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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
April 21, 1998
Date of Report (Date of earliest event reported)
CALIFORNIA MICROWAVE, INC.
(Exact name of registrant as specified in its charter)
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Delaware 0-7428 94-1668412
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
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1143 Borregas Avenue, Sunnyvale, California 94089
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including are code): 408/732-4000
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Item 2. Acquisition or Disposition of Assets.
California Microwave on April 21, 1998 announced through a press
release the completion of the sale of its Microwave Networks division (MN) to
Tadiran Microwave Networks, Inc. Pursuant to the terms of the Asset Purchase
Agreement announced on March 1, 1998, California Microwave was to receive $35
million in cash, subject to a post-closing adjustment for any change in net
assets between December 31, 1997, and the closing of the transaction. The
Agreement provided for an interim adjustment in the cash to be paid at closing
for any change in net assets between December 31, 1997, and the most recent
balance sheet date. Based upon a March 31, 1998 balance sheet, California
Microwave received approximately $31.5 million at the time of the closing, with
the difference of $3.5 million representing cash transfers made by MN to
California Microwave, and MN operating losses for the period.
Item 7.
(c) Exhibits
10.26 Asset Purchase Agreement among Tadiran Limited, Tadiran
Microwave Networks, Inc. and California Microwave, Inc., dated as of March
1, 1998, including a Cross-License Agreement between Tadiran Microwave
Networks, Inc. and California Microwave, Inc. attached thereto as Exhibit A.
10.27 Amendment to Asset Purchase Agreement among Tadiran Limited,
Tadiran Microwave Networks, Inc. and California Microwave, Inc., and California
Microwave, Inc., dated as of April 20, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CALIFORNIA MICROWAVE, INC.
(Registrant)
By: /s/ GEORGE L. SPILLANE
--------------------------------
Name: George L. Spillane
Title: Vice President and
Secretary
Dated: April 27, 1998
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EXHIBIT 10.26
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ASSET PURCHASE AGREEMENT
Between
TADIRAN LTD.
and
CALIFORNIA MICROWAVE, INC.
Dated as of March 1, 1998
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TABLE OF CONTENTS
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ARTICLE I............................................................................ 1
SALE AND PURCHASE OF THE ASSETS.............................................. 1
1.1 Assets......................................................... 1
1.2 Excluded Assets................................................ 3
1.3 Books and Records; Intellectual Property....................... 4
ARTICLE II........................................................................... 4
THE CLOSING.................................................................. 4
2.1 Place and Date................................................. 4
2.2 Purchase Price................................................. 4
2.3 Allocation of Purchase Price................................... 5
2.4 Assumption of Liabilities...................................... 5
2.5 Excluded Liabilities........................................... 6
2.6 Consent of Third Parties....................................... 8
2.7 Adjustment of Cash Portion..................................... 9
(a) Preparation of Estimated Closing
Statement of Net Assets................................. 9
(b) Calculation of Adjustment............................... 9
(c) Preparation of Closing Statement of
Net Assets.............................................. 9
(d) Certain Procedures...................................... 11
(e) Review of Closing Statement of Net
Assets.................................................. 12
(f) Resolution.............................................. 13
(g) Non-Transferred Foreign Cash............................... 13
ARTICLE III.......................................................................... 14
REPRESENTATIONS AND WARRANTIES OF SELLER..................................... 14
3.1 Authorization, etc............................................. 14
3.2 Corporate Status............................................... 14
3.3 No Conflicts, etc.............................................. 15
3.4 Financial Statements........................................... 15
3.5 Absence of Undisclosed Liabilities............................. 16
3.6 Taxes.......................................................... 16
3.7 Absence of Changes............................................. 16
3.8 Litigation..................................................... 18
3.9 Compliance with Laws; Governmental
Approvals and Consents; Governmental
Contracts...................................................... 18
3.10 Assets......................................................... 19
3.11 Contracts...................................................... 20
3.12 Territorial Restrictions....................................... 23
3.13 Inventories.................................................... 23
3.14 Receivables.................................................... 23
3.15 Product Warranties............................................. 23
3.16 Intellectual Property.......................................... 24
3.17 Insurance...................................................... 24
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3.18 Real Property Leases........................................... 24
3.19 Environmental Matters.......................................... 25
(a) Compliance with Environmental Law....................... 25
(b) Other Environmental Matters............................. 25
3.20 Employees, Labor Matters, etc.................................. 25
3.21 Employee Benefit Plans and Related
Matters........................................................ 26
(a) Employee Benefit Plans.................................. 26
(b) Compliance; Liability................................... 26
3.22 Brokers, Finders, etc.......................................... 26
3.23 Suppliers and Customers........................................ 27
3.24 Order Backlog.................................................. 27
3.25 Disclosure..................................................... 27
3.26 Year 2000...................................................... 28
3.27 No Transition Services......................................... 28
ARTICLE IV........................................................................... 28
REPRESENTATIONS AND WARRANTIES OF BUYER...................................... 28
4.1 Corporate Status; Authorization, Etc........................... 28
4.2 No Conflicts, etc.............................................. 29
4.3 Litigation..................................................... 29
4.4 Brokers, Finders, etc.......................................... 29
4.5 Adequate Funds................................................. 29
ARTICLE V............................................................................ 30
COVENANTS.................................................................... 30
5.1 Covenants of Seller............................................ 30
(a) Public Announcements.................................... 30
(b) Conduct of Business..................................... 30
(c) Access and Information.................................. 31
(d) Further Actions......................................... 32
(e) Further Assurances...................................... 32
(f) Noncompete.............................................. 33
(g) No Solicitation......................................... 34
(h) Post-Closing Confidentiality............................ 34
(i) Mail; Payments.......................................... 34
(j) Performance of Contracts................................ 34
(k) On-Site Buyer Representative............................ 35
(l) Seller Foreign Subsidiaries............................. 35
(m) Certain Environmental and Safety
Matters................................................. 35
5.2 Covenants of Buyer............................................. 35
(a) Public Announcements.................................... 35
(b) Further Actions......................................... 35
(c) Further Assurances...................................... 36
(d) Use of Business Names by Buyer.......................... 36
(e) Substitute Letters of Credit and
Bonds................................................... 37
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(f) Reimbursement of Certain Severance
Obligations............................................. 37
(g) Factored Accounts Receivable............................ 38
(h) Shareholders' Meetings.................................. 38
ARTICLE VI........................................................................... 39
CONDITIONS PRECEDENT......................................................... 39
6.1 Conditions to Obligations of Each Party........................ 39
(a) HSR Act and Exon-Florio................................. 39
(b) No Injunction, etc...................................... 39
(c) Supply and License Agreements........................... 39
6.2 Conditions to Obligations of Buyer............................. 39
(a) Representations, Performance............................ 39
(b) No Material Adverse Change.............................. 40
(c) Consents................................................ 40
(d) Corporate Proceedings................................... 40
(e) Transfer Documents...................................... 40
(f) Environmental Reports................................... 41
6.3 Conditions to Obligations of Seller............................ 41
(a) Representations, Performance, etc....................... 41
(b) Assumption Agreement.................................... 42
(c) Corporate Proceedings................................... 42
(d) Consents and Approvals.................................. 42
ARTICLE VII.......................................................................... 42
EMPLOYEES AND EMPLOYEE BENEFIT PLANS......................................... 42
7.1 Employment of Seller's Employees............................... 42
7.2 Welfare and Fringe Benefit Plans............................... 43
ARTICLE VIII......................................................................... 43
TERMINATION.................................................................. 43
8.1 Termination.................................................... 43
8.2 Effect of Termination.......................................... 44
ARTICLE IX........................................................................... 44
INDEMNIFICATION.............................................................. 44
9.1 By Seller...................................................... 44
9.2 By Buyer....................................................... 45
9.3 Adjustments to Indemnification Payments........................ 46
9.4 Indemnification Procedures..................................... 46
9.5 Expiration of Representations and
Warranties, etc................................................ 47
9.6 Exclusive Remedy............................................... 48
9.7 Set-Off........................................................ 48
ARTICLE X............................................................................ 48
DEFINITIONS, MISCELLANEOUS................................................... 48
10.1 Definition of Certain Terms.................................... 48
10.2 Expenses....................................................... 55
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10.3 Severability................................................... 56
10.4 Notices........................................................ 56
10.5 Miscellaneous.................................................. 57
(a) Headings................................................ 57
(b) Entire Agreement........................................ 57
(c) Counterparts............................................ 57
(d) Governing Law, etc...................................... 57
(e) Bulk Sales.............................................. 58
(f) Binding Effect.......................................... 58
(g) Assignment.............................................. 58
(h) No Third Party Beneficiaries............................ 58
(i) Amendment; Waivers, etc................................. 58
10.6 Arbitration Procedure.......................................... 59
10.7 Attorneys Fees................................................. 61
10.8 Liability for Transfer Taxes................................... 61
10.9 Notification of Certain Claims........................................ 61
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EXHIBITS
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EXHIBIT A Form of Cross-License Agreement
EXHIBIT B Memorandum Regarding Year 2000
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SCHEDULES
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SCHEDULE 1.2 Excluded Assets
SCHEDULE 2.4(a) Retention Incentive Agreements
SCHEDULE 3.2(b) Qualification to Do Business; Good
Standing
SCHEDULE 3.3 Conflicts
SCHEDULE 3.4 December Balance Sheet
SCHEDULE 3.5 Undisclosed Liabilities
SCHEDULE 3.6(a) Contested Taxes
SCHEDULE 3.7 Absence of Changes
SCHEDULE 3.7(a) Results Shown and Changes Forecast
SCHEDULE 3.8 Litigation
SCHEDULE 3.9(a) Compliance with Laws
SCHEDULE 3.9(b) Governmental Approvals and other Consents
SCHEDULE 3.9(c) Government Contracts
SCHEDULE 3.10 Asset Exceptions
SCHEDULE 3.11(a) Contracts
SCHEDULE 3.11(c) Defaults and Consents under Contracts
SCHEDULE 3.13 Inventory Exceptions
SCHEDULE 3.14(a) Accounts Receivable Aging Report
SCHEDULE 3.14(b) Doubtful Accounts
SCHEDULE 3.15 Product Warranties
SCHEDULE 3.16(a) Owned Intellectual Property
SCHEDULE 3.16(b) Intellectual Property Licensing
Arrangements
SCHEDULE 3.16(c) Infringement by Third Parties
SCHEDULE 3.16(d) Claims by Third Parties
SCHEDULE 3.17 Insurance
SCHEDULE 3.18 Real Property Leases
SCHEDULE 3.19(a) Environmental Matters
SCHEDULE 3.21(a) Employee Benefit Plans
SCHEDULE 3.23 Suppliers and Customers
SCHEDULE 3.24 Backlog
SCHEDULE 4.2 Governmental Approvals and other Consents
SCHEDULE 5.1(m) Environmental, Safety and Health Matters
SCHEDULE 5.2(e) Letters of Credit; Performance and Surety
Bonds
SCHEDULE 5.2(f) Severance Agreements
SCHEDULE 6.2(c) Consents
SCHEDULE 7.1 Employees
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of March 1, 1998, between Tadiran Ltd.,
an Israeli corporation ("Buyer") and California Microwave, Inc., a Delaware
corporation (the "Seller").
R E C I T A L S:
A. Seller conducts several businesses. One of such businesses is
manufacturing, marketing and selling microwave transmission radios and related
products in the United States and certain other countries through an
unincorporated division (the "MN Division") created by the combination of
Microwave Networks, Incorporated ("MNI"), TeleSciences Transmission Systems,
Inc. ("TTS"), and MRC-Digital ("MRC").
B. Buyer wishes to purchase or acquire from Seller, and Seller wishes to
sell, assign and transfer to Buyer, substantially all of the assets of the MN
Division, and Buyer has agreed to assume certain of the liabilities of such
Division, all for the purchase price and upon the terms and subject to the
conditions hereinafter set forth.
C. Capitalized terms used herein without separate definition have the
meanings given to such terms in Section 10.1.
NOW THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein, and of the mutual benefits to be derived hereby, the
parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF THE ASSETS
1.1 Assets. Subject to and upon the terms and conditions set forth in this
Agreement, at the Closing, Seller shall sell, transfer, convey, assign and
deliver to Buyer, and Buyer shall purchase and acquire from Seller, all right,
title and interest of Seller in and to the properties, assets and rights of
every nature, kind and description, tangible and intangible, whether real,
personal or mixed, whether accrued, contingent or otherwise and whether now
existing or hereinafter acquired (other than the Excluded Assets) that primarily
relate to and are used in the Business as the same may exist on the Closing Date
(collectively, the "Assets"), including, without limitation,
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(a) the Leased Real Property described on Schedule 3.18;
(b) all machinery, equipment, furniture, furnishings, vehicles, tools,
dies, molds and other tangible personal property;
(c) all inventories of raw materials, work in process, finished
products, goods, spare parts, replacement and component parts, and office and
other supplies (whether on hand, in-transit or on order) (collectively, the
"Inventories");
(d) all rights in Intellectual Property owned by Seller or used by
Seller pursuant to a license or other arrangement and, in each case used
primarily in the Business;
(e) all rights under all Contracts;
(f) all credits, prepaid expenses, deferred charges, advance payments,
security deposits and prepaid items;
(g) all notes and accounts receivable due to Seller (including
intercompany and interdivisional accounts receivable) and all notes, bonds and
other evidences of indebtedness of and rights to receive payments from any
Person (in all cases, whether or not billed) and the benefit of security
therefor;
(h) all Books and Records;
(i) to the extent their transfer is permitted by law, all Governmental
Approvals, including all applications therefor;
(j) all rights to causes of action, lawsuits, claims and demands of
any nature available to or being pursued by Seller with respect to the Assets or
the Assumed Liabilities (subject to Section 1.2(e));
(k) all guarantees, warranties, indemnities and similar rights in
favor of Seller with respect to the Assets;
(l) all computer hardware and software used primarily in the Business,
including all rights under licenses and other instruments or agreements relating
thereto;
(m) all assets reflected on the Final Closing Statement of Net Assets;
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(n) the cash and the cash equivalents in the non-U.S. bank accounts as
provided in Section 2.7(c) other than the Non-Transferred Cash (if any) referred
to in the last sentence of Section 2.7(g); and
(o) the Names and Logos incorporating "Microwave Networks" and "MN",
alone or in any combination of words, or any combination, variation or
derivation of any such Name or Logo.
Subject to the terms and conditions hereof, at the Closing, the Assets
shall be transferred or otherwise conveyed to Buyer free and clear of all Liens
excepting only Permitted Liens.
1.2 Excluded Assets. Seller shall retain and not transfer, and Buyer shall
not purchase or acquire, the following assets (collectively, the "Excluded
Assets"):
(a) the assets listed on Schedule 1.2;
(b) the name and mark "California Microwave" and any name or mark
derived from or including the foregoing;
(c) all cash and cash equivalents and similar type investments, such
as certificates of deposit, treasury bills and other marketable securities other
than the cash and the cash equivalents in the non-U.S. bank accounts as provided
in Section 2.7(c); provided, however, that Excluded Assets shall include the
Non-Transferred Cash (if any) referred to in the last sentence of Section
2.7(g);
(d) all Books and Records relating to or used in the business of
Seller and not primarily relating to or used in the Business;
(e) all insurance policies and all rights to causes of action,
lawsuits, claims and demands, rights of recovery and set-off, and proceeds,
under or with respect to insurance policies except to the extent provided for in
Section 5.1(e);
(f) all rights to causes of action, lawsuits, claims and demands of
any nature available to or being pursued by Seller with respect to the Excluded
Assets or the Excluded Liabilities;
(g) all Intellectual Property not used primarily in the Business; and
(h) all right, title and interest of the Seller in and to prepaid
Taxes of the Business (except to the
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extent reflected on the Final Closing Statement of Net Assets), and any claims
for any refund, rebate or abatement with respect to Taxes of the Business
(except to the extent reflected on the Final Closing Statement of Net Assets)
for any period or portion thereof through the Closing Date and any interest
payable with respect thereto.
1.3 Books and Records; Intellectual Property.
(a) From and after the Closing and until the sixth anniversary
thereof, (i) Seller agrees to grant to Buyer, upon reasonable notice and during
normal business hours, reasonable access to (and the right to copy) any Books
and Records that pertain to the operations of the Business but that are not
Books and Records that primarily relate to the Business, and (ii) Buyer agrees
to grant to Seller, upon reasonable notice and during normal business hours,
reasonable access to (and the right to copy) any Books and Records included in
the Assets that pertain to the operation of the Business on or prior to the
Closing Date, for any reasonable business purpose of Seller.
(b) At the Closing, Seller shall grant to Buyer a fully-paid,
royalty-free, nonexclusive license to use intellectual property used in the
operation of the Business but not constituting Intellectual Property that
primarily relates to the Business. At the Closing, Buyer shall grant to Seller a
fully-paid, royalty-free, nonexclusive license to use intellectual property used
in the operation of the Business constituting Intellectual Property that
primarily relates to the Business. Such licenses shall be substantially in the
form of the Cross-License Agreement between Buyer and Seller attached as Exhibit
A hereto (the "Cross-License Agreement").
ARTICLE II
THE CLOSING
2.1 Place and Date. The closing of the sale and purchase of the Assets (the
"Closing") and the assumption of the Assumed Liabilities shall take place at
10:00 a.m. local time on the 15th day of April, 1998, at the offices of Whitman
Breed Abbott & Morgan LLP, 200 Park Avenue, New York, NY 10166, or such other
time and place upon which the parties may agree. The day on which the Closing
actually occurs is herein sometimes referred to as the "Closing Date."
2.2 Purchase Price. On the terms and subject to the conditions set forth in
this Agreement, at the Closing, Buyer agrees to pay to Seller an aggregate of
U.S. $35 million, (i) minus the amount (if any) by which U.S.
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$49,150,347 exceeds the amount of Estimated Closing Date Net Assets as set forth
on the Estimated Closing Statement of Net Assets, or (ii) plus the amount (if
any) by which the amount of Estimated Closing Date Net Assets as set forth on
the Estimated Closing Statement of Net Assets exceeds U.S. $49,150,347 (the
"Cash Portion"), which shall be subject to later adjustment as provided for in
Section 2.7, and to assume the Assumed Liabilities as provided in Section 2.4.
The Cash Portion shall be paid at the Closing by the wire transfer of
immediately available funds to such bank account or accounts as are specified by
Seller in written instructions given to Buyer at least three days prior to the
Closing.
2.3 Allocation of Purchase Price. The parties agree to allocate the
aggregate of the Cash Portion and the Assumed Liabilities among the Assets for
purposes of Section 1060 of the Code, in accordance with allocations made
pursuant to that Section and the regulations thereunder that are approved in
writing by Deloitte & Touche. All such mutually agreed to allocations shall be
used by each party in preparing any filings required pursuant to Section 1060 of
the Code or any similar provisions of state or local law and all relevant income
and franchise tax returns, subject to adjustment to reflect the adjustment to
the Cash Portion provided for in Section 2.7 (with such adjustment to be
mutually agreed upon by the parties). Neither Buyer nor Seller will take any
position before any taxing authority or in any judicial proceeding that is
inconsistent with such mutually agreed to allocations without the prior consent
of the other party. The parties shall in good faith exercise reasonable efforts
to support such reported allocations in any audit proceedings initiated by any
taxing authority.
