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UNITED STATES 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
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) AUGUST 21, 1996
DYNAMOTION/ATI CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-19143 93-1192354
(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NUMBER)
1639 E. EDINGER AVE., SANTA ANA, CA 92705
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714)541-4818
N.A.
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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DYNAMOTION/ATI CORP.
ITEM 2. DISPOSITION OF ASSETS
DESCRIPTION OF ATI ASSET SALE
Pursuant to a Purchase and Sale Agreement (the "Sale
Agreement"), on August 21, 1996 the Company sold substantially all of the assets
(other than finished goods) associated with its ATI router product line to
Advanced Technology Inc. ("Purchaser"). The purchase price for the assets
consisted of (a) $1,100,000 ($300,000 paid in cash and the balance paid by
delivery to the Company of a $800,000 promissory note (the "Note")) and (b) the
value of certain assumed liabilities. Principal under the Note is payable
monthly at a rate equal to 15% of Purchaser's gross revenue and interest is
payable quarterly (with all principal and accrued interest due on December 31,
1997).
The finished goods associated with the Company's ATI router
product line will be sold to Purchaser pursuant to the terms of a Finished Goods
Agreement (the "Finished Goods Agreement"). Such finished goods will be sold to
Purchaser as customers agree to purchase the finished goods; provided, however,
Purchaser agreed, subject to certain conditions, to purchase on December 31,
1996 all finished goods not sold to customers on or before such date (payments
of the purchase price therefor to be made through June 30, 1997).
Purchaser's obligations under the Note and the Finished Goods
Agreement are secured by (i) a second priority security interest in all of
Purchaser's assets and (ii) a second priority lien in all of the outstanding
stock of Purchaser (which lien on such stock can be foreclosed upon only in the
event of fraud or malfeasance).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Pro forma information in support of Item 2 shall be furnished on or before
October 21,1996.
Exhibits.
10qq. Purchase and sale agreement dated August 20, 1996.
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DYNAMOTION/ATI CORP.
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 thereunto duly authorized.
DYNAMOTION/ATI CORP.
Date: September 4, 1996 By: /S/ Kirk A. Waldron
------------------ -------------------
Kirk A. Waldron
Chief Financial Officer and
Chief Accounting Officer
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PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT (the "Agreement"), made as of
August 20, 1996, by and among DYNAMOTION/ATI CORP., a New York corporation, with
offices at 1639 East Edinger Avenue, Santa Ana, CA 92705 ("Dynamotion" or
"Seller") and Advanced Technology Inc., a New Jersey Corporation, with offices
at 180 Broad Street, Carlstadt, NJ 07072 ("Purchaser").
W I T N E S S E T H:
A. WHEREAS, Seller, as part of its operations, is engaged in
the business of manufacturing and selling the products set forth on Schedule A
hereto constituting the ATI Router Product Line for the printed circuit board
industry (the "Business"); and
B. WHEREAS, Seller desires to sell, transfer and assign to
Purchaser, and Purchaser desires to purchase from Seller, Seller's assets and
properties used in the Business and described in Section 1 hereof on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the receipt
whereof is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Section 1. Purchase and Sale.
Seller hereby agrees to sell, transfer and deliver to
Purchaser at the Closing (as hereinafter defined), and Purchaser hereby agrees
to purchase from Seller at the Closing, free and clear of any liens, charges and
encumbrances except for minor encumbrances of record which, individually and in
the aggregate are not material to the transactions contemplated herein, the
properties and assets described in Sections 1.1, 1.2, 1.3, 1.4, and 1.5 hereof
used in connection with the Business as the same shall exist at the close of
business on the Closing Date (as defined below) (such assets are hereinafter
collectively called the "Purchased Assets"). The Purchased Assets are as
follows:
Section 1.1. Purchased Fixed Assets.
