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Exhibit 10.35
INVENTORY TRANSFER AGREEMENT
THIS INVENTORY TRANSFER AGREEMENT ("Agreement"), dated as of May 9,
2000 (the "Effective Date"), by and among GVI Security, Inc., a Delaware
corporation ("Purchaser"), Sensory Science Corporation, a Delaware corporation
("Seller"), and Samsung Electronics Co., Ltd., a Korean corporation ("Samsung").
R E C I T A L S
WHEREAS, Purchaser and Seller are parties to an Asset Purchase
Agreement, dated as of May 9, 2000 (the "Asset Purchase Agreement"), which
provides, among other things, for the purchase by Purchaser (the "Purchase") of
the business and certain assets (the "Purchased Assets") of Purchaser's security
products division (the "Business");
WHEREAS, the Purchased Assets do not include the inventory of the
Business which is located at 7835 East McClain, Scottsdale, Arizona or other
warehouses of Seller (the "Facility"), and which consists of (a) Samsung branded
inventory and GVI branded inventory manufactured by Samsung as more fully set
forth on the Schedule prepared by Samsung and Seller and approved by Purchaser
that is attached hereto as Annex A (the "Samsung Inventory"), which Schedule
sets forth the purchase price of the Samsung Inventory (the "Inventory Purchase
Price"), and (b) certain other inventory not manufactured by Samsung as listed
on Annex B hereto (the "Other Inventory" and together with the Samsung
Inventory, the "Inventory");
WHEREAS, Purchaser has agreed to assume certain costs incurred by
Seller for transportation of the Samsung Inventory to the Facility, customs
charges and duties, handling and unloading charges and insurance, in the
aggregate amount of $861,453.57 (the "Landed Costs" and together with the
Inventory Purchase Price, the "Total Purchase Price");
WHEREAS, Purchaser desires to purchase the Samsung Inventory, and
Seller and Samsung desire to transfer the Samsung Inventory to Purchaser, on the
terms and conditions set forth in this Agreement;
WHEREAS, Purchaser and Seller also desire that Purchaser act as
Seller's agent in selling the Other Inventory;
NOW, THEREFORE, in consideration of and reliance on the respective
representations, warranties and covenants contained herein and intending to be
legally bound hereby, Purchaser, Seller and Samsung agree as follows:
1. Transfer of Samsung Inventory.
(a) Seller, subject to the terms and conditions of this
Agreement, hereby sells, transfers, conveys and delivers to Purchaser
its entire interest, right and title to the Samsung Inventory.
(b) Seller represents and warrants to Purchaser as follows:
(i) other than claims of Samsung, the
security interest of Congress Financial (which interest
Congress Financial has agreed to release at the closing of the
Asset Purchase Agreement) and Permitted Liens (as defined in
the Asset Purchase Agreement), the Inventory is free and clear
of all mortgages, liens, pledges, security interests, charges,
claims, restrictions and other encumbrances and defects of
title of any nature whatsoever;
(ii) the Inventory is of a quality and
condition useable or saleable in the ordinary course of
business, except for returned Inventory in the amount of
approximately $139,000 ("Returned Inventory");
(iii) all Inventory is free of any known
defect or other deficiency; and
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(iv) all Inventory is located at the
Facility and no Inventory is held on a consignment basis.
2. Credit and Rebill.
(a) Samsung hereby consents to the transfer of the Samsung
Inventory by Seller to Purchaser and agrees that, effective upon
execution of this Agreement, Seller's account with Samsung will be
credited with a payment equal to the Total Purchase Price plus $100,000
in consideration of the value of Returned Inventory. Samsung hereby
releases Seller from any and all obligations in respect of payment of
the Inventory Purchase Price and the Landed Costs; provided that Seller
shall remain responsible for payment of any other amounts otherwise
owed by Seller to Samsung.
(b) Purchaser hereby agrees that, effective upon execution of
this Agreement, Purchaser will be invoiced by Samsung for an amount
equal to the Inventory Purchase Price in respect of payment for the
Samsung Inventory transferred to Purchaser hereunder and the Landed
Costs. The Total Purchase Price shall be debited from Purchaser's
account with Samsung. Subject to presentation of reasonably acceptable
financial information to Samsung, Purchaser shall pay the Inventory
Purchase Price to Samsung in accordance with the repayment terms for
such Samsung Inventory set forth in Annex C hereto and, concurrently
with any such payment, shall pay the portion of the Landed Costs
allocable to such Samsung Inventory. Samsung agrees that a commitment
letter from, or other agreement of, Purchaser's bank extending a line
of credit to Purchaser of not less than $2.0 million shall be
acceptable to Samsung.
(c) Seller shall maintain insurance (which insurance shall at
all times be in an amount equal to or greater than the amount of the
Inventory Purchase Price) during the Transitional Period with respect
to the Samsung Inventory against risks of loss by fire or theft, and
all other risks. Concurrently with the execution of this Agreement,
Seller shall cause the issuer of the insurance policy to provide
Purchaser with an endorsement or an independent instrument showing loss
payable to Purchaser and, if required by Purchaser, naming Purchaser as
an additional insured, and evidence thereof shall be delivered to
Purchaser.
