neither Seller, Sparkman nor Helbig is in default on any
indebtedness, contract, lease, or commitment to which any of them or any of
their assets is a party or bound.
6. Seller has exclusive, good and marketable title free of licenses,
liens, claims, encumbrances, charges, and other exceptions (or claims thereof)
of any kind to all of the H&S Remote Control Assets.
7. Neither Seller, Sparkman nor Helbig are engaged in or a party to any
legal action or other proceeding, and there are no legal actions or other
proceedings threatened against Seller, Sparkman or Helbig, and none of Sparkman,
Helbig, Seller or any current management employee of Seller has incurred or been
charged with, and is not under investigation with respect to, any violation of
any foreign, federal, state or local law or administrative regulation, any of
which if adversely determined could, in the opinion of the undersigned adversely
affect or impair the condition (financial or otherwise) of the H&S Remote
Control Assets or the H&S Remote Control Business.
<PAGE> 33
8. No consent of any governmental authority is required for the
execution and delivery of the Agreement and the other agreements, documents and
instruments executed and delivered pursuant thereto by Seller, Sparkman, and/or
Helbig, and the consummation by Seller, Sparkman, and/or Helbig of the
transactions contemplated thereby.
9. All bills of sale, assignments, deeds and other agreements, documents
and instruments to be delivered by Seller at the Closing are effective to sell,
convey and assign to Purchaser all of Seller's right, title and interest in and
to the &S Remote Control Assets free and clear of all licenses, liens,
encumbrances, charges, and other exceptions (or claims thereof).
10. Seller has all necessary authorizations, approvals, licenses,
permits, and orders of and from all governmental and regulatory offices and
bodies to carry on its business as now being conducted, to own or hold under
lease the property and assets it owns and holds under lease, and to perform the
obligations under the agreements to which it is a party, and no proceeding is
pending or threatened which seeks to revoke, limit or suspend any such
authorization, approval, license, permit or order. To the best of our knowledge,
Seller is in compliance with all applicable laws, contractual or legal
restrictions, regulations and administrative and executive orders of any
country, state or municipality or of any subdivisions thereof to which Seller's
business and employment of labor or use or occupancy of properties or any part
thereof are subject, and Seller has not received notice of any violation thereto
and the laws of those states in which Seller is legally required to be qualified
to transact business.
Sincerely,
[INSERT NAME OF LAW FIRM]
By:
--------------------------------------
<PAGE> 34
SCHEDULE 1.1(a)
PURSUANT TO SECTION 1.1(a)
OF THE
ASSET PURCHASE AGREEMENT
NON H&S REMOTE CONTROL ASSETS
All assets not specifically identified within the Asset Purchase Agreement
<PAGE> 35
SCHEDULE 10(a)
PURSUANT TO SECTION 10(a)
OF THE
ASSET PURCHASE AGREEMENT
STATES WHERE SELLER IS QUALIFIED
- - --------------------------------
Colorado
<PAGE> 36
SCHEDULE 10(d)
PURSUANT TO SECTION 10(d)
OF THE
ASSET PURCHASE AGREEMENT
SELLER FINANCIAL STATEMENTS
- - ---------------------------
None Provided
<PAGE> 37
SCHEDULE 10(e)
PURSUANT TO SECTION 10(e)
OF THE
ASSET PURCHASE AGREEMENT
LIST OF LITIGATION, CLAIMS AND CONTINGENT LIABILITIES
- - -----------------------------------------------------
None
<PAGE> 38
SCHEDULE 10(w)
PURSUANT TO SECTION 10(w)
OF THE
ASSET PURCHASE AGREEMENT
LIST OF ENVIRONMENTAL PERMITS/NOTICES/CLAIMS
- - --------------------------------------------
None
<PAGE> 39
SCHEDULE 1(a)
PURSUANT TO SECTION 1(a)
OF THE
ASSET PURCHASE AGREEMENT
INVENTORY
- - ---------
NONE
<PAGE> 40
SCHEDULE 1(b)
PURSUANT TO SECTION 1(b)
OF THE
ASSET PURCHASE AGREEMENT
ORDERS/WORK IN PROCESS
- - ----------------------
NONE
<PAGE> 41
SCHEDULE 1(c)
PURSUANT TO SECTION 1(c)
OF THE
ASSET PURCHASE AGREEMENT
TOOLING
- - -------
NONE
<PAGE> 42
SCHEDULE 1(d)
PURSUANT TO SECTION 1(d)
OF THE
ASSET PURCHASE AGREEMENT
EQUIPMENT
- - ---------
NONE
<PAGE> 43
SCHEDULE 1(g)
PURSUANT TO SECTION 1(g)
OF THE
ASSET PURCHASE AGREEMENT
CONTRACT RIGHTS
- - ---------------
1. Agreement between from GI Communications Division of General Instrument
Corporation of Delaware dated July 1, 1996 and amended on February 23,
1998 whenerby such amendment assigned the agreement to H & S Management
Corp.
<PAGE> 44
SCHEDULE 9.3
PURSUANT TO SECTION 9.3
OF THE
ASSET PURCHASE AGREEMENT
INSURANCE COVERAGE AND POLICIES
- - -------------------------------
[List to be provided by Seller]
<PAGE> 45
SCHEDULE 8
PURSUANT TO SECTION 8
OF THE
ASSET PURCHASE AGREEMENT
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
- - -------------------------
<S> <C> <C>
1. To H & S Management Corp.
Inventory; Orders/Work in Process;
Tooling; Equipment; Artwork;
Supplies; Contract; Rights;
Licenses and Permits; Records; and
Intangible/Goodwill $2,273,689.13
Non-Compete 50,000.00
-------------
Total $2,323,689.13
=============
2. To J. C. Sparkman
Non-Compete $ 25,000.00
=============
3. To Steven Helbig
Non-Compete $ 25,000.00
=============
Aggregate Total $2,373,689.13
=============
</TABLE>
<PAGE> 46
SCHEDULE 9.3
PURSUANT TO SECTION 9.3
OF THE
ASSET PURCHASE AGREEMENT
INSURANCE COVERAGE AND POLICIES
- - -------------------------------
[List to be provided by Seller]
<PAGE> 1
EXHIBIT 10.22
EXECUTIVE OFFICER
EMPLOYMENT AGREEMENT
THIS EXECUTIVE OFFICER EMPLOYMENT AGREEMENT (the "Agreement") is made
and entered into this 29th day of January 1998 by and between UNIVERSAL
ELECTRONICS INC. (the "Employer") and CAMILLE JAYNE ("Executive").
RECITALS:
WHEREAS, the Employer is presently headquartered in Twinsburg, Ohio, but
has the present intention of relocating its headquarters to its Cypress,
California facility during 1998, and is engaged in the business of developing
and marketing easy to use, pre-programmed universal remote control products
primarily for home video and audio entertainment equipment and home security and
home automation devices; and
WHEREAS, Employer wishes to retain Executive as one of its key
executives and avail itself of Executive's expertise, experience and capability
in Employer's business, and in this connection has offered employment to
Executive as its President and Chief Operating Officer to perform those duties
and assume those responsibilities as identified and outlined in Employer's
Amended and Restated By-Laws, and to undertake such other duties and to assume
such other responsibilities commensurate with Executive's designated position(s)
as may be reasonably assigned to Executive from time to time by the Board of
Directors of Employer; and
WHEREAS, Executive desires to be employed by the Employer subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
1. EMPLOYMENT
Subject to all of the terms and conditions of this Agreement, Employer
hereby employs Executive and Executive hereby accepts employment with Employer.
2. TITLE, AUTHORITY AND DUTIES
(a) TITLE(S) AND POSITION(S). At the commencement of this
Agreement, Executive shall be employed in the position(s) of and shall
have the title(s) of President and Chief Operating Officer of Employer.
Until this Agreement is terminated as provided herein,
1
<PAGE> 2
Executive will continue to occupy such position(s) and hold such
title(s) until Employer and Executive shall mutually agree in writing to
change any such position(s) and title(s).
(b) AUTHORITY AND DUTIES. Executive will, during the term of
this Agreement, perform those duties and assume those responsibilities
as identified and outlined in Employer's Amended and Restated By-Laws,
as amended as of the date of this Agreement, and to undertake such other
duties and to assume such other responsibilities commensurate with
Executive's designated position(s) as may be reasonably assigned to
Executive from time to time by the Chairman and CEO of Employer and/or
the Board of Directors of Employer.
(c) EXCLUSIVE SERVICES AND EFFORTS OF EXECUTIVE. During the term
of this Agreement, Executive shall serve the Employer, under the
direction of the Board of Directors of Employer, and shall faithfully,
diligently, competently and, to the best of her ability, exclusively
devote her full time, energy and attention (unless otherwise agreed to
by the parties) to the business of the Employer and to the promotion of
its interest. Executive recognizes that Employer's organization,
business and relationship with clients, prospective clients and others
having business dealings with Employer are and will be the sole property
of Employer and Executive shall have no separate interests or rights
with respect thereto, except as an employee of Employer.
(d) OTHER ACTIVITIES AND INTERESTS. Employer shall be entitled
to all of the benefits, emoluments, profits, discoveries or other issues
arising from, incident to and related to any and all work, services and
advice of Executive to Employer in carrying out her duties and
responsibilities hereunder. Executive shall not, without the written
consent of Employer, directly or indirectly, render services to or for
any person, firm, corporation or other entity or organization, whether
or not in exchange for compensation, regardless of the form in which
such compensation, if any, is paid and whether or not it is paid
directly or indirectly to her if the rendering of such service would
interfere with the performance of her duties and responsibilities to
Employer hereunder. Notwithstanding the foregoing sentence, Executive
may spend time and attention to personal investment and community
activity matters and such other personal matters consistent with
Employer's policies and procedures set forth within Employer's policy
manual in effect from time to time which are equally applicable to all
of Employer's executive employees, so long as the spending of such time
and attention does not substantially interfere with the performance of
her duties and responsibilities to Employer hereunder. In addition,
Executive shall be entitled to spend approximately eight (8) to ten (10)
business days between the date of this Agreement and April 30, 1998 to
perform and complete all consulting services for such contractual
assignments to which she is, on the date hereof, obligated. Executive
represents to Employer that her performance of such consulting services
shall not substantially interfere with her ability to carry out her
duties as set forth herein nor will it require significantly more time
than that as set forth in the preceding sentence.
2
<PAGE> 3
3. TERM OF EMPLOYMENT AND TERMINATION
(a) TERM. Unless earlier terminated as provided herein, the term
of this Agreement shall commence at the start of business on February 2,
1990 and shall continue through the end of business on February 1, 2000
(the "Initial Term"). Unless terminated by either party by giving the
other party written notice of an intent not to renew this Agreement at
least sixty (60) days prior to the end of the Initial Term or any
successive one (1) year term, this Agreement shall automatically extend
for one (1) additional year after the Initial Term and then again for a
one (1) year term after each successive year.
(b) TERMINATION.
(i) BY EMPLOYER FOR JUST CAUSE. Employer may terminate
the employment of Executive under this Agreement for Just Cause
(as defined herein) at any time upon delivery of written notice
to her setting forth, in reasonable specificity, such Just
Cause. For purposes of this Agreement, and particularly this
subsection 3(b)(i), "Just Cause" shall mean:
(1) The continued failure by or refusal of
Executive to substantially perform her duties and
responsibilities as set forth herein; or
(2) Executive's indictment for, conviction of or
a guilty plea to a felony or of any crime involving
moral turpitude, whether or not affecting the Employer;
or
(3) The engagement by Executive of personal
illegal conduct which, in the reasonable judgment of
Employer, by association with her, is materially and
demonstrably injurious to the property and/or business
of Employer; or
(4) Any material breach by Executive of the
terms and conditions contained herein, including without
limitation, those certain confidentiality provisions set
forth in Section 16; or
(5) The commission of any act opposed to the
best interests of Employer for which Executive would not
be entitled to indemnification under Employer's Restated
Certificate of Incorporation and Amended and Restated
By-Laws, each as amended as of the date of this
Agreement; or
(6) The failure by Executive to protect the best
interests of Employer through Executive's gross neglect
of duty.
3
<PAGE> 4
(ii) BY EXECUTIVE FOR GOOD REASON. Executive may
terminate her employment with Employer under this Agreement for
Good Reason (as defined herein) at any time upon delivery of
written notice to Employer setting forth, in reasonable
specificity, such Good Reason(s). For purposes of this
Agreement, and particularly this subsection 3(b)(ii), "Good
Reason" shall mean:
(1) The attempted discontinuance or reduction in
Executive's "Base Cash Salary" (as defined herein);
(2) The attempted discontinuance or reduction in
Executive's bonuses and/or incentive compensation award
opportunities under plans or programs applicable to her,
unless such discontinuance or reduction is a result of
Employer's policy applied equally to all executive
employees of Employer; or
(3) The attempted discontinuance or reduction in
Executive's stock option and/or stock award
opportunities under plans or programs applicable to her,
unless such discontinuance or reduction is a result of
Employer's policy applied equally to all executive
employees of Employer; or
(4) The attempted discontinuance or reduction in
Executive's perquisites from those historically provided
her during her tenure with the Employer and generally
applicable to executive employees of Employer; or
(5) The relocation of Executive to an office
(other than Employer's headquarters) located more than
fifty (50) miles from her then current office location;
or
(6) The significant reduction in Executive's
responsibilities and status within the Employer or
change in her title(s) or position(s); or
(7) The attempted discontinuance of Executive's
participation in any benefit plans maintained by
Employer unless such plans are discontinued by reason of
law or loss of tax deductibility to the Employer with
respect to the contributions to or payments under such
plans, or are discontinued as a matter of the Employer's
policy applied equally to all participants; or
(8) The attempted reduction of Executive's paid
vacation to less than that as provided in this
Agreement; or
(9) The failure by Employer to obtain an
assumption of Employer's obligations under this
Agreement by any assignee of or successor
4
<PAGE> 5
to Employer, regardless of whether such entity becomes a
successor to Employer as a result of merger,
consolidation, sale of assets of Employer or other form
of reorganization.
(iii) AUTOMATICALLY IN ACCORDANCE WITH SUBSECTION 3(a).
In addition to the rights to terminate this Agreement as set
forth in subsections 3(b)(i) and 3(b)(ii), this Agreement may
also terminate automatically in accordance with subsection 3(a).
(iv) DISAGREEMENTS. Any disagreement concerning whether
there has been Just Cause for termination by Employer or Good
Reason for termination by Executive will be resolved by binding
arbitration in accordance with the provisions of Section 20 of
this Agreement.
(c) EFFECT OF TERMINATION. Upon termination of Executive's
employment with Employer:
(i) BY EMPLOYER FOR JUST CAUSE. Executive shall not be entitled to receive
payment of any salary, bonus, expenses, or other benefits beyond the date of
termination and, subject to this subsection 3(c)(i) and Section 17, this
Agreement shall become null and void effective as of the date of termination and
Employer and Executive shall have no further obligation hereunder toward the
other except for the payment of salary, bonus, expenses and benefits, if any,
which have accrued but remain unpaid prior to and as of the termination date.
(ii) BY EXECUTIVE FOR GOOD REASON.
(1) Executive shall be paid by Employer in a lump sum within
twenty (20) business days of such termination, an amount which is equal
to the sum of the following:
(A) The amount equivalent to salary payments for
eighteen (18) months, at that rate of pay which is not less than
Executive's rate of Base Cash Salary in effect immediately prior
to the effective date of such termination (without regard to any
attempted reduction or discontinuance of such salary); and
(B) The amount equivalent to eighteen (18) months,
multiplied by the greater of (i) the monthly rate of the bonus
payment for the bonus period in the year immediately prior to
Executive's termination date or (ii) the estimated amount of the
bonus for the period which includes Executive's termination date
(without regard to any attempted reduction or discontinuance of
such bonus).
5
<PAGE> 6
(2) In addition to such amount under subsection
3(c)(ii)(1) above, Executive shall also receive, (i) in
cash, the value of the incentive compensation
(including, but not limited to, employer contributions
to the Universal Electronics Inc. 401(K) and Profit
Sharing Plan) and (ii) the rights to receive grants of
stock options and stock awards to which she would have
been entitled under all incentive compensation and stock
option and stock award plans maintained by Employer if
Executive had remained in the employ of Employer for
eighteen (18) months, (without regard to any attempted
reduction or discontinuance of such incentive
compensation). The amount of such payment and/or grants
shall be determined as of the date of termination and
shall be paid and/or issued as promptly as practicable
and in no event later than 30 days after such
termination.
(3) Employer shall also maintain in full force
and effect for the Executive's continued benefit (and,
to the extent applicable, the continued benefit of her
dependents) all of the employee benefits (including, not
limited to, coverage under any medical and insurance
plans, programs or arrangements) to which she would have
been entitled under all employee benefit plans, programs
or arrangements maintained by Employer if Executive had
remained in the employ of Employer for eighteen (18)
months, (without regard to any attempted reduction or
discontinuance of such benefits), or if such
continuation is not possible under the terms and
provisions of such plans, programs or arrangements,
Employer shall arrange to provide benefits substantially
similar to those which Executive (and, to the extent
applicable, her dependents) would have been entitled to
receive if she had remained a participant in such plans,
programs or for such eighteen (18) month period.
(4) Subject to this subsection 3(c)(ii) and
Section 17, this Agreement shall become null and void
effective as of the date of termination and Employer and
Executive shall have no further obligation hereunder
toward the other.
(iii) PURSUANT TO SUBSECTION 3(b)(iii). Executive
acknowledges and agrees that in the event that this Agreement
terminates in accordance with subsection 3(b)(iii), that
Employer and Executive shall have no further obligation
hereunder toward the other except for the payment of salary,
bonus, expenses and benefits, if any, which have accrued but
remain unpaid prior to and as of the termination date.
(iv) SUBMISSION OF RESIGNATIONS BY EXECUTIVE. Upon
termination of this Agreement by either Employer or Executive as
set forth herein and the receipt by Executive of (1) all cash
amounts due her as set forth herein and (2) a written
representation signed by an authorized representative of
Employer that all non-cash
6
<PAGE> 7
obligations of Employer as set forth herein have been fulfilled
or, as the case may be, have been commenced, Executive shall
immediately submit Executive's resignation for any and all
offices or directorships of Employer and/or any and all
subsidiaries and affiliates of Employer which resignation shall
have retroactive application and effect to such termination
date; provided however that during such time period from the
effective date of such termination to the date Executive submits
her resignation, Executive acknowledges and agrees that she does
not have authority to bind Employer to any contracts or
commitments and agrees not to create any obligation for Employer
or bind or attempt to bind Employer in any manner whatsoever.
Executive also acknowledges that she shall have no supervisory
or managerial responsibility or authority from and after the
effective date of her termination, regardless of whether she
submits the resignation or not, and agrees not to involve
herself in any activities of Employer, except as may be
requested by the an authorized officer of Employer.
4. TOTAL COMPENSATION
While employed under this Agreement and in consideration of the services
to be rendered by Executive pursuant hereto, Executive shall receive the
following amounts/benefits as the sole and total compensation for the
performance of her duties and obligations under this Agreement:
(a) BASE CASH SALARY. A salary at the rate of Three Hundred
Thousand Dollars (US$300,000) per annum (the "Base Cash Salary"), which
shall be deemed to accrue from day to day, payable in accordance with
Employer's standard payroll practices and procedures;
(b) BONUS. A bonus calculated in accordance with the plans or
programs established by Employer from time to time; provided that the
bonus for the 1998 calendar year shall be calculated in accordance with
the Bonus Plans attached hereto as Exhibit A, payable in accordance with
Employer's standard payroll practices and procedures; and provided
further, that any such bonuses whenever earned and paid shall be
determined without regard to any material gains and losses which occur
outside of the scope of Employer's ordinary operating business unless
any such plans or programs explicitly include such material gains and
losses within the determination of any such bonuses;
(c) STOCK OPTIONS. Stock options granted or stock awards in
accordance with the plans or programs established by Employer from time
to time; provided that the stock options and/or stock awards granted for
the 1998 calendar year shall be determined in accordance with the Stock
Option Plans attached hereto as Exhibit B;
(d) INCENTIVE COMPENSATION. Participation in Employer's
incentive compensation plans and/or programs, including, but not limited
to, receipt of employer contributions to the Universal Electronics Inc.
401(K) and Profit Sharing Plan and the right to receive stock awards and
to exercise stock options under the Universal Electronics Inc.
7
<PAGE> 8
1993 Stock Incentive Plan, the Universal Electronics Inc. 1995 Stock
Incentive Plan, the Universal Electronics Inc. 1996 Stock Incentive
Plan, the Salaried Employee Cash Incentive Program, and such other plans
and/or programs which are established from time to time;
(e) BENEFITS. The benefits provided by Employer to its executive
employees generally, including without limitation, the benefits and
perquisites included under the Universal Electronics Inc. group family
health insurance program, which includes comprehensive medical
insurance, dental insurance, group disability, group life insurance, and
executive bonus (supplemental life); provided that the benefits provided
to Executive shall be no less extensive than that provided her
immediately prior to the date of this Agreement;
(f) VACATION. Three (3) weeks (fifteen (15) working days)
vacation with pay, determined and carried over in accordance with the
policies and procedures set forth within Employer's policy manual in
effect from time to time which are equally applicable to all of
Employer's executive employees;
(g) OTHER PERQUISITES. Such other employee benefits and
perquisites which are provided by Employer to executives generally,
provided that the other perquisites provided to Executive shall be no
less extensive than the most extensive perquisites provided to any other
executive employee of the Employer;
(h) D&O INSURANCE. Director and Officer Liability insurance in a
reasonably sufficient amount;
(i) DISCRETIONARY BONUS. Such other amounts of compensation
and/or bonus which is determined by Employer from time to time;
(j) REVIEWS. The total amount of compensation to be paid and/or
provided to Executive shall be reviewed by the Board of Directors, or
such committee thereof, of Employer as of the first day of each calendar
year while this Agreement is in force and effect. In no event shall such
review result in a reduction or discontinuance of the amount of
compensation paid and/or provided to Executive hereunder except if such
reduction or discontinuance occurs by reason of law or loss of tax
deductibility to the Employer with respect to the contributions to such
plans, or are discontinued as a matter of the Employer's policy applied
equally to all participants;
(k) COMMUTING ALLOWANCE AND CORPORATE HOUSING. During the
Initial Term Employer shall:
(i) Reimburse Executive for costs actually incurred by
Executive in commuting from San Francisco, California to
Employer's Cypress, California facility, which amounts shall not
exceed $20,000 per year, and further, in the event that such
8
<PAGE> 9
amounts reimbursed by Employer pursuant to this subsection (i)
are determined to be taxable to Executive, then Employer shall
pay to Executive an additional amount (the "gross-up payment")
calculated so that the net amount received by her after
deduction of the Excise Tax and of all federal, state and local
income taxes upon the gross-up payment shall equal the payments
to be made and the benefits to be provided to her under this
subsection (i); and
(ii) Provide Executive with such corporate housing
reasonably acceptable to both Executive and Employer in an area
reasonably proximate to Employer's Cypress, California facility.
5. ADJUSTMENTS IN CASE OF EXCESS PARACHUTE PAYMENTS
In the event that the aggregate present value (determined in accordance
with applicable federal, state and local income tax law, rules and regulations)
of all payments to be made and benefits to be provided to Executive under this
Agreement and/or under any other plan, program or arrangement maintained or
entered into by Employer or any of its subsidiaries shall result in "excess
parachute payments" to her within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), or any comparable provision of
successor legislation, which subject her to the Excise Tax under Section 4999 of
the Code or any comparable provision of successor legislation, Employer shall
pay to Executive an additional amount (the "gross-up payment") calculated so
that the net amount received by her after deduction of the Excise Tax and of all
federal, state and local income taxes upon the gross-up payment shall equal the
payments to be made and the benefits to be provided to her under this Agreement.
For purposes of determining the amount of the gross-up payment, Executive shall
be deemed to pay federal, state and local income taxes at the highest marginal
rates thereof in the calendar year in which the gross-up payment is to be made,
net of the maximum reduction in federal income taxes obtainable from deduction
of such state and local taxes. The computations required by this Section 5 shall
be made by the independent public accountants then regularly retained by
Employer, in consultation with tax counsel selected by and acceptable to
Executive. Employer shall pay all of its accountants' fees and the lesser of (i)
one-half of Executive's tax counsel's fees or (ii) $2,500.
6. REIMBURSEMENT FOR BUSINESS RELATED EXPENSES
Employer shall reimburse Executive for all reasonable expenses incurred
and paid by her in connection with Employer's business in accordance with
Employer's policy manual in effect from time to time.
7. INTEREST
In the event any payment to Executive under this Agreement is not paid
within five (5) business days after it is due, such payment shall thereafter
bear interest at the prime rate from time
9
<PAGE> 10
to time in effect at The Provident Bank, Cleveland, Ohio; provided however,
that this provision shall not excuse the timely payment of such sums required by
this Agreement.
8. NOTICES
Written notices to be given under this Agreement shall be personally
delivered or sent by overnight courier (such as Federal Express, DHL or UPS and
the like) or by registered or certified mail, return receipt requested, to the
addresses set forth below:
To Employer:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attn.: Corporate Secretary
With a required copy to:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attn: The Board of Directors
To Executive:
Ms. Camille Jayne
At her last known address as reflected in Employer's records
9. SEVERABILITY
If any one or more of the provisions contained in this Agreement shall
be invalid, illegal or unenforceable in any respect under applicable law, the
validity, legality and enforceability of the remaining provisions contained
herein shall not, in any way, be ineffective or impaired thereby.
10. GOVERNING LAW
This Agreement shall be governed by the law of the state of California
and not the law of conflicts of the state of California.
11. WAIVER
The failure of either party to insist in any one or more instances on
strict performance of any of this Agreement's provisions, or to exercise or
enforce any right, remedy or obligation under this Agreement, shall not be
construed as a waiver or relinquishment of any right, remedy or obligation, and
the right, remedy or obligation shall continue in full force and affect.
10
<PAGE> 11
12. ENTIRE AGREEMENT AND MODIFICATION
This Agreement sets forth the entire agreement of the parties concerning
the employment of Executive by the Employer and any oral or written statements,
representations, agreements or understandings made or entered into prior to or
contemporaneously with the execution of this Agreement are hereby rescinded,
revoked, and rendered null and void by the parties. The parties hereto further
acknowledge and agree that the terms of that certain Offer Letter dated November
5, 1997 have been incorporated in this Agreement and such Offer Letter has been
superseded by this Agreement and therefore, is hereby terminated in its entirety
and shall be of no further force and effect. This Agreement may be modified only
by a written instrument duly executed by each party hereto.
13. ASSIGNMENT
This Agreement shall be binding upon the parties hereto, their
respective heirs, personal representatives, executors, administrators,
successors and assigns. Any such assignee or successor of Employer shall, within
ten (10) business days after receipt of a written request by Executive, send to
Executive its acknowledgment and agreement that such assignee or successor
expressly assumes all of Employer's obligations under this Agreement as if such
assignee or successor was the original employer and the term "Employer" as used
herein as include any such assignee or successor.
14. INTERPRETATION OF AGREEMENT
The parties have cooperated in the drafting and preparation of this
Agreement. Therefore, the parties hereto agree that, in any construction to be
made of the Agreement the same shall not be construed against any of the
parties. Each of the parties hereto has carefully read this Agreement and has
been given the opportunity to have it reviewed by legal counsel and negotiate
its terms.
15. SPECIFIC OBLIGATIONS OF THE EXECUTIVE
In addition to the general duties set forth herein, Executive shall use
her reasonable efforts for the benefit of Employer by whatever activities
Employer finds reasonably appropriate to maintain and improve Employer's
standing in the community generally and among current and prospective customers,
including such entertainment for professional purposes as Executive and Employer
mutually consider appropriate. Executive shall undertake business development
endeavors as reasonably directed by Employer.
16. NONDISCLOSURE AND NONAPPROPRIATION OF INFORMATION
(a) Executive recognizes and acknowledges that while employed by
Employer, she will have access to, learn, be provided with and, in some
cases, prepare and create certain confidential, proprietary business
information and/or trade secrets for
11
<PAGE> 12
Employer, including, but not limited to, lists, files and forms,
(hereinafter collectively referred to as the "trade secrets"), all of
which are of substantial value to Employer and its business. In this
connection, Executive expressly covenants and agrees, during her
employment with Employer and continuing thereafter, to:
(i) Hold in a fiduciary capacity and not reveal,
communicate, use or cause to be used for her own benefit or
divulge any trade secrets, or other proprietary right now or
hereafter owned by the Employer;
(ii) Not sell, exchange or give away, or otherwise
dispose of any trade secrets now or hereafter owned by Employer,
whether the same shall or may have been originated or discovered
by Employer or otherwise;
(iii) Not reveal, divulge or make known to any person,
firm, corporation or other entity any trade secrets of Employer;
(iv) Not reveal, divulge or make known to any person
(other than her spouse, attorney and/or accountant), firm,
company or corporation any of the terms of this Agreement;
(v) Not solicit, interfere with or endeavor to entice
away from Employer any person, firm, company or corporation in
the habit of dealing with Employer; and
(vi) Not interfere with or solicit for hire or hire any
other executive employee of Employer.
(b) Executive further covenants and agrees to return to Employer
either before or immediately upon her termination of employment with
Employer any and all written information, material or equipment that
constitutes, contains or relates to Employer's proprietary information
trade secrets and which relate to Employer's business which are in
Executive's possession, custody and control, whether confidential or
not, including any and all copies thereof which may have been made by or
for Executive. Executive shall maintain no copies thereof after
termination of her employment.
17. SURVIVAL OF OBLIGATIONS
In addition to those specific provisions of Section 3, which by their
express terms, survive the termination of this Agreement under certain
circumstances, the terms and conditions and obligations of the parties as
contained Sections 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16, 17, and 18 shall
survive the termination of this Agreement and, notwithstanding such termination,
shall remain fully binding on the parties hereto.
12
<PAGE> 13
18. ARBITRATION
Except for any claim or dispute in which equitable relief under this
Agreement is sought, any disagreement, dispute or controversy concerning whether
there has been Just Cause, Good Reason or breach of any of the terms of this
Agreement shall be settled exclusively and finally by arbitration. The
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association in effect from time to time (the
"AAA Rules"). The arbitration shall be conducted in Los Angeles, California, or
in such other city as the parties to the dispute may designate by mutual
consent. The arbitral tribunal shall consist of three arbitrators (or such
lesser number as may be agreed upon by the parties) selected according to the
procedure set forth in the AAA Rules, with the chairman of the arbitral tribunal
selected in accordance with the AAA Rules. Except as otherwise set forth in this
Agreement, the fees and expenses of the arbitral tribunal in connection with
such arbitration shall be borne by the parties to the dispute as shall be
determined by the arbitral tribunal.
IN WITNESS WHEREOF, the parties have executed the Agreement as of this
29th day of January, 1998
Signed and acknowledged in UNIVERSAL ELECTRONICS INC.
the presence of:
By: /s/ David M. Gabrielsen
- - -------------------------------- --------------------------------------
Its: Chairman and CEO
----------------------------------
CAMILLE JAYNE
/s/ Paul Arling /s/ Camille Jayne
- - -------------------------------- -----------------------------------------
Signature
13
<PAGE> 14
EXHIBIT A
BONUS PLAN
PURSUANT TO SECTION 4(b) FOR 1998
EPS at $0.80 bonus of 15% of Base Cash Salary or $ 45,000
EPS at $0.85 bonus of 30% of Base Cash Salary or $ 90,000
EPS at $0.90 bonus of 40% of Base Cash Salary or $120,000
EPS at $0.95 bonus of 45% of Base Cash Salary or $135,000
EPS at $1.00 bonus of 50% of Base Cash Salary or $150,000
14
<PAGE> 15
EXHIBIT B
STOCK OPTION AWARD
PURSUANT TO SECTION 4(c) FOR 1998
Options to acquire up to 175,000 shares of the common stock of Employer with an
exercise price determined as market price at the end of business on the date of
this Agreement. These options shall vest at a rate of 25% per year for four
years, but all in accordance with the terms and conditions of the Stock Option
Agreement and Stock Option Plans of Employer.
15
<PAGE> 1
EXHIBIT 10.24
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made as of the date set forth on the
signature page hereof by and between Universal Electronics Inc., a Delaware
corporation (the "Corporation") and the undersigned Optionee (the "Optionee").
As used in this Agreement, the term "Corporation" shall include, where
applicable, any and all of its subsidiaries.
WHEREAS, the stockholders of the Corporation at the annual shareholder
meeting and the Board of Directors of the Corporation (the "Board") have
approved the Universal Electronics Inc. 1998 Stock Incentive Plan (the "Plan");
and
WHEREAS, the Corporation desires to grant to the Optionee an option
("Option") to purchase shares of the Corporation's common stock, par value $0.01
per share (the "Stock"), upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, the parties, intending to be legally bound, hereto agree
as follows:
1. GRANT AND DESIGNATION OF OPTION. Upon the execution and delivery
of this Agreement and the related Stock Option Certificate of even date herewith
(the "Certificate"), the Corporation hereby grants to the Optionee the Option to
purchase the aggregate number of shares of Stock set forth on the Certificate at
the price per share ("Option Price") further set forth on the Certificate. The
Option granted hereunder shall not be treated as an incentive stock option
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended.
2. TERM AND EXERCISE OF OPTION. Subject to earlier termination,
acceleration or cancellation of the Option as provided herein, the term of the
Option shall be for that period of time also set forth on the Certificate (the
"Option Period") and, subject to the provisions of this Agreement, the Option
shall be exercisable at such times and as to such number of shares as determined
on the schedule set forth on the Certificate.
3. METHOD OF EXERCISE. The Option may be exercised by written
notice to the Corporation (the "Exercise Notice") at its offices at 6101 Gateway
Drive, Cypress, California 90630 to the attention of the Secretary of the
Corporation. The Exercise Notice shall state (i) the election to exercise the
Option, (ii) the total number of full shares in respect to which it is being
exercised, and (iii) shall be signed by the person or persons exercising the
Option. The Exercise Notice shall be accompanied by the Certificate and a
certified or cashier's check for the full amount of the purchase price of such
shares, or as may be permitted by the Board, by certificates for shares of Stock
which have been owned by the Optionee for more than six months prior to the date
of exercise and which have a fair market value of the date of exercise equal to
the purchase price, or by a combination of such methods of payment. Upon receipt
of the foregoing, the Corporation shall issue the shares of Stock as to which
the Option has been duly exercised and shall return the Certificate, duly
endorsed to reflect such exercise, to the Optionee.
1
<PAGE> 2
4. OPTIONEE'S REPRESENTATIONS.
(a) Optionee represents and warrants that any and all shares
acquired through the exercise of rights under the Option granted pursuant to
this Agreement will be acquired for Optionee's own account and not with a view
to, or present intention of, distribution thereof in violation of the Securities
Act of 1933, as amended and the rules and regulations promulgated thereunder
(the "1933 Act") and will not be disposed of in contravention of the 1933 Act.
(b) Optionee acknowledges that Optionee is able to bear the
economic risk of the investment in any and all shares of Stock acquired through
the exercise of rights under the Option for an indefinite period of time because
the Stock has not been registered under the 1933 Act and, therefore, cannot be
sold unless subsequently registered under the 1933 Act or an exemption from such
registration is available.
(c) Optionee has reviewed this Agreement and has had an
opportunity to ask questions and receive answers concerning the terms and
conditions of the offering of Stock and has had full access to such other
information concerning the Corporation as Optionee has requested.
5. RESTRICTION ON EXERCISE. This Option may not be exercised if the
issuance of such shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation. As a condition to the
exercise of this Option, the Corporation may require Optionee to make any
representation and warranty to the Corporation as may be required by any
applicable law or regulation. All exercises of the Option must be for full
shares of Stock only.
6. EFFECT OF TERMINATION OF EMPLOYMENT. Except as set forth in
Paragraphs 7 and 8 below, in the event that Optionee's employment with the
Corporation ceases for any reason, Optionee may (or Optionee's estate or
representative, in the event of Optionee's death during the applicable exercise
period as set forth in this Paragraph 6), during the earlier of (i) the 180 day
period following such cessation of employment or (ii) the remaining term of the
Option Period, exercise the Option to the extent such Option was exercisable on
the date such employment ceased and, on such date, that portion of the Option
which was not exercisable shall automatically terminate without further action
by the parties hereto and, in all events, to the extent not exercised, the
Option shall terminate in its entirety at the end of business on the applicable
exercise period as set forth in this Paragraph 6.
2
<PAGE> 3
7. EFFECT OF TERMINATION OF EMPLOYMENT WITHOUT CAUSE OR DUE TO
CONSTRUCTIVE TERMINATION.
(a) In the event that Optionee's employment with the Corporation
is terminated by the Corporation without "Cause" (as such term is defined in
subparagraph 7(b) below) or in the event of "Constructive Termination" (as such
term is defined in subparagraph 7(c) below), Optionee shall become immediately
fully vested in the Option without further action by the parties hereto, and, to
the extent not previously exercised, shall be exercisable in whole or in part
with respect to all remaining shares of Stock covered by the Option and may be
exercised by Optionee (or Optionee's estate or representative, in the event of
Optionee's death) at any time prior to the expiration of the Option Period.
(b) For purposes of this Agreement, "Cause" shall mean (i) the
willful and continued failure by Optionee to substantially perform Optionee's
duties with the Corporation (other than a failure resulting from Optionee's
death or "Total Disability" (as such term is defined in subparagraph 7(e)
below)) after a demand for substantial performance is delivered to Optionee by
the Corporation which specifically identifies the manner in which it is believed
that Optionee has not substantially performed Optionee's duties; (ii) the
willful engaging by Optionee in gross misconduct materially and demonstrably
injurious to the property or business of the Corporation; or (iii) Optionee's
commission of fraud, misappropriation or a felony. For purposes of this
definition of "Cause", no act or failure to act on Optionee's part will be
considered "willful" unless done, or omitted to be done, by Optionee not in good
faith and without reasonable belief that Optionee's action or omission was in
the interests of the Corporation or not opposed to the interests of the
Corporation.
(c) For purposes of this Agreement, "Constructive Termination"
shall occur on that date on which Optionee resigns from employment with the
Corporation, if such resignation occurs within eighteen (18) months after the
occurrence of (i) the failure of Optionee to be elected or re-elected or
appointed or reappointed to such office which Optionee holds (other than as a
result of a termination for "Cause") if Optionee is an officer of the
Corporation and the office which Optionee holds is one to which Optionee is
elected according to the Corporation's By-laws; (ii) a change in Optionee's
functions, duties, or responsibilities such that Optionee's position with the
Corporation becomes substantially less in responsibility, importance, or scope;
or (iii) a "Change in Control" (as such term is defined in subparagraph 7(d)
below).
(d) For purposes of this Agreement, a "Change in Control" shall
be deemed to occur when (i) any "person" or "group" (as such terms are used in
Sections 3(a), 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the "1934 Act")),
other than (1) a trustee or other fiduciary holding securities under any
employee benefit plan of the Corporation or (2) a corporation owned directly or
indirectly by the stockholders of the Corporation in substantially the same
proportions as their ownership of Stock in the Corporation immediately prior to
any such occurrence, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the total voting power of the then
outstanding securities of the
3
<PAGE> 4
Corporation entitled to vote generally in the election of directors (the "Voting
Stock"); (ii) individuals who are members of the Board on the date of this
Agreement and any individual who becomes a member of the Board hereafter whose
nomination for election as a director was approved by the affirmative vote of a
majority of such Directors, cease to constitute a majority of the members of the
Board; (iii) there occurs a merger or consolidation of the Corporation with any
other corporation or entity, other than a merger or consolidation which would
result in the Voting Stock of the Corporation immediately outstanding prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of the
total voting power represented by the Voting Stock or the voting securities of
such surviving entity outstanding immediately after such merger or
consolidation; (iv) there occurs a sale or transfer or disposition of all or
substantially all of the Corporation's assets to any other corporation or
entity, other than a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as their
ownership of Stock in the Corporation immediately prior to such sale, transfer
or disposition; or (v) the dissolution or liquidation of the Corporation.
(e) For purposes of this Agreement, "Total Disability" shall
mean an event of illness or other incapacity of Optionee resulting in Optionee's
failure or inability to discharge Optionee's duties as an employee of the
Corporation for ninety (90) or more days during any period of 120 consecutive
days.
8. EFFECT OF TERMINATION OF EMPLOYMENT DUE TO DEATH OR TOTAL
DISABILITY. In the event that Optionee's employment with the Corporation ceases
or is terminated due to Optionee's death or Total Disability, Optionee (or
Optionee's estate or representative, in the event of Optionee's death) may
during the earlier of (i) the one (1) year period following such cessation or
termination of employment or (ii) the remaining term of the Option Period,
exercise the Option to the extent such Option was exercisable on the date such
employment ceased or was terminated and, on such date, that portion of the
Option which was not exercisable shall automatically terminate without further
action by the parties hereto and, in all events, to the extent not exercised,
the Option shall terminate in its entirety at the end of business on the
applicable exercise period as set forth in this Paragraph 8; provided, however,
the Board, in its sole discretion, may approve the full vesting to Optionee (or
Optionee's estate or representative, in the event of Optionee's death) in the
Option and, in such event, to the extent not previously exercised, the Option
shall be exercisable in whole or in part with respect to all remaining shares of
Stock covered the Option and may be exercised by Optionee (or Optionee's estate
or representative, in the event of Optionee's death) at any time prior to the
expiration of the Option Period.
9. RIGHT OF A STOCKHOLDER. Optionee shall not have any rights as a
stockholder with respect to any shares of Stock unless and until legended
certificates for such shares of such Stock are issued.
10. WITHHOLDING OF TAXES. Whenever the Corporation is required to
issue shares of Stock upon exercise hereunder, the Corporation shall have the
right to require the recipient to remit in cash (or with the consent of the
Board, shares of Stock previously owned by the recipient or issuable
4
<PAGE> 5
upon such exercise) to the Corporation an amount sufficient to satisfy any
federal, state and/or local withholding tax requirements prior to the delivery
of any certificate or certificates for such shares of Stock.
11. ADJUSTMENTS. In the event of any change in the outstanding
shares of Stock of the Corporation by reason of a stock dividend or
distribution, recapitalization, spin-off, merger, consolidation, split-up,
combination, exchange of shares or the like, the Board shall adjust the number
of shares of Stock which may be issued under the Plan and shall provide for an
equitable adjustment of any outstanding Option or shares of Stock issuable
pursuant to an outstanding Option under the Plan.
12. COMPLIANCE WITH CERTAIN LAWS AND REGULATIONS. If the Board shall
determine, in its sole discretion, that the listing, registration or
qualification of the shares subject to the Option upon any securities exchange
or under any law or regulation, or that the consent or approval of any
governmental regulatory body is necessary or desirable in connection with the
granting of the Option or the acquisition of shares thereunder, the Optionee
shall supply the Board or the Corporation, as the case may be, with such
certificates, representations and information as the Board or the Corporation,
as the case may be, may request and shall otherwise cooperate with the
Corporation in obtaining any such listing, registration, qualification, consent
or approval.
13. TRANSFERABILITY OF OPTION. The Option is not transferable by the
Optionee otherwise than by will or by the laws of descent and distribution and
is exercisable, during the Optionee's lifetime, only by the Optionee, or in the
case of Optionee's legal incompetency, only by Optionee's guardian or legal
representative.
14. ADDITIONAL RESTRICTIONS ON TRANSFER. The certificates
representing the Stock purchased upon the exercise of the Option will bear the
following legend until such shares of Stock have been registered under an
effective registration statement under the 1933 Act:
The securities represented by this certificate were originally issued on
_____________________, 19___, have not been registered under the
Securities Act of 1933, as amended, or under the securities laws of any
state or other jurisdiction (together, the "Securities Laws") and may
not be offered for sale, sold or otherwise transferred or encumbered in
the absence of compliance with such Securities Laws and until the issuer
hereof shall have received from counsel acceptable to issuer a written
opinion reasonably satisfactory to issuer that the proposed transaction
will not violate any applicable Securities Laws.
15. NOTICES. Any notice or demand provided for in this Agreement
must be in writing and must be either personally delivered, delivered by
overnight courier, or mailed by first class mail, to the Optionee at Optionee's
most recent address on file in the records of the Corporation, to the
Corporation at the address set forth or established pursuant to Paragraph 3 or
to such other address or to the attention of such other person as the recipient
party shall have specified by prior written
5
<PAGE> 6
notice to the sending party. Any notice or demand under this Agreement will be
deemed to have been given when received.
16. SEVERABILITY. This Agreement and each provision hereof shall be
valid and enforced to the fullest extent permitted by law. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision. Without limiting the
generality of the foregoing, if the scope of any provision contained in this
Agreement is too broad to permit enforcement to its fullest extent, such
provision shall be enforced to the maximum extent permitted by law, and the
parties hereby agree that such scope may be judicially modified accordingly.
17. COMPLETE AGREEMENT. This Agreement and those documents expressly
referred to herein embody the complete agreement and understanding among the
parties and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
18. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same agreement.
19. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Optionee, the Corporation and
their respective permitted successors and assigns (including personal
representatives, heirs and legatees), and is intended to bind all successors and
assigns of the respective parties, except that Optionee may not assign any of
Optionee's rights or obligations under this Agreement except to the extent and
in the manner expressly permitted hereby.
20. REMEDIES. Each of the parties to this Agreement will be entitled
to enforce its rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may, in its sole discretion,
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement, without the necessity of posting
bond or any other security.
6
<PAGE> 7
21. WAIVER OR MODIFICATION. Any waiver or modification of any of the
provisions of this Agreement shall not be valid unless made in writing and
signed by the parties hereto. A waiver by either party of any breach of this
Agreement shall not operate as a waiver of any subsequent breach.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
on the ____ day of____________, 1998.
OPTIONEE UNIVERSAL ELECTRONICS INC.
By:
--------------------------- ---------------------------------------
Signature Its: President and Chief Executive Officer
---------------------------
Print Name
7
<PAGE> 8
Certificate Number: ____
UNIVERSAL ELECTRONICS INC.
1998 STOCK INCENTIVE PLAN
STOCK OPTION CERTIFICATE
THIS CERTIFIES THAT ____________has been awarded an OPTION to purchase
________ shares of common stock, par value $0.01 per share, of UNIVERSAL
ELECTRONICS INC. at a price per share of $____. This Certificate is issued in
accordance with and is subject to the terms and conditions of the related Stock
Option Agreement of even date herewith (the "Agreement").
THIS OPTION is not transferable except in accordance with the terms and
conditions of the Agreement.
THIS OPTION shall expire ten (10) years from the date of this
Certificate.
THIS OPTION shall be exercisable as to all or a portion of the number of
shares set forth above as follows:
<TABLE>
<CAPTION>
On and After the Following Maximum Percentage Taking
Dates, But Prior to Expiration Into Account Prior Exercises
- - ------------------------------ ----------------------------
<S> <C>
_______/99 25%
_______/00 50%
_______/01 75%
_______/02 100%
</TABLE>
IN WITNESS WHEREOF, UNIVERSAL ELECTRONICS INC. has caused this Stock
Option Certificate to be signed by its duly authorized officer the ____ day of
_____________, 1998.
UNIVERSAL ELECTRONICS INC.
By:
--------------------------------------
Its:
-------------------------------------
8
<PAGE> 1
EXHIBIT 10.25
AGREEMENT FOR PURCHASE AND SALE OF PROPERTY
THIS AGREEMENT is made and entered into as of this 29th day of May,
1998, by and between UNIVERSAL ELECTRONICS INC., a Delaware corporation
("Seller"), and DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited partnership
("Buyer").
WITNESSETH THAT:
WHEREAS, Buyer wishes to purchase, and Seller wishes to sell, the
Property (as hereinafter defined), but only upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), the Earnest
Money, the mutual covenants and agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
Section 1. Definitions and Exhibits.
1.1 Definitions. For purposes of this Agreement, each of the following
terms, when used herein with an initial capital letter, shall have the meaning
ascribed to it as follows:
1.1.1 Agreement. This Agreement for Purchase and Sale of
Property.
1.1.2 [Intentionally Omitted]
1.1.3 Building. A building containing approximately 64,432
square feet located at 1864 Enterprise Parkway in Twinsburg, Ohio.
1.1.4 Closing. The closing and consummation of the purchase
and sale of the Property pursuant hereto.
1.1.5 Closing Date. The date on which the Closing occurs as
provided in Section 11.1 hereof.
1.1.6 Confidential Information. The confidential information
described in Section 6.1 hereof.
1.1.7 Contract Date. The date upon which this Agreement shall
be deemed effective, which shall be the date first above written.
1.1.8 Deed. The General Warranty Deed to be executed by Seller
in the form attached hereto as Exhibit J.
<PAGE> 2
1.1.9 Earnest Money. The amount deposited by Buyer in escrow
with Escrow Agent as earnest money pursuant to the terms and conditions of
Section 3 hereof, together with any interest earned thereon.
1.1.10 Environmental Laws. Any applicable statute, code,
enactment, ordinance, rule, regulation, permit, consent, approval,
authorization, license, judgment, order, writ, common law rule (including
without limitation the common law respecting nuisance and tortious liability),
decree, injunction, or other requirement having the force and effect of law,
whether local, state, territorial or national, at any time in force or effect
relating to: (i) Emissions, discharges, spills, releases or threatened releases
of Hazardous Substances into ambient air, surface water, ground water,
watercourses, publicly or privately owned treatment works, drains, sewer
systems, wetlands, septic systems or onto land; (ii) The use, treatment,
storage, disposal, handling, manufacturing, transportation or shipment of
Hazardous Substances; (iii) The regulation of storage tanks; or (iv) Otherwise
relating to pollution or the protection of human health or the environment.
1.1.11 Escrow Agent. Land Title Agency, Inc., as agent for
First American Title Insurance Company, and which is acting as Escrow Agent
pursuant to the terms and conditions of the Escrow Agreement and Section 3
hereof.
1.1.12 Escrow Agreement. That certain Escrow Agreement of
even date herewith among Seller, Buyer and Escrow Agent referred to in Section 3
hereof and attached hereto as Exhibit A and by this reference made a part
hereof.
1.1.13 Hazardous Substances. All substances, wastes,
pollutants, contaminants and materials regulated, or defined or designated as
hazardous, extremely or imminently hazardous, dangerous, or toxic, under the
following federal statutes and their state counterparts, as well as these
statutes' implementing regulations: the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Sections 136 et seq., the
Atomic Energy Act, 42 U.S.C. Sections 2011 et seq, and the Hazardous Materials
Transportation Act, 42 U.S.C. Sections 1801 et seq.; petroleum and petroleum
products including crude oil and any fractions thereof, asbestos; and Natural
gas, synthetic gas, and any mixtures thereof.
1.1.14 [Intentionally Omitted]
1.1.15 [Intentionally Omitted]
1.1.16 Improvements. The Building and any other buildings,
structures and improvements located upon the Land, including Seller's interest
in all systems, facilities, fixtures, machinery, equipment and conduits to
provide fire protection, security, heat, exhaust, ventilation, air conditioning,
electrical power, light, plumbing, refrigeration, gas, sewer and water thereto
(including all replacements or additions thereto between the date hereof and the
Closing Date).
2
<PAGE> 3
1.1.17 Inspection Date. The Inspection Date set forth in
Section 6.3 hereof.
1.1.18 Land. All those tracts or parcels of land described in
Exhibit B attached hereto and by this reference made a part hereof and all
privileges, rights, easements, hereditaments and appurtenances thereto
belonging, and all right, title and interest of Seller in and to any streets,
alleys, passages and other rights of way included therein or adjacent thereto
(before or after the vacation thereof).
1.1.19 [Intentionally Omitted]
1.1.20 Permitted Title Exceptions. Those matters identified on
Exhibit D attached hereto and by this reference made a part hereof.
1.1.21 Property. All of Seller's right, title and interest in,
to and under the following property:
(i) The Land;
(ii) The Improvements;
(iii) The personal property, together with all
replacements or additions thereto between the date hereof and the Closing Date
(the "Personal Property") listed on Exhibit E attached hereto and by this
reference made a part hereof;
(iv) The Surviving Service Contracts and Warranties;
and
(v) All rights of way or use, licenses, permits,
trade names and marks, plans, drawings, specifications, surveys, engineering
reports, technical descriptions, tenements, hereditaments, appurtenances and
easements now or hereafter belonging or pertaining to any of the foregoing,
except those, if any, hereinafter reserved to Seller.
1.1.22 Proration Date. The effective date of the prorations
provided in Section 4.2 hereof, which is midnight on the eve of the Closing
Date.
1.1.23 Purchase Price. The purchase price for the Property
described in Section 4.1 hereof.
1.1.24 [Intentionally Omitted]
1.1.25 [Intentionally Omitted]
1.1.26 [Intentionally Omitted]
3
<PAGE> 4
1.1.27 Service Contracts. All of the service or management
contracts, equipment, labor or material contracts, maintenance or repair
contracts or other agreements that are in force and effect and affect the
Property or the operation, repair or maintenance thereof, a complete list of
such contracts or agreements being contained in Exhibit G attached hereto and by
this reference made a part hereof.
1.1.28 Survey. The survey of the Land described in Section 6.4
hereof.
1.1.29 Surviving Service Contracts. Those Service Contracts
which Buyer may elect in writing to assume, with Seller's consent, pursuant to
Section 7 below and which shall be assigned to Buyer at the Closing.
1.1.30 [Intentionally Omitted]
1.1.31 [Intentionally 0mitted]
1.1.32 Title Commitment. A commitment for an ALTA Form
B (1992) Owner's Title Insurance Policy for the Property issued by the Title
Insurer in the full amount of the Purchase Price, covering title to the Property
on or after the date hereof, showing Seller as owner of the Property, and
providing for full extended coverage over all general title exceptions contained
in such policies and the following special endorsements: Zoning 3.1 (amended to
include parking), Access, Restrictions, Utility, Comprehensive, Survey, Tax
Parcel, Contiguity and Location.
1.1.33 Title Insurer. Land Title Agency, Inc. as agent for
First American Title Insurance Company.
1.1.34 Warranties. Any and all warranties, guaranties and
similar contracts in favor of Seller on equipment and improvements pertaining to
the Property.
1.2 Exhibits. Attached hereto and forming an integral part of this
Agreement are the following exhibits, all of which are incorporated into this
Agreement as fully as if the contents thereof were set out in full herein at
each point of reference thereto:
Exhibit A - Escrow Agreement
Exhibit B - Description of Land
Exhibit C - [Intentionally Omitted]
Exhibit D - Permitted Title Exceptions
Exhibit E - List of Personal Property
4
<PAGE> 5
Exhibit F - [Intentionally Omitted]
Exhibit G - Service Contracts
Exhibit H - [Intentionally Omitted]
Exhibit I - Description of Litigation Affecting
Seller or the Property
Exhibit J - Form of Deed
Exhibit K - [Intentionally Omitted]
Exhibit L - Non-Foreign Certificate
Exhibit M - Bill of Sale
Exhibit N - Assignment and Assumption of Surviving
Service Contracts and Warranties
Exhibit O - [Intentionally Omitted]
Exhibit P - [Intentionally Omitted]
Exhibit Q - Lease
Section 2. Purchase and Sale Agreement. Subject to and in accordance
with the terms and provisions hereof, Seller agrees to sell and Buyer agrees to
purchase the Property.
Section 3. Earnest Money.
3.1 Earnest Money. Simultaneously herewith, Buyer has deposited with
Escrow Agent the sum of Twenty Thousand Dollars ($20,000.00) as the earnest
money deposit under this Agreement, which deposit, together with any interest or
other income earned thereon (collectively, the "Earnest Money"), shall be held,
invested and disbursed pursuant to the respective terms and provisions hereof
and of the Escrow Agreement.
3.2 Disbursement. Whenever the Earnest Money is by the terms hereof to
be disbursed by Escrow Agent, Seller and Buyer agree promptly to execute and
deliver such notice or notices as shall be necessary or, in the opinion of
Escrow Agent, appropriate to authorize Escrow Agent to make such disbursement.
5
<PAGE> 6
Section 4. Purchase Price.
4.1 Purchase Price. The purchase price (the "Purchase Price") for the
Property shall be One Million Seven Hundred Twenty Thousand Dollars
($1,720,000.00). The Purchase Price, as adjusted by the prorations provided in
Section 4.2 hereof and as reduced by the Earnest Money, which, unless otherwise
disbursed hereunder, shall be disbursed by Escrow Agent at the Closing to Seller
as a portion of the Purchase Price, shall be paid by Buyer to Seller at the
Closing in United States dollars, by Federal Reserve System wire transfer or
other immediately available funds acceptable to Seller.
4.2 Prorations. The following adjustments and prorations shall be made
at Closing with Buyer treated as the owner of the Property on the date of
Closing:
4.2.2 Property Operating Expenses. Operating expenses for the
Property (including payments under Surviving Services Contracts and any land
lease assigned to Buyer pursuant hereto) shall be prorated and utilities shall
be switched over by the parties outside of escrow as of midnight of the day
prior to the Closing Date. Regardless of when invoices for same are received,
Seller shall pay all utility charges and other operating expenses attributable
to the Property to, but not including the Closing Date and Buyer shall pay all
utility charges and other operating expenses attributable to the Property on or
after the Closing Date. Seller shall not assign to Buyer any deposits which
Seller has with any of the utility services or companies servicing the Property
unless Buyer, at Buyer's option, shall purchase the deposits at Closing, in
which event Seller shall assign to Buyer all of Seller's right, title and
interest in such deposits. Buyer shall arrange with such services and companies
to have accounts opened in Buyer's name beginning at 12:01 a.m. on the Closing
Date.
4.2.3 Closing Costs. Buyer shall pay one-half (1/2) of the
premium of the Title Insurer for the Owner's Title Policy all recording and
filing charges in connection with the instrument by which Seller conveys the
Property, one-half (1/2) of all escrow or closing agent charges, the cost of any
endorsements to Owner's Title Policy all costs of Buyer's Due Diligence, the
cost of the Survey, and any other costs customarily paid by the Buyer pursuant
to local practice. Seller shall pay one-half (1/2) of the premium of the Title
Insurer for the Owner's Title Policy, all transfer taxes and similar charges,
one-half (1/2) of all escrow or closing agent charges, and any other costs
customarily paid by the Seller pursuant to local practice. Each party shall pay
its own attorneys. The obligations of the parties to pay applicable escrow or
closing charges shall survive the termination of this Agreement.
4.2.4 Apportionment Credit. In the event the apportionments to
be made at the Closing result in a credit balance (i) to Buyer, such sum shall
be paid at the Closing by giving Buyer a credit against the Purchase Price in
the amount of such credit balance, or (ii) to Seller, Buyer shall pay the amount
thereof to Seller at the Closing in United States dollars, by Federal Reserve
System by wire transfer or other immediately available funds to the account or
accounts to be designated by Seller for the payment of the Purchase Price.
6
<PAGE> 7
4.2.5 Delayed Adjustment. If at any time following the Closing
Date, the amount of an item listed in any section of this Section 4.2 shall
prove to be incorrect (whether as a result in an error in calculation or a lack
of complete and accurate information as of the Closing), the party in whose
favor the error was made shall promptly pay to the other party the sum necessary
to correct such error upon receipt of proof of such error, provided that such
proof is delivered to the party from whom payment is requested on or before six
(6) months after Closing. The provisions of this Section 4.2 shall survive the
Closing for the aforesaid six (6) months period and not be merged therein.
Seller's auditors and accountants shall be permitted full access to the books
and records of the Property following Closing, without unreasonable interference
with Buyer's operation of the Property, as reasonably necessary to permit such
auditors and accountants to complete their audit of the Property for the Closing
and for periods prior to Closing to complete Seller's records and to participate
in any final adjustments pursuant to this Section 4.2.5.
Section 5. Title to the Property. Seller, at Seller's expense, shall
deliver the Title Commitment to Buyer within ten (10) days of the Contract
Date. Seller shall convey merchantable and marketable fee simple title to the
Land and the Improvements to Buyer in the form of the Deed in recordable form,
which shall expressly be made subject to the Permitted Title Exceptions. Buyer
shall have until fifteen (15) days after receipt of the Title Commitment
(together with legible copies of all documents noted as exceptions therein) and
the Survey by which to examine title to the Property and to give written notice
to Seller of any objections which Buyer may have. If Buyer fails to give any
notice to Seller by such date, Buyer shall be deemed to have waived such right
to object to any title exceptions or defects. If Buyer does give Seller timely
notice of objection to any other title exceptions or defects, Seller shall use
commercially reasonable efforts to cure or satisfy such objection by the
Closing. If such objection is not so timely and reasonably cured or satisfied or
undertaken to be reasonably cured or satisfied by Seller, then Buyer shall,
within ten (10) days thereafter, elect, by written notice to be received by
Seller on or before such tenth (10th) day, either to (a) terminate this
Agreement, in which case the Earnest Money shall be returned to Buyer by Escrow
Agent, and the parties shall have no further rights or obligations hereunder,
except for those which expressly survive any such termination, or (b) waive its
objections hereunder and proceeds with the transaction pursuant to the remaining
terms and conditions of this Agreement. If Buyer fails to give Seller notice of
its election by such time, it shall be deemed to have elected the option
contained in subparagraph (a) above. If Seller does so reasonably cure or
satisfy, or undertake to reasonably cure or satisfy, such objection to the
satisfaction of Buyer, as determined in its sole discretion, then this Agreement
shall continue in full force and effect. Buyer shall have the right at any time
to waive any objections that it may have made and, thereby, to preserve this
Agreement in full force and effect. Seller agrees not to further voluntarily
alter or encumber in any way Seller's title to the Property after the Contract
Date (except to the extent provided in Section 9 below) without Buyer's written
consent. Notwithstanding anything to the contrary contained herein, Seller shall
be obligated to remove as a title exception (i) all mortgages, security deeds or
other security instruments encumbering the Property, and (ii) all past due ad
valorem taxes and assessments, owners association, roadway or other easement
fees, dues or assessments of any kind, whether or not of record, which
constitute, or may constitute, a lien against the Property. In addition, Seller
shall be obligated to remove, bond over or insure over any judgments against the
Seller (which do
7
<PAGE> 8
not result from acts or omissions on the part of Buyer) which have attached to
and become a lien against the Property.
Section 6. Buyer's Inspection.
6.1 Document Inspection. Buyer and Seller acknowledge that Buyer shall
inspect the Property and shall examine, review and inspect the books and records
relating to the ownership and operation of the Property pursuant to the terms
hereof. To the extent Seller has such documents, Seller has made available to
Buyer complete copies of each of the following documents related to the Property
that it has in its possession as of the Contract Date:
(a) Copies of all service, management or brokerage contracts,
personal property leases and other executory contracts respecting the Property.
Seller shall update such list to a date which is not more than thirty (30) days
prior to the Closing Date;
(b) Copies of real estate tax bills and assessments for the
Property for the current year and for the past three (3) years;
(c) All engineering and architectural plans and
specifications, drawings, site plans, surveys, soil boring test results, other
test results, studies and as-built plans and specifications of the Property,
traffic studies, and other construction and zoning materials for the Property;
(d) Operating statements and related documents and records for
the Property, if any such documents exist;
(e) Copies of all certificates of occupancy for the building
shell and for all occupied spaces, licenses, permits, authorizations and
approvals required by law or by any governmental authority having jurisdiction
over the Property, relating to the construction, occupancy, operation or present
use of the Property;
(f) The most recent budget for the Property, including income,
operating expenses, property taxes and assessments and capital expenditures, if
any such documents exist;
(g) A list of all personal property located on the Property
and owned by Seller;
(h) Copies of all warranties and guaranties issued in
connection with the Property;
(i) Copies of all environmental reports of the Property;
(j) Copies of any prior surveys of the Property;
8
<PAGE> 9
(k) Copies of insurance policies and claims documentation for
the current year and for the past three (3) years respecting the insurance
maintained on the Property or any portion thereof;
(1) Any other information or documentation relating to the
design, construction, layout, structure, mechanical, electrical and plumbing
systems, fire protection systems and subsurface conditions relating to the
Property; and
(m) Copies of all books, records, bills, invoices, and other
documentation related to the ownership, construction and operation of the
Property.
6.2 Physical Inspection. Subject to any rights or restrictions under
any of the Permitted Title Exceptions, Buyer and its agents shall have the
right, from time to time prior to the Closing, to enter upon the Property to
examine the same and the condition thereof, and to conduct such surveys and to
make such engineering and other inspections, tests and studies as Buyer shall
determine to be reasonably necessary, all at Buyer's sole cost and expense.
Buyer agrees to give Seller advance notice of such examinations or surveys and
to conduct such examinations or surveys during normal business hours to the
extent practicable. Buyer agrees to conduct all examinations and surveys of the
Property in a manner that will not harm or damage the Property or cause any
claim adverse to Seller and agrees to restore the Property to its condition
prior to any such examinations or surveys immediately after conducting the same.
Buyer hereby indemnifies and holds Seller harmless from and against any claims
for injury or death to persons, damage to property or other losses, damages or
claims, and including, in each instance, attorneys' fees and litigation costs,
arising out of any action of any person or firm entering the Property on Buyer's
behalf as aforesaid, which indemnity shall survive the Closing and any
termination of this Agreement without the Closing having occurred.
Notwithstanding the foregoing, Buyer shall not be liable merely for the
discovery of a pre-existing condition at the Property.
6.3 Formal Inspection Period. Notwithstanding Buyer's right of
inspection contained in Section 6.2 above, with respect to the condition of the
Property, Buyer's obligation to close under this Agreement is subject to and
conditioned upon Buyer's investigation and study of and satisfaction with the
Property. Buyer shall have until forty-five (45) days after receipt of the items
set forth in Section 6.1, and the Title Commitment with legible copies of the
exception documents (the "Inspection Date") in which to make such investigations
and studies with respect to the Property as Buyer deems appropriate, and to
terminate this Agreement, by written notice to Seller, to be received on or
before the Inspection Date, if Buyer is not, for any reason, satisfied with the
Property. If Buyer falls to give notice of such termination, to be received by
Seller on or before the Inspection Date, then Buyer's rights under this Section
6.3) to terminate shall be deemed to have been waived by Buyer.
6.4 Survey. Buyer, at Buyer s expense shall obtain a current, ALTA/ACSM
as-built survey of the Property in the form acceptable to Buyer (the "Survey").
The Survey shall (a) be completed in accordance with the minimum standard detail
requirements for the ALTA Urban
9
<PAGE> 10
survey and certified to Seller, Buyer, Buyer's lender, Buyer's counsel, and the
Title Company by such surveyor; (b) have one perimeter description of the
Property; (c) show all casements, right-of-way, setback lines, encroachments and
other matters affecting the use or development of the Property; (d) show the
number and location of all parking spaces; (e) show the address, dimensions and
location of the Improvements and the height and square footage thereof; (f) show
the acreage of the Property; (g) certify the zoning of the Property; and (h)
certify that no portion of the Property lies within a flood plain or wetlands
area. The Deed to be delivered by Seller to Buyer at the Closing shall contain
the legal description of the Property as shown on the Survey.
6.5 Environmental Assessment. Buyer shall obtain, at Buyer's expense, a
current ASTM Phase I environmental site assessment for the Property, performed
by an environmental consultant acceptable to Buyer. If the Phase I environmental
site assessment recommends that Phase II environmental site assessment be
prepared, Buyer shall immediately notify Seller and the parties shall mutually
determine how to allocate the cost of such Phase II assessment. Seller shall
extend the Inspection Date until a reasonable period following completion of
that Phase II assessment.
Section 7. Service Contracts. Seller shall, at Seller's sole cost and
expense, at or prior to the Closing, terminate all Service Contracts, except
those Service Contracts, designated by Buyer within ten (10) days of the
Closing Date to be Surviving Service Contracts, which Buyer elects to assume
with Seller's consent.
Section 8. Representations and Warranties. As of the Contract Date,
Seller hereby warrants and represents to Buyer as follows:
8.1 Service Contracts. A complete and accurate list and description of
all of the Service Contracts is set forth in Exhibit G hereto. To Seller's
knowledge, all such Service Contracts are in full force and effect in accordance
with their respective terms. Seller has not given or received any notice of
default under the Service Contracts, and Seller has no knowledge of any event
which, with the passage of time or the giving of notice, would constitute a
default thereunder.
8.2 No Litigation. Except as described in Exhibit I attached hereto and
by this reference made a part hereof, Seller has no knowledge nor has Seller
received notice, of (a) any actual or pending litigation or proceeding by any
organization, person, individual or governmental agency against Seller with
respect to the Property or against the Property, (b) any violation of the
Property's compliance with applicable fire safety laws, building code
ordinances, zoning ordinances or any similar statutes, ordinances, laws, rules
or regulations, (c) any condition, defect or inadequacy which, if not corrected,
would result in the termination of, or increase in the cost of, insurance
coverage, (d) any proceedings which could cause the change, redefinition or
other modification of the zoning classifications or of other legal requirements
applicable to the Property or any part thereof, or (e) any pending or threatened
condemnation proceeding that would affect the Property.
8.3 Boundary Lines of Land. There is no pending litigation or dispute,
and Seller has no knowledge nor has Seller received notice, of any dispute,
concerning the location of the lines and
10
<PAGE> 11
corners of the Land, and Seller has not been served with any legal action
concerning the location of the lines and corners of the Land.
8.4 Authority. Seller is a duly organized and validly formed
corporation under the laws of the State of Delaware, is in good standing in the
State of Ohio, is qualified to do business in the State in which the Land is
located, is not subject to any involuntary proceeding for dissolution or
liquidation thereof, and has obtained all requisite authorizations to enter into
this Agreement with Buyer and to consummate and close the purchase and sale of
the Property pursuant hereto. Seller's execution, delivery and performance of
its obligations under this Agreement will not conflict with or result in a
breach of, or constitute a default under, any of the provisions of Seller's
organizational documents or of any contract, instrument, law, governmental rule,
regulation, judgment, decree or order to which Seller is a party or by which
Seller is bound.
8.5 No Rights to Purchase. Seller is the sole owner of the Property
and, no person, other than Buyer, has any right, agreement, commitment, option,
right of first refusal or any other agreement, whether oral or written, with
respect to the purchase, assignment or transfer of all or any portion of the
Property. No party other than Seller has or claims any unrecorded or undisclosed
legal or equitable interest in the Property.
8.6 Taxes and Assessments. Except as may be revealed in the public
records where the Land is located, the Land is not subject to or affected by any
special assessment for public improvements or otherwise, whether or not
presently a lien upon the Land. Seller has made no commitment to any
governmental authority, utility company, school board, church or other religious
body, homeowner or homeowner's association or any other organization, group or
individual relating to the Property which would impose an obligation upon Seller
or its successors or assigns to make any contributions or dedications of money
or land, or to construct, install or maintain any improvements of a public or
private nature as part of the Property or upon separate lands. No governmental
authority has imposed any requirement that Seller pay, directly or indirectly,
any special fees or contributions or incur any expenses or obligations in
connection with the development of the Property or any portion thereof, other
than any regular and nondiscriminatory local real estate or school taxes
assessed against the Property. No federal, state or local taxing authority has
asserted any tax deficiency, lien, interest or penalty, special assessment or
other assessment against the Property or Seller which has not been paid; and
there is no pending audit or inquiry from any federal, state or local tax
authority or other matter relating to the Property or Seller of which Seller has
notice or knowledge which reasonably may be expected to result in a tax
deficiency, lien, interest, penalty, special assessment or other assessment
against the Property or Seller.
8.7 Environmental Matters. To Seller's knowledge, and except as may be
revealed in any environmental report delivered to Buyer pursuant to Section 6.1
and 6.5 hereof:
(a) Hazardous Substances have not been used, generated,
transported, treated, stored, released, discharged or disposed of in, onto,
under or from the Property in violation of any
11
<PAGE> 12
Environmental Laws by Seller or by any predecessor-in-title or agent of Seller
or by any other person at any time;
(b) no notification of release of a Hazardous Substance has
been filed as to the Property, nor is the Property listed on the National
Priority List promulgated pursuant to CERCLA or on any other Federal or state
list of Hazardous Substance sites requiring investigation or cleanup;
(c) there are no above-ground or underground tanks or any
other underground storage facilities located on the Property, and there have
never been such tanks or facilities on the Property;
(d) the Property does not contain any PCBs, asbestos or urea
formaldehyde; and
(e) the Property does not lie within or contain, in whole or
in any part, any wetlands.
Seller has received no written or oral notice or other communication of pending
or threatened claims, actions, suits, proceedings or investigations against
Seller or occupant of the Property related to (i) the disposal or release of
solid, liquid or gaseous waste into the environment from the Property, (ii) the
use, generation, transportation, treatment, storage, release, discharge,
disposal or other handling of any Hazardous Substance on the Property, or (iii)
any alleged violation of any Environmental Laws in relation to the Property.
8.8 Non-Foreign Status. Seller is not a "foreign person" as that term
is defined in the Internal Revenue Code of 1986, as amended and the Regulations
promulgated pursuant thereto.