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The fixed assets of the Business owned by Seller and set forth
on Schedule 1.1 hereto, including without limitation, all machinery, equipment,
tooling, furnishings, plant equipment, jigs, fixtures, specialized tooling and
test equipment, and any molds, all artwork for sales brochures, instruction
manuals, original transparencies and any other media described therein whether
stored on or off Seller's premises (hereinafter collectively called the
"Purchased Fixed Assets").
Section 1.2 Purchased Inventory.
All raw materials, subassemblies, inspection inventory, MRB
inventory, out-to-vendor inventory, out to reps inventory, field service
inventory, free stock inventory and any other inventory held by Seller for use
in the Business and set forth on Schedule 2.1 hereto that is considered raw
material inventory under normal accounting standards used by Seller with respect
to the Business excluding the assets to be transferred pursuant to the Finished
Goods Agreement (as defined in Section 1.7).
Section 1.3. Purchased Contracts.
All of Seller's contract rights in and to the open sales
orders, sales contracts, supply contracts, purchase orders, purchase
commitments, contracts and other agreements related to the Business listed on
Schedule 1.3 hereto (the foregoing contracts, orders, commitments, and other
agreements collectively sometimes called the "Purchased Contracts").
Section 1.4. Purchased Rights.
All operating data and records of Seller (in whatever form
available to Seller, including, without limitation, on computer disk if so
available) relating solely to the Business (including, with respect to records
relating to the Business and Seller's other operations, those portions thereof
related to the Business), including books and records (other than minute books,
records of directors' and shareholders' meetings and Seller's tax and accounting
records), customer lists, credit information, correspondence, original
blueprints completed designs and drawings (whether for existing products or old
products), and all of
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Seller's patterns, slogans, processes, formula, trade secrets, and other similar
intangible property and rights used solely in connection with the Business
(including goodwill), and all rights in and to the tradename "ATI" (all of the
foregoing hereinafter collectively called the "Purchased Rights"); Seller shall
retain the right for itself and its representatives to examine the books and
records transferred to Purchaser, or to make extracts or copies therefrom, for a
period of six years after the date hereof, during reasonable business hours, and
during such other times as Purchaser and Seller may agree, and to remove such
books and records in connection with any proceedings, claims or actions which
may be brought against Seller, in any judicial or formal or informal
administrative proceeding or before any arbitration tribunal, in connection with
Seller's ownership of the Purchased Assets or operation of the Business.
Purchaser will not dispose of any such books and records without first offering
them in writing to Seller.
Section 1.5. Purchased Intellectual Property.
All trademarks, trade names, licenses, copyrights, patents,
patent applications and other similar rights listed on Schedule 1.5 hereto
(hereinafter collectively called the "Purchased Intellectual Property").
Section 1.6 Purchased Unenumerated Assets.
To the extent that, following the Closing, Seller discovers
any asset of Seller which is useful only in connection with the Business which
is not included in the assets otherwise transferred to Purchaser hereunder,
Seller agrees to notify Purchaser of such discovery and, if requested by
Purchaser, transfer such asset to Purchaser. Any asset so transferred shall be
deemed a "Purchased Asset" and if such transferred asset is an open sales order,
sales contract, supply contract, purchase order, purchase commitment, contract
or other agreement it will be deemed a "Purchased Contract."
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Section 1.7 Excluded Assets
The parties hereto have entered into an agreement
simultaneously herewith for the completion and sale of certain finished goods
related to the Business, a copy of which is annexed hereto as Exhibit A (the
"Finished Goods Agreement").
ARTICLE II
Section 2. Purchase Price and Payment.
Section 2.1. Purchase Price.
The aggregate purchase price of the Purchased Assets, (the
"Purchase Price") shall be (i) $1,100,000 (determined pursuant to the standard
cost schedules attached hereto as Schedule 2.1, which schedules the parties
agree represent the final binding determination of this portion of the Purchase
Price), plus (ii) the value of Assumed Liabilities (hereafter defined).