3. Other Inventory. Purchaser shall use its commercially reasonable
efforts to sell the Other Inventory as agent on behalf of Seller. Seller
acknowledges and agrees that Purchaser is not purchasing the Other Inventory but
is merely acting as agent for Seller who retains title to the Other Inventory.
Seller acknowledges and agrees that payment for the Other Inventory remains the
responsibility of Seller and Purchaser shall have no liability whatsoever with
respect thereto. Seller acknowledges and agrees that Purchaser assumes no
responsibility for the provision of warranty services of any kind or description
with respect to the Other Inventory and the provision of any such services shall
remain the sole responsibility of Seller.
4. Samsung Warranty and Liability.
(a) Samsung warrants to Purchaser as follows:
(i) the Samsung Inventory is free and clear
of all mortgages, liens, pledges, security interests, charges,
claims, restrictions and other encumbrances and defects of
title of any nature whatsoever;
(ii) Samsung has the right to sell the
Samsung Inventory for use both within and outside the United
States;
(iii) the Samsung Inventory is of a quality
and condition useable or saleable in the ordinary course of
business, except for Returned Inventory;
(iv) the Samsung Inventory will conform to
all applicable specifications for a period of 12 months from
the Closing Date;
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(v) the Samsung Inventory is free from
defect in materials and workmanship;
(vi) the Samsung Inventory does not infringe
the rights of any third party, including, without limitation,
intellectual property rights;
(vii) Samsung will take all necessary steps
to enforce Samsung's intellectual property rights in the
Samsung Inventory; and
(viii) the Samsung Inventory will correctly
process, provide and/or receive date data within and between
the 20th and 21st centuries.
(b) Samsung shall promptly provide free of charge all spare
parts necessary to enable Purchaser to provide warranty service
("Warranty Services") with respect to (1) all Samsung Inventory and (2)
all Samsung branded inventory and GVI branded inventory manufactured by
Samsung and sold or distributed by Seller. Samsung shall reimburse
Purchaser for any and all costs incurred by Purchaser in providing
Warranty Services, including, without limitation, costs of shipping,
spare parts and labor.
(c) Samsung shall indemnify Purchaser against any and all
losses, liabilities, claims, including, without limitation, any
third-party claims, and expenses incurred by Purchaser resulting from,
arising out of, or incurred by Purchaser in connection with, or
otherwise with respect to, (I) any breach or failure of a
representation or warranty by Samsung contained in this Agreement, or
(II) any product liability claims relating to the Inventory or any
Samsung branded inventory and GVI branded inventory manufactured by
Samsung and sold or distributed by Seller.
5. Resolution of Disputes.
(a) Any dispute, controversy or claim between Purchaser and
Samsung arising out of or relating to this Agreement or the performance
by the parties of its terms shall be settled by binding arbitration
held in Hawaii, United States, in accordance with the Rules of
Conciliation and Arbitration of the International Chamber of Commerce
then in effect, except as specifically otherwise provided in this
Section. The arbitrators shall be selected from a group of
professionals associated with JAMS/Endispute.
(b) The panel arbitration to be appointed shall consist of
three neutral arbitrators. Purchaser and Samsung shall each select one
arbitrator, and the arbitrators so selected shall select the third
arbitrator.
(c) The arbitrators shall allow such discovery as the
arbitrators determine appropriate under the circumstances, including
without limitation, the right to request production of documents and to
take such depositions of fact and experts as reasonably appropriate to
establish the parties' respective positions. Such discovery shall be
concluded within ninety (90) days following selection of the
arbitrators unless the arbitrators determine that fairness and justice
would require a longer time period. The arbitrators shall resolve the
dispute as expeditiously as practicable, and if reasonably practicable,
within one hundred twenty (120) days after the selection of the
arbitrators. The arbitrators shall give the parties written notice of
the decision, with the reasons therefor set out, and shall have thirty
(30) days thereafter to reconsider and modify such decision if any
party so requests within ten (10) days after the decision. Thereafter,
the decision of the arbitrators shall be final, binding, and
nonappealable with respect to all persons, including (without
limitation) persons who have failed or refused to participate in the
arbitration process.
(d) The arbitrators shall have the authority to award relief
under legal or equitable principles, including interim or preliminary
relief, and to allocate responsibility for the costs of the arbitration
and to award recovery of attorney's fees and expenses in such manner as
is determined to be appropriate by the arbitrators.
(e) Judgment upon the award rendered by the arbitrators may be
entered in any court having personal and subject matter jurisdiction.
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(f) All proceedings under this Section, and all evidence given
or discovered pursuant hereto, shall be maintained in confidence by all
parties.
(g) The fact that the dispute resolution procedures specified
in this Section shall have been or may be invoked shall not excuse any
party from performing its obligations under this Agreement and during
the pendency of any such procedure all parties shall continue to
perform their respective obligations in good faith, subject to any
rights to terminate this Agreement that may be available to any party.
(h) The arbitration procedure in this Section 5 shall be the
exclusive means available to the parties to resolve any claim,
controversy or dispute arising hereunder.