8.9 [Intentionally Omitted]
8.10 Prorations. The information to be furnished by Seller on which the
computation of prorations is based shall be true, correct and complete in all
material respects.
8.11 Personal Property. Except as shown on Exhibit E, Seller has good
and marketable title to the Personal Property and each item thereof is free and
clear of liens, security interests, encumbrances, leases and restrictions of
every kind and description, except the Permitted Title Exceptions.
8.12 Title to Property. The interest of Seller in the Service
Contracts, Leases, and other Property is free and clear of all encumbrances and
has not been assigned to any other person, except as reflected in the Permitted
Title Exceptions.
8.13 Utilities. All water, sewer, electric, natural gas, telephone and
drainage facilities, and all other utilities required for the intended operation
of the Property, are installed to the Property and are connected with valid
permits. All utility lines serving the Property are located within the
12
<PAGE> 13
boundaries of the Property, within lands dedicated to public use, or within
recorded easements for such purpose.
8.14 Warranties. The warranties and guaranties made available to Buyer
pursuant to Section 6.1 hereof are complete and accurate. All such warranties
and guaranties are in full force and effect in accordance with their respective
terms.
8.15 Compliance. To the best of Seller's knowledge, after due inquiry
(i) all governmental approvals necessary for the construction and operation of
the Property have been obtained and are in full force and effect, and (ii) the
Property is in compliance with all zoning, building, health, traffic,
environmental, flood control, fire safety and all other applicable rules,
regulations, ordinances and statutes of all governmental entities having
jurisdiction over the Property.
8.16 Condition. To the best of Seller's knowledge, after due inquiry,
all Improvements (including without limitation all pavement; elevators; roofs;
mechanical, plumbing, drainage, structural, heating, ventilating and
air-conditioning systems; or other systems at or servicing the Property and all
other facilities and equipment relating thereto) are in good order and operating
condition, free from physical or mechanical defects (whether latent or patent),
and fully usable for their intended purpose.
8.17 Seller's Knowledge. Whenever a representation and warranty made by
Seller in this Section 8 is limited to Seller's knowledge, the phrase "Seller's
knowledge" or any derivation thereof shall mean that Seller has made due inquiry
as to the accuracy of the representations and warranties to those of its
officers and supervising employees who are currently employed by Seller and who
are or were responsible on behalf of Seller for the acquisition, development,
management, operation and disposition of the Property and construction of the
Improvements.
8.18 Miscellaneous. It shall be a condition of Closing that the
representations and warranties contained in this Section 8 are true and correct
at Closing and Seller shall be deemed to have reaffirmed these representations
and warranties at Closing. In the event that Seller or Buyer learns that any of
said representations or warranties becomes inaccurate between the Contract Date
and the Closing Date, Seller or Buyer shall immediately notify the other party
in writing of such change. Seller shall then use its good faith efforts to cure
such change after giving or receiving notice thereof as require herein. The
Closing Date shall be automatically extended in order to allow Seller to cure
such change. In the event Seller so cures such change, this Agreement shall
remain in full force and effect. If Seller is unable to cure such change, Buyer
may either (a) terminate this Agreement by written notice to Seller, in which
case the Earnest Money shall be returned to Buyer and the parties shall have no
further rights or obligations hereunder, except for those which expressly
survive such termination, or (b) waive such right to terminate and proceed with
the transaction pursuant to the remaining terms and conditions of this
Agreement. In the event Buyer elects option (b) in the preceding sentence or in
the event Buyer elects to Close with the knowledge that a representation or
warranty of Seller herein is untrue or incorrect, the representations and
warranties shall be deemed to be automatically amended to reflect said change.
The representations and
13
<PAGE> 14
warranties contained in this Section 8 shall survive Closing but shall terminate
two (2) years after the Closing Date, unless a suit is filed thereupon in a
court of competent jurisdiction on or before the expiration of said two (2) year
period.
Section 9. Operations Pending Closing. Seller, at its expense, shall
use reasonable efforts to maintain the Property until the Closing Date or until
the termination of this Agreement, whichever is earlier, substantially in its
present condition, insured damage by fire or other casualty and condemnation
excepted. Prior to the Inspection Date, Seller may enter into or agree to enter
into any lease or other agreement concerning occupancy or use of any of the
Property, other agreements concerning operation of the Property or any
modification or amendment of any existing Service Contract, or any other
agreement relating to the Property; and institute any summary or other eviction
proceeding or action against any occupant; provided, however, that Seller shall
deliver to Buyer a copy of any and all offers, proposals, claims or demands or
amendments thereto and final agreements or settlements, at the same time such
offers, proposals, claims or demands are delivered to the prospective occupant,
service contractor or other entity; and provided further that Seller shall not
enter into any lease, service, management or other agreement relating to the
management or operation of the Property, including without limitation any
personal property lease or purchase agreement, which is not terminable upon
thirty (30) days notice to the other party. Seller agrees to consult with Buyer
from time to time in connection with such activities. Within five (5) days after
execution, Seller shall furnish Buyer with copies of any executed lease,
agreement, modification or amendment entered into by Seller, or of any pleadings
from any legal action filed by Seller against any occupant after the Contract
Date and prior to Closing.
On and after the Inspection Date and prior to Closing, Seller shall
not, without the prior written consent of Buyer , enter into or agree to enter
into any lease or other agreement concerning occupancy or use of any of the
Property, other agreements concerning operation or ownership of the Property, or
any modification or amendment of any existing Service Contract or any other
agreement relating to the Property; or institute any summary or other eviction
proceeding or action against any occupant of the Property.
Seller hereby agrees, through and including the Closing Date and at
Seller's sole cost and expense, to:
(a) keep all existing insurance policies affecting the
Property or any portion thereof in full force and effect;
(b) use due diligence and commercially reasonable efforts to
keep in full force and effect and/or to renew all licenses and permits, if any,
pertaining to Seller's ownership or operation of the Property or any portion
thereof;
(c) continue to provide all services currently provided by
Seller with respect to the Property or any portion thereof, and to continue to
operate, manage and maintain the Property
14
<PAGE> 15
in substantially the same manner as Seller currently operates, manages, repairs,
replaces and maintains the Property; and
(d) keep Buyer timely advised of any repair or improvements
required to keep the Property or any portion thereof in the condition required
by this Agreement, and which cost in excess of Ten Thousand Dollars
($10,000.00).
Seller hereby agrees to give Buyer written notice of any citation or
other notice which Seller may receive, subsequent to the Contract Date and prior
to the Closing Date, from any governmental authority and concerning any
violation of any law, ordinance, code rule, regulation or order regulating the
Property or the use thereof. Seller shall pay in full, prior to the Closing
Date, all bills and invoices for labor, material and services relating to the
Property which are attributable to the period prior to the Closing Date, subject
to Closing prorations, and which Buyer is not otherwise responsible for paying
pursuant to this Agreement.
Section 10. Conditions to Closing. Buyer's obligation to proceed to
Closing under this Agreement is subject to the following conditions precedent:
(a) Seller shall have performed and satisfied each and all of
Seller's obligations under this Agreement;
(b) Each and all of Seller's representations and warranties
set forth in this Agreement shall be true and correct at the Contract Date and
at the Closing Date;
(c) There shall be no material change between the Contract
Date and the Closing Date in the physical or financial condition or
profitability of the Property or Improvements or in Seller's obligations with
respect thereto;
(d) Buyer shall have received all corporate and partnership
approvals to complete this transaction on or before the Inspection Date.
(e) Buyer, as Landlord, and Seller, as Tenant, shall have
executed a lease for approximately 6,832 square feet located on the second floor
mezzanine of the Building, which lease shall be in substantially the form
attached hereto as Exhibit Q. The lease shall be for a term of four (4) years,
with a modified gross rent of $4.75 per square foot, all as more particularly
set forth in Exhibit Q.
In the event any of the foregoing conditions are not satisfied on the Closing
Date, Buyer shall have no obligation to proceed to Closing and, unless Buyer
shall deliver written notice to Seller that Buyer has waived any unsatisfied
condition and will proceed to Closing, this Agreement shall cease and terminate,
the Earnest Money shall be returned and paid to Buyer, and neither party shall
have any further obligation hereunder. Notwithstanding the foregoing, nothing
contained herein shall waive or diminish any right or remedy Buyer may have for
Seller's default or breach of this Agreement.
15
<PAGE> 16
Section 11. Closing.
11.1 Time and Place. Provided that all of the conditions set forth in
this Agreement are theretofore fully satisfied or performed, the Closing shall
be held at the offices of the Escrow Agent, on a date selected by Buyer and
reasonably acceptable to Seller, which shall be on or before fifteen (15) days
after the expiration of the Inspection Period, unless the Closing Date is
postponed pursuant to the express terms of this Agreement or as otherwise agreed
by Seller and Buyer in writing.
11.2 Closing Documents. For and in consideration of, and as a condition
precedent to Buyer's delivery to Seller of the Purchase Price, Seller shall
obtain and deliver to Buyer at the Closing the following documents (all of which
shall be duly executed and witnessed, which documents Buyer agrees to execute
where required):
11.2.1 A Deed, in the form attached as Exhibit J here to and
by this reference made a part hereof, conveying to Buyer all of Seller's right,
title and interest in and to the Property, subject to the Permitted Title
Exceptions and such other exceptions as are permitted by Section 5 hereof;
11.2.2 A Non-Foreign Certificate, in the form attached as
Exhibit L hereto and by this reference made a part hereof;
11.2.3 Such evidence as the Title Insurer shall reasonably
require as to the authority of the parties acting on behalf of Seller and Buyer
to enter into this Agreement and to discharge the obligations of Seller and
Buyer pursuant hereto;
11.2.4 An original executed counterpart or certified copy of
each Surviving Service Contract;
11.2.5 A Bill of Sale for all Personal Property, in the form
attached as Exhibit M hereto and by this reference made a part hereof;
11.2.6 An Assignment and Assumption of Surviving Service
Contracts and Warranties, in the form attached hereto as Exhibit N and by this
reference made a part hereof;
11.2.7 If applicable, a properly-completed property transfer
tax return, in form and substance appropriate to the jurisdiction in which the
Property is located;
11.2.8 A Closing Statement;
11.2.9 An affidavit of title or other affidavit customarily
required of sellers by the Title Insurer to remove the standard exceptions from
an owner's title insurance policy which are capable of being removed by such an
affidavit; and
16
<PAGE> 17
11.2.10 Such further instructions, documents and information,
including, but not limited to a Form 1099, as Buyer, Seller or Title Insurer may
reasonably request as necessary to consummate the purchase and sale contemplated
by this Agreement.
Section 12. Default and Remedies.
12.1 Buyer's Default. In the event of a default by Buyer under the
terms of this Agreement, Escrow Agent shall disburse the Earnest Money to
Seller, and Seller shall be entitled, as its sole and exclusive remedy
hereunder, to retain the Earnest Money as full liquidated damages for such
default of Buyer, whereupon this Agreement shall terminate and the parties
shall have no further rights or obligations hereunder, except for those which
expressly survive any such termination. It is hereby agreed that Seller's
damages in the event of a default by Buyer hereunder are uncertain and difficult
to ascertain, and that the Earnest Money constitutes a reasonable liquidation of
such damages and is intended not as a penalty, but as full liquidated damages.
Buyer covenants not to bring any action or suit challenging the amount of
liquidated damages provided hereunder in the event of such default. This
provision shall expressly survive the termination of this Agreement.
12.2 Seller's Default. In the event of a default by Seller under the
terms of this Agreement which is first discovered by Buyer prior to the Closing
and is not cured by Seller as provided hereunder, Buyer's sole and exclusive
remedies hereunder shall be to either terminate this Agreement and receive a
refund of the Earnest Money from Escrow Agent, or to seek specific performance
of Seller's obligations under this Agreement, together with any damages caused
by Seller's default hereunder.
Section 13. Condemnation or Destruction.
13.1 Condemnation. Seller hereby represents and warrants that Seller
has no knowledge of any action or proceeding pending, instituted or threatened
for condemnation or other taking of all or any part of the Property by friendly
acquisition or statutory proceeding. Seller agrees to give Buyer immediate
written notice of such actions or proceedings that may result in the taking of
all or a part of the Property. If, prior to the Closing, all or any material
part of the Property is subject to a bona fide threat of condemnation by a body
having the power of eminent domain, or is taken by eminent domain or
condemnation, or sale in lieu thereof, then Buyer, by written notice to Seller,
to be received within thirty (30) calendar days of Buyer's receiving Seller's
notice of such threat, condemnation or taking, or by the Closing Date, whichever
is earlier, may elect to terminate this Agreement.
13.2 Damage or Destruction. If, prior to the Closing, all or any
material part of the Property is damaged or destroyed by any cause, Seller
agrees to give Buyer immediate written notice of such occurrence and the nature
and extent of such damage and destruction, and Buyer, by written notice to
Seller, to be received within thirty (30) calendar days of Buyer's receipt of
Seller's notice
17
<PAGE> 18
of such damage or destruction, or by the Closing Date, whichever is earlier, may
elect to terminate this Agreement.
13.3 Termination. If this Agreement is terminated as a result of the
provisions of either Section 13.1 or Section 13.2 hereof, Buyer shall be
entitled to receive a refund of the Earnest Money from Escrow Agent, whereupon
the parties shall have no further rights or obligations hereunder, except for
those which expressly survive any such termination.
13.4 Awards and Proceeds. If Buyer does not elect to terminate this
Agreement following any notice of a threat of taking or taking by condemnation
or notice of damage or destruction to the Property, as provided above, this
Agreement shall remain in full force and effect and the conveyance of the
Property contemplated herein, less any interest taken by eminent domain or
condemnation, or sale in lieu thereof, shall be effected with no further
adjustments. At the Closing, Seller shall assign, transfer and set over to Buyer
all of Seller's right, title and interest in and to any awards, payments or
insurance proceeds for the actual value of the property lost or destroyed, up to
but not in excess of the Purchase Price, that have been or may thereafter be
made for any such taking, sale in lieu thereof or damage or destruction, to the
extent such awards, payments or proceeds shall not have theretofore been used
for restoration of the Property pursuant to a plan of restoration approved in
writing by Buyer. In addition there shall be credited to Buyer against the
Purchase Price the amount of any insurance deductible or other limitation on
insurance proceeds.
Section 14. Assignment.
14.1 Assignment by Buyer. Except as herein expressly provided, Buyer
shall not, without the prior written consent of Seller, which Seller may
withhold in its sole and absolute discretion, assign any of Buyer's rights
hereunder or any part thereof to any person, firm, partnership, corporation or
other entity. If any assignment is made with the consent of Seller, then the
sale contemplated by this Agreement shall be consummated in the name of, and by
and through the authorized officials of, any such assignee. Notwithstanding
anything to the contrary contained herein, Buyer may assign this Agreement and
all of its interests herein to an entity related to Buyer without the consent
of, but with notice to, Seller. Upon such assignment or nomination, the assignee
or nominee shall have and be subject to all the rights, benefits, duties and
obligations of Buyer hereunder, but Buyer shall not be released from any
liability or obligation of Buyer hereunder.
14.2 Assignment by Seller. From and after the Contract Date, Seller
shall not, without the prior written consent of Buyer, which consent Buyer may
withhold in its sole discretion, assign, transfer, convey, hypothecate or
otherwise dispose of all or any part of its right, title and interest in the
Property.
Section 15. Buyer's Representation and Warranty. Buyer does hereby
represent and warrant to Seller as of the Contract Date and the Closing Date
that it is a validly formed limited partnership under the laws of Indiana; that
it is in good standing in the state of its organization and qualified to do
business in the State in which the Land is located; that it is not subject to
any involuntary
18
<PAGE> 19
proceeding for the dissolution or liquidation thereof; that it has all requisite
authorizations to enter into this Agreement; and that the parties executing this
Agreement on behalf of Buyer are duly authorized to so do. If Buyer does not
terminate this Agreement on or before the Inspection Date, Buyer shall be deemed
to have represented and warranted to Seller as of the Inspection Date and the
Closing Date that Buyer has all requisite authorization to consummate the
transactions contemplated hereby.
Section 16. Broker and Broker's Commission. Buyer and Seller each
warrant and represent to the other that such party has not employed a real
estate broker or agent in connection with the transaction contemplated. Each
party agrees to indemnify and hold the other harmless from any loss or cost
suffered or incurred by it as a result of the other's representation herein
being untrue. This Section 16 shall expressly survive the Closing hereunder.
Section 17. Notices. Wherever any notice or other communication is
required or permitted hereunder, such notice or other communication shall be in
writing and shall be delivered by hand, by nationally-recognized overnight
express delivery service, by U.S. registered or certified mail, return receipt
requested, postage prepaid, or by electronic transfer with prompt telephone
confirmation to the addresses set out below or at such other addresses as are
specified by written notice delivered in accordance herewith:
SELLER: Universal Electronics Inc.
Attn: Paul Arling
1864 Enterprise Parkway
Twinsburg, OH 44087
Phone: (216)487-1110
Fax: (216) 963-7652
BUYER: Duke Realty Limited Partnership
Attn: Peter N. Anderson
8888 Keystone Crossing, Suite 1200
Indianapolis, IN 46240
Phone: (317) 574-3520
Fax: (317) 574-3509
With a copy to: Bose McKinney & Evans
Attn: Tammy K. Haney, Esq.
8888 Keystone Crossing, Suite 1500
Indianapolis, IN 46240
Phone: (317) 574-3708
Fax: (317) 574-3716
19
<PAGE> 20
Such notices shall be deemed received (a) on the date of delivery, if delivered
by hand or overnight express delivery service; (b) on the date indicated on the
return receipt if mailed; or (c) on the date of transmission, if sent by
electronic transfer device.
Section 18. Miscellaneous.
18.1 Governing Law; Headings; Rules of Construction. This Agreement
shall be governed by and construed in accordance with the internal laws of the
State in which the Land is located, without reference to the conflicts of laws
or choice of law provisions thereof. The titles of sections and subsections
herein have been inserted as a matter of convenience of reference only and shall
not control or affect the meaning or construction of any of the terms or
provisions herein. All references herein to the singular shall include the
plural, and vice versa. The parties agree that this Agreement is the result of
negotiation by the parties, each of whom was represented by counsel, and thus,
this Agreement shall not be construed against the maker thereof.
18.2 No Waiver. Neither the failure of either party to exercise any
power given such party hereunder or to insist upon strict compliance by the
other party with its obligations hereunder, nor any custom or practice of the
parties at variance with the terms hereof shall constitute a waiver of either
party's right to demand exact compliance with the terms hereof.
18.3 Entire Agreement. This Agreement contains the entire agreement of
the parties hereto with respect to the Property, and no representations,
inducements, promises or agreements, oral or otherwise, between the parties not
embodied herein or incorporated herein by reference shall be of any force or
effect.
18.4 Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors and assigns
(subject to Section 14 above).
18.5 Amendments. No amendment to this Agreement shall be binding on any
of the parties hereto unless such amendment is in writing and is executed by the
party against whom enforcement of such amendment is sought.
18.6 Possession. Possession of the Property shall be granted by Seller
to Buyer no later than the Closing Date, subject to the Permitted Title
Exceptions and other title matters allowed under Section 5 hereof.
18.7 Date For Performance. If the time period by which any right,
option or election provided under this Agreement must be exercised, or by which
any act required hereunder must be performed, or by which the Closing must be
held, expires on a Saturday, Sunday or legal or bank holiday, then such time
period shall be automatically extended through the close of business on the next
regularly scheduled business day.
20
<PAGE> 21
18.8 Recording. Seller and Buyer agree that they will not record this
Agreement and that they will not record a short form of this Agreement.
18.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which,
when taken together, shall constitute but one and the same instrument.
18.10 Time of the Essence. Time shall be of the essence of this
Agreement and each and every term and condition hereof.
18.11 Severability. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations, and is intended, and shall for all purposes
be deemed to be, a single, integrated document setting forth all of the
agreements and understandings of the parties hereto, and superseding all prior
negotiations, understandings and agreements of such parties. If any term or
provision of this Agreement or the application thereof to any person or
circumstance shall for any reason and to any extent be held to be invalid or
unenforceable, then such term or provision shall be ignored, and to the maximum
extent possible, this Agreement shall continue in full force and effect, but
without giving effect to such term or provision.
18.12 Confidentiality. Buyer and Seller covenant and agree that the
terms of this Agreement, as well as the identity of the parties to the
transactions contemplated thereby and hereby, and all information concerning the
Property (including, without limitation, all information obtained by Buyer prior
to the Closing Date) shall be kept in strictest confidence by Buyer and Seller
prior to the Closing, and thereafter, if the Closing fails to occur for any
reason. After the occurrence of the Closing, Buyer may disclose that the
transactions contemplated hereby have occurred and that the Property has been
sold, but shall not disclose the Purchase Price, except to actual or prospective
lenders, investors, shareholders, analysts, consultants and governmental
agencies. Notwithstanding the foregoing, nothing contained herein shall be
construed so as to prohibit Buyer and Seller from making (a) a disclosure to
officers, employees and those agents, contractors or vendors which need to know
in order to assist Buyer in its purchase of the Property, (b) any disclosure
required by law, including any such disclosure required by any Federal, state or
local governmental agency or court of competent jurisdiction, or (c) any
disclosure which is reasonably necessary to protect any such party's interest in
any action, suit or proceeding brought by or against such party and relating to
the Properties or the subject matter of this Agreement.
18.13 Attorneys' Fees. In the event that either party shall bring an
action or legal proceeding for an alleged breach of any provision of this
Agreement or any representation, warranty, covenant or agreement herein set
forth, or to enforce, protect, determine or establish any term, covenant or
provision of this Agreement or the rights hereunder of either party, the
prevailing party shall be entitled to recover from the nonprevailing party, as a
part of such action or proceedings, or in a separate action brought for that
purpose, reasonable attorneys' fees and costs, expert witness fees and court
costs as may be fixed by the court or jury.
21
<PAGE> 22
18.14 Like-Kind Exchange. Buyer shall have the right to acquire the
Property as part of a transaction that Buyer intends to qualify as a
tax-deferred exchange under Section 1031 of the Internal Revenue Code. Seller
shall make all reasonable efforts to cooperate with Buyer, provided, however,
that the date of Closing hereunder shall not thereby be delayed, Seller shall
not be obligated to incur any additional expenses and Buyer shall defend,
indemnify and hold harmless Seller against any and all losses, costs, expenses
and liabilities which may arise out of such tax-deferred exchange. To facilitate
such exchange, Buyer shall have the right to assign all of its right, title and
interest in this Agreement to a qualified intermediary and to require Seller to
convey the Property to that intermediary pursuant to the terms of this
Agreement.
18.15 Financial Information. At Buyer's request, Seller shall provide
buyer with whatever financial information Seller may have with respect to the
operation and maintenance of the Property.
18.16 Sign. Seller agrees that Buyer may install Buyer's sign
advertising the Property for lease in a location mutually acceptable to Buyer
and Seller upon the execution of this Agreement. Buyer shall pay the cost and
expense of installing, maintaining, repairing and removing such sign. If this
Agreement is terminated by Buyer prior to the expiration of the Inspection Date,
Buyer will promptly remove such sign.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and sealed by its duly authorized signatory, effective
as of the day and year first above written.
SELLER:
UNIVERSAL ELECTRONICS INC.,
a Delaware corporation
By: /s/ PAUL ARLING
------------------------------------
Printed: PAUL ARLING
--------------------------------
Title: CHIEF FINANCIAL OFFICER
BUYER:
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
By: Duke Realty Investments, Inc.,
an Indiana corporation, as general
partner
By: /s/ PETER N. ANDERSON
-----------------------------------
Peter N. Anderson, Assistant
Vice President Acquisitions
22
<PAGE> 23
EXHIBIT A
ESCROW AGREEMENT
THIS AGREEMENT is made and entered into this _ day of 199__, by and
among ________________________________________________ a(n) ("Seller"), and DUKE
REALTY LIMITED PARTNERSHIP, an Indiana limited partnership ("Buyer"), and
_____________________________("Escrow Agent").
WHEREAS, Seller and Buyer have entered into that certain Agreement for
Purchase and Sale of Property (the "Purchase Agreement") dated as of __________,
199_, for the sale and purchase of that certain real property described therein;
the Purchase Agreement is attached hereto as Exhibit A and by this reference
made a part hereof, and all terms used but not defined herein shall have the
meanings given to such terms in the Purchase Agreement; and
WHEREAS, Buyer and Seller desire to have Escrow Agent hold the Earnest
Money in escrow, as required by the Purchase Agreement and pursuant to the terms
hereof.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency whereof are hereby
acknowledged, the parties hereto hereby covenant and agree as follows:
1. Buyer and Seller appoint ________________ as Escrow Agent hereunder.
2. Simultaneous with the execution of this Escrow Agreement, Buyer will
deliver and deposit with Escrow Agent the amount of $ _________________,
representing the initial earnest money deposit required by Section 3 of the
Purchase Agreement (such deposit, together with the earnings thereon, the
"Earnest Money"). The Escrow Agent agrees to immediately deposit the Earnest
Money in an interest-bearing account in a national banking association and to
hold and disburse the same, together with any interest earned thereon, as
required by the Purchase Agreement, using Buyer's e.i.d. number.
3. Upon the Closing Date, Escrow Agent shall apply the Earnest Money,
together with any accrued interest thereon, to the Purchase Price as required by
the Purchase Agreement.
1
<PAGE> 24
4. Within fifteen (15) days after written notification from both Buyer
and Seller that the sale contemplated by the Purchase Agreement shall not take
place, Escrow Agent shall deliver the Earnest Money as required by the Purchase
Agreement.
5 . Buyer and Seller hereby covenant and agree that Escrow Agent shall
not be liable for any loss, cost or damage which it may incur as a result of
serving as Escrow Agent hereunder, except for any loss, cost or damage arising
out of Escrow Agent's gross negligence or willful misconduct. Accordingly,
Escrow Agent shall not incur any liability with respect to (a) any action taken
or Omitted to be taken in good faith upon advice of its counsel, given with
respect to any questions relating to its duties and responsibilities hereunder,
or (b) any action taken or Omitted to be taken in reliance upon any document,
including any written notice of instruction provided for herein or in the
Purchase Agreement, not only as to the due execution and the validity and
effectiveness thereof, but also as to the truth and accuracy of any information
contained therein, which Escrow Agent shall in good faith believe to be genuine
and to have been signed or presented by proper person or persons in conformity
with the provisions of this Agreement. Buyer and Seller hereby agree to
indemnify and hold harmless Escrow Agent against any and all losses, claims,
damages, liabilities and expenses, including, without limitation, reasonable
costs of investigation and reasonable attorneys' fees and disbursements actually
incurred, which may be imposed upon and incurred by Escrow Agent in connection
with its serving as Escrow Agent hereunder. In the event of a dispute between
Buyer and Seller, Escrow Agent shall be entitled to tender unto the registry or
custody of any court of competent jurisdiction in Summit County, Ohio all money
or property in Escrow Agent's hands held under the terms of this Agreement and
the Purchase Agreement, together with such legal pleadings as it deems
appropriate, and thereupon shall be discharged of its obligations hereunder and
under the Purchase Agreement.
6. Any notice required hereunder shall be delivered to the parties and
in the manner as required by the Purchase Agreement. Escrow Agent's address for
notice purposes is as follows:
----------------------------------------
Attn:
-----------------------------------
----------------------------------------
----------------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
7. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Ohio, without reference to the conflicts of
laws or choice of law provisions thereof.
2
<PAGE> 25
8. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs, executors, administrators,
legal representatives, successors and assigns.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and sealed as of the date first written above.
----------------------------------------
By:
-------------------------------------
Signature
-------------------------------------
Printed Name and Title
"SELLER"
DUKE REALTY LIMITED
PARTNERSHIP, an Indiana limited
partnership
By: Duke Realty Investments, Inc.,
its general partner
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
"BUYER"
ESCROW AGENT:
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
3
<PAGE> 26
EXHIBIT A TO ESCROW AGREEMENT
[THE PURCHASE AGREEMENT]
1
<PAGE> 27
EXHIBIT B
DESCRIPTION OF LAND
[To be attached upon receipt of survey]
1
<PAGE> 28
EXHIBIT C
[Intentionally Omitted]
1
<PAGE> 29
EXHIBIT D
PERMITTED TITLE EXCEPTIONS
1. Taxes and assessments becoming a lien in the calendar year in which the
Closing occurs but which are not, as of the date of Closing, due and payable.
2. Other title exceptions listed in Buyer's Title Commitment and acceptable to
Buyer.
1
<PAGE> 30
EXHIBIT E
LIST OF PERSONAL PROPERTY
[To be provided by Seller]
1
<PAGE> 31
EXHIBIT F
[Intentionally Omitted]
1
<PAGE> 32
EXHIBIT G
SERVICE CONTRACTS
None
1
<PAGE> 33
EXHIBIT H
[Intentionally Omitted]
1
<PAGE> 34
EXHIBIT I
DESCRIPTION OF LITIGATION AFFECTING SELLER OR THE PROPERTY
None
1
<PAGE> 35
EXHIBIT J
GENERAL WARRANTY DEED
__________________________________, a(n) _______________________ ("Grantor"),
for valuable consideration paid, GRANTS WITH GENERAL WARRANTY COVENANTS unto
_______________________________________, a(n) _______________________
("Grantee"), whose tax mailing address is ______________________________, the
real property situated in the County of _________________________, City of
__________________, State of Ohio and being further described in the attached
Exhibit A, incorporated herein by reference, subject to real estate taxes not
delinquent, public rights-of-way, matters that would be disclosed by an accurate
survey or physical inspection of the real estate and all matters of record.
Prior instrument reference: Volume __________, Page __________ of the
Official Records of ___________ County, Ohio.
Parcel #________________
Address:________________
________________
The undersigned person executing this deed on behalf of Grantor
represents and certifies that he is a duly elected officer of Grantor and has
been fully empowered, by proper resolution of the Board of Directors of Grantor,
to execute and deliver this deed; that Grantor has full corporate capacity to
convey the real estate described herein; and that all necessary corporate action
for the making of such conveyance has been taken and done.
IN WITNESS WHEREOF, Grantor has caused this General Warranty Deed to be
executed this ___________ day of __________, 19__.
Signed and Acknowledged
in the Presence of:
_________________________________________
__________________________ By:______________________________________
__________________________
(Printed)
Printed:_________________________________
__________________________
__________________________
(Printed) Title:___________________________________
2
<PAGE> 36
STATE )
)SS:
COUNTY OF )
Before me, a Notary Public in and for said County and State, personally
appeared ____________, by me known and by me known to be the ______________ of
______________ _____________, who acknowledged the execution of the foregoing
"General Warranty Deed" on behalf of said ______________.
WITNESS my hand and Notarial Seal this _______ day of ____, 199__.
-----------------------------------------
Notary Public
-----------------------------------------
(Printed Signature)
My Commission Expires:_________________
My County of Residence:________________
This instrument prepared by _______________________, Attorney-at-Law, Duke
Realty Investments, Inc., 8888 Keystone Crossing, Suite 1200, Indianapolis,
Indiana 46240.
3
<PAGE> 37
EXHIBIT K
[Intentionally Omitted]
1
<PAGE> 38
EXHIBIT L
CERTIFICATE AND AFFIDAVIT OF NON-FOREIGN STATUS
The undersigned, being duly sworn, hereby deposes, certifies and states
on oath as follows:
1. The undersigned is currently the __________________________, of
_____________________________________, a(n) _____________________________
organized and existing under the laws of the State of __________________ (the
"Corporation"), and that the address of the Corporation is
_______________________ Suite _________, __________________________.
2. The Corporation is not a "non-resident alien" for purposes of
United States income taxation or otherwise a "foreign person," as defined in
Section 1445 of the United States Internal Revenue Code of 1986 (as amended, the
"Code").
3. The Corporation's United States taxpayer identification number
or, if applicable, Social Security Number is ______________.
4. The undersigned is making this Certificate and Affidavit
pursuant to the provisions of the Code in connection with the sale of the real
property described on Exhibit A, attached hereto and incorporated herein by
reference, by the Corporation to Duke Realty Limited Partnership (the
"Transferee"), which sale constitutes the disposition by the
Corporation/Partnership of a United States real property interest, for the
purposes of establishing that the Transferee is not required to withhold tax
pursuant to Section 1445 of the Code in connection with such disposition.
5. The undersigned acknowledges that this Certificate and Affidavit
may be disclosed to the Internal Revenue Service by the Transferee, that this
Certificate and Affidavit is made under penalty of perjury, and that any false
statement made herein could be punished by fine, imprisonment or both.
6. Under penalty of perjury, I declare that I have examined the
foregoing Certificate and Affidavit and hereby certify that it is true, correct
and complete.
1
<PAGE> 39
Certified, sworn to and subscribed before
me this _______ day of __________, 19__.
___________________________
Notary Public ...........................(SEAL)
My Commission Expires:
___________________________
(NOTARIAL SEAL)
2
<PAGE> 40
EXHIBIT M
BILL OF SALE
THIS BILL OF SALE is executed and delivered as of the ____ day of
____________, 19___, by ________________________________, a(n)
_________________________ (hereinafter referred to as "Seller"), to DUKE REALTY
LIMITED PARTNERSHIP, an Indiana limited partnership (hereinafter referred to as
"Purchaser").
WITNESSETH:
WHEREAS, contemporaneously with the execution and delivery of this Bill
of Sale, Seller has sold and conveyed to Purchaser the improved real property
(the "Property") described on Exhibit A attached hereto and incorporated herein
by reference; and
WHEREAS, in connection with such conveyance of the Property, Seller has
agreed to sell to Purchaser and Purchaser has agreed to purchase from Seller all
right, title and interest of Seller in and to the personal property, if any,
owned by Seller and located on the Property (hereinafter referred to as the
"Personal Property") and identified on Exhibit B attached hereto and
incorporated herein by reference;
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) in hand paid at or before the execution, sealing and delivery
hereof, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by Seller, Seller hereby agrees as follows:
1. Sale and Conveyance. Seller hereby sells, transfers and conveys
unto Purchaser, its successors and assigns, all right, title and interest of
Seller in and to the Personal Property.
2. Governing Law. This Bill of Sale shall be governed by and
construed in accordance with the internal laws of the State of
_________________________, without reference to the conflicts of laws or choice
of law provisions thereof.
3. Binding Effect. This Bill of Sale shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators legal representatives, successors and assigns.
1
<PAGE> 41
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed
and sealed by its duly authorized signatory as of the day and year first above
written.
_________________________________________
By:______________________________________
Signature
_________________________________________
Printed Name and Title
2
<PAGE> 42
EXHIBIT A TO BILL OF SALE
[LEGAL DESCRIPTION OF PROPERTY]
1
<PAGE> 43
EXHIBIT B TO BILL OF SALE
[PERSONAL PROPERTY SOLD TO BUYER]
1
<PAGE> 44
EXHIBIT N
ASSIGNMENT AND ASSUMPTION OF
SURVIVING SERVICE CONTRACTS AND WARRANTIES
THIS ASSIGNMENT is made and entered into as of this _____ day of
___________, 19___, by and between ______________________, a(n)
__________________ (hereinafter referred to as "Assignor"), and DUKE REALTY
LIMITED PARTNERSHIP, an Indiana limited partnership (hereinafter referred to as
"Assignee").
WIINESSETH:
WHEREAS, contemporaneously with the execution and delivery hereof,
Assignor has sold and conveyed to Assignee all that tract or parcel of land more
particularly described in Exhibit A attached hereto and incorporated herein by
reference, together with all improvements thereon and all rights, easements and
appurtenances thereto (hereinafter collectively referred to as the "Property");
and
WHEREAS, in connection with such conveyance of the Property, Assignor
and Assignee have agreed that Assignor shall transfer and assign to Assignee all
right, title and interest of Assignor in and to all service, management,
equipment, labor, material, maintenance, repair, lease commission and other
contracts relating to the maintenance, repair or operation of the Property which
have not been terminated by Assignor as of the date hereof and continue in force
and effect which are set forth in Exhibit B attached hereto and incorporated
herein (hereinafter collectively referred to as the "Surviving Service
Contracts"); and
WHEREAS, Assignor and Assignee have further agreed that Assignee shall
expressly assume all of the obligations of Assignor arising under the Surviving
Service Contracts from and after the date of this Assignment;
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each party hereto, Assignor and
Assignee hereby agree as follows:
1. Transfer and Assignment. Assignor hereby sells, transfers and
assigns to Assignee, its successors and assigns, all right, title and interest
of Assignor in, to and under the Surviving Service Contracts, together with all
warranties and guaranties (collectively,
1
<PAGE> 45
the "Warranties") in favor of Assignor on equipment and improvements on the
Property (to the extent said Warranties are assignable by Assignor), including
those set forth in Exhibit C attached hereto and incorporated herein. If any of
the Warranties are not assignable by Assignor, Assignor agrees to fully
cooperate with Assignee, but without cost or expense to Assignor, to enforce
such Warranties for the benefit of Assignee.
2. Assumption of Obligations. Assignee hereby assumes and agrees to
observe and perform all of the obligations and duties of Assignor under each of
the Surviving Service Contracts and the Warranties arising from and after, but
not before, the date of this Assignment.
3. Indemnity. Assignor hereby indemnifies and holds Assignee
harmless from and against all claims, demands, losses, damages, expenses and
costs including, but not limited to, reasonable attorneys' fees and expenses
actually incurred, arising out of or in connection with Assignor's failure,
prior to the date hereof, to observe, perform and discharge each and every one
of the covenants, obligations and liabilities of the Assignor under the
Surviving Service Contracts and the Warranties to be observed, performed or
discharged with respect to the period prior to the date of this Assignment.
Assignee hereby indemnifies and holds Assignor harmless from and against all
claims, demands, losses, damages, expenses and costs including, but not limited
to, reasonable attorneys' fees and expenses actually incurred, arising out of or
in connection with Assignee's failure, from and after the delivery of this
Assignment, to observe, perform and discharge all covenants, obligations and
liabilities with respect to the period on and after, but not before, the date of
this Assignment.
4. Governing Law. This Assignment shall be governed by and
construed in accordance with the internal laws of the State of ______________,
without reference to the conflicts of laws or choice of law provisions thereof.
5. Binding Effect. This Assignment shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors and assigns.
6. Counterparts. This Assignment may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which,
when taken together, shall constitute but one and the same instrument.
2
<PAGE> 46
IN WITNESS WHEREOF, Assignor and Assignee have each caused this
Assignment to be executed and sealed by its duly authorized signatory as of the
day and year first above written.
ASSIGNOR:
--------------------------------------------
By:
----------------------------------------
Signature
----------------------------------------
Printed Name and Title
ASSIGNEE:
DUKE REALTY LIMITED
PARTNERSHIP, an Indiana limited
partnership
By: Duke Realty Investments, Inc.,
an Indiana corporation, as general
partner
By:
----------------------------------
Signature
----------------------------------
Printed Name and Title
3
<PAGE> 47
EXHIBIT A TO ASSIGNMENT AND ASSUMPTION OF SURVIVING SERVICE
CONTRACTS AND WARRATIES
[LEGAL DESCRIPTION OF PROPERTY]
EXHIBIT B TO ASSIGNMENT AND ASSUMPTION OF SURVIVING SERVICE
CONTRACTS AND WARRANTIES
[LIST OF SURVIVING SERVICE CONTRACTS, INCLUDING LEASE
COMMISSION AGREEMENTS]
EXHIBIT C TO ASSIGNMENT AND ASSUMPTION OF SURVIVING SERVICE
CONTRACTS AND WARRANTIES
[LIST OF WARRANTIES AND GUARANTIES]
4
<PAGE> 48
EXHIBIT 0
[Intentionally Omitted]
1
<PAGE> 49
EXHIBIT P
[Intentionally Omitted]
1
<PAGE> 50
EXHIBIT Q
LEASE AGREEMENT
THIS LEASE is executed this day ___ of ________________, 1998, by and
between DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited partnership
("Landlord"), and Universal Electronics, a(n) _________________ ("Tenant").
WITNESSETH:
ARTICLE 1 - LEASE OF PREMISES
Section 1.01. Basic Lease Provisions and Definitions.
A. Building Address: 1864 Enterprise Parkway, Twinsburg, Ohio, (the
"Building"); located in Business Center (the "Park");
B. Rentable Area: approximately 6832 rentable square feet;
Landlord shall use commercially reasonable standards, consistently
applied, in determining the Rentable Area and the rentable area of the
Building. The Rentable Area shall include the area within the Leased
Premises plus a pro rata portion of the area covered by the common areas
within the Building, as reasonably determined by Landlord from time to
time. Landlord's determination of Rentable Area made in good faith shall
conclusively be deemed correct for all purposes hereunder, including
without limitation the calculation of Tenant's Building Expense Percentage
and Tenant's Minimum Annual Rent.
C. Tenant's Proportionate Share: 10.60%;
D. Minimum Annual Rent: $32,452.00
E. Monthly Rental Installments: $2,704.33
F. Term: Four (4) years and N/A ( ) months;
G. Commencement Date: April 1, 1998 or upon closing and title transfer.
H. Security Deposit: $ to be mutually agreed upon between tenant and
landlord.
I. Guarantor(s): Universal Electronics;
J. Brokers: Duke Realty Limited Partnership representing Landlord and N/A
representing Tenant,
Duke Realty Limited Partnership will [not] share the broker's compensation
with other brokers who may represent Tenant
K. Permitted Use: Customer service and telemarketing center.
L. Address for notices:
Landlord: Duke Realty Limited Partnership
6000 Freedom Square Drive, Suite 500
Independence, OH 44131
<PAGE> 51
Tenant:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Address for rental and other payments;
Duke Realty Limited Partnership
P.O. Box 931845
Cleveland, OH 44193-1186
Section 1.02. Leased Premises. Landlord hereby leases to Tenant and Tenant
leases from Landlord, subject to all of the terms and conditions set forth
herein, that portion of the Building described in the Basic Lease Provisions and
outlined on Exhibit A attached hereto (the "Leased Premises"). Landlord also
grants to Tenant, together with and subject to the rights granted from time to
time by Landlord to other tenants and occupants of Landlord's premises, the
right to use the common parking area adjoining the Building.
ARTICLE 2 - TERM AND POSSESSION
Section 2.01. Term. The term of this Lease ("Lease Term") shall be the
period of time specified in the Basic Lease Provisions and shall commence on the
Commencement Date described in the Basic Lease Provisions. Upon delivery of
possession of the Leased Premises to Tenant, Tenant shall execute a letter of
understanding acknowledging (i) the Commencement Date of this Lease, and (ii)
that Tenant has accepted the Leased Premises for occupancy and that the
condition of the Leased Premises (including any tenant finish improvements
constructed thereon) and the Building was at the time satisfactory and in
conformity with the provisions of this Lease in all respects. Such letter of
understanding shall become a part of this Lease. If Tenant takes possession of
and occupies the Leased Premises, Tenant shall be deemed to have accepted the
Leased Premises as described above, even though Tenant may not have executed the
letter of understanding.
Section 2.02. Construction of Tenant Improvements. Tenant has personally
inspected the Leased Premises and accepts the same "as is" without
representation or warranty by Landlord of any kind and with the understanding
that Landlord shall have no responsibility with respect thereto except to
construct in a good and workmanlike manner the improvements designated as
Landlord's obligations in the attached Exhibit B, so that the Leased Premises
will be available for Tenant's occupancy by the Commencement Date, unless
prevented by causes beyond Landlord's reasonable control. Such improvements
shall be in accordance with and at the expense of the party indicated on Exhibit
B.
Section 2.03. Surrender of the Premises. Upon the expiration or earlier
termination of this Lease, or upon the exercise by Landlord of its right to
re-enter the Leased Premises without terminating this Lease, Tenant shall
immediately surrender the Leased Premises to Landlord, in broomclean condition
and in good order, condition and repair, except for ordinary wear and tear and
damage which Tenant is not obligated to repair. Tenant shall also remove its
personal property, trade fixtures and any of Tenant's alterations
-2-
<PAGE> 52
designated by Landlord; promptly repair any damage caused by such removal; and
restore the Leased Premises to the condition existing prior to the installation
of the items so removed. If Tenant fails to do so, Landlord may restore the
Leased Premises to such condition at Tenant's expense, and Landlord may cause
all of said property to be removed at Tenant's expense, and Tenant hereby agrees
to pay all the costs and expenses thereby reasonably incurred. All property of
Tenant which is not removed within ten (10) days following Landlord's written
demand therefor shall be conclusively deemed to have been abandoned by Tenant,
and Landlord shall be entitled to dispose of such property without thereby
incurring any liability to Tenant. The provisions of this section shall survive
the expiration or other termination of this Lease.
Section 2.04. Holding Over. If Tenant retains possession of the Leased
Premises after the expiration or earlier termination of this Lease, Tenant shall
become a tenant from month to month at 150% of the Monthly Rental Installment in
effect at the end of the Lease Term (plus Additional Rent as provided in Article
3 hereof), and otherwise upon the terms, covenants and conditions herein
specified, so far as applicable. Acceptance by Landlord of rent after such
expiration or earlier termination shall not result in a renewal of this Lease,
and Tenant shall vacate and surrender the Leased Premises to Landlord upon
Tenant being given thirty (30) days prior written notice from Landlord to
vacate.
ARTICLE 3 - RENT
Section 3.01. Base Rent. Tenant shall pay to Landlord as Minimum Annual
Rent for the Leased Premises the sum specified in the Basic Lease Provisions,
payable in equal consecutive Monthly Rental Installments, in advance, without
deduction or offset, beginning on the Commencement Date and on or before the
first day of each and every calendar month thereafter during the Lease Term. The
Monthly Rental Installment for partial calendar months shall be prorated based
on the number of days during the month this Lease was in effect in relation to
the total number of days in such month.
Section 3.02. Annual Rental Adjustment.
A. Definitions. For purposes of this Section 3.02, the following definitions
shall apply:
1. "Annual Rental Adjustment" - shall mean the amount of Tenant's
Proportionate Share of Operating Expenses, Tenant's Proportionate
Share of Real Estate Taxes and Insurance, and Tenant's Proportionate
Share of Groundskeeping Expenses for a particular calendar year.
2. "Operating Expenses" - shall mean the amount of all of Landlord's
direct costs and expenses paid or incurred in operating and
maintaining the Building (including the common areas and the land)
for a particular calendar year as determined by Landlord in
accordance with generally accepted accounting principles,
consistently applied, including all additional direct costs and
expenses of operation and maintenance of the Building which Landlord
reasonably determines that it would have paid or incurred during
such year if the Building had
-3-
<PAGE> 53
been fully occupied including by way of illustration and not
limitation: water, sewer, electrical and other utility charges other
than the separately billed electrical and other charges paid by
Tenant as provided in this Lease; tools and supplies; repair costs;
security services; license, permit and inspection fees; commercially
reasonable management fees and administrative expenses; wages and
related employee benefits payable for the maintenance and operation
of the Building; amortization of capital improvements that produce a
reduction in operating costs together with interest at the rate of
twelve percent (12%) per annum on the unamortized balance thereof;
maintenance and repair costs, and in general all other costs and
expenses which would, under generally accepted accounting
principles, be regarded as operating and maintenance costs and
expenses, including those which would normally be amortized over a
period not to exceed five (5) years. There shall also be included in
Operating Expenses the cost or portion thereof reasonably allocable
to the Building, amortized over such period as Landlord shall
reasonably determine, together with interest at the rate of twelve
percent (12%) per annum on the unamortized balance, of any capital
improvements made to the Building by Landlord after the date of this
Lease which are required under any governmental law or regulation
that was not applicable to the Building at the time it was
constructed. Notwithstanding the foregoing, Operating Expenses as
defined herein shall exclude Groundskeeping Expenses (as hereinafter
defined).
3. "Real Estate Taxes and Insurance" - shall mean any form of real
estate tax or assessment, general, special, ordinary or
extraordinary, and any license or permit fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than federal or state
inheritance, personal income or estate taxes) imposed upon the
Building and/or the land by any authority having the direct or
indirect power to tax, including any city, state or federal
government or any school, agricultural, sanitary, fire, street,
drainage or other improvement district thereof, including costs and
expenses of contesting the validity or amount of any such taxes; and
all insurance premiums.
4. "Groundskeeping Expenses" - shall mean all costs and expenses
associated with landscaping, snow removal, parking lot maintenance
and exterior lighting incurred in the operation and maintenance of
the Building and common areas.
5. "Building Expense Percentage" - shall mean the percentage specified
in Item C of the Basic Lease Provisions. This Percentage was
determined by dividing the rentable area in the Leased Premises by
the total rentable area in the Building.
6. "Tenant's Proportionate Share of Operating Expenses" shall be an
amount equal to Tenant's Building Expense Percentage multiplied by
the remainder of (i) Operating Expenses for a particular calendar
year less (ii) the
-4-
<PAGE> 54
actual operating Expenses for calendar year 1997, provided that such
amount shall not be less than zero.
7. "Tenant's Proportionate Share of Real Estate Taxes and Insurance" -
shall be an amount equal to Tenant's Building Expense Percentage
multiplied by the remainder of (i) Real Estate Taxes and Insurance
for a particular calendar year less (ii) the actual Real Estate
Taxes and Insurance for calendar year 1997, provided that such
amount shall not be less than zero.
8. "Tenant's Proportionate Share of Groundskeeping Expenses - shall be
an amount equal to Tenant's Building Expense Percentage times the
Groundskeeping Expenses for a particular calendar year.
B. Payment Obligation. In addition to the Minimum Annual Rent specified in
this Lease, Tenant shall pay to Landlord as additional rent for the Leased
Premises, the Annual Rental Adjustment for each such calendar year or
portion thereof.
1. Payment of Estimated Annual Rental Adjustment - The Annual Rental
Adjustment shall be estimated annually by Landlord, and written
notice thereof shall be given to Tenant at least thirty (30) days
prior to the beginning of each calendar year. In the event the Lease
Term shall commence in a calendar year, Tenant shall be furnished
with said notice on the Commencement Date. Tenant shall pay to
Landlord each month, at the same time the Monthly Rental installment
is due, an amount equal to one-twelfth (1/12) of the estimated
Annual Rental Adjustment.
2. Increases in Estimated Annual Rental Adjustment - If any expenses
comprising the Annual Rental Adjustment increase during a calendar
year, Landlord may increase the estimated Annual Rental Adjustment
during such year by giving Tenant written notice to that effect, and
thereafter Tenant shall pay to Landlord, in each of the remaining
months of such year, an amount equal to the amount of such increase
in the estimated Annual Rental Adjustment divided by the number of
months remaining in such year.
3. Adjustment to Actual Annual Rental Adjustment - Within a reasonable
time after the end of each calendar year, Landlord shall prepare and
deliver to Tenant a statement showing the actual Annual Rental
Adjustment. Within thirty (30) days after receipt of the
aforementioned statement, Tenant shall pay to Landlord, or Landlord
shall credit against the next rent payment or payments due from
Tenant, as the case may be, the difference between the actual Annual
Rental Adjustment for the preceding calendar year and the estimated
amount paid by Tenant during such year. For any fractional portion
of a calendar year at the commencement or termination of this Lease,
any such deficiency or overage shall be settled and adjusted between
the parties after the end of that calendar year in the same manner
as above, but prorated based on the number of days of the Lease Term
within such calendar year.
-5-
<PAGE> 55
4. Tenant verification - Tenant or its accountants shall have the right
to inspect, at reasonable times and in a reasonable manner, during
the ninety (90) day period following the delivery of Landlord's
statement of the actual amount of the Annual Rental Adjustment, such
of Landlord's books of account and records as pertain to and contain
information concerning such costs and expenses in order to verify
the amounts thereof.
Section 3.03. Late Charges. Tenant acknowledges that Landlord shall incur
certain additional unanticipated costs and expenses, including administrative
costs and attorneys' fees, if Tenant fails to timely pay any payment required
hereunder. Therefore, as compensation for such additional expenses, and in
addition to the other remedies available to Landlord hereunder, if any payment
of Minimum Rent or any other sum or charge required to be paid by Tenant to
Landlord hereunder shall become overdue for a period of five (5) days, a late
charge of seven percent (7%) of the payment so due shall be paid by Tenant as
additional rent. In addition, if Tenant fails to pay within fifteen (15) days
after the same is due and payable any sum or charge required to be paid by
Tenant to Landlord, such unpaid amount shall bear interest from the due date
thereof to the date of payment at the rate of fifteen percent (15%) per annum.
ARTICLE 4 - SECURITY DEPOSIT
Tenant, upon execution of this Lease, shall deposit with Landlord the
Security Deposit as specified in the Basic Lease Provisions as security for the
full and faithful performance by Tenant of all of the terms, conditions and
covenants contained in this Lease on the part of Tenant to be performed,
including but not limited to the payment of the rent. In the event of a default
by Tenant of any term, condition or covenant herein contained, Landlord may
apply all or any part of such security deposit to curing all or any part of such
default; and Tenant agrees to promptly, upon demand, deposit such additional sum
with Landlord as may be required to maintain the full amount of the security
deposit. All sums held by Landlord pursuant to this section shall be without
interest. At the end of the Lease Term, provided that there is then no uncured
default, Landlord shall return the security deposit to Tenant.
ARTICLE 5 - USE
Section 5.01. Use of Leased Premises. The Leased Premises are to be used
by Tenant solely as provided in the Basic Lease Provisions, and for no other
purposes without the prior written consent of Landlord.
Section 5.02. Covenants of Tenant Regarding Use. In connection with its
use of the Leased Premises, Tenant agrees to do the following:
(a) Tenant shall (i) use and maintain the Leased Premises and conduct its
business thereon in a safe, careful, reputable and lawful manner, (ii) comply
with all laws, rules, regulations, orders, ordinances, directions and
requirements of any governmental authority or agency, now in force or which may
hereafter be in force, including without limitation those which shall impose
upon Landlord or Tenant any duty with respect to or triggered by a change in the
use or occupation of, or any
-6-
<PAGE> 56
improvement or alteration to, the Leased Premises, and (iii) comply with and
obey all reasonable directions of the Landlord, including any Rules and
Regulations that may be adopted by Landlord from time to time.
(b) Tenant shall not (i) use the Leased Premises for any unlawful purpose
or act, (ii) commit or permit any waste or damage to the Leased Premises, (iii)
store any inventory, equipment or any other materials outside the Leased
Premises, or (iv) do or permit anything to be done in or about the Leased
Premises or appurtenant common areas which constitutes a nuisance or which will
in any way obstruct or interfere with the rights of other tenants or occupants
of the Building or injure or annoy them. Landlord shall not be responsible to
Tenant for the nonperformance by any other tenant or occupant of the Building of
its lease or of any Rules and Regulations.
(c) Tenant shall not overload the floors of the Leased Premises as to
cause damage to the floor. All damage to the floor structure or foundation of
the Building due to improper positioning or storage of items or materials shall
be repaired by Landlord at the sole expense of Tenant, who shall reimburse
Landlord immediately therefor upon demand.
(d) Tenant shall not use the Leased Premises, or allow the Leased Premises
to be used, for any purpose or in any manner which would, in Landlord's opinion,
invalidate any policy of insurance now or hereafter carried on the Building or
increase the rate of premiums payable on any such insurance policy. Should
Tenant fail to comply with this covenant, Landlord may, at its option, require
Tenant to stop engaging in such activity or to reimburse Landlord as Additional
Rent for any increase in premiums charged during the term of this Lease on the
insurance carried by Landlord on the Leased Premises and attributable to the use
being made of the Leased Premises by Tenant.
(e) Tenant may, at its own expense, erect a sign concerning its business
which shall be in keeping with the decor and other signs on the Building,
provided that such sign is first approved by Landlord in writing. Landlord's
approval, if given, may be conditioned upon such criteria as Landlord deems
appropriate to maintain the area in a neat and attractive manner. Tenant agrees
to maintain any sign in good state of repair, and upon expiration of the Lease
Term, Tenant shall promptly remove the sign and repair any resulting damage to
the Leased Premises or Building.
Section 5.03. Landlord's Rights Regarding Use. In addition to the rights
specified elsewhere in this Lease, Landlord shall have the following rights
regarding the use of the Leased Premises or the appurtenant common areas by
Tenant, its employees, agents, customers and invitees, each of which may be
exercised without notice or liability to Tenant:
(a) Landlord may install such signs, advertisements, notices or tenant
identification information as it shall deem necessary or proper.
(b) Landlord shall have the right at any time to change or otherwise alter
the appurtenant common areas. Landlord may control the appurtenant common areas
in such manner as it deems necessary or proper.
-7-
<PAGE> 57
(c) Landlord or Landlord's agent shall be permitted to inspect or examine
the Leased Premises at any reasonable time, and Landlord shall have the right to
make any repairs to the Leased Premises which are necessary for its
preservation; provided, however, that any repairs made by Landlord shall be at
Tenant's expense, except as provided in Section 7.02 hereof. If Tenant is not
present to open and permit such entry into the Leased Premises at any time when
such entry is necessary or permitted hereunder, Landlord and its employees and
agents may enter the Leased Premises by means of a master or pass key or
otherwise. Landlord shall incur no liability to Tenant for such entry, nor shall
such entry constitute an eviction of Tenant or a termination of this Lease, or
entitle Tenant to any abatement of rent therefor.
ARTICLE 6 - UTILITIES AND SERVICES
Tenant shall obtain in its own name and shall pay directly to the
appropriate supplier the cost of all utilities and services serving the Leased
Premises, including but not limited to: natural gas, heat, light, electrical
power, telephone, janitorial service, refuse disposal and other utilities and
services. However, if any services or utilities are jointly metered with other
property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord's
written statement. Landlord shall not be liable in damages or otherwise for any
failure or interruption of any utility service or other service furnished to the
Leased Premises; and no such failure or interruption shall entitle Tenant to
terminate this Lease or withhold sums due hereunder.
ARTICLE 7 - MAINTENANCE AND REPAIRS
Section 7.01. Tenant's Responsibility. During the term of this Lease,
Tenant shall, at its own cost and expense, maintain in good condition and repair
the interior of the Leased Premises, including but not limited to the electrical
systems, heating and air conditioning systems, plate glass, floors, windows and
doors, sprinkler and plumbing systems. Tenant, at its expense, shall obtain a
preventative maintenance contract on the heating, ventilating and
air-conditioning systems which shall be subject to Landlord's reasonable
approval. Tenant shall provide Landlord with a copy of the preventative
maintenance contract no later than ninety (90) days after the Commencement Date.
The preventative maintenance contract shall provide for the inspection and
maintenance of the heating, ventilating and air conditioning system on not less
than a semi-annual basis.
Section 7.02. Landlord's Responsibility. During the term of this Lease,
Landlord shall maintain in good condition and repair the roof, exterior walls,
foundation and structural frame of the Building and the parking and landscaped
areas, the costs of which shall be included in Operating Expenses; provided,
however, that to the extent any of the foregoing items require repair because of
the negligence, misuse, or default of Tenant, its employees, agents, customers
or invitees, Landlord shall make such repairs at Tenant's expense.
-8-
<PAGE> 58
Section 7.03. Alterations. Tenant shall not permit structural or
non-structural alterations or additions in or to the Leased Premises unless and
until the plans have been approved by Landlord in writing. As a condition of
such approval, Landlord may require Tenant to remove the alterations and restore
the Leased Premises upon termination of this Lease; otherwise, all such
alterations or improvements, except movable office furniture and equipment and
trade fixtures, shall at Landlord's option become a part of the realty and the
property of Landlord, and shall not be removed by Tenant. If Landlord consents
to Tenant's performance of alterations or additions to the Leased Premises,
Tenant shall ensure that all alterations and improvements which are made or
necessitated thereby shall be made in accordance with all applicable laws,
regulations and building codes, in a good and workmanlike manner and in quality
equal to or better than the original construction of the Building. Landlord's
approval of the plans, specifications and working drawings for Tenant's
alterations shall create no responsibility or liability on the part of Landlord
for their completeness, design sufficiency, or compliance with all laws, rules
and regulations of governmental agencies or authorities. Tenant shall indemnify
and save harmless Landlord from all costs, loss or expense in connection with
any construction or installation. No person shall be entitled to any lien
directly or indirectly derived through or under Tenant or through or by virtue
of any act or omission of Tenant upon the Leased Premises for any improvements
or fixtures made thereon or installed therein or for or on account of any labor
or material furnished to the Leased Premises or for or on account of any matter
or thing whatsoever; and nothing in this Lease contained shall be construed to
constitute a consent by Landlord to the creation of any lien. If any lien is
filed against the Leased Premises for work claimed to have been done for, or
material claimed to have been furnished to, Tenant, Tenant shall cause such lien
to be discharged of record within thirty (30) days after filing by bonding or in
any other lawful manner. Tenant shall indemnify and save harmless Landlord from
all costs, losses, expenses, and attorneys' fees in connection with any such
lien.
ARTICLE 8 - CASUALTY
Section 8.01. Casualty. In the event of total or partial destruction of
the Building or the Leased Premises by fire or other casualty, Landlord agrees
to promptly restore and repair the Leased Premises; provided, however, that
Landlord's obligation hereunder shall be limited to the reconstruction of such
of the tenant finish improvements as were originally required to be made by
Landlord, if any. Any insurance proceeds not used by Landlord in restoring or
repairing the Leased Premises shall be the sole property of Landlord. Rent shall
proportionately abate during the time that the Leased Premises or part thereof
are unusable because of any such damage thereto. Notwithstanding the foregoing,
if the Leased Premises are (i) so destroyed that they cannot be repaired or
rebuilt within one hundred eighty (180) days from the date on which the
insurance claim is adjusted; or (ii) destroyed by a casualty which is not
covered by the insurance required hereunder or, if covered, such insurance
proceeds are not released by any mortgagee entitled thereto or are insufficient
to rebuild the Building and the Leased Premises; then, in case of a clause (i)
casualty, either Landlord or Tenant may, or, in the case of a clause (ii)
casualty, then Landlord may, upon thirty (30) days written
-9-
<PAGE> 59
notice to the other party, terminate and cancel this Lease; and all further
obligations hereunder shall thereupon cease and terminate.
Section 8.02. Fire and Extended Coverage Insurance. During the term of
this Lease, Landlord shall maintain fire and extended coverage insurance on the
Building, but shall not protect Tenant's property on the Leased Premises; and,
notwithstanding the provisions of Section 9.01, Landlord shall not be liable for
any damage to Tenant's property, regardless of cause, including the negligence
of Landlord and its employees, agents, and invitees. Tenant hereby expressly
waives any right of recovery against Landlord (or any other tenant of the
Building) for damage to any property of Tenant located in or about the Leased
Premises, however caused, including the negligence of Landlord and its
employees, agents, and invitees; and, notwithstanding the provisions of Section
9.01 below, Landlord hereby expressly waives any rights of recovery against
Tenant for damage to the Leased Premises or the Building which is insured
against under Landlord's fire and extended coverage insurance. All insurance
policies maintained by Landlord or Tenant as provided in this section shall
contain an agreement by the insurer waiving the insurer's right of subrogation
against the other party to this Lease and agreeing not to acquire any rights of
recovery which the insured has expressly waived prior to loss.
ARTICLE 9 - LIABILITY INSURANCE
Section 9.01. Tenant's Responsibility. Landlord shall not be liable to
Tenant or to any other person for (i) damage to property or injury or death to
persons due to the condition of the Leased Premises, the Building or the
appurtenant common areas, or (ii) the occurrence of any accident in or about the
Leased Premises or the appurtenant common areas, or (iii) any act or neglect of
Tenant or any other tenant or occupant of the Building or of any other person,
unless such damage, injury or death is directly and solely the result of
Landlord's negligence; and Tenant hereby releases Landlord from any and all
liability for the same. Tenant shall be liable for, and shall indemnify and
defend Landlord and hold it harmless from, any and all liability for (i) any act
or neglect of Tenant and any person coming on the Leased Premises or appurtenant
common areas by the license of Tenant, express or implied, (ii) any damage to
the Leased Premises, and (iii) any loss of or damage or injury to any person
(including death resulting therefrom) or property occurring in, on or about the
Leased Premises, regardless of cause, except for any loss or damage from fire or
casualty insured as provided in Section 8.02 and except for that caused solely
and directly by Landlord's negligence. Notwithstanding the foregoing, Tenant
shall bear the risk of any loss or damage to its property as provided in Section
8.02.
Section 9.02. Tenant's Insurance. Tenant, in order to insure against the
liabilities specified in this Lease, shall at all times during the term of this
Lease carry, at its own expense, one or more policies of general public
liability and property damage insurance, issued by one or more insurance
companies acceptable to Landlord, with the following minimum coverages:
A. Worker's Compensation: minimum statutory amount.
-10-
<PAGE> 60
B. Comprehensive General Liability Insurance, including blanket, contractual
liability, broad form property damage, personal injury, completed
operations, products liability, and fire damage: Not less than $1,000,000
Combined Single Limit for both bodily injury and property damage.
C. Fire and Extended Coverage, Vandalism and Malicious Mischief, and
Sprinkler Leakage insurance, if applicable, for the full cost of
replacement of Tenant's property.
D. Business interruption insurance.
The insurance policy or policies shall protect Tenant and Landlord as their
interests may appear, naming Landlord and Landlord's managing agent and
mortgagee as additional insureds, and shall provide that they may not be
cancelled on less than thirty (30) days prior written notice to Landlord. Tenant
shall furnish Landlord with Certificates of Insurance evidencing all required
coverage. Should Tenant fail to carry such insurance and furnish Landlord with
such Certificates of Insurance after a request to do so, Landlord shall have the
right to obtain such insurance and collect the cost thereof from Tenant as
additional rent.
ARTICLE 10 - EMINENT DOMAIN
If all or any substantial part of the Building or appurtenant common areas
shall be acquired by the exercise of eminent domain, Landlord may terminate this
Lease by giving written notice to Tenant within fifteen (15) days after
possession thereof is so taken. If all or any part of the Leased Premises shall
be acquired by the exercise of eminent domain in such a manner that the Leased
Premises shall become unusable by Tenant for the purpose for which it is then
being used, Tenant may terminate this Lease by giving written notice to Landlord
within fifteen (15) days after possession of the Leased Premises or part thereof
is so taken. Tenant shall have no claim against Landlord on account of any such
acquisition for the value of any unexpired lease term remaining after possession
of the Leased Premises is taken. All damages awarded shall belong to and be the
sole property of Landlord; provided, however, that Tenant shall be entitled to
any award expressly made to Tenant by any governmental authority for the cost of
or the removal of Tenant's stock, equipment and fixtures and other moving
expenses.
ARTICLE 11 - ASSIGNMENT AND SUBLEASE
Tenant shall not assign this Lease or sublet the Leased Premises in whole
or in part without Landlord's prior written consent. If Landlord consents to
such assignment or subletting, Tenant shall remain primarily liable to perform
all of the covenants and conditions contained in this Lease, including but not
limited to payment of Minimum Rent and Additional Rent as provided herein. The
acceptance of rent from any other person shall not be deemed to be a waiver of
any of the provisions of this Lease or to be a consent to the assignment of this
Lease or the subletting of the Leased Premises. If Tenant shall make any
assignment or sublease, with Landlord's consent, for a rental in excess of the
rent payable under this Lease, Tenant shall not be
-11-
<PAGE> 61
entitled to keep such excess, and Tenant shall pay to Landlord one hundred
percent (100%) of any such excess rental upon receipt.
Without in any way limiting Landlord's right to refuse to consent to any
assignment or subletting of this Lease, Landlord reserves the right to refuse to
give such consent if in Landlord's discretion and opinion (i) the use of the
Leased Premises is or may be in any way adversely affected; (ii) the business
reputation of the proposed assignee or subtenant is deemed unacceptable; or
(iii) the financial worth of the proposed assignee or subtenant is insufficient
to meet the obligations hereunder or is less than that of Tenant. Landlord
further expressly reserves the right to refuse to give its consent to any
subletting if the proposed rent is to be less than the then current rent for
similar premises in the Park. Tenant agrees to reimburse Landlord for reasonable
accounting and attorneys' fees incurred in conjunction with the processing and
documentation of any such requested transfer, assignment, subletting or any
other hypothecation of this Lease or Tenant's interest in and to the Leased
Premises.
ARTICLE 12 - TRANSFERS BY LANDLORD
Section 12.01. Sale and Conveyance of the Building. Landlord shall have
the right to sell and convey the Building at any time during the term of this
Lease, subject only to the rights of Tenant hereunder; and such sale and
conveyance shall operate to release Landlord from liability hereunder after the
date of such conveyance.
Section 12.02. Subordination and Estoppel Certificate. Landlord shall have
the right to subordinate this Lease to any mortgage presently existing or
hereafter placed upon the Building by so declaring in such mortgage; and the
recording of any such mortgage shall make it prior and superior to this Lease
regardless of the date of execution or recording of either document. Within ten
(10) days following receipt of a written request from Landlord, Tenant shall
execute and deliver to Landlord, without cost:
(a) any instrument which Landlord may deem necessary or desirable to
confirm the subordination of this Lease. If Tenant fails or refuses to do so,
Landlord may execute such instrument in the name and as the act of Tenant.
(b) an estoppel certificate in such form as Landlord may reasonably
request certifying (i) that this Lease is in full force and effect and
unmodified (or, if modified, stating the nature of such modification), (ii) the
date to which rent has been paid, (iii) that there are not, to Tenant's
knowledge, any uncured defaults (or specifying such defaults if any are
claimed), and (iv) any other matters or state of facts reasonably required
respecting the Lease or Tenant's occupancy of the Leased Premises. Such estoppel
may be relied upon by Landlord and by any purchaser or mortgagee of all or any
part of the Building. Tenant's failure to deliver such statement within such
period shall be conclusive upon Tenant that this Lease is in full force and
effect and unmodified and that there are no uncured defaults in Landlord's
performance hereunder.
-12-
<PAGE> 62
(c) Notwithstanding the foregoing, if the mortgagee shall take title to
the Leased Premises through foreclosure or deed in lieu of foreclosure, Tenant
shall be allowed to continue in possession of the Leased Premises as provided
for in this Lease so long as Tenant shall not be in default. Tenant shall, in
the event any proceedings are brought to foreclose any such mortgage, attorn to
the purchaser through foreclosure or deed in be allowed to continue in as
provided for in this Lease default. Tenant shall, in the to foreclose any such
upon any such foreclosure and recognize such purchaser as the landlord under
this Lease.
Section 12.03. Lender's Rights. Landlord shall have the right, at any time
and from time to time, to notify Tenant in writing that Landlord has placed a
mortgage on the Building, specifying the identity of the Lender ("Lender").
Following receipt of such notice, Tenant agrees to give such Lender a copy of
any notice of default served by Tenant on Landlord. Tenant further agrees that
if Landlord fails to cure any default as provided in Section 13.03 herein,
Lender shall have an additional thirty (30) days within which to cure such
default; provided, however, that if the term, condition, covenant or obligation
to be performed by Landlord is of such nature that the same cannot reasonably
be performed within such thirty-day period, such default shall be deemed to have
been cured if Lender commences such performance within said thirty-day period
and thereafter diligently completes the same.
ARTICLE 13 - DEFAULT AND REMEDY
Section 13.01. Default. The occurrence of any of the following shall be
deemed an "Event of Default":
(a) Tenant shall fail to pay any Monthly Rental Installment or Additional
Rent within five (5) days after the same shall be due and payable, or Tenant
shall fail to pay any other amounts due Landlord from Tenant within ten (10)
days after the same shall be due and payable.
(b) Tenant shall fail to perform or observe any term, condition, covenant
or obligation as required under this Lease for a period of ten (10) days after
notice thereof from Landlord; provided, however, that if the nature of Tenant's
default is such that more than ten days are reasonably required to cure, then
such default shall be deemed to have been cured if Tenant commences such
performance within said ten-day period and thereafter diligently completes the
required action within a reasonable time.
(c) Tenant shall vacate or abandon the Leased Premises for any period, or
fail to occupy the Leased Premises or any substantial portion thereof for a
period of thirty (30) days.
(d) All or substantially all of Tenant's assets in the Leased Premises or
Tenant's interest in this Lease are attached or levied under execution (and
Tenant does not discharge the same within sixty (60) days thereafter); a
petition in bankruptcy, insolvency, or for reorganization or arrangement is
filed by or against Tenant (and Tenant fails to secure a stay or discharge
thereof within sixty (60) days thereafter); Tenant shall be insolvent and unable
to pay its debts as they become due; Tenant makes a general assignment for the
benefit of creditors; Tenant takes the benefit of any insolvency action or law;
the appointment of a receiver or trustee in bankruptcy for Tenant or its assets
if such receivership has not been vacated
-13-
<PAGE> 63
or set aside within thirty (30) days thereafter; dissolution or other
termination of Tenant's corporate charter if Tenant is a corporation.
Section 13.02. Remedies. Upon the occurrence of any Event of Default,
Landlord shall have the following rights and remedies, in addition to those
allowed by law, any one or more of which may be exercised without further notice
to or demand upon Tenant:
(a) Landlord may apply the security deposit or re-enter the Leased
Premises and cure any default of Tenant, and Tenant shall reimburse Landlord as
additional rent for any costs and expenses which Landlord thereby incurs; and
Landlord shall not be liable to Tenant for any loss or damage which Tenant may
sustain by reason of Landlord's action, regardless of whether caused by
Landlord's negligence or otherwise.