Allocation of the Purchase Price shall be as follows:
$30,000. For Goodwill
$20,000. For Equipment
Balance For Inventory
The parties agree to use such allocation for all reporting purposes and not to
take any position inconsistent with such allocation. In the event that the
physical counting of the Purchased Assets to be performed by representatives of
Seller and Purchaser in Santa Ana, California prior to shipment of the Purchased
Assets to Purchaser reveals that there is a shortage of in excess of $10,000
(calculated without netting any surplus) in the assets listed on Schedule 2.1,
an appropriate adjustment will be made to the Purchase Price and such adjustment
shall be effected by amending the principal balance of the Note (as defined
below). There will be no other adjustment to the Purchase Price for any reason
whatsoever even if there is a shortage upon delivery of the Purchased Assets to
Purchaser's locations.
Section 2.2. Payment of Purchase Price.
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At the Closing, Purchaser shall: (a) pay to Seller Three
Hundred Thousand ($300,000) Dollars by wire transfer of immediately available
funds and (b) execute and deliver to Seller Purchaser's promissory note in the
form attached as Exhibit B hereto (the "Note").
Section 2.3 Security.
At the Closing:
(i) Purchaser shall execute in favor of Seller (a) a
Security Agreement in the form of Exhibit C hereto (the
"Purchaser Security Agreement") pursuant to which Purchaser's
obligations under this Agreement, the Note and the Finished
Goods Agreement shall be secured by a security interest in all
of Purchaser's assets; provided, however, that the lien
created by the Purchaser Security Agreement shall be
self-subordinating to a lien on Purchaser's assets in favor of
Purchaser's lender, Fimanor Financial Management, A. G. or a
successor unaffiliated institutional secured lender of the
Company, subject to the terms and limitations set forth in the
Purchaser Security Agreement and (b) a UCC-1 Financing
statement covering all of Purchaser's assets;
(ii) Alfred Thumim and Sherry Lahav, as shareholders
of Purchaser shall (a) execute in favor of Seller a Pledge
Agreement in the form of Exhibit D hereto (the "Shareholder
Pledge Agreement") pursuant to which each would pledge his
shares in Purchaser as security for Purchaser's obligations
under this Agreement, the Note and the Finished Goods
Agreement; provided, however, that the liens created by the
Shareholder Pledge Agreement shall be self-subordinating to a
lien on the stock covered
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by the Shareholder Pledge Agreement in favor of Purchaser's
Lender, Fimanor Financial Management, A. G., subject to the
terms and limitations set forth in the Shareholder Pledge
Agreement and (b) each deliver to Seller a stock power
executed in blank covering the stock subject to the
Shareholder Pledge Agreement. The Shareholder Pledge Agreement
shall provide that it may only be enforced against Alfred
Thumim and/or Sherry Lahav in the event of their fraud or
malfeasance.
ARTICLE III
Section 3. Closing.
The closing of the transactions contemplated hereby (the
"Closing") shall take place on August 20, 1996 at the offices of Purchaser's
attorney at 10:00 a.m., or at such other time and place as the parties hereto
shall agree in writing (the "Closing Date"). At the Closing, Seller will deliver
to Purchaser such bills of sale, endorsements, assignments, or other instruments
as shall be reasonably necessary to vest in Purchaser good and marketable title
to the Purchased Assets subject to no liens or encumbrances, except for minor
encumbrances of record which, individually and in the aggregate are not material
to this transactions contemplated herein.
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ARTICLE IV
Section 4. Assumption of Liabilities.
Section 4.1. Assumption by Purchaser.
The Purchaser shall, by appropriate instruments to be executed
and delivered at the Closing, assume and agree to perform, pay or discharge, to
the extent not theretofore performed, paid or discharged, the following
liabilities and obligations of the Business (collectively called the "Assumed
Liabilities"):
(a) All liabilities and obligations under or related to the
Purchased Contracts.