6. Miscellaneous.
(a) Each party hereto shall pay its own expenses incidental to
the preparation of this Agreement, the carrying out of the provisions
of this Agreement and the consummation of the transactions contemplated
hereby.
(b) This Agreement and the Asset Purchase Agreement set forth
the entire understanding of Seller and Purchaser with respect to the
transactions contemplated hereby and thereby. Any and all previous
agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by
this Agreement and the Asset Purchase Agreement. This Agreement sets
forth the entire understanding of the parties with respect to the
transactions contemplated hereby. Any and all previous agreements and
understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this
Agreement.
(c) This Agreement may not be assigned by any party without
the prior written consent of the other parties; provided that Purchaser
may assign this Agreement to any affiliate thereof without such
consent. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective executors, heirs, personal
representatives, successors and permitted assigns.
(d) Any notice or other communication under this Agreement
shall be in writing and shall be sent by (i) personal delivery, (ii)
registered or certified mail (return receipt requested) or (iii)
nationally recognized overnight courier service, to such party, at the
address of such party set forth below or such other address as any
party may designate in the manner prescribed in this Section. A notice
or other communication shall be deemed to have been duly received (A)
if personally delivered, on the date of such delivery, (B) if mailed,
on the date set forth on the return receipt or (C) if delivered by
overnight courier, on the date of such delivery (as evidenced by the
receipt of the overnight courier service). Such communications, to be
valid, must be addressed as follows:
If to Purchaser, to:
GVI Security, Inc.
1200 West Northwest Highway
Suite 100
Grapevine, TX 76051
Attn: Thomas Wade
With a required copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre
Pittsburgh, PA 15232
Attention: Paul De Rosa, Esq.
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If to Seller, to:
Sensory Science Corporation
7835 E. McClain Dr.
Scottsdale, AZ 85260
Attention: President
With a required copy to:
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, AZ 85004-0001
Attention: Samuel C. Cowley, Esq.
If to Samsung, to:
Samsung Electronics Co., Ltd.
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With a required copy to:
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or to such other address or to the attention of person or persons as
the recipient party has specified by prior written notice to the
sending party (or in the case of counsel, to such other readily
ascertainable business address as such counsel may hereafter maintain).
If more than one method for sending notice as set forth above is used,
the earliest notice date established as set forth above shall control.
(e) Interpretation. Unless the context of this Agreement
clearly requires otherwise, (a) references to the plural include the
singular, the singular the plural, and the part the whole, (b) "or" has
the inclusive meaning frequently identified with the phrase "and/or"
and (c) "including" has the inclusive meaning frequently identified
with the phrase "but not limited to." The section and other headings
contained in this Agreement are for reference purposes only and shall
not control or affect the construction of this Agreement or the
interpretation thereof in any respect. Section, subsection, schedule
and exhibit references are to this Agreement unless otherwise
specified. Each accounting term used herein that is not specifically
defined herein shall have the meaning given to it under GAAP.
(f) Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Delaware,
without regard to its provisions concerning conflict of laws.
(g) No Benefit to Others. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole
benefit of the parties hereto and their heirs, executors,
administrators, legal representatives, successors and permitted
assigns, and they shall not be construed as conferring any rights on
any other persons.
(h) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be binding as of the date first
written above, and all of which shall constitute one and the same
instrument. Each such copy shall be deemed an original, and it shall
not be necessary in making proof of this Agreement to produce or
account for more than one such counterpart.
(i) Severability. Any provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall be ineffective to
the extent of such invalidity or unenforceability without invalidating
or
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rendering unenforceable the remaining provisions hereof, and any such
invalidity or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
(j) Specific Performance. The parties agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed by them in accordance with the terms
hereof and that the other parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law
or equity.
(k) Survival. The representations and warranties and covenants
of the parties contained in this Agreement shall survive for a period
of two (2) years following the Effective Date. In the event that notice
of any claim for indemnification shall have been given within the
applicable survival period, the representations and warranties and
covenants that are the subject of such indemnification claim shall
survive until such claim is finally resolved.
(l) Samsung Acknowledgment. Samsung understands that Purchaser
and Seller are parties to the Asset Purchase Agreement pursuant to
which Purchaser will purchase certain accounts receivable from Seller,
including accounts receivable relating to products sold to Seller by
Samsung. Seller is indebted to Samsung for certain trade payables
relating to the purchase of products by Seller from Samsung. Samsung
understands that such trade payables have not been assumed by Purchaser
and that payment with respect thereto remains the sole responsibility
of Seller. Samsung acknowledges that it has no recourse against, and
represents that it will not look to, Purchaser for any non-payment by
Seller of such trade payables.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto on the date first written above.
GVI Security, Inc.
By: /s/ Thomas Wade
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Thomas Wade
President
Sensory Science Corporation
By: /s/ Roger B. Hackett
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Roger Hackett
Chairman and Chief Executive Officer
Samsung Electronics Co., Ltd.
By: /s/ J. M Lee
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Name: J. M. Lee
Title: General Manager