(b) Landlord may terminate this Lease or, without terminating this Lease,
terminate Tenant's right to possession of the Leased Premises as of the date of
such default, and thereafter (i) neither Tenant nor any person claiming under or
through Tenant shall be entitled to possession of the Leased Premises, and
Tenant shall immediately surrender the Leased Premises to Landlord; and (ii)
Landlord may re-enter the Leased Premises and dispossess Tenant and any other
occupants of the Leased Premises by any lawful means and may remove their
effects, without prejudice to any other remedy which Landlord may have. Upon the
termination of this Lease, Landlord may declare the present value (as determined
by Landlord) of all rent which would have been due under this Lease for the
balance of the Lease Term to be immediately due and payable, whereupon Tenant
shall be obligated to pay the same to Landlord, together with all loss or damage
which Landlord may sustain by reason of Tenant's default ("Default Damages"),
which shall include without limitation expenses of preparing the Leased Premises
for re-letting, demolition, repairs, tenant finish improvements, and brokers'
and attorneys' fees, it being expressly understood and agreed that the
liabilities and remedies specified in this subsection (b) shall survive the
termination of this Lease.
(c) Landlord may, without terminating this Lease, re-enter the Leased
Premises and re-let all or any part thereof for a term different from that which
would otherwise have constituted the balance of the Lease Term and for rent and
on terms and conditions different from those contained herein, whereupon Tenant
shall be immediately obligated to pay to Landlord as liquidated damages the
difference between the rent provided for herein and that provided for in any
lease covering a subsequent re-letting of the Leased Premises, for the period
which would otherwise have constituted the balance of the Lease Term, together
with all of Landlord's Default Damages.
(d) Landlord may sue for injunctive relief or to recover damages for any
loss resulting from the breach.
(e) In addition to the defaults and remedies described above, the parties
hereto agree that if Tenant defaults in the performance of any (but not
necessarily the same) term or condition of this Lease three (3) or more times
during any twelve (12) month period, regardless of whether such defaults are
ultimately cured, then such conduct shall, at Landlord's
-14-
<PAGE> 64
option, represent a separate Event of Default. Tenant acknowledges that (i)
Landlord will incur additional unanticipated costs as a result of such
repetitive defaults, including but not limited to administrative costs and legal
fees, and (ii) the purpose of this provision is to adequately compensate
Landlord for those costs, which would be difficult to determine with certainty.
Therefore, Tenant agrees to pay to Landlord upon a default under this habitual
default provision the amount of One Thousand Dollars ($1,000.00) as liquidated
damages to cure such default, payable within ten (10) days after written demand
therefor to Tenant by Landlord.
Section 13.03. Landlord's Default and Tenant's Remedies. Landlord shall be
in default if it shall fail to perform or observe any term, condition, covenant
or obligation as required under this Lease for a period of thirty (30) days
after written notice thereof from Tenant to Landlord and to Lender, if any;
provided, however, that if the term, condition, covenant or obligation to be
performed by Landlord is of such nature that the same cannot reasonably be
performed within such thirty-day period, such default shall be deemed to have
been cured if Landlord commences such performance within said thirty-day period
and thereafter diligently undertakes to complete the same. Upon the occurrence
of any such default, Tenant may sue for injunctive relief or to recover damages
for any loss resulting from the breach, but Tenant shall not be entitled to
terminate this Lease or withhold, offset or abate any rent due hereunder.
Section 13.04. Limitation of Landlord's Liability. If Landlord shall fail
to perform or observe any term, condition, covenant or obligation required to be
performed or observed by it under this Lease and if Tenant shall, as a
consequence thereof, recover a money judgment against Landlord (whether
compensatory or punitive in nature), Tenant agrees that it shall look solely to
Landlord's right, title and interest in and to the Building for the collection
of such judgment; and Tenant further agrees that no other assets of Landlord
shall be subject to levy, execution or other process for the satisfaction of
Tenant's judgment and that Landlord shall not be personally liable for any
deficiency.
The references to "Landlord" in this Lease shall be limited to mean and
include only the owner or owners, at the time, of the fee simple interest in the
Building. In the event of a sale or transfer of such interest (except a mortgage
or other transfer as security for a debt), the "Landlord" named herein, or, in
the case of a subsequent transfer, the transferor, shall, after the date of such
transfer, be automatically released from all liability for the performance or
observance of any term, condition, covenant or obligation required to be
performed or observed by Landlord hereunder; and the transferee shall be deemed
to have assumed all of such terms, conditions, covenants and obligations.
Section 13.05. Nonwaiver of Defaults. Neither party's failure or delay in
exercising any of its rights or remedies or other provisions of this Lease shall
be construed to be a waiver thereof or affect its right thereafter to exercise
or enforce each and every such right or remedy or other provision. No waiver of
any default shall be deemed to be a waiver of any other default. Landlord's
receipt of less than the full rent
-15-
<PAGE> 65
due shall not be construed to be other than a payment on account of rent then
due, nor shall any statement on Tenant's check or any letter accompanying
Tenant's check be deemed an accord and satisfaction, and Landlord may accept
such payment without prejudice to Landlord's right to recover the balance of the
rent due or to pursue any other remedies provided in this Lease. No act or
omission by Landlord or its employees or agents during the term of this Lease
shall be deemed an acceptance of a surrender of the Leased Premises, and no
agreement to accept such a surrender shall be valid unless in writing and signed
by Landlord.
Section 13.06. Attorneys' Fees. If either party defaults in
the performance or observance of any of the terms, conditions, covenants or
obligations contained in this Lease and the non-defaulting party obtains a
judgment against the defaulting party, then the defaulting party agrees to
reimburse the non-defaulting party for the attorneys' fees incurred thereby.
ARTICLE 14 - LANDLORD'S RIGHT TO RELOCATE TENANT
Landlord shall have the right, at its option, upon at least thirty (30)
days' prior written notice to Tenant, to relocate Tenant and to substitute for
the Leased Premises other space in the Building or in the Park, containing at
least as much rentable area as the Leased Premises. Such substituted space shall
be improved by Landlord, at its expense, with improvements at least equal in
quantity and quality to those in the Leased Premises. Landlord shall reimburse
Tenant for all reasonable expenses incurred with and caused by such relocation
(including telephone installation, moving of equipment and furniture, and
printing of stationery with the Tenant's new address) within sixty (60) days
following receipt from Tenant of invoices or receipts marked "paid in full." In
no event shall Landlord be liable to Tenant for any consequential damages as a
result of any such relocation, including, but not limited to, loss of business
income or opportunity. Upon completion of the relocation, Landlord and Tenant
shall amend this Lease to change the description of the Leased Premises and any
other matters pertinent thereto.
ARTICLE 15 - NOTICE AND PLACE OF PAYMENT
Section 15.01. Notices. Any notice required or permitted to be given under
this Lease or by law shall be deemed to have been given if it is written and
delivered in person or by overnight courier or mailed by certified mail, postage
prepaid, to (i) the party who is to receive such notice at the address specified
in the Basic Lease Provisions and (ii) in the case of a default notice from
Tenant to Landlord, any Lender designated by Landlord. When so mailed, the
notice shall be deemed to have been given as of the date it was mailed. Either
party may change its address by giving written notice thereof to the other
party.
Section 15.02. Place of Payment. All payments required to be made by
Tenant to Landlord shall be delivered or mailed to Landlord's management agent
at the address specified in the Basic Lease Provisions or any other address
Landlord may specify from time to time by written notice to Tenant.
-16-
<PAGE> 66
ARTICLE 16 - TENANT'S RESPONSIBILITY REGARDING ENVIRONMENTAL LAWS AND
HAZARDOUS SUBSTANCES.
Section 16.01. Definitions.
a. "Environmental Laws" - All federal, state and municipal laws,
ordinances, rules and regulations applicable to the environmental and ecological
condition of the Leased Premises, including, without limitation, the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended; the Federal Resource Conservation and Recovery Act; the Federal Toxic
Substance Control Act; the Clean Air Act; the Clean Water Act; the rules and
regulations of the Federal Environmental Protection Agency, or any other
federal, state or municipal agency or governmental board or entity having
jurisdiction over the Leased Premises.
b. "Hazardous Substances" - Includes:
(i) Those substances included within the definitions of "hazardous
substances," "hazardous materials," "toxic substances" "solid waste" or
"infectious waste" in any of the Environmental Laws; and
(ii) Such other substances, materials and wastes which are or become
regulated under applicable local, state or federal law, or which are classified
as hazardous, toxic or infectious under present or future Environmental Laws or
other federal, state, or local laws or regulations.
Section 16.02. Compliance. Tenant, at its sole cost and expense, shall
promptly comply with the Environmental Laws which shall impose any duty upon
Tenant with respect to the use, occupancy, maintenance or alteration of the
Leased Premises. Tenant shall promptly comply with any notice from any source
issued pursuant to the Environmental Laws or with any notice from any insurance
company pertaining to Tenant's use, occupancy, maintenance or alteration of the
Leased Premises, whether such notice shall be served upon Landlord or Tenant.
Section 16.03. Restrictions on Tenant. Tenant shall not cause or permit to
occur:
a. Any violation of the Environmental Laws related to environmental
conditions on, under, or about the Leased Premises, or arising from Tenant's use
or occupancy of the Leased Premises, including, but not limited to, soil and
ground water conditions.
b. The use, generation, release, manufacture, refining, production,
processing, storage or disposal of any Hazardous Substances on, under, or about
the Leased Premises, or the transportation to or from the Leased Premises of any
Hazardous Substances, except as necessary and appropriate for general office use
in which case the use, storage or disposal of such Hazardous Substances shall be
performed in compliance with the Environmental Laws and the highest standards
prevailing in the industry.
Section 16.04. Notices, Affidavits, Etc.
a. Tenant shall immediately notify Landlord of (i) any violation by
Tenant, its employees, agents, representatives,
-17-
<PAGE> 67
customers, invitees or contractors of the Environmental Laws on, under or about
the Leased Premises, or (ii) the presence or suspected presence of any Hazardous
Substances on, under or about the Leased Premises and shall immediately deliver
to Landlord any notice received by Tenant relating to (i) and (ii) above from
any source.
b. Tenant shall execute affidavits, representations and the like from time
to time, within five (5) days of Landlord's request therefor, concerning
Tenant's best knowledge and belief regarding the presence of any Hazardous
Substances on, under or about the Leased Premises.
Section 16.05. Landlord's Rights.
a. Landlord and its agent shall have the right, but not the duty, upon
advance notice (except in the case of emergency when no notice shall be
required) to inspect the Leased Premises and conduct tests thereon at any time
to determine whether or the extent to which there has been a violation of
Environmental Laws by Tenant or whether there are Hazardous Substances on, under
or about the Leased Premises. In exercising its rights herein, Landlord shall
use reasonable efforts to minimize interference with Tenant's business but such
entry shall not constitute an eviction of Tenant, in whole or in part, and
Landlord shall not be liable for any interference, loss, or damage to Tenant's
property or business caused thereby.
b. If Landlord, any lender or governmental agency shall ever require
testing to ascertain whether there has been a release of Hazardous Substances
on, under or about the Leased Premises or a violation of the Environmental Laws,
and such requirement arose in whole or in part because of an act or omission on
the part of Tenant, then the reasonable costs thereof shall be reimbursed by
Tenant to Landlord upon demand as Additional Rent.
Section 16.06. Tenant's Indemnification. Tenant shall indemnify and hold
harmless Landlord and Landlord's managing agent from any and all claims, loss,
liability, costs, expenses or damage, including attorneys' fees and costs of
remediation, incurred by Landlord in connection with any breach by Tenant of its
obligations under this Article 16. The covenants and obligations of Tenant under
this Article 16 shall survive the expiration or earlier termination of this
Lease.
ARTICLE 17 - MISCELLANEOUS
Section 17.01. Benefit of Landlord and Tenant. This Lease and all of the
terms and provisions hereof shall inure to the benefit of and be binding upon
Landlord and Tenant and their respective successors and assigns.
Section 17.02. Governing Law. This Lease shall be governed in accordance
with the laws of the State of Ohio.
Section 17.03. Guaranty. In consideration of Landlord's leasing the Leased
Premises to Tenant, Tenant shall provide Landlord with a Guaranty of Lease
executed by the guarantor(s) described in the Basic Lease Provisions.
-18-
<PAGE> 68
Section 17.04. Force Majeure. Landlord shall be excused for the period of
any delay in the performance of any obligation hereunder when such delay is
occasioned by causes beyond its control, including, but not limited to, war,
invasion or hostility; work stoppages, boycotts, slowdowns or strikes; shortages
of materials, equipment, labor or energy; man-made or natural casualties;
unusual weather conditions; acts or omissions of governmental or political
bodies; or civil disturbances or riots.
Section 17.05. Condition of Premises. Tenant acknowledges that neither
Landlord nor any agent of Landlord has made any representation or warranty with
respect to the Leased Premises or the Building or with respect to the
suitability or condition of any part thereof for the conduct of Tenant's
business except as provided in this Lease.
Section 17.06. Examination of Lease. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation of or
option for Lease, and it is not effective as a Lease or otherwise until
execution by and delivery to both Landlord and Tenant.
Section 17.07. Indemnification for Leasing Commissions. The parties hereby
represent and warrant that the only real estate brokers involved in the
negotiation and execution of this Lease are those named in the Basic Lease
Provisions and that no other broker or person is entitled to any leasing
commission or compensation as a result of the negotiation or execution of this
Lease. Each party shall indemnify and hold the other harmless from any and all
liability for the breach of this representation and warranty on its part and
shall pay any compensation to any other broker or person who may be deemed or
held to be entitled thereto.
Section 17.08. Quiet Enjoyment. If Tenant shall perform all of the
covenants and agreements herein provided to be performed by Tenant, Tenant
shall, at all times during the Lease Term, have the quiet enjoyment and peaceful
possession of the Leased Premises without hindrance from Landlord or any persons
lawfully claiming under Landlord, except as may be provided in Section 12.02
hereunder.
Section 17.09. Severability of Invalid Provisions. If any provision of
this Lease shall be held to be invalid, void or unenforceable, the remaining
provisions hereof shall not be affected or impaired, and such remaining
provisions shall remain in full force and effect.
Section 17.10. Financial Statements. [MINIMUM RENT UNDER $100,000 PER
YEAR] During the Lease Term and any extensions thereof, Tenant shall provide to
Landlord on an annual basis, within ninety (90) days following the end of
Tenant's fiscal year, a copy of Tenant's most recent financial statements
prepared as of the end of Tenant's fiscal year. Such financial statements shall
be signed by Tenant or an authorized officer or representative of Tenant who
shall attest to the truth and accuracy of the information set forth in such
statements. All financial statements provided by Tenant to Landlord hereunder
shall be prepared in conformity with generally accepted accounting principles,
consistently applied.
-19-
<PAGE> 69
-OR-
Section 17.10. Financial Statements. [MINIMUM RENT OVER $100,000 PER YEAR]
During the Lease Term and any extensions thereof, Tenant shall provide to
Landlord on an annual basis, within ninety (90) days following the end of
Tenant's fiscal year, a copy of Tenant's most recent certified and audited
financial statements prepared as of the end of Tenant's fiscal year. Such
financial statements shall be prepared in conformity with generally accepted
accounting principles, consistently applied.
Section 17.11. Tenant's Representations and Warranties. The undersigned
represents and warrants to Landlord that (i) Tenant is duly organized, validly
existing and in good standing in accordance with the laws of the state under
which it was organized; (ii) all action necessary to authorize the execution of
this Lease has been taken by Tenant; and (iii) the individual executing and
delivering this Lease on behalf of Tenant has been authorized to do so, and such
execution and delivery shall bind Tenant. Tenant, at Landlord's request, shall
provide Landlord with evidence of such authority.
Section 17.12. Representations and Indemnifications. Any representations
and indemnifications of Landlord contained in the Lease shall not be binding
upon (i) any mortgagee having a mortgage presently existing or hereafter placed
on the Building, or (ii) a successor to Landlord which has obtained or is in the
process of obtaining fee title interest to the Building as a result of a
foreclosure of any mortgage or a deed in lieu thereof.
Section 17.13. Agency Disclosure. Tenant acknowledges having reviewed the
Agency Disclosure Statement and Tenant acknowledges that said Statement is
signed and attached hereto and made a part hereof as Exhibit C. The broker
identified as representing Landlord in Item J of Section 1.01 hereof, and its
agents and employees, have represented only Landlord, and have not in any way
represented Tenant, in the marketing, negotiation and completion of this lease
transaction.
Section 17.14. Additional Provisions. Additional provisions, if any, are
attached hereto as an Addendum, the provisions of which are incorporated herein
by reference. In the event of any inconsistencies between the provisions of this
Lease and of the Addendum, the provisions of the Addendum shall control.
-20-
<PAGE> 70
IN WITNESS WHEREOF, the Parties hereto have executed this Lease the day
and year first above written.
LANDLORD:
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
WITNESSES:
- - ------------------------------- By: Duke Realty Investments, Inc.
- - ------------------------------- its General Partner
(Printed)
- - -------------------------------
- - ------------------------------- By:
(Printed) ----------------------------------
Ross C. Farro
Vice President
Cleveland Group
TENANT:
--------------------------------,
a(n)
----------------------------
WITNESSES: By:
---------------------------------------
- - -------------------------------- Printed:
- - -------------------------------- -----------------------------------
(Printed) Title:
------------------------------------
- - --------------------------------
- - --------------------------------
(Printed)
STATE OF
--------------------- )
COUNTY OF ) SS:
--------------------- )
Before me, a Notary Public in and for said County and State, personally
appeared Ross C. Farro, by me known and by me known to be the Vice
President/Cleveland Group of Duke Realty Investments, Inc., the general partner
of Duke Realty Limited Partnership, an Indiana limited partnership, who
acknowledged the execution of the above and foregoing Lease Agreement for and on
behalf of said partnership.
WITNESS my hand and Notarial Seal this _______day of _________________,
1998.
-------------------------------------------
Notary Public
-------------------------------------------
(Printed Signature)
My Commission Expires: _________________________
My County of Residence: ________________________
-21-
<PAGE> 71
STATE OF
------------ )
COUNTY OF ) SS:
----------- )
Before me, a Notary Public in and for said County and State,
personally appeared ________________, by me known and by me known to be the
________________ of ________________ a(n) ________________, who acknowledged the
execution of the above and foregoing Lease Agreement for and on behalf of said
corporation.
WITNESS my hand and Notarial Seal this _____ day of _________________,
1998.
-------------------------------------------
Notary Public
-------------------------------------------
(Printed Signature)
My Commission Expires:
---------------------------------
My County of Residence:
---------------------------------
-22-
<PAGE> 1
EXHIBIT 10.26
AGREEMENT
THIS AGREEMENT is made as of the 12th day of August, 1998 by and between
Universal Electronics Inc., a Delaware corporation, including its subsidiaries
and affiliates (collectively, "UEI") and David M. Gabrielsen ("Gabrielsen").
WHEREAS, UEI is engaged, on a worldwide basis, in the business of
designing, developing and manufacturing, selling, distributing, licensing,
and/or maintaining (a) certain electronic products that emit, via infra-red and
other methods, pulse codes which can be used to operate original equipment
manufacturer ("OEM") device(s) (such as televisions, video cassette recorders,
cable and satellite set-top boxes, home theater systems, and the like),
including, without limitation, a battery-operated, hand-held remote control (the
"Remote Control"), (b) software to operate the Remote Control which can be used
to operate OEM device(s), electronic device(s) for the "home bus" market (as
defined by the Electronics Industry Association) and integrated system digital
networks ("ISDN"), electronic device(s) for use in the receipt and/or
transmission of data and/or software over multiple media, and other derivations
of such device(s) (the "Software"), and (c) a library of the devices' pulse
codes and such updates, enhancements and new releases of such library as UEI may
from time to time develop (the "Database") ("collectively, the "Business"); and
WHEREAS, Gabrielsen and UEI are parties to that certain Salary
Continuation Agreement dated June 29, 1995, and amended effective December 1,
1996, and further interpreted on November 25, 1997, copies of which are attached
hereto (the "SCA"); and
WHEREAS, the latest UEI restructuring is considered a triggering event
under the SCA, causing the SCA to become an employment agreement; and
WHEREAS, Gabrielsen believes he has the right to resign as an employee
of UEI for "good reason" (as such term is defined within the SCA); and
WHEREAS, Gabrielsen is the Chairman of the Board and Chief Executive
Officer of UEI and is not presently encumbered with a noncompetition agreement
in favor of UEI, and UEI wishes to avoid a controversy with Gabrielsen regarding
his termination of employment with UEI by agreeing to terminate Gabrielsen's
employment without cause and pay Gabrielsen in accordance with the terms of the
SCA in exchange for which Gabrielsen will agree to not compete with UEI; and
WHEREAS, by virtue of such termination all of the options granted to
Gabrielsen to acquire shares of UEI's common stock shall become immediately
fully vested.
NOW THEREFORE, in consideration of the premises and the mutual promises
set forth below, the parties hereto, intending to be legally bound, agree as
follows:
<PAGE> 2
1. TERMINATION OF EMPLOYMENT. Effective upon the execution of this
Agreement by both parties hereto, Gabrielsen's employment with UEI shall cease
and Gabrielsen and UEI agree that such termination is without cause.
2. NON-COMPETITION AND NON-SOLICITATION BY GABRIELSEN. Gabrielsen
covenants and agrees that, for a period of five (5) years from the date hereof
(the "Non-Compete Period") he shall not, directly or indirectly, either alone or
in partnership or jointly or in conjunction with any person or persons, firm,
association, syndicate, company or corporation as principal, agent, employee,
director, shareholder or in any other manner whatsoever (i) carry on or be
engaged in the Business or any other business which is in competition with the
Business as existing on the date hereof, (ii) solicit Business from or transact
Business with any person, firm or corporation to whom UEI has done business in
the past three (3) years prior to the date of this Agreement, (iii) directly or
indirectly solicit for employment, offer employment to, hire any person (as an
employee or consultant), or otherwise engage in business any person or persons
who is or are employed by UEI on the date of this Agreement or during the
Non-Compete Period, or (iv) take any action which might divert from UEI any
opportunity which would be within the scope of the Business, except with the
prior written consent of UEI.
3. EXCEPTIONS TO NON-COMPETE; NON-SOLICITATION. Nothing within
Section 2 above shall prohibit Gabrielsen from being an owner of not more than
five percent (5%) of the issued and outstanding stock of any class of a publicly
traded corporation whose principal business is competitive with the Business so
long as Gabrielsen has no active participation in the business of such
corporation.
4. PAYMENTS DUE GABRIELSEN.
(i) Compensation Amounts. UEI shall pay Gabrielsen, within five
(5) business days after the date both parties sign this Agreement, in
one lump sum, an amount equal to $30,320.39, less all applicable and
authorized withholdings and deductions. This amount represents
Gabrielsen's accrued but unpaid compensation through his last day of
employment with UEI and which includes $18,397.31 representing 123.44
hours of accrued but unused vacation through his termination date.
(ii) Non-compete/Non-solicitation Amounts. Within five (5)
business days after this Agreement has been signed by both parties, UEI
shall pay to Gabrielsen, in one lump sum, an amount equal to $948,653,
less all applicable and authorized withholdings and deductions, which
amount represents payment in full for Gabrielsen's agreements contained
within this Agreement.
Gabrielsen acknowledges and agrees that, upon receipt of such amounts, he shall
have received all amounts due him by virtue of his employment to which he is
entitled, including without limitation, all compensation, salary, vacation pay,
bonuses, profit sharing, and life insurance
2
<PAGE> 3
gross-up, except for expense reports that he has submitted and, so long as he
remains a director of UEI, will submit from time to time in accordance with UEI
policies and procedures.
5. TERMINATION OF SCA. The parties hereto agree that the SCA is
hereby immediately terminated in its entirety and such agreement shall be of no
force and effect and neither party hereto shall claim any right or entitlement
to any amounts or other things due them thereunder.
6. STOCK OPTION AGREEMENTS. Gabrielsen represents, warrants and
agrees that this Section 6 accurately sets forth all options previously granted
to him and that there are no other options which have been granted to him, and
that he has not exercised any of the options granted him by UEI:
(i) On March 20, 1995, UEI, pursuant to one of its Stock Option
Plans and a related Stock Option Agreement between UEI and Gabrielsen
dated March 20, 1995 and the attached Stock Option Certificate of even
date therewith, a copy of which is attached hereto as Exhibit A, granted
to Gabrielsen the option to purchase up to 50,000 shares of common stock
of UEI at an exercise price of $4.31 per share. Immediately prior to the
date of this Agreement, Gabrielsen was vested in 75% of the option, none
of which have been exercised; and
(ii) On December 15, 1995, UEI, pursuant to one of its Stock
Option Plans and a related Stock Option Agreement between UEI and
Gabrielsen dated December 15, 1995 and the attached Stock Option
Certificate of even date therewith, a copy of which is attached hereto
as Exhibit B, granted to Gabrielsen the option to purchase up to 10,000
shares of common stock of UEI at an exercise price of $7.6875 per share.
Immediately prior to the date of this Agreement, Gabrielsen was vested
in 50% of the option, none of which have been exercised; and
(iii) On January 1, 1996, UEI, pursuant to one of its Stock
Option Plans and a related Stock Option Agreement between UEI and
Gabrielsen dated January 1, 1996 and the attached Stock Option
Certificate of even date therewith, a copy of which is attached hereto
as Exhibit C, granted to Gabrielsen the option to purchase up to 50,000
shares of common stock of UEI at an exercise price of $7.6875 per share.
Immediately prior to the date of this Agreement, Gabrielsen was vested
in 50% of the option, none of which have been exercised; and
(iv) On December 1, 1996, UEI, pursuant to one of its Stock
Option Plans and a related Stock Option Agreement between UEI and
Gabrielsen dated December 1, 1996 and the three (3) attached Stock
Option Certificates of even date therewith, a copy of which is attached
hereto as Exhibit D, granted to Gabrielsen the option to purchase up to
150,000 shares of common stock of UEI as follows:
3
<PAGE> 4
110,000 at an exercise price of $5.6875 per share;
20,000 at an exercise price of $7.50 per share; and
20,000 at an exercise price of $8.50 per share.
Immediately prior to the date of this Agreement, Gabrielsen was vested
in 66.6666% of each portion of the option, none of which have been
exercised.
In accordance with each of the above referenced Stock Option Agreements, by
virtue of Gabrielsen's termination of employment without cause as set forth
herein, he shall immediately be vested in 100% of each option and the parties
agree that he shall have the continuing right to exercise the above options, in
full or any portion thereof, at anytime during the thirty (30) month period
following the date of this Agreement after which time these options shall
terminate and be of no further force and effect and to the extent unexercised at
the end of business on the last day of the thirtieth (30th) month, Gabrielsen
shall have forfeited all rights to such options.
UEI and Gabrielsen further agree that from the date of this Agreement
and continuing until the end of business on January 31, 1999, Gabrielsen shall
have the continuing right to cause UEI to purchase from Gabrielsen from time to
time all or any portion (but in no event fractional shares) of the shares of UEI
common stock acquired by him as a result of his exercise of the options
described above; provided, however, that (a) the price per share to be paid by
UEI for such shares of stock shall be equal to the lesser of the fair value (as
determined in accordance with the applicable plan under which the stock option
was granted) or $18.00 and (b) UEI shall not be obligated to acquire such shares
of stock in the event that its currently existing credit facility or facilities
is or, after including funds to be used to purchase such shares, will be in
excess of $8,000,000 at the time UEI purchases any such shares and (c) the
aggregate number of shares that UEI shall be obligated to purchase from
Gabrielsen shall not exceed 125,000 shares.
8. INSURANCE. UEI will provide you (as set forth below) with up to
twenty-four (24) months (commencing on the date of this Agreement and ending at
the end of business on August 31, 2000) of continuing insurance to the extent
you had such insurance as of the date of this Agreement. You had both life and
health (including medical, dental, AD&D, and LTD) insurance.
(i) During the first eighteen (18) months following your
termination as an employee of UEI, UEI, on your behalf, will elect COBRA
which will cause your health insurance coverage to remain the same and
UEI will pay the premiums for this COBRA continuance. Gabrielsen agrees
that he will be responsible for all deductibles and co-pays as in the
past in accordance with the terms of the policy. After this initial
eighteen (18) month period, Gabrielsen may elect to convert the policy
to an individual policy, which converted individual policy would not be
substantially equivalent to the coverage previously provided you. If
converted, except as provided below, Gabrielsen shall be solely
responsible for all cost and expense, including without limitation
payment of premiums, deductibles and co-pays. If at the time of
conversion, Gabrielsen does not have
4
<PAGE> 5
other health insurance available which, in Gabrielsen's sole discretion,
is acceptable (that is, for example through a current employer or
spouse's employer or otherwise), UEI will pay Gabrielsen a one-time,
lump sum amount equal to the estimated (a) cost of such continued health
insurance (exclusive of deductibles and co-pays for which Gabrielsen has
been responsible in the past in accordance with the terms of the policy)
for six (6) months, plus (b) difference of the cost of the health
insurance as converted for eighteen (18) months over the cost of the
COBRA continued health insurance which UEI paid for the first eighteen
(18) months. Such payment shall be made at or near the time Gabrielsen
elects to convert the COBRA continued health insurance to an individual
policy. To convert, Gabrielsen must contact the UEI's Human Resources
Department in California (714-820-1000) at lease two (2) months prior
the expiration of the initial eighteen (18) month period set forth in
subsection 6(i) above. It is understood and agreed that it is
Gabrielsen's sole responsibility to contact the UEI's Human Resources
Department to effect the conversion and his failure to do so will cause
the insurance to lapse at the end of the initial eighteen (18) month
period.
(ii) For the twenty-four (24) month period following your
termination as an employee of UEI, UEI, on your behalf, will cause your
life insurance coverage to remain the same and UEI will pay the premiums
for this continuance.
8. RETURN OF UEI PROPERTY. All computers and related peripherals,
notes, reports, sketches, plans, books, credit cards, calling cards, keys,
keycards, cellular telephones and related equipment, computer passwords,
unpublished memoranda or other documents or property which were created,
developed, generated or held or controlled by Gabrielsen and which are owned by,
paid for by, concern or are related to UEI's business, whether containing or
relating to Confidential Information as defined below or not, are the property
of UEI and have been or shall be returned to UEI immediately, except that
Gabrielsen may continue using the laptop computer and cellular telephone
currently in his possession so long as he continues as a member of UEI's Board
of Directors and within ten (10) business days after Gabrielsen ceases being a
member of UEI's Board of Directors, he shall return such computer and cellular
telephone in good working order. Gabrielsen acknowledges that he has received
all of his personal property which was located at UEI's offices. In the event
that UEI or Gabrielsen shall discover any other property of the other in its or
his possession, UEI or Gabrielsen, as the case may be, shall immediately return
such property to the other.
9. CONFIDENTIAL INFORMATION.
(i) Definitions
(a) "Confidential Information" shall mean all information,
including but not limited to trade secrets, disclosed to Gabrielsen or
known by him as a consequence of or through his employment by UEI,
concerning UEI's business and services and including, but not limited
to: software; computer programs; unpatented inventions, discoveries or
5
<PAGE> 6
improvements; marketing or financial research and development of
business plans; sales forecasts; personnel information, including the
identity of other employees of UEI, their responsibilities, competence,
abilities, and compensation; pricing and financial information;
information concerning financial and contractual arrangements between
UEI and its customers or its suppliers including, without limitation,
the identity of suppliers and products supplied; market research and
attendant databases and libraries; current and prospective customer
lists and information about customers, their accounts, their product
preferences, terms or their finances; the volume of business transacted
by UEI and/or its customers; telephone numbers of customers; selling
techniques; research resources information concerning planned or pending
expansions, acquisitions or divestitures; and information concerning
leasing or purchases of major equipment or property; and which:
(1) generally has not been made available to the public; and
(2) is useful or of value to UEI's current or anticipated
business, research or development activities or those of
any customer or supplier of UEI; or
(3) has been identified to Gabrielsen as confidential by
UEI, either orally or in writing.
Confidential Information shall not include information which:
(4) is in or hereafter enters the public domain through no
fault of Gabrielsen;
(5) is obtained by Gabrielsen from a third party having the
legal right to use and disclose the same; or
(6) is in the possession of Gabrielsen prior to receipt from
UEI (as evidenced by Gabrielsen's written records
per-dating the date of his employment with UEI.)
Confidential Information also does not include Gabrielsen's
general skills and experience as defined under the governing law of this
Agreement.
(ii) Gabrielsen acknowledges and agrees that unauthorized disclosure or
use of UEI's Confidential Information may cause UEI irreparable harm.
Consequently, Gabrielsen shall maintain in confidence at all times and shall not
divulge to any unauthorized person or corporation or other entity, or use in any
manner, or knowingly allow another to use, without UEI's written consent, either
during the Non-Compete Period thereafter, UEI's Confidential Information.
Gabrielsen agrees, therefore, that UEI is entitled to protection from any
unauthorized disclosure or use, or threatened disclosure or use of any
Confidential Information, including protection by injunctive relief, in addition
to other remedies available under the law. Gabrielsen further
6
<PAGE> 7
acknowledges agrees that UEI intends to operate and compete throughout the
world, and that UEI will be harmed by unauthorized disclosure or use of its
Confidential Information within such area.
10. REMEDIES. Gabrielsen acknowledges and agrees that the covenants
and agreements which he has made in this Agreement are reasonable and are
required for the reasonable protection of UEI's investment in the Business.
Gabrielsen agrees that the material breach of any covenant or agreement
contained herein may result in irreparable injury to UEI, and that in addition
to all other remedies provided by law or in equity with respect to the breach by
Gabrielsen of any provision of this Agreement, UEI and its successors and
assigns will be entitled to enforce the specific performance by Gabrielsen of
his obligations hereunder and to enjoin him from engaging in any activity in
violation hereof, all without the need of posting bond or any other security,
and that no claim by Gabrielsen against UEI or its successors or assigns will
constitute a defense or bar to the specific enforcement of such obligations. In
the event of a breach or a violation by Gabrielsen of any of the provisions of
this Agreement, the running of the Non-Compete Period shall be tolled during the
period of the continuance of any actual breach or violation.
11. PARTIAL INVALIDITY. The various covenants and provisions of this
Agreement are intended to be severable and to constitute independent and
distinct binding obligations each of the parties hereto. Should any covenant or
provision of this Agreement be determined to be void and unenforceable, in whole
or in part, it shall not be deemed to affect or impair the validity of any other
covenant or provision or part thereof, and such covenant or provision or part
thereof shall be deemed modified to the extent required to permit enforcement.
Without limiting the generality of the foregoing, if the scope of any covenant
contained in this Agreement is too broad to permit enforcement to its full
extent, such covenant shall be enforced to the maximum extent permitted by law,
and the parties hereto hereby agree that such scope may be judicially modified
accordingly.
12. ASSIGNMENT. Gabrielsen agrees that this Agreement may be
assigned by UEI to any entity controlled by, or under direct or indirect common
control with, UEI and to any person to whom UEI sells its business or assets,
and that upon any such assignment, such assignee shall acquire all of UEI's
rights under this Agreement, including without limitation the right of
assignment set out in this Section 12. Gabrielsen acknowledges that his
obligations hereunder are personal in nature and therefore incapable of being
performed by another; consequently, Gabrielsen agrees that he may not assign or
delegate all or any part of this Agreement and any attempt on his part to so
assign or delegate shall be void and with effect whatsoever.
13. NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
party hereto.
14. NOTICE. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have been duly
given to any party (i) upon delivery to the address of such party specified
below if delivered in person or by courier, or if sent
7
<PAGE> 8
by certified or registered mail (return receipt requested), postage prepaid,
(ii) upon dispatch if transmitted by telecopy or other means of facsimile, in
any case to the parties at the following address(es) or telecopy number(s), as
the case may be:
If to UEI:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attn: President
Facsimile No.: (714) 820-1010
With required copies to:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attn: General Counsel
Facsimile No.: (714) 820-1010
If to Gabrielsen:
Mr. David M. Gabrielsen
8155 Belle Vernon Drive
Novelty, Ohio 44072
Facsimile No.: (440) 338-4038
or to such address(es) or telecopy number(s) as any party may designate by
written notice in the aforesaid manner.
15. WAIVER OF BREACH. The waiver by any party hereto of a breach of
any provision of this Agreement by any other party shall not operate or be
construed as a waiver of any subsequent breach.
16. ENTIRE UNDERSTANDING. This Agreement and the agreements referred
to herein constitute the entire understanding and shall not be changed, altered,
modified or discharged, except in writing consented to by all parties.
17. BINDING EFFECT. This Agreement shall be binding upon the
administrators, legal representatives, heirs and legatees and the successors and
permitted assigns of Gabrielsen and UEI.
8
<PAGE> 9
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Ohio.
19. COUNTERPARTS. This Agreement shall be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one in the same agreement.
20. INQUIRIES AND REFERENCES. The parties hereto agree that should
inquiry be made as to the circumstances and reasons surrounding Gabrielsen's
departure from the employ of UEI, the parties shall respond by saying that Mr.
Gabrielsen's employment was terminated by UEI without cause upon the mutual
understanding of the parties and providing the inquiring party with the dates of
his employment and positions held and, except as may be required by law, nothing
further shall be stated, including discussing Gabrielsen's employment at UEI in
a demonstrably disparaging manner. Within five (5) days after this agreement has
been signed by both parties, the parties will prepare a press release regarding
this matter, which UEI will cause to be disseminated.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
UNIVERSAL ELECTRONICS INC.
By: /s/ CAMILLE JAYNE
--------------------------------------
Camille Jayne, President
I HEREBY ACKNOWLEDGE THAT I HAVE READ IN ITS ENTIRETY AND UNDERSTAND THE
FOREGOING AGREEMENT, INCLUDING BUT NOT LIMITED TO THE PROVISIONS WITH RESPECT TO
CONFIDENTIAL INFORMATION, NON-COMPETITION, INVENTIONS, AND REMEDIES AND THAT I
HAVE RECEIVED A FULLY SIGNED COPY OF THIS AGREEMENT FOR MY RECORDS.
By: /s/ DAVID M. GABRIELSEN
--------------------------------------
David M. Gabrielsen
9
<PAGE> 1
EXHIBIT 10.27
STOCK ACQUISITION REPRESENTATIONS AND COVENANTS
CERTIFICATE
Each of the undersigned, ________________________, President of H & S Management
Corp. (the "Corporation"), J. C. Sparkman and Steven Helbig, hereby certifies
that it and/or he acknowledges and agrees that:
1. They are parties to that certain Asset Purchase Agreement dated ,
1998 by and among the Corporation, J. C. Sparkman, Steven Helbig and Universal
Electronics Inc. ("UEI") (the "Agreement").
2. A portion of the consideration to be received in connection with the
sale by the Corporation of certain of its assets is shares of UEI's common
stock, par value $.01 (the "UEI Stock"), which UEI shall cause to be issued and
a new stock certificate (or certificates) shall be delivered to Buyer evidencing
the new ownership of the UEI Stock.
3. The UEI Stock being acquired hereunder have not been and will not be
registered under the Securities Act of 1933, as amended, or the securities laws
of any state or other jurisdiction (together "Securities Laws"); that the UEI
Stock is being sold in reliance on exemptions from the registration requirements
thereof; and that the UEI's reliance upon such exemptions is predicated in part
on the representations and covenants contained in this Certificate.
4. The UEI Stock is being acquired for the Corporation's own account and
not on behalf of any other person or persons and not with a view to, or for sale
in connection with, any public distribution thereof.
5. The certificate(s) or other documents evidencing the UEI Stock
(including those issued at any time in exchange or substitution thereof) will be
subject to stop transfer instructions and will bear a legend substantially in
the following form:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or under the securities laws of any
state or other jurisdiction (together, the "Securities Laws") and may
not be offered for sale, sold or otherwise transferred or encumbered in
the absence of compliance with such Securities Laws and until the issuer
thereof shall have received from counsel acceptable to it a written
opinion reasonably satisfactory to it that the proposed disposition will
not violate any applicable Securities Laws."
6. Prior to the closing of the transactions contemplated within the
Agreement, each of the undersigned and their respective duly authorized agents
and representatives have been afforded the opportunity to ask questions and
receive answers concerning the ownership of an interest in UEI
<PAGE> 2
and to obtain any additional information necessary to verify the accuracy of the
information relating to the UEI Stock, UEI, or otherwise provided with respect
thereto.
7. Buyer understands and acknowledges that this transaction contains a
high degree of risk, and agrees to accept such risk.
IN WITNESS WHEREOF, each of the undersigned have executed this
Certificate as of the _____________ day of _________, 1998.
H & S Management Corp.
-----------------------------------------
Its:
-------------------------------------
-----------------------------------------
J. C. Sparkman
-----------------------------------------
Steven Helbig
2
<PAGE> 1
EXHIBIT 10.28
NON-COMPETE AGREEMENT
This NON-COMPETE AGREEMENT made this 1st day of September, 1998 by and
among H & S Management Corp., a Colorado corporation ("H&S"), J. C. Sparkman, a
Colorado resident ("Sparkman"), and Steven Helbig, a Colorado resident
("Helbig") (individually, each of H&S, Sparkman and Helbig is referred to herein
as a "Covenantee", and collectively, the "Covenantees"), and Universal
Electronics Inc., a Delaware corporation ("UEI").
W I T N E S S E T H:
WHEREAS, Covenantees and UEI have entered into a certain Asset Purchase
Agreement dated September 1, 1998 ("Purchase Agreement") (unless otherwise
defined herein, capitalized terms shall be used herein as defined in the
Purchase Agreement) pursuant to which UEI will purchase from H&S the H&S Remote
Control Business and the H&S Remote Control Assets; and
WHEREAS, pursuant to the terms of the Purchase Agreement, UEI has agreed
to pay Covenantees a total of $______________________ for this Non-Compete
Agreement, with such payment allocated among the Covenantees as set forth on the
allocation schedule attached to the Purchase Agreement; and
WHEREAS, it is a condition to the Closing under the Purchase Agreement
that this Non-Compete Agreement be entered into by each of the Covenantees and
by UEI;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. NON-COMPETE; NON-SOLICITATION. In consideration of the consideration
paid to each of the Covenantees for this Agreement as described above and in the
Purchase Agreement, each Covenantee covenants and agrees that, for a period of
seven (7) years from the date hereof (the "Non-Compete Period") Covenantee shall
not, directly or indirectly, either alone or in partnership or jointly or in
conjunction with any person or persons, firm, association, syndicate, company or
corporation as principal, agent, employee, director, shareholder or in any other
manner whatsoever (i) carry on or be engaged in the H&S Remote Control Business
or any other business which is in competition with the H&S Remote Control
Business as existing on the date hereof, (ii) solicit business from or transact
business with any person, firm or corporation to whom UEI or any Covenantee has
sold products where such solicitation would involve the sale of products
competitive with those of the H&S Remote Control Business, or (iii) directly or
indirectly solicit for employment, offer employment to, or hire any person (as
an employee or consultant), or other engage in business any person or persons
who is or are employed by UEI immediately after the consummation of the
transactions contemplated by the Purchase Agreement or during the Non-Compete
Period, except with the prior written consent of UEI.
<PAGE> 2
1.1 EXCEPTIONS TO NON-COMPETE; NON-SOLICITATION. Nothing within Section
1, above shall prohibit any Covenantee from (i) carrying on or being engaged in
any type of business, which is not competitive with the H&S Remote Control
Business in any area whatsoever, or (ii) being an owner of not more than 5% of
the outstanding stock of any class of a corporation which is publicly traded
whose principal business is competitive with the H&S Remote Control Business, so
long as Covenantee has no active participation in the business of such
corporation.
2. REMEDIES. Each Covenantee acknowledges that the covenants and
agreements which it has made in this Agreement are reasonable and are required
for the reasonable protection of UEI's investment in the H&S Remote Control
Assets and the H&S Remote Control Business. Each Covenantee agrees that the
breach of any covenant or agreement contained herein will result in irreparable
injury to UEI, and that in addition to all other remedies provided by law or in
equity with respect to the breach by Covenantee of any provision of this
Agreement, UEI and its successors and assigns will be entitled to enforce the
specific performance by Covenantee of Covenantee's obligations hereunder and to
enjoin Covenantee from engaging in any activity in violation hereof, all without
the need of posting bond or any other security, and that no claim by Covenantee
against UEI or its successors or assigns will constitute a defense or bar to the
specific enforcement of such obligations. Each Covenantee agrees that UEI and
any successor or assign shall be entitled to recover all costs of successfully
enforcing any provision of this Agreement, including reasonable attorneys' fees
and costs of litigation (including incurred in connection with any
administrative, alternative dispute resolution or appellate proceeding) and any
interest. In the event of a breach or a violation by any Covenantee of any of
the provisions of this Agreement, the running of the Non-Compete Period, shall
be tolled during the period of the continuance of any actual breach or
violation.
3. PARTIAL INVALIDITY. The various covenants and provisions of this
Agreement are intended to be severable and to constitute independent and
distinct binding obligations and of each of the Covenantees. Should any covenant
or provision of this Agreement be determined to be void and unenforceable, in
whole or in part, it shall not be deemed to affect or impair the validity of any
other covenant or provision or part thereof, and such covenant or provision or
part thereof shall be deemed modified to the extent required to permit
enforcement. Without limiting the generality of the foregoing, if the scope of
any covenant contained in this Agreement is too broad to permit enforcement to
its full extent, such covenant shall be enforced to the maximum extent permitted
by law, and the Covenantees hereby agree that such scope may be judicially
modified accordingly.
4. ASSIGNMENT. Each Covenantee agrees that this Agreement may be
assigned by UEI to any entity controlled by, or under direct or indirect common
control with, UEI and to any person to whom UEI sells its business or assets,
and that upon any such assignment, such assignee shall acquire all of UEI's
rights under this Agreement, including without limitation the right of
assignment set out in this Section 4.
5. NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict
<PAGE> 3
construction will be applied against any party hereto.
6. NOTICE. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been duly given
to any party (i) upon delivery to the address of such party specified below if
delivered in person or by courier, or if sent by certified or registered mail
(return receipt requested), postage prepaid, (ii) upon dispatch if transmitted
by telecopy or other means of facsimile, in any case to the parties at the
following address(es) or telecopy number(s), as the case may be:
If to any Covenantees:
Mr. J. C. Sparkman
2530 South Dudley Street
Lakewood, Colorado 80227
Facsimile No.: (303) 984-1427
Telephone No.: (303) 980-5497
If to UEI:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attn.: President
Facsimile No.: (714) 820-1010
Telephone No.: (714) 820-1000
With required copies to:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attn.: General Counsel
Facsimile No.: (714) 820-1010
Telephone No.: (714) 820-1000
or to such address(es) or telecopy number(s) as any party may designate by
written notice in the aforesaid manner.
7. WAIVER OF BREACH. The waiver by any party hereto of a breach of any
provision of this Agreement by any other party shall not operate or be construed
as a waiver of any subsequent breach.
8. ENTIRE UNDERSTANDING. This Agreement and the agreements referred to
herein
<PAGE> 4
constitute the entire understanding and shall not be changed, altered, modified
or discharged, except in writing consented to by all parties.
9. BINDING EFFECT. This Agreement shall be binding upon the
administrators, legal representatives, heirs and legatees and the successors and
assigns of each Covenantee and UEI.
10. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of California, without regard to its
conflicts of laws provisions.
11. COUNTERPARTS. This Agreement shall be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one in the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
COVENANTEES: UEI:
H & S MANAGEMENT CORP. UNIVERSAL ELECTRONICS INC.
By: By:
------------------------------- --------------------------------------
Its: Camille Jayne, President & CEO
-------------------------------
- - ----------------------------------
J. C. SPARKMAN
- - ----------------------------------
STEVEN HELBIG
<PAGE> 1
EXHIBIT 10.29
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement"), made and entered into this
__ day of ____________, 1998 by and between Universal Electronics Inc., a
Delaware corporation ("UEI") and J. C. Sparkman, a Colorado resident residing at
2530 South Dudley Street, Lakewood, Colorado 80227 (ASparkman@).
WHEREAS, UEI is engaged in the business of developing and manufacturing
and/or maintaining (a) certain electronic products that emit, via infra-red and
other methods, pulse codes which can be used to operate original equipment
manufacturer ("OEM") device(s) (such as televisions, video cassette recorders,
cable and satellite set-top boxes, home theater systems, and the like),
including, without limitation, a battery-operated, hand-held remote control (the
"Remote Control"), (b) software to operate the Remote Control which can be used
to operate OEM device(s), electronic device(s) for the "home bus" market (as
defined by the Electronics Industry Association) and integrated system digital
networks ("ISDN"), electronic device(s) for use in the receipt and/or
transmission of data and/or software over multiple media, and other derivations
of such device(s) (the "Software"), and (c) a library of the devices' pulse
codes and such updates, enhancements and new releases of such library as UEI may
from time to time develop (the "Database"); and
WHEREAS, the parties hereto (along with others) have entered into an
Asset Purchase Agreement of even date herewith and all other documents and
instruments executed in connection therewith (the "Asset Purchase Documents")
wherein UEI acquired the H&S Remote Control Assets which were used and useful in
the operation of the H&S Remote Control Business (as such terms are defined
within the Asset Purchase Documents); and
WHEREAS, Sparkman has expertise in and has intimate knowledge of the H&S
Remote Control Business and the H&S Remote Control Assets which have been
acquired by UEI and has knowledge of the general requirements of UEI's business;
and
WHEREAS, Sparkman and UEI each agree to retain Sparkman as a consultant
to UEI upon the terms and conditions set forth herein;
THEREFORE, the parties intending to be legally bound, agree as follows:
1. CONSULTING SERVICES. Commencing on the first business day following
the closing of the acquisition of the H&S Remote Control Assets by UEI pursuant
to the Asset Purchase Documents, and for a period of two (2) years thereafter,
unless sooner terminated in accordance with the terms hereof (the "Consulting
Period"), Sparkman agrees to provide his services as UEI shall deem reasonably
necessary, to advise and consult with UEI in areas relating to the UEI business.
Such services shall also include being available for advice and counsel to UEI
from time to time by telephone, letter or in person. Each of the services listed
above or elsewhere in this Agreement shall be provided by Sparkman to the
satisfaction of UEI, subject to the following conditions:
<PAGE> 2
(a) Sparkman shall not be required to participate actively in
the day to day operations of UEI;
(b) It is expressly understood that in furnishing such services,
Sparkman is not, nor shall he be considered an employee of UEI but shall
act solely as an independent contractor. Accordingly, UEI will not
supervise or control the manner in which he performs such consulting and
advisory services, however, Sparkman shall keep the UEI Designated
Contact (as set forth in Paragraph 12) fully apprised of the status of
any and all projects which he is working on and/or commissioned to
perform;
(c) Sparkman shall be fully responsible and liable for all of
his acts and omissions;
(d) Sparkman shall not make any representation that he is an
agent or representative of UEI or is otherwise authorized to act for or
on behalf of UEI and agrees not to create any obligation or to assume
any responsibility for UEI or attempt to bind UEI in any manner
whatsoever; and
(e) Sparkman shall be responsible for all taxes, fees, and
licenses incurred in connection with rendering consulting services
hereunder and that he shall indemnify, defend, and hold UEI harmless
with respect to any taxes, penalties or interest claimed by any taxing
authority for failure to withhold any income taxes from the payments to
Sparkman provided for under this Agreement.
2. COMPENSATION. As full compensation for the consulting services to be
rendered by Sparkman and for the performance of all other obligations hereunder,
UEI shall pay to Sparkman a per annum fee equal to $250,000 for work performed
for UEI pursuant to this Agreement. UEI shall pay Sparkman for such services
within equal monthly installments on the first day of each calendar month.
3. REIMBURSEMENT FOR BUSINESS EXPENSES. Sparkman and UEI agree Sparkman
shall be reimbursed for all reasonable and fully documented travel, office,
entertainment, and other costs actually incurred in connection with carrying out
his consulting services hereunder.
4. ADDITIONAL INDEMNIFICATION. Sparkman agrees to indemnify, defend and
hold UEI harmless from and against all damages, losses, claims, liabilities,
costs and expenses, including without limitation all legal fees, costs and
expenses, resulting from, caused by or arising out of any claim made by a
shareholder, employee, or director of H & S Management Corp., or any
representative or successor of any such person, that all or any part of the
compensation paid or to be paid to Sparkman pursuant to this Agreement is due
such shareholder, employee or director.
2
<PAGE> 3
5. CONFIDENTIAL INFORMATION. Sparkman agrees to keep forever secret
confidential and inviolate and never disclose directly or indirectly without the
express written consent of UEI, either during or subsequent to the termination
of this Agreement, to any person, firm or corporation and to not use, directly
or indirectly in any manner whatsoever other than to carry out his duties and
obligations hereunder, any secret or confidential information regarding UEI's
business, products, product plans, software, device library or technology. The
provisions of this Section 5 shall survive the termination of this Agreement for
any reason whatsoever. Sparkman recognizes that UEI's organization, business and
relationship with clients, perspective clients and others having business
dealings with UEI are and will be the sole property of UEI, and he shall have no
separate interests or rights with respect thereto. In addition, Sparkman
understands that all technologies, processes and research which was or is
developed by UEI, Sparkman or an employee of UEI is the sole property of UEI.
Therefore, subject to Paragraph 5(d) below, Sparkman agrees, with respect to all
Inventions (as such term is defined below) made or conceived by Sparkman,
whether or not during the hours of its services conducted hereunder or with the
use of UEI facilities, materials or personnel, either solely or jointly with
others, during the term of this Agreement, and without royalty or any other
consideration, to do the following:
(a) Communicate to UEI promptly and fully all Inventions,
improvements or suggestions (including, without limitation, suggestions
concerning trade names, trademarks, service marks and slogans) made or
conceived by Sparkman (whether made or conceived solely by him or
jointly with others) from the time of entering this Agreement until
Agreement is terminated, (i) which are along the lines of the business,
work or investigations of UEI or of any companies which it owns or
controls at the time such Inventions are created, or (ii) which result
from or are suggested by any work which Sparkman has done or made for or
on behalf of UEI, or (iii) which are developed, tested, improved or
investigated either in part or entirely on time for which Sparkman was
paid by UEI or using any funds, equipment, laboratories or other
facilities of UEI.
(b) Make, without charge to UEI, but at the request and expense
of UEI, at any time such applications for United States and/or foreign
patents or copyright registrations covering such Inventions as UEI may
request, and assign to UEI, or its nominee, without further compensation
to Sparkman, his entire right, title, and interest to all such
Inventions, applications, patents, and/or copyright registrations
granted thereon. Sparkman will, without charge to UEI, at the request
and expense of UEI, execute, acknowledge, and deliver any and all
papers, including patent applications, and copyright applications,
assignments, and applications for reissue, and do all other lawful acts,
including the giving of testimony in proceedings in which such
Inventions may be involved or concerned, which UEI may consider
necessary or proper to secure to UEI the fullest-right to such
Inventions and to patents and to copyright registrations in the United
States and/or foreign countries covering the same, and to bring about
the full protection of the same. Sparkman agrees to perform the
above-specified acts whether or not this Agreement is in force at the
time UEI requests his performance.
3
<PAGE> 4
In the event UEI is unable for any reason whatsoever to secure
his signature to any lawful and necessary documents required to apply
for, or to prosecute, any United States or foreign applications for a
patent or copyright registration, Sparkman hereby irrevocably designates
and appoints UEI and its duly authorized officers and agents as its
agent and attorney in fact, to act for and, in its behalf and stead, to
execute and file any such application and to do all other
lawfully-permitted acts to further the prosecution and issuance of a
patent or copyright registration based thereon. Sparkman hereby waives
and quitclaims to UEI any and all claims, of any nature whatsoever,
which he may now have or may hereafter have for infringement of any
patent(s) or copyright registration(s) from any such application.
(c) "Invention" means any invention, discovery or improvement
(including, without limitation, any technology, test, concept, idea,
operation, product, process, method, formula, computer program or
flowchart or software or firmware, data bases, technique or improvement
thereof), whether or not related to a service or product of UEI being
sold, under development or consideration and whether or not patentable
or copyrightable, and all know-how related thereto.
(d) The foregoing notwithstanding, this Section 5 shall not
apply to any Inventions of Sparkman for which no equipment, supplies,
facility, or trade secret information of UEI was used and which was
developed entirely on his own time, unless (i) the Invention relates (1)
to the business of UEI or (2) to UEI's actual or demonstrably
anticipated research or development, or (ii) the Invention results from
any work performed by Sparkman for UEI.
(e) This Section 5 shall survive the termination of this
Agreement for any reason whatsoever.
6. TERMINATION.
(a) This Agreement shall commence on the date hereof and shall
terminate automatically at the end of the Consulting Period.
(b) Notwithstanding the provisions of Section 6(a) above, UEI
shall have the right to terminate this Agreement immediately by
delivering to the Sparkman written notice of such termination in the
event (i) of any attempted transfer or assignment by Sparkman of (1) the
entire Agreement (whether by operation of law or otherwise), (2) any
right or obligation of Sparkman hereunder without the prior written
consent of UEI, (ii) of the conviction of Sparkman of any crime which
may, in UEI's sole discretion, adversely affect the ownership,
operation, management, business or interests of Sparkman or UEI, (iii)
Sparkman shall file for or otherwise become bankrupt or (iv) Sparkman
violates any provision of this Agreement or of the Asset Purchase
Documents.
4
<PAGE> 5
(c) Notwithstanding any other provision of this Agreement,
either party may terminate this Agreement for any reason whatsoever upon
ninety (90) days written notice to the other party.
(d) Upon termination of this Agreement, Sparkman shall return to
UEI promptly and without charge all materials provided to the him by
UEI.
7. REMEDIES. Sparkman acknowledges that the covenants and agreements
which he has made in this Agreement are reasonable and are required for the
reasonable protection of UEI's investment in its business and its goodwill.
Sparkman agrees that the breach of any covenant or agreement contained herein
will result in irreparable injury to UEI, and that in addition to all other
remedies provided by law or in equity with respect to the breach by him of any
provision of this Agreement, UEI and its subsidiaries, successors and assigns
will be entitled to (i) withhold any payments or portion thereof due Sparkman
hereunder while he is in breach of any such covenant or agreement, and (ii)
enforce the specific performance by Sparkman of his obligations hereunder and to
enjoin him from engaging in any activity in violation hereof, all without the
need of posting bond or any other security, and that no claim by him against UEI
or its subsidiaries, successors or assigns will constitute a defense or bar to
the specific enforcement of such obligations. Sparkman agrees that UEI any
subsidiary, successor or assign shall be entitled to recover all costs of
successfully enforcing any provision of this Agreement, including reasonable
attorneys' fees and costs of litigation and any interest. Sparkman further
agrees that the withholding of any payments or portion thereof due it by UEI
pursuant to this Section 7 shall in no way to construed as a limitation to the
amount of damages sustained by UEI or to which UEI may be entitled or as
liquidated damages.
8. PARTIAL INVALIDITY. The various covenants and provisions of this
Agreement are intended to be severable and to constitute independent and
distinct binding obligations of the parties hereto. Should any covenant or
provision of this Agreement be determined to be void and unenforceable, in whole
or in part, to any party hereto or in any circumstance, it shall not be deemed
to affect or impair the validity of any other covenant or provision or part
thereof, and shall continue in effect to the extent valid, enforceable and
applicable in other circumstances and to the other party, and such covenant or
provision or part thereof shall be deemed modified to the minimum extent
required to permit it to remain valid, enforceable and applicable to such party
or circumstance. Without limiting the generality of the foregoing, if the scope
of any covenant, provision or part thereof contained in this Agreement is too
broad to permit enforcement to its full extent, such covenant provision or part
thereof shall be enforced to the maximum extent permitted by law, and the
parties hereto hereby agrees that such scope may be judicially modified
accordingly.
9. ASSIGNMENT. Sparkman agrees that this Agreement may be assigned by
UEI in its entirety to any entity controlled by, or under direct or indirect
common control with, UEI and to any person to whom UEI sells its business or
assets, and that upon any such assignment, such assignee shall acquire all of
UEI's rights and obligations under this Agreement, including without limitation
the right of assignment set out in this Section 9. The rights and obligations of
Sparkman hereunder, being personal in nature, may not be assigned or delegated
without the prior written consent of UEI.
5
<PAGE> 6
10. NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.
11. THIS AGREEMENT NOT TO CONSTITUTE A PARTNERSHIP. None of the
provisions of this Agreement shall be deemed to constitute a partnership or
joint venture between each of Sparkman and UEI and neither Sparkman nor UEI
shall have any authority to bind the other in any way.
12. NOTICE. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been duly
given to any party (a) upon delivery to the address of such party specified
below if delivered in person or by courier, or if sent by certified or
registered mail (return receipt requested), postage prepaid; (b) upon dispatch
if transmitted by telecopy or other means of facsimile, in any case to the
parties at the following address(es) or telecopy number(s), as the case may be:
If to Sparkman:
Mr. J. C. Sparkman
2530 South Dudley Street
Lakewood, Colorado 80227
Facsimile No.: (303) 984-1427
Telephone No.: (303) 980-5497
If to UEI:
Ms. Camille Jayne
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Facsimile No.: (714) 820-1010
Telephone No.: (714) 820-1000
With a required copy to be sent to:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attn.: General Counsel
Facsimile No.: (714) 820-1010
Telephone No.: (714) 820-1000
or to such address(es) or telecopy number(s) as any party may designate by
written notice in the aforesaid manner.
UEI=s Designated Contact:
--------------------------------
6
<PAGE> 7
or such other person as UEI may designate by written notice in the aforesaid
manner.
13. WAIVER OF BREACH. The waiver by any party hereto of a breach of any
provision of this Agreement by any other party shall not operate or be construed
as a waiver of any subsequent breach.
14. ENTIRE UNDERSTANDING. This Agreement and the agreements referred to
herein constitute the entire understanding and shall not be changed, altered,
modified or discharged, except in writing consented to by all parties.
15. BINDING EFFECT. This Agreement shall be binding upon the
administrators, legal representatives, and successors and permitted assigns of
Sparkman and UEI.
16. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of California without regard of its
conflicts of laws provisions.
17. COUNTERPARTS. This Agreement shall be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one in the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
J. C. SPARKMAN UNIVERSAL ELECTRONICS INC.
By:
- - ---------------------------------- --------------------------------------
Camille Jayne, President and Chief
Executive Officer
7
<PAGE> 1
EXHIBIT 10.30
EXECUTIVE OFFICER
EMPLOYMENT AGREEMENT
THIS EXECUTIVE OFFICER EMPLOYMENT AGREEMENT (the "Agreement") is made
and entered into this 29th day of September 1998 by and between UNIVERSAL
ELECTRONICS INC. (the "Employer") and PAUL D. ARLING ("Executive").
RECITALS:
WHEREAS, the Employer is presently headquartered in Cypress, California,
and is engaged in the business of developing and marketing easy to use,
pre-programmed universal remote control products primarily for home video and
audio entertainment equipment and home security and home automation devices; and
WHEREAS, Employer wishes to retain Executive as one of its key
executives and avail itself of Executive's expertise, experience and capability
in Employer's business, and in this connection has offered employment to
Executive as its President and Chief Operating Officer to perform those duties
and assume those responsibilities as set forth in this Agreement and as
identified and outlined in Employer's Amended and Restated By-Laws, and to
undertake such other duties and to assume such other responsibilities
commensurate with Executive's designated position(s) as may be reasonably
assigned to Executive from time to time by the Chief Executive Officer and/or
the Board of Directors of Employer; and
WHEREAS, Executive desires to be employed by the Employer subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
1. EMPLOYMENT
Subject to all of the terms and conditions of this Agreement, effective
on October 1, 1998 (the "Effective Date of this Agreement"), Employer hereby
employs Executive and Executive hereby accepts employment with Employer.
2. TITLE, AUTHORITY AND DUTIES
(a) TITLE(S) AND POSITION(S). On the Effective Date of this
Agreement, Executive shall be employed in the position(s) of and shall
have the title(s) of President and Chief Operating Officer of Employer.
Until this
1
<PAGE> 2
Agreement is terminated as provided herein, Executive will continue to
occupy such position(s) and hold such title(s) until Employer and
Executive shall mutually agree in writing to change any such position(s)
and title(s).
(b) AUTHORITY AND DUTIES. Executive will, during the term of
this Agreement, perform those duties and assume those responsibilities
as set forth in this Agreement and as identified and outlined in
Employer's Amended and Restated By-Laws, as amended as of the date of
this Agreement, and to undertake such other duties and to assume such
other responsibilities commensurate with Executive's designated
position(s) as may be reasonably assigned to Executive from time to time
by the Chief Executive Officer of Employer and/or the Board of Directors
of Employer.
(c) EXCLUSIVE SERVICES AND EFFORTS OF EXECUTIVE. During the term
of this Agreement, Executive shall serve the Employer, under the
direction of the Board of Directors of Employer, and shall faithfully,
diligently, competently and, to the best of his ability, exclusively
devote his full time, energy and attention (unless otherwise agreed to
by the parties) to the business of the Employer and to the promotion of
its interest. Executive recognizes that Employer's organization,
business and relationship with clients, prospective clients and others
having business dealings with Employer are and will be the sole property
of Employer and Executive shall have no separate interests or rights
with respect thereto, except as an employee of Employer.
(d) OTHER ACTIVITIES AND INTERESTS. Employer shall be entitled
to all of the benefits, emoluments, profits, discoveries or other issues
arising from, incident to and related to any and all work, services and
advice of Executive to Employer in carrying out his duties and
responsibilities hereunder. Executive shall not, without the written
consent of Employer, directly or indirectly, render services to or for
any person, firm, corporation or other entity or organization, whether
or not in exchange for compensation, regardless of the form in which
such compensation, if any, is paid and whether or not it is paid
directly or indirectly to him if the rendering of such service would
interfere with the performance of his duties and responsibilities to
Employer hereunder. Notwithstanding the foregoing sentence, Executive
may spend time and attention to personal investment and community
activity matters and such other personal matters consistent with
Employer's policies and procedures set forth within Employer's policy
manual in effect from time to time which are equally applicable to all
of Employer's executive employees, so long as the spending of such time
and attention does not substantially interfere with the performance of
his duties and responsibilities to Employer hereunder.
3. TERM OF EMPLOYMENT AND TERMINATION
(a) TERM. Unless earlier terminated as provided herein, the term
of this Agreement shall commence at the start of business on the
Effective Date of this Agreement
2
<PAGE> 3
and shall continue through the end of business on September 30, 2000
(the "Initial Term"). Unless terminated by either party by giving the
other party written notice of an intent not to renew this Agreement at
least one hundred twenty (120) days prior to the end of the Initial Term
or any successive one (1) year term, this Agreement shall automatically
extend for one (1) additional year after the Initial Term and then again
for a one (1) year term after each successive year.
(b) TERMINATION.
(i) BY EMPLOYER FOR JUST CAUSE. Employer may terminate
the employment of Executive under this Agreement for Just Cause
(as defined herein) at any time upon delivery of written notice
to him setting forth, in reasonable specificity, such Just
Cause. For purposes of this Agreement, and particularly this
subsection 3(b)(i), "Just Cause" shall mean:
(1) The continued failure by or refusal of Executive to
substantially perform his duties and responsibilities as set
forth herein; or
(2) Executive's indictment for, conviction of or
a guilty plea to a felony or of any crime involving
moral turpitude, whether or not affecting the Employer;
or
(3) The engagement by Executive of personal
illegal conduct which, in the reasonable judgment of
Employer, by association with him, is materially and
demonstrably injurious to the property and/or business
of Employer; or
(4) Any material breach by Executive of the
terms and conditions contained herein, including without
limitation, those certain confidentiality provisions set
forth in Section 16; or
(5) The commission of any act opposed to the
best interests of Employer for which Executive would not
be entitled to indemnification under Employer's Restated
Certificate of Incorporation and Amended and Restated
By-Laws, each as amended as of the date of this
Agreement; or
(6) The failure by Executive to protect the best
interests of Employer through Executive's gross neglect
of duty.
(ii) BY EXECUTIVE FOR GOOD REASON. Executive may
terminate his employment with Employer under this Agreement for
Good Reason (as defined herein) at any time upon delivery of
written notice to Employer setting forth, in
3
<PAGE> 4
reasonable specificity, such Good Reason(s). For purposes of
this Agreement, and particularly this subsection 3(b)(ii), "Good
Reason" shall mean:
(1) The attempted discontinuance or reduction in
Executive's "Base Cash Salary" (as defined herein);
(2) The attempted discontinuance or reduction in
Executive's bonuses and/or incentive compensation award
opportunities under plans or programs applicable to him,
unless such discontinuance or reduction is a result of
Employer's policy applied equally to all executive
employees of Employer; or
(3) The attempted discontinuance or reduction in
Executive's stock option and/or stock award
opportunities under plans or programs applicable to him,
unless such discontinuance or reduction is a result of
Employer's policy applied equally to all executive
employees of Employer; or
(4) The attempted discontinuance or reduction in
Executive's perquisites from those historically provided
him during his tenure with the Employer and generally
applicable to executive employees of Employer; or
(5) The relocation of Executive to an office
(other than Employer's headquarters) located more than
fifty (50) miles from his then current office location;
or
(6) The significant reduction in Executive's
responsibilities and status within the Employer or
change in his title(s) or position(s); or
(7) The attempted discontinuance of Executive's
participation in any benefit plans maintained by
Employer unless such plans are discontinued by reason of
law or loss of tax deductibility to the Employer with
respect to the contributions to or payments under such
plans, or are discontinued as a matter of the Employer's
policy applied equally to all participants; or
(8) The attempted reduction of Executive's paid
vacation to less than that as provided in this
Agreement; or
(9) The failure by Employer to obtain an
assumption of Employer's obligations under this
Agreement by any assignee of or successor to Employer,
regardless of whether such entity becomes a successor to
4
<PAGE> 5
Employer as a result of merger, consolidation, sale of
assets of Employer or other form of reorganization; or
(10) The occurrence of any of the items set
forth in paragraphs (1) through (9) of this subsection
3(b)(ii), if, in the reasonable determination by the
Executive, such occurrence happens as a result of and
within the shorter of six (6) months or the remaining
term of this Agreement following a "Change in Control"
(as such term is defined below). For the purposes of
this Agreement, a "Change in Control" shall be deemed to
occur when and only when the first of the following
events occurs:
a. Any "person" or "group" (as such
terms are used in Sections 3(a), 3(d), and 14(d)
of the Securities Exchange Act of 1934, as
amended, and the rules and regulations
promulgated thereunder (the "1934 Act"), other
than (i) a trustee or other fiduciary holding
securities under any employee benefit plan of
the Corporation or any of its subsidiaries or
(ii) a corporation owned directly or indirectly
by the stockholders of the Corporation in
substantially the same proportions as their
ownership of stock in the Corporation, is or
becomes the "beneficial owner" (as defined in
Rule 13d-3 under the 1934 Act)), directly or
indirectly, of securities of the Corporation
representing 20% or more of the total voting
power of the then outstanding securities of the
Corporation entitled to vote generally in the
election of directors (the "Voting Stock"); or
b. Individuals who are members of the
Incumbent Board, cease to constitute a majority
of the Board of Directors of the Corporation.
The term "Incumbent Board" shall mean (i) the
members of the Board of Directors on the
effective date of this Agreement, and (ii) any
individual who becomes a member of the Board of
Directors after the effective date of this
Agreement, if his or her election or nomination
for election as a director was approved by the
affirmative vote of a majority of the then
Incumbent Board; or
c. (i) The merger or consolidation of
the Corporation with any other corporation or
entity, other than a merger or consolidation
which would result in the Voting Stock
outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or
by being converted into voting securities of the
surviving entity) at least 80% of the total
voting power represented by the Voting Stock or
the voting securities of such surviving entity
outstanding immediately after such merger or
consolidation, (ii) the
5
<PAGE> 6
sale, transfer or disposition of all or
substantially all of the Corporation's assets to
any other corporation or entity, or (iii) the
dissolution or liquidation of the Corporation.
(iii) AUTOMATICALLY IN ACCORDANCE WITH SUBSECTION 3(a).
In addition to the rights to terminate this Agreement as set
forth in subsections 3(b)(i) and 3(b)(ii), this Agreement may
also terminate automatically in accordance with subsection 3(a).
(iv) DISAGREEMENTS. Any disagreement concerning whether
there has been Just Cause for termination by Employer or Good
Reason for termination by Executive will be resolved by binding
arbitration in accordance with the provisions of Section 18 of
this Agreement.