(b) All liabilities and obligations on account of any product
liability claim, which includes claims for personal injury or property damage,
with respect to products shipped by or on behalf of Purchaser (including,
without limitation, finished goods shipped pursuant to the Finished Goods
Agreement), Purchaser further agrees that, upon request of Seller, Purchaser
will cooperate with Seller in defending any product liability claims that may be
brought against Seller, provided, however, that Seller shall reimburse Purchaser
for any reasonable out-of-pocket expenses (including travel expenses of its
employees and reasonable counsel fees) incurred by Purchaser in providing such
assistance.
(c) Any other liabilities and obligations pertaining to the
Purchased Assets arising and accruing after the Closing Date.
(d) All liabilities and obligations set forth on Schedule 4.1
hereto.
Section 4.2. Liabilities Retained by Seller.
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Purchaser shall not be obligated to assume and shall not become liable for the
following liabilities and obligations that will be retained by Seller:
(a) Any foreign, federal, state or local income tax payable
with respect to operations of the Business with respect to periods ending on or
prior to the Closing Date;
(b) any indebtedness or obligations to any person for borrowed
money including, without limitations, amounts advanced Seller pursuant to
Seller's financing arrangements with IBJ Schroder Bank & Trust Company; or
(c) any other liabilities of Seller other than the Assumed
Liabilities.
ARTICLE V
Section 5. Other Actions.
Section 5.1. Delivery of Property Received After Closing.
From and after the Closing: (a) Seller agrees that it will
transfer or deliver to Purchaser, from time to time, any cash or other property
that Seller may receive after the Closing with respect to the Purchased Assets
within three business days of receipt and (b) Purchaser agrees that it will
transfer or deliver to Seller, from time to time, any cash or other property
that Purchaser may receive after the Closing relating to assets of the Seller
other than the Purchased Assets, within three business days of receipt.
Section 5.2. Execution of Further Documents.
From and after the Closing, Seller shall upon written request
from Purchaser perform, execute, acknowledge and deliver all such further acts,
bills of sale, assignments, transfers, conveyances, and assurances as may be
reasonably required to convey and transfer to and vest in Purchaser its right,
title and interest in the Purchased Assets, and as may otherwise be reasonably
appropriate to carry out the transactions contemplated by this
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Agreement. From and after the Closing, Purchaser shall upon written request from
Seller perform, execute, acknowledge and deliver all such further acts,
assumptions and assurances as may be reasonably appropriate to carry out the
transactions contemplated by this Agreement.
Section 5.3. Discharge of Encumbrance.
Seller agrees to diligently pursue the discharge and release of any encumbrances
of record with respect to the Purchased Assets that the parties have been unable
to discharge as of the Closing.
ARTICLE VI
Section 6. Representations and Warranties by Seller.
Seller makes the following representations, warranties, covenants and
agreements:
Section 6.1. Corporate Existence and Qualification of Seller.
Seller is or will be as of the Closing a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has or
will have as of the Closing all requisite corporate power and authority to own
its properties and to carry on its business as it will be conducted on the
Closing Date.
Section 6.2. Seller's Corporate Documents.
Copies of the Certificate of Incorporation and By-Laws, including the respective
amendments thereto, of Seller, have been delivered to Purchaser, and such copies
are, or will be as of the Closing, true, complete and correct in every
particular.
Section 6.3. Good Title to Assets.
Seller has good record and marketable title to all of the
Purchased Assets free and clear of any liens, pledges, privileges, charges or
encumbrances except minor
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encumbrances of record which, individually and in the aggregate, are not
material to the transactions contemplated herein.
Section 6.4. Litigation.
To the best of Seller's knowledge, there are no actions,
suits, claims or proceedings pending against Seller at law or in equity, or
before or by any Federal, provincial, state, municipal or other governmental
court, department, commission, board, bureau, agency or instrumentality,
domestic or foreign, prohibiting the transactions contemplated herein.
Section 6.5. Correctness of Representations and Warranties on
the Closing Date.