2.4 Assumption of Liabilities. Subject to the terms and conditions set
forth herein, at the Closing, Buyer shall assume and agree to pay, honor and
discharge when due only the following liabilities and obligations relating to
the Assets or the Business: (a) all payment obligations of Seller under the
agreements as set forth in Schedule 2.4(a), but only to the extent that such
payment obligations relate to the failure of Buyer to offer employment to
employees of the MN Division pursuant to Section 7.1 or the involuntary
termination by Buyer without cause of the employment of any Transferred Employee
after the Closing (it being understood and agreed that any payments due under
the agreements listed in Schedule 2.4(a) upon and by reason of the sale of the
MN Division shall not constitute Assumed Liabilities hereunder); provided,
however, that the maximum amount of payment obligations of Seller under each of
the agreements listed in Schedule 2.4(a) (which payment obligations are Assumed
Liabilities pursuant to this Section 2.4(a)) is as set forth
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on Schedule 2.4(a) hereto; (b) all product warranty obligations of the Business;
(c) all liabilities and obligations of Seller to be performed from and after the
Closing Date under or relating to Contracts and Governmental Approvals included
in the Assets; (d) to the extent reflected on the Final Closing Statement of Net
Assets, all liabilities and obligations of Seller relating to or arising out of
the operation of the Business and reflected on the December Balance Sheet or
disclosed in the notes thereto other than those relating to income taxes; (e) to
the extent reflected on the Final Closing Statement of Net Assets, all trade and
other accounts payable and other liabilities (other than those relating to
income taxes) arising out of or in respect of the ordinary course of business of
the Business (including intercompany and interdivisional trade accounts payable)
consistent with past practice since December 31, 1997; and (f) all liabilities
and obligations of Seller relating to or arising out of the lawsuits and claims
that are described on Schedule 3.5 (collectively, the "Assumed Liabilities").
2.5 Excluded Liabilities. Other than for the Assumed Liabilities, Buyer
shall not be responsible for any other debts, claims, commitments, liabilities
or obligations of Seller or the Business (collectively, the "Excluded
Liabilities"). Without limiting the generality of the foregoing, the term
"Excluded Liabilities" includes, without limitation, any and all debts, claims,
liabilities, obligations or commitments of Seller or the Business (except to the
extent reflected as a liability on the Final Closing Statement of Net Assets)
relating to or arising out of any of the following:
(a) any liability, obligation or commitment that, in accordance with
GAAP, was required to have been shown as a liability in the Financial Statements
or in the notes thereto and was not so shown;
(b) except as expressly assumed by Buyer pursuant to Article VII
hereof, (i) any liability, obligation or commitment relating to or arising out
of any Employee Benefit Plan, including any sponsorship, administration or
contribution obligation of any Person under any Employee Benefit Plan or
termination of any Employee Benefit Plan, or (ii) the termination of employment
of any employee of the Business by Seller;
(c) any cause of action or judicial or administrative action, suit,
proceeding or investigation, pending or threatened on the Closing Date, relating
to periods prior to the Closing Date, that is not disclosed on Schedule 3.8
hereto;
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(d) any failure or alleged failure to comply with, or any violation or
alleged violation of, (i) any law, rule, regulation, statute, ordinance, permit,
judgment, injunction, order, decree, license or other Governmental Approval
applicable to the Business or the Assets, or (ii) any Contract, in each case
which failure or violation occurred or was alleged to have occurred prior to the
Closing Date;
(e) any infringement or alleged infringement of the rights of any
other person or entity arising out of the use of any Intellectual Property in
connection with the Business prior to the Closing Date;
(f) any rights of any other Person relating to the Intellectual
Property pursuant to any license, sublicense or agreement required to be
disclosed and not so disclosed;
(g) any obligations against Seller with respect to any notes, bonds,
accounts receivable or other evidences of indebtedness of or rights to receive
payment from any Person that have been transferred to a third person by Seller;
(h) any liability for (i) any income Taxes, or (ii) any other Taxes
imposed on Seller arising from the operation of the Business on or before the
Closing Date;
(i) the Excluded Assets;
(j) all Environmental Liabilities and Costs (whether or not currently
known, discoverable or regulated by currently Applicable Law) arising from,
relating to, in respect of or incurred in connection with conditions existing or
events occurring on or prior to the Closing Date;
(k) all obligations of Seller under all retention agreements,
severance agreements (subject to the provisions of Section 5.2(f)), change of
control agreements and similar arrangements not listed on Schedule 2.4(a);
(l) all obligations of Seller under all agreements listed on Schedule
2.4(a) (including any payments due thereunder upon and by reason of the sale of
the MN Division), other than those payment obligations of Seller referred to in
Section 2.4(a);
(m) any claim, litigation, action or proceeding, whether or not now
pending or threatened, relating to the Business or the Assets to the extent
based on
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or arising out of or based upon product liability with respect to products
shipped or sold prior to the Closing;
(n) all intercompany or interdivisional obligations and liabilities
owed by the Business to Seller other than intercompany or interdivisional trade
accounts payable reflected on the Final Closing Statement of Net Assets; or
(o) all liabilities and obligations arising from, relating to, in
respect of, or incurred in connection with, the closure of facilities located in
Bloomingdale and Glendale Heights, Illinois, Fremont, California, Chelmsford,
Massachusetts and the Houston, Texas facilities located on Rockley Road and
South Wilcrest, including without limitation, any liabilities or obligations in
respect of severance or other employee benefits payable to terminated employees,
Environmental Liabilities and Costs and any amounts payable under any real
estate lease for any such facility.
2.6 Consent of Third Parties. Notwithstanding anything to the contrary in
this Agreement, this Agreement shall not constitute an agreement to assign or
transfer any Governmental Approval, instrument, contract, lease, permit or other
agreement or arrangement or any claim, right or benefit arising thereunder or
resulting therefrom if an assignment or transfer or an attempt to make such an
assignment or transfer without the consent of a third party would constitute a
breach or violation thereof or affect adversely the rights of Buyer or Seller
thereunder; and any transfer or assignment to Buyer by Seller of any interest
under any such Governmental Approval, instrument, contract, lease, permit or
other agreement or arrangement that requires the consent of a third party shall
be made subject to such consent or approval being obtained. In the event any
such consent or approval is not obtained on or prior to the Closing Date, Seller
shall (i) continue to use all reasonable efforts to obtain any such approval or
consent after the Closing Date until such time as such consent or approval has
been obtained without any third party cost to Buyer, (ii) hold such Governmental
Approval, instrument, contract, lease, permit or other agreement or arrangement
on behalf of Buyer, (iii) cooperate with Buyer in any lawful arrangement to
provide that Buyer shall receive the benefits under any such Governmental
Approval, instrument, contract, lease or permit or other agreement or
arrangement, including performance by Seller, as agent, and (iv) enforce and
perform for the account of Buyer any rights of Seller arising from such
Government Approval, instrument, contract, lease, permit or other agreement or
arrangement, provided that Buyer shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit
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to the extent Buyer would have been responsible therefor if such consent or
approval had been obtained. Nothing in this Section 2.6 shall be deemed a waiver
by Buyer of its right to receive an effective assignment of all of the Assets.
2.7 Adjustment of Cash Portion.
(a) Preparation of Estimated Closing Statement of Net Assets. At least
two Business Days prior to the Closing Date, Seller shall deliver to Buyer a
statement of net assets for the Business (the "Estimated Closing Statement of
Net Assets") as of the end of the month ending immediately preceding the Closing
Date. The Estimated Closing Statement of Net Assets shall be prepared by Seller
in the same manner and in accordance with the procedures that the Closing
Statement of Net Assets is to be prepared pursuant to Section 2.7(c), except
that it shall be unaudited. The Estimated Closing Statement of Net Assets will
be prepared in accordance with the books and records of the MN Division, and
will present fairly, in all material respects, the Assets and Assumed
Liabilities presented on such statement at the Closing Date in conformity with
GAAP consistently applied with the December 31, 1997 Financial Statements
(including the December Balance Sheet). The term "Estimated Closing Date Net
Assets" shall mean the excess of the Assets set forth on the Estimated Closing
Statement of Net Assets over the Assumed Liabilities set forth on the Estimated
Closing Statement of Net Assets, determined in accordance with the procedures
set forth in Section 2.7(c).
(b) Calculation of Adjustment. The Cash Portion shall be (i) increased
by the amount that the Closing Date Net Assets (as hereinafter defined), are
greater than the Estimated Closing Date Net Assets; or (ii) decreased by the
amount that the Closing Date Net Assets are less than the Estimated Closing Date
Net Assets. The amount of any decrease or increase to the Cash Portion pursuant
to this Section 2.7(b) plus interest from and including the Closing Date to but
excluding the date of payment at the Prime Rate (as hereinafter defined) shall
be paid by Seller or Buyer, as the case may be, by wire transfer in immediately
available funds within five (5) business days after the Final Closing Statement
of Net Assets is agreed to by Seller and Buyer or is determined by the Neutral
Auditor (as hereinafter defined). For purposes of this Agreement, "Prime Rate"
means the prime rate of interest in effect on the Closing Date as stated in the
"Money Rates" section of the Wall Street Journal.
(c) Preparation of Closing Statement of Net Assets. As soon as
practicable, and in any event within sixty (60) days after the Closing Date,
Seller shall cause
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Ernst & Young LLP ("E&Y") to prepare an audited statement of net assets for the
Business consisting of the Assets and the Assumed Liabilities, as of the close
of business on the Closing Date determined on a pro forma basis as if the
parties hereto had not consummated the transactions contemplated by this
Agreement (the "Closing Statement of Net Assets") to be prepared in accordance
with GAAP applied on a basis consistent with the December 31, 1997 Financial
Statements (including the December Balance Sheet) through full application of
the policies and procedures used in preparing the December 31, 1997 Financial
Statements (including the December Balance Sheet) and taking into account the
types of adjustments made in preparing the December Balance Sheet set forth in
Schedule 3.4, and with changes in contract estimates at completion ("EAC's") and
estimates to complete ("ETC's") determined on a basis consistent with the method
used for the determination of the December 31, 1997 Financial Statements
(including the December Balance Sheet); provided, however, that in preparing the
Closing Statement of Net Assets, the standards of materiality used in preparing
the June 30, 1997 Financial Statements (including the June 30, 1997 Balance
Sheet) shall apply; provided further, however, that, for purposes of preparing
the Closing Statement of Net Assets, the cash and cash equivalents held in
non-U.S. bank accounts for the benefit of the MN Division shall be transferred
to Buyer at the Closing and shall be reflected as assets of the MN Division and
shall be included in the calculation of any Purchase Price adjustment required
by this Section, subject to the provisions of Section 2.7(g). In connection with
the preparation of the Closing Statement of Net Assets, Seller and Buyer jointly
will conduct, as close as practicable to the Closing Date, a physical inventory
count, consisting of not less than 90% of the value of the inventory included in
the Assets, and Seller shall allow representatives of Buyer to observe such
physical inventory count; and, to the extent practicable, Seller and Buyer
jointly will conduct a physical inspection and count of the property plant and
equipment included in the Assets, and Seller shall allow representatives of
Buyer to observe such physical inspection and count. The Closing Statement of
Net Assets shall include all notes required by GAAP, and shall be accompanied by
the report of E&Y thereon and by a certificate of Seller's Chief Financial
Officer, each of which shall state that the Closing Statement of Net Assets
presents fairly, in all material respects, the Assets and Assumed Liabilities
presented on such statement as provided for in this Agreement at the Closing
Date in conformity with GAAP consistently applied with the December 31, 1997
Financial Statements (including the December Balance Sheet), except that it may
not contain all the notes required by GAAP. Buyer shall provide Seller, E&Y and
the Neutral Auditor such access to the Books and
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Records as may reasonably be required for the preparation and/or review of the
Closing Statement of Net Assets. All fees and expenses of E&Y relating to the
preparation of the Closing Statement of Net Assets shall be borne equally by
Seller and Buyer.
(d) Certain Procedures. For purposes of calculating the adjustment to
the Cash Portion pursuant to Section 2.7(b), the following procedures and
limitations shall apply:
(1) The Closing Statement of Net Assets and the Final Closing Statement of Net
Assets shall have the following columns of information:
(A) Balances excluding Special Adjustments (Column A);
(B) Special Adjustments (Column B); and
(C) Balances after giving effect to the Special Adjustments (Column C).
(2) From December 31, 1997 through the Closing Date, any increase in the
reserve for bad debts over the reserve for bad debts in the December
Balance Sheet in respect of those accounts or notes receivable overdue by
more than 120 days that are included in the December Balance Sheet will be
shown in Column B as a "Special Adjustment".
(3) From December 31, 1997 through the Closing Date, if as a result of the
physical inventory count undertaken in connection with the preparation of
the Closing Statement of Net Assets, the inventory amount resulting from
such physical inventory count (the "Physical Count Amount") is less than
the inventory amount on the books and records of the Business as of the
Closing Date (the "Book Amount"), then (i) the excess of the Book Amount
over the Physical Count Amount, if $300,000 or less, will be charged to the
inventory reserve, and (ii) the excess of the Book Amount over the Physical
Count Amount, if over $300,000, will be shown in Column A.
(4) From December 31, 1997 through the Closing Date, any increase in the
inventory reserve over the inventory reserve in the December Balance Sheet
in respect of inventory included in the December Balance Sheet, which
increase resulted from changes in management judgments from those
management judgments used in calculating the inventory reserve in the
December Balance Sheet, will be shown in Column B as a "Special
Adjustment".
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(5) From December 31, 1997 through the Closing Date, any increase in accruals
or reserves relating to "BT", "Nokia", "Pannon" or "Orange" over the
accruals or reserves relating thereto included in the December Balance
Sheet will be shown in Column B as a "Special Adjustment".
(6) The term "Closing Date Net Assets" shall mean the sum of (i) the excess of
the Assets set forth in Column A of the Final Closing Statement of Net
Assets over the Assumed Liabilities set forth in Column A of the Final
Closing Statement of Net Assets, minus (ii) the aggregate amount of the
Special Adjustments in Column B (after applying the rules set forth in
paragraph (7) of this Section 2.7 (d)).
(7) In making the calculation of Closing Date Net Assets, the following special
rules shall apply:
(A) If the aggregate amount of the Special Adjustments in Column B is
equal to or less than $1,500,000, then the amount to be included in
clause (ii) of the definition of Closing Date Net Assets shall be the
aggregate amount of the Special Adjustments in Column B.
(B) If the aggregate amount of the Special Adjustments in Column B is more
than $1,500,000, but equal to or less than $6,000,000, then the amount
to be included in clause (ii) of the definition of Closing Date Net
Assets shall be $1,500,000.
(C) If the aggregate amount of the Special Adjustments in Column B is more
than $6,000,000, then the amount to be included in clause (ii) of the
definition of Closing Date Net Assets shall be the sum of (x)
$1,500,000 plus (y) the amount by which the aggregate amount of the
Special Adjustments in Column B exceeds $6,000,000.
(8) Adjustments made for the purposes of this Section 2.7 shall not be used as
a basis for the purpose of claiming any breach of representations or
warranties contained in this Agreement.
(e) Review of Closing Statement of Net Assets. After receipt of the
Closing Statement of Net Assets, Buyer shall have thirty (30) days to review it.
Buyer and its authorized representatives shall have full access to all Books and
Records and appropriate employees of the Seller and its accountants, E&Y, to the
extent required to complete their review of the Closing Statement of Net
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Assets including work papers used in preparation thereof. Unless the Buyer
delivers written notice to Seller on or prior to the 30th day after receipt of
the Closing Statement of Net Assets specifying in reasonable detail all disputed
items and the basis therefor, the parties shall be deemed to have accepted and
agreed to the Closing Statement of Net Assets. If Buyer so notifies the Seller
of an objection to the Closing Statement of Net Assets, the parties shall,
within thirty (30) days following the date of such notice (the "Resolution
Period") attempt to resolve their differences and any resolution by them as to
any disputed amount shall be final, binding, conclusive and nonappealable for
all purposes under this Agreement.
(f) Resolution. If at the conclusion of the Resolution Period the
parties have not reached an agreement on the objections, then all amounts
remaining in dispute may, at the election of either party, be submitted to the
New York City office of Price Waterhouse or, if the parties mutually agree, the
New York City office of another large international accounting firm not
otherwise engaged by either party (the "Neutral Auditor"). Each party agrees to
execute, if requested by the Neutral Auditor, a reasonable engagement letter.
All fees and expenses relating to the work, if any, to be performed by the
Neutral Auditor shall be borne equally by Seller and Buyer, unless the Neutral
Auditor finds one party acted in bad faith in which case that party pays all.
Except as provided in the preceding sentence, all other costs and expenses
incurred by the parties in connection with resolving any dispute hereunder
before the Neutral Auditor shall be borne by the party incurring such cost and
expense. The Neutral Auditor shall act as an arbitrator to determine, based
solely on the presentations by Seller and Buyer, and not by independent review,
only those issues still in dispute. The Neutral Auditor's determination shall be
made within thirty (30) days of its engagement (which engagement shall be made
no later than five (5) business days after the election by either party to
submit the objections to the Neutral Auditor) or as soon thereafter as possible,
shall be set forth in a written statement delivered to Seller and Buyer and
shall be final, binding, conclusive and nonappealable for all purposes
hereunder. The term "Final Closing Statement of Net Assets", as hereinafter
used, shall mean the definitive Closing Statement of Net Assets agreed to by
Seller and Buyer in accordance with Section 2.7(e) or the definitive Closing
Statement of Net Assets resulting from the determination made by the Neutral
Auditor in accordance with this Section 2.7(f) (in addition to those items
theretofore agreed to by Seller and Buyer).
(g) Non-Transferred Foreign Cash. If any of the cash or cash
equivalents held in non-U.S. bank accounts
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for the benefit of the MN Division referred to in Section 2.7(c) are not
transferred by Seller to Buyer as of the Closing Date (the "Non-Transferred
Foreign Cash"), then the Non-Transferred Foreign Cash (i) shall not constitute
an Asset being conveyed to Buyer pursuant to this Agreement, (ii) shall not be
reflected as an Asset on the Estimated Closing Statement of Net Assets, Closing
Statement of Net Assets or the Final Closing Statement of Net Assets, and (iii)
shall not be included in the calculation of any adjustment to the Purchase Price
pursuant to this Section 2.7. If within 180 days after the Closing Date Seller
transfers to Buyer any of the Non-Transferred Foreign Cash, then Buyer shall pay
to Seller promptly thereafter, by the wire transfer of immediately available
funds, the U.S. dollar equivalent of the Non-Transferred Foreign Cash so
transferred (to be based on spot currency exchange rates in effect as of two
days prior to the transfer for value on the transfer date). Buyer shall use
commercially reasonable efforts to facilitate the transfer of the
Non-Transferred Foreign Cash within such 180-day period. If any Non-Transferred
Foreign Cash is not transferred to Buyer by Seller within such 180- day period,
then Buyer shall no longer be obligated to receive and pay for the same as
aforesaid.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 Authorization, etc. Seller has the corporate power and authority to
execute and deliver this Agreement, to perform fully its obligations hereunder,
and to consummate the transactions contemplated hereby. The execution and
delivery by Seller of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly authorized by all requisite corporate action
of Seller. Seller has duly executed and delivered this Agreement. This Agreement
is a legal, valid and binding obligation of Seller, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
affecting creditor's rights generally and by general equitable principles.
3.2 Corporate Status.
(a) Each of Seller and the Seller Foreign Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, with full corporate power
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and authority to carry on the Business and to own or lease and to operate the
properties of the Business as and in the places where the Business is conducted
and such properties are owned, leased or operated.