(c) EFFECT OF TERMINATION. Upon termination of Executive's
employment with Employer:
(i) BY EMPLOYER FOR JUST CAUSE. Executive shall not be
entitled to receive payment of any salary, bonus, expenses, or
other benefits beyond the date of termination and, subject to
this subsection 3(c)(i), Section 17, and Executive's agreement
to repay, without set off, all amounts due Employer for monies
loaned Executive as set forth in Section 19, this Agreement
shall become null and void effective as of the date of
termination and Employer and Executive shall have no further
obligation hereunder toward the other except for the payment of
salary, bonus, expenses and benefits, if any, which have accrued
but remain unpaid prior to and as of the termination date.
(ii) BY EXECUTIVE FOR GOOD REASON.
(1) Executive shall be paid by Employer in a
lump sum within twenty (20) business days of such
termination, an amount which is equal to the sum of the
following:
(A) The amount equivalent to salary
payments for eighteen (18) months (twenty-four
(24) months if such termination is pursuant to
subsection 3(b)(ii)(10)), at that rate of pay
which is not less than Executive's rate of Base
Cash Salary in effect immediately prior to the
effective date of such termination (without
regard to any attempted reduction or
discontinuance of such salary); and
(B) The amount equivalent to eighteen
(18) months (twenty-four (24) months if such
termination is pursuant to subsection
3(b)(ii)(10)), multiplied by the greater of (i)
the monthly
6
<PAGE> 7
rate of the bonus payment for the bonus period
in the year immediately prior to Executive's
termination date or (ii) the estimated amount of
the bonus for the period which includes
Executive's termination date (without regard to
any attempted reduction or discontinuance of
such bonus).
(2) In addition to such amount under subsection
3(c)(ii)(1) above, Executive shall also receive, (i) in
cash, the value of the incentive compensation
(including, but not limited to, employer contributions
to the Universal Electronics Inc. 401(K) and Profit
Sharing Plan) and (ii) the rights to receive grants of
stock options and stock awards to which he would have
been entitled under all incentive compensation and stock
option and stock award plans maintained by Employer if
Executive had remained in the employ of Employer for
eighteen (18) months (twenty-four (24) months if such
termination is pursuant to subsection 3(b)(ii)(10)),
(without regard to any attempted reduction or
discontinuance of such incentive compensation). The
amount of such payment and/or grants shall be determined
as of the date of termination and shall be paid and/or
issued as promptly as practicable and in no event later
than 30 days after such termination.
(3) Employer shall also maintain in full force
and effect for the Executive's continued benefit (and,
to the extent applicable, the continued benefit of her
dependents) all of the employee benefits (including, not
limited to, coverage under any medical and insurance
plans, programs or arrangements) to which he would have
been entitled under all employee benefit plans, programs
or arrangements maintained by Employer if Executive had
remained in the employ of Employer for eighteen (18)
months (twenty-four (24) months if such termination is
pursuant to subsection 3(b)(ii)(10)), (without regard to
any attempted reduction or discontinuance of such
benefits), or if such continuation is not possible under
the terms and provisions of such plans, programs or
arrangements, Employer shall arrange to provide benefits
substantially similar to those which Executive (and, to
the extent applicable, his dependents) would have been
entitled to receive if he had remained a participant in
such plans, programs or for such eighteen (18) month
(twenty-four (24) months, if such termination is
pursuant to subsection 3(b)(ii)(10)) period.
(4) Subject to this subsection 3(c)(ii), Section
17, and Executive's agreement to repay, without set off,
all amounts due Employer for monies loaned Executive as
set forth in Section 19, this Agreement shall become
null and void effective as of the date of termination
and Employer and Executive shall have no further
obligation hereunder toward the other.
7
<PAGE> 8
(iii) PURSUANT TO SUBSECTION 3(b)(iii). Executive
acknowledges and agrees that in the event that this Agreement
terminates in accordance with subsection 3(b)(iii), that
Employer and Executive shall have no further obligation
hereunder toward the other except (1) for the payment of salary,
bonus, expenses and benefits, if any, which have accrued but
remain unpaid prior to and as of the termination date, (2) as
set forth in Section 17, and (3) for Executive's agreement to
repay, without set off, all amounts due Employer for monies
loaned Executive as set forth in Section 19.
(iv) SUBMISSION OF RESIGNATIONS BY EXECUTIVE. Upon
termination of this Agreement by either Employer or Executive as
set forth herein and the receipt by Executive of (1) all cash
amounts due him as set forth herein and (2) a written
representation signed by an authorized representative of
Employer that all non-cash obligations of Employer as set forth
herein have been fulfilled or, as the case may be, have been
commenced, Executive shall immediately submit Executive's
resignation for any and all offices or directorships of Employer
and/or any and all subsidiaries and affiliates of Employer which
resignation shall have retroactive application and effect to
such termination date; provided however that during such time
period from the effective date of such termination to the date
Executive submits his resignation, Executive acknowledges and
agrees that he does not have authority to bind Employer to any
contracts or commitments and agrees not to create any obligation
for Employer or bind or attempt to bind Employer in any manner
whatsoever. Executive also acknowledges that he shall have no
supervisory or managerial responsibility or authority from and
after the effective date of his termination, regardless of
whether he submits the resignation or not, and agrees not to
involve himself in any activities of Employer, except as may be
requested by the an authorized officer of Employer.
4. TOTAL COMPENSATION
While employed under this Agreement and in consideration of the services
to be rendered by Executive pursuant hereto, Executive shall receive the
following amounts/benefits as the sole and total compensation for the
performance of his duties and obligations under this Agreement:
(a) BASE CASH SALARY. A salary at the rate of Two Hundred
Twenty-Five Thousand Dollars (US$225,000) per annum (the "Base Cash
Salary"), which shall be deemed to accrue from day to day, payable in
accordance with Employer's standard payroll practices and procedures;
(b) BONUS. A bonus calculated in accordance with the plans or
programs established by Employer from time to time; provided that the
bonus for the 1998 calendar
8
<PAGE> 9
year shall be calculated in accordance with the Bonus Plans attached
hereto as Exhibit A, payable in accordance with Employer's standard
payroll practices and procedures; and provided further, that any such
bonuses whenever earned and paid shall be determined without regard to
any material gains and losses which occur outside of the scope of
Employer's ordinary operating business unless any such plans or programs
explicitly include such material gains and losses within the
determination of any such bonuses;
(c) STOCK OPTIONS. Stock options granted or stock awards in
accordance with the plans or programs established by Employer from time
to time; provided that the stock options and/or stock awards granted for
the 1998 calendar year shall be determined in accordance with the Stock
Option Plans attached hereto as Exhibit B;
(d) INCENTIVE COMPENSATION. Participation in Employer's
incentive compensation plans and/or programs, including, but not limited
to, receipt of employer contributions to the Universal Electronics Inc.
401(K) and Profit Sharing Plan and the right to receive stock awards and
to exercise stock options under the Universal Electronics Inc. 1993
Stock Incentive Plan, the Universal Electronics Inc. 1995 Stock
Incentive Plan, the Universal Electronics Inc. 1996 Stock Incentive
Plan, the Universal Electronics Inc. 1998 Stock Incentive Plan, the
Salaried Employee Cash Incentive Program, and such other plans and/or
programs which are established from time to time;
(e) BENEFITS. The benefits provided by Employer to its executive
employees generally, including without limitation, the benefits and
perquisites included under the Universal Electronics Inc. group family
health insurance program, which includes comprehensive medical
insurance, dental insurance, group disability, group life insurance, and
executive bonus (supplemental life); provided that the benefits provided
to Executive shall be no less extensive than that provided him
immediately prior to the date of this Agreement;
(f) VACATION. Three (3) weeks (fifteen (15) working days)
vacation with pay, determined and carried over in accordance with the
policies and procedures set forth within Employer's policy manual in
effect from time to time which are equally applicable to all of
Employer's executive employees;
(g) OTHER PERQUISITES. Such other employee benefits and
perquisites which are provided by Employer to executives generally,
provided that the other perquisites provided to Executive shall be no
less extensive than the most extensive perquisites provided to any other
executive employee of the Employer;
(h) D&O INSURANCE. Director and Officer Liability insurance in a
reasonably sufficient amount;
9
<PAGE> 10
(i) DISCRETIONARY BONUS. Such other amounts of compensation
and/or bonus which is determined by Employer from time to time;
(j) REVIEWS. The total amount of compensation to be paid and/or
provided to Executive shall be reviewed by the Board of Directors, or
such committee thereof, of Employer as of the first day of each calendar
year while this Agreement is in force and effect. In no event shall such
review result in a reduction or discontinuance of the amount of
compensation paid and/or provided to Executive hereunder except if such
reduction or discontinuance occurs by reason of law or loss of tax
deductibility to the Employer with respect to the contributions to such
plans, or are discontinued as a matter of the Employer's policy applied
equally to all participants.
5. ADJUSTMENTS IN CASE OF EXCESS PARACHUTE PAYMENTS
In the event that the aggregate present value (determined in accordance
with applicable federal, state and local income tax law, rules and regulations)
of all payments to be made and benefits to be provided to Executive under this
Agreement and/or under any other plan, program or arrangement maintained or
entered into by Employer or any of its subsidiaries shall result in "excess
parachute payments" to him within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), or any comparable provision of
successor legislation, which subject him to the Excise Tax under Section 4999 of
the Code or any comparable provision of successor legislation, Employer shall
pay to Executive an additional amount (the "gross-up payment") calculated so
that the net amount received by him after deduction of the Excise Tax and of all
federal, state and local income taxes upon the gross-up payment shall equal the
payments to be made and the benefits to be provided to him under this Agreement.
For purposes of determining the amount of the gross-up payment, Executive shall
be deemed to pay federal, state and local income taxes at the highest marginal
rates thereof in the calendar year in which the gross-up payment is to be made,
net of the maximum reduction in federal income taxes obtainable from deduction
of such state and local taxes. The computations required by this Section 5 shall
be made by the independent public accountants then regularly retained by
Employer, in consultation with tax counsel selected by and acceptable to
Executive. Employer shall pay all of its accountants' fees and the lesser of (i)
one-half of Executive's tax counsel's fees or (ii) $2,500.
6. REIMBURSEMENT FOR BUSINESS RELATED EXPENSES
Employer shall reimburse Executive for all reasonable expenses incurred
and paid by him in connection with Employer's business in accordance with
Employer's policy manual in effect from time to time.
7. INTEREST
10
<PAGE> 11
In the event any payment to Executive under this Agreement is not paid
within five (5) business days after it is due, such payment shall thereafter
bear interest at the prime rate from time to time in effect at Bank of America,
Los Angeles, California; provided however, that this provision shall not excuse
the timely payment of such sums required by this Agreement.
8. NOTICES
Written notices to be given under this Agreement shall be personally
delivered or sent by overnight courier (such as Federal Express, DHL or UPS and
the like) or by registered or certified mail, return receipt requested, to the
addresses set forth below:
To Employer:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attn.: Corporate Secretary
With a required copy to:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attn: The Board of Directors
To Executive:
Mr. Paul D. Arling
At his last known address as reflected in Employer's records
9. SEVERABILITY
If any one or more of the provisions contained in this Agreement shall
be invalid, illegal or unenforceable in any respect under applicable law, the
validity, legality and enforceability of the remaining provisions contained
herein shall not, in any way, be ineffective or impaired thereby.
10. GOVERNING LAW
This Agreement shall be governed by the law of the state of California
and not the law of conflicts of the state of California.
11. WAIVER
The failure of either party to insist in any one or more instances on
strict performance of any of this Agreement's provisions, or to exercise or
enforce any right, remedy or obligation under this
11
<PAGE> 12
Agreement, shall not be construed as a waiver or relinquishment of any right,
remedy or obligation, and the right, remedy or obligation shall continue in full
force and affect.
12. ENTIRE AGREEMENT AND MODIFICATION
This Agreement, together with that certain Non-Interest Bearing
Unsecured Promissory Note, described more fully in Section 19 of this Agreement,
sets forth the entire agreement of the parties concerning the employment of
Executive by the Employer and any oral or written statements, representations,
agreements or understandings made or entered into prior to or contemporaneously
with the execution of this Agreement are hereby rescinded, revoked, and rendered
null and void by the parties. The parties hereto further acknowledge and agree
that the terms of that certain Memorandum dated September 14, 1998 have been
incorporated in this Agreement and such Memorandum has been superseded by this
Agreement and therefore, is hereby terminated in its entirety and shall be of no
further force and effect. This Agreement may be modified only by a written
instrument duly executed by each party hereto.
13. ASSIGNMENT
This Agreement shall be binding upon the parties hereto, their
respective heirs, personal representatives, executors, administrators,
successors and assigns. Any such assignee or successor of Employer shall, within
ten (10) business days after receipt of a written request by Executive, send to
Executive its acknowledgment and agreement that such assignee or successor
expressly assumes all of Employer's obligations under this Agreement as if such
assignee or successor was the original employer and the term "Employer" as used
herein as include any such assignee or successor.
14. INTERPRETATION OF AGREEMENT
The parties have cooperated in the drafting and preparation of this
Agreement. Therefore, the parties hereto agree that, in any construction to be
made of the Agreement the same shall not be construed against any of the
parties. Each of the parties hereto has carefully read this Agreement and has
been given the opportunity to have it reviewed by legal counsel and negotiate
its terms.
15. SPECIFIC OBLIGATIONS OF THE EXECUTIVE
In addition to the general duties set forth herein, Executive shall use
his reasonable efforts for the benefit of Employer by whatever activities
Employer finds reasonably appropriate to maintain and improve Employer's
standing in the community generally and among current and prospective customers,
including such entertainment for professional purposes as Executive and Employer
mutually consider appropriate. Executive shall undertake business development
endeavors as reasonably directed by Employer.
16. NONDISCLOSURE AND NONAPPROPRIATION OF INFORMATION
12
<PAGE> 13
(a) Executive recognizes and acknowledges that while employed by
Employer, he has and will have access to, learn, be provided with and,
in some cases, prepare and create certain confidential, proprietary
business information and/or trade secrets for Employer, including, but
not limited to, lists, files and forms, (hereinafter collectively
referred to as the "trade secrets"), all of which are of substantial
value to Employer and its business. In this connection, Executive
expressly covenants and agrees, during his employment with Employer and
continuing thereafter, to:
(i) Hold in a fiduciary capacity and not reveal,
communicate, use or cause to be used for his own benefit or
divulge any trade secrets, or other proprietary right now or
hereafter owned by the Employer;
(ii) Not sell, exchange or give away, or otherwise
dispose of any trade secrets now or hereafter owned by Employer,
whether the same shall or may have been originated or discovered
by Employer or otherwise;
(iii) Not reveal, divulge or make known to any person,
firm, corporation or other entity any trade secrets of Employer;
(iv) Not reveal, divulge or make known to any person
(other than his spouse, attorney and/or accountant), firm,
company or corporation any of the terms of this Agreement;
(v) Not solicit, interfere with or endeavor to entice
away from Employer any person, firm, company or corporation in
the habit of dealing with Employer; and
(vi) Not interfere with or solicit for hire or hire any
other executive employee of Employer.
(b) Executive further covenants and agrees to return to Employer
either before or immediately upon his termination of employment with
Employer any and all written information, material or equipment that
constitutes, contains or relates to Employer's proprietary information
trade secrets and which relate to Employer's business which are in
Executive's possession, custody and control, whether confidential or
not, including any and all copies thereof which may have been made by or
for Executive. Executive shall maintain no copies thereof after
termination of his employment.
17. SURVIVAL OF OBLIGATIONS
In addition to those specific provisions of Section 3, which by their
express terms survive the termination of this Agreement under certain
circumstances, the terms and conditions and
13
<PAGE> 14
obligations of the parties as contained Sections 5, 6, 7, 8, 9, 10, 11, 12, 13,
14, 16, 17, 18, and 19 shall survive the termination of this Agreement and,
notwithstanding such termination, shall remain fully binding on the parties
hereto.
18. ARBITRATION
Except for any claim or dispute in which equitable relief under this
Agreement is sought, any disagreement, dispute or controversy concerning whether
there has been Just Cause, Good Reason or breach of any of the terms of this
Agreement shall be settled exclusively and finally by arbitration. The
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association in effect from time to time (the
"AAA Rules"). The arbitration shall be conducted in Los Angeles, California, or
in such other city as the parties to the dispute may designate by mutual
consent. The arbitral tribunal shall consist of three arbitrators (or such
lesser number as may be agreed upon by the parties) selected according to the
procedure set forth in the AAA Rules, with the chairman of the arbitral tribunal
selected in accordance with the AAA Rules. Except as otherwise set forth in this
Agreement, the fees and expenses of the arbitral tribunal in connection with
such arbitration shall be borne by the parties to the dispute as shall be
determined by the arbitral tribunal.
19. RELOCATION LOAN MADE TO EXECUTIVE
Within five (5) business days after the Effective Date of this
Agreement, Employer shall loan Two Hundred Thousand Dollars ($200,000) to
Executive which Executive shall use solely for relocating his home and family
from his present place of residence in Shaker Heights, Ohio to a new residence
located in Southern California and in this connection the Executive shall
execute and deliver to Employer a Non-Interest Bearing Unsecured Promissory Note
in favor of Employer in the form attached to this Agreement as Exhibit C, the
terms and conditions of which are incorporated into this Agreement by this
reference. Such loan is in addition to all amounts to be paid and/or reimbursed
to Executive pursuant to Employer's Executive Relocation Policy.
IN WITNESS WHEREOF, the parties have executed the Agreement as of this
29th day of September, 1998
Signed and acknowledged in UNIVERSAL ELECTRONICS INC.
the presence of:
By:
- - ---------------------------------- --------------------------------------
Its:
-------------------------------------
PAUL D. ARLING
- - ---------------------------------- -----------------------------------------
Signature
14
<PAGE> 15
EXHIBIT A
BONUS PLAN
PURSUANT TO SECTION 4(b) FOR 1998
EPS at $0.80 bonus of 15% of Base Cash Salary or $ 33,750
EPS at $0.85 bonus of 30% of Base Cash Salary or $ 67,500
EPS at $0.90 bonus of 40% of Base Cash Salary or $ 90,000
EPS at $0.95 bonus of 45% of Base Cash Salary or $101,250
EPS at $1.00 bonus of 50% of Base Cash Salary or $112,500
16
<PAGE> 16
EXHIBIT B
STOCK OPTION AWARD
PURSUANT TO SECTION 4(c) FOR 1998
Options to acquire up to 80,000 shares of the common stock of Employer with an
exercise price determined as market price at the end of business on the
Effective Date of this Agreement. These options shall vest at a rate of 25% per
year for four years, but all in accordance with the terms and conditions of the
Stock Option Agreement and Stock Option Plans of Employer.
17
<PAGE> 17
EXHIBIT C
FORM OF PROMISSORY NOTE
PURSUANT TO SECTION 19
18
<PAGE> 1
EXHIBIT 10.31
================================================================================
REVOLVING LOAN AND SECURITY AGREEMENT
Dated as of October 2, 1998
BETWEEN
UNIVERSAL ELECTRONICS INC.
AND
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS AND TERMS ............................................ 1
ARTICLE II COMMITMENTS OF THE BANK; BORROWING PROCEDURES ................... 11
2.1 Commitments ................................................... 11
2.2 Absence of Defaults ........................................... 12
2.3 Disbursements to Other Persons ................................ 12
2.4 Borrowing Procedure ........................................... 12
2.5 Various Types of Loans ........................................ 13
2.6 Continuation and Conversion of Loans .......................... 13
ARTICLE III NOTE EVIDENCING LOANS; REPAYMENTS AND RECORD
KEEPING ...................................................... 13
3.1 Revolving Note ............................................... 13
3.2 Voluntary Repayments ......................................... 14
3.3 Recordkeeping ................................................ 14
ARTICLE IV INTEREST, FEES AND LETTERS OF CREDIT ........................... 14
4.1 Interest, Etc ................................................ 14
4.2 Nonuse Fee ................................................... 14
4.3 Closing Fee .................................................. 15
4.4 Computation of Interest and Fees ............................. 15
4.5 Payment Dates for Interest ................................... 15
4.6 Letter of Credit Fees ........................................ 15
4.7 Request for Issuance of Letters of Credit .................... 15
4.8 Letter of Credit Provisions .................................. 15
4.9 Disbursements ................................................ 16
4.10 Reimbursement By Borrower of Drawings Under Letters of Credit 16
ARTICLE V COLLATERAL; GENERAL TERMS ........................................ 17
5.1 Collateral ................................................... 17
5.2 Further Assurances ........................................... 18
5.3 Inspections .................................................. 18
5.4 Perfection; Locations ........................................ 18
5.5 Power-of-Attorney ............................................ 19
5.6 Assignments .................................................. 19
5.7 Special Collateral ........................................... 19
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
5.8 Waivers, etc .................................................... 19
5.9 Set-off ......................................................... 19
5.10 Bank Accounts .................................................. 20
ARTICLE VI APPLICATION OF COLLECTIONS TO LIABILITIES ....................... 20
6.1 Collateral Proceeds Account and Lock Boxes ...................... 20
6.2 Bank as Attorney and Agent-in-Fact .............................. 20
6.3 Application of Proceeds ......................................... 20
6.4 Availability of Proceeds ........................................ 21
6.5 Other Provisions ................................................ 21
ARTICLE VII COLLATERAL; ACCOUNTS ........................................... 22
7.1 Representations and Warranties with respect to Accounts ......... 22
7.2 Verification .................................................... 22
7.3 Covenants with respect to Accounts .............................. 23
7.4 Accounts and Special Collateral ................................. 23
7.5 Power of Attorney ............................................... 23
7.6 Records of Accounts ............................................. 24
ARTICLE VIII COLLATERAL; INVENTORY ......................................... 24
8.1 Inventory ....................................................... 24
8.2 Sale of Inventory ............................................... 25
ARTICLE IX COLLATERAL EQUIPMENT ............................................ 25
9.1 Good Title ...................................................... 25
9.2 Maintenance of Equipment ........................................ 25
9.3 Certificates of Title, etc ...................................... 25
ARTICLE X INSURANCE AND CHARGES ............................................ 26
10.1 Insurance ....................................................... 26
10.2 Charges ......................................................... 26
ARTICLE XI REPRESENTATIONS AND WARRANTIES .................................. 27
11.1 Organization .................................................... 27
11.2 Authorization ................................................... 27
11.3 No Conflicts .................................................... 27
11.4 Validity and Binding Effect ..................................... 27
11.5 No Default ...................................................... 28
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
11.6 Financial Statements ........................................... 28
11.7 Insurance ...................................................... 28
11.8 Litigation; Contingent Liabilities ............................. 28
11.9 Ownership of Assets; Liens ..................................... 28
11.10 Subsidiaries ................................................... 29
11.11 Partnerships; Joint Ventures ................................... 29
11.12 Pension and Welfare Plans ...................................... 29
11.13 Regulation U ................................................... 29
11.14 Compliance ..................................................... 30
11.15 Taxes .......................................................... 30
11.16 Investment Borrower Act Representation ......................... 30
11.17 Public Utility Holding Borrower Act Representation ............. 30
11.18 Environmental Matters .......................................... 30
11.19 Accuracy of Information ........................................ 30
11.20 Year 2000 Problem .............................................. 30
ARTICLE XII COVENANTS ........................................................ 31
12.1 Financial Statements and Other Reports ......................... 31
12.1.1 Financial Statements and Reports ............................... 31
12.1.2 Other Reports .................................................. 32
12.2 Notices ........................................................ 32
12.3 Existence ...................................................... 33
12.4 No Change in Line of Business .................................. 33
12.5 Books, Records and Access ...................................... 33
12.6 Insurance ...................................................... 34
12.7 Maintenance of Assets .......................................... 34
12.8 Taxes .......................................................... 34
12.9 Compliance ..................................................... 34
12.10 Use of Proceeds ................................................ 34
12.11 Pension Plans .................................................. 34
12.12 Consolidations, Mergers, Acquisitions .......................... 35
12.13 Dividends and Restricted Payments .............................. 35
12.14 Indebtedness ................................................... 36
12.15 Liens .......................................................... 36
12.16 Investments .................................................... 37
12.17 Capital Expenditures ........................................... 37
12.18 Financial Covenants ............................................ 37
12.18.1 Consolidated EBITDA ............................................ 37
12.18.2 Consolidated Net Worth ......................................... 38
12.18.3 Indebtedness to EBITDA Ratio ................................... 38
12.18.4 Asset Coverage Ratio ........................................... 38
12.19 Other Agreements ............................................... 38
12.20 Unconditional Purchase Options ................................. 39
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
12.21 Subsidiary Payments, etc ......................................... 39
ARTICLE XIII CONDITIONS PRECEDENT ........................................... 39
13.1 Initial Loan and Letter of Credit ................................ 39
13.2 All Loans ........................................................ 40
ARTICLE XIV EVENTS OF DEFAULT .............................................. 41
14.1 Event of Default ................................................. 41
14.2 Termination of Commitments and Effect of Event of Default......... 43
14.3 Collateral ....................................................... 43
14.4 Assembly of Collateral ........................................... 44
14.5 Notice ........................................................... 44
14.6 Sale of Collateral ............................................... 44
14.7 Waiver of Borrower ............................................... 44
ARTICLE XV INCREASED COSTS AND OTHER SPECIAL PROVISIONS .................... 45
15.1 Increased Costs .................................................. 45
15.2 Changes in Law Rendering Certain Loans Unlawful .................. 45
15.3 Funding Losses; Prepayment of Fixed Rate Loans ................... 46
15.4 Basis for Determining Interest Rate Inadequate or Unfair.......... 47
15.5 Right of Bank to Fund through Other Offices ...................... 47
15.6 Discretion of Bank as to Manner of Funding ....................... 47
15.7 Conclusiveness of Statements; Survival of Provisions ............. 47
ARTICLE XVI ENVIRONMENTAL, SAFETY AND HEALTH INDEMNITY AND WAIVER ............ 47
ARTICLE XVII MISCELLANEOUS ................................................... 48
17.1 Waiver and Amendments ............................................ 48
17.2 Notices .......................................................... 48
17.3 Expenses ......................................................... 49
17.4 General Indemnity ................................................ 49
17.5 Information ...................................................... 50
17.6 Severability ..................................................... 50
17.7 Law .............................................................. 50
17.8 Successors ....................................................... 50
17.9 WAIVER OF JURY TRIAL ............................................. 50
</TABLE>
-iv-
<PAGE> 6
LIST OF EXHIBITS AND SCHEDULES
Exhibit A - Form of Revolving Note
Exhibit B - Form of Patent and Trademark Assignment
Exhibit C - Forms of Opinions of Counsel
Schedule 5.4 - Locations of Collateral, Books and Records, Chief
Executive Office and list of Affiliates
Schedule 8.1 - Inventory Stored With Bailee, Warehouseman or Other
Third-Party
Schedule 10.1 - Insurance
Schedule 11.1 - Organization
Schedule 11.5 - Defaults
Schedule 11.8 - Litigation and Contingent Liabilities
Schedule 11.9 - Liens
Schedule 11.10 - Subsidiaries
Schedule 11.11 - Partnerships and Joint Ventures
Schedule 11.12 - ERISA Matters
Schedule 11.14 - Compliance Matters
Schedule 11.18 - Environmental Matters
Schedule 12.14 - Outstanding Indebtedness
Schedule 12.15 - Existing Liens
Schedule 12.16 - Existing Investments
-v-
<PAGE> 7
REVOLVING LOAN AND SECURITY AGREEMENT
THIS REVOLVING LOAN AND SECURITY AGREEMENT (this "Agreement"), made as
of the 2nd day of October, 1998, between BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association (the "Bank"), and UNIVERSAL
ELECTRONICS INC., a Delaware corporation (the "Borrower").
WITNESSETH:
WHEREAS, the Borrower has requested that the Bank make revolving loans
to, and issue letters of credit to or for the account of, the Borrower; and
WHEREAS, the Bank is willing to make such loans and issue such letters
of credit, subject to the terms and conditions hereof;
NOW THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
The following words, terms and/or phrases shall have the meanings set
forth thereafter and such meanings shall be applicable to the singular and
plural form thereof, giving effect to the numerical difference; whenever the
context so requires, the use of "it" in reference to Borrower shall mean
Borrower as identified at the beginning of this Agreement:
"Accounts" is defined in Section 5.1.
"Acquisition" means, with respect to any Person, (a) the acquisition by
such Person of all or substantially all of the assets of any other Person (or a
division or ongoing business thereof), whether through the purchase of assets,
through merger, consolidation or otherwise (other than a Person that is a
Subsidiary of the Borrower or one of its Subsidiaries prior to such purchase of
assets) or (b) an Investment by such Person in any other Person as a result of
which such other Person becomes a Subsidiary of such first Person.
"Adjusted Reference Rate" means, at any time, the higher of (a) the
Reference Rate or (b) the Federal Funds Rate plus one-half of one percent (0.5%)
per annum.
"Adjusted Reference Rate Loan" means a Loan bearing interest at the
Adjusted Reference Rate.
" Affiliate" means any "Person" (hereinafter defined) in which Borrower,
one or more partners of Borrower, one or more equity interest holders of
Borrower, "Subsidiary" (hereinafter defined), and/or "Parent" (hereinafter
defined), individually, jointly and/or severally, now or
<PAGE> 8
at any time or times hereafter, has or have an equity or other ownership
interest equal to or in excess of 50% of the total equity of or other ownership
interest in such Person.
"and/or" means one or the other or both, or any one or more or all, of
the things or Persons in connection with which the conjunction is used.
"Applicable Margin" means (a) from the Effective Date to but not
including the first (1st) anniversary of the Effective Date, 1.75% per annum
with respect to IBOR Loans and Fixed Rate Loans and 0.125% per annum with
respect to the Non-Use Fee and (b) from and including the first (lst)
anniversary of the Effective Date and thereafter, the Applicable Margin shall be
determined as of the last day of each fiscal quarter of each fiscal year of the
Borrower on a trailing basis, based on the Borrower's Consolidated EBITDA as of
the last day of each of the four fiscal quarters immediately preceding the date
of any determination of the Applicable Margin hereunder and such Applicable
Margin shall equal the percentage per annum set forth below in the following
table:
<TABLE>
<CAPTION>
Applicable Margin
Trailing Four- for IBOR Loans Applicable Margin
Quarter Consolidated EBITDA and Fixed Rate Loans for Non-Use Fee
- - --------------------------- -------------------- ------------------
<S> <C> <C>
Equal to or greater than 1.25% per annum 0.1250% per annum
$13,500,000
Equal to or greater than 1.50% per annum 0.1250% per annum
$10,500,000 but less than
$13,500,000
Equal to or greater than 1.75% per annum 0.1250% per annum
$7,500,000 but less than
$10,500,000
Less than $7,500,000 2.00% per annum 0.1875% per annum
</TABLE>
Any change in the Applicable Margin shall become effective two (2) Banking Days
following delivery by the Borrower to the Bank of a quarterly compliance
certificate pursuant to Section 12.1.1(d) evidencing that the Borrower's
Consolidated EBITDA for the four fiscal quarters immediately preceding the date
of determination for the Applicable Margin warrants an adjustment to the
Applicable Margin, whether upward or downward. Notwithstanding the foregoing,
but subject to Section 4.1(d), at any time an Event of Default exists or an
Unmatured Event of Default with respect to the Borrower's obligations under
Section 12.1.1 exists, the Applicable Margin shall be determined as if the
trailing four-quarter Consolidated EBITDA was less than $7,500,000 until such
Event of Default or Unmatured Event of Default is cured or waived by the Bank.
-2-
<PAGE> 9
"Application" means any application by Borrower, in a form and
containing terms and provisions acceptable to Bank, for the issuance by Bank of
a Letter of Credit.
"Approved Acquisition" means any Acquisition by any Person (the
"Purchaser") of all or substantially all of the Stock, equity interests or
assets of another Person (the "Target") provided that (a) such transaction has
been approved by the board of directors or other similar body of the Target and
if necessary under applicable law, the shareholders or other owners of the
Target have also so approved such transaction, (b) the Target is engaged in
substantially the same lines of business as engaged in by the Purchaser
immediately prior to such transaction, (c) immediately before and after giving
effect to such transaction, there shall not exist an Event of Default or an
Unmatured Event of Default, and (d) if the total consideration payable for such
Acquisition, whether in cash, property or by the face amount of an instrument
evidencing Indebtedness, exceeds $1,000,000, the Bank shall have given its prior
written consent thereto.
"Bank" is defined in the Preamble.
"Banking Day" means (a) a day other than a Saturday, Sunday or a legal
holiday on which banks are authorized or required to be closed for the conduct
of commercial banking business in Chicago, Illinois and San Francisco,
California and (b) relative to the making, continuing, prepaying or repaying of
an IBOR Loan, any day on which dealings in Dollars are carried on in the
interbank market.
"Borrower" is defined in the Preamble.
"Capital Expenditures" shall mean for any period, the sum of (a) the
aggregate amount of all expenditures of Borrower and its Subsidiaries for fixed
or capital assets made during such period which, in accordance with GAAP, would
be classified as capital expenditures; and (b) the aggregate amount of all
Capitalized Lease Liabilities paid or payable during such period.
"Capitalized Lease" means any lease which is or should be capitalized on
the balance sheet of the lessee under such lease in accordance with GAAP.
"Capitalized Lease Liabilities" shall mean all monetary obligations of
Borrower or any of its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as a Capitalized Lease, and,
for purposes of this Agreement and each of the Other Agreements, the amount of
such obligations shall be the capitalized amount thereof, determined in
accordance with GAAP, and the stated maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Cash Equivalents" means (a) investments in direct obligations of the
United States of America or of any agency or instrumentality thereof whose
obligations constitute full faith and credit obligations of the United States of
America, provided that any such obligations shall mature within one year of the
date of issuance thereof; (b) investments in commercial paper
-3-
<PAGE> 10
rated at least P-1 by Moody's Investors Service, Inc. or at least A-1 by
Standard & Poors Corporation maturing within 270 days of the date of issuance
thereby; and (c) investments in certificates of deposits and bankers acceptances
issued by (i) the Bank, (ii) any Person controlling the Bank or (iii) any United
States commercial bank having capital and surplus of not less then $100,000,000
and which have a maturity of one year or less.
"Charges" means all national, federal, state, county, city, municipal
and/or other governmental (or any instrumentality, division, agency, body or
department thereof including without limitation the Pension Benefit Guaranty
Corporation) taxes, levies, assessments, charges, liens, claims or encumbrances
upon and/or relating to the "Collateral" (as hereinafter defined), Borrower's
business, Borrower's ownership and/or use of any of its assets, and/or
Borrower's income and/or gross receipts.
"Collateral" is defined in Section 5.1.
"Commitment" is defined in Section 2.1.
"Consolidated EBITDA" means, at any date of determination, the sum for
such period of the Consolidated Net Income of Borrower, plus the aggregate
amount deducted, in determining Borrower's consolidated net income for such
period, in respect of (a) total interest expense (including any interest expense
in respect of Capitalized Lease Liabilities), plus (b) tax expense, plus (c)
depreciation, amortization and other similar non-cash charges, all determined in
accordance with GAAP.
"Consolidated Net Income" means the consolidated net income of Borrower
and its Subsidiaries, less taxes and excluding extraordinary or non-recurring
gains, all determined in accordance with GAAP.
"Consolidated Net Worth" means the consolidated net worth of Borrower
and its Subsidiaries.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Domestic Account" means an Account with respect to which the Obligor
thereof is a resident of any State or Commonwealth of the United States of
America.
"Domestic Inventory" means Inventory which is located in any State or
Commonwealth of the United States of America.
"Domestic Subsidiary" means a Subsidiary of the Borrower that is
incorporated or otherwise formed under the corporate, partnership or other
applicable governing law of any State or Commonwealth of the United States of
America.
-4-
<PAGE> 11
"Effective Date" means the date upon which Borrower satisfies the
conditions precedent for the initial Loan or Letter of Credit.
"Environmental Laws" means the Resource Conservation and Recovery Act;
the Comprehensive Environmental Response, Compensation and Liability Act; any
so-called "Superfund" or "Superlien" law; the Toxic Substances Control Act; and
any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree or other requirement regulating, relating to, or
imposing liability or standards of conduct (including, but not limited to,
permit requirements, and emission or effluent restrictions) concerning any
Hazardous Materials or any hazardous, toxic or dangerous waste, substance or
constituent, or any pollutant or contaminant or other substance, whether solid,
liquid or gas, as now or at any time hereafter in effect.
"Equipment" is defined in Section 5.1.
"Event of Default" means the occurrence of any one or more of the events
described in Section 14.1 after giving effect to any applicable periods of
notice and/or cure which are provided for in said Section 14.1 or in any
instrument referred to in Sections or (c) thereof.
" Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)" on the preceding Banking Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Banking Day, the rate for such day will be the
arithmetic mean as determined by Bank of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that
day by each of three leading brokers of Federal funds transactions in New York
City selected by Bank.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"Fixed Rate" means, at any time, the rate of interest applicable to any
Loan denominated by Borrower and Bank as a Fixed Rate Loan for the Interest
Period applicable to such Loan, as agreed to by Borrower and Bank,
telephonically or in writing, at the time of the making of such Loan as set
forth in Section 2.4(c) and 4.1(c). Such Fixed Rate is intended to reflect
Bank's approximate cost of funds with respect to each Fixed Rate Loan, as
determined by Bank in its sole and absolute discretion, determined and provided
to Borrower on a non-discriminatory manner with respect to all commercial
banking customers of Bank for whom Bank has extended credit based upon its fixed
rate lending program as in effect at the time of the making of such Fixed Rate
Loan. Bank shall have no obligation to disclose to Borrower its actual cost of
funds, how such cost of funds was determined or any element thereof.
-5-
<PAGE> 12
"Fixed Rate Loan" means a Loan bearing interest at the Fixed Rate as set
forth in Section 4.1(c)hereof.
"GAAP" means generally accepted accounting principles as from time to
time in effect.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guarantee Liability" of any Person means any agreement, undertaking or
arrangement by which such Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
Indebtedness, obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation in respect of any Guarantee Liability
shall (subject to any limitation set forth therein) be deemed to be the
outstanding principal amount (or maximum principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby.
"Hazardous Materials" means any toxic substance, hazardous substance,
hazardous material, hazardous chemical or hazardous waste defined or qualifying
as such in (or for the purposes of) any Environmental Law, or any pollutant or
contaminant, and shall include, but not be limited to, petroleum, including
crude oil or any fraction thereof which is liquid at standard conditions of
temperature or pressure (60 degrees Fahrenheit and 14.7 pounds per square inch
absolute), any radioactive material, including, but not limited to, any source,
special nuclear or by-product material as defined at 42 U.S.C. section 2011 et.
seq., as amended or hereafter amended, polychlorinated biphenyls, and asbestos
in any form or condition.
"Hedging Obligations" means, with respect to any Person, all liabilities
of such Person under interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements, and all other agreements or arrangements
designed to protect such Person against fluctuations in interest rates or
currency exchange rates.
"IBOR Loan" means a Loan which bears interest at a rate determined by
reference to the IBOR Rate (Adjusted).
" IBOR Office" means the office or offices of Bank which shall be making
or maintaining the IBOR Loans of Bank hereunder or such other office or offices
through which Bank determines its IBOR Rate. An IBOR Office may be, at the
option of Bank, either a domestic or foreign office.
-6-
<PAGE> 13
"IBOR Rate" means, with respect to any IBOR Loan for any Interest
Period, the rate per annum at which Dollar deposits in immediately available
funds are offered by Bank to major banks in the interbank market as at or about
11:00 a.m. Chicago time two Banking Days prior to the beginning of such Interest
Period for delivery on the first day of such Interest Period, and in an amount
equal or comparable to the amount of Bank's IBOR Loan for such Interest Period.
"IBOR Rate (Adjusted)" means, relative to any IBOR Loan for any
Interest Period, a rate per annum determined pursuant to the following formula:
IBOR Rate = IBOR Rate
------------------------------
(Adjusted) 1.00 - IBOR Reserve Percentage
The IBOR Rate (Reserve Adjusted) for any Interest Period for any IBOR Loan will
be determined by Bank on the basis of the IBOR Reserve Percentage in effect two
(2) Banking Days before the first day of such Interest Period.
"IBOR Reserve Percentage" means, for any day in any Interest Period for
any IBOR Loan, the percentage in effect on such day as prescribed by the Board
of Governors of the Federal Reserve System (or any successor thereto) or other
U.S. government agency for determining the maximum reserve requirement
(including, without limitation, any marginal, basic, emergency, supplemental,
and other reserves and taking into account any transitional adjustments or other
scheduled changes in reserve requirements) for banks in respect of liabilities
or assets (with a term equal to such Interest Period) consisting of or including
"Eurocurrency Liabilities", as currently defined in Regulation D of the Federal
Reserve Board, or any other applicable regulation or other liabilities or assets
which Bank determines are actually maintained and attributable to or allocable
to such IBOR Loan. In determining such amount, Bank may use any reasonable
averaging and attribution methods.
"Indebtedness" means all obligations and liabilities of Borrower to any
Person (including without limitation all debts, claims and indebtedness for
borrowed money) whether primary, secondary, direct, contingent, fixed or
otherwise, heretofore, now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and however
arising, whether under written or oral agreement, by operation of law, or
otherwise; excluding, however, trade payables arising in the ordinary course of
business, normal and customary business accruals and other employee-related
obligations and liabilities not constituting indebtedness for borrowed money.
Indebtedness includes, without limiting the generality of the foregoing: (a)
obligations or liabilities of any Person that are secured by any lien, claim,
encumbrance, or security interest upon property owned by Borrower even though
Borrower has not assumed or become liable for the payment therefor; (b)
obligations or liabilities created or arising under any lease of real or
personal property, or conditional sale or other title retention agreement with
respect to property used and/or acquired by Borrower, even though the rights and
remedies of the lessor, seller and/or lender thereunder are limited to
repossession of such property; (c) Hedging Obligations and (d) Capitalized Lease
Liabilities.
-7-
<PAGE> 14
"Interest Period" means, with respect to any IBOR Loan or Fixed Rate
Loan, the period commencing on the borrowing date of such IBOR Loan or Fixed
Rate Loan or any applicable date of conversion or continuation and (a) with
respect to IBOR Loans, ending one, two, three or six months thereafter and (b)
with respect to Fixed Rate Loans, ending on such day as the Borrower shall
select not to exceed 30 days from the making of such Loan or the conversion to
such Loan, as selected by Borrower pursuant to Sections 2.4(c), 2.5 or 2.6, as
the case may be; provided that
(i) if such Interest Period would otherwise end on a day which is not a
Banking Day, such Interest Period shall end on the next following Banking Day
(unless with respect to IBOR Loans such next following Banking Day is the first
Banking Day of a calendar month, in which case such Interest Period shall end on
the immediately preceding Banking Day);
(ii) if with respect to IBOR Loans, there exists no day numerically
corresponding to the day such Loan was made in the month in which the last day
of such Interest Period would otherwise fall, such Interest Period shall end on
the last Banking Day of such month; and
(iii) Borrower shall not be permitted to select an Interest Period that
ends on a date later than the Termination Date.
"Investment" of any Person means, without duplication, (a) any
investment, made in cash or by delivery of any kind of property or asset, in any
other Person, whether by acquisition of shares of stock or similar interest,
Indebtedness or other obligation or security, or by loan, advance or capital
contribution, or otherwise, (b) any Guarantee Liability of such Person and (c)
any ownership or similar interest held by such Person in any other Person. The
amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property.
"Letter of Credit" means a standby or commercial letter of credit issued
by Bank pursuant to an Application and for the account of Borrower, in such form
and containing such terms as Bank shall require.
"Letter of Credit Commitment" means the obligation of Bank to issue
Letters of Credit in accordance with the terms of Section 2.1(b)
"Letter of Credit Facility Amount" means the lesser of (a) $3,000,000
minus the aggregate of all drawings which have been honored but have not been
reimbursed under any Letter of Credit or (b) an amount equal to the Revolving
Loan Commitment minus the outstanding principal amount of all Revolving Loans.
-8-
<PAGE> 15
"Letter of Credit Liabilities" means, at any time of determination, but
without duplication, an amount equal to the sum of (a) the aggregate amount
available to be drawn under outstanding Letters of Credit plus (b) the aggregate
amount of all drawings which have been honored but have not been reimbursed
under any Letter of Credit.
"Liabilities" means all obligations and liabilities of Borrower to Bank
(including, without limitation, all Letter of Credit Liabilities, Hedging
Obligations, debts, claims, and Indebtedness) whether primary or secondary,
direct or indirect, absolute or contingent, fixed or otherwise, heretofore, now
and/or from time to time hereafter owing, due or payable, however evidenced,
created, incurred, acquired or owing and however arising, whether under this
Agreement or the Other Agreements (hereinafter defined), or by oral agreement or
operation of law or otherwise.
"Lien" means any mortgage, pledge, hypothecation, judgment lien or
similar legal process, title retention lien, or other lien, encumbrance or
security interest, including, without limitation, the interest of a vendor under
any conditional sale or other title retention agreement and the interest of a
lessor under any Capitalized Lease.
"Loan" is defined in Section 2.1.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries taken
as a whole; (b) a material impairment of the ability of any Borrower to perform
under this Agreement or any Other Agreement; or (c) a material adverse effect
upon the legality, validity, binding effect or enforceability against the
Borrower of this Agreement or any Other Agreement.
"Non-Domestic Inventory" means Inventory which does not constitute
Domestic Inventory.
"Note" and "Revolving Note" means the promissory note of the Borrower
referred to in Section 3.1 hereof.
"Obligor" means any Person who is and/or may become obligated to
Borrower under or on account of any Account.
"Occupational Safety and Health Law" means the Occupational Safety and
Health Act of 1970 and any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to or
imposing liability or standards of conduct concerning employee health and/or
safety.
"Other Agreements" means each Application, the Note, the Patent and
Trademark Assignment, the Supplemental Documentation, and any agreements,
instruments and documents, including without limitation guaranties, pledges,
powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other written matter
-9-
<PAGE> 16
heretofore, now and/or from time to time hereafter executed by and/or on behalf
of Borrower and delivered to Bank.
"Patent and Trademark Assignment" is defined in Section 5.2.
"Payment Date" means (a) with respect to any IBOR Loan or Fixed Rate
Loan, the last day of each Interest Period with respect thereto and, with
respect to IBOR Loans if such Interest Period is in excess of three months, the
day three months after the commencement of such Interest Period and thereafter
the last day of the Interest Period with respect thereto; (b) with respect to
any Adjusted Reference Rate Loan, the last day of each month commencing on the
first such date to occur after an Adjusted Reference Rate Loan is made or an
IBOR Loan or a Fixed Rate Loan is converted into such Adjusted Reference Rate
Loan; and (c) as to the nonuse fee, the last day of each calendar quarter,
commencing on the first such date to occur after the date hereof.
"Permitted Encumbrances" means (a) Liens for current Charges not
delinquent or for Charges being contested in good faith, by appropriate
proceedings and with respect to which the Borrower is maintaining adequate
reserves if required in accordance with GAAP, (b) Liens which arise in the
ordinary course of business for sums not due or sums which the Borrower is
contesting in good faith, by appropriate proceedings and with respect to which
the Borrower is maintaining adequate reserves if required in accordance with
GAAP, but which do not involve any deposits, advances or Indebtedness or the
deferred purchase price of property or services, (c) Liens granted by any
Subsidiary to secure such Subsidiary's Indebtedness (if any) to the Borrower, or
(d) Liens granted to, or in favor of, the Bank.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (whether national, federal, state,
county, city, municipal or otherwise, including without limitation, any
instrumentality, division, agency, body or department thereof).
"Reference Rate" means the rate of interest publicly announced from time
to time by Bank as its reference rate. The Reference Rate is set by Bank based
on various factors, including Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point in pricing some
loans. The Bank may price loans to its customers at, above or below the
Reference Rate. Any change in the Reference Rate will take effect at the opening
of business on the day specified in the public announcement of a change in the
Bank's Reference Rate.
"Restructuring Charges" means all costs, expenses and other charges paid
or incurred by the Borrower in connection with the write-down of any fixed
assets, accounts receivable, intangibles or inventory, severance and employee
benefit costs, costs relating to the disposition of assets, and all other
special charges paid or incurred in connection with the discontinuation of
Borrower's North American One For All business, as more fully described in
Borrower's Annual Report on SEC Form 10-K dated March 30, 1998.
-10-
<PAGE> 17
"Revolving Loan" is defined in Section 2.1(a).
"Revolving Loan Commitment" is defined in Section 2.1(a).
"Special Collateral" is defined in Section 5.7.
"Stock" means all shares, interests, participants or other equivalents
(however designated) of or in a corporation, whether or not voting, including
but not limited to common stock, warrants, preferred stock, convertible
debentures and all agreements, instruments and documents convertible, in whole
or in part, into any one or more or all of the foregoing.
"Subsidiary" means any Person at least a majority of whose issued and
outstanding Stock or other ownership interests now or at any time or times
hereafter is owned by Borrower or Parent, as the case may be, and/or one or more
of their respective Subsidiaries.
"Supplemental Documentation" is defined in Section 5.2.
"Termination Date" is defined in Section 2.1(a).
"UCC" means the Uniform Commercial Code as from time to time in effect
in the State of Illinois or other applicable jurisdiction.
"Unmatured Event of Default" means any event which if it continues
uncured will, with lapse of time or notice or lapse of time and notice,
constitute an Event of Default.
Except as otherwise defined in this Agreement or the Other Agreements,
all words, terms and/or phrases used herein and therein shall be defined by the
applicable definition therefor (if any) in the UCC.
ARTICLE II
COMMITMENTS OF THE BANK; BORROWING PROCEDURES
SECTION 2.1 Commitments. Subject to the terms and conditions of this
Agreement, Bank agrees:
(a) Revolving Loan Commitment. To make loans to Borrower (herein
collectively called the "Revolving Loans" and individually called a
"Revolving Loan") on a revolving basis from time to time from the
Effective Date to the Termination Date, in such amounts as Borrower may
from time to time request; provided that the aggregate principal amount
of all Revolving Loans from time to time outstanding shall not exceed
$15,000,000 minus the aggregate amount of all Letter of Credit
Liabilities. The foregoing commitment is herein called the "Revolving
Loan Commitment". The Revolving Loan Commitment shall terminate on the
date which is the earlier of (i)
-11-
<PAGE> 18
_____________, 2001 or (ii) if sooner, the date upon which the
Commitments are terminated pursuant to Section 14.2 hereof (the
"Termination Date"). Subject to this Agreement, Revolving Loans which
have been repaid may be reborrowed.
(b) Letter of Credit Commitment. To issue standby or commercial
Letters of Credit from time to time on any Banking Day from the
Effective Date to the Banking Day immediately prior to the Termination
Date in an aggregate outstanding amount not exceeding the Letter of
Credit Facility Amount. Each Letter of Credit shall be issued pursuant
to an Application and shall be subject to the applicable provisions of
Section 3 hereof.
The Revolving Loans are herein collectively called the "Loans" and individually
called a "Loan" and the Revolving Loan Commitment and the Letter of Credit
Commitment are herein collectively called the "Commitments" and individually
called a "Commitment".
SECTION 2.2 Absence of Defaults. Each request for a Revolving Loan or
any Letter an Credit shall constitute an automatic warranty and representation
by Borrower to Bank that there does not then exist an Event of Default or an
Urunatured Event of Default on the date of such request and on the date of
receipt of the proceeds of such Loan or such Letter of Credit.
SECTION 2.3 Disbursements to Other Persons. Borrower hereby authorizes
and directs Bank to disburse, for and on behalf of Borrower and for Borrower's
account, each Letter of Credit and the proceeds of Loans made by Bank to
Borrower pursuant to this Agreement to such Person or Persons as Borrower or any
Person specified in writing by Borrower shall direct in writing.
SECTION 2.4 Borrowing Procedure.
(a) Adjusted Reference Rate Loans. Each request for a proposed borrowing
of an Adjusted Reference Rate Loan shall be made on a Banking Day upon written
or telephonic notice from Borrower received by Bank prior to 2:00 p.m., Chicago,
Illinois time, on such Banking Day. Such notice shall specify (i) the borrowing
date (which shall be a Banking Day) and (ii) the amount of such Loan. Subject to
the satisfaction of the applicable conditions precedent set forth herein, Bank
shall pay over such funds to Borrower on the requested borrowing date. Each
Adjusted Reference Rate Loan shall be in a minimum amount of $100,000 and an
integral multiple of $100,000.
(b) IBOR Loans. Each request for a proposed borrowing of an IBOR Loan
shall be made upon at least two (2) Banking Days' prior written or telephonic
notice from Borrower received by the Bank prior to 2:00 p.m., Chicago, Illinois
time. Such notice shall specify (i) the borrowing date (which shall be a Banking
Day), (ii) the amount of such Loan, and (iii) the initial Interest Period for
such Loan. Subject to the satisfaction of the applicable conditions precedent
set forth herein, the Bank shall pay over such funds to Borrower on the
requested borrowing
-12-
<PAGE> 19
date. Each IBOR Loan shall be in a minimum amount of $500,000 and an integral
multiple of $100,000.
(c) Fixed Rate Loans. Each request for a proposed borrowing of a Fixed
Rate Loan shall be made on a Banking Day upon written or telephonic notice from
Borrower received by the Bank prior to 2:00 p.m., Chicago, Illinois time. Such
notice shall specify (i) the borrowing date (which shall be a Banking Day), (ii)
the amount of such Loan, and (iii) the initial Interest Period for such Loan.
Subject to the satisfaction of the applicable conditions precedent set forth
herein, the Bank shall pay over such funds to Borrower on the requested
borrowing date. Each Fixed Rate Loan shall be in a minimum amount of $10,000 and
an integral multiple of $1,000.
SECTION 2.5 Various Types of Loans. On the terms and subject to the
conditions of this Agreement, all or any portion of the Loans shall be
maintained as either Adjusted Reference Rate Loans, IBOR Loans, Fixed Rate Loans
or combinations thereof (each a "type" of Loan), as Borrower shall specify. Not
more than 5 IBOR Loans having different Interest Periods shall be outstanding at
any one time. Not more than 3 Fixed Rate Loans having different Interest Periods
shall be outstanding at any one time.
SECTION 2.6 Continuation and Conversion of Loans. Borrower may elect to
(i) continue any outstanding IBOR Loan or Fixed Rate Loan from the then current
Interest Period for such Loan into a subsequent Interest Period to begin on the
last day of such current Interest Period or (ii) convert all or any part
(subject to the limits set forth below) of any outstanding IBOR Loan or Fixed
Rate Loan into a different type of Loan by giving Bank prior written or
telephonic notice of such continuation or conversion by 2:00 p.m., Chicago time,
(a) in the case of conversion into an Adjusted Reference Rate Loan, on the day
of such conversion and (b) in the case of continuation of or conversion into an
IBOR Loan or Fixed Rate Loan, at least one Banking Day with respect to Fixed
Rate Loans and three Banking Days with respect to IBOR Loans prior to the date
of such continuation or conversion; provided that any conversion of an IBOR Loan
or Fixed Rate Loan on a day other than the last day of an Interest Period
therefor shall be subject to the provisions of Section 15.3. Each such notice
shall specify (i) the effective date of continuation or conversion (which shall
be a Banking Day), (ii) the IBOR Loan or Fixed Rate Loan (or portion thereof) to
be continued or converted and (iii) if applicable, the Interest Period for such
IBOR Loan or Fixed Rate Loan after giving effect to such continuation or
conversion. Absent timely notice of continuation or conversion, each IBOR Loan
or Fixed Rate Loan shall automatically convert to an Adjusted Reference Rate
Loan on the last day of the current Interest Period or at any time an Event of
Default exists.
ARTICLE III
NOTE EVIDENCING LOANS; REPAYMENTS AND RECORD KEEPING
SECTION 3.1 Revolving Note. The Revolving Loans shall be evidenced by a
promissory note (herein called the "Note" or "Revolving Note") substantially in
the form set forth as Exhibit A, with appropriate insertions, dated the date
hereof, payable to the order of
-13-
<PAGE> 20
Bank in the maximum principal amount of $15,000,000, which Note shall mature and
be payable in full on the Termination Date.
SECTION 3.2 Voluntary Repayments. In addition to the application of
collections to the Liabilities contemplated by Article VI, Borrower may from
time to time, on any Banking Day voluntarily repay the principal of the
Revolving Loans in whole or in part without any premium or penalty, except as
contemplated by Article XV; provided, however, that any partial repayment of
principal shall be in a minimum amount of $500,000 and in an integral multiple
of $100,000. Borrower shall promptly confirm any telephonic notice of repayment
in writing.
SECTION 3.3 Recordkeeping. Bank shall record in its records the date
and amount of each Loan made and Letter of Credit issued hereunder, each
repayment thereof and the other information provided for thereon. The aggregate
unpaid principal amount so recorded shall be rebuttable presumptive evidence of
the principal amount owing and unpaid on the Note and any Letter of Credit. The
failure to so record any such information shall not however limit or otherwise
affect the obligations of Borrower hereunder, under the Note or any Application
to pay the principal amount of all Revolving Loans, Letters of Credit or any
other of the Liabilities.
ARTICLE IV
INTEREST, FEES AND LETTERS OF CREDIT
SECTION 4.1 Interest, Etc. Borrower hereby promises to pay interest on
the unpaid principal amount of any Loan for the period commencing on the date
such Loan is made until such Loan is paid in full, as follows:
(a) with respect to any portion of the Loan being maintained as Adjusted
Reference Rate Loan, at a rate per annurn equal to the Adjusted Reference Rate
from time to time in effect;
(b) with respect to any portion of the Loan being maintained as an IBOR
Loan, at a rate per annum equal to the IBOR Rate (Adjusted) applicable to each
Interest Period for such Loan plus the Applicable Margin; and
(c) with respect to any portion of the Loan being maintained as a Fixed
Rate Loan, at a rate per annurn equal to the Fixed Rate applicable to each
Interest Period for such Loan plus the Applicable Margin.
(d) with respect to all Loans at any time any Event of Default shall
exist, at a rate per annum equal to the Adjusted Reference Rate in effect from
time to time plus two percent (2.0%)
SECTION 4.2 Nonuse Fee. The Borrower agrees to pay to the Bank a nonuse
fee equal to the product of the Applicable Margin times the daily average of the
unused amount of
-14-
<PAGE> 21
the Revolving Loan Commitment during the period from and including the Effective
Date to and including the Termination Date. Such nonuse fee shall be payable on
each Payment Date and on the Termination Date for any period then ending for
which such nonuse fee shall not have been paid.
SECTION 4.3 Closing Fee. Concurrently with its execution and delivery of
this Agreement, the Borrower shall pay to Bank, in full, a nonrefundable closing
fee of $25,000.
SECTION 4.4 Computation of Interest and Fees. Interest, the nonuse fee
set forth in Section 4.2 and the letter of credit fee set forth in Section 4.6
shall be computed on the actual number of days elapsed on the basis of a year
consisting of 360 days. The interest rate applicable to each Adjusted Reference
Rate Loan shall change simultaneously with each change in the Adjusted Reference
Rate.
SECTION 4.5 Payment Dates for Interest. Interest shall be payable, in
arrears, on each Payment Date.
SECTION 4.6 Letter of Credit Fees. The Borrower hereby agrees to pay to
Bank a letter of credit fee with respect to all standby letters of credit (but
not with respect to commercial letters of credit) calculated upon the aggregate
amount available to be drawn under outstanding standby Letters of Credit at a
per annum rate equal to 50% of the Applicable Margin with respect to IBOR
Loans. Such fee shall be payable, in arrears, on each Payment Date and on the
Termination Date for any period then ending for which such fee shall not have
been paid following the issuance of a standby Letter of Credit. In addition to,
and not in lieu of, the foregoing, Borrower hereby agrees to pay to Bank, upon
demand from time to time, all fees and administrative expenses of Bank in
connection with the issuance, amendment, maintenance, modification (if any) and
administration of each Letter of Credit (whether standby or commercial Letters
of Credit), in accordance with Bank's standard schedule of fees as in effect
from time to time.
SECTION 4.7 Request for Issuance of Letters of Credit. From time to
time, upon receipt by Bank of a properly completed Application for a Letter of
Credit, together with such other documents, instruments and/or agreements as
Bank may reasonably require, Bank shall issue a Letter of Credit on such terms
as have been requested by Borrower and are consistent with this Agreement and
satisfactory to Bank. Notwithstanding the foregoing, Bank shall not be required
to issue any Letter of Credit if, before or after giving effect to the issuance
of such Letter of Credit (a) the Letter of Credit Liabilities exceed or would
exceed the Letter of Credit Facility Amount or (b) an Event of Default or an
Unmatured Event of Default exists or would result therefrom.
SECTION 4.8 Letter of Credit Provisions. Each standby Letter of Credit
shall, by its terms, expire on a date (its "Expiry Date") which is not later
than 365 days from its date of issuance. Each commercial Letter of Credit shall,
by its terms, expire on a date (its "Expiry Date") which is not later than 180
days from its date of issuance. As long as no Event of
-15-
<PAGE> 22
Default or Unmatured Event of Default then exists, by delivery to Bank of a
written request therefor at least thirty (30) days prior to the Expiry Date of
any Letter of Credit, Bank shall extend the Expiry Date of such Letter of Credit
for an additional period not to exceed 365 days in the case of standby Letters
of Credit, and 180 days in the case of commercial Letters of Credit, from its
then Expiry Date. Any Letter of Credit which has an Expiry Date on or after the
Termination Date must be secured by cash collateral or other collateral
acceptable to the Bank in an amount not less than the stated amount of such
Letter of Credit.
SECTION 4.9 Disbursements. Bank will notify Borrower promptly of the
presentment for payment of any Letter of Credit, together with notice of the
date (a "Disbursement Date") such payment shall be made. Subject to the terms
and provisions of such Letter of Credit, Bank shall make such payment to the
beneficiary (or its designee) of such Letter of Credit. In the event Bank shall
make payment of any Letter of Credit prior to 5:00 p.m., Chicago, Illinois time
on any Disbursement Date, provided there are sufficient available funds in the
Collateral Proceeds Account (as determined pursuant to Section 6.4 hereof) on
the Disbursement Date, Bank shall charge such Account on the Disbursement Date
in the amount so paid by the Bank with respect to such Letter of Credit and
interest shall not be payable with respect to such amount. Subject to Section
4.10, if the available funds in the Collateral Proceeds Account on the
Disbursement Date are insufficient to reimburse the Bank for the amount so paid
with respect to any Letter of Credit, such Account shall be so charged on the
next Business Day immediately following the Disbursement Date when sufficient
available funds have been deposited in the Collateral Proceeds Account and,
subject to Section 4.l(d), interest shall be payable and so charged to the
Account for the period from, and including, the Disbursement Date to, but not
including, the date of such reimbursement at the then applicable Fixed Rate.
SECTION 4.10 Reimbursement By Borrower of Drawings Under Letters of
Credit. Borrower irrevocably agrees to immediately reimburse Bank, on demand,
and without setoff, protest, defense or counterclaim of any kind, for each
payment made by Bank under or pursuant to any Letter of Credit. Borrower's
obligation to reimburse Bank for payments and disbursements made by Bank under
any Letter of Credit shall be absolute and unconditional under, other than with
respect to Bank's gross negligence or willful misconduct, irrespective of any
setoff, counterclaim or defense to payment which Borrower may have or have had
against Bank or any other Person, including, without limitation, (a) any defense
based on the failure of the demand for payment under such Letter of Credit, (b)
any draft, demand or certificate or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient, (c) the
legality, validity, regularity or enforceability of such Letter of Credit, (d)
the identity of the transferee of such Letter of Credit, and (e) the sufficiency
of any transfer if such Letter of Credit is transferable. Borrower assumes all
risks of the acts or omissions of the user of any Letters of Credit and all
risks of the misuse of a Letter of Credit other than due to Bank's gross
negligence, or willful misconduct. Neither Bank nor any of its correspondents
shall be responsible, (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document specified in an Application even if
it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent, or forged, (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
Letter of Credit or
-16-
<PAGE> 23
any of the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason, (iii) for
errors, omissions, interruptions or delays in transmission of delivery of any
messages, by mail, cable, telegraph, telex or otherwise, (iv) for any error,
neglect, default, suspension or insolvency of any correspondents of Bank, (v)
for errors in translation or for errors in interpretation of technical terms not
constituting gross negligence or willful misconduct, (vi) for any loss or delay,
in the transmission or otherwise, of any such document or draft or of proceeds
thereof, (vii) for the misapplication by the beneficiary of a Letter of Credit
or of the proceeds of any drawing under such Letter of Credit, (viii) for any
consequences arising from causes beyond the control of Bank including, without
limitation, any act or omission, rightful or wrongful, of any present or future
de jure or de facto governmental authority or (ix) for any other circumstances
whatsoever, in making or failing to make payment under any Letter of Credit,
except only that Borrower shall have a claim against Bank, and Bank shall be
liable to Borrower, to the extent of any direct, as opposed to consequential,
damages suffered by Borrower which Borrower proves were caused by Bank's gross
negligence or willful misconduct. None of the above shall affect, impair or
prevent the vesting of any of the rights or powers of Bank. Bank shall have the
right to transmit the terms of any Letter of Credit without translating them.
ARTICLE V
COLLATERAL; GENERAL TERMS
SECTION 5.1 Collateral. To secure the prompt payment to Bank of the
Liabilities and the prompt, full and faithful performance by Borrower of all of
the provisions to be kept, observed or performed by Borrower under this
Agreement and/or the Other Agreements, Borrower grants to Bank a security
interest in and to all of Borrower's now existing and/or owned and hereafter
arising and/or acquired: (a) accounts, chattel paper, contract rights,
instruments, documents, patents, trademarks, tradenames, and general intangibles
(sometimes hereinafter individually and collectively referred to as "Accounts"),
and all goods whose sale, lease or other disposition by Borrower has given rise
to Accounts and have been returned to or repossessed or stopped in transit by
Borrower; (b) inventory ("Inventory"); (c) goods (other than Inventory),
equipment, machinery, vehicles and fixtures, together with all accessions
thereto and all substitutions, renewals, improvements and replacements of and
additions thereto (sometimes hereinafter individually and collectively referred
to as "Equipment"); (d) monies, reserves, deposits, deposit accounts and
interest or dividends thereon, securities, cash, cash equivalents and other
property now or at any time or times hereafter in the possession or under the
control of Bank or its bailee; (e) books and records and (f) all products and
proceeds of the foregoing including without limitation proceeds of insurance
policies insuring the foregoing (all of the foregoing personal property and any
property pursuant to which a lien is granted in favor of the Bank pursuant to
the Supplemental Documentation is hereinafter sometimes individually and
sometimes collectively referred to as "Collateral"). Borrower shall make
appropriate entries upon its financial statements and its books and records
disclosing Bank's security interest in the Collateral.
-17-
<PAGE> 24
SECTION 5.2 Further Assurances. Borrower shall execute and/or deliver to
Bank, at any time and from time to time hereafter at the request of Bank, all
agreements, instruments, documents and other written matter (hereinafter,
individually and/or collectively, referred to as "Supplemental Documentation"),
including but not limited to a Patent and Trademark Collateral Assignment
substantially in the form of Exhibit B hereto (the "Patent and Trademark
Assignment"), that Bank reasonably may request, in a form and substance
acceptable to Bank, to perfect and maintain perfected Bank's security interest
in the Collateral and to consummate the transactions contemplated in or by this
Agreement and the Other Agreements. Borrower, irrevocably, hereby makes,
constitutes and appoints Bank (and all Persons designated by Bank for that
purpose) as Borrower's true and lawful agent (and attorney-in-fact) to sign the
name of Borrower on the Supplemental Documentation and to deliver the
Supplemental Documentation to such Persons as Bank in its sole and absolute
discretion, may elect. Borrower agrees that a carbon, photographic or
photostatic copy, or other reproduction, of this Agreement or of any financing
statement, shall be sufficient as a financing statement.
SECTION 5.3 Inspections. Bank (by any of its officers, employees and/or
agents) shall have the right, upon reasonable notice, at any time or times
during Borrower's usual business hours, to inspect the Collateral and all
related records (and the premises upon which it is located) and to verify the
amount and condition of or any other matter relating to the Collateral. All
costs, fees and expenses incurred by Bank, or for which Bank has become
obligated, in connection with such inspection and/or verification shall
constitute part of the Liabilities, payable by Borrower to Bank on demand.
SECTION 5.4 Perfection; Locations. Borrower warrants and represents to,
and covenants with, Bank that: (a) Bank's security interest in the Collateral is
now and at all times hereafter shall be perfected (other than with respect to
Non-Domestic Inventory, but subject to this Section 5.4) and has and shall at
all times have a first priority, subject to Liens permitted by Section 12.15;
(b) the offices and/or locations where Borrower keeps the Collateral and
Borrower's books and records concerning the Collateral are at the locations
specified on Schedule 5.4 hereto, and Borrower shall not remove such books and
records and/or the Collateral therefrom and shall not keep any of such books and
records and/or the Collateral at any other office or location unless Borrower
gives Bank written notice thereof at least ten days prior thereto and the same
is within the continental United States of America (unless such Collateral or
books and records are located outside of the United States of America as of the
date hereof as disclosed on Schedule 5.4, in which event any change in the
locations of such Collateral or books and records may be made to another
location outside of the United States of America with the Bank's prior written
consent, which shall not be unreasonably withheld); and (c) the address of the
Borrower's chief executive office is set forth on Schedule 5.4. Borrower, by
written notice delivered to Bank at least ten days prior thereto, shall advise
Bank of Borrower's opening of any new office or place of business, any change in
the location of its chief executive office, or its closing of any existing
office or place of business and any new office or place of business shall be
within the continental United States of America. Borrower hereby covenants and
agrees that upon the occurrence of any Event of Default, upon the request of
Bank made at its sole and absolute discretion, Borrower shall take such actions
as shall be
-18-
<PAGE> 25
necessary or desirable in order to perfect the Bank's security interest and Lien
in and to the Borrower's Non-Domestic Inventory. Borrower shall provide evidence
of such perfection, including opinions of counsel, as Bank shall require and all
costs and expenses of such perfection, including recording fees and taxes,
counsel fees and expenses, and all other amounts shall be payable by Borrower.
All costs, fees and expenses which are incurred by Bank in connection with any
matter referred to in this Section 5.4 shall be part of the Liabilities, payable
by Borrower to Bank on demand.
SECTION 5.5 Power-of-Attorney. Effective at any time that there shall be
an Event of Default, Bank, in its sole and absolute discretion, may take control
of, in any manner, and may endorse Borrower's name to any of the items of
payment or proceeds of any Collateral above and, pursuant to the provisions of
this Agreement, Bank shall apply the same to and on account of the Liabilities.
For the purposes of this Section, Borrower, irrevocably, hereby makes,
constitutes and appoints Bank (and all persons designated by Bank for that
purpose) as Borrower's true and lawful agent (and attorney-in-fact), with power,
without notice to Borrower, to take any such actions.
SECTION 5.6 Assignments. Bank, in its sole and absolute discretion,
without waiving or releasing any obligation, liability or duty of Borrower under
this Agreement or the Other Agreements or any Event of Default, may at any time
or times hereafter, but shall be under no obligation to, pay, acquire and/or
accept an assignment of any security interest, lien, encumbrance or claim
asserted by any Person against the Collateral. All sums paid by Bank in respect
thereof and all costs, fees and expenses, including reasonable attorneys' fees,
court costs, expenses and other charges relating thereto incurred by Bank on
account thereof shall be part of the Liabilities payable by Borrower to Bank on
demand.
SECTION 5.7 Special Collateral. Immediately upon Borrower's receipt of
that portion of the Collateral evidenced by an agreement, instrument and/or
document other than as relates to Accounts as such ("Special Collateral")
Borrower shall mark the same to show that such Special Collateral is subject to
a security interest in favor of Bank and shall deliver the original thereof to
Bank, together with appropriate endorsement and/or other specific evidence of
assignment (in form and substance acceptable to Bank).
SECTION 5.8 Waivers, etc. No authorization given by Bank pursuant to
this Agreement or the Other Agreements to sell any specified portion of
Collateral or any items thereof, and no waiver by Bank in connection therewith
shall establish a custom or constitute a waiver of any prohibition contained in
this Agreement against such sales, with respect to any portion of the Collateral
or any item thereof not covered by said authorization.
SECTION 5.9 Set-off. Borrower agrees that the Bank shall have all rights
of setoff and bankers' liens provided under applicable law, and in addition
thereto, Borrower agrees that at any time (a) any amount owing by Borrower under
or in connection with this Agreement or the Note is then due to the Bank or (b)
any Event of Default exists Bank may apply to the
-19-
<PAGE> 26
payment of such amount any and all balances, credits, deposits, accounts or
monies of the Borrower then or thereafter held by the Bank.
SECTION 5.10 Bank Accounts. Except as the Bank may expressly agree,
Borrower agrees to maintain, and to cause its Domestic Subsidiaries to maintain,
with the Bank all of its and their depository accounts. The Bank shall have a
lien on and security interest in all such accounts of Borrower. Borrower shall
obtain Bank's prior written approval of all disbursements or other accounts to
be maintained by Borrower with any financial institution other than Bank.