Each representation and warranty of Seller set forth in this
Agreement shall be true on and as of the Closing as though such representation
or warranty was made again on and as of such time.
Section 6.6. Authorization of Agreement.
All corporate and other action required to be taken by Seller
to authorize it to carry out this Agreement have been, or as of the Closing Date
shall have been, duly and properly taken; and this Agreement constitutes a valid
and binding obligation of Seller, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by the principles governing the
availability of equitable remedies.
Section 6.7. Condition of Purchased Assets.
The Purchased Assets are being sold to Purchaser "AS IS, WHERE
IS" AND SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EITHER EXPRESSED OR
IMPLIED, WITH RESPECT TO THE PURCHASED ASSETS OR THEIR
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MERCHANTABILITY, CONDITION, SUITABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.
Section 6.8. Conduct of ATI Business Pending the Closing.
From the date hereof until the Closing and except as otherwise consented to or
approved by Purchaser in writing:
(a) Seller will conduct the business and operations of the
Business in the ordinary course consistent with past practice.
(b) Seller will until the Closing maintain its existing
insurance upon all of the Purchased Assets in such amounts and of such kinds
comparable to that in effect on the date of this Agreement.
(c) Seller agrees not to enter into any new contracts or
agreements with respect to the Business other than in the ordinary course of
business consistent with past practice without the consent of Purchaser.
Section 6.9. Representation as to Insolvency.
Seller represents that as of the Closing Date it does not
intend to file a voluntary bankruptcy petition under Title 11 of the United
States Bankruptcy Code.
ARTICLE VII
Section 7. Representations and Warranties by Purchaser.
Purchaser makes the following representations, warranties,
covenants and agreements:
Section 7.1. Corporate Existence and Qualification of
Purchaser.
Purchaser is a corporation duly organized and existing and in
good standing under the laws of the State of New Jersey.
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Section 7.2. Authorization of Agreement by Purchaser.
All corporate and other action required to be taken by
Purchaser to authorize it to carry out this Agreement has been, or as of the
Closing Date shall have been, duly and properly taken, and this Agreement
constitutes a valid and binding obligation of Purchaser, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by the principles governing the availability of equitable remedies.
Section 7.3. Correctness of Representations and Warranties on
the Closing Date.
Each representation and warranty of Purchaser set forth in
this Agreement shall be true on and as of the Closing as though such
representation and warranty was made again on and as of such time.
Section 7.4. Financial Ability to Perform.
Purchaser has sufficient funds and credit arrangements to
deliver the Purchase Price and the other amounts payable by it hereunder at the
Closing and to take such other actions as may be required by it to perform the
transactions contemplated hereby and satisfy its obligations hereunder.
Section 7.5. Consents of Third Parties.
No consent, approval, or agreement of any person, government
or entity is required to be obtained by Purchaser in connection with the
execution and delivery of this Agreement, the Note, the Purchaser Security
Agreement, the Finished Goods Agreement or the consummation of the transactions
contemplated hereby or thereby.
ARTICLE VIII
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Section 8. Conditions to Obligations of Purchaser.
The obligations of the Purchaser under this Agreement are, at
the option of Purchaser, subject to the conditions that, at the Closing:
Section 8.1. Compliance by Seller: Correctness of Seller's
Representations and Warranties.
Seller shall have complied with and performed in all material
respects all the terms, covenants and conditions of this Agreement to be
complied with and performed, and all of the representations and warranties made
by Seller under this Agreement shall be true and correct in all material
respects as of the Closing.
Section 8.2. Certified Resolutions of the Seller.
Seller shall have delivered to Purchaser a certificate signed
by the Secretary or Assistant Secretary of Seller under its corporate seal
setting forth the votes or consents constituting the authorization and approval
of the board of directors of Seller of the transactions contemplated hereby.
Section 8.3. Consents.