(b) Each of Seller and the Seller Foreign Subsidiaries is duly
qualified or licensed to do business and is in good standing in each of the
jurisdictions in which the operation of the Business or the character of the
properties owned, leased or operated by it in connection with the Business makes
such qualification or licensing necessary, except where the failure to be so
qualified or licensed would not have a Material Adverse Effect. Such
jurisdictions are listed on Schedule 3.2(b).
(c) Seller has delivered to Buyer complete and correct copies of its
certificate of incorporation and by-laws in each case, as amended and in effect
on the date hereof and on the Closing Date. Seller is not in violation of any of
the provisions of its certificate of incorporation or by-laws or other
organizational documents.
3.3 No Conflicts, etc. The execution, delivery and performance by Seller of
this Agreement and the consummation of the transactions contemplated hereby, do
not and will not conflict with or result in a violation of or a default under
(with or without the giving of notice or the lapse of time or both), or result
in the acceleration of or give rise to any party the right to terminate, modify
or cancel under, or result in the loss of any rights, privileges, options or
alternatives under, or result in the creation of any Lien on any assets of
Seller (including the Assets) under (i) any Applicable Law applicable to Seller
or any of the Assets, (ii) the certificate of incorporation or by-laws of Seller
or (iii) except as set forth in Schedule 3.3, any Contract or other agreement or
instrument to which Seller is a party or by which Seller or its properties
(including the Assets) is bound. Except as specified in Schedule 3.3 and as may
be required under the HSR Act or the Exon-Florio Amendment to the Defense
Production Act of 1950, no Governmental Approval or other Consent is required to
be obtained or made by Seller in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
3.4 Financial Statements. Seller has delivered to Buyer (a) the audited
balance sheet (the "June Balance Sheet") and the related audited statements of
operations and cash flows of the Business as at and for the fiscal year ended
June 30, 1997 and (b) the unaudited adjusted balance sheet, a copy of which is
attached hereto as Schedule 3.4 (the "December Balance Sheet") and the related
statement of
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income of the Business as at and for the six-month period ended December 31,
1997 (collectively, the "Financial Statements"). The December 31, 1997 Financial
Statements have been prepared on a basis consistent with the June 30, 1997
Financial Statements. The Financial Statements are in accordance with the books
and records of the MN Division, have been prepared in accordance with GAAP and
fairly present the financial condition and results of operations of the Business
as at and for the periods specified, except that the December 31, 1997 Financial
Statements may not contain all the notes required by GAAP.
3.5 Absence of Undisclosed Liabilities. Seller has no debts, claims,
liabilities or obligations of any nature, whether known or unknown, absolute,
accrued, contingent or otherwise and whether due or to become due, asserted or
unasserted, arising out of or relating to the Business, except (a) as set forth
in Schedule 3.5, (b) as and to the extent disclosed or reserved against in the
December Balance Sheet, and (c) liabilities and obligations that were incurred
after December 31, 1997 in the ordinary course of business consistent with prior
practice.
3.6 Taxes. Seller has (or by the Closing will have) duly and timely filed
all Tax Returns relating to the Business with respect to Taxes required to be
filed on or before the Closing Date. Except for Taxes set forth on Schedule
3.6(a), which are being contested in good faith and by appropriate proceedings,
the following Taxes have (or by the Closing Date will have) been duly and timely
paid: (i) all Taxes shown to be due on the Tax Returns, (ii) all deficiencies
and assessments of Taxes of which notice has (or by the Closing Date will have)
been received by Seller that are or may become payable by Buyer or chargeable as
a lien upon the Business, and (iii) all other Taxes in respect of periods prior
to the Closing.
3.7 Absence of Changes. Except (i) as set forth in Schedule 3.7, (ii) for
the results shown and changes forecast in Schedule 3.7(a), and (iii) for losses
for the quarter ending June 30, 1998 not in excess of the negative contribution
shown on Schedule 3.7(a), since December 31, 1997, Seller has not in connection
with or relating to the Business or the Assets:
(a) suffered any material adverse change in the financial condition,
results of operation or Assets of the Business, other than changes in the MN
Division's intercompany account with CMI corporate, which changes represent (i)
the results of operations of the MN Division, (ii) the cash advanced to the MN
Division by CMI corporate or repaid by the MN Division to CMI corporate, and
(iii) certain
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allocations between CMI corporate and the MN Division, which allocations were
made in the ordinary course of business consistent in type and amount with past
practice;
(b) incurred, assumed, guaranteed or discharged any obligation or
liability, absolute, accrued, contingent or otherwise, whether due or to become
due, or any indebtedness for borrowed money, except current liabilities for
trade or business obligations incurred in connection with the purchase of goods
or services in the ordinary course of business consistent with prior practice;
(c) mortgaged, pledged or subjected to Lien, any property, business or
assets, tangible or intangible;
(d) sold, transferred, leased to others or otherwise disposed of any
of the Assets, except for inventory sold in the ordinary course of business, or
canceled or compromised any debt or claim, or waived or released any right of
substantial value;
(e) received any notice of termination of any material contract, lease
or other agreement;
(f) suffered any damage, destruction or loss (whether or not covered
by insurance), in any case or in the aggregate, in excess of $50,000;
(g) transferred or granted any rights under, or entered into any
settlement regarding the breach or infringement of, any Intellectual Property,
or modified any existing rights with respect thereto;
(h) made any change in the rate of compensation, commission, bonus or
other direct or indirect remuneration payable, or paid or agreed or orally
promised to pay, conditionally or otherwise, any bonus, incentive, retention or
other compensation, retirement, welfare, fringe or severance benefit or vacation
pay, to or in respect of any employee, distributor or agent of the Business,
other than increases in the ordinary course of business consistent with past
practice in the compensation payable to those employees of the Business earning
less than $50,000 per annum each;
(i) encountered any labor union organizing activity, had any actual or
threatened employee strikes, work stoppages, slowdowns or lockouts, or had any
material change in its relations with its employees, distributors, agents,
customers or suppliers;
(j) entered into any transaction, contract or commitment other than in
the ordinary course of business or
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paid or agreed to pay any legal, accounting, brokerage, finder's fee, Taxes or
other expenses in connection with, or incurred any severance pay obligations by
reason of, this Agreement or the transactions contemplated hereby;
(k) made any grant of credit to any customer or distributor on terms
or in amounts materially more favorable than had been extended to that customer
or distributor in the past; or
(l) taken any action or omitted to take any action that would result
in the occurrence of any of the foregoing.
Seller makes no representation or warranty as to the realization of any
results forecast in Schedule 3.7(a).
3.8 Litigation. (a) Except as set forth on Schedule 3.8, there is no
action, claim, demand, suit, proceeding, arbitration, grievance, citation,
summons, subpoena, inquiry or investigation, civil, criminal, regulatory or
otherwise, in law or in equity, pending or, to the knowledge of Seller,
threatened, by or against or relating to Seller in connection with the Assets or
the Business seeking unspecified damages, damages in excess of $50,000 or any
injunctive or other equitable relief or against or relating to the transactions
contemplated by this Agreement.
(b) Except as set forth in Schedule 3.8, (i) since April 1992, in the case
of that portion of the Business relating to MRC, (ii) since October 1993, in the
case of that portion of the Business relating to TTS, and (iii) since May 1995,
in the case of that portion of the Business relating to MNI, there have been no
product liability claims, suits, actions or proceedings relating to products or
services manufactured or sold by the MN Division or the Business.
3.9 Compliance with Laws; Governmental Approvals and Consents;
Governmental Contracts.
(a) Except as disclosed in Schedule 3.9(a), Seller has complied in all
respects with all Applicable Laws applicable to the Business or the Assets,
except for any non-compliance that has not had or would not result in,
individually or in the aggregate, a Material Adverse Effect.
(b) Schedule 3.9(b) sets forth all Governmental Approvals and other
Consents necessary for, or otherwise material to, the conduct of the Business as
conducted by Seller. Except as set forth in Schedule 3.9(b), all such
Governmental Approvals and Consents have been duly
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obtained and are in full force and effect, and Seller is in compliance in all
material respects with each of such Governmental Approvals and Consents held by
it with respect to the Assets and the Business.
(c) Schedule 3.9(c) sets forth all Contracts with any Governmental
Authority.
3.10 Assets.
(a) Except for those Liens listed on Schedule 3.10, on the date
hereof, Seller has good and valid title to all the Assets free and clear of any
and all Liens other than Permitted Liens. Except for the Lien listed in item
number 1 on Schedule 3.10, on the Closing Date, Seller will have good and valid
title to all the Assets free and clear of any and all Liens other than Permitted
Liens. The Assets include all material assets required for the continued conduct
of the Business by Buyer as now being conducted or material to the financial
condition or results of operations of the Business, except for the Excluded
Assets. On the date hereof and at the Closing, the assets do not and will not
include stock of or other equity interests in any Person other than the stock of
or other equity interests in the Seller Foreign Subsidiaries; provided, however,
that if Buyer elects to acquire directly the Assets held by such Seller Foreign
Subsidiary pursuant to clause (i) of Section 5.1(l), then the Assets will not
include at the Closing the stock of or other equity interest in such Seller
Foreign Subsidiary.
All the issued and outstanding shares of each of the Seller Foreign
Subsidiaries (collectively, the "Shares") are owned, beneficially and of record,
by Seller, are validly issued, fully paid, and nonassessable, and have been
issued in full compliance with all Applicable Laws. No stock of any Seller
Foreign Subsidiary constitutes treasury stock.
Other than this Agreement, there are no outstanding subscriptions, options,
rights, warrants, stock-based or stock-related awards, convertible, exercisable
or exchangeable securities, or other agreements or commitments obligating any
Seller Foreign Subsidiary or Seller to issue, grant, award, purchase, acquire,
sell or transfer any shares of any Seller Foreign Subsidiary's capital stock of
any class, or other securities of any Seller Foreign Subsidiary (including,
without limitation, any agreement or commitment obligating any Seller Foreign
Subsidiary to enter into any employee compensation arrangement based on any
valuation or transaction price of, or change of ownership in, shares of its
capital stock), and the Seller Foreign Subsidiaries and Seller shall not issue,
grant, award, purchase, acquire, sell
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or transfer such capital stock or other securities prior to the Closing. There
are no voting trusts, proxies or other agreements or understandings to which any
Seller Foreign Subsidiary or Seller is a party with respect to the voting of
capital stock of any Seller Foreign Subsidiary.
Seller is the sole owner, beneficially and of record, of all the Shares,
and has good and valid title to the Shares, free and clear of all Liens of any
kind. In the event Buyer makes the election to acquire the Shares pursuant to
Section 5.1(l), upon delivery to Buyer at the Closing of certificates
representing the Shares, duly endorsed in blank or accompanied by stock powers
duly endorsed in blank in proper form for transfer, good and valid title to the
Shares will pass to Buyer, free and clear of all Liens of any kind, other than
those arising from acts of Buyer. Other than this Agreement, the Shares are not
subject to any voting commitment or understanding restricting or otherwise
relating to voting, dividend rights or the disposition of the Shares or
otherwise.
None of the Seller Foreign Subsidiaries owns, directly or indirectly, any
interest or investment (whether in equity or debt) in any corporation,
partnership, business, trust or other Person.
(b) All material property and assets owned or utilized by the Business
are in good operating condition and repair (except for ordinary wear and tear),
free from any defects (except such minor defects as do not interfere with the
use thereof in the conduct of the normal operations), and are sufficient to
carry on the Business as presently conducted. All buildings, plants and other
structures utilized by the Business are in good condition and repair (except for
ordinary wear and tear).
3.11 Contracts.
(a) Schedule 3.11(a) contains a complete and correct list of all
agreements, contracts, commitments, orders, licenses, leases, and other
instruments and arrangements (whether written or oral) of the types described
below to which Seller is a party or by which it or any of its assets is bound in
connection with the Business, the Assets or the Assumed Liabilities (the
"Contracts"):
(i) leases, licenses, permits, franchises, insurance policies,
Governmental Approvals and other contracts concerning or relating to the Leases;
(ii) employment, consulting, agency, collective bargaining or
other similar contracts, agreements,
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and other instruments and arrangements relating to or for the benefit of
employees, sales representatives, distributors, dealers, agents, or (if
material) independent contractors;
(iii) loan agreements, indentures, letters of credit, mortgages,
security agreements, pledge agreements, deeds of trust, bonds, notes,
guarantees, and other agreements and instruments relating to the borrowing of
money or obtaining of or extension of credit;
(iv) licenses, licensing arrangements and other contracts
providing in whole or in part for the use of, or limiting the use of, any
Intellectual Property;
(v) brokerage or finder's agreements;
(vi) joint venture, partnership and similar contracts involving a
sharing of profits or expenses (including but not limited to joint research and
development and joint marketing contracts);
(vii) asset purchase agreements and other acquisition or
divestiture agreements, including but not limited to any agreements relating to
the sale, lease or disposal of any Assets (other than sales of inventory in the
ordinary course of business) or involving continuing indemnity or other
obligations;
(viii) any contract with respect to which the aggregate amount
that could reasonably be expected to be paid or received thereunder in the
future exceeds $100,000 per annum;
(ix) sales agency, manufacturer's representative, marketing or
distributorship agreements;
(x) contracts, agreements or arrangements with respect to the
representation of the Business in foreign countries;
(xi) purchase commitments for inventory items or supplies that,
together with amounts on hand, constitute in excess of six months normal usage;
(xii) any agreement, understanding, contract or commitment
(written or oral) with (x) any employee, agent, consultant, distributor, dealer
or franchisee other than those involving in the aggregate consideration or other
expenditure of less than $100,000, or (y) any Affiliate;
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(xiii) any collective bargaining agreements with any unions,
guilds, shop committees or other collective bargaining groups;
(xiv) any guarantee of the payment or performance of any Person
or agreement to indemnify any Person, or act as a surety, or other agreement to
be contingently or secondarily liable for the obligations of any Person other
than (x) the endorsement of checks in the ordinary course of business and (y)
guarantees or agreements which in the aggregate do not exceed $100,000;
(xv) any outstanding bid or proposal or any outstanding customer
option relating to Contracts in the Backlog in excess of $100,000; and
(xvi) any other contracts, agreements or commitments that are
material to the Business.
(b) Seller has furnished Buyer with access to all written Contracts,
together with all amendments thereto, set forth in Schedule 3.11(a). Seller has
furnished Buyer with a complete and accurate summary of all oral contracts
listed on Schedule 3.11(a).
(c) There does not exist under any Contract any event of default or
event or condition that, after notice or lapse of time or both, would constitute
a violation, breach or event of default thereunder on the part of Seller or, to
the knowledge of Seller, any other party thereto except as set forth in Schedule
3.11(c) and except for such events or conditions that, individually and in the
aggregate, (i) have not had or resulted in a Material Adverse Effect and (ii)
have not materially impaired the ability of Seller to perform its obligations
under the Agreement. Except as set forth in Schedule 3.11(c), each Contract is a
legal, valid, binding and enforceable obligation of Seller and, to the knowledge
of Seller, the other parties thereto. Except as set forth in Schedule 3.11(c),
no consent of any third party is required under any Contract as a result of or
in connection with the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby. Except as set forth in
Schedule 3.11(c), no outstanding bid or proposal (or series of related bids or
proposals) was bid or made at a loss in excess of $25,000. For purposes of this
Section 3.11(c), a loss shall be defined as occurring when the cost of the
products and/or services to be sold exceeds the proposed sales price for those
products and/or services. For purposes of this Section 3.11(c), the cost of the
products and/or services to be sold shall include all of the relevant costs,
including direct
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material, direct labor, and all applicable overheads included in the Business'
cost accounting standards and methods.
(d) For purposes of this Article III, the term Seller shall include,
where applicable, the Seller Foreign Subsidiaries.
3.12 Territorial Restrictions. Seller is not restricted by any agreement or
understanding with any other Person from carrying on the Business anywhere in
the world.
3.13 Inventories. Except as set forth on Schedule 3.13 and net of reserves
as reflected in the December Balance Sheet or to be reflected in the Final
Closing Statement of Net Assets, (a) Inventories are of such quality as to meet
the quality control standards of Seller and any applicable governmental quality
control standard and are of such a quality and quantity as to be usable in the
ordinary course of business, and (b) Inventories that are finished goods are
saleable in the ordinary course of business.
3.14 Receivables. Seller's receivables (including accounts receivable,
loans receivable and advances) which have arisen in connection with the Business
and which are reflected in the December Balance Sheet or will be reflected in
the Final Closing Statement of Net Assets, and all such receivables which will
have arisen since the date of the Financial Statements, have arisen only from
bona fide transactions in the ordinary course of business. Seller has no
knowledge of any facts or circumstances generally (other than general economic
conditions) which would result in any material increase in the uncollectability
of such receivables as a class in excess of the reserves therefor set forth on
the Financial Statements. To Seller's knowledge, there has not been any material
adverse change in the collectability of such receivables since December 31,
1997. Schedule 3.14(a) sets forth an accounts receivable aging report and
Schedule 3.14(b) sets forth a list of all receivables classified as doubtful
accounts.
3.15 Product Warranties. Except as set forth in Schedule 3.15 and for
warranties under Applicable Law, (a) there are no warranties express or implied,
written or oral, with respect to the products of the Business and (b) except as
reflected in the Financial Statements or as incurred in the ordinary course of
business thereafter there are no pending or threatened claims with respect to
any such warranty. Seller is not aware of any facts that indicate that the
reserves for product warranties reflected in the December Balance Sheet are
materially understated. Schedule 3.15 sets forth a list of all pending or, to
the knowledge of
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Seller, threatened product warranty claims in excess of $50,000.
3.16 Intellectual Property. Schedule 3.16(a) sets forth a complete and
correct list of all material Intellectual Property that is owned by Seller and
used in connection with the Business (the "Owned Intellectual Property").
Schedule 3.16(b) sets forth a complete and correct list of all material written
or oral licenses and arrangements, (i) pursuant to which the use by any Person
of Intellectual Property is permitted by Seller and (ii) pursuant to which the
use by Seller of Owned Intellectual Property is permitted by any Person
(collectively, the "Intellectual Property Licenses"). The Owned Intellectual
Property and the Intellectual Property Licenses constitute all Intellectual
Property necessary to operate the Business consistent with past practice. On the
date hereof and at the Closing, all Intellectual Property Licenses are or will
be in full force and effect in accordance with their terms, and are free and
clear of any Liens (other than Permitted Liens). To the knowledge of Seller, the
conduct of the Business does not infringe the rights of any third party in
respect of any Intellectual Property, except as set forth on Schedule 3.16(c).
To the knowledge of Seller, none of the Intellectual Property is being infringed
by third parties. Except as set forth on Schedule 3.16(d), there is no claim or
demand of any Person pertaining to, or any proceeding which is pending or, to
the knowledge of Seller, threatened, that challenges the rights of Seller in
respect of any Intellectual Property, or claims that any default exists under
any Intellectual Property License.
3.17 Insurance. Schedule 3.17 contains a list of all insurance policies
maintained by Seller for the benefit of or in connection with the Assets or the
Business and no notice of cancellation, termination, or reduction of coverage,
and no notice of intention to cancel, terminate or reduce coverage, has been
received. Seller has given Buyer access to complete and correct copies of all
such policies together with all riders and amendments thereto. Such policies are
in full force and effect, and all premiums due thereon have been paid.
3.18 Real Property Leases. Schedule 3.18 contains a complete and correct
list of all Leases setting forth the address, landlord and tenant for each
Lease. Seller has delivered to Buyer correct and complete copies of the Leases.