Nothing contained in this Section 5.10 shall be deemed to restrict the right of
Borrower's Subsidiaries, other than Domestic Subsidiaries, to open depository
accounts with banks or financial institutions other than Bank.
ARTICLE VI
APPLICATION OF COLLECTIONS TO LIABILITIES
SECTION 6.1 Collateral Proceeds Account and Lock Boxes. Borrower shall
establish and shall maintain a special account at Bank's 231 South LaSalle
Street, Chicago, Illinois office (the "Collateral Proceeds Account") into which
are deposited all checks, drafts, cash and other remittances in payment or as
proceeds of, or on account of, its Accounts or Collateral which are received in
the Lock Boxes referred to below. Borrower shall establish and shall maintain
one or more post office lock box arrangements acceptable to Bank (each, a "Lock
Box") into which are received payments from such Borrower's Obligors.
SECTION 6.2 Bank as Attorney and Agent-in-Fact. In addition to any other
agreements between Bank and Borrower regarding the Lock Boxes, Borrower hereby
appoints Bank, or any Person whom Bank may from time to time designate, as
Borrower's attorney and agent-in-fact with power to open and have access to each
Lock Box, to remove mail and any checks, drafts, cash and other remittances in
payment or as proceeds of, or on account of, its Accounts or other Collateral
which are received in each such Lock Box, and to deposit any such drafts, cash
and other remittances into the Collateral Proceeds Account. Neither Bank nor any
of the directors, officers, employees or agents of Bank will be liable for any
acts of commission or omission on or for any error in judgment or mistake of
fact or law, unless the same shall have resulted from gross negligence or
willful misconduct.
SECTION 6.3 Application of Proceeds. Borrower hereby authorizes Bank,
and Bank will, subject to the provisions of this Section 6.3 apply the whole or
any part of any amounts deposited in Borrower's Collateral Proceeds Account
against the Liabilities in such order of application as Bank may determine,
provided, however, that no check, draft or other instrument deposited in a
Collateral Proceeds Account and applied to any Liabilities shall constitute
final payment to Lender unless and until such item of payment has actually been
collected. All available balances in the Collateral Proceeds Account (determined
in accordance with Section 6.4, below) in excess of the Liabilities shall be
credited to the Borrower's operating account at the Bank when and as such
amounts become available pursuant to Section 6.4.
-20-
<PAGE> 27
SECTION 6.4 Availability of Proceeds. Notwithstanding anything to the
contrary herein, for purposes of determining the Banking Day on which a check,
draft or other instrument deposited in a Collateral Proceeds Account is applied
to payment of any Liabilities,
(a) cash, wire transfers and other immediately available funds
shall be applied on the Banking Day actually received and deposited in
the Collateral Proceeds Account if received herein on or before 12:30
p.m., Chicago time on such Banking Day, otherwise on the next Banking
Day following receipt thereof;
(b) checks and other items of payment not constituting
immediately available funds shall be applied on the first Banking Day on
which such funds would be available to Lender if the drawee of such
check or other item used the same "availability schedules" as that used
by Bank; and
(c) Funds in the Collateral Proceeds Account are not available
if, in the reasonable determination of the Bank, they are subject to any
writ, levy, order or similar judicial or regulatory order or process.
SECTION 6.5 Other Provisions. Notwithstanding anything to the contrary
herein
(a) If the balances in the Collateral Proceeds Account are not
sufficient to pay Bank for any returned items, Borrower agrees to pay
Bank on demand the amount due Bank. If the balances in the Collateral
Proceeds Account are not sufficient to compensate Bank for any fees or
charges due Bank in connection with the Lock Boxes or the Collateral
Proceeds Account, Borrower agrees to pay Bank on demand the amount due
Bank.
(b) Borrower hereby authorizes Bank, without prior notice, from
time to time to debit any other account Borrower may have with Bank for
the amount or amounts due Bank under subsection (a).
(c) Borrower may not terminate this Article VI except with the
written consent of Bank or upon payment in full of the Liabilities and
termination of this Agreement.
(d) Bank will not be liable to Borrower for any expense, claim,
loss, damage or cost ("Damages") arising out of or relating to its
performance under this Agreement, other than those Damages which result
directly from its acts or omissions constituting negligence. In no event
will Bank be liable for any special, indirect, exemplary or
consequential damages, including but not limited to lost profits.
(e) Bank will be excused from failing to act or delay in acting,
and no such failure or delay shall constitute a breach of Article VI
hereof or otherwise give rise to any liability of Bank, if (i) such
failure or delay is caused by circumstances beyond Bank's reasonable
control, including but not limited to legal constraint, emergency
-21-
<PAGE> 28
conditions, action or inaction of governmental, civil or military
authority, fire, strike, lockout or other labor dispute, war, riot,
theft, flood, earthquake or other natural disaster, breakdown of public
or private or common carrier communications or transmission facilities,
equipment failure, or act, negligence or default of Borrower or (ii)
such failure or delay resulted from Bank's reasonable belief that the
action would have violated any guideline, rule or regulation of any
governmental authority.
(f) Borrower agrees that (i) it will not withdraw any monies
from the Collateral Proceeds Account until such time as Bank no longer
claims any interest in the Collateral Proceeds Account and the monies
deposited and to be deposited in the Collateral Proceeds Account and
(ii) it will not permit the Collateral Proceeds Account to become
subject to any other pledge, assignment, lien, charge or encumbrance of
any kind, nature or description, other than Bank's security interest
referred to herein.
ARTICLE VII
COLLATERAL; ACCOUNTS
SECTION 7.1 Representations and Warranties with respect to Accounts.
With respect to Accounts, except as otherwise disclosed by Borrower to Bank in
writing, and except as would, individually or in the aggregate, have a Material
Adverse Effect, Borrower warrants and represents to Bank that so long as this
Agreement shall remain in effect and any Liabilities remain outstanding: (a)
they are genuine, in all respects what they purport to be and are not evidenced
by a judgment or a negotiable instrument; (b) they represent undisputed, bona
fide transactions completed in accordance with the terms and provisions
contained in the invoices and other documents delivered to Bank with respect
thereto subject, however, to customary returns and disputed items arising in the
ordinary course of business; (c) the amounts thereof, and/or all invoices and
statements delivered to Bank with respect thereto, are actually and absolutely
owing to Borrower and are not contingent for any reason; (d) there are no
setoffs, counterclaims or disputes existing or asserted with respect thereto and
Borrower has not made any agreement with any Obligor thereof for any deduction
therefrom except a regular discount allowed by Borrower in the ordinary course
of its business for prompt payment; (e) there are no facts, events or
occurrences which in any way impair the validity or enforcement thereof or tend
to reduce the amount payable thereunder from the amount thereof which may be
shown on any invoices and statements delivered to Bank with respect thereto; (f)
to Borrower's knowledge, all Obligors have the capacity to contract and are
solvent; (g) the services furnished and/or goods sold giving rise thereto are
not subject to any lien, claim, encumbrance or security interest except that of
Bank; (h) Borrower has no knowledge of any fact or circumstance which would
impair the validity or collectibility thereof; and (i) to the best of Borrower's
knowledge, there are no proceedings or actions which are threatened or pending
against any Obligor which might result in any material adverse change in its
financial condition.
SECTION 7.2 Verification. Any of Bank's officers, employees or agents
shall have the right, at any time or times hereafter, in Bank's name or in the
name of a nominee of
-22-
<PAGE> 29
Bank, to verify the validity, amount or any other matter relating to any
Accounts by mail, telephone, telegraph or otherwise. All costs, fees and
expenses relating thereto which are incurred by Bank (or for which Bank becomes
obligated) shall be part of the Liabilities, payable by Borrower to Bank on
demand.
SECTION 7.3 Covenants with respect to Accounts. Unless Bank notifies
Borrower in writing to the contrary, Borrower shall: (a) promptly upon
Borrower's learning thereof, inform Bank, in writing, of any material delay in
Borrower's performance of any of its obligations to any Obligor and of any
assertion of any claims, offsets or counterclaims by any Obligor and of any
allowances, credits and/or other monies granted by Borrower to any Obligor other
than as may arise in the ordinary course of the Borrower's business and which
would not, individually or in the aggregate, result in a material adverse change
in the Borrower's business or financial condition taken as a whole or its
ability to pay the Liabilities; (b) not permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account, including any of the terms relating thereto
other than as may arise in the ordinary course of the Borrower's business and
which would not, individually or in the aggregate, result in a material adverse
change in the Borrower's business or financial condition taken as a whole or its
ability to pay the Liabilities; (c) promptly upon Borrower's receipt or learning
thereof, furnish to and inform Bank of all material adverse information relating
to the financial condition of any Obligor; and (d) keep all goods returned by
any Obligor and all goods repossessed or stopped in transit by Borrower from any
Obligor segregated from other property of Borrower, immediately notify Bank of
Borrower's possession of such goods, and hold the same as trustee for Bank until
otherwise directed in writing by Bank.
SECTION 7.4 Accounts and Special Collateral. Bank shall have the right,
at any time there shall exist any Event of Default, in its sole and absolute
discretion, upon notice thereof to Borrower: (a) to notify any or all Obligors
that the Accounts and Special Collateral have been assigned to Bank and that
Bank has a security interest therein; (b) to direct such Obligors to make all
payments due from them to Borrower upon the Accounts and Special Collateral
directly to Bank; (c) to enforce payment of and collect, by legal proceedings or
otherwise, the Accounts and Special Collateral in the name of Bank and Borrower;
and (d) to take control, in any manner, of any item of payment or proceeds
referred to Section 6.
SECTION 7.5 Power of Attorney. Effective at any time that there shall
exist any Event of Default, Borrower irrevocably hereby designates, makes,
constitutes and appoints Bank (and all Persons designated by Bank), as
Borrower's true and lawful agent (and attorney-in-fact), without notice to
Borrower and at such time or times hereafter as Bank, in its sole and absolute
discretion, may determine, in Borrower's or Bank's name: (a) to demand payment
of the Accounts and Special Collateral; (b) to enforce payment of the Accounts
and Special Collateral by legal proceedings or otherwise; (c) to exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts
and Special Collateral; (d) to settle, adjust, compromise, extend or renew the
Accounts and Special Collateral; (e) to settle, adjust or compromise any legal
proceedings brought to collect the Accounts and Special Collateral; (f) to
-23-
<PAGE> 30
sell or assign the Accounts and Special Collateral upon such terms, for such
amounts and at such time or times as Bank deems advisable; (g) to discharge and
release the Accounts and Special Collateral; (h) to take control, in any manner,
of any item of payment or proceeds referred to in Section 6; (i) to prepare,
file and sign Borrower's name on any notice of lien, assignment or satisfaction
of lien or similar document in connection with the Accounts and Special
Collateral; (j) to prepare, file and sign Borrower's name on any proof of claim
in bankruptcy or similar document against any Obligor; (k) to do all acts and
things necessary, in Bank's sole discretion, to fulfill Borrower's obligations
under this Agreement; (1) to endorse the name of Borrower upon any of the items
of payment or proceeds referred to in Section 6 and to deposit the same to the
account of Bank to and on account of the Liabilities; (m) to endorse the name of
Borrower upon any chattel paper, document, instrument, invoice, freight bill,
bill of lading or similar document or agreement relating to the Accounts and
Special Collateral; and (n) to sign the name of Borrower to verifications of the
Accounts and Special Collateral and notices thereof to Obligors.
SECTION 7.6 Records of Accounts. Borrower shall keep accurate and
complete records of its Accounts, which records shall be made available to Bank
at all times hereafter (during Borrower's customary business hours and upon
reasonable notice) for Bank's inspection, copying, verification or otherwise.
ARTICLE VIII
COLLATERAL; INVENTORY
SECTION 8.1 Inventory. Borrower warrants and represents to and covenants
with Bank that so long as this Agreement shall remain in effect and any
Liabilities remain outstanding and except as Bank may otherwise expressly agree
in writing: (a) Inventory shall be kept only at the locations set forth on
Schedule 5.4; (b) Borrower, immediately upon demand by Bank therefor, shall
execute and deliver to Bank such information relating to Inventory as Bank may
reasonably request; (c) Borrower does now keep and hereafter at all times shall
keep correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's costs therefor and selling price
thereof and the withdrawals therefrom and additions thereto all of which records
shall be available (during Borrower's usual business hours upon reasonable
notice), upon demand, to any of Bank's officers, employees or agents for
inspection and copying thereof; (d) all Inventory is now and hereafter at all
times shall be of good and merchantable quality, free from defects, other than
Inventory which becomes scrap or obsolete in the ordinary course of business;
(e) Domestic Inventory stored at Borrower's Cypress, California location or with
Cal-Switch, Carson, California; Phillips Sound & Vision, El Paso, Texas or
Cerritos Terminal Services, Anaheim, California or any other location containing
a material amount of Domestic Inventory (as reasonably determined by Bank) shall
at all times be subject to a third-party consent and waiver in form and
substance satisfactory to Bank (each a "Third-party Consent"); provided that the
Borrower shall have a reasonable period of time, not to exceed sixty (60) days
following the Effective Date, to deliver to Bank such Third-party Consents with
respect to the Domestic Inventory located at the four (4) specific locations
identified in this Section 8.1(e); and (f) any of Bank's officers, employees or
agents shall have
-24-
<PAGE> 31
the right, upon reasonable notice, now and at any time or times hereafter during
Borrower's usual business hours, to inspect and examine inventory and to check
and test the same as to quality, quantity, value and condition. Upon the
occurrence of any Event of Default, Bank, at its sole discretion, may require
the Borrower to provide Third-Party Consents with respect to all Domestic and
Non-Domestic Inventory. All costs, fees and expenses which are incurred by Bank
in connection with any matter referred to in this Section 8.1 (or which Bank
becomes obligated to pay) shall be part of the Liabilities, payable by Borrower
to Bank on demand.
SECTION 8.2 Sale of Inventory. Until an Event of Default, Borrower may
sell Inventory in the ordinary course of its business (which does not include a
transfer in partial or total satisfaction of Indebtedness). In no event shall
Borrower make any sale of Inventory which would cause a breach of Section 8.1.
SECTION 8.3 Responsibility for Inventory. Borrower shall be liable or
responsible for: (a) the safekeeping of Inventory; (b) any loss or damage
thereto or destruction thereof occurring or arising in any manner or fashion
from any cause; (c) any diminution in the value thereof; or (d) any act or
default of any carrier, warehouseman, bailee or forwarding agency thereof or
other person whomsoever.
ARTICLE IX
COLLATERAL EQUIPMENT
SECTION 9.1 Good Title. Borrower warrants and represents to Bank that
Borrower has good, indefeasible, and merchantable title, free and clear of all
liens, claims and encumbrances (other than Permitted Encumbrances), to, and
ownership of, all Equipment (other than Equipment leased by Borrower under
operating leases incurred in the ordinary course) and that all of such Equipment
is and shall be located on each of Borrower's places of business specified in
Schedule 5.4 and that Equipment shall be kept and/or maintained solely thereat.
SECTION 9.2 Maintenance of Equipment. Borrower shall keep and maintain
the Equipment in good operating condition and repair (normal wear and tear
excepted) and shall make all necessary replacements thereof and renewals thereto
so that the value and operating efficiency thereof shall at all times be
maintained and preserved. Borrower shall not permit any such items to become a
fixture to real estate or accession to other personal property.
SECTION 9.3 Certificates of Title, etc. Borrower, immediately on demand
by Bank, shall deliver to Bank any and all evidence of ownership of Equipment,
including, without limitation, certificates of title to and applications for
title to, any Equipment.
-25-
<PAGE> 32
ARTICLE X
INSURANCE AND CHARGES
SECTION 10.1 Insurance. Borrower, at its sole cost and expense, shall
keep and maintain: (a) the Collateral insured for the full insurable value
against loss or damage by fire, theft, explosion, sprinklers and all other
hazards and risks ordinarily insured against by other owners or users of such
properties in similar businesses: and (b) business interruption insurance and
public liability and property damage insurance relating to Borrower's ownership
and use of its assets. All such policies of insurance shall be in form and with
insurers recognized as adequate by prudent business persons and all such
policies shall be in such amounts as may be satisfactory to Bank. Upon request
of Bank, Borrower shall deliver at least annually to Bank, or sooner if
requested by Bank, the original (or certified) copy of each policy of insurance,
or a certificate of insurance, and evidence of payment of all premiums for each
such policy. Schedule 10.1 hereto sets forth a description of each of such
policies of insurance and evidence of payment therefor as of the date hereof.
Such policies of insurance (except those of public liability and property
damage) shall contain an endorsement, in a form and substance acceptable to
Bank, showing loss payable to Bank. Such endorsement or an independent
instrument furnished to Bank, shall provide that the insurance companies will
give Bank at least thirty days' written notice before any such policy or
policies of insurance shall be altered or cancelled and that no act or default
of Borrower or any other person shall affect the right of Bank to recover under
such policy or policies of insurance in case of loss or damage. Borrower shall
direct all insurers under such policies of insurance (except those of public
liability and property damage) that in the event of a loss or claim, to pay all
proceeds payable thereunder directly to Bank for deposit in the Collateral
Proceeds Account. During such time, if any, as there shall exist an Event of
Default, Borrower, irrevocably, makes, constitutes and appoints Bank (and all
officers, employees or agents designated by Bank) as Borrower's true and lawful
agent (and attorney-in-fact) for the purpose of making, settling and adjusting
claims under such policies of insurance, indorsing the name of Borrower on any
check, draft, instrument or other item of payment for the proceeds of such
policies of insurance and for making all determinations and decisions with
respect to such policies of insurance. In the event Borrower at any time or
times hereafter shall fail to obtain or maintain any of the policies of
insurance required above or to pay any premium in whole or in part relating
thereto, then Bank, without waiving or releasing any obligation or Event of
Default by Borrower hereunder, may at any time or times thereafter (but shall be
under no obligation to) obtain and maintain such policies of insurance and pay
such premiums and take any other action with respect thereto which Bank deems
advisable. All sums so disbursed by Bank, including reasonable attorneys' fees,
court costs, expenses and other charges relating thereto, shall be part of the
Liabilities, payable by Borrower to Bank on demand.
SECTION 10.2 Charges. (a) Borrower shall pay promptly, when due, all of
the Charges other than Permitted Encumbrances; and/or (b) Borrower shall not
permit the Charges to arise, or to remain, and will promptly discharge the same,
other than Permitted Encumbrances. In the event Borrower, at any time or times
hereafter, shall fail to pay the Charges or to obtain such discharges, Borrower
shall so advise Bank thereof in writing; Bank may, without waiving or releasing
any obligation or liability of Borrower hereunder or any
-26-
<PAGE> 33
Event of Default, in its sole and absolute discretion, at any time or times
thereafter, make such payment, or any part thereof, or obtain such discharge and
take any other action with respect thereto which Bank deems advisable. All sums
so paid by Bank and any expenses, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be part of the
Liabilities, payable by Borrower to Bank on demand.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
To induce the Bank to make each Loan and to issue each Letter of Credit,
Borrower makes the following representations and warranties, all of which shall
be true and correct as of the date each Loan is made and each Letter of Credit
is issued:
SECTION 11.1 Organization. Except as disclosed on Schedule 11.1,
Borrower and all of its Subsidiaries are corporations duly organized, validly
existing and in good standing under the laws of the jurisdictions of their
respective incorporation or formation. Borrower and all of its Subsidiaries are
in good standing and are duly qualified to do business in each jurisdiction
where, because of the nature of their respective activities or properties, such
qualification is required except where the failure to be so qualified has not
had not and could not reasonably be expected to have a Material Adverse Effect.
SECTION 11.2 Authorization. Borrower is duly authorized, has full
corporate power and authority, and holds all requisite governmental licenses,
permits and other approvals, to execute and deliver this Agreement, the Note,
and any Other Agreements and is and will continue to be duly authorized, have
full corporate power and authority and hold all requisite governmental licenses,
permits and other approvals necessary to borrow monies hereunder and to perform
its obligations under this Agreement, the Note and any such Other Agreements.
The execution, delivery and performance by Borrower of this Agreement, the Note,
and any Other Agreements and the borrowings hereunder, do not and will not
require any consent or approval of any Governmental Authority except any that
have been obtained and are in full force and effect or, as to which the failure
to obtain and/or maintain in effect has not had and could not reasonably be
expected to have a Material Adverse Effect.
SECTION 11.3 No Conflicts. The execution, delivery and performance by
Borrower of this Agreement, the Note, and any Other Agreements do not and will
not conflict with (a) any provision of law, (b) Borrower's articles of
incorporation and by-laws, (c) any agreement binding upon Borrower or (d) any
court or administrative order or decree applicable to Borrower, and do not and
will not require, or result in, the creation or imposition of any Lien on any
asset of Borrower (other than in favor of Bank) or any of its Subsidiaries.
SECTION 11.4 Validity and Binding Effect. This Agreement, the Note, and
any Other Agreements, when duly executed and delivered, will be legal, valid and
binding obligations of Borrower, enforceable against Borrower in accordance with
their respective terms,
-27-
<PAGE> 34
except as enforceability may be limited by bankruptcy, insolvency or other
similar laws of general application affecting the enforcement of creditors'
rights or by general principles of equity limiting the availability of equitable
remedies.
SECTION 11.5 No Default. Except as disclosed on Schedule 11.5, neither
Borrower nor any of its Subsidiaries is in default under any agreement or
instrument to which Borrower or such Subsidiary is a party or by which any of
their respective properties or assets is bound or affected, which default has
had or could reasonably be expected to have a Material Adverse Effect. No Event
of Default or Unmatured Event of Default has occurred and is continuing.
SECTION 11.6 Financial Statements. Borrower's audited financial
statements as at December 31, 1997 and unaudited consolidated financial
statements as at March 31, 1998, copies of which have been furnished to the
Bank, have been prepared in conformity with GAAP applied on a basis consistent
with that of the preceding fiscal year and period and present fairly the
consolidated financial condition of Borrower and its Subsidiaries as at such
dates and the results of their operations for the periods then ended, subject
(in the case of any interim financial statement) to year-end audit adjustments.
Since March 31, 1998, there has been no material adverse change in the financial
condition of Borrower, any of its Subsidiaries or Borrower and its Subsidiaries
taken as a whole.
SECTION 11.7 Insurance. In addition to the insurance maintained by the
Borrower pursuant to Section 10.1 hereof, Borrower and each of its Subsidiaries
maintains insurance to the extent and against such hazards and liabilities as is
commonly maintained by companies similarly situated and which is adequate to
insure Borrower and each of its Subsidiaries against risks which could
reasonably be expected to be encountered by it in the conduct of its business.
SECTION 11.8 Litigation; Continent Liabilities.
(a) Except for those referred to in Schedule 11.8 or disclosed
in the financial statements referred to in Section 11.6, no claims,
litigation, arbitration proceedings or governmental proceedings are
pending or, to the knowledge of the Borrower, overtly threatened against
or are affecting Borrower or any of its Subsidiaries, or any of their
respective properties, assets or revenues, the results of which has had
or could reasonably be expected to have a Material Adverse Effect.
(b) Other than any liability incident to the claims, litigation
or proceedings disclosed in Schedule 11.8, or disclosed in the financial
statements referred to in Section 11.6, neither Borrower nor any of its
Subsidiaries has any contingent liabilities which are material to
Borrower, any of its Subsidiaries or Borrower and its Subsidiaries taken
as a whole.
SECTION 11.9 Ownership of Assets; Liens. Borrower and each of its
Subsidiaries owns good and marketable title to all of its properties and assets,
real and personal, tangible and
-28-
<PAGE> 35
intangible, of any nature whatsoever which are material to the operation of its
respective business. None of such property, revenues or assets of the Borrower
or any of its Subsidiaries is subject to any Lien except: (a) Liens disclosed in
the financial statements referred to in Section 11.6, (b) Liens listed on
Schedule 11.9, and (c) Permitted Encumbrances.
SECTION 11.10 Subsidiaries. As of the date hereof, Borrower has no
Subsidiaries except as listed on Schedule 11.10. Schedule 11.10 sets forth, for
each Subsidiary of Borrower, a complete and accurate statement as of the date
hereof of (a) Borrower's and each such Subsidiary's percentage ownership of each
of their respective Subsidiaries and (b) the country, state or other
jurisdiction of formation or incorporation of each such Subsidiary.
SECTION 11.11 Partnerships: Joint Venture. Neither Borrower nor any of
its Subsidiaries is a partner or joint venturer in any partnership or joint
venture other than the partnerships and joint ventures listed on Schedule 11.11.
Schedule 11.11 sets forth, for each partnership or joint venture that is not a
Subsidiary of Borrower, a complete and accurate statement as of the date hereof
of (a) Borrower's and each Subsidiary's percentage ownership of each such
partnership or joint venture and (b) the country, state or other jurisdiction of
formation or incorporation, as appropriate, of each such partnership or joint
venture.
SECTION 11.12 Pension and Welfare Plans. Each Pension Plan complies in
all material respects with all applicable statutes and governmental rules and
regulations; no Reportable Event has occurred and is continuing with respect to
any Pension Plan; neither Borrower nor any ERISA Affiliate has withdrawn from
any Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" as
defined in sections 4203 or 4205 of ERISA, respectively; no steps have been
instituted to terminate any Pension Plan; no contribution failure has occurred
with respect to any Pension Plan sufficient to give rise to a Lien under section
302(f) of ERISA; no condition exists or event or transaction has occurred in
connection with any Pension Plan or Multiemployer Plan which could result in the
incurrence by Borrower, any Subsidiary, any ERISA Affiliate of any material
liability, fine or penalty; and neither Borrower nor any Subsidiary nor any
ERISA Affiliate is a "contributing sponsor" as defined in section 4001(a)(13) of
ERISA of a "single-employer plan" as defined in section 4001(a)(15) of ERISA
which has two or more contributing sponsors at least two of whom are not under
common control. Except as listed in Schedule 11.12, neither Borrower nor any of
its Subsidiaries has any contingent liability with respect to any
post-retirement benefit under any Welfare Plan which covers retired or
terminated employees and their beneficiaries, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
SECTION 11.13 Regulation U. Neither Borrower nor any of its Subsidiaries
is engaged in the business of purchasing or selling Margin Stock or extending
credit to others for the purpose of purchasing or carrying Margin Stock, and no
part of the proceeds of any borrowing hereunder will be used to purchase or
carry any Margin Stock or for any other purpose which would violate any of the
margin regulations of the Federal Reserve Board.
-29-
<PAGE> 36
SECTION 11.14 Compliance. Except as described on Schedule 11.14,
Borrower and all of its Subsidiaries are in compliance with all statutes,
judicial or administrative orders, licenses, permits and governmental rules and
regulations applicable to them, except where the failure to comply has not had
and could not reasonably be expected to have a Material Adverse Effect.
SECTION 11.15 Taxes. Borrower and each of its Subsidiaries has filed all
tax returns and reports which are required to have been filed by it and has paid
all of its Taxes which are due and payable, except such taxes, if any, as are
being diligently contested in good faith and by appropriate proceedings and as
to which appropriate reserves or other appropriate provisions (including but not
limited to any which may be required by GAAP) have been set aside on its books.
Borrower is not aware of any proposed assessment against Borrower or any of its
Subsidiaries for additional taxes (or any basis for any such assessment) which
has had or could reasonably be expected to have a Material Adverse Effect.
SECTION 11.16 Investment Borrower Act Representation. Neither Borrower
nor any of its Subsidiaries is an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Borrower Act of
1940, as amended.
SECTION 11.17 Public Utility Holding Borrower Act Representation.
Neither Borrower nor any of its Subsidiaries is a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" within the meaning of the Public Utility Holding Borrower Act of 1935,
as amended.
SECTION 11.18 Environmental Matters. Except as disclosed on Schedule
11.18 and to the Borrower's knowledge, Borrower and each of its Subsidiaries is
in compliance with all Environmental Laws.
SECTION 11.19 Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower in
writing to Bank for purposes of or in connection with this Agreement or any
Other Agreement, or any transaction contemplated hereby or thereby is, and all
other such factual information hereafter furnished by or on behalf of the
Borrower to Bank will be, true and accurate in every material respect on the
date as of which such information is dated or certified and as of the date of
execution and delivery of this Agreement by Bank, and such information is not,
or shall not be, as the case may be, incomplete by omitting to state any
material fact necessary to make such information not misleading.
SECTION 11.20 Year 2000 Problem. Borrower has conducted a comprehensive
review and assessment of its and its Subsidiary's computer applications with
respect to the Year 2000 Problem (as hereinafter defined). Based on the
foregoing review and assessment, Borrower reasonably believes that (a) it will
not incur material expenditures to modify or replace applications in order to
address the Year 2000 Problem and (b) the Year 2000 Problem will not result in a
material adverse change in the Borrower's and any Subsidiary's business
condition
-30-
<PAGE> 37
(financial or otherwise), operations, properties or prospects taken as a whole,
or its ability to repay the Liabilities. Borrower has no knowledge of any Year
2000 Problem affecting any of its or its Subsidiary's material suppliers,
vendors or customers which Borrower reasonably believes will result in a
material adverse change in the Borrower's or such Subsidiary's business
condition (financial or otherwise), operations, properties or prospects taken as
a whole or its ability to repay the Liabilities. As used herein, the term "Year
2000 Problem" shall mean the capability of any applicable mainframe computer
system, computer network, personal computer, computed assisted design or
computer assisted manufacturing system to recognize and correctly calculate
dates on or after January 1, 2000 or to otherwise perform its intended functions
in a proper manner in connection with data containing any date on or after
January 1, 2000.
ARTICLE XII
COVENANTS
From the date of this Agreement and thereafter until all Liabilities
(other than Liabilities which expressly survive termination of this Agreement)
are paid in full, Borrower agrees that, unless the Bank shall otherwise consent
in writing, it will comply with the provisions of this Section 12.
SECTION 12.1 Financial Statements and Other Reports. Borrower will
furnish, or cause to be furnished, to Bank:
SECTION 12.1.1 Financial Statements and Reports:
(a) Annual Audited Financial Statements of Borrower. Within 90
days after each fiscal year of Borrower, a copy of the annual audited
consolidated financial statements of the Borrower and its Subsidiaries,
prepared in accordance with GAAP, which statements shall have been
prepared by an independent certified public accounting firm acceptable
to the Bank;
(b) Monthly Unaudited Financial Statements of Borrower. Within
30 days after the end of each calendar month (other than the last month
of each year), a copy of the unaudited consolidated financial statements
of the Borrower and its Subsidiaries, prepared in the same manner as the
financial statements referred to in the preceding subsection (a), signed
by the Borrower's chief financial officer and consisting of a balance
sheet as at the close of such month and an income statement for the
period from the beginning of the fiscal year to the close of such month;
(c) Quarterly Financial Statements of Borrower. Within 30 days
after the end of each fiscal quarter of each fiscal year of the Borrower
(other than the last fiscal quarter of each fiscal year), a copy of the
unaudited consolidated financial statement of the Borrower and its
Subsidiaries, prepared in the same manner as the financial statements
referred to in the preceding subsection (a), signed by the Borrower's
chief
-31-
<PAGE> 38
financial officer and consisting of a statement of funds flow for the
period from the beginning of the applicable fiscal year to the close of
such fiscal quarter; and
(d) Officer's Certificate. Within 45 days after the end of each
fiscal quarter of the Borrower (including the last fiscal quarter of
each fiscal year), a certificate of Borrower's chief financial officer
dated the last day of such fiscal quarter containing a statement that no
Event of Default or Unmatured Event of Default has occurred and is
continuing, or, if there is any such event, describing it and the steps,
if any, being taken to cure it, and containing a computation of, and
showing compliance with, each of the financial ratios and restrictions
contained in this Section 12.
SECTION 12.1.2 Other Reports:
(a) SEC and Other Reports. Copies of each filing and report made
by Borrower or any of its Subsidiaries with or to any securities
exchange or the Securities and Exchange Commission and of each written
communication from Borrower or any of its Subsidiaries to shareholders
generally, contemporaneously with the filing or making thereof;
(b) Report of Changes in Schedule Information. Promptly from
time to time, a written report of any change in the information set
forth in Schedules 11.10 or 11.11 concerning Borrower or any of its
Subsidiaries;
(c) Other Reports. Any information required to be provided
pursuant to other provisions of this Agreement or any Other Agreements,
and promptly from time to time, such other reports or information as the
Bank may reasonably request.
SECTION 12.2 Notices. The Borrower will notify the Bank in writing of
any of the following immediately upon the occurrence thereof:
(a) Default. The occurrence of an Event of Default or Unmatured
Event of Default;
(b) Litigation, Etc. The institution of any litigation, action
or proceeding affecting Borrower or any of Borrower's Subsidiaries,
whether or not considered to be covered by insurance, where the amount
claimed or at issue is $1,000,000 or more; the commencement of any labor
controversy or dispute which has had or could reasonably be expected to
have a Material Adverse Effect; or the occurrence of any adverse
development with respect to any litigation, action, proceeding, labor
controversy or dispute, or contract or agreement;
(c) Judgments, Etc. The entry of any judgment or decree in any
litigation, action or proceeding involving Borrower or any Subsidiary of
Borrower if the amount
-32-
<PAGE> 39
for which any such Person will be liable or responsible as a result
thereof, individually or in the aggregate, exceeds $500,000;
(d) Pension Plans and Welfare Plans. The occurrence of a
Reportable Event with respect to any Pension Plan; the filing of a
notice of intent to terminate a Pension Plan by Borrower or any ERISA
Affiliate; the institution of proceedings to terminate a Pension Plan by
the PBGC or any other Person; the withdrawal in a "complete withdrawal"
or a "partial withdrawal" as defined in sections 4203 and 4205,
respectively, of ERISA by Borrower or any ERISA Affiliate from any
Multiemployer Plan; the failure of Borrower or any ERISA Affiliate to
make a required contribution to any Pension Plan, including but not
limited to any failure to pay an amount sufficient to give rise to a
Lien under section 302(f) of ERISA; the taking of any action with
respect to a Pension Plan which could result in the requirement that
Borrower or any ERISA Affiliate furnish a bond or other security to the
PBGC or such Pension Plan; the occurrence of any other event with
respect to any Pension Plan which could result in the incurrence by
Borrower or any ERISA Affiliate of any liability, fine or penalty; or
the incurrence of any material increase in the contingent liability of
Borrower, or any of its Subsidiaries with respect to any Welfare Plan
which covers retired or terminated employees and their beneficiaries;
(e) Material Adverse Effect. The occurrence of any event or
condition, or the existence of any facts or circumstances, constituting,
or which could reasonably be expected to have, a Material Adverse
Effect;
(f) Other Notices. Any notices required to be provided pursuant
to any Other Agreement or the other provisions of this Agreement, and
notice of the occurrence of such other events as the Bank may reasonably
from time to time specify.
SECTION 12.3 Existence. Except for any merger, consolidation,
acquisition or similar transaction permitted under Section 12.12, subject to the
Bank's prior written consent, which consent shall not be unreasonably withheld
or delayed, Borrower will maintain and preserve, and cause each of its
Subsidiaries to maintain and preserve, its respective existence as a corporation
or other form of business organization, as the case may be, and all rights,
privileges, licenses, patents, patent rights, copyrights, trademarks, trade
names, trade styles, franchises and other authority to the extent material and
necessary for the conduct of its respective business in the ordinary course as
conducted from time to time.
SECTION 12.4 No Change in Line of Business. Borrower will engage, and
cause each of its Subsidiaries to engage, in substantially the same types and
fields of business as it is engaged in on the date hereof, and such other
activities as may be incidental or related thereto, and no other.
SECTION 12.5 Books, Records and Access. Borrower will maintain, and
cause each of its Subsidiaries to maintain, complete and accurate books and
records in which full and correct entries in conformity with GAAP shall be made
of all dealings and transactions in
-33-
<PAGE> 40
relation to its respective business and activities. Upon reasonable notice,
Borrower will permit, and cause each of its Subsidiaries to permit, access by
the Bank and its agents or employees to the Collateral in order to conduct field
examinations or other reviews and to Borrower's and its Subsidiaries' books and
records and its respective place or places of business at intervals to be
reasonably determined by the Bank and without hindrance or delay.
SECTION 12.6 Insurance. In addition to any insurance which the Borrower
is required to maintain pursuant to Section 10.1 hereof, the Borrower will
maintain, and cause each of its Subsidiaries to maintain, insurance to such
extent and against such hazards and liabilities as is hereof commonly maintained
by companies similarly situated and which is adequate to insure the Borrower and
each of its Subsidiaries against risks which could reasonably be expected to be
encountered by it in the conduct of its business.
SECTION 12.7 Maintenance of Assets. The Borrower will maintain, preserve
and keep, and cause each of its Subsidiaries to maintain, preserve and keep, its
properties in operating condition and repair, ordinary wear and tear excepted,
and from time to time make, and cause each of its Subsidiaries to make, all
necessary and proper repairs, renewals, replacements, additions, betterments and
improvements thereto so that at all times the efficiency thereof shall be fully
preserved and maintained in all material respects unless the Borrower or such
Subsidiary determines in good faith that the continued maintenance thereof is no
longer economically desirable.
SECTION 12.8 Taxes. Borrower will pay, and will cause each of its
Subsidiaries to pay, when due, all of its Taxes unless and only to the extent
that Borrower or such Subsidiary is diligently contesting such Taxes in good
faith and by appropriate proceedings and Borrower or such Subsidiary has set
aside on its books appropriate reserves or other appropriate provisions therefor
(including but not limited to any as may be required by GAAP).
SECTION 12.9 Compliance. The Borrower will comply, and cause each of its
Subsidiaries to comply, with all statutes, judicial or administrative orders,
licenses, permits, and governmental rules and regulations applicable to it,
except where such noncompliance does not have and could not reasonably be
expected to have a Material Adverse Effect.
SECTION 12.10 Use of Proceeds. The Borrower will use the proceeds of
the Loans to refinance existing Indebtedness, to finance the working capital
requirements of the Borrower and its Subsidiaries, for Investments permitted by
Section 12.16, for Capital Expenditures to the extent permitted by Section 12.17
and to finance Approved Acquisitions. The Borrower will not use or permit any
proceeds of the Loans to be used, either directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of "purchasing or carrying"
any Margin Stock, and will furnish to Bank upon request, a statement in
conformity with the requirements of Federal Reserve Form U-1 referred to in
Regulation U of the Federal Reserve Board.
SECTION 12.11 Pension Plans. The Borrower will not, and will not permit
any of its Subsidiaries to, permit any condition to exist in connection with any
Pension Plan which
-34-
<PAGE> 41
could constitute grounds for the PBGC to institute proceedings to have such
Pension Plan terminated or a trustee appointed to administer such Pension Plan.
The Borrower will not fail, and will not permit any of its Subsidiaries to fail,
to make a required contribution to any Pension Plan if such failure is
sufficient to give rise to a Lien under section 302(f) of ERISA. The Borrower
will not engage in, or permit to exist or occur, or permit any of its
Subsidiaries to engage in, or permit to exist or occur, any other condition,
event or transaction with respect to any Pension Plan which could result in the
incurrence by the Borrower or any of its Restricted Subsidiaries of any
liability, fine or penalty.
SECTION 12.12 Consolidations, Mergers, Acquisitions. The Borrower will
not, and will not permit any of its Subsidiaries to, be a party to any merger,
liquidation, dissolution, consolidation, or Acquisition, except that
(a) any Subsidiary of the Borrower may liquidate, or dissolve
voluntarily into, or may merge with and into, the Borrower or any other
wholly-owned Subsidiary of the Borrower;
(b) the assets or stock of any Subsidiary of the Borrower may be
purchased or otherwise acquired by the Borrower or any Domestic
Subsidiary of the Borrower;
(c) the Borrower may merge with any other Person, and any other
Person may liquidate or dissolve voluntarily into the Borrower, as long
as the Borrower is the surviving Person;
(d) the Borrower may create additional Subsidiaries and may make
Acquisitions of Subsidiaries pursuant to transactions which are Approved
Acquisitions, provided that promptly following the creation or
Acquisition of a Subsidiary which is a Domestic Subsidiary, the Borrower
shall pledge the Stock or other equity interest in such newly-created or
acquired Domestic Subsidiary to the Bank pursuant to documentation
satisfactory to Bank pursuant to which the Borrower shall grant to the
Bank a first-priority perfected lien and security interest in and to
such Stock or equity interests and shall take such other actions as Bank
shall reasonably request in order to perfect and confirm such lien and
security interest; or
(e) Borrower may complete the Acquisition described on Schedule
12.14.
provided, however, that no transaction otherwise permitted by this Section shall
be permitted if immediately before or after giving effect thereto any Unmatured
Event of Default or Event of Default shall have occurred and be continuing or
would result therefrom.
SECTION 12.13 Dividends and Restricted Payments.
(a) Without the prior written consent of the Bank, the Borrower
will not apply declare, pay or make any dividend or distribution on any
shares of any class of Stock
-35-
<PAGE> 42
(now or hereafter outstanding) or on any warrants, options or other
rights with respect to any Stock (now or hereafter outstanding), other
than dividends or distributions payable in its common stock or warrants
to purchase its common stock or split-ups or reclassifications of its
stock into additional or other shares of its common stock; or
(b) Without the prior written consent of the Bank, the Borrower
will not apply any of its property, funds or assets to the purchase,
redemption, sinking fund or other retirement of any shares of its Stock
or to any warrants, options or other rights with respect to such shares
of its Stock; provided, however, the Borrower may redeem up to 1,000,000
shares of common Stock during the period from the Effective Date to the
Termination Date so long as immediately before and after giving effect
to any such redemption (i) neither an Event of Default nor an Unmatured
Event of Default shall have occurred and be continuing and (ii) the
ratio of (x) the Borrower's consolidated Indebtedness to (y) the
Borrower's consolidated Indebtedness plus the Borrower's Consolidated
Net Worth is less than 40.0%.
SECTION 12.14 Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or permit to exist, or
otherwise become or be liable in respect of, any Indebtedness other than,
without duplication, the following:
(a) Indebtedness under the terms of this Agreement and the Other
Agreements;
(b) Indebtedness outstanding on the date hereof and disclosed in
the financial statements referred to in Section 11.6 or in Schedule
12.14; and
(c) Indebtedness existing on the date hereof of a Subsidiary of
the Borrower owing to the Borrower or to another Subsidiary of the
Borrower disclosed in the financial statements referred to in Section
11.6 or in Schedule 12.14.
SECTION 12.15 Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create or permit to exist any Lien with respect to any of
its property (whether real, personal or mixed), revenues or assets, whether now
owned or hereafter arising or acquired, except:
(a) Liens granted in favor of the Bank;
(b) Liens of carrier's, warehousemen, mechanics, materialmen,
repairmen, landlords and other like statutory Liens arising in the
ordinary course of business securing obligations which are not overdue
or which are being diligently contested in good faith and by appropriate
proceedings and as to which such reserves or other appropriate
provisions as may be required by GAAP are being maintained on its books;
-36-
<PAGE> 43
(c) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other
forms of governmental insurance or benefits;
(d) judgment Liens in existence less than 30 days after the
entry thereof or with respect to which execution has been stayed or the
payment of which is covered in full (subject to a customary deductible)
by insurance maintained with responsible insurance companies;
(e) Liens in existence on the date hereof and identified on
Schedule 12.15; and
(f) Permitted Encumbrances.
SECTION 12.16 Investments. The Borrower will not, and will not permit
any of its Subsidiaries to, make or permit to exist any Investment in any
Person, except for, without duplication:
(a) Investments existing on the date hereof and identified and
disclosed in the financial statements referred to in Section 11.6 or
Schedule 12.16;
(b) advances to its employees or employees of any of its
Subsidiaries for travel or other ordinary business expenses, in amounts
which are reasonable and consistent with the Borrower's past practices;
(c) shares of stock, obligations or other securities received in
settlement of claims arising in the ordinary course of business;
(d) Investments permitted under Section 12.12;
(e) minority Investments in less than all or substantially all
of the Stock, equity interests or assets of another Person in any
transaction or series of transactions not constituting an Acquisition;
and
(f) Cash Equivalents.
SECTION 12.17 Capital Expenditures. The Borrower will not, and will not
permit any Subsidiary to, make any Capital Expenditures in any fiscal year of
the Borrower if, after giving effect thereto, the aggregate of all Capital
Expenditures made by the Borrower and its Subsidiaries in such fiscal year would
exceed $4,000,000;
SECTION 12.18 Financial Covenants.
SECTION 12.18.1 Consolidated EBITDA. The Borrower will not permit its
Consolidated EBITDA plus Restructuring Charges, determined as of the last day of
each fiscal
-37-
<PAGE> 44
quarter of each fiscal year of the Borrower on a trailing, four-fiscal quarter
basis, to be less than (a) $5,000,000 for the fiscal quarters ending June 30,
1998, September 30, 1998 and December 31, 1998 and (b) $7,500,000 for the fiscal
quarter ending March 31, 1999 and $7,500,000 for each fiscal quarter thereafter.
SECTION 12.18.2 Consolidated Net Worth. The Borrower will not permit
its Consolidated Net Worth, determined as of the last day of each fiscal quarter
of each fiscal year of Borrower, to be less than the "Minimum Required Amount".
As used herein, the Minimum Required Amount shall mean $38,000,000 and such
Minimum Required Amount shall increase as of January 1, 1998 and each January
1, thereafter, by an amount equal to 50% of the Borrower's cumulative positive
Consolidated Net Income earned in the fiscal year completed on the December 3
immediately preceding the relevant January 1 of each year (but without
subtraction for any negative Consolidated Net Income for such fiscal year);
provided, however, that for purposes of this Section 12.18.2, the calculation of
Consolidated Net Worth shall not be reduced by the redemption of up to 1,000,000
shares of the Borrower's common Stock made in accordance with Section 12.13(b)
hereof during the period from the Effective Date to the Termination Date.
SECTION 12.18.3 Indebtedness to EBITDA Ratio. The Borrower will not
permit the ratio of its (a) consolidated Indebtedness to (b) Consolidated EBITDA
plus Restructuring Charges, determined as of the last day of each fiscal quarter
of each fiscal year of the Borrower on a trailing, four-fiscal quarter basis, to
be greater than (i) 3.0:1.0 for the fiscal quarters ending June 30, 1998,
September 30, 1998 and December 31, 1998 and (ii) 2.0:1.0 for the fiscal quarter
ending March 31, 1999 and 2.0:1.0 for each fiscal quarter thereafter.
SECTION 12.18.4 Asset Coverage Ratio. The Borrower will not permit its
Asset Coverage Ratio, determined as of the last day of each calendar month, to
be less than 1.25:1.00. As used herein, the term "Asset Coverage Ratio" shall
mean the ratio of (a) the sum of (i) cash on deposit in demand deposit accounts
maintained by Borrower with Bank plus (ii) Cash Equivalents of Borrower and its
Subsidiaries plus (iii) Borrower's Domestic Accounts, as reflected on Borrower's
books and records plus (iv) Borrower's Domestic Inventory, valued at lower of
(x) the Borrower's cost (on a "first in-first out" basis) or (y) fair market
value, but not exceeding the Maximum Inventory Value (as hereinafter defined) to
(b) the outstanding principal amount of the Loans hereunder plus the aggregate
amount of Letter of Credit Liabilities; and the term "Maximum Inventory Value"
shall mean an amount equal to 75% of the sum of (1) cash on deposit in demand
deposit account maintained by Borrower with Bank, plus (ii) Cash Equivalents of
the Borrower and it Subsidiaries; plus (iii) Borrower's Domestic Accounts, as
reflected on Borrower's books and records.
SECTION 12.19 Other Agreements. The Borrower will not, and not permit
any of its Subsidiaries to, enter any agreement containing any provision which
would be violated or breached by the performance by Borrower or such Subsidiary
of its obligations hereunder or under any Other Agreement or any instrument or
document to be delivered by Borrower in connection herewith.
-38-
<PAGE> 45
SECTION 12.20 Unconditional Purchase Options. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into or be a party to any
contract for the purchase of materials, supplies or other property or services,
if such contract requires that payment be made by it regardless of whether or
not delivery is ever made of such materials, supplies or other property or
services.
SECTION 12.21 Subsidiary Payments, etc. The Borrower will not, and not
permit any of its Subsidiaries to, enter into any agreement prohibiting the
ability of any of the Borrower's Subsidiaries to make any payments, directly or
indirectly, to the Borrower by way of dividends, advances, repayments of loans
or advances, reimbursements of management and other intercompany charges,
expenses and accruals or other returns on investments, or any other agreement or
arrangement which restricts the ability of any such Subsidiary to make any
payment, directly or indirectly, to the Borrower.
ARTICLE XIII
CONDITIONS PRECEDENT
SECTION 13.1 Initial Loan and Letter of Credit. The obligation of Bank
to make the initial Loan or issue the initial Letter of Credit is, in addition
to the conditions precedent set forth in Section 13.2, subject to the condition
precedent that Bank shall have received all of the following, each duly executed
and dated such date as shall be satisfactory to Bank, and in form and substance
satisfactory to Bank:
(a) Agreements. This Agreement, the Note, the Patent and
Trademark Assignment, and in the case of a Letter of Credit, the
Application therefor.
(b) Authorization. Evidence of the due authorization and
incumbency of the officers of Borrower executing and delivering this
Agreement and the Other Agreements, including specimen signatures of
each such officer.
(c) Consents, etc. Certified copies of all documents evidencing
any necessary consents and governmental approvals (if any) with respect
to this Agreement or any other document provided for hereunder.
(d) Opinions of Counsel. The opinions of Rose Helen Perez and
Richard A. Firehammer, counsels to the Borrower, addressed to Bank,
substantially in the forms of Exhibit C hereto.
(e) Confirmatory Certificate. A duly completed certificate
confirming satisfaction of the conditions set forth in Section 13.2
signed by the President, a Senior Vice President or Chief Financial
Officer of Borrower.
-39-
<PAGE> 46
(f) Articles and By-Laws. Copies of the articles of
incorporation and by-laws of Borrower, certified by the Secretary,
Assistant Secretary or other senior officer of Borrower.
(g) Financing Statements, etc. Duly executed and completed UCC
financing statements, together with such documents as Bank may require
pursuant to Section 5.1 and 5.2.
(h) Lien Searches. UCC, tax lien and judgment searches recently
performed against Borrower in such jurisdictions as the Bank may require
and the results of all such searches shall be satisfactory to Bank.
(i) Good Standing. Evidence of recent date of the good standing
of Borrower in the States of Delaware, Ohio, California and such other
jurisdictions as the Bank may require. Evidence of Insurance. Evidence
of insurance as required by Section 10.1 of this Agreement.
(k) Lien Terminations. The Bank shall have received such UCC
termination statements and other releases and satisfactions with respect
to all existing UCC filings and other liens against Borrower as shall be
necessary to terminate of record all such filings, other than with
respect to Liens permitted by Section 12.15.
(l) Payment of Expenses. Borrower shall have paid, in full, all
costs and expenses of Bank, including reasonable fees and expenses of
counsel to the Bank, contemplated by Section 17.3.
(m) Lock Boxes and Collateral Proceeds Account. Borrower shall
have opened the Lock Boxes and Collateral Proceeds Account contemplated
by Article VI hereof, all required notices to Obligors and other
third-parties referred to thereunder shall have been given and the Lock
Boxes and Collateral Proceeds Account shall, in all respects, be
operational.
(n) Closing Fee. Borrower shall have paid, in full, the closing
fee referred to in Section 4.3.
(o) Other. Such other documents as Bank may reasonably request.
SECTION 13.2 All Loans and Letter of Credit. The obligation of the Bank
to make the initial Loan or issue the initial Letter of Credit and each
subsequent Loan or Letter of Credit is subject to the following conditions
precedent that: (a) No Event of Default or Unmatured Event of Default, shall
have occurred and be continuing on the date of such requested Loan or
-40-
<PAGE> 47
Letter of Credit or will result from the making of such Loan or the issuance of
such Letter of Credit, (b) the warranties of Borrower contained in this
Agreement and the Other Agreements shall be true and correct as of the date of
such requested Loan or Letter of Credit, with the same effect as though made on
the date of such Loan or Letter of Credit, (c) no Material Adverse Effect shall
have occurred and be continuing and (d) in the case of any Letter of Credit, the
Borrower shall have executed and delivered an Application therefor and all
warranties of Borrower contained therein shall be true and correct as of the
date of issuance of such Letter of Credit.
ARTICLE XIV
EVENTS OF DEFAULT
SECTION 14.1 Event of Default. Each of the following shall constitute an
Event of Default under this Agreement:
(a) Non-Payment. Default in the payment when due of (i) any
principal of any Loan and the continuance of such default for two (2)
Banking Days after notice thereof to the Borrower from the Bank or (ii)
any interest on any Loan or any fee hereunder and the continuance of
such default for five (5) Banking Days after notice thereof to the
Borrower from the Bank.
(b) Non-Payment of Other Indebtedness. Default in the payment
when due, whether by acceleration or otherwise (subject to any
applicable grace period), of any Indebtedness in a principal amount
equal to or greater than $250,000 of, or guaranteed by, the Borrower or
any Subsidiary (other than (i) any Indebtedness of any Subsidiary to the
Borrower or to any other Subsidiary and (ii) the Indebtedness evidenced
by the Note).
(c) Acceleration of Other Indebtedness. Any event or condition
shall occur which results in the acceleration of the maturity of any
Indebtedness in a principal amount equal to or greater than $250,000 of,
or guaranteed by, the Borrower or any Subsidiary (other than (i) any
Indebtedness of any Subsidiary to the Borrower or to any other
Subsidiary and (ii) the Indebtedness evidenced by the Note) or enables
the holder or holders of such other Indebtedness or any trustee or agent
for such holders (any required notice of default having been given and
any applicable grace period having expired) to accelerate the maturity
of such other Indebtedness.
(d) Other Obligations. Default in the payment when due, whether
by acceleration or otherwise, or in the performance or observance
(subject to any applicable grace period) of (i) any obligation or
agreement of the Borrower or any Subsidiary to or with the Bank (other
than any obligation or agreement of the Borrower hereunder, under the
Other Agreements or under the Note), or (ii) any material obligation or
agreement of the Borrower or any Subsidiary to or with any other Person
providing for payments
-41-
<PAGE> 48
in a total amount equal to a greater than $250,000 (other than (x) any
such material obligation or agreement constituting or related to
Indebtedness, (y) trade accounts payable, and (z) any material
obligation or agreement of any Subsidiary to the Borrower or to any
other Subsidiary), except only to the extent that the existence of any
such default is being contested by the Borrower or such Subsidiary, as
the case may be, in good faith and by appropriate proceedings and the
Borrower or such Subsidiary shall have set aside on its books such
reserves or other appropriate provisions therefor as may be required by
GAAP.
(e) Insolvency. The Borrower or any Subsidiary becomes
insolvent, or generally fails to pay, or admits in writing its inability
to pay, its debts as they mature, or applies for, consents to, or
acquiesces in, the appointment of a trustee, receiver or other custodian
for the Borrower or such Subsidiary or for a substantial part of the
property of the Borrower or such Subsidiary, or makes a general
assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for the Borrower or any Subsidiary or for a
substantial part of the property of the Borrower or any Subsidiary and
is not discharged within 30 days; or any bankruptcy, reorganization,
debt arrangement or other proceeding under any bankruptcy or insolvency
law, or any dissolution or liquidation proceeding, is instituted by or
against the Borrower or any Subsidiary and, if instituted against the
Borrower or any Subsidiary is consented to or acquiesced in by the
Borrower or such Subsidiary or remains for 30 days undismissed; or any
warrant of attachment or similar legal process is issued against any
substantial part of the property of the Borrower or any Subsidiary which
is not released within 30 days of service.
(f) Pension Plans. (i) The institution by the Borrower or any
ERISA Affiliate of steps to terminate any Pension Plan if, in order to
effectuate such termination, (a) the Borrower or any ERISA Affiliate
would be required to make a contribution to such Pension Plan or would
incur a liability or obligation to such Pension Plan and immediately
after giving effect to the payment or satisfaction of such contribution,
liability or obligation (if made or undertaken by the Borrower or any
Subsidiary) an Event of Default or Unmatured Event of Default would
exist and be continuing; (ii) the institution by the PBGC of steps to
terminate any Pension Plan; or (iii) a contribution failure occurs with
respect to any Pension Plan sufficient to give rise to a Lien under
section 302(f) of ERISA.
(g) Agreements. Default in the performance of any of the
Borrower's agreements in this Agreement or in any Other Agreement (and
not constituting an Event of Default under any of the other subsections
of this Section 14.1) and continuance of such default for 30 days after
notice thereof to the Borrower from the Bank.
(h) Warranty. Any warranty made by the Borrower in this
Agreement or in any Other Agreement is untrue or misleading in any
material respect when made or deemed made; or any schedule, statement,
report, notice, certificate or other writing
-42-
<PAGE> 49
furnished by the Borrower to the Bank is untrue or misleading in any
material respect on the date as of which the facts set forth therein are
stated or certified; or any certification made or deemed made by the
Borrower to the Bank is untrue or misleading in any material respect on
or as of the date made or deemed made.
(i) Litigation. There shall be entered against the Borrower or
any Subsidiary one or more judgments or decrees in excess of $1,500,000
in the aggregate at any one time outstanding for the Borrower and all
Subsidiaries, excluding those judgments or decrees (i) that shall have
been outstanding less than 30 calendar days from the entry thereof or
(ii) for and to the extent which the Borrower or any Subsidiary is
insured and with respect to which the insurer has assumed responsibility
in writing or for and to the extent which the Borrower or any Subsidiary
is otherwise indemnified if the terms of such indemnification and the
Person providing such indemnification are satisfactory to the Bank.
(j) Lock Boxes and Collateral Proceeds Amount. Except as
contemplated by Section 6.5 hereof, the Lock Boxes and the Collateral
Proceeds Account are terminated or are no longer in effect as set forth
herein.
SECTION 14.2 Termination of Commitments and Effect of Event of Default.
Upon an Event of Default, Bank may declare the Commitments to be terminated and
the Note and all other Liabilities to be due and payable, whereupon the
Commitments shall immediately terminate and the Note and all other Liabilities
shall become immediately due and payable, all without further notice of any
kind. Bank shall promptly advise Borrower of any such declaration but failure to
do so shall not impair the effect of such declaration. Notwithstanding the
foregoing, the effect as an Event of Default of any event described in Section
14 may be waived by Bank. Upon any such termination, the Borrower shall provide
cash collateral or other collateral satisfactory to the Bank with respect to the
Letter of Credit Liabilities. All of Bank's rights and remedies under this
Agreement and the Other Agreements are cumulative and non-exclusive.
Notwithstanding any provision of this Article XIV to the contrary, it shall not
be an Event of Default under this Agreement so long as (a) Borrower notifies
Bank promptly upon occurrence of the event or events constituting such Event of
Default, (b) Borrower promptly and in good faith commences such actions as shall
be necessary or appropriate to cure such Event of Default, if such Event of
Default is, by its nature, in Bank's reasonable opinion, capable of such cure
and Borrower completes such cure within thirty (30) days of such notice or such
longer period as shall be agreed to by Bank and (c) at the time of such Event of
Default and during the pendency of such cure as set forth herein, there shall
not exist any Material Adverse Effect.
SECTION 14.3 Collateral. Upon an Event of Default, Bank, in its sole and
absolute discretion, may: (a) exercise any one or more of the rights and
remedies accruing to a secured party under the UCC (b) enter, with or without
process of law and without breach of the peace, any premises where the
Collateral or the books and records of Borrower related thereto is or may be
located, and without charge or liability to Bank therefor seize and remove the
Collateral
-43-
<PAGE> 50
(and copies of Borrower's books and records in any way relating to the
Collateral) from said premises and/or remain upon said premises and use the same
(together with said books and records) for the purpose of collecting, preparing
and disposing of the Collateral, and Borrower hereby grants Bank a security
interest in said books and records for the purpose above stated; and (c) sell or
otherwise dispose of the Collateral at public or private sale on commercially
reasonable terms for cash or credit. The proceeds of such dispositions shall
first be applied toward the payment of the Liabilities, then toward the payment
of expenses reasonably and actually incurred by the Bank in effecting any such
sale or other disposition of the Collateral, including without limitation
reasonably and actually incurred attorneys' fees and expenses, and then the
remaining balance, if any, shall be remitted to the Borrower.
SECTION 14.4 Assembly of Collateral. Upon an Event of Default, Borrower,
immediately upon demand by Bank, shall assemble the Collateral and make it
available to Bank at a place or places to be designated by Bank which is
reasonably convenient to Bank and Borrower. Borrower recognizes that in the
event Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement or the Other Agreements, no remedy of law will
provide adequate relief to Bank, and agrees that Bank shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
SECTION 14.5 Notice. Any notice required to be given by Bank of a sale,
lease, other disposition of the Collateral or any other intended action by Bank,
shall be made as set forth in Section 17.2 hereof not less than five Banking
Days prior to such proposed action and shall constitute commercially reasonable
and fair notice to Borrower thereof.
SECTION 14.6 Sale of Collateral. Upon an Event of Default, Borrower
agrees that Bank may, if Bank deems it reasonable, postpone or adjourn any such
sale of the Collateral from time to time by an announcement at the time and
place of sale or by announcement at the time and place of such postponed or
adjourned sale, without being required to give a new notice of sale. Borrower
agrees that Bank has no obligation to preserve rights against prior parties to
the Collateral. Further, Borrower waives and releases any cause of action and
claim against Bank as a result of Bank's possession, collection or sale of the
Collateral, any liability or penalty for failure of Bank to comply with any
requirement imposed on Bank relating to notice of sale, holding of sale or
reporting of sale of the Collateral.
SECTION 14.7 Waiver of Borrower. In the event Bank seeks possession of
the Collateral through replevin or other court process, Borrower hereby
irrevocably waives: (a) any bond, surety or security required as an incident to
such possession, and (b) any demand for possession of the Collateral prior to
the commencement of any suit or action to recover possession thereof. The Bank
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if it takes such action for that purpose as the
Borrower shall request in writing, but failure of the Bank to comply with any
such request shall not of itself be deemed a failure to exercise reasonable
care, and no failure of the Bank to preserve or protect any rights with respect
to the Collateral against prior parties, or to do any act with respect to
-44-
<PAGE> 51
preservation of the Collateral not so requested by the Borrower shall be deemed
a failure to exercise reasonable care in the custody of preservation of any
Collateral.
ARTICLE XV
INCREASED COSTS AND OTHER SPECIAL PROVISIONS
SECTION 15.1 Increased Costs. If (i) Regulation D of the Board of
Governors of the Federal Reserve System, or (ii) after the date hereof, the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Bank (or any IBOR Office of Bank) with
any request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency
(A) shall subject Bank (or any IBOR Office of Bank) to any tax,
duty or other charge with respect to its IBOR Loans, the Notes or its
obligation to make IBOR Loans, or shall change the basis of taxation of
payments to Bank of the principal of or interest on its IBOR Loans or
any other amounts due under this Agreement in respect of its IBOR Loans
or its obligation to make IBOR Loans (except for changes in the rate of
tax on the overall net income of Bank or its IBOR Office imposed by the
jurisdiction in which Bank's principal executive office or IBOR Office
is located); or
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board of
Governors of the Federal Reserve System, but excluding any reserve
included in the determination of interest rates pursuant to Section 4),
special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, Bank (or any IBOR Office
of Bank); or
(C) shall impose on Bank (or its IBOR Office) any other
condition affecting its IBOR Loans, the Notes or its obligation to make
IBOR Loans;
and the result of any of the foregoing is to increase the actual cost to (or in
the case of Regulation D referred to above, to impose an actual cost on) Bank
(or any IBOR Office of Bank) of making or maintaining any IBOR Loan, or to
reduce the actual amount of any sum received or receivable by Bank (or its IBOR
Office) under this Agreement or under the Notes with respect thereto, then
within 10 days after demand by Bank (which demand shall be accompanied by a
statement setting forth in reasonable detail the basis of such demand), Borrower
shall pay directly to Bank such additional amount or amounts as will compensate
Bank for such actual increased cost or such actual reduction.
SECTION 15.2 Changes in Law Rendering Certain Loans Unlawful. In the
event that any change in (including the adoption of any new) any applicable law
or regulation, or any change in the interpretation of any applicable law or
regulation by any governmental or other
-45-
<PAGE> 52
regulatory body charged with the administration thereof, should make it (or in
the good faith judgment of Bank raise a substantial question as to whether it
is) unlawful for Bank to make, maintain or fund IBOR Loans, then Bank shall
promptly notify Borrower and, so long as such circumstances shall continue, (a)
Bank shall have no obligation to make or convert into IBOR Loans and (b) on the
last day of the current Interest Period for each IBOR Loan (or, in any event, if
Bank so requests, on such earlier date as may be required by the relevant law,
regulation or interpretation), such IBOR Loan shall, unless then repaid in full,
automatically convert to an Adjusted Reference Rate Loan.
SECTION 15.3 Funding Losses; Prepayment of Fixed Rate Loans.
(a) Borrower hereby agrees that upon demand by Bank (which
demand shall be accompanied by a statement setting forth in reasonable
detail the basis for the calculations of the amount being claimed)
Borrower will indemnify Bank against any net loss or expense which Bank
(or its IBOR Office) may sustain or incur (including, without
limitation, any net loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by Bank
(or its IBOR Office) to fund or maintain any IBOR Loan), as reasonably
determined by Bank, as a result of (a) any payment or prepayment or,
conversion of any IBOR Loan on a date other than the last day of an
Interest Period for such Loan (other than any such payment made at the
request of the Bank pursuant to Section 15.2 as required by any relevant
law, regulation or interpretation) or (b) any failure of Borrower to
borrow or convert any Loan (or any portion thereof) on a date specified
therefor in a notice of borrowing or conversion pursuant to this
Agreement. For this purpose, all notices to Bank pursuant to this
Agreement shall be deemed to be irrevocable.
(b) Each prepayment of a Fixed Rate Loan, whether voluntary, by
reason of acceleration or otherwise, will be accompanied by the amount
of accrued interest on the amount prepaid, and a prepayment fee as
described below. A "prepayment" is a payment of an amount on a date
earlier than the scheduled payment date for such amount as required by
this Agreement. The prepayment fee shall be equal to the amount (if any)
by which:
(i) the additional interest which would have been
payable during the interest period on the amount prepaid had it not been
prepaid, exceeds
(ii) the interest which would have been recoverable by
the Bank by placing the amount prepaid on deposit in the domestic
certificate of deposit market, the eurodollar deposit market, or other
appropriate money market selected by the Bank for a period starting on
the date on which it was prepaid and ending on the last day of the
interest period for such Portion (or the scheduled payment date for the
amount prepaid, if earlier).
-46-
<PAGE> 53
SECTION 15.4 Basis for Determining Interest Rate Inadequate or Unfair.
If with respect to any Interest Period deposits in Dollars (in the applicable
amount) are not being offered to Bank in the interbank IBOR market for such
Interest Period, or Bank determines (which determination shall be binding and
conclusive on Borrower) that by reason of circumstances affecting the interbank
IBOR market adequate and reasonable means do not exist for ascertaining the
applicable IBOR Rate or Bank otherwise determines that the IBOR Rate will not
adequately and fairly reflect the cost to Bank of maintaining or funding such
Loans for such Interest Period; Bank shall promptly notify Borrower thereof and,
so long as such circumstances shall continue, (a) Bank shall be under no
obligation to make or convert into IBOR Loans and (b) on the last day of the
current Interest Period for each IBOR Loan, such Loan shall, unless then repaid
in full, automatically convert to an Adjusted Reference Rate.
SECTION 15.5 Right of Bank to Fund through Other Offices. Bank may, if
it so elects, fulfill its commitment as to any IBOR Loan by causing a foreign
branch or affiliate of Bank to make such Loan, provided that in such event for
the purposes of this Agreement such Loan shall be deemed to have been made by
Bank and the obligation of Borrower to repay such Loan shall nevertheless be to
Bank and shall be deemed held by it, to the extent of such Loan, for the account
of such branch or affiliate.
SECTION 15.6 Discretion of Bank as to Manner of Funding. Notwithstanding
any provision of this Agreement to the contrary, Bank shall be entitled to fund
and maintain its funding of all or any part of its Loans in any manner it sees
fit, it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if Bank had actually funded and
maintained each IBOR Loan during each Interest Period for such Loan through the
purchase of deposits having a maturity corresponding to such Interest Period and
bearing an interest rate equal to the IBOR Rate for such Interest Period.
SECTION 15.7 Conclusiveness of Statements; Survival of Provisions.
Determinations and statements of Bank pursuant to Section 15 shall be conclusive
absent demonstrable error. Bank may use reasonable averaging and attribution
methods in determining its costs and compensation under Section 15, and the
provisions of such Section shall survive termination of this Agreement.
ARTICLE XVI
ENVIRONMENTAL, SAFETY AND HEALTH INDEMNITY AND WAIVER
(a) Environmental and Safely and Health Indemnity. The Borrower
hereby indemnifies the Bank and agrees to hold the Bank harmless from
and against any and all losses, liabilities, damages, injuries, costs,
expenses and claims of any and every kind whatsoever (including, without
limitation, court costs and attorneys' fees) (i) relating to or arising
under any Environmental Law with respect to any period of time when
Borrower held a fee, leasehold or other possessory interest in or to any
premises subject to such Environmental Law; or (ii) which otherwise may
be paid, incurred or suffered
-47-
<PAGE> 54
by or asserted against the Bank for, with respect to, or as a direct or
indirect result of the violation by the Borrower or any Subsidiary (or
any of their predecessors) of any Environmental Law or Occupational
Safety and Health Law; or (iii) with respect to, or as a direct or
indirect result of (a) the presence on or under, or the escape, seepage,
leakage, spillage, disposal, discharge, emission, threat of release, or
release of any Hazardous Material from, any property allegedly owned or
operated by the Borrower or any Subsidiary (or any of their
predecessors), or any property at which Hazardous Materials allegedly
generated by the Borrower or any Subsidiary (or any of their
predecessors) may have come to be located, or (b) the existence of any
unsafe or unhealthy condition on or at any premises utilized by the
Borrower or any Subsidiary (or any of their predecessors). The
provisions of the undertakings and indemnification set forth in this
Section 16 shall survive satisfaction and payment of the Note and other
liabilities of the Borrower hereunder and any termination of this
Agreement.
(b) Waiver. The Borrower and its successors and assigns hereby
release the Bank from all liability under any Environmental Law, and
waive and agree not to make any claim or bring any cost recovery or
contribution action against the Bank under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
section 9601 et seq., as amended or hereafter amended, or any other
Environmental Law now existing or hereafter enacted, other than with
respect to any act or inaction attributable to the Bank.
ARTICLE XVII
MISCELLANEOUS
SECTION 17.1 Waiver and Amendments. No failure or delay on the part of
the Bank or the holder of the Note in the exercise of any power or right, and no
course of dealing between the Borrower and the Bank or the holder of the Note,
shall operate as a waiver of such power or right, nor shall any single or
partial exercise of any power or right preclude other or further exercise
thereof or the exercise of any other power or right. The remedies provided for
herein are cumulative and not exclusive of any remedies which may be available
to the Bank at law or in equity. No notice to or demand on the Borrower not
required hereunder or under the Note shall in any event entitle the Borrower to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of the Bank or the holder of the Note to any
other or further action in any circumstances without notice or demand. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement or the Note shall in any event be effective unless the same
shall be in writing and signed and delivered by the Bank. Any waiver of any
provision of this Agreement or the Note, and any consent to any departure by the
Borrower from the terms of any provision of this Agreement or the Note, shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 17.2 Notices. Except as otherwise expressly provided herein, any
notice hereunder to the Borrower or the Bank shall be in writing (including
telecopy communication)
-48-
<PAGE> 55
and shall be given to the Borrower or the Bank at its address or telecopier
number set forth on the signature pages hereof or at such other address or
telecopier number as the Borrower or the Bank may, by written notice, designate
as its address or telecopier number for purposes of notice hereunder. All such
notices shall be deemed to be given when transmitted by telecopier and a
confirmation of receipt is received, personally delivered or, in the case of a
mailed notice, five (5) Banking Days after being sent by registered or certified
mail, postage prepaid, in each case addressed as specified in this Section 17.2,
provided, however, that notices to the Bank under Sections 2.4 or 2.6 shall not
be effective until actually received by the Bank; and provided further that
notices sent by registered or certified mail shall also be sent by telecopy on
the date such notice is mailed.
SECTION 17.3 Expenses. The Borrower agrees, whether or not any Loan is
made hereunder, to pay the Bank upon demand for all reasonable expenses,
including reasonable attorneys' fees and other legal expenses and costs of
collection, incurred by the Bank in connection with (a) the preparation,
negotiation and execution of this Agreement, the Note, the Other Agreements and
any other instrument or document provided for herein or delivered or to be
delivered hereunder or in connection herewith, (b) the preparation, negotiation
and execution of any and all amendments to this Agreement, the Note or any such
Other Agreements, (c) the enforcement of the Borrower's obligations hereunder,
under the Other Agreements or under the Note and (d) all reviews, audits and
field examinations of its books and records and of the Collateral. The Borrower
also agrees to (i) indemnify and hold the Bank harmless from any loss or expense
which may arise or be created by the acceptance of telephonic or other
instructions for making Loans or disbursing the proceeds thereof, and (ii) pay,
and save the Bank harmless from all liability for, any stamp or other tax which
may be payable with respect to the execution or delivery of this Agreement or
the issuance of the Note or any other instrument or document provided for herein
or delivered or to be delivered hereunder or in connection herewith. The
Borrower's foregoing obligations shall survive satisfaction and payment of the
Note and other liabilities of the Borrower hereunder and any termination of this
Agreement.