Seller shall have obtained all consents or approvals which
Seller and Purchaser have agreed should be obtained (and shown by evidence
reasonably satisfactory to Purchaser) in connection with the consummation of the
transactions contemplated hereby. Purchaser shall cooperate with Seller to
obtain such consents and approvals where reasonably deemed appropriate by
Seller.
Section 8.4. Good Standing.
Seller shall be in good standing under the laws of the State
of New York.
ARTICLE IX
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Section 9. Conditions to Obligations of the Seller.
The obligations of Seller under this Agreement are, at its
option, subject to the conditions that, at the Closing:
Section 9.1. Compliance by Purchaser: Correctness of
Purchaser's Representations and Warranties.
Purchaser shall have complied with and performed in all
material respects all the terms, covenants and conditions of this Agreement to
be complied with and performed, and all of the representations and warranties
made by Purchaser under this Agreement shall be true and correct in all material
respects as at the Closing.
Section 9.2. Certified Resolutions of Purchaser.
Purchaser shall have delivered to Seller a certificate signed
by its directors, setting forth the votes or consents constituting the
authorization and approval of the directors of Purchaser of this Agreement and
the transactions contemplated hereby.
Section 9.3. Deliveries.
Purchaser shall have executed in favor of Seller and delivered
to Seller the Note, the Purchaser Security Agreement and the related financing
statement, and the Finished Goods Agreement. Alfred Thumim and Sherry Lahav
shall have each executed in favor of Seller and delivered to Seller the
Shareholder Pledge Agreement and the related stock powers.
Section 9.4. Good Standing.
Seller shall be in good standing under the laws of the State
of New York.
ARTICLE X
Section 10. Expenses of the Parties.
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Except as otherwise expressly provided, Purchaser and Seller
will pay their respective expenses, including the expenses of their counsel, in
connection with the origin, negotiation, execution and performance of this
Agreement. Purchaser shall pay any and all sales, recording and transfer and
similar taxes with respect to the transactions and transfer of the Purchased
Assets.
ARTICLE XI
Section 11. Termination and Effect.
Section 11.1. Termination of Agreement.
This Agreement may be terminated prior to the Closing:
(a) At the election of Seller, if any one or more of
the conditions to the obligation of Seller under Article VIII has not been
fulfilled in all material respects as of the Closing Date; or
(b) At the election of Purchaser, if any one or more
of the conditions to the obligation of the Purchaser under Article IX has not
been fulfilled in all material respects as of the Closing Date; or
(c) At the election of Purchaser or Seller, if the
Closing shall not have taken place on or before August 30, 1996, provided that
the party exercising such right of termination shall not then be in default
under its obligations hereunder; or
(d) At any time on or prior to the Closing by mutual
written consent of all parties hereto.
Section 11.2. Effect of Termination.
If this Agreement is terminated and the transactions
contemplated hereby are not consummated as described above, this Agreement shall
become null and void and of no
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further effect, except for the provisions of Section 15.5 relating to the
obligation of Purchaser to keep confidential and not to use certain information
and data obtained by it from Seller, without any liability on the part of any
party or any of its employees, representatives, agents, directors, officers or
stockholders, unless such party is in default under its respective obligations
hereunder in which event the party or parties in default shall be liable to the
other party or parties for such default. If a condition precedent to any party's
obligation is not satisfied, nothing contained herein shall be deemed to require
such party to terminate this Agreement, rather than to waive such condition and
proceed with the Closing.
ARTICLE XII
Section 12. Continuing Arrangements.
Section 12.1 Use of Name.
Upon consummation of the sale, Purchaser shall own exclusively
the name "ATI" and all rights in and to that name. Seller agrees to as
expeditiously as possible discontinue any use of the name ATI and file any and
all documents required to amend its corporate name so as to delete "ATI" from
its name.