Each Lease is legal, valid, binding and enforceable, and in full force and
effect, except as may be limited by bankruptcy, insolvency, reorganization and
similar Applicable Laws affecting creditors generally and by the availability of
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equitable remedies. Seller is not in default, violation or breach in any respect
under any Lease, and no event or condition has occurred and is continuing that
constitutes or, with notice or the passage of time or both, would constitute a
default, violation or breach in any respect under any Lease. No renewal or
extension options have been granted to tenants.
3.19 Environmental Matters.
(a) Compliance with Environmental Law. To the knowledge of Seller,
Seller is and has been in compliance in all material respects with all
applicable Environmental Laws pertaining to any of the properties and assets of
the Business and the use by Seller thereof. Except as disclosed on Schedule
3.19(a) hereto, Seller has obtained all material permits, licenses and other
authorizations that are required under Environmental Law necessary to operate
the Business and the same are listed on Schedule 3.19(a) hereto. No violation by
Seller is being alleged of any applicable Environmental Law relating to any of
the Assets.
(b) Other Environmental Matters. To the knowledge of Seller, Seller
has not caused or taken any action that resulted in, and Seller is not subject
to, any material liability or obligation on the part of Seller, relating to (x)
the environmental conditions on, under, or about the Leased Real Property or
other properties or assets owned, leased, operated or used by Seller in the
Business including without limitation, the air, soil and groundwater conditions
at such properties or (y) the use, management, handling, transport, treatment,
generation, storage, disposal or Release of any Hazardous Materials by Seller.
3.20 Employees, Labor Matters, etc. Seller is not a party to or bound by
any collective bargaining agreement and there are no labor unions or other
organizations representing, purporting to represent or attempting to represent
any employees employed in the operation of the Business. Since August 31, 1994,
there has not occurred or, to the knowledge of Seller, been threatened any
material strike, slowdown, picketing, work stoppage, concerted refusal to work
overtime or other similar labor activity with respect to any employees employed
in the operation of the Business. There are no labor disputes currently subject
to any grievance procedure, arbitration or litigation and there is no
representation petition pending or, to the knowledge of Seller, threatened with
respect to any employee employed in the operation of the Business.
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3.21 Employee Benefit Plans and Related Matters.
(a) Employee Benefit Plans. Schedule 3.21(a) lists each pension,
retirement, profit-sharing, deferred compensation, bonus, phantom stock or other
incentive plan, restricted stock plan, stock option plan, stock purchase plan,
deferred compensation arrangement, severance pay plan or policy, supplemental
executive retirement plan or policy, or other employee benefit program,
arrangement, agreement or understanding, or medical, vision, dental or other
health plan, or life insurance or disability plan, or any other employee benefit
plan, including, without limitation, any "employee benefit plan" as defined in
Section 3(3) of ERISA, to which Seller contributes or is a party or is bound and
under which it may have liability and under which employees or former employees
of the Business (or their beneficiaries) are eligible to participate or derive a
benefit ("Employee Benefit Plans"). Seller has delivered to Buyer true, correct
and complete copies of all documents, summary plan descriptions, insurance
contracts, third party administration contracts and all other documentation
created to embody all Employee Benefit Plans, plus descriptions of any Employee
Benefit Plans that have not been reduced to writing. The Assets are not subject
to any Lien in favor of, or enforceable by, the Pension Benefit Guaranty
Corporation.
(b) Compliance; Liability.
(i) No liability has been or is expected to be incurred by Seller
under or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint
and several liability provisions of the Code or ERISA relating to Employee
Benefit Plans and, to the knowledge of the Seller, no event, transaction or
condition has occurred or exists that could result in any such liability to the
Business or, following the Closing, Buyer or any such Employee Benefit Plan.
(ii) No Employee Benefit Plan is a "multiemployer plan" within
the meaning of Section 4001(a)(3) of ERISA, a "multiple employer plan" within
the meaning of Section 413(c) of the Code, or a defined benefit plan within the
meaning of Section B(35) of ERISA.
3.22 Brokers, Finders, etc. With the exception of fees and expenses payable
to J.P. Morgan & Co. Incorporated and certain employees of Seller and its
Affiliates which shall be paid by Seller, all negotiations relating to this
Agreement, and the transactions contemplated hereby, have been carried on
without the participation of any Person acting on behalf of Seller or its
Affiliates in such manner as to give rise to any valid claim against Buyer for
any
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brokerage or finder's commission, fee or similar compensation, or for any bonus
payable to any officer, director, employee, agent or sales representative of or
consultant to Seller or its Affiliates upon consummation of the transactions
contemplated hereby or thereby.
3.23 Suppliers and Customers. Schedule 3.23 attached hereto sets forth the
twenty (20) largest suppliers and all sole source suppliers and the twenty (20)
largest customers of the Business for the period July 1, 1996 through the date
hereof. During the period July 1, 1996 through the date hereof, (a) none of the
20 largest customers referred to in the next preceding sentence has canceled in
whole or in part its agreement or commitment with Seller or the Business to
purchase products or services (or threatened in writing to do any of the
foregoing). During the period July 1, 1996 through the date hereof, none of the
sole source suppliers referred to in the first sentence of this Section has
canceled in whole or in part its agreement or commitment to supply services or
supplies to Seller or the Business (or threatened in writing to do any of the
foregoing). To Seller's knowledge, the relationship of Seller with each of its
suppliers and each of its customers is a good commercial working relationship.
Seller does not have knowledge that any such supplier or customer intends to
cancel or otherwise substantially modify its relationship with Seller or the
Business or limit its services, supplies or materials to Seller or the Business,
or its usage or purchase of the services and products of the Business either as
a result of the transactions contemplated hereby or otherwise.
3.24 Order Backlog. A true and complete list of (a) all firm product and
service purchase orders and contracts for the sale of goods or the delivery of
services by Seller in connection with the Business to Persons other than
Governmental Authorities, and (b) all firm funded product and service purchase
orders and contracts for the sale of goods or the delivery of services by Seller
in connection with the Business to Governmental Authorities (collectively, the
"Backlog") pending as of the latest practical date prior to the date of this
Agreement is set forth in Schedule 3.24 attached hereto.
3.25 Disclosure. No representation or warranty of Seller in this Agreement
and the Schedules or certificates attached hereto or delivered by Seller in
accordance with the terms hereof contains any untrue statement of a material
fact or omits any statement of a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading.
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3.26 Year 2000. The information contained in the memorandum attached hereto
as Exhibit B fairly and accurately represents the status of Seller's Year 2000
compliance program.
3.27 No Transition Services. Except as expressly provided in this Section
3.27 and except for matters covered by the Cross-License Agreement, no
transition services by Seller are necessary in order for Buyer to operate the
Business after the Closing as currently conducted on a stand-alone basis. To the
extent any operations of the Business are conducted at, or otherwise utilize,
the facilities of Seller or any Subsidiary of Seller outside of the United
States, Buyer may elect, at the Closing, by giving notice thereof to Seller, to
continue to conduct such operations at, or to continue to utilize, such
facilities in a manner substantially similar to that prior to the Closing, for a
period of six months from the Closing Date. Buyer promptly shall reimburse
Seller for any reasonable out-of-pocket expenses incurred by Seller and paid to
third parties that are not Affiliates of Seller in connection with the
activities of the Business at such non-U.S. facilities during such six-month
period.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Corporate Status; Authorization, Etc.
(a) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation with full
corporate power and authority to execute and deliver the Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby.
(b) The execution and delivery by Buyer of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly authorized
by action of its Board of Directors. The Board of Directors of Buyer has
determined that the transactions contemplated by this Agreement are for the
benefit of the Buyer and its shareholders and has recommended to the
shareholders of Buyer the approval of such transactions by such shareholders. On
or prior to the date hereof, Buyer has delivered to Seller a letter from Koor
Industries, Ltd., a shareholder which, as of the date hereof owns approximately
64% of the voting ordinary shares of Buyer, which letter contains the agreement
that it
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will vote in favor of the transactions contemplated by this Agreement. Buyer has
duly executed and delivered this Agreement.
(c) This Agreement is a valid and legally binding obligation of Buyer,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium, fraudulent
conveyance and similar laws affecting creditor's rights generally and by general
equitable principles.
4.2 No Conflicts, etc. The execution, delivery and performance by Buyer of
the Agreement, and the consummation of the transactions contemplated hereby, do
not and shall not conflict with or result in a violation of or under (with or
without the giving of notice or the lapse of time, or both) (i) the certificate
of incorporation or by-laws or other organizational documents of Buyer, (ii) any
Applicable Law applicable to Buyer or any of its properties or assets or (iii)
any contract, agreement or other instrument applicable to Buyer or any of its
properties or assets, except, in the case of clause (iii), as set forth in
Schedule 4.2 and for violations and defaults that, individually and in the
aggregate, have not and shall not materially impair the ability of Buyer to
perform its obligations under the Agreement. Except as specified in Schedule 4.2
and except as required under the HSR Act or the Exon-Florio Amendment to the
Defense Production Act of 1950, no Governmental Approval or other Consent is
required to be obtained or made by Buyer in connection with the execution and
delivery of the Agreement or the consummation of the transactions contemplated
hereby.
4.3 Litigation. There is no action, claim, suit or proceeding pending, or
to the knowledge of Buyer threatened, by or against or affecting Buyer in
connection with or relating to the transactions contemplated by this Agreement
or of any action taken or to be taken in connection herewith or the consummation
of the transactions contemplated hereby.
4.4 Brokers, Finders, etc. All negotiations relating to this Agreement and
the transactions contemplated hereby have been carried on without the
participation of any Person acting on behalf of Buyer in such manner as to give
rise to any valid claim against Seller for any brokerage or finder's commission,
fee or similar compensation.
4.5 Adequate Funds. Buyer has all funds necessary to enable it to perform
this Agreement in accordance with its terms.
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ARTICLE V
COVENANTS
5.1 Covenants of Seller.
(a) Public Announcements. Except as required by Applicable Law (in
which case the nature of the announcement shall be described to Buyer prior to
dissemination to the public), Seller shall not make any public announcement in
respect of this Agreement or the transactions contemplated hereby without the
prior written consent of Buyer.
(b) Conduct of Business. From the date hereof to the Closing Date,
except as permitted or required by this Agreement or as otherwise consented to
by Buyer in writing, Seller shall:
(i) carry on the Business in the ordinary course, in
substantially the same manner as heretofore conducted, and use all reasonable
best efforts to maintain the Business in good operating condition and repair,
and preserve its relationships with customers, suppliers and others having
business dealings with the Business;
(ii) not grant (or commit to grant) any increase in the
compensation (including incentive or bonus compensation) of any employee
employed in the operation of the Business other than increases in the ordinary
course of business consistent with past practice in the compensation payable to
those employees of the Business earning less than $50,000 per annum each; or
institute, adopt or amend (or commit to institute, adopt or amend) any
compensation or benefit plan, policy, program or arrangement or collective
bargaining agreement applicable to any such employee;
(iii) not sell, assign, voluntarily encumber, grant a Lien on or
license with respect to, or dispose of, any of the Assets having a fair market
value of at least $50,000 individually or $100,000 in the aggregate, or incur
any liabilities or obligations (including, without limitation, liabilities with
respect to capital leases or guarantees thereof) in excess of $100,000
individually or in the aggregate, except for sales and dispositions made or
liabilities incurred, including the creation of purchase money security
interests, in the ordinary course of business consistent with past practice;
(iv) take any action inconsistent with, the representations and
warranties of Seller hereunder or that would cause any of the representations
and warranties of
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Seller hereunder to become untrue in any material respect; and
(v) not make, give or grant any bid or proposal, or any customer
option relating to contracts in the Backlog, involving an amount in excess of
$250,000 (or amend, supplement or terminate any existing bid or proposal, or any
existing customer option relating to contracts in the Backlog, involving an
amount in excess of $250,000), in each case without the prior approval of Buyer
(which approval shall not be unreasonably withheld or delayed).
(c) Access and Information. (i) Prior to and after the Closing,
Seller shall (and shall cause its accountants, counsel, consultants, employees
and agents to) give Buyer and its respective accountants, counsel, consultants,
employees and agents, reasonable access during normal 10 business hours to, and
furnish them with all documents, records, work papers and information with
respect to, all properties, assets, books, contracts, commitments, reports and
records relating to the Business, as Buyer shall from time to time reasonably
request. In addition, Seller shall permit Buyer, and its accountants, counsel,
consultants, employees and agents, reasonable access to such personnel of Seller
during normal business hours as may be necessary to Buyer in its review of the
properties, assets and business affairs of the Business and the above-mentioned
documents, records and information. Buyer and Buyer's agents shall have the
right, upon giving reasonable advance notice to enter upon and inspect the
Leased Real Property, including physical inspection of the surface and
sub-surface land to install such soil borings and/or monitoring wells as Buyer,
in its reasonable judgment may deem appropriate, and all improvements and the
major components thereof, including heating, plumbing, air conditioning,
electrical equipment and wiring and roof. Buyer shall indemnify and hold Seller
harmless from and against any and all costs and liabilities resulting from the
negligence or willful misconduct of any third party engaged by Buyer to perform
such inspections, and Buyer shall return the Leased Real Property to Seller in
substantially the same condition as before such inspections. Inspections shall
be conducted during times reasonably convenient to Seller and the Business.
Buyer shall promptly provide Seller with a copy of any report prepared in
connection with the installation of soil borings and monitoring wells at the
Leased Real Property.
(ii) Buyer shall remain bound by the terms of the existing
Confidentiality Agreement with Seller, dated September 22, 1997 (the
"Confidentiality Agreement"), except that from and after the Closing: (A) the
terms "Evaluation Material" and "Notes", as defined and used in the
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Confidentiality Agreement, shall no longer include information concerning the
Business or the properties of the MN Division; (B) clause (d) of the second
paragraph of the Confidentiality Agreement shall cease to have any further force
and effect insofar as the provisions thereof relate to the MN Division or the
Business; and (C) the seventh and eighth paragraphs of the Confidentiality
Agreement shall cease to have any further force and effect insofar as the
provisions thereof relate to the MN Division or the Business.
(d) Further Actions.
(i) Seller agrees to use commercially reasonable efforts to take
all actions and to do all things necessary, proper or advisable to consummate
the transactions contemplated hereby by the Closing Date.
(ii) Seller, as promptly as practicable, shall file or supply, or
cause to be filed or supplied, all applications, notifications and information
required to be filed or supplied by Seller pursuant to Applicable Law in
connection with the Agreement, the sale and transfer of the Assets pursuant to
the Agreement and the consummation of the other transactions contemplated
hereby, including but not limited to filings pursuant to the HSR Act and the
Exon-Florio Amendment to the Defense Production Act of 1950.
(iii) Seller, as promptly as practicable, shall use all
reasonable efforts to obtain, or cause to be obtained, all Consents (including,
without limitation, all Governmental Approvals and any Consents required under
any Contract) necessary to be obtained by it in order to consummate the sale and
transfer of the Assets pursuant to the Agreement and the consummation of the
other transactions contemplated hereby.
(iv) Seller shall coordinate and cooperate with Buyer in
exchanging such information and supplying such assistance as may be reasonably
requested by Buyer in connection with the filings and other actions contemplated
by Section 5.2.
(e) Further Assurances. Following the Closing, Seller shall from time
to time, execute and deliver such additional instruments, documents, conveyances
or assurances and take such other actions as shall be necessary, or otherwise
reasonably requested by Buyer, to confirm and assure the rights and obligations
provided for in this Agreement and render effective the consummation of the
transactions contemplated hereby. Seller until the Closing shall maintain in
force in respect of the Business the existing insurance covering the Business,
subject to normal
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variations required by ordinary operations of the Business. Seller shall
cooperate with Buyer in order to afford Buyer the benefit of all insurance
policies covering the Business for periods prior to the Closing to the extent
that the claims thereunder relate to any of the Assets or the Assumed
Liabilities.
(f) Noncompete. Seller will not and will cause its subsidiaries and
operating units and Affiliates (collectively the "Restricted Parties" and
individually, a "Restricted Party"), not to, for a period of thirty (30) months
following the Closing (the "Non-Competition Period"), manufacture or sell
products or services which are, or otherwise engage in any commercial activity
which is, competitive to the Primary Activities, except that these provisions
shall not preclude (i) a Restricted Party from manufacturing or selling products
or services which the Microwave Data Systems Division of Seller or the Microwave
Radio Communications Division of Seller currently manufactures or sells, or (ii)
the bona fide sale, whether by merger or otherwise, of all or substantially all
of the properties and assets of Seller (in one transaction or a series of
related transactions) to a Person that is not an Affiliate of Seller that
manufactures or sells products competitive to the Primary Activities or restrict
the activities of any such acquiring Person after the consummation of such sale
(other than any such sale in which the stockholders of Seller immediately before
the transaction or series of related transactions possess immediately thereafter
50% or more of the voting power of Seller or the acquiring Person or any parent
entity of either). "Primary Activities" shall mean the manufacture or sale of
licensed, point-to-point radio products operating at the following RF
frequencies and data speeds: 2 Ghz at 6 Mbps or higher, and 6 Ghz and above at 3
Mbps or higher, in markets related to cellular/PCS cell site connection, PCS
relocation of public safety networks and terrestrial backbone connection for
public and private networks (internationally, domestically and to governmental
entities) that do not include distance learning, multimedia and video
programming contribution or distribution feeds.
During the Non-Competition Period, Seller will not, and will cause its
Affiliates not to, (i) directly or indirectly, induce or solicit, or aid or
assist any Person to induce or solicit, any employees, salespersons, agents,
consultants, distributors, representatives, advisors, customers or suppliers of
the Business to terminate, curtail or otherwise limit their employment by or
business relationship with the Business, or (ii) license, assign or otherwise
grant any interest in the Name or Logo "California Microwave" (alone or in any
combination of words, or any
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combination, variation or derivation of such Name or Logo), for use by any
Person in connection with the manufacturing, marketing, sale or provision of any
products or services which are competitive to the Primary Activities.
(g) No Solicitation. From the date hereof to the Closing Date, Seller
shall cause its employees, directors, agents and Affiliates to immediately
suspend any existing negotiations or discussions relating to any sale, joint
venture or other transfer of actual or beneficial ownership of the MN Division,
its operations or any of its assets associated therewith (other than inventory
in the ordinary course of business) (collectively a "Transaction") and Seller
shall not, and shall cause its employees, directors, agents and Affiliates to
not, (a) solicit any proposals or offers relating to a Transaction, or (b)
negotiate or discuss with any third party concerning any proposal or offer for a
Transaction.
(h) Post-Closing Confidentiality. From and after the Closing, Seller
will, and will cause its Affiliates to, hold in strict confidence, and will not
use to the detriment of Buyer or any of its Affiliates, all information with
respect to the Business. Notwithstanding the foregoing, Seller may disclose such
information (i) if compelled to disclose the same by judicial or administrative
process or by other requirements of law, (ii) if the same hereafter is in the
public domain through no fault of Seller, or (iii) if the same is later acquired
by Seller from another source and Seller is not aware that such source is under
an obligation to another Person to keep such information confidential.
(i) Mail; Payments. Seller authorizes and empowers Buyer from and
after the Closing Date to receive and open all mail and other communications
received by Buyer and to act with respect to such communications in such manner
as Buyer may elect if such communications relate to the Business other than the
Excluded Assets or Excluded Liabilities, or, if such communications do not
relate to the Business or relate to the Excluded Assets or Excluded Liabilities,
to forward the same promptly to Seller. Seller and Buyer shall promptly deliver
to the other any cash, checks or other instruments of payment to which the other
is entitled and shall hold the same in trust for the other until such delivery.