SECTION 17.4 General Indemnity. The Borrower hereby indemnifies,
exonerates, and holds the Bank and any holder of the Note and each of the
officers, directors, employees and agents of the Bank and any such holder
(collectively, the "Indemnitees") harmless from and against any and all
obligations, losses, liabilities, damages, costs, expenses, actions, suits,
judgments, penalties and claims of any kind whatsoever (including, without
limitation, court costs and reasonable attorneys' fees and disbursements in
connection with any investigative, administrative or judicial proceeding
commenced or threatened (whether or not such Indemnitee shall be designated a
party thereto)) which may be imposed on, incurred by or asserted against any
Indemnitee, in any a manner relating to or arising out of (a) this Agreement or
any other agreement, instrument or document executed and delivered by the
Borrower in connection herewith, (b) the use or intended use of the proceeds of
any Loan or Letter of Credit, or (c) the Borrower's failure to comply with any
tax law or any other law, statute or governmental rule or regulation applicable
to the Borrower (the "Indemnified Liabilities"); provided, however, that the
Borrower shall have no obligation to any Indemnitee hereunder with respect to
(i) Indemnified Liabilities arising from the gross negligence or willful
misconduct of such
-49-
<PAGE> 56
Indemnitee, (ii) any third-party contractual rights to which any Indemnitee is
bound or (iii) the violation of any law, rule, regulation or court or
administrative decree to which any Indemnitee is bound. If and to the extent
that the foregoing undertaking may be unenforceable for any reason whatsoever,
the Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. The provisions of and undertakings and indemnification set forth
in this Section 17.4 shall survive satisfaction and payment of the Note and
other liabilities of the Borrower hereunder and any termination of this
Agreement.
SECTION 17.5 Information. The Bank may furnish any information
concerning the Borrower in the possession of the Bank from time to time to
assignees of the rights and/or obligations of the Bank hereunder and to
participants in any Loan (including prospective assignees and participants) and
may furnish information in response to credit inquiries consistent with general
banking practice.
SECTION 17.6 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 17.7 Law. THIS AGREEMENT AND THE NOTE SHALL BE CONTRACTS MADE
UNDER, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
SECTION 17.8 Successors. This Agreement shall be binding upon the
Borrower and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrower and the Bank and the successors and assigns
of the Bank. The Borrower shall not assign its rights or duties hereunder
without the consent of the Bank.
SECTION 17.9 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS (a) UNDER THIS AGREEMENT OR ANY OTHER AGREEMENT OR UNDER ANY AMENDMENT.
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR ANY OTHER
[Remainder of Page Intentionally Left Blank]
-50-
<PAGE> 57
AGREEMENT OR (b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
at Chicago, Illinois, as of the day and year specified at the beginning hereof.
Attest: UNIVERSAL ELECTRONICS, INC.
/s/ RICHARD A. FIREHAMMER By: /s/ PAUL D. ARLING
- - ---------------------------------- ----------------------------------
Secretary Name: Paul D. Arling
Richard A. Firehammer, Jr. Title:President and Chief Operating
Officer
Address: 6101 Gateway Drive
Cypress, California 90630
Attention: Mr. Paul D. Arling
President and Chief
Operating Officer
Facsimile Number: (714) 820-1042
Telephone Number: (714) 820-1060
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ CHARLES W. A. HAGEL
---------------------------------
Name: Charles W. A. Hagel
---------------------------------
Title: VICE PRESIDENT
---------------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Mr. Charles W. A. Hagel
Vice President
Facsimile Number: (312) 828-1974
Telephone Number: (312) 828-4360
-51-
<PAGE> 58
STATE OF CALIFORNIA)
)SS.:
COUNTY OF ORANGE )
I, JAMES W. TAYLOR, a Notary Public duly qualified, commissioned, sworn
and acting in and for the County and State aforesaid, do hereby certify that
Paul D. Arling, personally known to me to be the President and Chief Operating
Officer of Universal Electronics, Inc., a Delaware corporation, personally known
to me to be the same person whose name is subscribed to the foregoing
instrument, appeared before me this day in person and severally acknowledged
that as such President and Chief Operating Officer he signed and delivered the
said instrument as his free and voluntary act, and as the free and voluntary act
and deed of Universal Electronics, Inc., for the uses and purposes therein set
forth.
Given under my hand and official seal, this 18 day of OCTOBER, 1998.
My Commission expires:
JULY 9, 2001 /s/ JAMES W. TAYLOR
- - ---------------------------------- ------------------------------------
Notary Public
(NOTARIAL SEAL)
- - ------------
JAMES W. TAYLOR
COMMISSION #1141744
[SEAL] NOTARY PUBLIC-CALIfORNIA
ORANGE COUNTY
My Comm. Expires July 9, 2001
<PAGE> 59
STATE OF ILLINOIS )
)SS.:
COUNTY OF COOK )
I, ROXANE S. VENENGA, a Notary Public duly qualified, commissioned,
sworn and acting in and for the County and State aforesaid, do hereby certify
that Charles W. A. Hagel, personally known to me to be a Vice President of Bank
of America National Trust and Savings Association, a national banking
association, and personally known to me to be the same person whose name is
subscribed to the foregoing instrument, appeared before me this day in person,
and acknowledged that as such Vice President, he signed and delivered the said
instrument as his free and voluntary act, and as the free and voluntary act and
deed of Bank of America National Trust and Savings Association, for the uses and
purposes therein set forth.
Given under my hand and official seal, this 22nd day of October, 1998.
My Commission expires:
3-16-2002 /s/ ROXANE S. VENEVGA
- - ---------------------------------- ------------------------------------
Notary Public
(NOTARIAL SEAL)
OFFICIAL SEAL
ROXANE S. VENENGA
NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES 3-16-2002
<PAGE> 60
SCHEDULE 5.4
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LOCATIONS OF COLLATERAL, BOOKS AND RECORDS, CHIEF EXECUTIVE OFFICE AND LIST OF
AFFILIATES
Locations of Collateral and Books and Records
BORROWER'S LOCATIONS
6101 Gateway Drive
Cypress, California 90630
Phone # (714) 820-1000
1864 Enterprise Parkway West
Twinsburg, Ohio 44087
Phone # (330) 487-1110
See also Borrower's List of Affiliates
Borrower also has employee sales representatives living in
various States operating out of their homes.
THIRD PARTIES' LOCATIONS
Amity Pen
16006 Montoya St.
Azusa, CA 91072
Phone # (626) 969-0863
Amros - Packaging
5712 Brookpark Rd
Cleveland, Ohio 44129
Phone # (216) 741-6070
Circuit Solutions Inc.
34425 Lorain Rd.
N. Ridgeville, Ohio
<PAGE> 61
SCHEDULE 5.4
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LOCATIONS OF COLLATERAL, BOOKS AND RECORDS, CHIEF EXECUTIVE OFFICE AND LIST OF
AFFILIATES (CONT.)
Cal-Switch
1010 Sandhill Avenue
Carson, CA 90746-1313
Phone # (310) 669-4140
Philips Sound & Vision
12435 Rojas Drive
El Paso, TX
Phone # (915) 778-3191
Cerritos Terminal Services
905 East Katella St.
Anaheim, CA 92806
Phone # (714) 991-0470
Pentex Inc.
6836 Commerce Ave
El Paso, TX 79915
Phone # (915) 774-9100
Kimex Electronics
330-11 Sinjung-Dong, Yangchon-Gu
Seoul, Korea
Phone # 011-822-653-2461
Philips Singapore Pte. Ltd.
Remote Control Systems
Tuner Factory
Toa Payoh, Lorong 1
Singapore 319762
Phone # 011-65-350-2927
<PAGE> 62
SCHEDULE 5.4
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LOCATIONS OF COLLATERAL, BOOKS AND RECORDS, CHIEF EXECUTIVE OFFICE AND LIST OF
AFFILIATES (CONT.)
SMK Corp.
5-5 Togoshi 6-chrome, Shinagawa-Ku
Tokyo 142 Japan
Phone # 011-813-3785-2136
WKK Industries
WKK Building
418A Kwun Tong Road
Kowloon, Hong Kong
Phone # 011-852-2357-8888
System X-10 Ltd
Room 1103-4, Hilder Center
2 Sung Ping Street
Hungham, Kowloon, Hong Kong
Cablevision Technologies
Plot 232, Jalan Pknk 2
Sungai Petani Industrial Estate
Kadeh Darulaman, Malaysia
Phone # 011-604-441-3999
Computime Ltd.
7/F How Ming Fty. Bldg.
99 How Ming Street
Kwun Tong, Kowloon, Hong Kong
Phone # 011-852-2970-3938
Displaytech Ltd.
1501-2 Empress Plaza
17-19, Chatham Road South
Tsin Sha Tsui, Kowloon, Hong Kong
Phone # 011-852-2311-2080
<PAGE> 63
SCHEDULE 5.4
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LOCATIONS OF COLLATERAL, BOOKS AND RECORDS, CHIEF EXECUTIVE OFFICE AND LIST OF
AFFILIATES (CONT.)
Jetta Company Ltd.
Jetta House
19 On Kui Street
On Lok Tsuen
Fanling, Hong, Kong
Phone # 011-852-2680-0268
Jeckson Inc.
1/F, 8/F, &11F DJ Building
173 Hol Bun Road
Kwun Tong, Kowloon, Hong Kong
Phone # 011-852-2389-7337
Some of Borrower's Books and Records are located at Borrower's
outside counsels' offices located in various States.
Chief Executive OFFICE
6101 Gateway Drive
Cypress, California 90630
Phone # (714) 820-1000
Wholly-owned Subsidiaries
One For All (UK) - Not operating
Universal Electronics B.V. - Javastraat 92
(formerly One For All B.V.) 7512 Enschede
Netherlands
One For All GmbH - Postfach 1740
48578 Gronau
Germany
<PAGE> 64
SCHEDULE 5.4
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LOCATIONS OF COLLATERAL, BOOKS AND RECORDS, CHIEF EXECUTIVE OFFICE AND LIST OF
AFFILIATES (CONT.)
Business and Trade Names under which Borrower does Business
Borrower transacts business under its corporate name "Universal
Electronics Inc.", and sometimes under the names "Universal" and/or "Universal
Electronics", none of which have been registered as a trade name or Trademark.
In addition, Borrower's corporate name is extremely common, with a variety of
unrelated and unaffiliated companies incorporated and operating under names
substantially similar to Borrower's corporate name. This has caused Borrower to
qualify to do business in Ohio, California and Florida under names different
than Borrower's corporate name. In Ohio, Borrower is qualified to do business
under the name One For All, Inc.; in California, Borrower is qualified to do
business under the name Delaware Universal Electronics, Inc.; and in Florida,
Borrower is qualified to business under the name Universal Electronics of
Delaware, Inc. (with the restructuring, Borrower no longer maintains an office
in Florida).
Additionally, in July 1990, an unrelated and unaffiliated corporation
was incorporated in Delaware and qualified to do business under the name "One
For All Incorporated". In Europe, Borrower transacts business through itself and
through its wholly owned subsidiaries (see List of Affiliates).
Other
Borrower is a publicly-traded corporation and has received a copy of one
Schedule 13D and one Schedule 13G, each filed by Geoffrey Nixon, Mission
Partners, L.P., Liberty Nominees Limited, Horizon Offshore, Ltd., and M Partners
L.P. (copies of which are attached hereto). Other than the Schedules 13D and 13G
stated above, since November 21, 1995, Borrower has not received copies of any
filings required under the Federal securities laws or the securities laws under
any state from any person, entity or group that such person, entity or group has
acquired a sufficient number of shares of the issued and outstanding common
stock of Borrow so as to be or be deemed to be an affiliate of Borrower; and
therefore, to the best of Borrower's knowledge, there are no other Affiliates of
Borrower.
<PAGE> 65
SCHEDULE 8.1
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
INVENTORY STORED WITH BAILEE, WAREHOUSEMAN OR OTHER THIRD-PARTY
See Schedule 5.4.
<PAGE> 66
SCHEDULE 10.1
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LIST AND EVIDENCE OF INSURANCE
See attached 4 pages.
<PAGE> 67
- - --------------------------------------------------------------------------------
ACCORD EVIDENCE OF PROPERTY INSURANCE CSR JK DATE (MM/DD/YY)
10/13/98
THIS IS EVIDENCE THAT INSURANCE AS IDENTIFIED BELOW HAS BEEN ISSUED, ----------
IS IN FORCE, AND CONVEYS ALL THE RIGHTS AND PRIVILEGES AFFORDED
UNDER THE POLICY.
- - --------------------------------------------------------------------------------
PRODUCER PHONE/FAX COMPANY
(A/C. No. Ext): 213-630-3200
----------------------------
Aon Risk Services, Inc. Federal Insurance Company
707 Wilshire Blvd., Ste. 6000 6500 Wilshire Blvd.
Los Angeles CA 90017 Los Angeles CA 90048-4403
Carole Mitchell
- - --------------------------------------
CODE: SUB CODE:
- - --------------------------------------
AGENCY
CUSTOMER ID #: UNIV100
- - --------------------------------------------------------------------------------
INSURED LOAN NUMBER POLICY NUMBER
3533-58-31
----------------------------------------
Universal Electronics, Inc. EFFECTIVE EXPIRATION CONTINUED UNTIL
6101 Gateway Drive DATE DATE TERMINATION
Cypress CA 90630 04/30/98 04/30/99 [ ] IF CHECKED
----------------------------------------
THIS REPLACES PRIOR EVIDENCE DATED:
- - --------------------------------------------------------------------------------
PROPERTY INFORMATION
LOCATION/DESCRIPTION
- - --------------------------------------------------------------------------------
COVERAGE INFORMATION
COVERAGE/PERILS/FORMS AMOUNT OF INSURANCE DEDUCTIBLE
- - --------------------------------------------------------------------------------
Blanket Real & Personal Property $7,868,000 $5,000
Special Form, Direct Physical Loss, Subject
to all policy conditions and exclusions.
Agreed Amount Endorsement
- - --------------------------------------------------------------------------------
REMARKS (Including Special Conditions)
CP 1218 Attached
- - --------------------------------------------------------------------------------
CANCELLATION
THE POLICY IS SUBJECT TO THE PREMIUMS, FORMS, AND RULES IN EFFECT FOR EACH
POLICY PERIOD. SHOULD THE POLICY BE TERMINATED, THE COMPANY WILL GIVE THE
ADDITIONAL INTEREST IDENTIFIED BELOW 30 DAYS WRITTEN NOTICE, AND WILL SEND
NOTIFICATION OF ANY CHANGES TO THE POLICY THAT WOULD AFFECT THAT INTEREST,
IN ACCORDANCE WITH THE POLICY PROVISIONS OR AS REQUIRED BY LAW.
- - --------------------------------------------------------------------------------
ADDITIONAL INTEREST [ ] MORTGAGEE [ ] ADDITIONAL INSURED
[X] LOSS PAYEE [ ]
NAME AND ADDRESS ----------------------------------------
LOAN #
Bank of America National Trust
and Savings Association ----------------------------------------
231 South LaSalle Street AUTHORIZED REPRESENTATIVE
Chicago IL 60697
/s/ CAROLE MITCHELL
-----------------------
Carole Mitchell
ACCORD 27 (3/93) (C) ACCORD CORPORATION 1993
- - --------------------------------------------------------------------------------
<PAGE> 68
POLICY NUMBER: 3533-58-31 COMMERCIAL PROPERTY
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
LOSS PAYABLE PROVISIONS
This endorsement modifies insurance provided under the following:
BUILDING AND PERSONAL PROPERTY COVERAGE FORM
BUILDERS' RISK COVERAGE FORM
CONDOMINIUM ASSOCIATION COVERAGE FORM
CONDOMINIUM COMMERCIAL UNIT-OWNERS COVERAGE FORM
STANDARD PROPERTY POLICY
SCHEDULE
<TABLE>
<CAPTION>
PROVISIONS APPLICABLE
- - ------------------------------------------
LOSS LENDER'S CONTRACT
PAYABLE LOSS PAYABLE OF SALE
<S> <C> <C>
XXX
</TABLE>
<TABLE>
<CAPTION>
PREM. BLDG. DESCRIPTION LOSS PAYEE
NO. NO. OF PROPERTY (NAME & ADDRESS)
<S> <C> <C> <C>
1 & 2 BLANKET REAL & PERSONAL PROPERTY BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
231 SOUTH LA SALLE STREET
CHICAGO, IL 60697
</TABLE>
A. When this endorsement is attached to the STANDARD PROPERTY POLICY CP 00 99
the term Coverage Part in this endorsement is replaced by the term Policy.
The following is added to the LOSS PAYMENT Loss Condition, as indicated in the
Declarations or by an "X" in the Schedule:
B. LOSS PAYABLE
For Covered Property in which both you and a Loss Payee shown in the
Schedule or in the Declarations have an insurable interest, we will:
1. Adjust losses with you; and
CP 12 18 10 91 Copyright, ISO Commercial Risk Services, Inc., 1990
Page 1 of 2
<PAGE> 69
ACCORD CERTIFICATE OF LIABILITY INSURANCE
<TABLE>
<S> <C> <C>
CSR JK DATE (MM/DD/YY)
UNIV100 10/13/98
PRODUCER ------------------------------------
THIS CERTIFICATE IS ISSUED AS A MATTER
Aon Risk Services, Inc. OF INFORMATION ONLY AND CONFERS NO
707 Wilshire Blvd., Ste. 6000 RIGHTS UPON THE CERTIFICATE HOLDER. THIS
Los Angeles CA 90017 CERTIFICATE DOES NOT AMEND, EXTEND OR
ALTER THE COVERAGE AFFORDED BY THE
Carole Mitchell POLICIES BELOW.
Phone NO. 213-630-3200 Fax No.__________ ----------------------------------------
COMPANIES AFFORDING COVERAGE
----------------------------------------
COMPANY
A Federal Insurance Company
----------------------------------------
COMPANY
B
----------------------------------------
COMPANY
C
Universal Electronics, Inc. ----------------------------------------
6101 Gateway Drive COMPANY
Cypress CA 90630 D
- - -------------------------------------------------------------------------------------
COVERAGES
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN
ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED
NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER
DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY
PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT
TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN
MAY HAVE BEEN REDUCED BY PAID CLAIMS.
- - -------------------------------------------------------------------------------------
CO TYPE OF INSURANCE POLICY NUMBER POLICY EFFECTIVE POLICY EXPIRATION LIMITS
LTR DATE (MM/DD/YY) DATE (MM/DD/YY)
- - -----------------------------------------------------------------------------------------------------------------------------------
GENERAL LIABILITY 3533-58-31 04/30/98 04/30/99 GENERAL AGGREGATE $2,000,000
--------------------------------------
A [X] COMMERCIAL GENERAL LIABILITY PRODUCTS-COMP/OP AGG $2,000,000
[ ] [ ] CLAIMS MADE [X] OCCUR --------------------------------------
[ ] OWNERS & CONTRACTOR'S PROT PERSONAL & ADV INJURY $1,000,O00
[ ] --------------------------------------
[ ] ___________________ EACH OCCURRENCE $1,000,000
[ ] --------------------------------------
FIRE DAMAGE (Any one fire) $1,000,000
--------------------------------------
MED EXP (Any one person) $ 10,000
- - -----------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE LIABILITY 7323-09-95 04/30/98 04/30/99 COMBINED SINGLE LIMIT $1,000,000
--------------------------------------
A [ ] ANY AUTO BODILY INJURY
[ ] ALL OWNED AUTOS (Per person) $
[X] HIRED AUTOS --------------------------------------
[X] NON-OWNED AUTOS BODILY INJURY
[ ] ___________________ (Per accident)
[ ] --------------------------------------
PROPERTY DAMAGE $
- - -----------------------------------------------------------------------------------------------------------------------------------
GARAGE LIABILITY AUTO ONLY--EA ACCIDENT $
--------------------------------------
[ ] ANY AUTO OTHER THAN AUTO ONLY
[ ] NON-OWNED AUTOS --------------------------------------
[ ] ___________________ EACH ACCIDENT $
--------------------------------------
AGGREGATE $
- - -----------------------------------------------------------------------------------------------------------------------------------
EXCESS LIABILITY EACH OCCURRENCE $
[ ] UMBRELLA FORM --------------------------------------
[ ] OTHER THAN UMBRELLA FORM AGGREGATE $
--------------------------------------
$
- - -----------------------------------------------------------------------------------------------------------------------------------
WORKERS COMPENSATION AND X WC STATU- OTH-
EMPLOYERS' LIABILITY TORY LIMITS ER
--------------------------------------
THE PROPRIETOR/ EL EACH ACCIDENT $1,000,000
A PARTNERS/EXECUTIVE [ ] INCL 7162-97-58 04/30/98 04/30/99 --------------------------------------
OFFICERS ARE [ ] EXCL EL DISEASE-POLICY LIMIT $1,000,000
--------------------------------------
EL DISEASE-EA EMPLOYEE $1,000,000
- - -----------------------------------------------------------------------------------------------------------------------------------
OTHER
- - -----------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS
Certificate Holder is named as Additional Insured as respects their interest in the Named Insures.
- - -----------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER CANCELLATION
BOUNTSA SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED
Bank of America National Trust BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL
and Savings Association ENDEAVOR TO MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE
231 South LaSalle Street HOLDER NAMED TO THE LEFT. SUCH NOTICE SHALL IMPOSE NO
Chicago IL 60697 OBLIGATION OR LIABILITY OF ANY KIND UPON THE COMPANY, ITS
AGENTS OR REPRESENTATIVES.
--------------------------------------------------------------------
ACORD 25-S (1/95) AUTHORIZED REPRESENTATIVE
/s/ CAROLE MITCHELL
-------------------
Carole Mitchell
(C) ACCORD CORPORATION 1988
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 70
[LOGO] Aon Risk Services
October 13, 1998
Mr. Peter H. Barrow
Neal, Gerber & Eisenberg
Two North LaSalle Street
Chicago, IL 60602
RE: Universal Electronics, Inc.
Bank Line Request
Commercial Insurance - Premium Payment Confirmation
Dear Mr. Barrow:
Per your request, the following is confirmation of Universal Electronics, Inc.s'
current payment status of their Commercial Insurance policies.
1) Commercial Package - Quarterly Installments, Current To Date (4/30/98-99)
2) Automobile - Paid In Full (4/30/98-99)
3) Workers' Compensation - Quarterly Installment, Current To Date (4/30/98-99)
4) Umbrella Liability - Paid In Full (4/30/98-99)
5) DIC/Earthquake - Paid In Full (2/11/98-4/30/99)
6) Directors & Officers Liability - Paid In Full (4/30/98-99)
7) Fiduciary Liability - Paid In Full (5/9/98-4/30/99)
8) Employment Practices Liability - Paid In Full (2/12/98 to 4/30/99)
9) Foreign Package - Quarterly Installments, Current To Date (4/30/98-99)
10) Marine Cargo - Quarterly Installments, Current To Date (4/30/98-99)
Should you have any questions, please contact our office.
Sincerely,
/s/ JOHN MCKINLEY
John McKinley
Account Manager
[LETTERHEAD]
<PAGE> 71
SCHEDULE 11.1
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
ORGANIZATION
Borrower's United Kingdom subsidiary may no longer be in good standing due to
Borrower ceasing such subsidiary's operations.
<PAGE> 72
SCHEDULE 11.5
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
DEFAULTS
By virtue of the restructuring of Borrower, the shutting down of its Twinsburg,
Ohio facility, and the relocation of its headquarters to its Cypress, California
facility, Borrower may by in violation of certain provisions of that certain
Enterprise Zone Agreement between Borrower and the City of Twinsburg dated June
20, 1995.
<PAGE> 73
SCHEDULE 11.8
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LITIGATION AND CONTINGENT LIABILITIES
UNIVERSAL ELECTRONICS INC. v. THE UNITED STATES, 93-11-00740 IN THE UNITED
STATES COURT OF INTERNATIONAL TRADE. Consolidated complaints filed by Borrower
on various dates against the United States seeking a correct interpretation of
the United States Harmonized Tariff Schedules with respect to the importation of
certain of the Company's remote control products.
UNIVERSAL ELECTRONICS INC. Prior Disclosure Administrative Matter brought to the
attention of US Customs by Borrower regarding incorrect classification of
earlier entries. Action reactivated due to recent decision by United States
Court of international Trade in United States v. Snuggles, Inc. (Slip Opinion
96-141) decided on August 20, 1996.
FURST ENERGY INCORPORATED AND DAVID A. BENOIT V. UNIVERSAL ELECTRONICS INC.,
CASE NO. 97CV1479(JEI) IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
NEW JERSEY. Action filed by Furst Energy Incorporated and David A. Benoit Inc.
in March 1997 against the Company alleging that the Company misappropriated
certain proprietary ideas and trade secrets, committed fraud and constructive
fraud, made negligent misrepresentations, engaged in unfair competition,
tortiously interfered with Furst's and Benoit's business and breached a contract
with them. On August 29, 1997, the Court granted the Company's motion to dismiss
Furst's and Benoit's claims for tortious business interference, fraud and
constructive fraud. In addition, the Company filed its answer denying these
claims and has and will continue to vigorously defend against them.
CIRCUIT SOLUTIONS, INC. V. UNIVERSAL ELECTRONICS INC., Case No. 98CV121418 IN
THE COURT OF COMMON PLEAS, LORAIN COUNTY, OHIO. Action filed on June 23, 1998 by
Circuit Solutions, Inc. against Borrower, alleging breach of contract and
further alleging damages in the amount of $110,000. On July 20, 1998, due to a
motion by Borrower, the suit was transferred to the United States District Court
for the Northern District of Ohio, Eastern Division, CIRCUIT SOLUTIONS, INC. V.
UNIVERSAL ELECTRONICS INC., CASE NO. 1:98 CV 1647. This case is in the
preliminary stages of pleading, with Borrower filing its answer on July 24, 1998
denying plaintiff's allegations and claims. Borrower intends to vigorously
defend this action.
<PAGE> 74
SCHEDULE 11.8
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LITIGATION
(CONT.)
BRUCE V. VEREECKEN v. UNIVERSAL ELECTRONICS INC., CASE NO. CV 98 06 2506 IN THE
COURT OF COMMON PLEAS, SUMMIT COUNTY, OHIO. Action filed on June 25, 1998 by
Bruce V. Vereecken, a former executive officer of Borrower, alleging the Company
has breached its Separation Agreement and General Release with him, and in
addition, claiming promissory estoppel, unjust enrichment and bad faith.
Vereecken is seeking damages in excess of $25,000. This case is in the
preliminary stages of pleading, with Borrower filing its answer on August 13,
1998 denying plaintiff s allegations and claims. Borrower intends to vigorously
defend this action.
Various other administrative claims for workers' compensation and unemployment.
See also Schedule 11.5.
<PAGE> 75
SCHEDULE 11.9
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LIENS
Society National Bank
The Provident Bank
<PAGE> 76
SCHEDULE 11.10
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
SUBSIDIARIES
See Schedules 5.4 and II.1.
<PAGE> 77
SCHEDULE 11.11
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
PARTNERSHIPS; JOINT VENTURES
Presently, Borrower has no Partnerships or Joint Ventures in which it is
participating; however, within its business plan, Borrower intends to actively
seek and enter into such relationships when it is determined that it makes
strategic sense. Presently, Borrower is in such discussions with General
Instrument Corporation, Microsoft, Philips, and Scientific Atlanta.
<PAGE> 78
SCHEDULE 11.12
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
ERISA MATTERS
Universal Electronics Inc. 401K and Profit Sharing Plan.
Borrower has granted options to acquire shares of Borrower's common stock at an
option price equal to the then fair market value of the stock to various
employees and members of Borrower's Board of Directors in 1992 as the Board of
Directors authorized, and in subsequent years pursuant to Borrower's Universal
Electronics Inc. 1993 Stock Incentive Plan, Universal Electronics Inc. 1995
Stock Incentive Plan, Universal Electronics Inc. 1996 Stock Incentive Plan, and
Universal Electronics Inc. 1998 Stock Incentive Plan.
Borrower also provides a standard package of medical, health, vision, dental,
disability and life insurance, and vacations to its employees. Borrower also
provides certain of its executives with additional life insurance. In addition,
Borrower provides certain of its employees with incentive compensation, tuition
reimbursement, and relocation programs, and in certain instances, a severance
program. Also, due to the restructuring of Borrower's organization and
relocation of Borrower's corporate headquarters, Borrower is obligated to
continue certain of Borrower's employees' medical, vision, dental, disability
and life insurance for periods of time ranging from 2 months to 24 months
following such employees' termination from employment.
Borrower has also entered into Salary Continuation Agreements with certain of
its executive officers and non-executive officers.
Borrower is insured for worker's compensation matters in the State of Ohio
through the State of Ohio insurance program.
<PAGE> 79
SCHEDULE 11.14
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
COMPLIANCE WITH LAWS
In the event that Borrower is found liable under any of the litigation matters
to which Borrower is a party, Borrower would be deemed to have violated the
applicable laws related to the claims made in connection with such matters.
See also Schedules 11.1 and 11.5.
<PAGE> 80
SCHEDULE 11.18
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
ENVIRONMENTAL MATTERS
None to Borrower's knowledge.
<PAGE> 81
SCHEDULE 12.14
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
OUTSTANDING INDEBTEDNESS
Pursuant to an agreement to acquire certain assets ("Purchase Agreement"),
Borrower has a contingent obligation to pay $1,000,000 in two installments of
$500,000 each, with the first payable on January 29, 1999 and the second payable
on September 30, 1999, for additional assets described in the Purchase
Agreement, in the event the seller thereunder elects during the month of January
1999 to sell those assets to Borrower. The Purchase Agreement also grants
Borrower the option to acquire those assets on the same terms.
<PAGE> 82
SCHEDULE 12.15
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
EXISTING LIENS
See Schedule 11.9.
<PAGE> 83
SCHEDULE 12.16
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
EXISTING INVESTMENTS
None, other than as described in the financial statements referred to in Section
11.6.
<PAGE> 1
EXHIBIT 10.32
REVOLVING NOTE
Due: On the Termination Date
Chicago, Illinois
October 2, 1998
$15,000,000
FOR VALUE RECEIVED, on or before the Termination Date (as defined in the
Revolving Loan and Security Agreement referred to below) or such earlier date as
Bank may declare in accordance with the Revolving Loan and Security Agreement
hereinafter referred to, UNIVERSAL ELECTRONICS INC., a Delaware corporation
("Borrower"), promises to pay to order of BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION ("Bank"), at such place as Bank may from time to time
designate in writing, the principal sum of FIFTEEN MILLION DOLLARS
($15,000,000), or if less, the aggregate principal amount then outstanding of
all Revolving Loans made by Bank to Borrower pursuant to the Revolving Loan and
Security Agreement.
Borrower further promises to pay interest on the unpaid principal amount
of Borrower's obligations and liabilities to Bank under this Note from time to
time outstanding, payable as provided in the Revolving Loan and Security
Agreement. Payments of both principal and interest are to be made in lawful
money of the United States of America.
This Note evidences indebtedness incurred under, and is entitled to the
benefits of, a Revolving Loan and Security Agreement dated as of October 2, 1998
(herein, as amended, supplemented or otherwise modified, called the "Revolving
Loan and Security Agreement"), between Borrower and Bank, to which Revolving
Loan and Security Agreement reference is hereby made for a statement of the
terms and provisions under which this Note may be paid prior to its due date or
its due date accelerated. Terms used but not otherwise defined herein are used
herein as defined in the Revolving Loan and Security Agreement.
This Note is secured pursuant to the Revolving Loan and Security
Agreement and reference is hereby made to such Revolving Loan and Security
Agreement for a description of the collateral securing this Note and the rights
of the holder of this Note with respect thereto.
In addition to, and not in limitation of the foregoing and the
provisions of the Revolving Loan and Security Agreement, Borrower further
agrees, subject only to any limitation imposed by applicable law, to pay all
expenses, including reasonable attorneys' fees and legal expenses, incurred by
the holder of this Note in endeavoring to collect any amounts payable hereunder
which are not paid when due, whether by acceleration or otherwise.
If any provision of this Note or the application thereof to any party or
circumstances is held invalid or unenforceable, the remainder of this Note and
the application of such
<PAGE> 2
provision to other parties or circumstances will not be affected thereby and the
provisions of this Note shall be severable in any such instance.
This Note is submitted by Borrower to Bank at Bank's place of business
in Chicago, Illinois and shall be deemed to have been made thereat. Presentment,
demand, notice of dishonor and protest are hereby waived.
This Note shall be governed and controlled by the internal laws of the
State of Illinois, without regard to principles of conflicts of law.
UNIVERSAL ELECTRONICS INC.
ATTEST: /s/ [SIGNATURE ILLEGIBLE]
---------------------------
Secretary
By: /s/ PAUL ARLING
---------------------------------
Name: PAUL ARLING
-------------------------------
Title: PRESIDENT, COO
------------------------------
-2-
<PAGE> 1
EXHIBIT 10.33
PATENT AND TRADEMARK COLLATERAL ASSIGNMENT
This Patent and Trademark Collateral Assignment, dated as of October 2,
1998 from UNIVERSAL ELECTRONICS INC., a Delaware corporation (herein called the
"Company"), to BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association (herein called the "Bank").
WHEREAS, the Company has entered into a certain Revolving Loan and
Security Agreement, dated as of even date herewith (herein, as the same may be
amended, modified, supplemented or renewed called the "Loan Agreement") with the
Bank pursuant to which the Bank has agreed to make loans to, and issue letters
of credit to or for the account of, the Company;
WHEREAS, the Company is the owner of certain patents as more
particularly specified in Schedule I attached hereto and of certain registered
trademarks as more particularly specified in Schedule II attached hereto; and
WHEREAS, the Loan Agreement provides for the Company to execute and
deliver to the Bank a Patent and Trademark Collateral Assignment in the form of
this Assignment, and to assign to the Bank all such patents and trademarks, all
as more fully hereinafter set forth;
NOW, THEREFORE, in consideration of any loan or letter of credit
heretofore or hereafter made or issued to or for the benefit of the Company and
for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. When used herein, the following terms shall have
the following meanings:
The terms "Commitments", "Event of Default", "Liabilities", "Note",
"Unmatured Event of Default", and all other terms used but not defined herein
shall have the meanings assigned thereto in the Loan Agreement.
"Patents" - see Section 2 hereof.
"Trademarks" - see Section 2 hereof.
SECTION 2. Assignment. Solely as security for the payment of the Note
and all other Liabilities, the Company hereby grants, assigns, and conveys unto
the Bank, its successors and assigns, a security interest, with power of sale
(but only to the extent permitted herein), in and to the following, whether
now-owned or hereafter acquired or arising: (a) all foreign and United States
patents, including but not limited to those listed in Schedule I attached
hereto, and in and to any and all, and all patents for, reissues, divisions,
continuations, renewals, extensions and continuations-in-part thereof, the right
to sue for past, present and future infringements thereof, all rights
corresponding thereto throughout the world, and all proceeds
<PAGE> 2
of the foregoing (including, without limitation, license royalties and proceeds
of suits) (all of the foregoing being herein called collectively the "Patents");
and (b) all foreign and United States trademarks, including but not limited to
those listed on Schedule II hereto, and all of the goodwill of the business
connected with the use of, and symbolized by, each trademark, and all
continuations and extensions thereof, the right to sue for past, present, and
future infringements or dilutions thereof or for injury to the goodwill
associated therewith, all rights corresponding thereto throughout the world, and
all proceeds of the foregoing (including, without limitation. license, royalties
and proceeds of suit) (all of the foregoing being herein called collectively the
"Trademarks"). In the event the Company shall at any time purchase, acquire,,
receive or otherwise obtain title to (i) any foreign or United States Patents
other than those listed on Schedule I attached hereto or (ii) any foreign or
United States Trademarks other than those listed on Schedule II attached hereto,
the Company shall promptly notify the Bank thereof and shall amend Schedules I
and II, as the case may be, and take such actions as the Bank shall reasonably
request in order to grant to the Bank a first priority perfected lien and
security interest in and to all such Patents and Trademarks. All reasonable
costs and expenses related thereto including, without limitation, reasonable
costs and expenses of counsel to the Bank and costs and expenses related to the
perfection of the Bank's security interest in such Patents and Trademarks shall
be paid by the Company, on demand. Notwithstanding the foregoing, the Bank
hereby agrees that it will not perfect its lien (A) on any Patent referred to on
Schedule I attached hereto or hereafter subject to this Agreement which is
issued by a country other than the United States or (B) on any Trademark
referred to on Schedule II attached hereto or hereafter subject to this
Agreement which is registered in any country other than the United States unless
an Event of Default has occurred and is continuing.
SECTION 3. Warranties and Covenants. The Company hereby warrants and
agrees that: (a) each of the Patents and Trademarks is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part; (b) each of the
Patents and Trademarks is valid and enforceable, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws, both state and federal, affecting the enforcement of creditor's
rights or remedies in general from time to time in effect and the exercise by
courts of equity powers or their application of principles of public policy; (c)
except as disclosed by Company to Bank in the Loan Agreement and schedules and
attachments thereto, the Company is the sole and exclusive owner of the entire
and unencumbered right, title and interest in and to each of the Patents and
Trademarks, free and clear of any liens, charges and encumbrances, including,
without limitation, licenses, shop rights and covenants by the Company not to
sue third persons; (d) the Company has the unqualified right to enter into this
Assignment and perform its terms; (e) except as disclosed by Company to Bank in
the Loan Agreement and schedules and attachments thereto, no litigation is
pending or to the Company's knowledge, threatened which contains allegations
respecting the validity of any of the Patents or Trademarks; and (f) except to
the extent that the Bank shall consent in writing, the Company (either itself or
through licensees) will, unless the Company shall reasonably determine that a
Trademark is of negligible economic value to the Company, (i) continue to use
each Trademark on each and every trademark class of goods applicable to its
current line as reflected in its current catalogs, brochures and price lists in
order to maintain each Trademark in full force
-2-
<PAGE> 3
free from any claim of abandonment for non-use, (ii) maintain as in the past the
quality of products and services offered under each Trademark, (iii) employ each
Trademark with the appropriate notice of ownership, (iv) not adopt or use any
mark which is confusingly similar or a colorable imitation of any Trademark, (v)
not use any Trademark except in accordance with its customary practices, and
(vi) except as permitted or as otherwise provided herein, not (and not permit
any licensee or sublicensee thereto to) do any act or knowingly omit to do any
act whereby any Trademark may become invalidated.
SECTION 4. Protection of Patents and Trademarks. The Company shall have
the duty to protect, preserve and maintain all rights in each of the Patents and
Trademarks, including but not limited to the duty to prosecute and/or defend
against any and all suits contesting infringement or dilution of the Patents or
Trademarks, any other suits containing allegations respecting the validity of
the Patents or the Trademarks, and any suits claiming injury to the goodwill
associated with any of the Trademarks but only in the event that the Company
shall reasonably determine that any such Patent or Trademark is of such value to
the Company as to warrant such protection, preservation or maintenance. Any
expenses incurred in protecting, preserving and maintaining the Patents or
Trademarks shall be borne by the Company. Upon the occurrence and during the
continuation of any Event of Default, the Bank shall have the right to bring
suit to enforce any or all Patents, Trademarks, or licenses thereunder, in which
event, subject to the first sentence of this Section 4, the Company shall at the
request of the Bank do any and all lawful acts and execute any and all proper
documents to effectuate such enforcement and the Company shall promptly, upon
demand, reimburse and indemnify the Bank for all costs and expenses incurred by
the Bank in the exercise of its rights under this Section 4. Notwithstanding the
foregoing, the Bank shall have no obligations or liabilities regarding the
Patents or Trademarks or any of them by reason of, or arising out of, this
Assignment.
SECTION 5. Reissues, etc. If, before the Liabilities shall have been
paid in full, the Company shall become entitled to any patent for any reissue,
division, continuation, renewal, extension, or continuation-in-part of any of
the Patents or any improvement on any Patent, the provisions of Section 2 shall
automatically apply thereto and the Company shall give to the Bank prompt notice
thereof in writing. The Company hereby authorizes the Bank to modify this
Assignment by amending Schedule I attached hereto to include any future patents
and patent applications which are Patents under Section 2 hereof or this Section
5.
SECTION 6. Reassignment. At such time as the Company shall completely
satisfy all of the Liabilities, the Bank shall execute and deliver to the
Company all deeds, assignments and other instruments as may be necessary or
proper to reassign to the Company the interest in the Patents and Trademarks
assigned pursuant to this Assignment, subject to any disposition thereof which
may have been made by the Bank in accordance with the terms of this Assignment.
Any such reassignment shall be without recourse upon or warranty by the Bank.
-3-
<PAGE> 4
SECTION 7. Remedies. Whenever an Event of Default shall exist, all
Liabilities shall become immediately due and payable, as provided in the Loan
Agreement. If any Event of Default shall exist, the Bank shall have, in addition
to all other rights and remedies given it by this Assignment, those allowed by
law and the rights and remedies of a secured party under the Uniform Commercial
Code as enacted in any jurisdiction in which the Patents or Trademarks or any
thereof may be located and, without limiting the generality of the foregoing,
the Bank may immediately, without demand of performance and without other notice
(except as set forth next below) or demand whatsoever to the Company, all of
which are hereby expressly waived, and without advertisement, sell on
commercially reasonable terms at public or private sale or otherwise realize
upon, in Chicago, Illinois or elsewhere, the whole or from time to time any
part of the Patents or Trademarks or any interest which the Company may have
therein. Notice of any such sale or other disposition of the Patents or
Trademarks or any thereof shall be given to the Company at least five (5)
Banking Days before the time of any such intended public or private sale or
other disposition of the Patents or Trademarks or any thereof is to be made,
which the Company hereby agrees shall be reasonable notice of such sale or other
disposition. The proceeds of such dispositions shall first be applied toward the
payment of the Liabilities, then toward the payment of expenses reasonably and
actually incurred by the Bank in effecting any such sale or other disposition
of the Patents and Trademarks, including without limitation reasonably and
actually incurred attorneys' fees and expenses, and then the remaining balance,
if any, shall be remitted to the Company.
SECTION 8. General. The Company will, upon request of the Bank, execute
such financing statements and other documents (and pay the cost of filing or
recording the same in all public offices deemed necessary by the Bank), and do
such other acts and things, all as the Bank may from time to time reasonably
request to establish and maintain a valid assignment of the Patents and
Trademarks.
This Assignment, and the terms, covenants and conditions hereof, shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company shall not be
permitted to assign this Assignment or any interest herein or in the Patents or
Trademarks, or any part thereof except if any such complete or partial
assignment or transfer occurs in connection with a merger, consolidation, or
sale of all or substantially all of the Company's assets permitted by the Loan
Agreement.
Neither this Assignment nor any provision hereof may be amended,
modified, waived, discharged or terminated except by an instrument in writing
duly signed by or on behalf of the Bank.
No delay on the part of the Bank in exercising any rights, power or
remedy hereunder shall operate as a waiver thereof nor shall any single or
partial exercise of any such right, power or remedy preclude any other further
exercise thereof or the exercise of any other right, power or remedy. No
amendment, modification or waiver of, or any consent with respect to, any
provision of this Assignment shall in any event be effective unless the same
shall be in writing, and signed and delivered by the party to be bound thereby,
and then such amendment,
-4-
<PAGE> 5
modification, waiver of consent shall be effective only in the specific instance
and for the purpose for which given.
All obligations of the Company and all rights, powers and remedies of
the Bank expressed herein are in addition to all other rights, powers and
remedies possessed by them, including, without limitation, those provided by
applicable law or in any other written instrument or agreement relating to any
of the Liabilities or security therefor.
Except as otherwise provided herein, the provisions of the Loan
Agreement shall apply as to the giving of notices hereunder.
At the Bank's option this Assignment, or a photographic or other
reproduction of this Assignment or of any Uniform Commercial Code financing
statement covering the Patents and Trademarks or any portion thereof, shall be
sufficient as the Uniform Commercial Code financing statement and may be filed.
Section captions used in this Assignment are for convenience of
reference only, and shall not affect the construction of this Assignment.
This Assignment shall in all respects be a continuing agreement and
shall remain in full force and effect until expiration or termination of all of
the Commitments and final payment in full of all Liabilities.
This Assignment shall be construed in accordance with and governed by
the laws of the State of Illinois, without regard to conflict of laws
principles. Wherever possible each provision of this Assignment shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Assignment shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Assignment.
This Assignment is made by the Company and is accepted by the Bank for
collateral security purposes only and by its acceptance thereof, the Bank shall
have only the rights of a secured party under the Uniform Commercial Code or
other applicable law and shall not be deemed the owner of the Patents and
Trademarks or responsible for the maintenance, registration or any other actions
with respect to the Patents or Trademarks referred to herein.
[Remainder of Page Intentionally Left Blank]
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Assignment to be
executed as of the date first above written.
UNIVERSAL ELECTRONICS, INC.
Attest: /s/ RICHARD A. FIREHAMMER, JR.
-------------------------------
Richard A. Firehammer, Jr.
By: /s/ PAUL ARLING
---------------------------------
Name: Paul D. Arling
-------------------------------
Title: President and Chief Operating
------------------------------
Officer
------------------------------
Address: 6101 Gateway Drive
Cypress, California 90630
Attention: Mr. Paul D. Arling
President and Chief
Operating Officer
Facsimile Number: (714) 820-1042
Telephone Number: (714) 820-1060
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: /s/ CHARLES W. A. HAGEL
---------------------------------
Name: Charles W. A. Hagel
-------------------------------
Title: Vice President
------------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Mr. Charles W. A. Hagel
Vice President
Facsimile Number: (312) 828-1974
Telephone Number: (312) 828-4360
-6-
<PAGE> 7
SCHEDULE I
UEI PATENT SCHEDULE 14-Oct-98
<TABLE>
<CAPTION>
TITLE COUNTRY PATENT NUMBER ISSUE DATE
- - ----- ------- ------------- ----------
<S> <C> <C> <C>
UNIVERSAL REMOTE CONTROL AU 648277 09-Aug-1994
SYSTEM
UNIVERSAL REMOTE CONTROL WITH AU 673185 31-Oct-1996
FUNCTION SYNTHESIS
INFRARED REMOTE CONTROL DEVICE CA 2158947 23-Mar-1994
FOR A PERSONAL DIGITAL ASSISTANT
KEY MOVER DE G9318890.0 03-Feb-1994
MODULAR CASE DESIGN DE G9309894.4 11-Nov-1993
UNIVERSAL REMOTE CONTROL WITH DE G9310317.4 05-Jan-1994
FUNCTION SYNTHESIS
FAVORITE KEY MACRO COMMAND AND IL P/107952 16-Feb-1997
CHAINED MACRO COMMAND IN A
REMOTE CONTROL
UNIVERSAL REMOTE CONTROL JP 2085314 23-Aug-1996
SYSTEM
FAVORITE KEY MACRO COMMAND AND MX 186389 13-Oct-1997
CHAINED MACRO COMMAND IN A
REMOTE CONTROL
MINIMAL FUNCTION REMOTE CONTROL MX 188429 27-Mar-1998
WITHOUT DIGIT KEYS AND WITH A
POWER TOGGLE PROGRAM AND WITH
A CHANNEL ROTATION PROGRAM
DIRECT ENTRY REMOTE CONTROL US 5481256 02-Jan-1996
WITH CHANNEL SCAN
FAVORITE KEY MACRO COMMAND AND US 5414426 09-May-1995
CHAINED MACRO COMMAND IN A
REMOTE CONTROL
INFRARED REMOTE CONTROL DEVICE US 5778256 07-Jul-1998
FOR A PERSONAL DIGITAL ASSISTANT
MAGNETIC MODEM IN A REMOTE US 5537463 16-Jul-1996
CONTROL
MEANS FOR LOCATING A REMOTE US 5686891 11-Nov-1997
CONTROL DEVICE
MEANS FOR LOCATING A REMOTE US 5638050 10-Jun-1997
CONTROL DEVICE
METHOD FOR SELECTING A REMOTE US 5614906 25-Mar-1997
CONTROL COMMAND SET
MINIMAL FUNCTION REMOTE CONTROL US 5481251 02-Jan-1996
WITHOUT DIGIT KEYS AND WITH A
POWER TOGGLE PROGRAM AND WITH
A CHANNEL ROTATION PROGRAM
</TABLE>
1
<PAGE> 8
<TABLE>
<CAPTION>
TITLE COUNTRY PATENT NUMBER ISSUE DATE
----- ------- ------------- ----------
<S> <C> <C> <C>
MODULAR CASE DESIGN US 5422783 06-Jun-1995
REMOTE CONTROL US 5552917 03-Sep-1996
REMOTE CONTROL (BASEBALL) US D372479 06-Aug-1996
REMOTE CONTROL (BASKETBALL) US D370915 18-Jun-1996
REMOTE CONTROL (FOOTBALL) US D371794 16-Jul-1996
REMOTE CONTROL WITH KEY LIGHTING US 5568367 22-Oct-1996
REMOTE CONTROL WITH TWO-WAY US 5689353 18-Nov-1997
DATA COUPLING
REMOTELY UPGRADEABLE UNIVERSAL US 5228077 13-Jul-1993
REMOTE CONTROL
SINGLE WIRE KEYBOARD ENCODE AND US 5619196 08-Apr-1997
DECODE CIRCUIT
TIME ENABLED PHOTOSENSING US 5272418 21-Dec-1993
CIRCUIT
UNIVERSAL REMOTE CONTROL US D354490 17-Jan-1995
UNIVERSAL REMOTE CONTROL US D342259 14-Dec-1993
UNIVERSAL REMOTE CONTROL US D366263 16-Jan-1996
UNIVERSAL REMOTE CONTROL DEVICE US 5255313 19-Oct-1993
UNIVERSAL REMOTE CONTROL DEVICE US 4959810 25-Sep-1990
UNIVERSAL REMOTE CONTROL US 5414761 09-May-1995
SYSTEM
UNIVERSAL REMOTE CONTROL WITH US 5515052 07-May-1996
FUNCTION SYNTHESIS
WARNING LIGHT SYSTEM FOR USE US 5177461 05-Jan-1993
WITH A SMOKE DETECTOR
</TABLE>
2
<PAGE> 9
SCHEDULE II
UEI Trademark Schedule 14-Oct-98
<TABLE>
<CAPTION>
TRADEMARK COUNTRY REGISTRATION NUMBER REGISTRATION DATE
- - --------- ------- ------------------- -----------------
<S> <C> <C> <C>
EVERSAFE AR 1346060 10-May-89
EVERSAFE AR 1346059 10-May-89
ONE FOR ALL AR 1493628 30-Dec-93
ONESHOT AR 1524004 31-May-94
BIG EASY AU 703943 20-Jun-97
EVERSAFE AU B507918 28-May-92
EVERSAFE AU B507917 28-May-92
ONE FOR ALL AU B534572 10-Nov-92
ONESHOT AU 729188 13-Mar-98
EVERSAFE BH 12374 09-Jan-90
EVERSAFE BH 12373 07-May-90
EVERSAFE BI 2478/BUR 01-Mar-90
BIG EASY BO 60469-C 09-Feb-96
EVERSAFE BO 49191 15-Sep-89
LITTLE EASY BO 60445-C 07-Feb-96
ONESHOT BO 60436-C 07-Feb-96
ALL IN ONE BR 817453148 06-Jun-95
BIG EASY BR 817543996 10-Jun-97
BIG EZ BR 817544003 09-Jan-96
EVERSAFE BR 814899170 13-Feb-91
EVERSAFE BR 815234074 28-Jan-92
LITTLE EASY BR 817588302 22-Aug-95
ONE FOR ALL BR 817453130 06-Jun-95
ONESHOT BR 817666931 21-Feb-96
EVERSAFE BS 13899 18-Feb-91
EVERSAFE BS 13898 07-Aug-91
</TABLE>
1
<PAGE> 10
<TABLE>
<CAPTION>
TRADEMARK COUNTRY REGISTRATION NUMBER REGISTRATION DATE
- - --------- ------- ------------------- -----------------
<S> <C> <C> <C>
EVERSAFE BS 13900 11-Mar-91
ALL IN ONE BX 534980 03-Jan-94
BIG EASY BX 511144 04-Mar-92
EVERSAFE BX 457280 02-Oct-89
KEY MAGIC BX 523711 01-Jul-93
LITTLE EASY BX 534820 01-Mar-94
MAGIC KEYS BX 521192 27-Oct-92
ONE FOR ALL BX 484964 02-May-91
ONESHOT BX 495457 02-Dec-91
SO EASY BX 534423 02-Aug-93
SPEAK EASY BX 533066 22-Jun-93
VCRPRO BX 510679 04-Mar-92
VIDEOPRO BX 510338 30-Mar-92
EVERSAFE CA 368895 25-May-90
KEY MAGIC CA 439452 17-Feb-95
LITTLE EASY CA 444904 07-Jul-95
ONE FOR ALL CA 445945 11-Aug-95
ONESHOT CA 440933 24-Mar-95
SO EASY CA 440931 24-Mar-95
VCRPRO CA 440932 24-Mar-95
ONE FOR ALL CH 401606 02-Jan-93
BIG EZ CL 415096 26-Oct-93
EVERSAFE CL 351038 16-Jan-90
EVERSAFE CL 344181 27-Jun-89
ONE FOR ALL CL 443330 13-Apr-95
ONESHOT CL 429857 08-Aug-94
BIG EASY CO 1676535 25-Oct-94
</TABLE>
2
<PAGE> 11
<TABLE>
<CAPTION>
TRADEMARK COUNTRY REGISTRATION NUMBER REGISTRATION DATE
- - --------- ------- ------------------- -----------------
<S> <C> <C> <C>
EVERSAFE CO 170362 21-Nov-94
LITTLE EASY CO 170753 25-Oct-94
ONE FOR ALL CO 167652 25-Oct-94
ONESHOT CO 182216 29-Sep-95
BIG EASY DE 2029764 08-Feb-93
EVERSAFE DE 1164666 25-Sep-90
KEY MAGIC DE 2046261 04-Oct-93
LITTLE EASY DE 2055696 02-Feb-94
MAGIC KEYS DE 2046262 04-Oct-93
ONE FOR ALL & DESIGN DE 2042950 20-Aug-93
ONESHOT DE 2073692 02-Aug-94
SPEAK EASY DE 2093805 28-Mar-95
VCRPRO DE 2028941 28-Jan-93
VIDEOPRO DE 2029765 08-Feb-93
ONE FOR ALL DK VR06385 17-Jul-92
EVERSAFE DO 47740 14-Nov-89
EVERSAFE DO 47746 14-Nov-89
EVERSAFE DZ 41010 08-May-89
BIG EASY EC 1356-95 17-Apr-95
EVERSAFE EC 5430-95 16-Dec-90
EVERSAFE EC 5521-95 07-Jun-90
EVERSAFE EC 5522-95 07-Jun-90
LITTLE EASY EC 1357-95 17-Apr-95
ONE FOR ALL EC 2683-94 29-Aug-94
ONESHOT EC 1354-95 17-Apr-95
VCRPRO EC 1345-95 17-Apr-95
EVERSAFE EG 74103 08-Mar-93
</TABLE>
3
<PAGE> 12
<TABLE>
<CAPTION>
TRADEMARK COUNTRY REGISTRATION NUMBER REGISTRATION DATE
- - --------- ------- ------------------- -----------------
<S> <C> <C> <C>
EVERSAFE EG 74104 08-Mar-93
EVERSAFE EG 74105 08-Mar-93
BIG EASY ES 1782873 20-Sep-94
KEY MAGIC ES 1781455 03-Apr-96
MAGIC KEYS ES 1781456 03-Apr-96
ONESHOT ES 1781457 24-Sep-93
SPEAK EASY ES 1786121 05-Apr-94
ONE FOR ALL FI 125070 22-Feb-93
ALL IN ONE FR 93/479530 21-Jan-94
BIG EASY FR 93/483244 04-Mar-94
EVERSAFE FR 1549486 06-Sep-89
KEY MAGIC FR 93460382 03-Sep-93
LITTLE EASY FR 93483246 04-Mar-94
MAGIC KEYS FR 93460383 18-Mar-93
ONE FOR ALL FR 1715378 27-Dec-91
ONESHOT FR 93/483243 04-Mar-94
SO EASY FR 93/483245 09-Sep-93
SPEAK EASY FR 93/494804 30-Nov-93
VCRPRO FR 92427718 22-Jul-92
VIDEOPRO FR 92418017 23-Oct-92
BIG EASY GB 1493477 12-Nov-93
EVERSAFE GB B1488908 26-Aug-94
EVERSAFE GB B1488907 03-Jan-95
KEY MAGIC GB B1517331 21-Sep-92
LITTLE EASY GB B1517950 14-Oct-92
ONE FOR ALL GB B1425401 18-Dec-92
ONESHOT GB 1451507 20-Sep-94
</TABLE>
4
<PAGE> 13
<TABLE>
<CAPTION>
TRADEMARK COUNTRY REGISTRATION NUMBER REGISTRATION DATE
- - --------- ------- ------------------- -----------------
<S> <C> <C> <C>
SPEAK EASY GB 1539582 10-Mar-95
VIDEOPRO GB 1495556 27-Mar-93
EVERSAFE GN 79/82 25-Jul-89
EVERSAFE GR 93130 17-Feb-92
ONE FOR ALL GR 115574 17-May-96
EVERSAFE GT 60408 22-May-90
EVERSAFE GT 60407 22-May-90
KEY MAGIC HK B8167/94 21-Sep-92
ONE FOR ALL HK B4417/94 11-Nov-91
EVERSAFE ID 268042 24-Oct-91
ONE FOR ALL IE 155762 03-Aug-93
ONE FOR ALL IL 1610477 03-Jun-98
EVERSAFE IS 949/1989 08-Dec-89
BIG EASY IT 661767 08-Nov-95
KEY MAGIC IT 666279 29-Dec-95
MAGIC KEYS IT 666277 29-Dec-95
ONE FOR ALL IT 636902 19-Dec-94
SPEAK EASY IT 663196 24-Nov-95
VIDEOPRO IT 661766 08-Nov-95
BIG EASY JP 4077026 31-Oct-97
EVERSAFE JP 2721983 06-Jun-97
EVERSAFE JP 2579835 30-Sep-93
KEY MAGIC JP 3127131 29-Mar-96
LITTLE EASY JP 3134428 29-Mar-96
ONE FOR ALL JP 3241813 25-Dec-96
VCRPRO JP 2709493 31-Aug-95
KEY MAGIC KR 283103 13-Jan-94
</TABLE>
5
<PAGE> 14
<TABLE>
<CAPTION>
TRADEMARK COUNTRY REGISTRATION NUMBER REGISTRATION DATE
- - --------- ------- ------------------- -----------------
<S> <C> <C> <C>
MAGICKEYS KR 283102 13-Jan-94
ONE FOR ALL KR 252372 21-Oct-92
BIG EZ MX 466731 18-Jul-94
EVERSAFE MX 368741 23-Oct-89
EVERSAFE MX 365547 09-Aug-89
KEY MAGIC MX 481617 06-Dec-94
LITTLE EASY MX 503441 08-Sep-95
ONE FOR ALL MX 473944 20-Sep-94
ONE SHOT MX 476578 11-Oct-94
SPEAK EASY MX 509976 24-Nov-95
EVERSAFE NG 50701 06-Jun-89
EVERSAFE NG 50702 06-Jun-89
ONE FOR ALL NO 1588455 26-Aug-93
EVERSAFE NT 15424 11-Sep-89
EVERSAFE NZ 189587 13-Jul-95
EVERSAFE NZ B189588 28-May-92
ONE FOR ALL NZ 229095 04-Aug-93
EVERSAFE PA 053745 27-Aug-91
EVERSAFE PA 053743 27-Aug-91
BIG EASY PE 8654 19-Jul-94
EVERSAFE PE 80556 26-Jul-89
EVERSAFE PE 80557 26-Jul-89
LITTLE EASY PE 8588 11-Jul-94
ONE FOR ALL PE 7783 22-Jun-94
ONESHOT PE 8589 11-Jul-94
VCRPRO PE 15107 30-Mar-95
BIG EASY PY 174310 27-Dec-94
</TABLE>
6
<PAGE> 15
<TABLE>
<CAPTION>
TRADEMARK COUNTRY REGISTRATION NUMBER REGISTRATION DATE
- - --------- ------- ------------------- -----------------
<S> <C> <C> <C>
EVERSAFE PY 137091 01-Nov-89
EVERSAFE PY 135813 16-Aug-89
LITTLE EASY PY 174311 27-Dec-94
ONE FOR ALL PY 168155 05-Apr-94
ONESHOT PY 174309 27-Dec-94
VCRPRO PY 178584 26-Jul-95
EVERSAFE RK 2579835 30-Sep-93
EVERSAFE RK 6820 12-Dec-90
EVERSAFE RU 88175 05-Mar-90
ONE FOR ALL SE 300289 07-Apr-95
EVERSAFE SO 3688 01-Aug-89
EVERSAFE SR 12468 10-Apr-89
EVERSAFE SV 125 27-Sep-90
EVERSAFE TH 131809 17-Nov-89
EVERSAFE TI 7190 24-Apr-89
EVERSAFE TN EE89.0545 15-Jun-89
EVERSAFE TR 1114990 13-Apr-89
EVERSAFE TT 18351 03-Jan-95
EVERSAFE TW 470180 16-Dec-89
ONE FOR ALL TW 583970 15-Jan-93
ALL IN ONE US 1879123 14-Feb-95
BIG EASY US 1789855 24-Aug-93
EVERSAFE US 1565671 14-Nov-89
EVERSAFE US 1564267 07-Nov-89
EVERSAFE US 1563242 31-Oct-89
KEY MAGIC US 1802632 02-Nov-93
LITTLE EASY US 1826857 15-Mar-94
</TABLE>
7
<PAGE> 16
<TABLE>
<CAPTION>
TRADEMARK COUNTRY REGISTRATION NUMBER REGISTRATION DATE
- - --------- ------- ------------------- -----------------
<S> <C> <C> <C>
ONE CALL US 2005111 01-Oct-96
ONE FOR ALL US 1610477 21-Aug-90
ONE FOR ALL & DESIGN US 1923489 03-Oct-95
ONE FOR ALL LITE US 1922854 26-Sep-95
ONE SHOT US 1841190 21-Jun-94
PUTTING YOU IN CONTROL OF US 2146387 24-Mar-98
TODAY'S TECHNOLOGY
PUTTING YOU IN CONTROL OF US 2146388 24-Mar-98
TODAY'S TECHNOLOGY
SO EASY US 1916015 05-Sep-95
SPORTS CLICKER US 2019647 26-Nov-96
SPORTS CLICKER & DESIGN US 2030693 14-Jan-97
UNIVERSAL ELECTRONICS & DESIGN US 2150809 14-Apr-98
UNIVERSAL ELECTRONICS & DESIGN US 2150807 14-Apr-98
UNIWAND US 1736318 01-Dec-92
EVERSAFE UY 229392 16-Nov-89
LITTLE EASY UY 269348 04-Nov-96
ONE SHOT UY 269350 14-Feb-96
VCRPRO UY 269351 04-Aug-95
EVERSAFE ZA 29127 27-Jun-90
ONE FOR ALL ZA 93/6647 05-Aug-93
EVERSAFE ZR 1886/89 26-Mar-91
EVERSAFE ZW B398/89 05-Jul-89
EVERSAFE ZW B397/89 05-Jul-89
</TABLE>
8
<PAGE> 1
EXHIBIT 10.34
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made this eighth day of November
1998 by and between UNIVERSAL ELECTRONICS INC., a Delaware corporation with
offices at 6101 Gateway Drive, Cypress, California 90630 and GENERAL INSTRUMENT
CORPORATION, a Delaware corporation with offices at 101 Tournament Drive,
Horsham, Pennsylvania 19044. Seller and Buyer are sometimes referred to
individually as a "Party" and collectively as the "Parties".
The Parties, intending to be legally bound, agree as follows:
1. SCOPE Buyer shall purchase from Seller and Seller shall sell to
Buyer, upon the terms and conditions set forth herein, remote controls,
keyboards and peripheral devices (excluding dedicated devices such as single
function remotes) (the "Products") which are offered for sale by Buyer with
Buyer's analog and digital set top terminals. The Products will be developed by
Seller in accordance with the schedule (the "Milestone Schedule") set forth on
Exhibit A. The Milestone Schedule and the initial Specifications referred to
therein (the "Specifications") will be mutually agreed to by the Parties within
sixty days after the date hereof and may be changed only upon the written
consent of the Parties.
2. BUYER'S REQUIREMENTS
(a) Subject to the terms and conditions set forth in this Agreement,
from and after the date of Buyer's acceptance of the first shipment of the
Products in commercial quantities (which, for purposes of this Agreement, shall
mean quantities that in the aggregate equal or exceed 5,000 units of the
Products) and until the termination of this Agreement (the "Exclusive Period"),
Buyer shall purchase from Seller all of Buyer's requirements for Products
offered for sale in the United States with Buyer's analog and digital set top
terminals. Notwithstanding the foregoing, Buyer shall have the right to
purchase Products from other suppliers under the following circumstances:
(i) Until such time as Seller can provide Buyer with such
Products in commercial quantities, Buyer shall be entitled to purchase from
other suppliers Products necessary for the replacement of Products sold by
Buyer prior to the commencement of the Exclusive Period and to fulfill Buyer's
other customary product support obligations with respect to such Products sold
prior to the commencement of the Exclusive Period; provided, however, that
Buyer shall be entitled to continue purchasing Products from such other
suppliers regardless of whether Seller is able to provide such Products, if
Buyer's customer specifically requests such other Products;
(ii) Buyer shall be entitled to purchase from other suppliers
Products offered for sale by Buyer outside of the United States; except that in
the event Buyer is selling or will sell Products outside of the United States,
Buyer shall first give Seller an opportunity to demonstrate to Buyer's
reasonable satisfaction that Seller has an appropriate database library for
1
<PAGE> 2
such Products offered or to be offered for sale outside of the United States,
and upon such showing, Seller and Buyer shall in good faith negotiate a
mutually acceptable agreement for the exclusive purchase and sale of such
Products outside of the United States during the Exclusive Period;
(iii) Buyer may purchase Products from other suppliers under the
circumstances set forth in Sections 3 and 6(a);
(iv) Buyer may purchase Products from other suppliers to satisfy
a request made by a customer for a Product manufactured by such other suppliers,
so long as Buyer does not promote, directly or indirectly, such other suppliers'
Products; and
(v) In the event that a Product is offered by another supplier
to Buyer with new technology which Seller is not willing to manufacture and sell
to Buyer on terms (including, without limitation, dates of availability and
price) no less favorable to Buyer than those offered by such other supplier,
Buyer shall have the right to purchase such Product from such supplier on the
offered terms; provided however, that Buyer shall provide Seller, to the extent
it is able after exerting its best efforts to obtain and release such
information, all information necessary to allow Seller to reasonably determine
whether or not it is willing to provide such Product. In the event Buyer is not
able or fails to release all such information to Seller, Seller reserves the
right to dispute the existence of the new technology or the favorableness of the
terms.
(b) Seller shall not, whether during or after the term of this
Agreement, sell to any party other than Buyer any product utilizing the same or
substantially similar exterior design as the Product.
3. TERM Unless otherwise terminated pursuant to the terms hereof, this
Agreement shall commence on the date first above written and shall continue for
the five (5) years thereafter (the "Term"), provided, however, that during the
ninety (90) day period immediately preceding the third (3rd) anniversary of this
Agreement, Buyer shall have the right to obtain good faith competitive price
quotes from other suppliers of products which are substantially similar to the
Products in design, functionality and quantities and Seller shall have to right
to meet or beat any such competitive price quote for such products. If Seller
meets or beats such competitive price quote for such products after receiving
from Buyer, to the extent Buyer is able after exerting its best efforts to
obtain and release such information, all information necessary to reasonably
determine that such products are substantially similar to the Products and to
reasonably prepare a price quote, this Agreement shall remain exclusive as to
those specific products during the balance of the Term. If Seller does not meet
or beat such competitive price quote, the provisions of Section 2(a) as to the
specific products to which Seller was unable to meet or beat the competitive
price quote shall be of no further force or effect. Nothing in this Section,
however, shall cause Seller to lose exclusivity as to any Products that are not
the subject of the good faith competitive price quote. In addition, in the event
Buyer is not able or fails to release all such information to Seller, Seller
reserves the right to dispute Buyer's belief that Seller was unable to meet or
beat such competitive price quote.
2
<PAGE> 3
4. FORECAST Beginning on the first day of the first calendar month after
the Products are available for shipment in commercial quantities and continuing
during the Term, Buyer shall provide to Seller on or before the first day of
each calendar month a forecast of expected aggregate monthly delivery
requirements for Products for that month and the immediately succeeding five
calendar months (each a "Forecast"). In each Forecast, Buyer shall state its
anticipated requirements by calendar month. The first four months of each
Forecast shall set forth binding commitment levels, as provided below, and the
remaining two months shall be non-binding commitment levels, as provided below,
and the remaining two months shall be non-binding forecasts without any related
purchase or sale obligations. The commitment levels shall be carried forward,
and may be adjusted, as follows in successive Forecasts:
(a) Quantities stated for the first month of each Forecast must
equal one hundred percent (100%) of the quantities forecasted for the second
month of the immediately preceding Forecast;
(b) Quantities stated for the second month of each Forecast
must be not less than eighty-five percent (85%) or more than one hundred
fifteen percent (115%), of the quantities forecasted for the third month
of the immediately preceding Forecast; and
(c) Quantities stated for the third month of each Forecast must
be not less than seventy-five percent (75%) or more than on hundred twenty-five
percent (125%), of the quantities forecasted for the fourth month of the
immediately preceding Forecast; and
(d) Quantities stated for the fourth month of each Forecast
must be not less than fifty percent (50%) or more than one hundred fifty
percent (150%), of the quantities forecasted for the fifth month of the
immediately preceding Forecast.
5. PURCHASE ORDERS Except as the Parties otherwise agree in writing,
concurrent with the delivery of the Forecast as set forth in Section 4 above,
Buyer shall issue a purchase order or purchase orders for, and Seller shall be
obligated to sell and deliver, the Products specified in the second month of
the most recent Forecast delivered with the purchase order or purchase orders;
except that the first purchase order or purchase orders issued by Buyer shall
be for the Products specified in the first and second months of the Forecast
delivered with such first purchase order or purchase orders. This purchase
order or purchase orders shall be applied toward and reduce all forecasted
quantities for the applicable month or months and then toward any subsequent
month or months of the Forecast. Except as provided in subsection 6(b) below,
the failure of Buyer to provide a schedule or to accept delivery pursuant to
the terms hereof for ninety (90) consecutive days or one hundred (100) days in
the aggregate, except for reasons excusing performance under Section 16 hereof,
shall be deemed a material breach of this Agreement and Seller may terminate
this Agreement by giving written notice to Buyer at any time thereafter prior
to the time Buyer schedules or accepts delivery in conformity with the terms
hereof.
<PAGE> 4
6. CANCELLATION OF PURCHASE ORDERS
(a) FOR CAUSE If Seller fails to deliver the Products set forth in
a purchase order within thirty (30) days after the date specified for delivery
in such purchase order (or such later date as Buyer authorizes in writing),
regardless of whether performance by Seller is excused under Section 16 hereof,
Buyer may, upon written notice to Seller, cancel all or a portion of the
relevant purchase order without liability to Seller for such termination. If
Seller fails to deliver the Products within thirty (30) days after the dates
specified for delivery in the purchase orders issued by Buyer for three
consecutive months (or such later dates as Buyer authorizes in writing), except
if performance by Seller is excused under Section 16 hereof, Buyer, may, upon
written notice to Seller, (i) suspend its obligation under Section 5 to submit
purchase orders pursuant to a Forecast, and (ii) purchase Products and products
comparable to the Products from other suppliers, provided that, Buyer agrees
that such suspension shall only continue until such time as Seller is able to
resume timely delivery of Product; provided further that if Buyer has not
resumed such delivery after ninety (90) days, Buyer may notify Seller in writing
of Buyer's intent to terminate this Agreement, and if Seller shall fail to
resume delivery within thirty (30) days after receipt of such notification to
cure, this Agreement shall terminate at the end of the thirty (30) day period
without further notice from Buyer.