Section 12.2 Non-Compete
For a period of thirty-six (36) months following the Closing,
Dynamotion agrees not to compete directly or in association with others in the
business of manufacturing or selling any routers designed to route at a working
speed of less than 60,000 RPM ("Low Speed Routers"); provided that the parties
acknowledge that routers designed to route at a working speed of 60,000 RPM or
more can be operated at less than 60,000 RPM and that the fact that any customer
operates a router designed to operate at a working speed of 60,000
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RPM or more at less than 60,000 RPM shall not be deemed a breach of Seller's
agreement not to compete in this Section 12.2.
Section 12.3 Partial Release of Joseph P. Drier, Jr. from his
Non-Compete
Seller at Closing shall release Joseph P. Drier, Jr. from his
Non- Compete Agreement with Seller but only to the extent that such Non-Compete
Agreement prohibits him from competing against Seller in his capacity as an
employee of ATI or its successor.
ARTICLE XIII
Section 13. Broker's Commissions.
The parties hereby agree and warrant to each other that there
are no claims for brokerage commissions, or placement or finders' fees in
connection with the transaction contemplated by this Agreement. Purchaser will
indemnify and hold Seller harmless from the commissions, fees or claims of any
person, firm or corporation employed or retained or claiming to be employed or
retained, by Purchaser to bring about, or to represent it, in the transactions
contemplated hereby. Seller will indemnify and hold harmless Purchaser from the
commissions, fees or claims of any person, firm or corporation employed or
retained or claiming to be employed or retained, by Seller or its agents to
bring about, or to represent it, in the transactions contemplated hereby.
ARTICLE XIV
Section 14.1. Survival of Representations.
The representations and warranties contained in Article VI and
Article VII and the parties' liability with respect thereto shall survive for
one year following the Closing Date, all other representations and warranties
herein shall survive indefinitely.
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Section 14.2. Indemnification by Seller.
Should any claim of liability continue after the Closing by
which Seller is or may be liable hereunder, Purchaser shall give Seller a
reasonable opportunity to take part in any examination of the books and records
delivered to Purchaser pursuant to this Agreement, to conduct any proceedings or
negotiations in connection therewith and necessary to defend such claim or
liability, to take all other required steps or proceedings to settle or defeat
any such claims, and to employ counsel to contest any such claim or liability.
At the request of Seller, Purchaser agrees to reasonably cooperate with and
assist Seller in the defense of any such claims or asserted liabilities which
Seller elects to defend; and the expense of such defense, as well as the
out-of-pocket cost (including travel expenses of Purchaser's employees and
agents engaged in such efforts) to the Purchaser of assisting and cooperating
with Seller as aforesaid, shall be borne by Seller. Seller's aggregate liability
to Purchaser under this Agreement shall in no event exceed $1,000,000.00. All
claims of Purchaser hereunder shall be subject to an aggregate deductible of
$25,000, which deductible shall be the responsibility of Purchaser.
Section 14.3. Indemnification by Purchaser.
Purchaser agrees to defend, indemnify and hold Seller harmless
from and against any and all losses or damages (including reasonable attorney's
fees) resulting from: (a) any misrepresentation or breach of warranty or
covenant by Purchaser made or contained in this Agreement; (b) Purchaser's
failure to pay, discharge or perform any of the Assumed Liabilities; and (c) the
conduct of the Business following the Closing Date. Seller agrees to give
reasonable notice to Purchaser in writing of any claim made against Seller which
could result in an obligation or liability of Seller which has been assumed by
Purchaser or for which
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Seller has been indemnified by Purchaser under the terms of this Agreement,
(provided, however, that the failure to give such notice will not affect the
obligations of Purchaser hereunder unless, and only to the extent that,
Purchaser is actually prejudiced by such failure) and Seller agrees to
reasonably cooperate with and assist Purchaser in defense to any such claims;
and the expense of such defense, as well as the out-of-pocket cost (including
travel expenses of Seller's employees and agents engaged in such efforts) to
Seller of assisting and cooperating with Purchaser as aforesaid, shall be borne
by the Purchaser.