(j) Performance of Contracts. With respect to each Contract,
Governmental Approval, Lease and Intellectual Property License, Seller shall
duly perform and comply with all agreements and conditions required thereby to
be performed or complied with by it prior to or on the Closing Date.
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(k) On-Site Buyer Representative. From the date hereof to the Closing
Date, Seller shall (and shall cause its accountants, counsel, consultants,
employees and agents to) give one or more of Buyer's employees the right to stay
at the facilities of the Business during normal business hours and to observe
the operations of the Business.
(l) Seller Foreign Subsidiaries. With respect to the Assets (and the
Assumed Liabilities relating to such Assets) that are held by a Seller Foreign
Subsidiary, at the election of Buyer in its sole discretion, at the Closing
either (i) Seller shall transfer or cause such Seller Foreign Subsidiary to
transfer such Assets to Buyer or to a foreign affiliate of Buyer as part of and
in connection with the transfer of the Assets contemplated by Section 1.1 and
without further consideration, or (ii) Seller shall transfer at the Closing
directly to Buyer as part of and in connection with the Assets contemplated by
Section 1.1 and without further consideration all the stock of or other equity
interests in such Seller Foreign Subsidiary. Buyer agrees that it will make the
election referred to in this Section within 25 days after the date hereof.
(m) Certain Environmental and Safety Matters. Promptly after the date
hereof, Seller shall use commercially reasonable efforts to implement the
environmental, safety and health matters described in Schedule 5.1(m) attached
hereto prior to the Closing. Promptly after the Closing and upon presentation of
invoices, Buyer shall reimburse Seller for 50% of the reasonable out-of-pocket
expenditures made by Seller to non-Affiliates of Seller prior to the Closing in
connection with the implementation of such matters.
5.2 Covenants of Buyer.
(a) Public Announcements. Except as required by Applicable Law (in
which case the nature of the announcement shall be described to the Seller prior
to dissemination to the public), Buyer shall not, and shall not permit its
Affiliates to, make any public announcement in respect of this Agreement or the
transactions contemplated hereby without the prior written consent of Seller.
(b) Further Actions.
(i) Buyer agrees to use commercially reasonable efforts to take
all actions and to do all things necessary, proper or advisable to consummate
the transactions contemplated hereby by the Closing Date.
(ii) Buyer shall, as promptly as practicable, file or supply, or
cause to be filed or
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supplied, all applications, notifications and information required to be filed
or supplied by Buyer pursuant to Applicable Law in connection with this
Agreement, Buyer's acquisition of the Assets pursuant to this Agreement and the
consummation of the other transactions contemplated thereby, including but not
limited to filings pursuant to the HSR Act and the Exon-Florio Amendment to the
Defense Production Act of 1950.
(iii) Buyer shall coordinate and cooperate with Seller in
exchanging such information and supplying such reasonable assistance as may be
reasonably requested by Seller in connection with the filings and other actions
contemplated by Section 5.1.
(c) Further Assurances. Following the Closing, Buyer shall, from time
to time, execute and deliver such additional instruments, documents, conveyances
or assurances and take such other actions as shall be necessary, or otherwise
reasonably requested by Seller, to confirm and assure the rights and obligations
provided for in this Agreement and render effective the consummation of the
transactions contemplated hereby.
(d) Use of Business Names by Buyer.
(i) Buyer acknowledges that Seller has the absolute and exclusive
proprietary right to all names, marks, trade names, trademarks, service names
and service marks (collectively, "Names") incorporating "California Microwave"
or any similar Name and to all corporate symbols or logos (collectively,
"Logos") incorporating California Microwave or any similar Name. All rights of
Seller and its respective affiliates to which and the goodwill represented
thereby and pertaining thereto are being retained by Seller. Buyer agrees that
it will not, and will cause the Business not to, use the Name California
Microwave or any similar Name or any Logo incorporating such Name or any similar
Name in any manner, including in connection with the sale of any products or
services or otherwise in the conduct of the business, except as expressly
permitted by clause (ii) of this Section 5.2(d) or as permitted by the
Cross-License Agreement.
(ii) For a period of six months from the Closing Date (the
"Window Period"), Seller shall and hereby irrevocably grants, effective as of
the Closing Date, on a fully-paid, royalty-free basis, the Buyer the right to
use the California Microwave Logo and the California Microwave Name in
connection with the operation of the Business as currently conducted including,
during the Window Period, to (A) use any molds or castings included in the
equipment or
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machinery included in the Assets despite the appearance thereon and on the
products manufactured therewith of the Name California Microwave or the
California Microwave Logo, (B) market and sell all such products produced by the
Business, and (C) use any other assets on hand included in the Assets,
including, without limitation, any catalogs, invoices, packaging material or
stationery, bearing the California Microwave Name or California Microwave Logo.
Immediately upon the expiration of the Window Period, Buyer shall cease to use
in any manner the Name California Microwave or the California Microwave Logo
incorporating such Name and remove or obliterate such Name or the California
Microwave Logo from any molds, castings, products or other assets and clearly
and prominently mark the new name of the Business thereon; provided, however,
that, notwithstanding the foregoing, Buyer shall continue to have the right
following the expiration of the Window Period, on a fully-paid, royalty-free
basis, to market and sell all products having thereon the Name California
Microwave or the California Microwave Logo incorporating such Name that (i) were
manufactured during the Window Period in the ordinary course of business, or
(ii) were manufactured by the Business prior to the Closing, it being the intent
of the Buyer, however, to phase out the use of the Name California Microwave and
the California Microwave Logo incorporating such Name as quickly as possible
after the Closing. At all times following the Closing, Buyer shall indicate that
neither Buyer nor the Business are affiliated with Seller or any of its
affiliates.
(e) Substitute Letters of Credit and Bonds. Buyer shall use
commercially reasonable efforts to furnish as of the Closing or as soon as
practicable thereafter, Buyer's own letters of credit or performance or surety
bonds in substitution for the letters of credit and bonds referred to in
Schedule 5.2(e) attached hereto and agrees to reimburse Seller for any
out-of-pocket bank fees or charges incurred by Seller by reason of any of the
same remaining outstanding from and after 30 days after the Closing Date.
(f) Reimbursement of Certain Severance Obligations. Schedule 5.2(f)
lists three severance agreements heretofore entered into between Seller and each
of William Montgomery, James Gordon and Richard Beeber (each an "Executive"),
respectively (each a "Severance Agreement"). If (i) an Executive becomes
employed by Buyer as of the Closing Date as a Transferred Employee, (ii) there
shall occur thereafter a termination by such Executive of his employment with
Buyer for Good Reason (as defined below) within one year after the Closing Date,
and (iii) as a result of the termination of employment of the type described in
clause (ii) above, Seller shall be obligated to make any cash
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payment to such Executive pursuant to the provisions of the Severance Agreement
with such Executive, then Buyer shall reimburse Seller for any such cash payment
it so makes to such Executive, such reimbursement to occur promptly upon receipt
by Buyer of evidence of the making of such payment; provided, however, that
Seller shall obtain Buyer's consent prior to making any such payment to such
Executive (which consent will not be unreasonably withheld or delayed); provided
further, however, that the reimbursement obligation of Buyer to Seller under
this Section 5.2(f) with respect to any Executive shall not in any event exceed
the amount that would have been payable to such Executive under his agreement
that is listed on Schedule 2.4(a) in the event of an involuntary termination by
Buyer without cause of the employment of such Executive after the Closing (and
which amount, had it been payable, would have constituted an Assumed Liability
under Section 2.4(a)); provided further, however, Buyer shall have no
reimbursement obligation to Seller under this Section 5.2(f) if Buyer otherwise
is obligated to make a payment to the Executive under his agreement listed on
Schedule 2.4(a) pursuant to Section 2.4(a).
As used herein, "Good Reason" means the occurrence of any of the following:
(x) the assignment to the Executive in question of duties inconsistent with, or
a substantial alteration in the nature or status of, such Executive's
responsibilities with respect to the Business at the MN Division immediately
before the Closing; (y) a reduction in the Employee's base salary or in the
benefits that Buyer is required to provide such Executive pursuant to Section
7.2; or (z) such Executive's relocation to a work site requiring an increase in
one-way commute from such Executive's residence of more than 35 miles.
(g) Factored Accounts Receivable. Buyer 10 shall use commercially
reasonable efforts to collect the accounts receivable that were sold by Seller
to ABN AMRO N.V. pursuant to a Master Purchase Agreement, dated June 24, 1996,
as amended on December 31, 1996, between Seller and ABN AMRO N.V. and promptly
remit any of such collections to Seller.
(h) Shareholders' Meetings. Buyer shall call and hold a meeting of its
shareholders as promptly as practicable for the purpose of voting upon the
approval of the transactions contemplated by this Agreement.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Obligations of Each Party. The obligations of the parties
to consummate the transactions contemplated hereby shall be subject to the
fulfillment on or prior to the Closing Date of the following conditions:
(a) HSR Act and Exon-Florio. In respect of the notifications of Buyer
and Seller pursuant to the HSR Act, the applicable waiting period and any
extensions thereof shall have expired or been terminated without the receipt of
any objection from any Governmental Authority. A notice of determination not to
investigate shall have been given under the Exon-Florio Amendment to the Defense
Production Act of 1950.
(b) No Injunction, etc. Consummation of the transactions contemplated
hereby shall not have been restrained, enjoined or otherwise prohibited by any
Applicable Law, including any order, injunction, decree or judgment of any court
or other Governmental Authority. No court or other Governmental Authority shall
have determined that any Applicable Law makes illegal the consummation of the
transactions contemplated hereby, and no proceeding with respect to the
application of any such Applicable Law to such effect shall be pending.
(c) Supply and License Agreements. Buyer and Seller shall have entered
into the Cross-License Agreement (substantially in the form of Exhibit A). Buyer
and Seller shall have entered into a supply agreement with respect to existing
supply arrangements currently in effect between the MN Division and the
Microwave Radio Communications Broadband Division of Seller (it being understood
that each of Seller and Buyer shall use commercially reasonable efforts to
negotiate and agree upon the terms and conditions of such supply agreement from
and after the date hereof until the Closing).
6.2 Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by Buyer) on or prior to the Closing Date of the
following additional conditions:
(a) Representations, Performance. Each of the representations and
warranties of Seller contained in this Agreement that is 10 qualified as to
materiality shall be true and correct and each such representation and warranty
that is not so qualified shall be true and correct in all material respects in
each case on the date hereof and at and
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as of the Closing Date as though made on and as of the Closing Date. Seller
shall have duly performed and complied in all material respects with all
agreements and conditions required by the Agreement to be performed or complied
with by it prior to or on the Closing Date. Seller shall have delivered to Buyer
a certificate, dated the Closing Date and signed by its duly authorized officer,
to the foregoing effect.
(b) No Material Adverse Change. Since the date hereof, (i) there shall
not have occurred any material adverse change in the financial condition,
results of operations or Assets of the Business, except for the results shown
and changes forecast in Schedule 3.7(a) and losses for the quarter ending June
30, 1998 not in excess of the negative contribution shown on Schedule 3.7(a),
and other than changes in the MN Division's intercompany account with CMI
corporate, which changes represent (x) the results of operations of the MN
Division, (y) the cash advanced to the MN Division by CMI corporate or repaid by
the MN Division to CMI corporate, and (z) certain allocations between CMI
corporate and the MN Division, which allocations shall have been made in the
ordinary course of business consistent in type and amount with past practice,
and (ii) there shall not have occurred, in the aggregate, any change in the
ETC's and EAC's of the Business' Contracts such as to cause a material adverse
change in its financial quarterly contribution.
(c) Consents. Seller shall have obtained and shall have delivered to
Buyer copies of (i) all Governmental Approvals required to be obtained by Seller
in connection with the execution and delivery of the Agreement and the
consummation of the transactions contemplated hereby, and (ii) all Consents
(including, without limitation, all Consents required under any Contract)
necessary to be obtained in order to consummate the sale and transfer of the
Assets pursuant to this Agreement and the consummation of the other transactions
contemplated hereby and listed on Schedule 6.2(c). Buyer shall have obtained the
Consents listed on Schedule 4.2.
(d) Corporate Proceedings. All corporate and other proceedings of
Seller in connection with this Agreement and the transactions contemplated
hereby, and all documents and instruments incident thereto, shall be reasonably
satisfactory in substance and form to Buyer and its counsel, and Buyer and its
counsel shall have received all such documents and instruments, or copies
thereof, certified if requested, as may be reasonably requested.
(e) Transfer Documents. Seller shall have delivered to Buyer at the
Closing all documents, certificates
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and agreements necessary to transfer to Buyer title to the Assets, free and
clear of any and all Liens thereon, other than Permitted Liens, including
without limitation:
(i) a bill of sale, assignment and general conveyance, in form
and substance reasonably satisfactory to Buyer, dated the Closing Date, with
respect to the Assets;
(ii) assignments of all Contracts, Intellectual Property and any
other agreements and instruments constituting Assets, dated the Closing Date,
assigning to Buyer all of Seller's right, title and interest therein and
thereto;
(iii) an assignment of lease, dated as of the Closing Date, with
respect to each Lease; and
(iv) certificates of title to all motor vehicles included in the
Assets to be transferred to Buyer hereunder, duly endorsed for transfer to Buyer
as of the Closing Date.
(f) Environmental Reports. Buyer at its own expense shall have
received from an environmental consulting firm of its choice, an environmental
site assessment report and analytical report covering the Leased Real Property
(including analyses of samples, soil and groundwater taken from all areas of the
Leased Real Property as may be deemed appropriate by such consulting firm),
which reports shall be in form, scope and substance reasonably satisfactory to
Buyer. In addition, Buyer shall be reasonably satisfied with the results of its
due diligence investigation of environmental matters in respect of the Leased
Real Property.
6.3 Conditions to Obligations of Seller. The obligation of Seller to
consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by Seller), on or prior to the Closing Date, of the
following additional conditions:
(a) Representations, Performance, etc. Each of the representations and
warranties of Buyer contained in this Agreement that is qualified as to
materiality shall be true and correct and each such representation and warranty
that is not so qualified shall be true and correct in all material respects in
each case on the date hereof and at and as of the Closing Date as though made on
and as of the Closing Date. Buyer shall have duly performed and complied in all
material respects with all agreements and conditions required by this Agreement
to be performed or complied with by Buyer prior to or on the Closing Date. Buyer
shall have
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delivered to Seller a certificate, dated the Closing Date and signed by its duly
authorized officers, to the foregoing effect.
(b) Assumption Agreement. Seller shall have received from Buyer an
Assumption Agreement, in substance and form satisfactory to Seller, under which
Buyer shall have assumed the Assumed Liabilities.
(c) Corporate Proceedings. All corporate proceedings of Buyer in
connection with this Agreement and the transactions contemplated hereby, and all
documents and instruments incident thereto, shall be reasonably satisfactory in
substance and form to Seller, and its counsel, and Seller and its counsel shall
have received all such documents and instruments, or copies thereof, certified
if requested, as may be reasonably requested.
(d) Consents and Approvals. Seller shall have obtained all
Governmental Approvals necessary to consummate the transactions contemplated
hereby.
ARTICLE VII
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
7.1 Employment of Seller's Employees. Buyer intends to offer employment,
effective as of the Closing Date, to those employees listed on Schedule 7.1
attached hereto and other employees who are hired from the date hereof through
the Closing Date in the ordinary course of business, consistent with past
practices, in each case who are employed by Seller on the Closing Date in the MN
Division primarily in the operation of the Business, at then current wage or
salary levels; provided, however, that Seller shall not, from the date hereof
until the Closing, hire any such employee with an annual compensation of $50,000
or more without the prior consent of Buyer. Those employees who accept such
offers of employment and become employees of Buyer shall be referred to herein
as the "Transferred Employees". Effective as of the Closing Date, Buyer shall
assume the liability of Seller in respect of the Transferred Employees for
accrued but unpaid salaries, wages, vacation and sick pay and 1998 cash
incentive compensation, but only to the extent such liability is accrued as a
liability on the Final Closing Statement of Net Assets. Buyer shall not have any
liability, obligation or commitment with respect to any employee of Seller or
Employee Benefit Plan or any claim thereof or related thereto except to the
extent expressly provided in this Article VII with respect to Transferred
Employees and except as provided in Section 2.4(a) and Section 5.2(f).
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7.2 Welfare and Fringe Benefit Plans. Following the Closing Date and
through December 31, 1998, Buyer shall provide Transferred Employees with life
insurance, medical coverage and other employee welfare benefit plans, programs,
policies or arrangements, on a basis comparable in the aggregate to those
provided Transferred Employees prior to the Closing Date; provided, however,
that Buyer shall not be required to provide Transferred Employees with any
stock-based plans relating to equity securities (or their equivalent, such as
phantom stock plans or SARs) or (except as provided in the next sentence) any
incentive bonus programs based on the achievement of financial targets; provided
further, however, that if any Transferred Employee becomes entitled to a payment
under an agreement listed in Schedule 2.4(a) or under a Severance Agreement,
then Buyer shall not be required to provide such Transferred Employee with any
other severance payment or benefit. For the period following the Closing Date
through December 31, 1998, Buyer will provide or establish a cash incentive
bonus program(s) based on the achievement of financial targets established by
Buyer for such period, to those Transferred Employees who currently are eligible
for cash incentive bonus program(s) of Seller based on the achievement of
financial targets, the potential of which cash incentive bonus program(s) of
Buyer shall be comparable in the aggregate to such cash incentive bonus
program(s) of Seller.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by the written agreement of Buyer and Seller;
(b) by either Seller or Buyer by written notice to the other party if
the transactions contemplated hereby shall not have been consummated pursuant
hereto by 5:00 p.m. California time on April 30, 1998, unless such date shall be
extended by the mutual written consent of Seller and Buyer;
(c) by Buyer by written notice to Seller if (i) the representations
and warranties of Seller shall not have been true and correct in all material
respects as of the date when made or (ii) if any of the conditions set forth in
Section 6.1 or 6.2 shall not have been, or if it becomes apparent that any of
such conditions will not be, fulfilled by 5:00 p.m. California time on April 30,
1998, unless such failure shall be due to the failure of Buyer to perform or
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comply with any of the covenants, agreements or conditions hereof to be
performed or complied with by it prior to the Closing; or
(d) by Seller by written notice to Buyer if (i) the representations
and warranties of Buyer shall not have been true and correct in all material
respects as of the date when made or (ii) if any of the conditions set forth in
Section 6.1 or 6.3 shall not have been, or if it becomes apparent that any of
such conditions will not be, fulfilled by 5:00 p.m. California time on April 30,
1998, unless such failure shall be due to the failure of Seller to perform or
comply with any of the covenants, agreements or conditions hereof to be
performed or complied with by it prior to the Closing.
8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to the provisions of Section 8.1, this Agreement shall become
void and have no effect, without any liability to any Person in respect hereof
or of the transactions contemplated hereby on the part of any party hereto, or
any of its directors, officers, employees, agents, consultants, representatives,
advisers, stockholders or Affiliates, except as specified in Section 10.2 and
except for any liability resulting from such party's breach of this Agreement.