(b) FOR CONVENIENCE Upon proper written notice to Seller, Buyer may
cancel all or a portion of a purchase order prior to the shipment of any
Products pursuant to such purchase order or elect not to submit a purchase
order required under Section 5, in each case for Buyer's convenience. In the
event of such a cancellation or such an election not to submit a required
purchase order, Buyer and Seller shall have the following sole and exclusive
rights and obligations:
(i) PAYMENTS BY BUYER In the case of a purchase order properly
canceled, in whole or in part, Buyer shall be responsible for and shall pay to
Seller within fifteen (15) days after receipt of an invoice from Seller the sum
of (1) the purchase price for all canceled Products which have been completed by
Seller as of the date Seller receives Buyer's notice of cancellation, and (2)
the actual direct labor and material costs incurred by Seller for all work in
process for canceled Products as of the date Seller receives Buyer's notice of
cancellation, and (3) to the extent not included in clause (2), Seller's actual
cost of all components purchased for the canceled Products, and (4) re-stocking
charges, and (5) other commercially reasonable costs incurred by Seller due to
such cancellation.
(ii) SELLER'S ACTIONS UPON NOTICE Upon receiving Buyer's
notice of its cancellation of a purchase order or its election to not submit a
purchase order required under Section 5, Seller shall take the following
actions to the extent commercially reasonable and permitted by its suppliers:
(A) Provide Buyer with an identification of all
components for which Buyer must make a payment under Section 6(b)(i), Seller's
actual cost of such components, and the potential options for their disposition;
4
<PAGE> 5
(B) Cooperate with Buyer to identify whether current work
in process should be completed, scrapped, or shipped to Buyer "as is";
(C) Make all commercially reasonable efforts to the extent
permitted by its suppliers to use the components for which Buyer must make a
payment under Section 6(b)(i) in other programs of Seller, in which case Buyer
shall be entitled to a credit against such payment in an amount equal to the
lesser of (1) Seller's actual cost of such components or (2) the amount received
by Seller due to the use of such components in the other programs;
(D) Reduce or cancel component orders to the extent
commercially reasonable and permitted by its suppliers.
(E) Attempt to return to the original vendor all
components for which Buyer must make a payment under Section 6(b)(i), in which
case Buyer shall be entitled to a credit against such payment in an amount equal
to the credit or refund received from each such vendor; and
(F) Attempt to sell to third parties on commercially
reasonable terms all components for which Buyer must make a payment under
6(b)(i), in which case Buyer shall be entitled to a credit against such payment
in an amount equal to the proceeds of such sales.
(iii) DELIVERY OF FINISHED PRODUCTS, WORK IN PROCESS, AND
COMPONENTS Upon receipt of Buyer's payment for finished Products pursuant to
Section 6(b)(i), all such finished Products shall be delivered to, or at the
direction of, Buyer and such Products will be subject to all of the terms and
conditions set forth in this Agreement, including, without limitation, the
acceptance and warranty provisions hereof. Upon receipt of Buyer's payment for
work in process and components, all such work in process and components shall be
delivered to Buyer, or at Buyer's direction, in accordance with the delivery
provisions of Section 7; provided however that any such work in process and
components shall not be subject to any of the terms and conditions set forth in
this Agreement, including without limitation, the acceptance and warranty and
indemnification provisions hereof. Buyer shall bear the risk, and all costs and
expenses, including, without limitation, storage, transportation, shipping,
recalling, repackaging, reshipping, and the like, associated with the shipment
and delivery of all such Product, work in process and components.
(iv) AUDIT Before any payment is made to Seller pursuant to
Section 6(b)(i), Buyer shall have the right to audit Seller's records at
reasonable times, using a nationally recognized accounting firm of its choice,
to substantiate any and all charges payable to Seller. Buyer shall notify Seller
of its election to have such audit performed within ten (10 days of its receipt
of Seller's invoice and such audit will take place within fifteen (15) days from
Buyer's receipt of Seller's invoice and shall be completed within twenty (20)
days of start of such audit, after which Buyer shall immediately pay to Seller
all charges as determined by the audit. Such accounting firm and each of the
persons actually performing the audit will, if requested, execute Seller's
standard non-disclosure agreement with respect to such audit. Seller may dispute
the findings of any such audit and in such case, Buyer and Seller shall meet
within ten (10) days from
5
<PAGE> 6
hours. The goal of the cost reduction program target shall be to reduce the
prices stated in Exhibit B to this Agreement by a minimum of 6% per year. Any
cost savings which are achieved by Seller as a result of implementing cost
reductions, whether proposed by Buyer or Seller, shall reduce the purchase
price of the Products by fifty percent (50%) of the cost reduction. On each
anniversary of this Agreement, the costs to which future cost reductions shall
be compared shall be the costs of the Product in effect on the day immediately
preceding such anniversary. Buyer acknowledges and agrees this Section sets
forth goals of the Parties to improve efficiencies and costs and Buyer agrees
that under no circumstances shall Seller be liable to Buyer for any amount or
in any other fashion in the event such goals are not achieved.
(d) MOST FAVORED CUSTOMER Seller warrants that the prices,
payment terms and other terms and conditions stated for the Products and
services covered by this Agreement are not less favorable than prices, payment
terms or other terms and conditions accorded to Seller's most favored customers
for like products for use in similar applications and sale or use in similar
markets and sales in similar quantities. If at any time during the term of this
Agreement, Seller gives any other customer more favorable payment terms and
other terms and conditions for equipment, parts and services which are
substantially comparable to those sold to Buyer hereunder, Seller shall
immediately extend such prices, payment terms and other terms and conditions to
Buyer as well.
10. SOFTWARE LICENSE For the life of the Products within which any
"Software" is delivered by Seller, Seller hereby grants to Buyer, Buyer's
customers, and each of their successors and assigns (hereinafter collectively,
"Licensees"), a fully paid, nonexclusive worldwide license to use only, and for
no other purpose whatsoever, such Software in connection with such Licensees'
use and operation of the Products. The prices of the Products include the fee
and any royalties for this license of the Software. For purposes of this
Section, the term "Software" shall mean the portions of the Products consisting
of programs, data, and routines for use in the Product. Software shall include
such programs, data, and routines embodied in the Products as are commonly
referred to as "firmware" and computer programs comprising a series of
statements or instructions in machine readable or human readable form in any
medium, including magnetic tape, disks, printed listings or optical media, and
related materials such as flow charts, logic diagrams, manuals, and other
documentation and Seller's Library of infrared codes. Each Licensee agrees,
that except for the use specified in this Section 10, such Licensee shall (i)
not use, copy or reproduce the Software in any manner; (ii) not modify or adapt
the Software in any way; (iii) not translate, reverse assemble, reverse compile
or reverse engineer, decompile, disassemble, or create derivative works of the
Software; or (iv) not transfer, assign, rent, sell, distribute or otherwise
dispose of the Software or this license (including granting sublicenses) to
anyone or in any manner other than to another Licensee hereunder.
11. PRODUCT DESIGN The external designs for the Products made by
Seller for Buyer hereunder as set forth on Exhibit D (the "External Designs")
are works made for hire by Seller for Buyer. Except as otherwise agreed to
between the Parties, Seller hereby confirms that Buyer has the sole right,
title, and interest in and to all proprietary rights in the External Designs,
all design patents and design patent applications relating to the External
Designs and all documentation, methods, processes, and information relating to
the External Designs. Seller
8
<PAGE> 7
hereby acknowledges that it has no design patent or design patent applications
or any other proprietary rights relating to the External Designs.
Except as otherwise agreed to between the Parties, Seller hereby
assigns to Buyer, its successors and assigns, all right, title and interest in
and to the External Designs, together with the right to seek protection by
obtaining design patents therefor and to claim all rights or priority
thereunder, and the same shall become and remain Buyer's property regardless of
whether such protection is sought. Buyer shall have the right to cause design
patent applications to be filed thereon through counsel designated by Buyer.
Seller shall give Buyer and its counsel all reasonable assistance, at Buyer's
sole expense, in connection with the preparation and prosecution of any such
design patent application and shall cause to be executed and delivered to Buyer
all such assignments or other instruments or documents as Buyer may reasonably
request to carry out the intent of this paragraph.
12. INSIGNIA Neither Party shall use the other Party's name,
trademarks, trade names, logos, nor any descriptions or representations made by
the Parties without the prior written consent of the such other Party.
13. WARRANTIES Seller represents and warrants to Buyer that during
the Warranty Period (as such term is defined below), (a) the Products will
conform to the applicable Specifications set forth on Exhibit A attached hereto,
(b) the Products will be free from defects in material or workmanship under
normal use and service, (c) all services will be performed by Seller in a
workmanlike manner in accordance with good commercial practices and in
conformance with the Specifications, (d) Buyer's Software and the hardware
incorporated in the Products shall perform so as to enable to Products to meet
the Specifications, and (e) all Products shall function under ordinary use in
conformance with the Specifications. The foregoing warranties shall apply to
each Product for a period of fifteen (15) months from the date such Product is
manufactured (the "Warranty Period").
Seller shall repair or replace all Products which do not conform to
any of the foregoing warranties so long as Buyer (i) notifies Seller within the
Warranty Period in reasonable specificity the Products which fail to conform to
such warranties and (ii) return all such Products within fifteen (15) days after
such notification is received by Seller. Seller shall repair or, at Seller's
option, replace the defective Product within 15 days after it has been received
by Seller. The repaired or replacement Product shall be warranted as set forth
in this Section for a period equal to the greater of (a) the remaining balance
of the original warranty period or (b) ninety (90) days; provided, that in the
case of a defect discovered within the first 60 days of the warranty period with
respect to a Product, the repaired or replaced Product shall be warranted as set
forth in this Section for a period equal to 13 months from the date such Product
is received by Buyer. Seller shall reimburse Buyer for all transportation costs
associated with the return by Buyer of a defective Product to Seller for
warranty repair and shall bear all risk of loss or damage to the Product while
in transit. Seller shall reimburse Buyer for all transportation costs for the
return of the repaired or replaced Product to Buyer and shall bear all risk of
loss or damage to the Product while in transit. In the event any Product
returned by Buyer to Seller is determined by Seller to not be defective, Seller
shall notify Buyer of such determination and Buyer shall within ten (10)
9
<PAGE> 8
days of receipt of such notice instruct Seller what to do with such Product. If
Seller does not receive such instruction from Buyer, Seller shall have the
right to scrap such Product with no other obligation or notice to Buyer.
In the event that statistical evidence as determined by Buyer
suggests a catastrophic failure rate of more than 5% of the Products in the
field and/or returned to Buyer for repair (a "Catastrophic Failure Condition"),
then Seller shall reimburse Buyer for all of its actually and reasonably
incurred costs associated with such Catastrophic Failure Condition, including
the actually and reasonably incurred costs of recall from Buyer's customer if
so requested by Buyer's customer. Seller shall replace all Products affected by
a Catastrophic Failure Condition or, at Buyer's option, reimburse Buyer for
cost of replacement products from other suppliers. In the event any Product
returned by Buyer to Seller is determined by Seller to not be defective, Seller
shall notify Buyer of such determination and Buyer shall mutually agree what to
do with such Product. If the Parties are unable to agree within sixty (60) days
of Seller's receipt of such Product, Seller shall have the right to scrap such
Product with no other obligation or notice to Buyer.
In the event that statistical evidence as determined by Buyer
suggests a catastrophic failure rate of more than fifteen (15) percent, then,
in addition to the remedies in this Section, Buyer may terminate this Agreement
by providing written notice to Seller. In the event that Seller, in good faith,
disputes Buyer's determination, Buyer and Seller agree to mutually and in good
faith resolve such dispute.
THE WARRANTIES MADE BY SELLER IN THIS AGREEMENT, WHEREVER LOCATED, ARE IN LIEU
OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, AND SELLER NEITHER MAKES
NOR INTENDS, NOR DOES IT AUTHORIZE ANY OF ITS AGENTS OR REPRESENTATIVES TO
MAKE, ANY OTHER WARRANTY, WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INCIDENTAL, INDIRECT,
CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES OF ANY KIND OR NATURE, ARISING UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR IN CONNECTION WITH THE USE OR
PERFORMANCE OF ALL OR ANY PART OF THE PRODUCT, INCLUDING WITHOUT LIMITATION
LOSS OF USE OR PERFORMANCE OF THE PRODUCT, LOST REVENUES OR PROFITS, WHETHER
SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT (INCLUDING, WITHOUT
LIMITATION, THE BREACH OF THIS AGREEMENT OR ANY TERMINATION OF THIS AGREEMENT
BUT EXCLUDING SELLER'S INDEMNIFICATION OBLIGATIONS UNDER SECTION 21), TORT
(INCLUDING NEGLIGENCE OR STRICT LIABILITY), OR OTHERWISE EVEN IF THE OTHER
PARTY HAS BEEN WARNED OR IS OTHERWISE AWARE OF THE POSSIBILITY OF ANY SUCH LOSS
OR DAMAGE IN ADVANCE.
10
<PAGE> 9
14. Changes to Specifications
(a) BY BUYER Buyer may from time to time request changes to the
Specifications for the Products or the work required of Seller. If any change(s)
requested by Buyer result(s) in any increase to Seller's costs or time of
performance under this Agreement, then to the extent such change(s) and
its/their effect(s) is/are not addressed by specific terms and conditions of
this Agreement, Seller shall within ten (10) business days inform Buyer of all
such changes and effects and Buyer and Seller shall promptly negotiate a
reasonable adjustment of payments, schedules, lead times, and all other relevant
items or issues in order to make a commercially reasonable and equitable
adjustment for Seller.
(b) BY SELLER Seller shall make no change to the
Specifications, to any materials or component parts described therein, or to the
Products, including without limitation changes in form,fit function, design,
appearance or place of manufacture of the of the Products or changes which would
affect the reliability of any of the Products, without Buyer's express written
consent which consent will not be unreasonably withheld or delayed.
15. CONSEQUENTIAL DAMAGES Neither Party shall be liable for any
consequential damages as a result of the breach of this Agreement, including,
without limitation, loss of profits, loss of good will, or business
interruption, even if advised or otherwise aware of the possibility that such
damages may arise, but excluding Seller's indemnification obligations under
Section 21.
16. FORCE MAJEURE Notwithstanding anything contained herein to
the contrary, neither Seller nor Buyer shall be liable or in default hereunder
because of any failure to perform in accordance with the terms and conditions of
this Agreement if such failure arises from any cause beyond its reasonable
control, including, but not limited to, actions taken or failed to be taken by
Buyer, compliance with regulations, law, orders or instructions of any foreign
government, federal, state or municipal government or any department or agent
thereof, acts of God, act or omissions of the other Party, acts of civil or
military authority, fire, strikes, embargoes, war, riots or other forms of civil
unrest ("Force Majeure"). The Party so effected shall resume performance
promptly after the cessation of a Force Majeure. Nothing herein to the contrary
shall relieve Buyer from its obligation to pay Seller in accordance with the
terms hereof for any conforming Product ordered and accepted by Buyer.
17. ASSIGNMENT This Agreement may not be assigned or otherwise
transferred nor may any duties be delegated by either Party hereto without the
prior written consent of the other party, which consent will not be unreasonably
withheld or delayed, except that either party may assign or delegate to a
parent, subsidiary, or affiliate of the assignor, or to an entity acquiring
substantially all of the assets due to merger, acquisition or consolidation, so
long as the assignor remains liable for the full and faithful performance of the
assignee hereunder. Any assignment or other transfer in violation of this
Section 17 shall be void and of no effect. Subject to this restriction, the
provisions of this Agreement shall be binding upon and inure to the benefit of
the Parties, their permitted successors and permitted assigns.
<PAGE> 10
18. PERFORMANCE The failure by either Party to insist upon the strict
performance of any of its rights or any of the terms or provisions of this
Agreement in a particular instance shall not be construed as a waiver of the
same or different rights or terms or provisions in subsequent instances. All
remedies, rights, undertakings and obligations hereunder shall be cumulative,
and none shall operate as a limitation of any other remedy, right, undertaking
or obligation hereunder.
19. COPYRIGHT Seller represents and warrants to Buyer that Seller has
obtained, and there are in full force and effect, all rights necessary to
design, engineer, manufacture and sell the Products and otherwise to perform
its obligations under this Agreement. The Products shall not infringe any
copyright, mask work, patent or trademark or misappropriate any trade secret or
any other right of any third party. To Seller's knowledge, no claims that the
Products or any component thereof infringes any copyright, mask work, patent or
trademark or misappropriates any trade secret or other right has been asserted
or threatened against Seller, and no claim is pending against Seller or against
any person or entity from which Seller obtained such rights.
20. INDEMNIFICATION
(a) BY SELLER Seller shall indemnify and hold harmless Buyer and its
stockholders, directors, officers, employees, agents, subsidiaries, affiliates
and subcontractors from and against any losses, damages, liabilities, expenses
(including reasonable attorney's fees), costs, claims, suits, demands, actions,
causes of action, proceedings, judgments, assessments, deficiencies and
occasioned by, arising out of or resulting from (i) any misrepresentation or
breach of warranty or covenant, default or non-fulfillment of any agreement by
Seller under this Agreement; (ii) any costs on account of physical damage to
tangible property and personal injuries, including death, to persons, arising
from any breach of this Agreement by Seller, or any negligent act or omission
or willful misconduct of Seller; and (iii) all costs resulting from, caused by,
relating to or arising out of Seller's relationships with its employees,
suppliers, subcontractors, agents and consultants in the course of its
performance except matters for which Buyer has agreed to indemnify Seller; and
(iv) negligent acts or omissions or willful misconduct of Seller in connection
with the conduct of Seller's business, including any assertions regarding
unfair competition or violations of laws by Seller.
(b) BY BUYER Buyer shall indemnify and hold harmless Seller, its
stockholders, directors, officers, employees, agents, subsidiaries, affiliates
and subcontractors from and against losses, damages, liabilities, expenses
(including reasonable attorneys' fees and expenses, including without
limitation any such fees and expenses incurred in connection with any appellate
proceeding), costs, claims, suits, demands, actions, causes of action,
proceedings, judgments, assessments, deficiencies and occasioned by, arising
out of or resulting from (i) any misrepresentation or breach of warranty or
covenant, default or non-fulfillment of any agreement by Buyer under this
Agreement; (ii) any costs on account of physical damage to tangible property
and personal injuries, including death, to persons, arising from any breach of
this Agreement by Buyer, or any negligent act or omission or willful misconduct
of Buyer; (iii) all costs resulting from, caused by, relating to or arising out
of Buyer's relationships with its employees, suppliers,
<PAGE> 11
subcontractors, agents and consultants in the course of its performance except
matters for which Seller has agreed to indemnify Buyer; (iv) negligent acts or
omissions or willful misconduct of Buyer in connection with the conduct of
Buyer's business, including any assertions regarding unfair competition or
violations of laws by Buyer; and (v) any costs occasioned by, arising out of or
resulting from any dispute or disagreement between Buyer and any approved
purchasers of the Product.
21. INTELLECTUAL PROPERTY CLAIMS If any claim, suit, action or
proceeding is brought against Buyer or any of its officers, directors,
stockholders, agents, subsidiaries, affiliates, subcontractors, assignees and
employees) purchasing or using the Products hereunder on the basis of an
allegation that the manufacture, use or sale of the Products, or use of
associated software, infringes or violates United States or foreign letters
patent, copyright, mask work, trademark, trade secret or other intellectual
property rights of any third party (collectively, "Intellectual Property
Claims"), Seller shall indemnify, defend and hold harmless such persons or
entities from and against all costs, liabilities, expenses and damages,
including without limitation court costs and reasonable attorney's fees, arising
out of or resulting from Intellectual Property Claims. As part of its
obligations under this Section 21, Seller shall: (i) at Seller's expense, defend
and at its option with Buyer's written approval, which approval shall not be
unreasonably withheld or delayed, settle the claim, suit, or action, and (ii)
pay the costs and damages, including without limitation court costs and
attorney's fees, awarded against such indemnified parties arising out of the
Intellectual Property Claims. If a Product delivered or to be delivered under
this Agreement becomes the subject of an Intellectual Property Claim, or if as a
result of an Intellectual Property Claim, or the settlement thereof, the
production, use, repair or sale of Products is prohibited, Seller shall, at its
expense, do one or more of the following: (a) obtain for Buyer the right to
sell, repair or use the infringing Product without any additional cost to Buyer,
(b) modify the infringing Product so that it becomes non-infringing, while
remaining in commercially reasonable compliance with the Specifications, subject
to Buyer's technical approval, which approval will not be unreasonably withheld
or delayed or (c) replace the infringing Product with a non-infringing unit that
performs substantially the same functions in substantially the same manner,
while remaining in commercially reasonable compliance with the Specifications.
Notwithstanding, Seller shall have no liability for any infringement from (y)
use of the Products in combination with other items, unless Seller sold, made or
specifically recommended or approved them all as a combination, or the
combination would be necessary for use in the ordinary course in connection with
the Product, or (z) modification of Products after delivery, unless either
Seller or an authorized agent of Seller made, specifically recommended or
approved the modification, or the modification constitutes normal repair,
replacement or implementation of Seller provided options and enhancements for
the Products.
22. THIS SECTION INTENTIONALLY OMITTED.
13
<PAGE> 12
23. YEAR 2000 COMPLIANCE
(a) PRODUCTS Seller warrants that the Products to be furnished
pursuant to this Agreement shall, when used in accordance with the Product
documentation, be able to accurately process date/time data (including, but not
limited to, calculating, comparing, and sequencing) from, into, and between the
twentieth and twenty-first centuries, and the years 1999 and 2000, including
leap year calculations. Where a purchase requires that specific Products must
perform as a package or system, this warranty shall apply to the products as a
system. In the event of any breach of this warranty, Seller shall restore the
Products to the same level of performance as warranted herein, or repair or
replace the Products with conforming Products so as to minimize interruption to
Buyer's customers' ongoing business processes, at Seller's sole cost and
expense.
(b) SELLER'S OPERATIONS Seller warrants that all products it
uses in connection with providing the Products and other services to Buyer
under this Agreement shall be able to accurately process date/time data
(including, but not limited to, calculating, comparing, and sequencing) from,
into, and between the twentieth and twenty-first centuries, and the years 1999
and 2000, including leap year calculations. In the event of any breach of this
warranty, Seller shall undertake all commercially reasonable efforts to replace
non-compliant products with compliant products and to minimize interruption to
Buyer's ongoing business operations, at Seller's sole cost and expense.
24. CERTAIN OBLIGATIONS
(a) SALES COLLATERAL Seller shall, at its sole cost and
expense, provide Buyer with such quantities of quality printed sales
literature, other similar sales tools and training as has been customarily
provided by Seller to similarly situated customers under similar circumstances
to permit Buyer to effectively promote the sale of the Products.
(b) SAFETY STOCK Seller shall, at its sole expense, keep in
storage a supply of backup units and inventory of the Products equal to
one-half of one months forecast which is averaged based on a rolling
twelve-month rolling forecast, which will be used to satisfy its warranty,
maintenance and other obligations.
(c) SUPPLIER MANAGEMENT MODEL The Parties agree to mutually
develop a cost effective supplier management program whereby reduced inventory
liabilities, product lead-time reductions and overall acquisition cost
reductions are implemented. This program may include but is not limited to
stocking of key components, kanban delivery methods, direct ship to customers,
and other leading edge procurement practices as identified by the Parties.
Seller will provide any incremental cost impacts to Buyer and the Parties will
mutually determine the best program to implement.
(d) QUARTERLY BUSINESS REVIEWS ("QBR") Seller shall consult
with Buyer no less than once each calendar quarter in order to perform a
thorough review of Seller's performance under this Agreement, shall implement a
continuous productivity program to reduce
14
<PAGE> 13
lead times, improve quality, reduce costs, and achieve other manufacturing
process improvements, and shall provide Buyer with such information, including
analytical and manufacturing documentation, as Buyer may reasonably request from
time to time regarding quality control of the Products. The locations of QBR
meetings shall be held at sites alternately selected by Seller and Buyer and
mutually agreed upon. A detailed QA Procedures are attached hereto for reference
as Exhibit E. Seller shall use best efforts to address all production issues
within its control according to Exhibit E, and shall provide Buyer with a
monthly report of inventory.
25. TERMINATION This Agreement may be terminated:
(a) By either Party upon written notice to the other Party in
the event of a material breach of this Agreement by the other Party (except for
a breach covered within subsection 6(a)) which is not cured within thirty (30)
days (five (5) days in the event of a breach of payment) after written notice of
such breach; provided however, that where a given default, by its nature would
require more than thirty (30) days to cure, the defaulting Party shall have more
time within which to effect a cure, provided that it commences and continues to
commercially and reasonably expend efforts to cure and completes such cure
within no later than sixty (60) additional days; or
(b) By written notice by Buyer in the event that Seller
engages in a sale of assets, merger, or the transfer of management or control of
a significant ownership to a direct competitor of Buyer and such new controlling
party does not affirm its obligations under this Agreement; or
(c) By Buyer pursuant to Section 6(a) or Section 13.
26. NOTICES All notices and demands of any kind which either the
Buyer or the Seller may be required or desire to serve upon the other under the
terms of this Agreement shall be in writing and shall be served to the Parties
at the addresses set forth below or at such other addresses as may be designated
hereafter by the Parties in writing. The personal delivery or the sending of a
notice by Federal Express (or similar overnight delivery method) or by postage
prepaid, certified mail, return receipt requested shall be sufficient service.
BUYER: General Instrument Corporation
101 Tournament Drive
Horsham, Pennsylvania 19044
Attention: Executive Vice President
With required copies to: General Instrument Corporation
101 Tournament Drive
Horsham, Pennsylvania 19044
Attention: Group General Counsel Commercial
General Instrument Corporation
15
<PAGE> 14
101 Tournament Drive
Horsham, Pennsylvania 19044
Attention: Procurement Department
SELLER: Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attention: President and Chief Operating Officer
With a required copy to: Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attention: General Counsel
If by personal delivery, service shall be deemed complete upon such delivery. If
by overnight delivery method or by certified mail, service shall be deemed
complete upon the date shown on the return receipt where the signature of the
Party's employee or agent appears or if no date is shown, on the date such
receipt is received by the sending Party.
27. CONTINUATION In the event that any of the provisions of this
Agreement or the application of any such provisions to the Parties hereto with
respect to their obligations hereunder shall be held by a court of competent
jurisdiction to be unlawful or unenforceable, the remaining portions of this
Agreement shall remain in full force and effect and shall not be affected,
impaired or invalidated in any manner.
28. PROPRIETARY INFORMATION Each Party, on behalf of itself and its
officers, directors, employees and other authorized representatives
(collectively, "Agents") agrees to maintain in confidence all Proprietary
Information (as defined below) disclosed or to be disclosed to it by the other
Party in connection with this Agreement which it obtains in the course of the
transactions contemplated hereby. The Parties agree that all Proprietary
Information shall remain the property of the disclosing Party. Each Party shall
use its reasonable best efforts to cause its Agents to comply with the terms of
this Section, and each Party shall be responsible for any breach of these
provisions by such Party's Agents.
"Proprietary Information" as used herein means any proprietary plans
and information, including, without limitation, information of a technological
or business nature (including, without limitation, all trade secrets,
technology, intellectual property, data, marketing plans, summaries, reports,
mailing lists, or other non-public information relating to a Party's business,
whether written or oral and, if written, however produced or reproduced)
received by or otherwise disclosed to the receiving person from or by the
disclosing person, that is marked proprietary or confidential, or bears the
marking of like import, or that the disclosing person states to be considered
proprietary or confidential at the time of disclosure and confirms in writing to
be proprietary or confidential within ten (10) business days after such
disclosure. Proprietary Information shall also include the terms of this
Agreement.
16
<PAGE> 15
Information shall not be deemed to be Proprietary Information, and the
receiving Party shall no obligation with respect thereto, or to any part
thereof, to the extent such information: (i) is approved for release by prior
written authorization of the disclosing person; (ii) is disclosed in order to
comply with a judicial order issued by a court of competent jurisdiction, any
order or directive of a governmental agency or other entity, or with government
laws or regulations, in which event the receiving person shall give written
notice to the disclosing person of such disclosure as soon as practicable and
shall cooperate with the disclosing person in using all reasonable efforts but
at disclosing Party's sole cost and expense to obtain an appropriate protective
order or equivalent, provided that the information shall continue to be
Proprietary Information to the extent it is covered by such protective order or
equivalent; (iii) is already known to the receiving person at the time or
receipt of disclosure, as evidenced by written records made prior to such
receipt or disclosure, or subsequently becomes publicly available without any
fault of the receiving person or is already publicly available prior to receipt
or disclosure; or (iv) is independently developed or formulated by the
receiving person, or its related companies without breach of this Agreement as
evidenced by files of the receiving Party in existence at the time of
disclosure by the disclosing Party.
Notwithstanding the above, however, a Party may disclose (subject to a
reasonable nondisclosure agreement prohibiting further disclosure) the terms of
this Agreement and related agreements or documents to a bona fide prospective
purchaser (by merger, stock acquisition or otherwise) of substantially all the
assets of such Party or its ultimate corporate parent, or to its legal or
financial advisors who have signed nondisclosure agreements or are otherwise
obligated to maintain the confidential nature thereof; provided, however, that
each Party shall remain liable for any breach of this provision by those
persons to whom it discloses such Proprietary Information.
29. ENTIRE AGREEMENT This Agreement constitutes the final agreement
between the Parties pertaining in any manner to the subject matter hereof, and
contains all of the covenants and undertakings between the Parties with respect
to said subject matter. Each Party to this Agreement acknowledges that no
written or oral representations, inducements, promises or agreements have been
made which are not embodied herein. Except for the Warrant of even date hereof,
a copy of which is attached hereto, any and all prior or contemporaneous
written or oral agreements between the Parties pertaining in any manner to the
subject matter of this Agreement, including without limitation that certain
Memorandum of Understanding dated July 28, 1998, are expressly superseded and
canceled by this Agreement. No modification of this Agreement shall be effected
by the acknowledgment or acceptance of purchase order or shipping instruction
forms or any other document containing terms or conditions at variance with or
in addition to those set forth herein, all such varying or additional terms
being hereby objected to.
30. COUNTERPART This Agreement may be executed in multiple counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.
31. U.N. CONVENTION The Parties agree to exclude the application of the
U.N. Convention on Contracts for the International Sale of Goods, 1980.
17
<PAGE> 16
32. TERMINATION Termination or expiration of this Agreement for any
reason shall not release either Party from any liabilities or obligations set
forth in this Agreement which (i) the Parties have expressly agreed shall
survive any such termination or expiration, or (ii) remain to be performed or
by their nature would be intended to be applicable following any such
termination or expiration, including but not limited to liabilities or
obligations set forth in Sections 6, 7, 8, 9(a), 9(b), 10, 11, 13, 15, 20, 21,
23, 28, this Section 32, and 34.
33. RELATIONSHIP Nothing in this Agreement will be deemed to
constitute, create, give effect to or otherwise recognize a joint venture,
partnership, or business entity of any kind and the rights and obligations of
the Parties will be limited to those expressly set forth herein. Nothing herein
will be construed as providing for the sharing of profits or losses arising out
of the efforts of the Parties hereto, except as may be provided for in any
resulting agreement between the Parties.
34. CHOICE OF LAW This Agreement shall be governed by and construed
under, and the legal relations between the Parties hereto shall be determined in
accordance with, the laws of the State of California, without giving effect to
such state's conflict of law principles. If either Party employs attorneys to
enforce any rights arising out of or relating to this Agreement, the prevailing
Party shall be entitled to recover its reasonable attorney's fees, costs and
other expenses.
35. AUTHORIZATION Each Party to this Agreement represents and warrants
to, and agrees with the other, that it has the right, power and authority to
enter into, and perform all its obligations under, and has taken all the
requisite corporate action to approve the execution, delivery and performance of
this Agreement and that the execution, delivery and performance of this
Agreement shall not result in the breach or non-performance of any agreements it
has with third parties. The representations and warranties of this Section 35
are made as of the effective date of this Agreement.
36. ANNOUNCEMENTS Except as may otherwise be required by applicable
law, neither Party shall make any public announcement regarding this Agreement
or the relationship and transactions contemplated herein without the prior
written consent of the other. Notwithstanding the foregoing, the Parties agree
to make commercially reasonable efforts to make an announcement within two (2)
weeks of the execution of this Agreement.
37. TIME OF THE ESSENCE The Parties acknowledge and agree that time is
of the essence in connection with the performance of their respective
obligations and duties under this Agreement.
18
<PAGE> 17
IN WITNESS WHEREOF, this Agreement has been executed as of the date and year
hereinabove written.
GENERAL INSTRUMENT CORPORATION UNIVERSAL ELECTRONICS INC.
By: /s/ STEPHEN W. TAYLOR By: /s/ PAUL D. ARLING
-------------------------- --------------------------
Stephen W. Taylor Paul D. Arling
Sr. Director, Procurement President and COO
19
<PAGE> 18
EXHIBIT A
The Specifications and Milestone Schedule shall be the specifications and
milestone schedule currently being reviewed by the Parties, together with such
changes upon which the Parties may mutually agree.
<PAGE> 19
EXHIBIT B
PURCHASE PRICE: Initially, $5.50 per unit based upon the
Specification agreed to by the parties at the time of
signing this Agreement, however, it is understood and
agreed that such purchase price shall be adjusted from
time to time upon the mutual agreement of the parties
in the event the Specification shall be changed or as
otherwise allowed under this Agreement. All such
prices shall be reflected in the purchase orders that
are issued from time to time, and at all times such
prices shall be based upon the achievement of the
Gross Margin Guarantee (as provided below).
PAYMENT: Sixty (60) days following receipt of invoice from
Seller, which invoice shall be delivered to Buyer at
the same time the Product shall be delivered.
DELIVERY: F.O.B. Shipping port
GROSS MARGIN GUARANTEE: Buyer guarantees that Seller shall receive a gross
margin on all sales of Product of no less than 30%,
consequently, if necessary, the Purchase Price shall
be adjusted in order for Seller to receive such 30%
gross margin. Seller shall provide each Buyer each
Quarter the actual Gross Margin. Notwithstanding
anything contained with this Exhibit B or the
Agreement to the contrary, it is understood and
agreed to by the parties that presently Seller's
actual cost of the Product is such that the gross
margin which Seller shall receive for sales of the
Product to Buyer, based upon the current
Specifications, is less than 30% and that as an
accommodation to Buyer, the purchase price of the
Product shall not be adjusted in order for Seller to
achieve a 30% gross margin. It is further understood
and agreed to by the parties that notwithstanding the
cost savings sharing provisions of this Agreement,
Buyer shall enjoy and not share any cost savings which
occur, regardless of whether such savings result from
proposals from Buyer or Seller, until such time as
Seller's gross margin on sales of the Product equal
30%.
For purposes of this Agreement, the term "gross margin" shall mean revenues from
the sale of the Products less the cost of goods sold attributable to the
Products, a such amounts are determined in accordance with generally accepted
accounting principles, consistently applied.
<PAGE> 20
PURCHASE PRICE REBATE: During the Term of this Agreement, Buyer shall
earn an annual rebate of its purchases of Product,
as follows:
When Buyer has purchased and paid for more than $3,500,000 of Products,
Buyer shall earn 2% of the Purchase Price paid on each additional dollar
of purchases made up to and including $5,000,000 of Products;
When Buyer has purchased and paid for more than $5,000,000 of Products,
Buyer shall earn 3% of the Purchase Price paid on each additional dollar
of purchases made up to and including $10,000,000 of Products;
When Buyer has purchased and paid for more than $10,000,000 of Products,
Buyer shall earn 4% of the Purchase Price paid on each additional dollar
of purchases made up to and including $15,000,000 of Products;
When Buyer has purchased and paid for more than $15,000,000 of Products,
Buyer shall earn 6% of the Purchase Price paid on each additional dollar
of purchases made up to and including $20,000,000 of Products;
When Buyer has purchased and paid for more than $20,000,000 of Products,
Buyer will earn 10% of the Purchase Price paid on each additional dollar
of purchases made thereafter.
The rebates payable hereunder shall accrue quarterly and shall be paid to
Buyer within sixty (60) days after the end of the quarter in which they were
earned.
SOFTWARE DEVELOPMENT FEES
$35,000* - To be paid as follows:
Fifty percent (50%) upon the execution of Agreement and the
balance upon approval of software and device code library.
* The Software Development Fees are based upon Seller's current understanding
of Buyer's specifications. Any substantial changes to these specifications prior
to Buyer's approval of the software and device code library may require an
adjustment to these fees. Any such adjustment shall be paid upon the approval by
Buyer of the software and device code library.
MASKING COSTS
$2,500 - To be paid as follows:
Fifty percent (50%) upon the execution of Agreement and the balance upon
approval of software and device code library.
<PAGE> 21
EXHIBIT D
The External Design shall be the external design currently being reviewed by
the Parties, together with such changes upon which the Parties may mutually
agree.
<PAGE> 22
EXHIBIT E
The QA Procedures shall be QA Procedures currently reviewed by the Parties,
together with such changes upon which the Parties may mutually agree.
<PAGE> 1
EXHIBIT 10.35
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION (TOGETHER, THE "SECURITIES LAWS") AND MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED OR ENCUMBERED IN THE ABSENCE OF COMPLIANCE WITH
SUCH SECURITIES LAWS AND UNTIL THE ISSUER THEREOF SHALL HAVE RECEIVED FROM
COUNSEL ACCEPTABLE TO SUCH ISSUER A WRITTEN OPINION ACCEPTABLE TO SUCH ISSUER
THAT THE PROPOSED SALE, TRANSFER OR ENCUMBRANCE WILL NOT VIOLATE ANY APPLICABLE
LAWS, INCLUDING WITHOUT LIMITATION, THE SECURITIES LAWS.
VOID AFTER 2:00 P.M., CYPRESS, CALIFORNIA TIME, ON THE EXERCISE EXPIRATION DATE,
AS DEFINED HEREINBELOW.
WARRANT FOR THE PURCHASE OF UP TO
300,000 SHARES
OF
COMMON STOCK, PAR VALUE $.01 PER SHARE,
OF
UNIVERSAL ELECTRONICS INC., A DELAWARE CORPORATION
THIS IS TO CERTIFY THAT, FOR VALUE RECEIVED, THE RECEIPT AND SUFFICIENCY OF
WHICH IS HEREBY ACKNOWLEDGED AND ACCEPTED,
GENERAL INSTRUMENT CORPORATION, a Delaware corporation, or its permitted
successors and permitted assigns ("Holder"), is entitled to purchase, subject to
the provisions of this Warrant, from UNIVERSAL ELECTRONICS INC., a Delaware
corporation (the "Corporation"), up to Three Hundred Thousand (300,000) shares
of the Corporation's common stock, par value $.01 per share ("Common Stock"), at
an exercise price of 12 and 5/8 dollars per share (the "Exercise Price"), at any
time or from time to time on or after December 31, 2002, (the "Exercise Start
Date"), and not later than 2:00 P.M. Cypress, California time on December 31,
2004 (the "Exercise Expiration Date"). The number of shares of Common Stock
which the Holder is entitled to purchase and receive upon the exercise of this
Warrant shall be adjusted from time to time as hereinafter set forth. The shares
of Common Stock deliverable upon any exercise of this Warrant by the Holder are
hereinafter sometimes referred to as "Warrant Stock". The time period commencing
on the Exercise Start Date and ending on the Exercise Expiration Date is
hereinafter sometime referred to as the "Exercise Period".
1. EXERCISE OF WARRANT. Subject to Sections 2 and 3 and the other
provisions of this Warrant, the Holder may exercise this Warrant, in whole or in
part (but in no event in fractional
1
<PAGE> 2
shares), at any time or from time to time during the Exercise Period by
presentation and surrender of this Warrant to the Corporation at its principal
office, together with: (a) the Purchase Form annexed hereto properly prepared
and duly executed by the Holder, (b) payment, in United States Dollars, of the
aggregate Exercise Price for the number of Warrant Shares specified in such
Purchase Form, together with all federal, state and local taxes applicable upon
such exercise, (c) such representations from the Holder as are deemed necessary
by the Corporation, and (d) a written opinion acceptable to the Corporation from
legal counsel further acceptable to the Corporation that such exercise (i) is in
accordance with the provisions of this Warrant and (ii) does not violate any
applicable law, including without limitation, the Securities Laws. As soon as
practicable after each such exercise, but not later than thirty (30) days from
the date of such exercise, the Corporation shall issue or shall cause to be
issued and delivered to the Holder a certificate or certificates for the shares
of Warrant Stock issuable upon such exercise. Upon the proper exercise of this
Warrant as set forth herein, the Holder shall be deemed to be the holder of
record of the shares of Common Stock issuable upon such exercise notwithstanding
that the stock transfer books of the Corporation shall then be closed or that
certificates representing such shares of Common Stock shall not then be actually
delivered to the Holder.
2. DETERMINATION OF NUMBER OF WARRANT STOCK. (a) The number of shares of
Warrant Stock to which the Holder shall be entitled to purchase upon the proper
exercise hereunder shall be as follows:
(i) One Hundred Thousand (100,000) shares of Warrant Stock so
long as the Holder (or General Instrument Corporation, in the event of a
permitted assignment or transfer of this Warrant in accordance with the
provisions of this Warrant) purchases and pays for at least Three
Million (3,000,000) units of products from the Corporation during the
1999 calendar year; plus
(ii) One Hundred Thousand (100,000) shares of Warrant Stock so
long as the Holder (or General Instrument Corporation, in the event of a
permitted assignment or transfer of this Warrant in accordance with the
provisions of this Warrant) purchases and pays for at least Three
Million Five Hundred Thousand (3,500,000) units of products from the
Corporation during the 2000 calendar year; plus
(iii) One Hundred Thousand (100,000) shares of Warrant Stock so
long as the Holder (or General Instrument Corporation, in the event of a
permitted assignment or transfer of this Warrant in accordance with the
provisions of this Warrant) purchases and pays for at least Four Million
(4,000,000) units of products from the Corporation during the 2001
calendar year.
(b) As described in this subsection 2(b), the number and kind of
securities purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of the events described within
this subsection as follows:
2
<PAGE> 3
(i) If the Corporation (1) declares a dividend or makes a
distribution on its outstanding shares of Common Stock; or (2)
subdivides or reclassifies its outstanding shares of Common Stock into a
greater or smaller number of shares, then the number of Warrant Stock
subject to purchase upon the exercise of this Warrant shall be adjusted
(and the exercise price shall be correspondingly adjusted), effective at
the record date for such dividend or distribution or the effective date
of such subdivision, combination or reclassification, to a number of
Warrant Shares determined by multiplying the number of Warrant Shares
subject to purchase upon the exercise of this Warrant determined without
regard to any adjustment in connection with such dividend, distribution,
subdivision, combination or reclassification by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately after giving effect to such dividend,
distribution, subdivision, combination or reclassification, and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately before giving effect to such dividend,
distribution, subdivision, combination or reclassification.
(ii) If the Corporation elects to issue shares of any class of
its capital stock ("Shares to be Issued"), or securities convertible
into or exchangeable for Shares to be Issued or any other options,
rights, or warrants to purchase Shares to be Issued or securities
convertible into or exchangeable for Shares to be Issued ("Securities"),
to any individual, corporation, partnership, association, trust or other
entity or organization (a "Person), the Corporation shall notify the
Holder in writing of the proposed issuance the number of Shares to be
Issued or the amount of Securities to be issued, the date on or about
which such issuance is to be consummated and the price and other terms
and conditions thereof, at least twenty (20) days prior to the proposed
date for consummation of such issuance. For a period of ten (10) days
after Holder's receipt of such notice, the Holder shall have the option
to purchase, upon the same price, terms and conditions as such Shares to
be Issued or Securities are proposed to be issued to such Person(s),
that number of Shares to be Issued or Securities as may be necessary to
adjust the number of shares of capital stock of the Corporation owned by
the Holder on a fully-diluted basis (including, without limitation, the
Warrant Stock) to provide that the percentage of all of the
fully-diluted shares of capital stock of the Corporation owned by the
Holder immediately after the date of issuance to such Person(s) is equal
to the percentage of all of the fully-diluted shares of Common Stock of
the Corporation owned by the Holder immediately prior to the date of
issuance. If the Holder exercises its purchase option under this
subsection 2(b)(ii), it shall purchase such Shares to be Issued or
Securities contemporaneously with the consummation of the issuance of
Shares to be Issued or Securities to such Person(s).
(iii) Notwithstanding anything to the contrary herein, the
provisions of this Section 2(b) shall not apply to the issue, sale,
distribution or grant of Common Stock to any employee, officer or
director of the Corporation of (1) any currently issued and outstanding
grant of options to subscribe for or purchase shares of Common Stock or
(2) any future grant of options pursuant to any Stock Incentive or other
stock option plan of the Corporation or (3) any shares of Common Stock
held by the Corporation in its treasury.
3
<PAGE> 4
(iv) No fractional shares shall be issued and therefore, all
calculations under this subsection 2(b) shall be made lowered to the
nearest full share of Common Stock.
(v) Whenever the number of Warrant Stock subject purchase upon
exercise of this Warrant is adjusted as herein provided, the Corporation
shall promptly cause a notice setting forth the adjusted number of
shares of Warrant Stock subject to purchase upon exercise of this
Warrant to be mailed to the Holder, with a copy thereof to be mailed to
the Corporation's Transfer Agent, if any. The Corporation's regularly
retained firm of independent certified public accountants may be used to
make any computation required by this subsection 2(b), and a certificate
signed by such firm shall be conclusive evidence of the correctness of
such adjustment.
(vi) In the event that at any time, as a result of an adjustment
made pursuant to subparagraph (i) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the
Corporation other than Common Stock, thereafter the number of such other
shares so receivable upon exercise of this Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common
Stock contained herein..
(vii) Irrespective of any adjustments to the number or kind of
Warrant Stock subject to purchase upon exercise of this Warrant, any
Warrants issued in substitution or replacement of this Warrant may
continue to express that same number and kind of Warrant Stock as are
stated in the Warrants initially issued by the Corporation.
(viii) As a condition precedent to the taking of any action which
would require an adjustment pursuant to this subsection 2(b), the
Corporation shall take any action which may be necessary in order that
the Corporation may thereafter validly and legally issue as fully paid
and nonassessable all Warrant Stock which the Holder of this Warrant is
entitled to receive upon the exercise thereof.
(ix) The Corporation shall not consummate a merger,
consolidation, or other form of business combination in which it is not
the surviving entity without making adequate provision for the exercise
of this Warrant with respect to the shares of the capital stock of such
surviving entity.
(c) In the event the Holder (or General Instrument Corporation, in the
event of a permitted assignment or transfer of this Warrant in accordance with
the provisions of this Warrant) fails to purchase and pay for the requisite
number of units of product as set forth in this Section 2 in any year, the
Holder shall have forfeited the right to acquire the applicable number of shares
of Warrant Stock for such year which shares may not be recouped by purchasing
additional quantities of product in any subsequent year.
4
<PAGE> 5
3. VESTING OF WARRANT STOCK. The Holder may not exercise this Warrant or
any part thereof until Holder is vested in shares of Warrant Stock to which the
Holder may purchase upon exercise as determined pursuant to Section 2 above. The
Holder shall become vested in
a. Fifty percent (50%) of such shares of Warrant Stock on
January 1, 2003; and
b. The balance of such shares of Warrant Stock on January 1,
2004.
4. RESERVATION OF SHARES OF WARRANT STOCK. The Corporation shall at all
times prior to the Exercise Expiration Date reserve and keep available, free
from preemptive rights, for issuance and/or delivery upon the proper exercise of
this Warrant by the Holder in accordance with the provisions of this Warrant,
such number of its duly authorized and unissued shares of Common Stock or shares
of Common Stock held by the Corporation in its treasury, or any combination
thereof, as shall be required for issuance and delivery of shares of Warrant
Stock upon the proper exercise of this Warrant in accordance with the provisions
of this Warrant. Upon such issuance, the shares of Warrant Stock shall be duly
authorized, validity issued, fully paid and nonassessable.
5. TRANSFER, EXCHANGE OR LOSS OF WARRANT.
a. No Holder shall give, sell, transfer (by operation of law or
otherwise, including without limitation any transfers due to the merger,
consolidation or other combination of the Holder with any other entity
or person or due to the bankruptcy or insolvency of Holder), pledge,
mortgage, hypothecate or otherwise dispose of ("Transfer") this Warrant
or any part hereof without the prior written consent of the Corporation,
which consent will not be unreasonably withheld or delayed.
Notwithstanding any consent given by the Corporation in connection with
any proposed Transfer of this Warrant or any part hereof, no such
proposed Transfer shall be effective unless and until the proposed
transferor properly provides to the Corporation: (i) such investment
representations and other information of the proposed transferee as the
Corporation may reasonably request; (ii) a duly and validly executed
Assignment Form, in the form of that attached hereto, together with
funds sufficient to pay any transfer tax; (iii) a legal opinion or other
evidence satisfactory to the Corporation from legal counsel to the
proposed transferor also acceptable to the Corporation that such
proposed transfer may be effected without registration under the
Securities Laws; and (iv) a binding written acknowledgment, in form and
substance satisfactory to the Corporation, executed by the proposed
transferee, pursuant to which such transferee agrees to be bound by the
terms and provisions set forth herein and that the proposed transferee
acknowledges that it is dependent upon General Instrument Corporation to
acquire significant quantities of product from the Corporation and the
passage of time before which it will entitled to acquired shares of the
Warrant Stock in accordance the provisions of this Warrant. The
Corporation shall, without charge to the transferor or the transferee,
execute and delivery a new Warrant or Warrants in the name or names of
the transferee or transferees and in the denomination or denominations
specified in such properly prepared, delivered and accepted instrument
of transfer, and this Warrant shall promptly be cancelled.
5
<PAGE> 6
b. Upon receipt by the Corporation of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant and (in
the case of loss, theft or destruction) of satisfactory indemnification
to the Corporation, and (in the case of mutilation) upon the surrender
and cancellation of this Warrant, the Corporation will prepare, execute
and deliver a new Warrant of like tenor and date exercisable for an
equivalent number of shares of Warrant Stock as replacement for the
lost, stolen, destroyed or mutilated Warrant.
6. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights as a stockholder of the Corporation, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant only and are not enforceable against the Corporation except to the
extent set forth herein.
7. WARRANT REGISTER. The Corporation shall maintain a register for the
registration of the Warrant and of its Transfer as permitted herein (the
"Warrant Register") at its principal executive office.
8. EXPIRATION OF WARRANT. This Warrant shall automatically expire and be
null, void and have no further effect after the Exercise Expiration Date without
further action of any kind or nature from either the Corporation or the Holder.
9. TRANSFERS TO COMPLY WITH SECURITIES LAWS.
a. This Warrant, the Warrant Stock and any other security issued
or issuable upon the proper exercise or Transfer of this Warrant may not
be offered for sale or Transfer nor sold or Transferred except in strict
conformity with the Securities Laws.
b. The Corporation may place or cause to be placed on this
Warrant and any certificate or certificates representing the Warrant
Stock or any other security issued or issuable upon the proper exercise
of this Warrant the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION (TOGETHER, THE
"SECURITIES LAWS") AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED OR ENCUMBERED IN THE ABSENCE OF COMPLIANCE
WITH SUCH SECURITIES LAWS AND UNTIL THE ISSUER THEREOF SHALL
HAVE RECEIVED FROM COUNSEL ACCEPTABLE TO SUCH ISSUER A WRITTEN
OPINION ACCEPTABLE TO SUCH ISSUER THAT THE PROPOSED SALE,
TRANSFER OR ENCUMBRANCE WILL NOT
6
<PAGE> 7
VIOLATE ANY APPLICABLE LAWS, INCLUDING WITHOUT LIMITATION, THE
SECURITIES LAWS.
10. PURCHASE FOR INVESTMENT. The Holder agrees, acknowledges and affirms
that this Warrant is being purchased and the Warrant Stock and any other
security issued or issuable upon the proper exercise or Transfer of this Warrant
will be purchased for investment purposes only and not for resale or other
distribution.
11. APPLICABLE LAW. This Warrant and all provisions contained herein
shall be governed by and construed in accordance with the laws of the State of
Delaware, without giving effect to such state's conflicts of laws provisions.
12. NOTICES. All notices and other communications provided for hereunder
shall be in writing (including telegraphic, telex or cable communication) and
shall become effective (a) when personally delivered on a business day during
normal business hours, (b) on the third business day following the day when
deposited, if mailed by certified or registered mail with return receipt
requested and postage thereon fully prepaid, (c) on the business day following
the business day when deposited if sent by overnight courier, fully prepaid, or
(d) on the business day such notice shall have been sent by telex, telegram,
telecopier, cable or similar electronics device, including facsimile, fully
prepaid. The addresses and facsimile numbers for such notices are as follows:
If to the Corporation:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Facsimile No.: 714-820-1010
Attention: Secretary of the Corporation
If to the Holder, the address and facsimile number thereof as show on
the Warrant Register
or to such other addresses and facsimile numbers as any of the foregoing parties
shall from time to time designate in writing to the other party in accordance
herewith.
13. WAIVERS; AMENDMENTS. No failure or delay of either party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof, or any abandonment or
discontinuance of steps to enforce such a right, power or privilege, preclude
any other further exercise thereof or the exercise of any other rights, power or
privilege. The rights and remedies of either party hereto are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified, or waived so long as notice
of any such amendment, modification, or waiver is in writing and signed by the
party against whom such amendment, modification or waiver is sought to be
enforced.
7
<PAGE> 8
14. SEVERABILITY. In the event that any one or more of the provisions
contained in this Warrant shall be held to be invalid, illegal, or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired in such
jurisdiction and such a determination shall not invalidate or render illegal or
unenforceable such provision in any other jurisdiction.
15. SUCCESSORS AND ASSIGNS OF THE CORPORATION. All covenants, agreements
and provisions of this Warrant by or for the benefit of the Corporation shall
bind and inure to the benefit of its successors and assigns.
16. AUTHORITY. The Corporation hereby represents and warrants to the
Holder that all requisite corporate action necessary for the Corporation to
execute, deliver and perform this Warrant has been taken by the Corporation and
that this Warrant constitutes the legal, valid and binding obligation of the
Corporation, enforceable against it in accordance with its terms, except as the
enforceability thereof may be affected by applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting the enforcement of creditors'
rights generally and the possible unavailability of certain equitable remedies,
including the remedy of specific performance.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be
executed this 9th day of November, 1998.
UNIVERSAL ELECTRONICS INC.
By:__________________________________
Its:__________________________________
<PAGE> 9
PURCHASE FORM
Date:_______________________
The undersigned hereby irrevocably elects to exercise the Warrant which
is attached hereto to the extent of purchasing __________ shares of Warrant
Stock and hereby tenders payment in cash of the aggregate Exercise Price.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name of Holder:________________________________________________________
(Type or Print Name in Block Letters)
Address:
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
-------------------------------------
Signature
- - ---------------------------
Witness
<PAGE> 10
ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________________________________ hereby
sells, assigns, and transfers unto
- - --------------------------------------------------------------------------------
(Please type or print name of Transferee in block letter)
- - --------------------------------------------------------------------------------
(Address)
the right to purchase shares of Common Stock of Universal Electronics Inc. (the
"Corporation") represented by this Warrant to the extent of Warrant Stock as to
which such right is exercisable, and does hereby irrevocably constitute and
appoint _______________________________________ as its attorney-in fact to
transfer the same on the Warrant Register of the Corporation with full power of
substitution in the premises.
Date:
----------------------------
- - ---------------------------------
Signature
Universal Electronics Inc. hereby consents to the above referenced assignment.
UNIVERSAL ELECTRONICS INC.
By:____________________________
Its:___________________________
<PAGE> 11
(c) INTANGIBLE/GOODWILL. All of the intangible assets and
intellectual property used or useful in the Business including, without
limitation, (i) all trade secrets, proprietary or other trade rights of
Seller pertaining to the operation of the Business; (ii) all customer
lists, and (iii) all of the goodwill of Seller in the Business (the
"Intangibles/Goodwill").
(d) NO OTHER ASSETS. Seller is not selling and Purchaser is not
acquiring the right to any asset not described in Section 1.
2. PURCHASE PRICE; ALLOCATION. The aggregate purchase price (the
"Purchase Price") for the Assets is Seven Hundred Thousand Dollars (United
States) (US$700,000). The Purchase Price shall be allocated among the Assets as
follows:
(a) US$233,333 is allocated to the Records and the
Intangibles/Goodwill; and
(b) US$466,667 is allocated to the Covenants Not to
Compete/Confidentiality.
2.1 PAYMENT. The Purchase Price shall be paid on the Closing
Date
2.2 NO OTHER ASSUMED OBLIGATIONS. Notwithstanding anything contained
herein to the contrary, PURCHASER DOES NOT ASSUME ANY LIABILITY OR OBLIGATION OF
SELLER OR MAEIZUMI OF ANY KIND, whether fixed or contingent, known or unknown,
and whether to general or secured creditors, or for national, international,
state or local taxes of whatever kind, or otherwise.
3. CLOSING. The Closing shall be held at the offices of Strand Europe,
Ltd., Strand House, Galway Road, Blackbushe Business Park, Yateley, Hampshire at
11:00 a.m. local time on January 31, 1998, or such other date, place, or time as
the parties hereto shall agree in writing (the "Closing"). The date on which
Closing shall take place is referred to herein as the "Closing Date".
4. INTENTIONALLY OMMITTED
5. INTENTIONALLY OMMITTED
6. BEST EFFORTS. The parties hereto will use their respective best
efforts to cause their respective representations and warranties hereunder to be
true and correct on and as of the Closing Date, to obtain promptly all consents,
approvals and agreements of other parties or governmental authorities which are
required in connection with the consummation of the transactions provided for
herein, and to close such transactions no later than February 15, 1998.
7. POSSESSION. At the Closing, Seller shall deliver to Purchaser
possession of all the Assets, which, in the case of all tangible assets, shall
be in the same condition in which they were on December 31, 1997, ordinary wear
and tear excepted.
<PAGE> 12
8. COVENANTS OF SELLER AND MAEIZUMI.
(a) INFORMATION AND ACCESS. From and after the date of this
Agreement and to the Closing, each of Seller and Maeizumi will, within
three (3) days of receiving a request (whether oral or written), furnish
or cause to be furnished to Purchaser and its duly authorized
representatives and agents any reasonably requested information about
Seller relating to the Assets and the Business and will give Purchaser
and its duly authorized representatives and agents, complete access with
reasonable notice and during normal business hours to Seller's officers,
employees, accountants, attorneys, auditors, books, records, tax
returns, physical facilities, assets and agreements for purposes of a
complete investigation. The exercise of any rights of access or
inspection by or on behalf of Purchaser under this subsection 8(a) shall
not affect or mitigate the covenants, representations and warranties of
Seller and Maeizumi or Purchaser's rights to indemnity under this
Agreement.
(b) CONDUCT OF BUSINESS. From the date hereof through the
Closing, each of Seller and Maeizumi will conduct the Business
diligently and in the usual and ordinary course as heretofore conducted.
Seller and Maeizumi will use their respective best efforts to preserve
the Business intact and to preserve for Purchaser the goodwill and
relationship of Seller with its employees, suppliers, customers and
others having business relations with Seller. From the date hereof
through the Closing, each of Seller and Maeizumi will not, in connection
with the operation of the Business except with the consent of Purchaser,
incur any obligation or liability, engage in any activity or
transaction, or enter into any contract or commitment with respect to
the Business extending beyond the Closing, other than sales, purchases
or returns made in the ordinary course of the Business as heretofore
conducted.
(c) RISK OF LOSS/INSURANCE COVERAGE. Seller shall bear the risk
of loss on the Assets through the Closing. Each of Seller and Maeizumi
covenants and agrees that the Business and the Assets to be purchased by
Purchaser hereunder will each be adequately insured by Seller against
fire and casualty and any other claims or losses whatsoever, to the
Closing, and will use their respective best efforts to maintain in full
force and effect until Closing at the same level of coverage as Seller
had in place immediately prior to the Closing and that such policies
will continue after the Closing to cover and respond to all claims made
in respect of insured occurrences prior to the Closing.
(d) LITIGATION, CLAIMS AND CONTINGENT LIABILITIES. Each of
Seller and Maeizumi agrees to indemnify Purchaser and hold it harmless
from all Damages (as defined in Section 17 below) resulting from,
relating to or arising out of, all existing litigation and all claims
and contingent, undisclosed, or unknown liabilities of Seller which
relate to any condition existing, product produced or sold, or action
taken or omitted by Seller, whether prior to, on or after the Closing,
including but not limited to all such litigation, claims and liabilities
resulting from, related to or arising out of (i) injury to or sickness,
disease or death of any person who was at any time an employee or former
employee of Seller which is caused by any condition existing, product
produced or sold,
<PAGE> 13
or action taken or omitted by Seller, and (ii) any injury to or
sickness, disease or death of any person or persons or any damage to any
property or the environment which arises from the manufacture, handling,
sale or use of any product manufactured, sold or shipped by Seller.
(e) EXCLUSIVITY. Prior to the Closing, each of Seller and
Maeizumi agrees not to conduct negotiations or discussions with anyone
other than Purchaser with respect to the sale of any of the Business,
Assets or capital stock of Seller.
9. REPRESENTATIONS AND WARRANTIES OF SELLER AND MAEIZUMI. Each of Seller
and Maeizumi represents and warrants that as of the date hereof, and as of the
Closing:
(a) CORPORATE STATUS AND VALIDITY. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of Hong
Kong, and is duly qualified to do business, and is in good standing in
all of the countries in which Seller is legally required to be so
qualified, with full corporate power and authority to own, lease and
operate its business and properties as now owned and conducted. Seller
has the corporate power and authority to enter into and perform the
transactions contemplated by this Agreement and all other instruments,
agreements, and other documents contemplated hereby. All necessary
corporate and shareholder action and other proceedings required to be
taken by or on behalf of Seller to authorize Seller to execute and
deliver this Agreement and to consummate the transactions contemplated
herein, have been duly authorized and properly taken. This Agreement
constitutes, and all instruments, agreements, and other documents to be
delivered in connection herewith, when executed and delivered by Seller,
will constitute the legal, valid and binding obligation of Seller,
enforceable in accordance with their respective terms.
(b) INDIVIDUAL STATUS AND VALIDITY. Maeizumi has full power,
capacity, and authority to enter into and perform the transactions
contemplated by this Agreement and all other instruments, agreements,
and other documents contemplated hereby. This Agreement constitutes, and
all instruments, agreements, and other documents to be delivered in
connection herewith, when executed and delivered by Maeizumi, will
constitute the legal, valid, and binding obligation of Maeizumi,
enforceable in accordance with their respective terms.
(c) NO CONFLICT WITH OTHER INSTRUMENTS OR AGREEMENTS. Neither
the execution, delivery or performance of this Agreement and all other
instruments, agreements, and other documents in connection herewith, nor
the consummation of the transactions contemplated hereby or thereby will
violate, conflict with, or result in a breach of or constitute a default
under any contract, instrument, article of incorporation, by-law,
agreement, indenture, or license to which either Seller, Maeizumi, the
Assets, or the Business is or are a party or is bound or affected, or
under any law, judgment, order, decree, rule or regulation to which
either Seller, Maeizumi, the Assets, or the Business is or are subject.
No governmental, public authority, or other agency authorization,
approval, order, license, permit, or consent, and no registration,
declaration or filing with
<PAGE> 14
any governmental, public authority or agency is required for the
execution, delivery or performance of this Agreement or the other
instruments, agreements, or other documents by Seller or Maeizumi or the
consummation of the transactions contemplated hereby or thereby.
(d) TITLE TO ASSETS, ABSENCE OF LIENS. Seller has and at the
Closing will have, and the same pursuant hereto will vest in Purchaser,
good and marketable title and merchantable ownership, right, title and
interest in and to all of the Assets, in each case free and clear of all
liens, encumbrances, charges, and other exceptions (or claims thereof)
of whatever kind or nature. Seller owns, and has the right to sell and
convey to Purchaser without interference from others, all rights in and
to the Intangible Assets/Goodwill, and has not previously entered into
any agreement concerning the use, sale, or license of, or the granting
of any right to or interest in, any of the Intangible Assets/Goodwill.
(e) LITIGATION, CLAIMS AND CONTINGENT LIABILITIES. There is (i)
no action, suit, arbitration or administrative or judicial proceeding,
government investigation, judgment, order, writ, injunction or decree
outstanding, pending or threatened against Seller, Maeizumi, any person
in his capacity as an employee or agent of Seller, the Assets, the
Business, the goodwill of Seller, or any such matter to which Seller,
Maeizumi, or any such person is a party which adversely effects the
Assets or the Business being acquired hereunder, or the consummation of
the transactions contemplated hereunder, (ii) there is no contingent
liability of, and no claim made by any party against, Seller, Maeizumi,
any person in his capacity as an employee or agent of Seller, the
Assets, the Business, or goodwill of Seller which adversely effects the
Assets or the Business being acquired hereunder, or the consummation of
the transactions contemplated hereunder, (iii) there is no pending or
threatened labor dispute or attempt by any union to organize or be
certified as the representative of any of Seller's employees which
adversely effects the Assets or the Business being acquired hereunder,
or the consummation of the transactions contemplated hereunder, (iv)
there is no rezoning petition or reclassification proceeding with
respect to or that affects the Business now pending or threatened, and
(v) there is or has been no event or occurrence which is likely to give
rise to any of the foregoing.
(f) EMPLOYEE AND RELATED CONTRACTS AND AGREEMENTS. With regard
to the Assets and the Business sold to Purchaser hereunder, Seller is
not a party to any written or oral, express or implied, (i) contract or
commitment for the employment or continued employment of any employee or
agent of Seller; (ii) contract with any labor union or other collective
bargaining agreement; (iii) any other material contract or commitment
involving employees or independent contractors, where the existence of
or the absence of the items specified in clauses (i), (ii), or (iii)
above would materially and adversely affect Purchaser's purchase of the
Assets and the operation of the Business.
(g) AUTHORITY FOR AND CONDUCT OF BUSINESS. Seller presently has
all licenses, permits, approvals, orders, and other authorizations from
governmental and regulatory offices and authorities necessary for the
conduct of the Business as now being conducted, to own or hold under
lease the properties and assets it owns or holds under lease, and to
<PAGE> 15
perform the obligations under the agreements to which it is a party, and
no proceeding is pending or threatened which seeks to revoke, limit or
suspend any such authorization, approval, license, permit or order.
Seller is in compliance with all applicable laws material to the
Business, contractual or legal restrictions, regulations and
administrative and executive orders of any country, or municipality or
of any subdivisions thereof to which its business and employment of
labor or use or occupancy of properties or any part thereof are subject
where the existence of any non-compliance with such laws, contractual or
legal restrictions, regulations and administrative and executive orders
would adversely affect the Assets or the Business, and neither Seller
nor Maeizumi has received notice of any violation thereof. The laws,
regulations and administrative and executive orders referred to above
include, but are not limited to, those relating to labor relations,
employment practices, worker's compensation, communications, zoning,
building codes, copyright and patent protection, protection of the
environment, waste disposal, toxic substances, product liability,
health, occupational and other safety, transportation, employment
benefits, exports, antitrust, consumer protection, the processing,
production, advertising, sale or labeling of products, and other similar
matters.
(h) NO MATERIAL ADVERSE CONDITIONS. There are no conditions,
matters or events, known or unknown, contingent or otherwise which
adversely affect, or might reasonably be expected to adversely affect
the Assets or the Business or its prospects which are to be carried on
by Purchaser.
(i) TAXES AND TAX RETURNS OF SELLER. All taxes imposed by Hong
Kong or by any other country or by any state, province, municipality or
subdivision thereof which are due or payable or which become due or
payable by Seller with respect to any period or portion thereof up to
and including the date of the Closing have been (or will have been) paid
in full or will be paid in full on the due date of the required return
or report with respect to any such tax. Seller has filed or will file in
a timely manner all required returns and reports with respect to income
taxes and all other taxes of any kind, such returns and reports have
been prepared accurately and in accordance with the law, and all taxes,
interest and penalties due thereon have been paid. There are no actions,
suits, proceedings, claims, or investigations or assessments now pending
or threatened against Seller in respect of taxes or governmental
charges, or any matters under discussion with any governmental authority
relating to taxes or governmental charges and there are no waivers or
extensions of any statutes of limitations in effect with respect
thereto.
(j) EMPLOYEE BENEFIT PLANS OF SELLER. All employee benefit plans
of any kind, including but not limited to group life insurance, medical,
long-term disability, pension and profit sharing plans, established,
maintained or participated in by Seller (the "Plans") are in compliance
with all applicable reporting, disclosure and other requirements of such
Plans in accordance with all applicable laws.
(k) NO DEFAULT. Seller is not in default or breach of any
contract or agreement, written or oral, indenture or other instrument or
obligation, to which it is a party or to which it or its property is
subject and which affects the Business or the Assets, and there
<PAGE> 16
exists no state of facts which after notice or lapse of time or both
would constitute such a default or breach, and all such contracts,
agreements, indentures or other instruments are in good standing and in
full force and effect, enforceable in accordance with their respective
terms.
(l) CURTAILMENT NOTICES. Neither Seller nor Maeizumi has
received any notice from any supplier (including utilities) of
curtailment or intended curtailment of services or supplies to Seller.
(m) CUSTOMER RELATIONS. Neither Seller nor Maeizumi is are aware
of any facts or information indicating that any customer intends to or
may cease doing any material amount of business with Seller or to
materially alter the amount of any such business or to increase the
quantity of returned product beyond that which such customer
historically returned to Seller or to delay the return of products until
after the Closing Date.
(n) TRUE AND COMPLETE DISCLOSURES. All information furnished by
Seller, Maeizumi or their representatives to Purchaser or its
representatives in connection with the negotiation of this Agreement is
true and complete in all material respects. All of the statements,
representations, warranties and agreements made by Seller or Maeizumi in
this Agreement shall be true and correct in all material respects on and
as of the Closing and thereafter with the same force and effect as if
made by Seller and Maeizumi at the Closing.
10. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants that, as of the date hereof and as of the Closing Date:
(a) NO CONFLICT WITH OTHER INSTRUMENTS OR AGREEMENTS. Neither
the execution, delivery, or performance of this Agreement and all other
instruments, agreements, and other documents in connection herewith nor
the consummation of the transactions contemplated hereby or thereby will
violate, conflict with or result in a breach of or constitute a default
under any contract, instrument, article or charter of incorporation,
by-law, agreement, indenture, or license to which Purchaser is a party
or by which Purchaser is bound or affected, or under any law, judgment,
order, decree, rule or regulation to which Purchase is subject. No
governmental, public authority, or other agency authorization, approval,
order, license, permit, or consent, and no registration, declaration or
filing with any governmental, public authority or agency is required in
connection with the execution, delivery or performance of this Agreement
or the other instruments, agreements, or other documents by Purchaser or
the consummation of the transactions hereby or thereby.
(b) CORPORATE ORGANIZATION AND AUTHORIZATION. Purchaser is a
corporation duly organized, validly existing and in good standing under
the laws of The Netherlands. Purchaser has the corporate power to own
and lease its properties and carry on its business as it is now
conducted and otherwise as necessary for the purposes of this Agreement.
All necessary corporate action and other proceedings required to be
taken by or on behalf of Purchaser to authorize Purchaser to enter into
and consummate this
<PAGE> 17
Agreement in accordance with the terms hereof have been duly authorized
and properly taken. This Agreement constitutes, and all instruments,
agreements and other documents to be delivered in connection herewith,
when executed and delivered, will constitute legal, valid and binding
obligations of Purchaser, enforceable in accordance with their terms.
(c) TRUE AND COMPLETE DISCLOSURES. All information furnished by
Purchaser of its representatives to Seller or its representative in
connection with the negotiation of this Agreement is true and complete
in all material respects. All of the statements, representations,
warranties and agreements made by Purchaser in this Agreement shall be
true and correct in all material respects on and as of the Closing and
thereafter with the same force and effect as if made by Purchaser at the
Closing.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants,
representations and warranties of the parties contained herein and in any
Schedule, Exhibit, or document attached hereto shall be deemed to have been
relied upon by the parties hereto, notwithstanding any investigation made by the
parties. All covenants, representations and warranties made herein shall not be
affected by any examinations or investigations conducted by Purchaser or Seller
prior to Closing and shall survive the Closing and shall continue in effect
after the execution of this Agreement and the consummation of the sale
contemplated hereby unless waived in writing.