ARTICLE IX
INDEMNIFICATION
9.1 By Seller. Subject to the terms and conditions of this Article IX,
Seller covenants and agrees to defend, indemnify and hold harmless Buyer, its
officers, directors, employees, agents, advisers, representatives and Affiliates
(collectively, the "Buyer Indemnitees") from and against, and pay or reimburse
Buyer Indemnitees for, any and all claims, liabilities, obligations, losses,
fines, costs, proceedings, deficiencies or damages (whether absolute, accrued,
conditional or otherwise and whether or not resulting from third party claims),
including out-of-pocket expenses and reasonable attorneys' fees incurred in the
investigation or defense of any of the same or in asserting any of their
respective rights hereunder (collectively, "Losses"), resulting from or arising
out of:
(i) Any misrepresentation or breach of any warranty of Seller
contained in this Agreement; provided, however, that, for purposes of this
Article IX, in determining whether any such misrepresentation or breach
occurred, any dollar amount thresholds contained in any representation or
warranty herein shall be disregarded;
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provided further that any claim for indemnification by Buyer under this clause
(i) may be made no later than 18 months from and after the Closing Date,
excepting only that any claim for misrepresentation or breach of warranty under
Sections 3.6, 3.10(a), 3.18, 3.19 and 3.21 may be made no later than a date
thirty days from and after the expiration of the period of the applicable
statute of limitations;
(ii) any failure of Seller to perform any covenant or agreement made
or contained in this Agreement or fulfill any obligation in respect thereof;
(iii) any Excluded Liabilities;
(iv) any and all benefit liabilities in respect of employees except,
with respect to Transferred Employees, to the extent assumed by Buyer pursuant
to Article VII; and
(v) any product liability claim with respect to products manufactured
by Seller and sold prior to the Closing.
Seller shall not be required to indemnify Buyer Indemnitees with respect to
any claim for indemnification resulting from or arising out of matters described
in clauses (i) and (v) above pursuant to this Section unless and until the
aggregate amount of all claims against Seller exceeds $200,000 and then only to
the extent such aggregate amount exceeds $200,000. Claims thereafter may be
asserted regardless of amount. Seller's maximum liability to Buyer Indemnitees
under clauses (i) and (v) of this Section shall not exceed $17,850,000.
9.2 By Buyer. Subject to the terms and condition of this Article IX, Buyer
covenants and agrees to defend, indemnify and hold harmless Seller and its
officers, directors, employees, agents, advisers, representatives and Affiliates
(collectively, the "Seller Indemnitees") from and against, and pay or reimburse
Seller Indemnities for, any and all Losses resulting from or arising out of:
(i) any misrepresentation or breach of warranty of Buyer contained in
this Agreement; provided that any claim for indemnification by Seller under this
paragraph (i) may be made no later than 18 months from and after the Closing
Date;
(ii) any failure of Buyer to perform any covenant or agreement made or
contained in the Agreement or fulfill any other obligation in respect thereof;
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(iii) the Assumed Liabilities;
(iv) claims made on or drawings under any of the letters of credit or
performance or surety bonds referred to in Schedule 5.2(e) attached hereto;
(v) the use by Buyer of any Seller tradenames or trademarks after the
Closing Date other than as permitted or contemplated by Section 5.2(d) or by the
Cross-License Agreement; and
(vi) the operation of the Business by Buyer or Buyer's ownership,
operation or use of the Assets following the Closing Date except to the extent
that such Loss is the result of any action of Seller prior to the Closing.
Buyer shall not be required to indemnify Seller Indemnitees with respect to
any claim for indemnification resulting from or arising out of matters described
in clause (i) above pursuant to this Section unless and until the aggregate
amount of all claims against Buyer exceeds $200,000 and then only to the extent
such aggregate amount exceeds $200,000. Claims thereafter may be asserted
regardless of amount. Buyer's maximum liability to Seller Indemnitees under
clause (i) of this Section shall not exceed $17,850,000.
9.3 Adjustments to Indemnification Payments. Any payment made by Seller to
Buyer Indemnitees, on the one hand, or by Buyer to Seller Indemnitees, on the
other hand, pursuant to this Article IX in respect of any claim shall be net of
any insurance proceeds realized by and paid to the Indemnified Party in respect
of such claim. The Indemnified Party shall use its reasonable efforts to make
insurance claims relating to any claim for which it is seeking indemnification
pursuant to this Article IX; provided that the Indemnified Party shall not be
obligated to make such an insurance claim if the Indemnified Party in its
reasonable judgment believes that the cost of pursuing such an insurance claim
together with any corresponding increase in insurance premiums or other
chargebacks to the Indemnified Party, as the case may be, would exceed the value
of the claim for which the Indemnified Party is seeking indemnification.
9.4 Indemnification Procedures. In the case of any claim asserted by a
third party against a party entitled to indemnification under this Agreement
(the "Indemnified Party"), notice shall be given by the Indemnified Party to the
party required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and the Indemnified Party shall permit the
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Indemnifying Party (at the expense of such Indemnifying Party) to assume the
defense of any third party claim or any litigation with a third party resulting
therefrom, provided that (i) the counsel for the Indemnifying Party who shall
conduct the defense of such claim or litigation shall be reasonably satisfactory
to the Indemnified Party, (ii) the Indemnified Party may participate in such
defense at such Indemnified Party's expense, and (iii) the omission by any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its indemnification obligation under this Agreement except
and only to the extent that such Indemnifying Party is materially damaged as a
result of such failure to give notice. Except with the prior written consent of
the Indemnified Party, no Indemnifying Party, in the defense of any such claim
or litigation, shall consent to entry of any judgment or enter into any
settlement that provides for injunctive or other nonmonetary relief affecting
the Indemnified Party or that does not include as an unconditional term thereof
the giving by each claimant or plaintiff to such Indemnified Party of a release
from all liability with respect to such claim or litigation. In the event that
the Indemnified Party shall in good faith determine that the conduct of the
defense of any claim subject to indemnification hereunder or any proposed
settlement of any such claim by the Indemnifying Party might be expected to
affect adversely the Indemnified Party's Tax liability or the ability of Buyer
to conduct its business, or that the Indemnified Party may have available to it
one or more defenses or counterclaims that are inconsistent with one or more of
those that may be available to the Indemnifying Party in respect of such claim
or any litigation relating thereto, the Indemnified Party shall have the right
at all times to take over and assume control over the defense, settlement,
negotiations or litigation relating to any such claim at the sole cost of the
Indemnifying Party, provided that if the Indemnified Party does so take over and
assume control, the Indemnified Party shall not settle such claim or litigation
without the written consent of the Indemnifying Party, such consent not to be
unreasonably withheld. In the event that the Indemnifying Party does not accept
the defense of any matter as above provided, the Indemnified Party shall have
the full right to defend against any such claim or demand and shall be entitled
to settle or agree to pay in full such claim or demand. In any event, the
Indemnifying Party and the Indemnified Party shall cooperate in the defense of
any claim or litigation subject to this Article IX and the records of each shall
be available to the other with respect to such defense.
9.5 Expiration of Representations and Warranties, etc. All representations
and warranties contained in this Agreement shall survive the Closing for a
period of 18
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months; provided that the representations and warranties stated in Sections 3.6,
3.10(a), 3.19 and 3.21 shall survive the Closing for the applicable statute of
limitations.
9.6 Exclusive Remedy. The indemnifications provided for in this Article IX
shall be the sole and exclusive post-Closing remedies available to either party
against the other party for any claims under or based upon this Agreement.
9.7 Set-Off. If it is established pursuant to Article IX that an
indemnification payment is required to be made to Buyer, then Buyer shall be
entitled, in addition to any other right or remedy it may have, to set-off the
amount of the indemnification payment so established against any amounts due and
payable to Seller hereunder at the time any such indemnification payment is so
required to be made.
ARTICLE X
DEFINITIONS, MISCELLANEOUS
10.1 Definition of Certain Terms. The terms defined in this Section 10.1,
whenever used in this Agreement (including in the Schedules), shall have the
respective meanings indicated below for all purposes of this Agreement. All
references herein to a Section, Article or Schedule are to a Section, Article or
Schedule of or to this Agreement, unless otherwise indicated.
Affiliate: of a Person means a Person that directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, the Person. "Control" (including the terms "Controlled by" and
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management policies of a
person, whether through the ownership of voting securities, by contract or
credit arrangement, as trustee or executor, or otherwise.
Agreement: means this Asset Purchase Agreement (including the Exhibits and
the Schedules), as the same from time to time may be amended, supplemented or
waived.
Applicable Law: all applicable provisions of all (i) constitutions,
treaties, statutes, laws (including the common law), rules, regulations,
ordinances, codes or orders of any Governmental Authority, (ii) Governmental
Approvals and (iii) orders, decisions, injunctions, judgments, awards and
decrees of or agreements with any Governmental Authority.
Assets: has the meaning set forth in Section 1.1.
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Assumed Liabilities: has the meaning set forth in Section 2.4.
Backlog: has the meaning set forth in Section 3.24.
Book Amount: has the meaning set forth in Section 2.7(d).
Books and Records: all books and records, including manuals, price lists,
mailing lists, lists of customers, production data, sales and promotional
materials, purchasing materials, personnel records, manufacturing and quality
control records and procedures, research and development files, accounting
records, tax records and litigation files (regardless of the media in which
stored), in each case relating to or used in the Business.
Business: the business currently conducted by Seller through its MN
Division, as described in Recital A at the head of this Agreement.
Buyer: has the meaning set forth in the first paragraph of this Agreement.
Buyer Indemnitees: has the meaning set forth in Section 9.1.
Buyer's Arbitrator: has the meaning set forth in Section 10.6(c).
Cash Portion: has the meaning set forth in Section 2.2.
Closing: has the meaning set forth in Section 2.1.
Closing Date: has the meaning set forth in Section 2.1.
Closing Statement of Net Assets: has the meaning set forth in Section
2.7(c).
Code: the Internal Revenue Code of 1986, as amended.
Consent: any consent, approval, authorization, waiver, permit, grant,
franchise, concession, agreement, license, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to, any Person,
including but not limited to any Governmental Authority.
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Contract: has the meaning set forth in Section 3.11(a).
Cross-License Agreement: has the meaning set forth in Section 1.3(b).
December Balance Sheet: has the meaning set forth in Section 3.4.
Disputes: has the meaning set forth in Section 10.6(a).
Disputing Person: has the meaning set forth in Section 10.6(b).
$ or dollars: lawful money of the United States.
E&Y: has the meaning set forth in Section 2.7(c).
EAC's: has the meaning set forth in Section 2.7(c).
Employee Benefit Plans: has the meaning set forth in Section 3.21(a).
Environmental Laws: all Applicable Laws relating to the protection of the
environment, to human health and safety, or to any emission, discharge,
generation, processing, storage, holding, abatement, existence, Release,
threatened Release, arranging for the disposal or transportation of any
Hazardous Substances.
Environmental Liabilities and Costs: all Losses imposed by, under or
pursuant to Environmental Laws, or for damages (including without limitation,
personal injury, property damage, property diminution, medical monitoring or
fear of illness) allegedly resulting from exposure to hazardous or other
substances, including all fees, disbursements and expenses of counsel or
technical consultants.
ERISA: the Employee Retirement Income Security Act of 1974, as amended.
Estimated Closing Date Net Assets: has the meaning set forth in Section
2.7(a).
Estimated Closing Statement of Net Assets: has the meaning set forth in
Section 2.7(a).
ETC's: has the meaning set forth in Section 2.7(c).
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Excluded Assets: has the meaning set forth in Section 1.2.
Excluded Liabilities: has the meaning set forth in Section 2.5.
Executive: has the meaning set forth in Section 5.2(f).
Final Closing Statement of Net Assets: has the meaning set forth in Section
2.7(f).
Final Determination: has the meaning set forth in Section 10.6(e).
Financial Statements: has the meaning set forth in Section 3.4.
GAAP: generally accepted accounting principles as in effect in the United
States.
Good Reason: has the meaning set forth in Section 5.2(f).
Governmental Approval: any Consent of, with or to any Governmental
Authority.
Governmental Authority: any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including, without limitation, any government authority, agency, department,
board, commission or instrumentality of Israel, the United States, any State of
the United States or any political subdivision thereof, and any tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory organization.
Hazardous Substances: any substance that: (i) requires investigation,
removal or remediation under any Environmental Law, or is defined, listed or
identified as a "hazardous waste" or "hazardous substance" thereunder, or (ii)
is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is regulated by any
Governmental Authority or Environmental Law.
HSR Act: the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"include" and "including" shall be construed as if followed by the phrase
"without being limited to".
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Indemnified Party: has the meaning set forth in Section 9.4.
Indemnifying Party: has the meaning set forth in Section 9.4.
Intellectual Property: any and all United States and foreign: (a) patents
(including design patents, industrial designs and utility models) and patent
applications (including docketed patent disclosures awaiting filing, reissues,
divisions, continuations-in-part and extensions), patent disclosures awaiting
filing determination, inventions and improvements thereto; (b) trademarks,
service marks, trade names, trade dress, logos, business and product names,
slogans, and registrations and applications for registration thereof but
excluding the name "California Microwave"; (c) copyrights (including software)
and registrations thereof; (d) inventions, processes, designs, formulae, trade
secrets, know-how, industrial models, confidential and technical information,
manufacturing, engineering and technical drawings, product specifications and
confidential business information; (e) mask work and other semiconductor chip
rights and registrations thereof; (f) intellectual property rights similar to
any of the foregoing; and (g) copies and tangible embodiments thereof (in
whatever form or medium, including electronic media).
Intellectual Property Licenses: has the meaning set forth in Section 3.16.
Inventories: has the meaning set forth in Section 1.1(c).
IRS: the Internal Revenue Service.
June Balance Sheet: has the meaning set forth in Section 3.4.
Leased Real Property: means all space leased pursuant to the Leases.
Leases: means the real property leases, subleases, use agreements, licenses
and occupancy agreements pursuant to which Seller is the lessee, sublessee,
user, licensee or occupant related to the Business, other than real property
leases, subleases, licenses and occupancy agreements included in Excluded
Assets.
Lien: any mortgage, pledge, hypothecation, right of others, claim, security
interest, encumbrance, lease, sublease, license, occupancy agreement, adverse
claim or
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interest, easement, covenant, encroachment, burden, title defect, title
retention agreement, voting trust agreement, interest, equity, option, lien,
right of first refusal, charge or other restrictions or limitations.
Logos: has the meaning set forth in Section 5.2(d).
Losses: has the meaning set forth in Section 9.1.
Material Adverse Effect: any event, occurrence, fact, condition, change or
effect that is materially adverse to the business, operations, results of
operations, financial condition, properties, assets or liabilities of the
Business.
MNI: has the meaning set forth in Recital A at the beginning of this
Agreement.
MN Division: has the meaning set forth in Recital A at the beginning of
this Agreement.
MRC: has the meaning set forth in Recital A at the beginning of this
Agreement.
Names: has the meaning set forth in Section 5.2(d).
Neutral Auditor: has the meaning set forth in Section 2.7(f).
Non-Competition Period: has the meaning set forth in Section 5.1(f).
Non-Transferred Foreign Cash: has the meaning set forth in Section 2.7(g).
Notice of Arbitration: has the meaning set forth in Section 10.6(b).
Owned Intellectual Property: has the meaning set forth in Section 3.16.
Permitted Liens: (i) Liens reserved against in the December Balance Sheet,
to the extent so reserved, (ii) Liens for Taxes not yet due and payable or which
are being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on Seller's books in accordance
with GAAP, (iii) contract rights of third parties to Contracts, or (iv) Liens
that, individually and in the aggregate, do not and would not materially detract
from the value of any of the property or assets of the Business or materially
interfere with the use
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thereof as currently used or contemplated to be used or otherwise.
Person: any natural person, firm, partnership, association, corporation,
company, limited liability company, trust, business trust, Governmental
Authority or other entity.
Physical Count Amount: has the meaning set forth in Section 2.7(d).
Prime Rate: has the meaning set forth in Section 2.7(b).
Release: any releasing, disposing, discharging, injecting, spilling,
leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping,
dispersal, migration, transporting, placing and the like, including without
limitation, the moving of any materials through, into or upon, any land, soil,
surface water, ground water or air, or otherwise entering into the environment.
Resolution Period: has the meaning set forth in Section 2.7(e).
Seller: has the meaning set forth in the first paragraph of this Agreement.
Seller Indemnitees: has the meaning set forth in Section 9.2.
Seller Foreign Subsidiaries: Microwave Networks (Philippines), Inc., a
registered Philippine company; California Microwave S.A. de C.V., Inc., a
registered Mexican company; and Microwave Networks Australia Pty Ltd., a
registered Australian company.
Seller's Arbitrator: has the meaning set forth in Section 10.6(c).
Severance Agreement: has the meaning set forth in Section 5.2(f).
Shares: has the meaning set forth in Section 3.10(a).
Subsidiaries: each corporation or other Person in which a Person owns or
controls, directly or indirectly, capital stock or other equity interests
representing at least 50% of the outstanding voting stock or other equity
interests.
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Tax: any federal, state, provincial, local or foreign income, alternative,
minimum, accumulated earnings, personal holding company, franchise, capital
stock, net worth, capital, profits, windfall profits, gross receipts, value
added, sales, use, goods and services, excise, customs duties, transfer,
conveyance, mortgage, registration, stamp, documentary, recording, premium,
severance, environmental (including taxes under Section 59A of the Code), real
property, personal property, ad valorem, intangibles, rent, occupancy, license,
occupational, employment, unemployment insurance, social security, disability,
workers' compensation, payroll, health care, withholding, estimated or other
similar tax, duty or other governmental charge or assessment or deficiencies
thereof, and including any interest, penalties or additions to tax attributable
to the foregoing.
Tax Return: any return, report, declaration, form, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Transaction: has the meaning set forth in Section 5.1(g).
Transaction Expenses: has the meaning set forth in Section 10.2.
Transfer Taxes: has the meaning set forth in Section 10.8.
Transferred Employee: has the meaning set forth in Section 7.1.
Treasury Regulations: the regulations prescribed pursuant to the Code.
TTS: has the meaning set forth in Recital A at the beginning of this
Agreement.
Window Period: has the meaning set forth in Section 5.2(d)(ii).
10.2 Expenses. Except to the extent otherwise provided hereby, Seller, on
the one hand, and Buyer, on the other hand, shall bear their respective
expenses, costs and fees (including filing fees (if any) required in connection
with the HSR Act and the Exon-Florio Amendment to the Defense Production Act of
1950 and attorneys', auditors' and financing commitment fees) in connection with
the transactions contemplated hereby, including the preparation,
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execution and delivery of this Agreement and compliance herewith (the
"Transaction Expenses"), whether or not the transactions contemplated hereby
shall be consummated.
10.3 Severability. If any provision of this Agreement, including any
phrase, sentence, clause, Section or subsection is inoperative or unenforceable
for any reason, such circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to any extent whatsoever.
10.4 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or (c) sent by next-day or overnight mail or
delivery or (d) sent by facsimile transmission or telegram.
(i) if to Buyer, to
Tadiran Ltd.
29 Hamerkava Street
P.O.B. 150 Holon
Israel
Facsimile: (972)-3-5573289
Attention: Bosmat Chelouche, Esq.
with a copy to:
Whitman Breed Abbott & Morgan LLP
200 Park Avenue
New York, NY 10166
Facsimile: 212/351-3131
Attention: James P. Gerkis, Esq.
(ii) if to Seller, to
California Microwave, Inc.
1143 Borregas Avenue
Sunnyvale, California 94089
Attn: George L. Spillane
Facsimile: 408/743-3482
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with a copy to:
Richard W. Canady, Esq.
Howard, Rice, Nemerovski, Canady,
Falk & Rabkin
A Professional Corporation
Three Embarcadero Center, 7th Floor
San Francisco, California 94111
Facsimile: 415/399-3041
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications shall
be deemed to have been received (w) if by personal delivery on the day after
such delivery, (x) if by certified or registered mail, on the seventh business
day after the mailing thereof, (y) if by next-day or overnight mail or delivery,
on the day delivered, (z) if by facsimile or telegram, on the next day following
the day on which such facsimile or telegram was sent, provided that a copy is
also sent by certified or registered mail.
10.5 Miscellaneous.
(a) Headings. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
(b) Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
(c) Counterparts. This Agreement may be executed (including by
facsimile transmission) with counterpart signature pages or in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
(d) Governing Law, etc. This Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of New York without giving effect to the conflict of laws
rules thereof. Buyer and Seller hereby irrevocably submit to the jurisdiction of
the courts of the State of New York, and the Federal courts of the United States
of America located in the Southern District of New York solely in respect of the
interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this Agreement, and hereby waive, and agree not to
assert, as a defense in
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any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any of such
document may not be enforced in or by said courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a New York State or Federal court. Buyer
and Seller hereby consent to and grant any such court jurisdiction over the
person of such parties and over the subject matter of any such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 10.4, or in such other manner as
may be permitted by law, shall be valid and sufficient service thereof.
(e) Bulk Sales. Buyer and Seller hereby waive compliance by the other
with the provisions of the bulk sales laws of any jurisdiction. Seller shall
indemnify and hold harmless Buyer from and against any and all Losses resulting
from or arising out of any noncompliance or alleged noncompliance with such bulk
sales laws.
(f) Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns.
(g) Assignment. This Agreement shall not be assignable or otherwise
transferable by any party hereto without the prior written consent of the other
party hereto; provided, however, that Buyer may assign this Agreement to any of
its Subsidiaries (it being understood and agreed that no such assignment by
Buyer pursuant to this proviso shall relieve Buyer of any of its obligations
hereunder); provided further that from and after the Closing Buyer shall have
the right to assign its rights (but not its obligations) hereunder.
(h) No Third Party Beneficiaries. Except as provided in Article IX
with respect to indemnification of Indemnified Parties hereunder, nothing in
this Agreement shall confer any rights upon any person or entity other than the
parties hereto and their respective heirs, successors and permitted assigns.
(i) Amendment; Waivers, etc. No amendment, modification or discharge
of this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver
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only with respect to the specific matter described in such writing and shall in
no way impair the rights of the party granting such waiver in any other respect
or at any other time. Neither the waiver by any of the parties hereto of a
breach of or a default under any of the provisions of this Agreement, nor the
failure by any of the parties, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or privilege hereunder,
shall be construed as a waiver of any other breach or default of a similar
nature, or as a waiver of any of such provisions, rights or privileges
hereunder.
10.6 Arbitration Procedure.
(a) Buyer and Seller agree that the arbitration procedure set forth
below shall be the sole and exclusive method for resolving and remedying any and
all disputes regarding claims for money damages based upon, arising out of or in
any way connected with this Agreement or the transactions contemplated herein
(the "Disputes"). Nothing in this Section 10.6 shall prohibit a party hereto
from instituting litigation to enforce any Final Determination (as defined
below). The parties hereby agree and acknowledge that, except as otherwise
provided in this Section 10.6 or in the Commercial Arbitration Rules of the
American Arbitration Association as in effect from time to time, the arbitration
procedures and any Final Determination hereunder shall be governed by and shall
be enforced pursuant to the Uniform Arbitration Act as in effect in the State of
New York.
(b) In the event that any party asserts that there exists a Dispute,
such party shall deliver a written notice to each other party involved therein
specifying the nature of the asserted Dispute and requesting a meeting to
attempt to resolve the same. If no such resolution is reached within 45 days
after such delivery of such notice, the party delivering such notice of Dispute
(the "Disputing Person") may, within 75 days after delivery of such notice,
commence arbitration hereunder by delivering to each other party involved
therein a notice of arbitration (a "Notice of Arbitration") and by filing a copy
of such Notice of Arbitration with the New York City office of the American
Arbitration Association. Such Notice of Arbitration shall specify the matters as
to which arbitration is sought, the nature of any Dispute, the claims of each
party to the arbitration and the amount and nature of damages or other relief
sought to be recovered as a result of any alleged claim and any other matters
required by the Commercial Arbitration Rules of the American Arbitration
Association as in effect from time to time to be included therein.
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(c) Buyer and Seller each shall select one arbitrator expert in the
subject matter of the Dispute (the arbitrators so selected shall be referred to
herein as "Buyer's Arbitrator" and "Seller's Arbitrator," respectively). In the
event that either party fails to select an arbitrator as set forth herein within
30 days after the delivery of a Notice of Arbitration, then the matter shall be
resolved by the arbitrator selected by the other party. Seller's Arbitrator and
Buyer's Arbitrator shall select a third independent, neutral arbitrator expert
in the subject matter of the Dispute, and the three arbitrators so selected
shall resolve the Dispute according to the procedures set forth in this Section
10.6. If Seller's Arbitrator and Buyer's Arbitrator are unable to agree on a
third arbitrator within 20 days after their selection, Seller's Arbitrator and
Buyer's Arbitrator shall each prepare a list of three independent arbitrators.
Seller's Arbitrator and Buyer's Arbitrator shall each have the opportunity to
designate as objectionable and eliminate one arbitrator from the other
arbitrator's list within ten days after submission thereof, and the third
arbitrator shall then be selected by lot from the arbitrators remaining on the
lists submitted by Seller's Arbitrator and Buyer's Arbitrator.
(d) The arbitrators selected pursuant to Section 10.6(c) shall
determine the allocation of the costs and expenses of arbitration.
(e) The arbitration shall be conducted in New York City, under the
Commercial Arbitration Rules of the American Arbitration Association as in
effect from time to time, except as otherwise set forth herein or as modified by
the agreement of Buyer and Seller. The arbitrators shall conduct the arbitration
such that a final result, determination, finding, judgment and/or award (the
"Final Determination") is made or rendered as soon as practicable, but in no
event later than 120 days after the delivery of the Notice of Arbitration nor
later than ten days following completion of the arbitration. The Final
Determination shall be made in writing, shall state the basis for such
determination and shall be agreed upon and signed by the sole arbitrator or by
at least two of the three arbitrators (as the case may be). The Final
Determination shall be final and binding on all parties, and there shall be no
appeal from or reexamination of the Final Determination, except for fraud,
perjury, evident partiality or misconduct by an arbitrator prejudicing the
rights of any party and to correct manifest clerical errors.
(f) Buyer and Seller may enforce any Final Determination in any state
or federal court having jurisdiction over the Dispute. For the purpose of any
action
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or proceeding instituted with respect to any Final Determination, each party
hereto hereby irrevocably submits to the jurisdiction of such courts,
irrevocably consents to the service of process by registered mail or personal
service and hereby irrevocably waives, to the fullest extent permitted by law,
any objection which it may have or hereafter have as to personal jurisdiction,
the laying of the venue of any such action or jurisdiction, the laying of the
venue of any such action or proceeding brought in any such court and any claim
that any such action or proceeding brought in any court has been brought in an
inconvenient form.
10.7 Attorneys Fees. In the event any party hereto initiates any legal
action arising out of or in connection with this Agreement, the prevailing party
shall be entitled to recover from the other party all reasonable attorneys'
fees, expert witness fees and expenses incurred by the prevailing party in
connection therewith.
10.8 Liability for Transfer Taxes. Buyer and Seller shall each be
responsible for and pay in a timely manner 50% of all sales (including, without
limitation, bulk sales), use, value added, documentary, stamp, gross receipts,
registration, transfer, conveyance, excise, recording, license and other similar
Taxes and fees ("Transfer Taxes"), arising out of or in connection with or
attributable to the transactions effected pursuant to this Agreement. Each party
hereto shall prepare and timely file all Tax Returns required to be filed in
respect of Transfer Taxes (including, without limitation, all notices required
to be given with respect to bulk sales taxes) that are the primary
responsibility of such party under applicable law; provided, however, that such
party's preparation of any such Tax Returns shall be subject to the other
party's approval, which approval shall not be withheld or delayed unreasonably.
10.9 Notification of Certain Claims. From and after the Closing until the
first anniversary thereof, Seller shall use commercially reasonable efforts to
provide Buyer with prior notice of any claim or dispute or potential claim or
dispute between Seller or any Subsidiary of Seller and a Person that is
currently a supplier, customer, representative or employee of the Business or
was a supplier, customer, representative or employee of the Business at any time
during the last three years; provided, however, Seller shall have no liability
to Buyer for failure to give any such notice pursuant to this Section 10.9.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
TADIRAN LTD.
By:
------------------------------------
Name: Israel Zamir
Title: President
By:
------------------------------------
Name: Yossef ben Shalom
Title: Chief Financial Officer
CALIFORNIA MICROWAVE, INC.
By:
------------------------------------
Name:
Title:
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EXHIBIT A
CROSS-LICENSE AGREEMENT
CROSS-LICENSE AGREEMENT dated as of April __, 1998 (this "Agreement"),
between California Microwave, Inc. a Delaware corporation ("CMI"), and Tadiran
Microwave Networks, Inc., a Delaware corporation ("Buyer").
RECITALS
WHEREAS, Buyer, CMI and Tadiran Limited ("Tadiran") have entered into that
certain Asset Purchase Agreement dated as of March 1, 1998, as amended (the
"Purchase Agreement"), in connection with the sale and purchase of the Assets
(as defined below) of the MN Division of CMI (the "MN Division"), which sale and
purchase has closed or is closing effective as of the date hereof simultaneously
with the execution and delivery of this Agreement (the "Closing Date"); and
WHEREAS, effective as of the Closing Date the parties hereto currently own
or have licenses to use various intellectual property rights heretofore used
primarily (in some circumstances) and not primarily (in other circumstances) in
connection with the Business (as defined below) of the MN Division; and
WHEREAS, the parties hereto have determined that this Agreement is
appropriate in order to effectuate the purposes of the Purchase Agreement as
described therein, and in order to promote a clear understanding of their
respective intellectual property rights subsequent to the Closing Date;
NOW, THEREFORE, in consideration of the mutual agreements, undertakings and
covenants herein and therein, the sufficiency and receipt of which hereby are
acknowledged, the parties hereby agree as follows:
ARTICLE I. DEFINITIONS.
Section 1.01 General. As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Affiliate" shall have the meaning set forth in the Purchase Agreement.
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"Agreement" shall have the meaning specified in the first paragraph hereof.
"Assets" shall have the meaning set forth in the Purchase Agreement.
"Business" shall have the meaning set forth in the Purchase Agreement.
"Buyer Intellectual Property" shall have the meaning specified in Section
2.01.
"Closing" shall have the meaning set forth in the Purchase Agreement.
"Closing Date" shall have the meaning specified in the recitals to this
Agreement.
"CMI Intellectual Property" shall have the meaning specified in Section
2.02.
"Intellectual Property" shall have the meaning set forth in the Purchase
Agreement.
"MN Division" shall have the meaning specified in the recitals to this
Agreement.
"Notice" shall have the meaning specified in Section 9.03.
"Person" shall have the meaning set forth in the Purchase Agreement.
"Purchase Agreement" shall have the meaning specified in the recitals to
this Agreement.
"Term" shall have the meaning specified in Section 8.01.
ARTICLE II. OWNERSHIP OF INTELLECTUAL PROPERTY ASSETS.
Section 2.01. The parties agree that, as a result of the Closing under the
Purchase Agreement, Buyer will acquire and own all right, title and interest,
including the right to sue and collect past and future damages, in any
Intellectual Property which relates primarily to the Business (the "Buyer
Intellectual Property").
Section 2.02. The parties agree that CMI will continue to own all right,
title and interest, including the right to sue and collect past and future
damages, in any Intellectual Property which is being used as of the Closing Date
in the operation of the Business but does not
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constitute Intellectual Property that relates primarily to the Business (the
"CMI Intellectual Property").
Section 2.03. The confirmation of ownership of the Intellectual Property
rights provided for under Sections 2.01 and 2.02 is subject to all pre-existing
third party rights, obligations and restrictions as of the Closing Date.
ARTICLE III. INTELLECTUAL PROPERTY LICENSES.
Section 3.01. Buyer hereby grants as of the Closing Date to CMI a
non-assignable, worldwide, fully paid-up, royalty-free, non-exclusive license
for the duration of the Term, including the right to grant sublicenses (but such
sublicenses may be granted only to Affiliates of CMI, contractors for whom CMI
or any of its Affiliates is acting as a subcontractor (who will also have the
right to sublicense to end-user customers) and end-user customers of CMI or any
of its Affiliates), under the Buyer Intellectual Property, to manufacture, have
manufactured, use, offer to sell, and sell, lease, license or otherwise transfer
any and all methods, apparatus, processes, compositions and products, and offer
and provide any services, in each case in connection with all fields of activity
other than the fields of activity of the business of Buyer. Any sublicense
permitted hereunder shall not extend beyond the Term.
Section 3.02. CMI hereby grants as of the Closing Date to Buyer a
non-assignable, worldwide, fully paid-up, royalty-free, non-exclusive license
for the duration of the Term, including the right to grant sublicenses (but such
sublicenses may be granted only to Affiliates of Buyer, contractors for whom
Buyer or any of its Affiliates is acting as a subcontractor (who will also have
the right to sublicense to end-user customers) and end-user customers of Buyer
or any of its Affiliates), under the CMI Intellectual Property, to manufacture,
have manufactured, use, offer to sell, and sell, lease, license or otherwise
transfer any and all methods, apparatus, processes, compositions and products,
and offer and provide any services, in each case in connection with all fields
of activity other than the fields of activity of the business of CMI. Any
sublicense permitted hereunder shall not extend beyond the Term.
Section 3.03. The rights granted by the parties under Sections 3.01 and
3.02 are subject to all pre-existing third party rights, obligations and
restrictions as of the Closing Date.
Section 3.04. Each of the parties hereto understands and agrees that,
except as otherwise expressly provided, no party hereto is in this Agreement
making any representation or warranty whatsoever, including, without limitation,
as to title, value or legal sufficiency. The
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foregoing provisions of this Section shall not, however, limit, modify or impact
in any manner whatsoever any of the representations and warranties of CMI or
Buyer in the Purchase Agreement, all of which shall remain unaffected hereby.
Section 3.05. The rights granted by the parties under Sections 3.01 and
3.02 are limited to the Intellectual Property owned by the parties as of the
Closing Date (after giving effect to the Closing) and do not include any
intellectual property rights that are acquired or come into existence
thereafter.
Section 3.06. Except as may be specifically provided for in this Agreement
or the Purchase Agreement, the parties agree that no party shall be obligated to
provide any technical assistance, or to transfer any technical information or
documentation associated therewith, to any other party.
ARTICLE IV. UNDERTAKINGS.
Section 4.01. To the extent that the grants of Intellectual Property rights
and licenses under Article III herein would violate or be prohibited by any
agreement with a third party, and such Intellectual Property actually is used by
the grantee party, then the granting party undertakes to use reasonable efforts
to obtain the necessary consent(s) from such third party so as to be permitted
to make such grants. However, each party hereto understands and agrees that no
party hereto is in this Agreement representing or warranting in any way that the
obtaining of any consents or approvals, the execution and delivery of any
amendatory agreements and the making of any filings or applications possibly
contemplated by this Agreement will satisfy the provisions of any and all
applicable agreements or the requirements of any or all applicable laws or
judgments. The foregoing provisions of this Section shall not, however, limit,
modify or impact in any manner whatsoever any of the representations and
warranties of CMI or Buyer in the Purchase Agreement, all of which shall remain
unaffected hereby.
Section 4.02. To the extent a party or its Affiliates shall require
technical assistance in connection with the Intellectual Property licensed
hereunder, then that technical assistance may be provided (but shall not be
required to be provided), if at all, pursuant to a separate agreement entered
into by the parties pursuant to terms and conditions agreed to by the parties.
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ARTICLE V. CONFIDENTIALITY.
From and after the Closing Date, each party will, and will cause its
Affiliates to, hold in strict confidence, and will not use to the detriment of
the other party or any of such party's Affiliates, all information that is
licensed pursuant to this Agreement; provided, however, that either party may
disclose any of such information to third parties performing services on behalf
of the disclosing party who have a need to know such information in order to
perform such services and have agreed in writing to maintain the same
confidential. Also, each party may disclose such information to contractors or
end user customers of such party who have a need to know such information and
have agreed in writing to maintain the confidentiality of the same or, in the
case of any such disclosure to the U.S. government, if such party has taken all
reasonable steps to maintain the confidentiality of the same. Notwithstanding
the foregoing, either party may disclose such information (i) by judicial or
administrative process or by other requirements of law, (ii) if the same
hereafter is in the public domain through no fault of such party, or (iii) if
the same is later acquired by such party from another source and the other party
is not aware that such source is under an obligation to another Person to keep
such information confidential.
ARTICLE VI. THIRD PARTY INFRINGEMENT.
Section 6.01. If Buyer determines that a person or entity is infringing on
or unlawfully using CMI Intellectual Property, Buyer shall notify CMI. CMI, in
its sole discretion, may take all necessary action, including, without
limitation, filing suit and enjoining the alleged infringement, at CMI's sole
expense; and CMI, as a result thereof, shall retain all damages and other
compensation received as a result of taking such actions against such
infringement. Buyer shall not take any action in connection with such
infringement or unlawful use (including without limitation any action to settle
or compromise any such claim, action or proceeding).
Section 6.02. If CMI determines that a person or entity is infringing on or
unlawfully using Buyer Intellectual Property, CMI shall notify Buyer. Buyer, in
its sole discretion, may take all necessary action, including, without
limitation, filing suit and enjoining the alleged infringement, at Buyer's sole
expense; and Buyer, as a result thereof, shall retain all damages and other
compensation received as a result of taking such actions against such
infringement. CMI shall not take any action in connection with such infringement
or unlawful use (including without limitation any action to settle or compromise
any such claim, action or proceeding).
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ARTICLE VII. INDEMNITY.
Section 7.01. Buyer agrees to indemnify and hold CMI, its Affiliates and
their respective officers, directors, employees and agents, harmless from and
against any damages, liabilities, losses and expenses arising out of any claim
by any third party, including, without limitation, reasonable attorneys' fees
and amounts paid in settlement of any claim, of any kind or nature whatsoever,
which may be sustained or suffered as a result of any use by Buyer of CMI
Intellectual Property.
Section 7.02. CMI agrees to indemnify and hold Buyer, its Affiliates and
their respective officers, directors, employees and agents, harmless from and
against any damages, liabilities, losses and expenses arising out of any claim
by any third party, including, without limitation, reasonable attorneys' fees
and amounts paid in settlement of any claim, of any kind or nature whatsoever,
which may be sustained or suffered as a result of any use by CMI of Buyer
Intellectual Property.
ARTICLE VIII. TERM AND TERMINATION.
Section 8.01. This Agreement shall commence on the Closing Date and shall
continue for a period of one year thereafter unless sooner terminated as
provided herein (the "Term").
Section 8.02. This Agreement may be terminated by any party with respect to
the other party upon written notice to the other party if the other party fails
to perform or otherwise breaches in any material respect an obligation under
this Agreement; provided, however, that such party failing to perform or
otherwise breaching shall have 30 days from the date notice of intention to
terminate is received to cure the failure to perform or breach of an obligation.
Section 8.03. This Agreement shall terminate automatically without action
by either party if any party shall cease or threaten to cease paying its debts
when due in the ordinary course or to carry on its business, become insolvent,
propose a compromise or arrangement with its creditors or otherwise take
advantage of any law for the relief of debtors, a receiver is appointed for any
of the other party's assets or any step or proceeding is taken to have the other
party declared bankrupt or be liquidated, dissolved, wound up or reorganized.