12. NON-COMPETITION/NON-SOLICITATION/CONFIDENTIALITY. Each of Seller and
Maeizumi hereby covenants and agrees:
(a) that for a period of six (6) years from the Closing, neither
Seller, Maeizumi, nor any company controlling, controlled by, or under
common control with Seller or Maeizumi, will, directly or indirectly,
either alone, or in partnership, or in conjunction with person, company
or entity as principal, agent, shareholder, or joint venturer: (i)
conduct business which is similar to the Business; (ii) engage in the
sale at products and/or services which similar to the products or
services sold and/or provided by Seller in the conduct of the Business
to any person, company or entity which in the two (2) year period
immediately preceding the Closing was a customer of Seller in the
Business or was a competitor of any such customer; (iii) except for
appropriate notification of the sale of the Assets, affirmatively
interfere with, disrupt, or attempt to disrupt, in any manner, the
relationship, contractual or otherwise, between Purchaser and any person
who is or was a customer or supplier of Seller for the Business at any
time during the two (2) year period immediately prior to the Closing for
products and/or services of any type or quality provided to such
customer or for supplies acquired from such supplier by Seller for the
Business; or (iv) solicit for employment or other working relationship
any of the employees hired by Purchaser; and
(b) to hold in confidence all Confidential and Proprietary
Information, and that each of them will not disclose or use or permit
the disclosure or use of the Confidential and Proprietary Information at
any time, except as may be required as a matter of law, or at any
judicial or governmental proceeding; and
<PAGE> 18
(c) that (i) the time duration and geographic and other scope
limitations contained in this Section 12 are reasonable and are required
for the reasonable protection of Purchaser's investment in the Assets
and the Business and constitute an integral part of the consideration
given by Seller and Maeizumi in exchange for the Purchase Price;
provided, however, the parties hereto agree that a court of competent
jurisdiction or other trier of fact may modify and enforce the covenants
contained in this Section 12 to the extent it deems reasonable under the
circumstances at that time and such modification shall be binding on the
parties hereto and (ii) any breach by any of them of any of the terms of
this Section 12 may cause substantial and irreparable injury to
Purchaser in amounts which may be difficult or impossible to ascertain,
and covenants and agrees that in the event of such breach any of the
terms of this Section 12, Purchaser shall have, in addition to all other
remedies available in the event of a breach of this Agreement, the right
to injunctive or other equitable relief, without the need of posting
bond or other security, as well as an award of attorneys' fees and costs
incurred as a result of such action, and in the event of any breach or
other violation of the provisions of this Section 12 by either Seller
or Maeizumi, the running of the time period of Non-Competition/
Non-Solicitation shall be tolled during the period of the continuance
of any actual breach or violation.
For purposes of this Section 12, "Confidential and Proprietary
Information" means any information constituting a part of the Assets, including,
but not limited to, the following to the extent they constitute a part of the
Assets: (i) trade secrets; (ii) proprietary products and trade names; (iii) all
other intellectual property rights; and (iv) any compilations of otherwise
public information, such as vendor or customer listings; provided, however, that
Confidential and Proprietary Information does not include any (w) information
which is used by Seller in its retained business which is not the subject of
this Agreement and none of which is used or useful in the Business or is a part
of the Assets, (x) information already generally known to the public; (y)
information which, either prior to or subsequent to the Closing, is lawfully
disclosed to Seller and Maeizumi by anyone else rightfully in possession of such
information and who is not in a confidential relationship with Purchaser; and
(z) information which, without violating any legal rights of Purchaser, becomes
generally known and used by others who are not in a confidential relationship
with Purchaser.
13. CONDITIONS OF OBLIGATIONS OF PURCHASER. The obligations of
Purchaser, including but not limited to the obligation to close the transaction
contemplated hereunder, are, at the option of Purchaser, subject to satisfaction
of the following conditions on or prior to the Closing, all of which may be
waived by Purchaser in whole or in part:
(a) The representations and warranties of Seller contained
herein shall be true, correct and complete in all material respects on
and as of the Closing and Purchaser shall have received at the Closing a
certificate to that effect, dated the Closing Date and executed by the
President of Seller and Maeizumi; provided that the receipt of such
certificate and the closing of the sale herein provided shall not be
deemed to be a waiver of any representation or warranty contained in
this Agreement, which representations and warranties shall continue in
full force and effect for the benefit of the parties as provided herein.
<PAGE> 19
(b) Each of Seller and Maeizumi shall have performed and
observed, in all material respects, all covenants, agreements, acts,
undertakings and conditions of each of them herein to be performed or
observed by each of them on or before the Closing.
(c) Delivery to Purchaser of such other documents, instruments,
or certificates as Purchaser shall reasonably request.
14. CONDITIONS OF OBLIGATIONS OF SELLER. The obligations of Seller and
Maeizumi, including but not limited to the obligation to close the transactions
contemplated hereunder, are, subject to the satisfaction of the following
conditions on or prior to the Closing all of which may be waived by Seller or
Maeizumi in whole or in part:
(a) The representations and warranties of Purchaser contained
herein shall be true, correct and complete in all material respects on
and as of the Closing and Seller and Maeizumi shall have received at the
Closing a certificate to that effect, dated the Closing Date, and
executed on behalf of Purchaser by its chief executive officer or chief
financial officer.
(b) Purchaser shall have performed and observed, in all material
respects, all covenants, agreements and conditions herein to be
performed or complied with by Purchaser on or before the Closing.
(c) Delivery to Seller of such other documents, instruments, or
certificates as Seller shall reasonably request.
15. FURTHER ASSURANCES. Each party hereto shall from time to time at the
reasonable request of the other party hereto, whether on or after the Closing,
do, make, execute, acknowledge, and deliver all such further acts and
instruments of conveyance, assignment, transfer and consent, in form and
substance reasonably satisfactory to the requesting party, concerning compliance
with the terms and conditions of this Agreement as such requesting party may
reasonably require for the more effective performance of their respective
obligations hereunder and the completion of the transactions contemplated
hereby.
<PAGE> 20
16. ADDITIONAL COVENANTS OF SELLER AND MAEIZUMI.
(a) USE OF SELLER'S TRADE NAME, TRADEMARKS AND SERVICE MARKS.
After Closing, neither Seller, Maeizumi, nor any person or entity
affiliated with any of them shall use the trade name and/or trademark
"Universal Electronics", "One For All", or any other trade name,
trademark or service mark of Purchaser or any of its affiliates, or any
name similar to or a derivative of any of the aforementioned trade
names, trademarks or services marks.
(b) PAYMENT OF CREDITORS. On or before the tenth day after the
Closing, Seller and Maeizumi shall deliver to Purchaser a certificate,
signed by a duly authorized officer of the Seller and Maeizumi, that all
creditors of Seller with regard to the Assets or the Business have been
paid in full or that provisions have been made for the satisfaction of
the same.
17. INDEMNIFICATION.
(a) Each of Seller and Maeizumi hereby agrees to indemnify
Purchaser and its successors, assigns and affiliates, and present and
future directors, officers, employees, and agents against, and hold them
harmless from and against all damages, losses, liens, claims,
deficiencies, liabilities, fines, penalties, costs and expenses,
including but not limited to reasonable legal fees and costs of
litigation (including without limitation any appellate proceedings)
(collectively referred to as "Damages") resulting from, caused by or
arising out of any of the following: (i) the inaccuracy of any statement
or representation or the breach of any warranty, covenant, or agreement
of either of Seller or Maeizumi, made herein, or the failure of any of
them, to perform any covenant or agreement made or referred to herein;
(ii) any claim against any of the Assets, against Purchaser by a
creditor of Seller, or arising out of a breach of this Agreement by
either of Seller or Maeizumi; (iii) any transaction, occurrence, action,
or omission in connection with the operation of the Business by Seller
or Maeizumi prior to the Closing; (iv) any claim asserted against
Purchaser in connection with or arising out of any delinquent
contributions to any pension plan of Seller, any withdrawal liability to
any multi-employer pension plan, or any employee benefits, including
without limitation any severance benefits, accruing prior to the Closing
or as a result of the consummation of the transactions contemplated
hereunder; (v) any claim contained in any pending litigation against
Seller or Maeizumi; and (vi) any claim asserted against Purchaser by
reason of any noncompliance of any applicable bulk transfers or similar
laws under the provisions of any applicable jurisdiction.
(b) Purchaser hereby agrees to indemnify and hold Seller and
Maeizumi and their respective successors, assigns and affiliates, and
present and future directors, officers, employees, and agents against,
and hold them harmless from and against all Damages resulting from,
caused by or arising out of the following: (i) the inaccuracy of any
statement or representation or the breach of any warranty, covenant, or
agreement of
<PAGE> 21
Purchaser made herein, or the failure of Purchaser to perform any
covenant or agreement made by it herein; and (ii) any transaction,
occurrence, action or omission in connection with the operation of the
Business by Purchaser after the Closing.
(c) Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any
claim by a person not a party to this Agreement ("third person") or the
commencement of any action or proceeding by a third person, the
Indemnified Party shall, if a claim with respect thereto is to be made
against any party obligated to provide indemnification pursuant hereto
(hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or
proceeding. Such notice shall state the nature and basis of such claim
and, if ascertainable, the amount thereof. In each such case the
Indemnified Party agrees to give such notice to the Indemnifying Party
promptly; provided, however, that the failure of the Indemnified Party
to give such notice shall not excuse the Indemnifying Party's obligation
to indemnify except to the extent the Indemnifying Party has suffered
damage or prejudice by reason of the Indemnified Party's failure to give
or delay in giving such notice. The Indemnified Party shall have the
right to compromise or defend such third person claim, upon notice to
and at the expense of the Indemnifying Party; provided that the
Indemnifying Party shall not have objected to such compromise or defense
by written notice to the Indemnified Party within five (5) days after
receipt by the Indemnifying Party of the Indemnified Party's notice of
such intention to compromise or defend the third party claim. After
receipt of such notice from the Indemnified Party, the Indemnifying
Party shall acknowledge in writing its obligation to indemnify in
respect of such third person claim. Provided that the Indemnifying Party
shall have so acknowledged its obligation to indemnify in respect of
such claim, the Indemnifying Party may, at its expense, have the right
to participate in the defense of such third person claim and no such
third person claim shall be settled by the Indemnified Party without the
consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. At any time after notice of any third person
claim, the Indemnifying Party may request the Indemnified Party to agree
in writing to the payment or compromise of the third person claim,
whereupon such action shall be taken unless the Indemnified Party
determines that the contest should be continued, and so notifies the
Indemnifying Party in writing within fifteen (15) days of such request
from the Indemnifying Party.
(d) If an Indemnified Party shall have any claim pursuant to
this Section 17, including but not limited to a claim for Damages as the
result of the Indemnifying Party's failure to acknowledge its obligation
to indemnify, the Indemnified Party shall deliver to the Indemnifying
Party written notice explaining the nature and amount of such claim
promptly after the Indemnified Party shall know the amount of such
claim. The Indemnified Party and Indemnifying Party shall thereafter
attempt in good faith for a period of not less than thirty (30) days to
agree upon whether the Indemnified Party is entitled to be indemnified
and held harmless under this Section 17 and the extent to which it is
entitled to be indemnified and held harmless hereunder. If the parties
cannot so agree within said period, the Indemnified Party may thereafter
commence litigation in a court of competent jurisdiction for a
determination of its claim. Upon resolution of any claim
<PAGE> 22
pursuant to this Section 17, whether by agreement between the parties or
the rendering of a final judgment in any litigation, the Indemnifying
Party shall within ten (10) days of such resolution pay over and deliver
to the Indemnified Party funds in the amount of any claim as resolved,
and any fees and interest, including reasonable attorneys' fees and
costs (including without limitation any appellate proceedings), incurred
by the Indemnified Party with respect to any such litigation.
(e) Notwithstanding anything to the contrary herein, in the
event Purchaser has a claim for indemnification pursuant to this Section
17, Purchaser may set-off Damages against any amount of the Purchase
Price which has not yet been paid by Purchaser to Seller pursuant to the
terms of this Agreement; provided however, Purchaser's election to
set-off pursuant to this Section 17(e) shall in no way limit Purchaser
from pursuing any other remedy available to it hereunder, at law, or in
equity and in no way shall such election to set-off be construed as a
liquidation of such Damages.
18. EXPENSES. Except to the extent otherwise provided by this Agreement
or as specifically authorized in writing by the parties hereto, each party shall
pay for its own legal, accounting and other similar expenses incurred in
connection with the transactions contemplated by this Agreement, whether or not
such transactions are consummated.
19. BROKERAGE COMMISSIONS. Each party represents and warrants that this
Agreement is the result of direct negotiations between them and that there are
no claims for brokerage commissions or finder's fees in connection with the
transactions contemplated by this Agreement. Each of the parties agrees to
indemnify and hold harmless the other for any Damages resulting from or arising
out of any liability to any broker or finder on the basis of any arrangement or
agreement made by or on behalf of such party.
20. ENTIRE AGREEMENT AND BINDING EFFECT. This Agreement and the
Exhibits, Schedules and documents attached hereto contain the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and supersede all prior agreements or understandings between the parties
relating to the subject matter hereof. This Agreement, and all questions
concerning its construction, validity, and interpretation, and the performance
of the obligations imposed by this Agreement, shall be governed, interpreted and
enforced according to the internal law, not the law of conflicts, of The
Netherlands. All Exhibits, Schedules and documents attached hereto are
incorporated herein by this reference.
21. ASSIGNABILITY. This Agreement shall not be assignable by any of the
parties hereto without the prior written consent of the other parties hereto,
except that it may be assigned by Purchaser to any corporation controlled by, or
under direct or indirect common control with, Purchaser. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, representatives, successors and permitted assigns.
22. PARTIAL INVALIDITY/SEVERABILITY. The various covenants and
provisions of this Agreement, including specifically, without limitation those
covenants and provisions contained in Section 12 hereof, are intended to be
severable and to constitute independent and distinct binding
<PAGE> 23
obligations of the parties hereto. In the event any one or more of the covenants
or provisions contained in this Agreement or any application thereof shall be
invalid, illegal or unenforceable in whole or in part, the validity, legality
and enforceability of the remaining covenants or provisions of this Agreement
and any other part or application thereof shall not in any way be affected or
impaired thereby (except if such partial invalidity may frustrate the basic
intents and purposes hereof).
23. TERMINATION. This Agreement may be terminated or abandoned any time
prior to the consummation hereof by (a) the mutual consent of the parties
hereto; (b) either Purchaser or Seller, respectively, if there has been a
material misrepresentation or breach on the part of Seller or Purchaser,
respectively, of any representation, warranty or covenant set forth in or made
pursuant to this Agreement; or (c) Purchaser or Seller if the Closing has not
occurred by February 15, 1998; provided, however, that any termination pursuant
to clause (b) above shall not be deemed to be a waiver of any rights and
remedies otherwise available under this Agreement, by operation of law or
otherwise to the party who so terminates.
24. WAIVERS AND NOTICES. Any term or condition of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument. No delay or failure on the part of any party in exercising any
rights hereunder, and no partial or single exercise thereof, will constitute a
waiver of such rights or of any other rights hereunder nor shall operate as a
waiver of, or estoppel with respect to, any subsequent or other exercise of any
rights hereunder. All notices, waivers, consents, requests, instructions,
approvals, and other communications provided for herein shall be in writing and
shall be validly given, made or served (a) upon delivery to the address of such
party specified below if delivered personally or by courier, or sent by
certified or registered mail, return receipt requested, postage prepaid, or (b)
upon dispatch if transmitted by telecopy or other means of facsimile, in any
case to the parties at the following addresses or telecopy number, as the case
may be:
(a) If to Seller and/or Maeizumi: Mr. T. Maeizumi
c/o Strand Europe Ltd.
Strand House, Galway Road
Blackbushe Business Park
Yateley, Hampshire
GU46 6GE
Telecopy No. 011 441 252 861006
Confirm No. 011 441 252 861000
(b) If to Purchaser: Mr. Paul Bennett
Universal Electronics B.V.
Javastraat 92
7512 ZK Enschede
Netherlands
Telecopy No. 011 31 53 432 7080
Confirm No. 011 31 53 488 8000
<PAGE> 24
or to such other address or telecopy number as either party may have furnished
to the other in writing in accordance herewith, except that notices of change of
address shall only be effective upon receipt. If notice is transmitted by
telecopy or other means of facsimile, the sending party must, on the same day,
send a copy of such notice by regular mail, postage pre-paid.
25. AMENDMENT. This Agreement may be amended, modified, or supplemented
only by written agreement of the parties hereto.
26. REMEDIES CUMULATIVE. All remedies of the parties provided herein
shall, to the extent permitted by law, be deemed cumulative and not exclusive of
any thereof or of any other remedies available to the parties, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained herein, and every remedy given herein or by
law to any party hereto may be exercised from time to time, and as often as
shall be deemed expedient, by such party.
27. SPECIFIC PERFORMANCE. Each of Seller and Maeizumi acknowledges and
agrees that the Assets are unique, that damages for any failure of Seller or
Maeizumi to transfer the Assets pursuant to this Agreement would be an
inadequate remedy, and that Purchaser shall be entitled to enforcement by
judgment for specific performance.
28. ATTORNEYS' FEES. Should suit be brought to enforce or interpret any
part of this Agreement, the prevailing party shall be entitled to recover, as an
element of costs of suit and not as damages, interest and reasonable attorneys'
fees and costs, including all costs and expenses of any appellate court
proceedings.
29. HEADINGS. The section and other headings contained in this Agreement
are for reference purposes only and shall not affect the interpretation or
meaning of this Agreement.
30. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
31. NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent and no rule of strict construction will be applied against any party.
32. NONDISCLOSURE OF TERMS AND IDENTITY OF RELATED PARTIES. Purchaser,
Seller and Maeizumi each agrees to not disclose any of the terms, conditions or
provisions of this Agreement to any person, firm, corporation, association,
agency or entity other than its own attorneys and shareholders, except where
such disclosure is lawfully required and in such instances such disclosure shall
be limited to the information specifically required to be produced.
<PAGE> 25
If the foregoing is an accurate statement of our agreement, please
indicate your approval by countersigning the enclosed copy of this letter and
returning it to me as soon as possible.
Sincerely,
UNIVERSAL ELECTRONICS B.V.,
a Netherlands corporation
By:
--------------------------------------
Paul Bennett, Managing Director
APPROVED THIS __30TH___ DAY
OF DECEMBER, 1998.
EURO QUALITY ASSURANCE, LTD.
a Hong Kong corporation
By:
--------------------------------
T. Maeizumi, Managing Director
AND
- - -----------------------------------
T. Maeizumi, Individually
<PAGE> 1
EXHIBIT 10.36
January 30, 1998, as amended December 30, 1998
PERSONAL AND CONFIDENTIAL
Mr. T. Maeizumi
Managing Director
Euro quality Assurance Ltd.
c/o Strand Europe Ltd.
Strand House, Galway Road
Blackbushe Business Park
Yateley, Hampshire
GU46 6GE
RE: ACQUISITION OF CERTAIN OF THE ASSETS OF EURO QUALITY ASSURANCE
LTD. AND COVENANTS NOT TO COMPETE/CONFIDENTIALITY.
Dear Mr. Maeizumi:
This letter will constitute our agreement of the purchase by Universal
Electronics B.V., a corporation formed under the laws of The Netherlands
("Purchaser"), from Euro quality Assurance, Ltd., a corporation formed under the
laws of Hong Kong ("Seller"), of certain of Seller's assets and the purchase
from you ("Maeizumi") and Seller of certain covenants not to
compete/confidentiality, all upon the following terms and conditions:
1. SALE OF ASSETS. Subject to the terms and conditions of this
Agreement, each of Seller and Maeizumi shall, upon the Closing referred to
below, sell, transfer, assign, convey and deliver to Purchaser, and Purchaser
agrees to purchase from Seller and take possession of all good and marketable
title, including without limitation all of Seller's right, title, and interest,
free and clear from all liens and encumbrances of whatever kind and nature, in
and to the following assets (collectively, the "Assets") used or useful in the
operation of Seller's business of selling and/or servicing products and/or
services which utilize or involve infrared and/or radio frequency technology in
remote control applications for use, sale or distribution in the consumer
electronics industry (the business conducted by the Seller is hereinafter
referred to as the "Business"):
(a) RECORDS. All records and files attributable to the Assets
and the operation of the Business which are mutually agreed upon by the
parties, including but not limited to, records relating to customers and
suppliers, payment records and correspondence, except, however, such
records and files as are required by applicable laws to be kept by
Seller (the "Records"). Copies of all such documents retained by Seller
shall be made available to Purchaser upon request.
(b) COVENANTS NOT TO COMPETE/CONFIDENTIALITY. An agreement by
each of Seller and Maeizumi to not compete with Purchaser and keep
confidential certain proprietary information sold by Seller to Purchaser
hereunder, all upon such terms and conditions set forth in Section 12
hereof ("Covenants Not to Compete/Confidentiality").
<PAGE> 1
EXHIBIT 10.37
February 3, 1998, as amended December 30, 1998
PERSONAL AND CONFIDENTIAL
Mr. Ashok Suri
Strand Europe Ltd.
Strand House, Galway Road
Blackbushe Business Park
Yateley, Hampshire
GU46 6GE
RE: ACQUISITION OF CERTAIN OF THE ASSETS OF STRAND EUROPE LTD. AND
COVENANTS NOT TO COMPETE/CONFIDENTIALITY.
Dear Mr. Suri:
This letter will constitute our agreement of the purchase by Universal
Electronics B.V., a corporation formed under the laws of The Netherlands
("Purchaser"), from Strand Europe Ltd., a corporation formed under the laws of
England ("Seller"), of certain of Seller's assets, the purchase from you
("Suri") and Seller of certain covenants not to compete/confidentiality, the
grant of options between the parties, and the appointment by Seller of Purchaser
as the sole and exclusive subdistributor under the "Distribution Agreement" (as
such agreement is defined in Section 36 below), all upon the following terms and
conditions:
1. SALE OF ASSETS. Subject to the terms and conditions of this
Agreement, each of Seller and Suri shall, upon the Closing referred to below,
sell, transfer, assign, convey and deliver to Purchaser and shall grant to
Purchaser the option set forth in Section 2.1 below, and Purchaser agrees to
purchase from Seller and take possession of all good and marketable title,
including without limitation all of Seller's right, title, and interest, free
and clear from all liens and encumbrances of whatever kind and nature, in and to
the following assets (collectively, the "Assets" (which definition shall include
the "Option Assets" (as such term is hereinafter defined) if either the "Call
Option" or the "Put Option" (as such terms are hereinafter defined) is
exercised) used or useful in the operation of Seller's business of selling
and/or servicing products and/or services which utilize or involve infrared
and/or radio frequency technology in remote control applications for use, sale
or distribution in the consumer electronics industry (the business conducted by
the Seller is hereinafter referred to as the "Business") and to grant to Seller
the option set forth in Section 2.2 below:
(a) INVENTORY. All inventory and operating supplies used or
useful in the Business and owned by Seller as of Closing (the
"Inventory").
(b) RECORDS. Copies of all records and files attributable to the
Assets and the operation of the Business which are mutually agreed upon
by the parties, including but not limited to, records relating to
customers and suppliers, payment records and correspondence (the
"Records").
1
<PAGE> 2
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
(c) COVENANTS NOT TO COMPETE/CONFIDENTIALITY. An agreement by
each of Seller and Suri to not compete with Purchaser and keep
confidential certain proprietary information sold by Seller to Purchaser
hereunder, all upon such terms and conditions set forth in Section 14
hereof ("Covenants Not to Compete/Confidentiality").
2. THE OPTIONS.
2.1 THE CALL OPTION. Seller and Suri each hereby grants to Purchaser the
right at any time during the thirty-one (31) day period commencing on January 1,
1999 and ending at the end of January 31, 1999 (the "Option Period") to purchase
from Seller and Suri and take possession of all good and marketable title,
including without limitation all of Seller's right, title, and interest, free
and clear from all liens and encumbrances of whatever kind and nature, in and to
the following assets (collectively, the "Option Assets") used or useful in the
operation of the Business and the Option Covenants Not to Compete/
Confidentiality and each of Seller and Suri shall be bound to sell, transfer,
assign, convey and deliver the same to Purchaser (the "Call Option").
(a) INTANGIBLE/GOODWILL. Subject to the proviso in subsection
15(c), all of the intangible assets and intellectual property used or
useful in the Business including, without limitation, (i) all trade
secrets, proprietary or other trade rights of Seller pertaining to the
operation of the Business; (ii) all customer lists, and (iii) all of the
goodwill of Seller in the Business (the "Intangibles/Goodwill").
(b) OPTION COVENANTS NOT TO COMPETE/CONFIDENTIALITY. An
agreement by each of Seller and Suri to not compete with Purchaser and
keep confidential certain proprietary information sold by Seller to
Purchaser hereunder, all upon such terms and conditions set forth in
Section 15 hereof (the "Option Covenants Not to Compete/
Confidentiality").
(c) ORIGINALS RECORDS. The originals of the Records, except,
however, such of the Records as are required by applicable law to be
kept by Seller. Copies of all such Records retained by Seller shall be
made available to Purchaser upon request.
2.2 PUT OPTION. Purchaser hereby grants to Seller and Suri the right at
any time during the Option Period to sell, transfer, assign, convey and deliver
to Purchaser (jointly, but not individually) all good and marketable title,
including without limitation all of Seller's right, title, and interest, free
and clear from all liens and encumbrances of whatever kind and nature, in and to
the Option Assets and the Option Covenants Not to Compete/Confidentiality and
Purchaser shall be bound to purchase from Seller and Suri and take possession of
the same (the "Put Option").
2
<PAGE> 3
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
2.3 OPTION EXERCISE AND CLOSING. The Put Option and the Call Option
shall be exercisable by irrevocable written notice served by the exercising
party on the other in accordance with the notice provisions of this Agreement.
3. NO OTHER ASSETS. Seller is not selling and Purchaser is not acquiring
the right to any asset not described in this Agreement.
4. PURCHASE PRICE; ALLOCATION.
4.1 (a) Subject to adjustment as set forth in Section 7, the aggregate
purchase price for the Assets (in this Section only, the term "Assets"
being exclusive of the "Option Assets") set forth and more fully
described in Section 1 is One Million and One Dollars (United States)
(US$1,000,001) plus that amount for the Inventory which is determined in
accordance with Section 7. The purchase price set forth in this
subsection 4.l(a) shall be allocated among these Assets as follows:
(i) That amount which is determined in accordance with
Section 7 is allocated to the Inventory;
(ii) US$1 is allocated to the Records;
(iii) US$475,000 is allocated to Seller's Covenants Not
to Compete/Confidentiality;
(iv) US$475,000 is allocated to Suri's Covenant's Not to
Compete/Confidentiality; and
(v) US$50,000 is allocated to the Call Option.
(b) The aggregate purchase price for the Put Option is One
Dollar (United States) (US$l).
(c) The aggregate purchase price as set forth in this subsection
4. 1 shall be paid as follows:
(i) That portion of the purchase price set forth in
subsections 4.l(a)(1), (ii), (iii), and (v) less the aggregate
of (1) the purchase price for the Put Option (as set forth in
subsection 4.1(b) plus (2) the amounts owed by Seller to
Purchaser as reflected on Purchaser's books and records shall be
paid by Purchaser to Seller, after delivery of a fully executed
and binding copy of this Agreement, on the date
3
<PAGE> 4
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
payment for the Inventory would be made in accordance with
Section 7 and shall be accompanied with a schedule depicting how
such amount was calculated by Purchaser, provided however, that
in the event that the amount owed by Seller to Purchaser as
reflected on Purchaser's books and records exceeds the amounts
of the purchase price set forth in subsections 4.1(a)(i), (ii),
(iii) and (v) then Seller shall within two (2) business days pay
such excess amount to Purchaser; and
(ii) That portion of the purchase price set forth in
subsection 4.l(a)(iv) shall be paid by Purchaser to Suri on the
same date payment is made to either Seller or Purchaser (as the
case may be) as set forth in subsection 4.1(c)(i) above.
4.2 (a) So long as either the Call Option or the Put Option has been
exercised, the aggregate purchase price for the Assets set forth and
more fully described in subsection 2.1 (a), (b) and (c) is One Million
Dollars (United States) (US$1,300,000). The purchase price set forth in
this subsection 4.2(a) shall be allocated among these Assets as follows:
(i) US$200,000 is allocated to the Intangibles/Goodwill;
(ii) US$550,000 is allocated to Seller's Option
Covenants Not to Compete/Confidentiality; and
(iii) US$550,000 is allocated to Suri's Option
Covenant's Not to Compete/Confidentiality.
(b) So long as either the Call Option or the Put Option has been
exercised, the aggregate purchase price as set forth in this subsection
4.2 shall be paid as follows:
(i) US$800,000 to be paid by Purchaser on January 29,
1999 or, if later, within two (2) business days of the election
to exercise either the Call Option or the Put Option and shall
be paid as to US$500,000 thereof to Seller and as to US$300,000
thereof to Suri; and
(ii) US$500,000 to be paid by Purchaser on September 30,
1999 as shall be paid as to US$250,000 thereof as to Seller and
as to US$250,000 thereof to Suri.
4.3 NO OTHER ASSUMED OBLIGATIONS. Notwithstanding anything contained
herein to the contrary, PURCHASER DOES NOT ASSUME ANY LIABILITY OR OBLIGATION OF
SELLER OR SURI OF ANY KIND, whether fixed or contingent, known or unknown, and
4
<PAGE> 5
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
whether to general or secured creditors, or for national, international, state
or local taxes of whatever kind, or otherwise, except as provided in Schedule
4.3.
5. CLOSING. The Closing shall be held at the offices of Seller
immediately upon the execution of this agreement by both parties, or such other
date, place, or time as the parties hereto shall agree in writing (the
"Closing"). The date on which Closing shall take place is referred to herein as
the "Closing Date".
6. ACCOUNTS RECEIVABLE. Notwithstanding anything contained herein to the
contrary, all accounts receivable of Seller shall remain the property of Seller
and are not part of the Assets to be transferred to Purchaser hereunder. Upon
the request of Purchaser, Seller shall deliver to Purchaser a listing, in
alphabetical order, depicting all customers with accounts receivable balances
and the amount of such balances.
7. DETERMINATION OF INVENTORY VALUE. The parties hereto agree that a
portion of the Purchase Price shall be based on a physical inventory and pricing
thereof as of January 31, 1998, using Seller's acquisition costs which is set
forth on that pricing schedule attached hereto as Schedule 7; except that no
value shall be assigned to any Damaged or Discontinued items (the "Interim
Inventory Value"). Within five (5) days of the Closing Date, Seller shall
deliver to Purchaser a schedule depicting the Interim Inventory Value which
shall be prepared by Seller, at its cost. Purchaser shall have the right to have
its personnel and accounting representatives present during such physical
inventory, shall have full access to all records, reports, and working documents
of Seller. Each party shall bear its own costs in connection with taking the
physical inventory and in the preparation of the said schedule.
Unless Purchaser shall give notice to Seller of any objection to the
Interim Inventory Value on or before five (5) business days after its receipt of
such, Purchaser shall be deemed to have accepted the Interim Inventory Value
which shall then be final and binding on the parties and Purchaser shall
immediately pay such Interim Inventory Value to Seller and such Interim
Inventory Value shall become the Final Inventory Value. If Purchaser objects to
the Interim Inventory Value, which objection cannot be satisfied by negotiation
between Purchaser and Seller within ten (10) business days of the objection, the
dispute will be referred for arbitration by a mutually selected nationally
recognized independent accounting firm to be determined within sixty (60) days
and its determination will be final and binding upon the parties (the "Final
Inventory Value"). Such accounting firm's determination of Final Inventory Value
shall not, however, exceed the amount thereof as prepared by Seller or be less
than the amount thereof as asserted by Purchaser. Within ten (10) business days
after the determination of the Final Inventory Value by such accounting firm in
accordance with this Section 7, Purchaser shall pay such Final Inventory Value
5
<PAGE> 6
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
to Seller. One-half of the expenses of such accounting firm in connection with
such arbitration shall be paid by each of Seller and Purchaser.
7.1 DEFINITIONS FOR PURPOSES OF SECTION 7. For purposes of Section 7,
"Discontinued" items are those which are not on any current price list of
Seller, or included in any of Seller's current catalogs or other sales
literature or sales offerings or not useable, saleable, or merchantable in the
ordinary operation of the Store; and "Damaged" items are those items which,
consistent with past practice, are scrap or are non-repairable for sale to third
parties in the ordinary operation of the Store.
8. BEST EFFORTS. The parties hereto will use their respective best
efforts to cause their respective representations and warranties hereunder to be
true and correct on and as of the Closing Date, to obtain promptly all consents,
approvals and agreements of other parties or governmental authorities which are
required in connection with the consummation of the transactions provided for
herein, and to close such transactions no later than February 15, 1998.
9. POSSESSION. At the Closing, Seller shall deliver to Purchaser
possession of all the Assets, which, in the case of all tangible assets, shall
be in the same condition in which they were on December 31, 1997, ordinary wear
and tear excepted. Title to the Inventory shall remain with the Seller until to
Final Inventory Value has been paid.
10. COVENANTS OF SELLER AND SURI.
(a) INFORMATION AND ACCESS. From and after the date of this
Agreement and to the Closing, each of Seller and Suri will, within three
(3) days of receiving a request (whether oral or written), furnish or
cause to be furnished to Purchaser and its duly authorized
representatives and agents any reasonably requested information about
Seller relating to the Assets and the Business and will give Purchaser
and its duly authorized representatives and agents, complete access with
reasonable notice and during normal business hours to Seller's officers,
employees, accountants, attorneys, auditors, books, records, tax
returns, physical facilities, assets and agreements for purposes of a
complete investigation. The exercise of any rights of access or
inspection by or on behalf of Purchaser under this subsection 10(a)
shall not affect or mitigate the covenants, representations and
warranties of Seller and Suri or Purchaser's rights to indemnity under
this Agreement.
(b) CONDUCT OF BUSINESS. From the date hereof through the
Closing, each of Seller and Suri will conduct the Business diligently
and in the usual and ordinary course as heretofore conducted. Seller and
Suri will use their respective best efforts to preserve
6
<PAGE> 7
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
the Business intact and to preserve for Purchaser the goodwill and
relationship of Seller with its employees, suppliers, customers and
others having business relations with Seller. From the date hereof
through the Closing, each of Seller and Suri will not, in connection
with the operation of the Business except with the consent of Purchaser,
incur any obligation or liability, engage in any activity or
transaction, or enter into any contract or commitment with respect to
the Business extending beyond the Closing, other than sales, purchases
or returns made in the ordinary course of the Business as heretofore
conducted.
(c) RISK OF LOSS/INSURANCE COVERAGE. Seller shall bear the risk
of loss on the Assets through the Closing. Each of Seller and Suri
covenants and agrees that the Business and the Assets to be purchased by
Purchaser hereunder will each be adequately insured by Seller against
fire and casualty and any other claims or losses whatsoever, to the
Closing, and will use their respective best efforts to maintain in full
force and effect until Closing at the same level of coverage as Seller
had in place immediately prior to the Closing and that such policies
will continue after the Closing to cover and respond to all claims made
in respect of insured occurrences prior to the Closing.
(d) LITIGATION, CLAIMS AND CONTINGENT LIABILITIES. Each of
Seller and Suri agrees to indemnify Purchaser and hold it harmless from
all Damages (as defined in Section 19 below) resulting from, relating to
or arising out of, all existing litigation and all claims and
contingent, undisclosed, or unknown liabilities of Seller which relate
to any condition existing, product produced or sold, or action taken or
omitted by Seller, whether prior to, on or after the Closing, including
but not limited to all such litigation, claims and liabilities resulting
from, related to or arising out of (i) injury to or sickness, disease or
death of any person who was at any time an employee or former employee
of Seller which is caused by any condition existing, product produced or
sold, or action taken or omitted by Seller, and (ii) any injury to or
sickness, disease or death of any person or persons or any damage to any
property or the environment which arises from the manufacture, handling,
sale or use of any product manufactured, sold or shipped by Seller.
(e) EXCLUSIVITY. Prior to the Closing, each of Seller and Suri
agrees not to conduct negotiations or discussions with anyone other than
Purchaser with respect to the sale of any of the Business, Assets,
Option Assets, or capital stock of Seller, except that Seller may trade
the Inventory in the ordinary course of Business.
11. REPRESENTATIONS AND WARRANTIES OF SELLER AND SURI. Each of Seller
and Suri represents and warrants that as of the date hereof, and as of the
Closing:
7
<PAGE> 8
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
(a) CORPORATE STATUS AND VALIDITY. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of
England, and is duly qualified to do business, and is in good standing
in all of the countries in which Seller is legally required to be so
qualified, with full corporate power and authority to own, lease and
operate its business and properties as now owned and conducted. Seller
has the corporate power and authority to enter into and perform the
transactions contemplated by this Agreement and all other instruments,
agreements, and other documents contemplated hereby. All necessary
corporate and shareholder action and other proceedings required to be
taken by or on behalf of Seller to authorize Seller to execute and
deliver this Agreement and to consummate the transactions contemplated
herein, have been duly authorized and properly taken. This Agreement
constitutes, and all instruments, agreements, and other documents to be
delivered in connection herewith, when executed and delivered by Seller,
will constitute the legal, valid and binding obligation of Seller,
enforceable in accordance with their respective terms.
(b) INDIVIDUAL STATUS AND VALIDITY. Suri has full power,
capacity, and authority to enter into and perform the transactions
contemplated by this Agreement and all other instruments, agreements,
and other documents contemplated hereby. This Agreement constitutes, and
all instruments, agreements, and other documents to be delivered in
connection herewith, when executed and delivered by Suri, will
constitute the legal, valid, and binding obligation of Suri, enforceable
in accordance with their respective terms.
(c) NO CONFLICT WITH OTHER INSTRUMENTS OR AGREEMENTS. Neither
the execution, delivery or performance of this Agreement and all other
instruments, agreements, and other documents in connection herewith, nor
the consummation of the transactions contemplated hereby or thereby will
violate, conflict with, or result in a breach of or constitute a default
under any contract, instrument, article of incorporation, by-law,
agreement, indenture, or license to which either Seller, Suri, the
Assets, or the Business is or are a party or is bound or affected, or
under any law, judgment, order, decree, rule or regulation to which
either Seller, Suri, the Assets, or the Business is or are subject. No
governmental, public authority, or other agency authorization, approval,
order, license, permit, or consent, and no registration, declaration or
filing with any governmental, public authority or agency is required for
the execution, delivery or performance of this Agreement or the other
instruments, agreements, or other documents by Seller or Suri or the
consummation of the transactions contemplated hereby or thereby.
(d) TITLE TO ASSETS, ABSENCE OF LIENS. Seller has and at the
Closing will have, and the same pursuant hereto will vest in Purchaser,
good and marketable title and
8
<PAGE> 9
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
merchantable ownership, right, title and interest in and to all of the
Assets, in each case free and clear of all liens, encumbrances, charges,
and other exceptions (or claims thereof) of whatever kind or nature.
Seller owns, and has the right to sell and convey to Purchaser without
interference from others, all rights in and to the Intangible
Assets/Goodwill, and has not previously entered into any agreement
concerning the use, sale, or license of, or the Granting of any right to
or interest in, any of the Intangible Assets/Goodwill.
(e) FINANCIAL RECORDS AND STATEMENTS OF SELLER. The gross sales
of Seller for all products and services sold or provided by Seller in
the ordinary course of the Business for the year ended December 31, 1997
is in excess of US$____________________.
(f) LITIGATION, CLAIMS AND CONTINGENT LIABILITIES. There is (i)
no action, suit, arbitration or administrative or judicial proceeding,
government investigation, judgment, order, writ, injunction or decree
outstanding, pending or threatened against Seller, Suri, any person in
his capacity as an employee or agent of Seller, the Assets, the
Business, the goodwill of Seller, or any such matter to which Seller,
Suri, or any such person is a party which adversely effects the Assets
or the Business being acquired hereunder, or the consummation of the
transactions contemplated hereunder, (ii) there is no contingent
liability of, and no claim made by any party against, Seller, Suri, any
person in his capacity as an employee or agent of Seller, the Assets,
the Business, or goodwill of Seller which adversely effects the Assets
or the Business being acquired hereunder, or the consummation of the
transactions contemplated hereunder, (iii) there is no pending or
threatened labor dispute or attempt by any union to organize or be
certified as the representative of any of Seller's employees which
adversely effects the Assets or the Business being acquired hereunder,
or the consummation of the transactions contemplated hereunder, (iv)
there is no rezoning petition or reclassification proceeding with
respect to or that affects the Business now pending or threatened, and
(v) there is or has been no event or occurrence which is likely to give
rise to any of the foregoing.
(g) EMPLOYEE AND RELATED CONTRACTS AND AGREEMENTS. With regard
to the Assets and the Business sold to Purchaser hereunder, Seller is
not a party to any written or oral, express or implied, (i) contract or
commitment for the employment or continued employment of any employee or
agent of Seller; (ii) contract with any labor union or other collective
bargaining agreement; (iii) any other material contract or commitment
involving employees or independent contractors, where the existence of
or the absence of the items specified in clauses (i), (ii), or (iii)
above would materially and adversely affect Purchaser's purchase of the
Assets and the operation of the Business.
9
<PAGE> 10
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
(h) AUTHORITY FOR AND CONDUCT OF BUSINESS. Seller presently has
all licenses, permits, approvals, orders, and other authorizations from
governmental and regulatory offices and authorities necessary for the
conduct of the Business as now being conducted, to own or hold under
lease the properties and assets it owns or holds under lease, and to
perform the obligations under the agreements to which it is a party, and
no proceeding is pending or threatened which seeks to revoke, limit or
suspend any such authorization, approval, license, permit or order.
Seller is in compliance with all applicable laws material to the
Business, contractual or legal restrictions, regulations and
administrative and executive orders of any country, or municipality or
of any subdivisions thereof to which its business and employment of
labor or use or occupancy of properties or any part thereof are subject
where the existence of any non-compliance with such laws, contractual or
legal restrictions, regulations and administrative and executive orders
would adversely affect the Assets or the Business, and neither Seller
nor Suri has received notice of any violation thereof. The laws,
regulations and administrative and executive orders referred to above
include, but are not limited to, those relating to labor relations,
employment practices, worker's compensation, communications, zoning,
building codes, copyright and patent protection, protection of the
environment, waste disposal, toxic substances, product liability,
health, occupational and other safety, transportation, employment
benefits, exports, antitrust, consumer protection, the processing,
production, advertising, sale or labeling of products, and other similar
matters.
(i) NO MATERIAL ADVERSE CONDITIONS. There are no conditions,
matters or events, known or unknown, contingent or otherwise which
adversely affect, or might reasonably be expected to adversely affect
the Assets or the Business or its prospects which are to be carried on
by Purchaser.
(j) TAXES AND TAX RETURNS OF SELLER. All taxes imposed by
England or by any other country or by any state, province, municipality
or subdivision thereof which are due or payable or which become due or
payable by Seller with respect to any period or portion thereof up to
and including the date of the Closing have been (or will have been) paid
in full or will be paid in full on the due date of the required return
or report with respect to any such tax. Seller has filed or will file in
a timely manner all required returns and reports with respect to income
taxes and all other taxes of any kind, such returns and reports have
been prepared accurately and in accordance with the law, and all taxes,
interest and penalties due thereon have been paid. There are no actions,
suits, proceedings, claims, or investigations or assessments now pending
or threatened against Seller in respect of taxes or governmental
charges, or any matters under discussion with any governmental authority
relating to taxes or governmental charges and there are no waivers or
extensions of any statutes of limitations in effect with respect
thereto.
10
<PAGE> 11
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
(k) EMPLOYEE BENEFIT PLANS OF SELLER. All employee benefit plans
of any kind, including but not limited to group life insurance, medical,
long-term disability, pension and profit sharing plans, established,
maintained or participated in by Seller (the "Plans") are in compliance
with all applicable reporting, disclosure and other requirements of such
Plans in accordance with all applicable laws.
(1) NO DEFAULT. Seller is not in default or breach of any
contract or agreement, written or oral, indenture or other instrument or
obligation, to which it is a party or to which it or its property is
subject and which affects the Business, the Assets or the Option Assets,
and there exists no state of facts which after notice or lapse of time
or both would constitute such a default or breach, and all such
contracts, agreements, indentures or other instruments are in good
standing and in full force and effect, enforceable in accordance with
their respective terms.
(m) INVENTORY. The Inventory to be sold to Purchaser on the
Closing Date will consist of a quality and quantity usable, salable, and
merchantable in the ordinary course of the Business and all such
Inventory is valued at Seller's cost (on a first-in, first-out basis).
(n) CURTAILMENT NOTICES. Neither Seller nor Suri has received
any notice from any supplier (including utilities) of curtailment or
intended curtailment of services or supplies to Seller.
(o) CUSTOMER RELATIONS. Neither Seller nor Suri is are aware of
any facts or information indicating that any customer intends to or may
cease doing any material amount of business with Seller or to materially
alter the amount of any such business or to increase the quantity of
returned product beyond that which such customer historically returned
to Seller or to delay the return of products until after the Closing
Date.
(p) TRUE AND COMPLETE DISCLOSURES. All information furnished by
Seller, Suri or their representatives to Purchaser or its
representatives in connection with the negotiation of this Agreement is
true and complete in all material respects. All of the statements,
representations, warranties and agreements made by Seller or Suri in
this Agreement shall be true and correct in all material respects on and
as of the Closing and thereafter with the same force and effect as if
made by Seller and Suri at the Closing.
12. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants that, as of the date hereof and as of the Closing Date:
11
<PAGE> 12
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
(a) NO CONFLICT WITH OTHER INSTRUMENTS OR AGREEMENTS. Neither
the execution, delivery, or performance of this Agreement and all other
instruments, agreements, and other documents in connection herewith nor
the consummation of the transactions contemplated hereby or thereby will
violate, conflict with or result in a breach of or constitute a default
under any contract, instrument, article or charter of incorporation,
by-law, agreement, indenture, or license to which Purchaser is a party
or by which Purchaser is bound or affected, or under any law, judgment,
order, decree, rule or regulation to which Purchase is subject. No
governmental, public authority, or other agency authorization, approval,
order, license, permit, or consent, and no registration, declaration or
filing with any governmental, public authority or agency is required in
connection with the execution, delivery or performance of this Agreement
or the other instruments, agreements, or other documents by Purchaser or
the consummation of the transactions hereby or thereby.
(b) CORPORATE ORGANIZATION AND AUTHORIZATION. Purchaser is a
corporation duly organized, validly existing and in good standing under
the laws of The Netherlands. Purchaser has the corporate power to own
and lease its properties and carry on its business as it is now
conducted and otherwise as necessary for the purposes of this Agreement.
All necessary corporate action and other proceedings required to be
taken by or on behalf of Purchaser to authorize Purchaser to enter into
and consummate this Agreement in accordance with the terms hereof have
been duly authorized and properly taken. This Agreement constitutes, and
all instruments, agreements and other documents to be delivered in
connection herewith, when executed and delivered, will constitute legal,
valid and binding obligations of Purchaser, enforceable in accordance
with their terms.
(c) TRUE AND COMPLETE DISCLOSURES. All information furnished by
Purchaser of its representatives to Seller or its representative in
connection with the negotiation of this Agreement is true and complete
in all material respects. All of the statements, representations,
warranties and agreements made by Purchaser in this Agreement shall be
true and correct in all material respects on and as of the Closing and
thereafter with the same force and effect as if made by Purchaser at the
Closing.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants,
representations and warranties of the parties contained herein and in any
Schedule, Exhibit, or document attached hereto shall be deemed to have been
relied upon by the parties hereto, notwithstanding any investigation made by the
parties. All covenants, representations and warranties made herein shall not be
affected by any examinations or investigations conducted by Purchaser or Seller
prior to
12
<PAGE> 13
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
Closing and shall survive the Closing and shall continue in effect after the
execution of this Agreement and the consummation of the sale contemplated hereby
unless waived in writing.
14. NON-COMPETITION/NON-SOLICITATION/CONFIDENTIALITY. Each of Seller and
Suri hereby covenants and agrees:
(a) that for a period of one (1) year from the Closing, neither
Seller, Suri, nor any company controlling, controlled by, or under
common control with Seller or Suri, will, directly or indirectly, either
alone, or in partnership, or in conjunction with person, company or
entity as principal, agent, shareholder, or joint venturer: (i) conduct
business which is similar to the Business; (ii) engage in the sale at
products and/or services which similar to the products or services sold
and/or provided by Seller in the conduct of the Business to any person,
company or entity which in the two (2) year period immediately preceding
the Closing was a customer of Seller in the Business or was a competitor
of any such customer; (iii) except for appropriate notification of the
sale of the Assets and the appointment of the Purchaser as Seller's sole
and exclusive subdistributor pursuant to Section 36, affirmatively
interfere with, disrupt, or attempt to disrupt, in any manner, the
relationship, contractual or otherwise, between Purchaser and any person
who is or was a customer or supplier of Seller for the Business at any
time during the two (2) year period immediately prior to the Closing for
products and/or services of any type or quality provided to such
customer or for supplies acquired from such supplier by Seller for the
Business; or (iv) solicit for employment or other working relationship
any of the employees hired by Purchaser; and
(b) to hold in confidence all Confidential and Proprietary
Information, and that each of them will not disclose or use or permit
the disclosure or use of the Confidential and Proprietary Information at
any time, except as may be required as a matter of law, or at any
judicial or governmental proceeding; and
(c) that (i) the time duration and geographic and other scope
limitations contained in this Section 14 are reasonable and are required
for the reasonable protection of Purchaser's investment in the Assets
and the Business and constitute an integral part of the consideration
given by Seller and Suri in exchange for the Purchase Price; provided,
however, the parties hereto agree that a court of competent jurisdiction
or other trier of fact may modify and enforce the covenants contained in
this Section 14 to the extent it deems reasonable under the
circumstances at that time and such modification shall be binding on the
parties hereto and (ii) any breach by any of them of any of the terms of
this Section 14 may cause substantial and irreparable injury to
Purchaser in amounts which may be difficult or impossible to ascertain,
and covenants and agrees that in the event of such
13
<PAGE> 14
Mr. Ashok Sur]
Strand Europe Ltd.
February 3, 1998, as amended
December 30. 1998
breach any of the terms of this Section 14, Purchaser shall have, in
addition to all other remedies available in the event of a breach of
this Agreement, the right to injunctive or other equitable relief,
without the need of posting bond or other security, as well as an award
of attorneys' fees and costs incurred as a result of such action, and in
the event of any breach or other violation of the provisions of this
Section 14 by either Seller or Suri, the running of the time period of
Non-Competition/Non-Solicitation shall be tolled during the period of
the continuance of any actual breach or violation.
For purposes of this Section 14, "Confidential and Proprietary
Information" means any information constituting a part of the Assets, including,
but not limited to, the following to the extent they constitute a part of the
Assets: (i) trade secrets; (ii) proprietary products and trade names; (iii) all
other intellectual property rights; and (iv) any compilations of otherwise
public information, such as vendor or customer listings; provided, however, that
Confidential and Proprietary Information does not include any (w) information
which is used by Seller in its retained business which is not the subject of
this Agreement and none of which is used or useful in the Business or is a part
of the Assets, (x) information already generally known to the public; (y)
information which, either prior to or subsequent to the Closing, is lawfully
disclosed to Seller and Suri by anyone else rightfully in possession of such
information and who is not in a confidential relationship with Purchaser; and
(z) information which, without violating any legal rights of Purchaser, becomes
generally known and used by others who are not in a confidential relationship
with Purchaser. In addition, the provisions of this Section 14 shall not apply
to sales by Seller of infrared or radio frequency remote control products
bearing the brand names "Bush" and "Einstein" so long as such remote control
products are manufactured and approved by Purchaser.
15. NON-COMPETITION/NON-SOLICITATION/CONFIDENTIALITY. Each of Seller and
Suri hereby covenants and agrees:
(a) that for a period of five (5) years from January 31, 1999,
neither Seller, Suri, nor any company controlling, controlled by, or
under common control with Seller or Suri, will, directly or indirectly,
either alone, or in partnership, or in conjunction with person, company
or entity as principal, agent, shareholder, or joint venturer: (i)
conduct business which is similar to the Business; (ii) engage in the
sale at products and/or services which similar to the products or
services sold and/or provided by Seller in the conduct of the Business
to any person, company or entity which in the two (2) year period
immediately preceding the Closing was a customer of Seller in the
Business or was a competitor of any such customer, except that after
January 31, 2001, the restrictions contained within this subsection
15(a)(ii) shall not apply to Argos, and Seller and/or Suri shall be free
to sell products to Argos in competition with Purchaser, provided
however,
14
<PAGE> 15
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
that prior to selling any products to Argos in competition with
Purchaser, Seller and/or Suri agree to first allow Purchaser an
opportunity to provide Seller and/or Suri with the products that Seller
and/or Suri propose to sell to Argos on terms and other conditions that
will allow Seller and/or Suri to earn the same gross margin as Seller
and/or Suri would have earned by selling products which have not been
provided by Purchaser and if Purchaser is unable to chooses to not
provide Seller and/or Suri with any such products, then Seller and/or
Suri shall be allowed to obtain and sell products in competition with
Purchaser; (iii) except for appropriate notification of the sale of the
Assets, affirmatively interfere with, disrupt, or attempt to disrupt, in
any manner, the relationship, contractual or otherwise, between
Purchaser and any person who is or was a customer or supplier of Seller
for the Business at any time during the two (2) year period immediately
prior to the Closing for products and/or services of any type or quality
provided to such customer or for supplies acquired from such supplier by
Seller for the Business; or (iv) solicit for employment or other working
relationship any of the employees hired by Purchaser; and
(b) to hold in confidence all Confidential and Proprietary
Information, and that each of them will not disclose or use or permit
the disclosure or use of the Confidential and Proprietary Information at
any time, except as may be required as a matter of law, or at any
judicial or governmental proceeding; and
(c) that (i) the time duration and geographic and other scope
limitations contained in this Section 15 are reasonable and are required
for the reasonable protection of Purchaser's investment in the Assets
and the Business and constitute an integral part of the consideration
given by Seller and Suri in exchange for the Purchase Price; provided,
however, the parties hereto agree that a court of competent jurisdiction
or other trier of fact may modify and enforce the covenants contained in
this Section 15 to the extent it deems reasonable under the
circumstances at that time and such modification shall be binding on the
parties hereto and (ii) any breach by any of them of any of the terms of
this Section 15 may cause substantial and irreparable injury to
Purchaser in amounts which may be difficult or impossible to ascertain,
and covenants and agrees that in the event of such breach any of the
terms of this Section 15, Purchaser shall have, in addition to all other
remedies available in the event of a breach of this Agreement, the right
to injunctive or other equitable relief, without the need of posting
bond or other security, as well as an award of attorneys' fees and costs
incurred as a result of such action, and in the event of any breach or
other violation of the provisions of this Section 15 by either Seller or
Suri, the running of the time period of Non-Competition/Non-Solicitation
shall be tolled during the period of the continuance of any actual
breach or violation.
15
<PAGE> 16
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
For purposes of this Section 15, "Confidential and Proprietary
Information" means any information constituting a part of the Assets, including,
but not limited to, the following to the extent they constitute a part of the
Assets: (i) trade secrets; (ii) proprietary products and trade names; (iii) all
other intellectual property rights; and (iv) any compilations of otherwise
public information, such as vendor or customer listings; provided, however, that
Confidential and Proprietary Information does not include any (w) information
which is used by Seller in its retained business which is not the subject of
this Agreement and none of which is used or useful in the Business or is a part
of the Assets, (x) information already generally known to the public; (y)
information which, either prior to or subsequent to the Closing, is lawfully
disclosed to Seller and Suri by anyone else rightfully in possession of such
information and who is not in a confidential relationship with Purchaser; and
(z) information which, without violating any legal rights of Purchaser, becomes
generally known and used by others who are not in a confidential relationship
with Purchaser. In addition, the provisions of this Section 15 shall not apply
to sales by Seller of infrared or radio frequency remote control products
bearing the brand names "Bush" and "Einstein" so long as such remote control
products are manufactured and approved by Purchaser.
16. CONDITIONS OF OBLIGATIONS OF PURCHASER. The obligations of
Purchaser, including but not limited to the obligation to close the transaction
contemplated hereunder, are, at the option of Purchaser, subject to satisfaction
of the following conditions on or prior to the Closing, all of which may be
waived by Purchaser in whole or in part:
(a) The representations and warranties of Seller contained
herein shall be true, correct and complete in all material respects on
and as of the Closing and Purchaser shall have received at the Closing a
certificate to that effect, dated the Closing Date and executed by the
President of Seller and Suri; provided that the receipt of such
certificate and the closing of the sale herein provided shall not be
deemed to be a waiver of any representation or warranty contained in
this Agreement, which representations and warranties shall continue in
full force and effect for the benefit of the parties as provided herein.
(b) Each of Seller and Suri shall have performed and observed,
in all material respects, all covenants, agreements, acts, undertakings
and conditions of each of them herein to be performed or observed by
each of them on or before the Closing.
(c) Delivery to Purchaser of such other documents, instruments,
or certificates as Purchaser shall reasonably request.
16
<PAGE> 17
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
17. CONDITIONS OF OBLIGATIONS OF SELLER. The obligations of Seller and
Suri, including but not limited to the obligation to close the transactions
contemplated hereunder, are, subject to the satisfaction of the following
conditions on or prior to the Closing all of which may be waived by Seller or
Suri in whole or in part:
(a) The representations and warranties of Purchaser contained
herein shall be true, correct and complete in all material respects on
and as of the Closing and Seller and Suri shall have received at the
Closing a certificate to that effect, dated the Closing Date, and
executed on behalf of Purchaser by its chief executive officer or chief
financial officer.
(b) Purchaser shall have performed and observed, in all material
respects, all covenants, agreements and conditions herein to be
performed or complied with by Purchaser on or before the Closing.
(c) Delivery to Seller of such other documents, instruments, or
certificates as Seller shall reasonably request.
18. FURTHER ASSURANCES. Each party hereto shall from time to time at the
reasonable request of the other party hereto, whether on or after the Closing,
do, make, execute, acknowledge, and deliver all such further acts and
instruments of conveyance, assignment, transfer and consent, in form and
substance reasonably satisfactory to the requesting party, concerning compliance
with the terms and conditions of this Agreement as such requesting party may
reasonably require for the more effective performance of their respective
obligations hereunder and the completion of the transactions contemplated
hereby.
19. ADDITIONAL COVENANTS OF SELLER AND SURI.
(a) Use OF PURCHASER'S TRADE NAME, TRADEMARKS AND SERVICE Marks.
After Closing, neither Seller, Suri, nor any person or entity affiliated
with any of them shall use the trade name and/or trademark "Universal
Electronics", "One For All", or any other trade name, trademark or
service mark of Purchaser or any of its affiliates, or any name similar
to or a derivative of any of the aforementioned trade names, trademarks
or services marks.
(b) PAYMENT OF CREDITORS. On or before the tenth day after the
Closing, Seller and Suri shall deliver to Purchaser a certificate,
signed by a duly authorized officer of the Seller and Suri, that all
creditors of Seller with regard to the Assets or the Business have been
paid in full or that provisions have been made for the satisfaction of
the same.
17
<PAGE> 18
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
20. INDEMNIFICATION.
(a) Each of Seller and Suri hereby agrees to indemnify Purchaser
and its successors, assigns and affiliates, and present and future
directors, officers, employees, and agents against, and hold them
harmless from and against all damages, losses, liens, claims,
deficiencies, liabilities, fines, penalties, costs and expenses,
including but not limited to reasonable legal fees and costs of
litigation (including without limitation any appellate proceedings)
(collectively referred to as "Damages") resulting from, caused by or
arising out of any of the following: (i) the inaccuracy of any statement
or representation or the breach of any warranty, covenant, or agreement
of either of Seller or Suri, made herein, or the failure of any of them,
to perform any covenant or agreement made or referred to herein; (ii)
any claim against any of the Assets, against Purchaser by a creditor of
Seller, or arising out of a breach of this Agreement by either of Seller
or Suri; (iii) any transaction, occurrence, action, or omission in
connection with the operation of the Business by Seller or Suri prior to
the Closing; (iv) any claim asserted against Purchaser in connection
with or arising out of any delinquent contributions to any pension plan
of Seller, any withdrawal liability to any multi-employer pension plan,
or any employee benefits, including without limitation any severance
benefits, accruing prior to the Closing or as a result of the
consummation of the transactions contemplated hereunder; (v) any claim
contained in any pending litigation against Seller or Suri; and (vi) any
claim asserted against Purchaser by reason of any noncompliance of any
applicable bulk transfers or similar laws under the provisions of any
applicable jurisdiction.
(b) Purchaser hereby agrees to indemnify and hold Seller and
Suri and their respective successors, assigns and affiliates, and
present and future directors, officers, employees, and agents against,
and hold them harmless from and against all Damages resulting from,
caused by or arising out of the following: (i) the inaccuracy of any
statement or representation or the breach of any warranty, covenant, or
agreement of Purchaser made herein, or the failure of Purchaser to
perform any covenant or agreement made by it herein; and (ii) any
transaction, occurrence, action or omission in connection with the
operation of the Business by Purchaser after the Closing.
(c) Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any
claim by a person not a party to this Agreement ("third person") or the
commencement of any action or proceeding by a third person, the
Indemnified Party shall, if a claim with respect thereto is to be made
against any party obligated to provide indemnification pursuant hereto
(hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or
proceeding. Such notice shall state the nature and basis of such claim
18
<PAGE> 19
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
and, if ascertainable, the amount thereof. In each such case the
Indemnified Party agrees to give such notice to the Indemnifying Party
promptly; provided, however, that the failure of the Indemnified Party
to give such notice shall not excuse the Indemnifying Party's obligation
to indemnify except to the extent the Indemnifying Party has suffered
damage or prejudice by reason of the Indemnified Party's failure to give
or delay in giving such notice. The Indemnified Party shall have the
right to compromise or defend such third person claim, upon notice to
and at the expense of the Indemnifying Party; provided that the
Indemnifying Party shall not have objected to such compromise or defense
by written notice to the Indemnified Party within five (5) days after
receipt by the Indemnifying Party of the Indemnified Party's notice of
such intention to compromise or defend the third party claim. After
receipt of such notice from the Indemnified Party, the Indemnifying
Party shall acknowledge in writing its obligation to indemnify in
respect of such third person claim. Provided that the Indemnifying Party
shall have so acknowledged its obligation to indemnify in respect of
such claim, the Indemnifying Party may, at its expense, have the right
to participate in the defense of such third person claim and no such
third person claim shall be settled by the Indemnified Party without the
consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. At any time after notice of any third person
claim, the Indemnifying Party may request the Indemnified Party to agree
in writing to the payment or compromise of the third person claim,
whereupon such action shall be taken unless the Indemnified Party
determines that the contest should be continued, and so notifies the
Indemnifying Party in writing within fifteen (15) days of such request
from the Indemnifying Party.
(d) If an Indemnified Party shall have any claim pursuant to
this Section 20, including but not limited to a claim for Damages as the
result of the Indemnifying Party's failure to acknowledge its obligation
to indemnify, the Indemnified Party shall deliver to the Indemnifying
Party written notice explaining the nature and amount of such claim
promptly after the Indemnified Party shall know the amount of such
claim. The Indemnified Party and Indemnifying Party shall thereafter
attempt in good faith for a period of not less than thirty (30) days to
agree upon whether the Indemnified Party is entitled to be indemnified
and held harmless under this Section 20 and the extent to which it is
entitled to be indemnified and held harmless hereunder. If the parties
cannot so agree within said period, the Indemnified Party may thereafter
commence litigation In a court of competent jurisdiction for a
determination of its claim. Upon resolution of any claim pursuant to
this Section 20, whether by agreement between the parties or the
rendering of a final judgment in any litigation, the Indemnifying Party
shall within ten (10) days of such resolution pay over and deliver to
the Indemnified Party funds in the amount of any claim as resolved, and
any fees and interest, including reasonable attorneys' fees and costs
19
<PAGE> 20
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
(including without limitation any appellate proceedings), incurred by
the Indemnified Party with respect to any such litigation.
(e) Notwithstanding anything to the contrary herein, in the
event Purchaser has a claim for indemnification pursuant to this Section
20, Purchaser may set-off Damages against any amount of the Purchase
Price which has not yet been paid by Purchaser to Seller pursuant to the
terms of this Agreement; provided however, Purchaser's election to
set-off pursuant to this Section 20(e) shall in no way limit Purchaser
from pursuing any other remedy available to it hereunder, at law, or in
equity and in no way shall such election to set-off be construed as a
liquidation of such Damages.
21. EXPENSES. Except to the extent otherwise provided by this Agreement
or as specifically authorized in writing by the parties hereto, each party shall
pay for its own legal, accounting and other similar expenses incurred in
connection with the transactions contemplated by this Agreement, whether or not
such transactions are consummated.
22. BROKERAGE COMMISSIONS. Each party represents and warrants that this
Agreement is the result of direct negotiations between them and that there are
no claims for brokerage commissions or finder's fees in connection with the
transactions contemplated by this Agreement. Each of the parties agrees to
indemnify and hold harmless the other for any Damages resulting from or arising
out of any liability to any broker or finder on the basis of any arrangement or
agreement made by or on behalf of such party.
23. ENTIRE AGREEMENT AND BINDING EFFECT. This Agreement and the
Exhibits, Schedules and documents attached hereto contain the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and supersede all prior agreements or understandings between the parties
relating to the subject matter hereof. This Agreement, and all questions
concerning its construction, validity, and interpretation, and the performance
of the obligations imposed by this Agreement, shall be governed, interpreted and
enforced according to the internal law, not the law of conflicts, of England.
All Exhibits, Schedules and documents attached hereto are incorporated herein by
this reference.
24. ASSIGNABILITY. This Agreement shall not be assignable by any of the
parties hereto without the prior written consent of the other parties hereto,
except that it may be assigned by Purchaser to any corporation controlled by, or
under direct or indirect common control with, Purchaser. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, representatives, successors and permitted assigns.
20
<PAGE> 21
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
25. PARTIAL INVALIDITY/SEVERABILITY. The various covenants and
provisions of this Agreement, including specifically, without limitation those
covenants and provisions contained in Sections 14 and 15 hereof, are intended to
be severable and to constitute independent and distinct binding obligations of
the parties hereto. In the event any one or more of the covenants or provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in whole or in part, the validity, legality and enforceability
of the remaining covenants or provisions of this Agreement and any other part or
application thereof shall not in any way be affected or impaired thereby (except
if such partial invalidity may frustrate the basic intents and purposes hereof).
26. TERMINATION. This Agreement may be terminated or abandoned any time
prior to the consummation hereof by (a) the mutual consent of the parties
hereto; (b) either Purchaser or Seller, respectively, if there has been a
material misrepresentation or breach on the part of Seller or Purchaser,
respectively, of any representation, warranty or covenant set forth in or made
pursuant to this Agreement; or (c) Purchaser or Seller if the Closing has not
occurred by February 15, 1998; provided, however, that any termination pursuant
to clause (b) above shall not be deemed to be a waiver of any rights and
remedies otherwise available under this Agreement, by operation of law or
otherwise to the party who so terminates.
27. WAIVERS AND NOTICES. Any term or condition of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument. No delay or failure on the part of any party in exercising any
rights hereunder, and no partial or single exercise thereof, will constitute a
waiver of such rights or of any other rights hereunder nor shall operate as a
waiver of, or estoppel with respect to, any subsequent or other exercise of any
rights hereunder. All notices, waivers, consents, requests, instructions,
approvals, and other communications provided for herein shall be in writing and
shall be validly given, made or served (a) upon delivery to the address of such
party specified below if delivered personally or by courier, or sent by
certified or registered mail, return receipt requested, postage prepaid, or (b)
upon dispatch if transmitted by telecopy or other means of facsimile, in any
case to the parties at the following addresses or telecopy number, as the case
may be:
(a) If to Seller and/or Suri: Mr. Ashok Suri
Strand Europe Ltd.
Strand House, Galway Road
Blackbushe Business Park
Yateley, Hampshire
GU46 6GE
Telecopy No. 011 441 252 861006
Confirm No. 011 441 252 861000
21
<PAGE> 22
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
(b) If to Purchaser: Mr. Paul Bennett
Universal Electronics B.V.
Javastraat 92
7512 ZK Enschede
Netherlands
Telecopy No. 011 31 53 432 7080
Confirm No. 011 31 53 488 8000
or to such other address or telecopy number as either party may have furnished
to the other in writing in accordance herewith, except that notices of change of
address shall only be effective upon receipt. If notice is transmitted by
telecopy or other means of facsimile, the sending party must, on the same day,
send a copy of such notice by regular mail, postage pre-paid.
28. AMENDMENT. This Agreement may be amended, modified, or supplemented
only by written agreement of the parties hereto.
29. REMEDIES CUMULATIVE. All remedies of the parties provided herein
shall, to the extent permitted by law, be deemed cumulative and not exclusive of
any thereof or of any other remedies available to the parties, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained herein, and every remedy given herein or by
law to any party hereto may be exercised from time to time, and as often as
shall be deemed expedient, by such party.
30. SPECIFIC PERFORMANCE. Each of Seller and Suri acknowledges and
agrees that the Assets are unique, that damages for any failure of Seller or
Suri to transfer the Assets pursuant to this Agreement would be an inadequate
remedy, and that Purchaser shall be entitled to enforcement by judgment for
specific performance.
31. ATTORNEYS' FEES. Should suit be brought to enforce or interpret any
part of this Agreement, the prevailing party shall be entitled to recover, as an
element of costs of suit and not as damages, interest and reasonable attorneys'
fees and costs, including all costs and expenses of any appellate court
proceedings.
32. HEADINGS. The section and other headings contained in this Agreement
are for reference purposes only and shall not affect the interpretation or
meaning of this Agreement.
22
<PAGE> 23
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
33. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
34. NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent and no rule of strict construction will be applied against any party.
35. NONDISCLOSURE OF TERMS AND IDENTITY OF RELATED PARTIES. Purchaser,
Seller and Suri each agrees to not disclose any of the terms, conditions or
provisions of this Agreement to any person, firm, corporation, association,
agency or entity other than its own attorneys and shareholders, except where
such disclosure is lawfully required and in such instances such disclosure shall
be limited to the information specifically required to be produced.
36. DISTRIBUTION AGREEMENT. Effective the Closing Date but subject to
Universal Electronics Inc., a Delaware corporation ("UEI") consent, Purchaser
shall become the sole and exclusive subdistributor of Seller under that certain
Distribution Agreement by and between Seller and UEI dated November 1995 (the
"Distribution Agreement") for the period commencing on the Closing Date (or the
date of UEI's consent) and ending on the earlier of January 31, 1999 or the date
on which either the Call Option or the Put Option is exercised. During such time
as Purchaser is the sole and exclusive subdistributor, Seller shall not exercise
any of its rights under the Distribution Agreement other than to enforce its
rights under the Distribution Agreement in the event of a breach of the
Distribution Agreement by either Purchaser or UEI (but only in the event that
UEI is in breach and Purchaser fails to enforce its rights against UEI). Seller
represents to Purchaser that it is not now in default or breach of the
Distribution Agreement, there exists no state of facts which after notice or
lapse of time or both would constitute such a default or breach, the
Distribution Agreement is in good standing and in full force and effect,
enforceable in accordance with its terms, and Seller has not appointed any other
party or person as a subdistributor under the Distribution Agreement. In the
event that either the Call Option or the Put Option is exercised, then the
Distribution Agreement shall automatically terminate and be of no further force
and effect.
23
<PAGE> 24
Mr. Ashok Suri
Strand Europe Ltd.
February 3, 1998, as amended
December 30, 1998
If the foregoing is an accurate statement of our agreement, please
indicate your approval by countersigning the enclosed copy of this letter and
returning it to me as soon as possible.
Sincerely,
UNIVERSAL ELECTRONICS B.V.,
a Netherlands corporation
By:
---------------------------------
Paul Bennett, Managing Director
APPROVED THIS 30TH DAY
OF DECEMBER, 1998.
STRAND EUROPE LTD.
an England corporation
By
-------------------------------
Ashok Suri, Managing Director
AND
- - ----------------------------------
Ashok Suri, Individually
24
<PAGE> 25
SCHEDULE 4.3
PURSUANT TO SECTION 4.3
Purchaser shall be responsible for the following:
1. All products returned after the Closing Date; and
2. Telephone services to be provided after the Closing Date in
connection with the products.
Each of Seller and Suri acknowledges and agrees that Seller shall be and remain
solely responsible for all product returns and all telephone services provided
prior to the Closing Date.
25
<PAGE> 26
SCHEDULE 7
PURSUANT TO SECTION 7
<TABLE>
<CAPTION>
PRODUCT US$PRICE
- - ------- --------
<S> <C>
URC 2510 6.75
ONESHOT
URC 2530 7.35
SO EASY
URC 3505 9.35
ZAP-3
URC 2560 9.65
LITTLE EASY
URC 2585 10.50
BIG EASY
URC 3550 11.50
MENU-3
URC 2500 13.00
OFA-4
URC 2589 13.50
LITE
URC 2505 16.00
OFA-5
URC 4300 18.50
OFA-6
URC 5550 29.00
LCD-5
URC 8550 34.00
LCD-8
</TABLE>
26
<PAGE> 1
Exhibit 21.1
UNIVERSAL ELECTRONICS INC.
LIST OF SUBSIDIARIES OF THE REGISTRANT
One For All B.V. (organized under the laws of The Netherlands)
One For All GmbH (organized under the laws of Germany)
One For All (UK) Ltd. (organized under the laws of the United Kingdom)