Section 8.04. Termination under this Article VIII will be effected by
notice given by the terminating party to the other party, except with respect to
a situation described in Section 8.03 where no notice shall be required.
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Section 8.05. Any termination of this Agreement shall not affect any of the
rights of either party hereto which shall have arisen prior to such termination.
Section 8.06. Upon termination or expiration of this Agreement, (a) each
party's rights with respect to use of the other party's Intellectual Property in
any way shall be as if this Agreement had not been entered into, and (b) each
party shall cease using the other party's Intellectual Property immediately in
any way.
ARTICLE IX. MISCELLANEOUS.
Section 9.01. Entire Agreement. This Agreement, together with the Purchase
Agreement, constitutes the entire agreement and understanding between and among
the parties with respect to the subject matter hereof and shall supersede any
prior agreements and understandings among the parties with respect to such
subject matter.
Section 9.02. Counterparts. This Agreement may be executed with counterpart
signature pages or in one or more counterparts, all of which shall be one and
the same Agreement, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to all the parties.
Section 9.03. Notices. All notices, consents, requests, waivers or other
communications required or permitted under this Agreement (each a "Notice")
shall be in writing and shall be sufficiently given (a) if hand delivered or
sent by telecopy, (b) if sent by nationally recognized overnight courier, or (c)
if sent by registered or certified mail, postage prepaid, return receipt
requested, and in each case addressed as follows:
If to Buyer:
Tadiran Microwave Networks, Inc.
4000 Greenbriar
Stafford, Texas 77477
Attention: President
with a copy to:
c/o Tadiran Ltd.
29 Hamerkava Street
P.O.B. 150
Holon, Israel
Attention: Bosmat Chelouche, Esq.
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<PAGE> 76
and:
Whitman Breed Abbott & Morgan LLP
200 Park Avenue
New York, NY 10166
Attention: James P. Gerkis, Esq.
If to CMI:
California Microwave, Inc.
1143 Borregas Avenue
Sunnyvale, California 94089
Attn: George L. Spillane
with a copy to:
Richard W. Canady, Esq.
Howard, Rice, Nemerovski, Canady,
Falk & Rabkin
A Professional Corporation
Three Embarcadero Center, 7th Floor
San Francisco, California 94111
or such other address as shall be furnished by any of the parties in a Notice.
Any Notice shall be deemed effective upon receipt.
Section 9.04. Waivers. The failure of any party to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish the other party's right to demand strict performance thereafter of
that or any other provision hereof.
Section 9.05. Amendments. This Agreement may be amended, supplemented or
waived only by a subsequent writing signed by each of the parties.
Section 9.06. Assignment. This Agreement may not be assigned by any party
without the consent of the other parties.
Section 9.07. Successors and Assigns. All terms and conditions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the successors and permitted assigns of the parties.
Section 9.08. Third Party Beneficiaries. Except with respect to indemnified
parties referred to in Article VII, each party intends that this Agreement shall
not benefit or create any right or cause of action in or on behalf of any person
other than the parties hereto.
Section 9.09. Specific Performance. Each of the parties hereto acknowledges
that there is no adequate remedy
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<PAGE> 77
at law for failure by such parties to comply with the provisions of this
Agreement and that such failure would cause immediate harm that would not be
adequately compensable in damages, and therefore agree that in the event of a
breach or threatened breach of any provision of this Agreement by either party,
the other party, may, in addition to all other remedies, immediately obtain and
enforce injunctive relief prohibiting the breach or compelling specific
performance without the requirement of posting a bond or other security, in
addition to all other remedies available to the parties hereto under this
Agreement or otherwise.
Section 9.10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER.
Section 9.11. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and in no way be affected,
impaired or invalidated thereby.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
TADIRAN MICROWAVE NETWORKS, INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
CALIFORNIA MICROWAVE, INC.
By:
------------------------------------
Name:
Title:
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<PAGE> 1
AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT dated as of April 20, 1998 (this "Amendment"), among Tadiran
Limited, an Israeli corporation ("Tadiran"), Tadiran Microwave Networks, Inc., a
Delaware corporation ("TMN"), and California Microwave, Inc., a Delaware
corporation ("Seller"). Capitalized terms used herein, but not otherwise defined
herein, shall have the meanings ascribed to them in the Purchase Agreement (as
defined below).
R E C I T A L S
A. Tadiran and Seller have entered into and executed an Asset Purchase
Agreement dated as of March 1, 1998 (the "Purchase Agreement").
B. Section 10.5(g) of the Purchase Agreement permits Tadiran to assign its
rights under the Purchase Agreement to any of its Subsidiaries.
C. Tadiran wishes to assign all of its rights under the Purchase Agreement
to TMN and TMN wishes to accept and receive such rights from Tadiran.
D. The parties also desire to amend the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements, representations and warranties made herein and in the Purchase
Agreement, and of the mutual benefits to be derived hereby and thereby, the
parties agree that the Purchase Agreement shall be amended, and the same hereby
is amended, as follows:
1. Assignment and Assumption. Tadiran hereby conveys, bargains, transfers,
sets over and assigns to TMN, its successors and assigns, all of Tadiran's
rights under the Purchase Agreement, as amended hereby, including, without
limitation, the right to acquire the Assets. TMN hereby assumes and agrees to
perform all of Tadiran's covenants and agreements under the Purchase Agreement,
as amended hereby. For purposes of the Closing under the Purchase Agreement, as
amended hereby, and thereafter, TMN shall be substituted for Tadiran as the
"Buyer" thereunder.
2. Joint and Several Liability. Tadiran shall be jointly and severally
liable with TMN in respect of the covenants and agreements assumed by TMN
hereunder.
<PAGE> 2
3. Amendments to the Purchase Agreement.
(a) Recital A of the Purchase Agreement hereby is amended by adding
immediately after the words "unincorporated division" the following words: "and
the Seller Foreign Subsidiaries".
(b) Section 2.1 of the Purchase Agreement hereby is amended by deleting the
word "15th" and replacing it with the word "21st".
(c) Section 5.1 of the Purchase Agreement hereby is amended by adding a new
paragraph (n) at the end thereof as follows:
"(n) Seller Foreign Subsidiaries. For purposes of this Section 5.1 and
Section 6.2, through the Closing Date, the term Seller shall include, where
applicable, the Seller Foreign Subsidiaries."
(d) Clause (v) of Section 9.1 of the Purchase Agreement hereby is
amended by: (1) adding immediately after the word "Seller" the following
words: "or any of the Seller Foreign Subsidiaries"; and (2) adding at the
end thereof the following: "; "
(e) Section 9.1 of the Purchase Agreement hereby is amended by adding
new clauses (vi), (vii) and (viii) at the end thereof as follows:
"(vi) any debt, claim, liability, obligation or commitment of any
of the Seller Foreign Subsidiaries (including Losses resulting from or
arising out of the non-performance or non-compliance by any Seller
Foreign Subsidiary of any agreement or condition of any contract,
agreement, license, lease, Governmental Approval, commitment, order or
other instrument or arrangement to which it is a party or by which it
or any of its property is bound, which agreement or condition was
required thereby to be performed or complied with by such Seller
Foreign Subsidiary prior to or on the Closing Date), except to the
extent the same constitutes an Assumed Liability;
(vii) any termination of, or any acceleration of any of the
obligations or liabilities under, the Discretionary Grant Agreement,
dated January 3, 1995, between the Industry Research and Development
Board and Microwave Networks Australia Pty. Ltd., including any costs,
charges and expenses incurred in connection with a demand by the
Industry Research and Development Board that Microwave Networks
Australia Pty. Ltd. repay all or any portion of the grant monies that
have been provided to Microwave Networks Australia Pty. Ltd., which
termination or acceleration is
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<PAGE> 3
the result of the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby; and
(viii) any termination by California Microwave S.A. de C.V. (or
its successor), whether before or after the Closing, of the employment
of or any consulting or similar arrangement or agreement with Sr.
Fernando Vallarta Aguilar (including the agreement referred to in Item
No. 10 of Schedule 3.11(a))."
(f) Clause (vi) of Section 9.2 hereby is amended to read as follows:
"(vi) the operation of the Business by Buyer or Buyer's ownership,
operation or use of the Assets (including the assets of the Seller Foreign
Subsidiaries) following the Closing Date except to the extent such Loss is
the result of any action of Seller or any of the Seller Foreign
Subsidiaries prior to the Closing."
(g) The definition of "Business" contained in Section 10.1 of the Purchase
Agreement hereby is amended by adding immediately after the words "MN Division"
the words: "(including the Seller Foreign Subsidiaries)".
(h) The definition of "Seller Foreign Subsidiaries" in Section 10.1 hereby
is amended to read as follows:
"Seller Foreign Subsidiaries: Microwave Networks (Phils.), Inc., a
registered Philippine company; California Microwave S.A. de C.V., a
registered Mexican company; and Microwave Networks Australia Pty. Ltd., a
registered Australian company."
(i) Clause (i) of Section 10.4 of the Purchase Agreement hereby is amended
by: (1) adding immediately after the words "if to Buyer, to:" the following
words:
"Tadiran Microwave Networks, Inc.
4000 Greenbriar
Stafford, Texas 77477
Attention: President
Facsimile: 281/263-6413
with copies to:"
; and (2) deleting the words "with a copy to:" and replacing such deleted words
with the word "and".
(j) Section 2.3 of the Purchase Agreement hereby is amended by adding a new
paragraph at the end thereof as follows:
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<PAGE> 4
"An aggregate amount of $434,000 of the Cash Portion shall be
allocated to the purchase of the Shares included in the Assets as follows:
(a) $354,000 for the purchase of the capital stock of California Microwave
S.A. de C.V.; (b) $50,000 for the purchase of the capital stock of
California Microwave (Phils.), Inc.; and (c) $30,000 for the purchase of
the capital stock of Microwave Networks Australia Pty. Ltd."
(k) The first sentence of the fourth paragraph of Section 3.10(a) of the
Purchase Agreement hereby is amended to read as follows:
"The capitalization of each of the Seller Foreign Subsidiaries
immediately prior to the Closing is set forth on Schedule 3.10A attached
hereto; immediately prior to the Closing, the Persons set forth on Schedule
3.10A will be the owners, beneficially and of record, of all the issued and
outstanding Shares of the Seller Foreign Subsidiaries set forth opposite
their respective names, which represent all the issued and outstanding
Shares, and each such Person will have good and valid title to the Shares
listed opposite such Person's name, free and clear of all Liens."
(l) Section 5.2 of the Purchase Agreement hereby is amended by adding a new
paragraph (i) at the end thereof:
"(i) IRDB. Buyer shall use commercially reasonable efforts after the
Closing to cause the Industry Research and Development Board to waive any
right of termination that it may have under the Discretionary Grant
Agreement with Microwave Networks Australia Pty. Ltd. as a result of the
consummation of the transactions contemplated by this Agreement."
(m) Article X of the Purchase Agreement hereby is amended by adding a new
Section 10.10 at the end thereof:
"Section 10.10 China and Singapore Facilities. For the period
commencing on the Closing Date and ending on the 180th day after the
Closing Date, (a) Buyer may occupy and continue to conduct the operations
of the Business at, and exercise Seller's rights and otherwise utilize, the
facility of Seller at 1008 East Ocean Center, 24A, Jian Guo Men Wai Da Jie,
Beijing, China (the "China Facility"), in a manner substantially similar to
that conducted by Seller prior to the Closing; and (b) Seller may occupy
and continue to conduct its non-Business operations at, and exercise
Seller's rights and otherwise utilize, the facility of Buyer at 10 Collyer
Quay No. 13-08, Ocean Building, Singapore (the "Singapore Facility"), in a
manner
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<PAGE> 5
substantially similar to that conducted by Seller prior to the Closing. In
the case of the China Facility, Buyer promptly shall reimburse Seller for
any reasonable out-of-pocket expenses (including a pro rata share of rental
expense) incurred and paid to non-Affiliate third parties in connection
with the utilization by Buyer of the China Facility pursuant to this
Section. In the case of the Singapore Facility, Seller promptly shall
reimburse Buyer for any reasonable out-of-pocket expenses (including a pro
rata share of rental expense) incurred and paid to non-Affiliate third
parties in connection with the utilization by Seller of the Singapore
Facility pursuant to this Section. The allocation of out-of-pocket expenses
between the operations of the Business by Buyer and Seller's non-Business
operations at each of the China Facility and the Singapore Facility,
respectively, for purposes of reimbursement pursuant to this Section, shall
be made on a reasonable basis, taking into account the number of employees
of Buyer and Seller, respectively, at each such facility and the square
footage used thereat by Buyer and Seller, respectively."
(n) Clause (f) of Section 2.4 of the Purchase Agreement hereby is amended
by adding immediately after the words "on Schedule 3.5" the following words:
"(other than the claim described in Item No. 3 of Schedule 3.5)"
(o) Section 2.5 of the Purchase Agreement hereby is amended by: (1) adding
at the end of paragraph (o) thereof the following word "; or"; and (2) adding
new paragraphs (p) and (q) at the end thereof as follows:
"(p) the claim described in Item No. 3 of Schedule 3.5; or
(q) the agreement between California Microwave S.A. de C.V. and Sr.
Fernando Vallarta Aguilar referred to in Item No. 10 of Schedule 3.11(a)."
(p) The definition of "Affiliate" in Section 10.1 of the Purchase Agreement
hereby is amended by adding the following new sentence at the end thereof:
"Following the Closing, each of the Seller Foreign Subsidiaries shall be an
Affiliate of Buyer.
(q) Section 10.2 of the Purchase Agreement hereby is amended by adding the
following new sentence at the end thereof: "Seller shall reimburse Buyer for a
reasonable portion of the legal fees and expenses of Buyer's counsel in
Australia and the Philippines with respect to the consummation of the
transactions contemplated by this Agreement."
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<PAGE> 6
(r) Section 3.27 of the Purchase Agreement hereby is amended by deleting
the second and third sentences thereof.
4. Amendments to the Schedules to the Purchase Agreement.
(a) Item 1 of Schedule 1.2 to the Purchase Agreement hereby is amended by:
(1) deleting in the first paragraph thereof clause (v) in its entirety; (2)
deleting in the sixth line of the second paragraph thereof the word "and"; and
(3) adding at the end of the second paragraph thereof the following words: ";
and 1008 East Ocean Centre, 24A, Jian Guo Men Wai Da Jie, Beijing, China."
(b) Attachment A to Schedule 3.11(a) to the Purchase Agreement hereby is
amended by deleting the attachments referred to in Attachment A to Schedule
3.11(a) in its entirety. An amended attachment to Attachment A to Schedule
3.11(a), a copy of which is attached hereto as Exhibit A ("Attachment to
Attachment A to Schedule 3.11(a)") and incorporated herein by reference, shall
be substituted therefor, and all references in Attachment A to Schedule 3.11(a)
to attachments shall, from and after the date hereof, mean and refer to such
amended Attachment to Attachment A to Schedule 3.11(a).
(c) Schedule 3.14(a) to the Purchase Agreement hereby is amended by
deleting the Attachment to Schedule 3.14(a) in its entirety. An amended
Attachment to Schedule 3.14(a), a copy of which is attached hereto as Exhibit B
("Attachment to Schedule 3.14(a)") and incorporated herein by reference, shall
be substituted therefor, and all references in Schedule 3.14(a) to an attachment
shall, from and after the date hereof, mean and refer to such amended Attachment
to Schedule 3.14(a).
(d) Schedule 3.17 to the Purchase Agreement hereby is amended by deleting
the Attachment to Schedule 3.17 in its entirety. An amended Attachment to
Schedule 3.17, a copy of which is attached hereto as Exhibit C ("Attachment to
Schedule 3.17") and incorporated herein by reference, shall be substituted
therefor, and all references in Schedule 3.17 to an attachment shall, from and
after the date hereof, mean and refer to such amended Attachment to Schedule
3.17.
(e) Schedule 3.23 to the Purchase Agreement hereby is amended by deleting
the Attachment to Schedule 3.23 in its entirety. An amended Attachment to
Schedule 3.23, a copy of which is attached hereto as Exhibit D ("Attachment to
Schedule 3.23") and incorporated herein by reference, shall be substituted
therefor, and all references in Schedule 3.23 to an attachment shall, from and
after the date hereof, mean and refer to such amended Attachment to Schedule
3.23.
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<PAGE> 7
(f) Schedule 3.24 to the Purchase Agreement hereby is amended by deleting
the Attachment to Schedule 3.24 in its entirety. An amended Attachment to
Schedule 3.24, a copy of which is attached hereto as Exhibit E ("Attachment to
Schedule 3.24") and incorporated herein by reference, shall be substituted
therefor, and all references in Schedule 3.24 to an attachment shall, from and
after the date hereof, mean and refer to such amended Attachment to Schedule
3.24.
(g) Schedule 5.2(e) to the Purchase Agreement hereby is amended by deleting
the Attachment to Schedule 5.2(e) in its entirety. An amended Attachment to
Schedule 5.2(e), a copy of which is attached hereto as Exhibit F ("Attachment to
Schedule 5.2(e)") and incorporated herein by reference, shall be substituted
therefor, and all references in Schedule 5.2(e) to an attachment shall, from and
after the date hereof, mean and refer to such amended Attachment to Schedule
5.2(e).
(h) Schedule 7.1 to the Purchase Agreement hereby is amended by deleting
the Attachment to Schedule 7.1 in its entirety. An amended Attachment to
Schedule 7.1, a copy of which is attached hereto as Exhibit G ("Attachment to
Schedule 7.1") and incorporated herein by reference, shall be substituted
therefor, and all references in Schedule 7.1 to an attachment shall, from and
after the date hereof, mean and refer to such amended Attachment to Schedule
7.1.
(i) A new Schedule 3.10A to the Purchase Agreement hereby is added to the
Purchase Agreement, a copy of which is attached hereto as Exhibit H and
incorporated herein by reference, and all references to Schedule 3.10A in the
Purchase Agreement shall mean and refer to such Schedule 3.10A.
(j) Schedule 3.5 to the Purchase Agreement hereby is amended by adding a
new Item No. 3 at the end thereof:
"3. On or about April 16, 1998, Fernando Vallarta Aguilar telephoned
George Spillane of Seller and claimed that he was owed U.S. $146,000 by
California Microwave S.A. de C.V."
(k) Schedule 3.11(a) to the Purchase Agreement hereby is amended by adding
a new Item No. 10 at the end thereof:
"10. VALLARTA AGREEMENT. Independent Professional Services Agreement,
dated January 1, 1997, between California Microwave S.A. de C.V. and
Fernando Vallarta Aguilar."
5. Agreement in Full Force. As expressly amended hereby, the Purchase
Agreement shall remain in full force and effect, and the parties hereby ratify
and confirm the same.
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<PAGE> 8
6. Counterparts. This Amendment may be executed (including by facsimile
transmission) by the parties with counterpart signature pages or in one or more
counterparts, each of which shall be deemed to be an original.
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<PAGE> 9
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of the
date first above written.
TADIRAN LIMITED
By:
------------------------------------
Name: Israel Zamir
Title: President
By:
------------------------------------
Name: Yossef Ben Shalom
Title: Chief Financial Officer
TADIRAN MICROWAVE NETWORKS, INC.
By:
------------------------------------
Name: Israel Zamir
Title: Director
By:
------------------------------------
Name: Bosmat Chelouche
Title: Secretary
CALIFORNIA MICROWAVE, INC.
By:
------------------------------------
Name: George L. Spillane
Title: Vice President and Secretary
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