ARTICLE XV
Section 15. PMC Controllers
Section 15.1 Sale of PMC Controllers
Seller owns, operates and controls a division known as "PMC"
which is in the business of producing controllers for Low Speed Routers, among
other applications. During such time as PMC is under the ownership of Seller,
Seller agrees for a period of five (5) years to make available to ATI
controllers (with specifications similar to or better than those produced as of
the date hereof) for Low Speed Routers, and for a period of two (2) years
following the Closing in accordance with the price terms set forth on Schedule
15.1 and thereafter at such prices as are offered by Seller or its successor.
Seller agrees, upon request from Purchaser, to provide to Purchaser one year's
advance notice of such offered prices. In the event Seller sells or transfers
the PMC division, then Seller agrees to include conditions in the sales
agreement such that the purchaser of the PMC division will be obligated to
continue the ability of Purchaser to purchase from PMC controllers as described
above, or an equivalent thereof, on the terms of this Section 15.1 for the
balance of such five (5) year period. A copy of such portion of such sales
agreement shall be provided to Purchaser.
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Notwithstanding the foregoing, in the event Seller or any purchaser from Seller
of the PMC division intends to discontinue the production of the controllers to
be provided pursuant to this Section 15.1, such party may do so but only if it
provides to Purchaser at least twelve (12) months prior written notice of such
discontinuance.
Section 15.2 Escrow of Designs, Drawing, etc.
Seller agrees to deposit in escrow, copies of all drawings,
designs and any other relevant technical information and any and all proprietary
information concerning the production of PMC controllers (the "Information").
The Information shall be held in escrow and shall be released from escrow only
as provided in the Escrow Agreement attached hereto as Exhibit E.
ARTICLE XVI
Section 16 Returned ATI Routers
Section 16.1 Return of ATI Routers
In the event Seller receives, either by purchase, trade in or
otherwise, any Low Speed Routers produced by the Business, other than the
Machines (as defined in the Finished Goods Agreement) returned to Seller
pursuant to Section 6 of the Finished Goods Agreement which return (but not any
subsequent trade in) will be handled pursuant to the Finished Goods Agreement.
Seller agrees that it shall not except as provided herein resell such Low Speed
Routers, but shall advise Purchaser of the receipt of same. Purchaser shall have
the right: (i) for ten (10) days following its receipt of the notice, to
purchase the returned Low Speed Routers at a then agreed-upon price; or (ii) to
act as commission agent for Seller in the resale of the returned Low Speed
Routers, or any parts thereof under normal commission sales arrangements in the
industry. In the event Purchaser does not purchase the returned Low
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Speed Routers as provided above, Seller shall have the right, notwithstanding
the restrictions set forth in Section 12.2 hereof, to sell such returned Low
Speed Routers on the wholesale market without paying a commission to Purchaser,
provided Purchaser shall have a right of first refusal, for a period of ten (10)
days following delivery of notice of such proposed sale, to purchase such Low
Speed Routers on the terms offered to the wholesaler.
ARTICLE XVII
Section 17. Miscellaneous.
Section 17.1. Amendment to Agreement.
Either party to this Agreement may, by written notice to the
other: (I) extend the time for the performance of any of the obligations or
other acts of the other party, (ii) waive any inaccuracies in the
representations of the other party contained in this Agreement or in any
document delivered pursuant to this Agreement, and (iii) waive any compliance
with any of the covenants of the other party contained in this Agreement and
waive performance of any of the obligations of the other party. Any other
amendment to this Agreement must be in writing and signed by both parties.
Section 17.2. Binding Effect.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns; provided,
however, that neither party may assign rights or obligations under this
Agreement, in part or in their entirety, without the prior written consent of
the other party; provided, however, Seller shall be entitled to assign its
rights hereunder to a financial institution as security for obligations of
Seller or as part of a transfer of Seller's business, except that the Note
delivered from Purchaser to Seller hereunder shall be non-negotiable and shall
not be voluntarily assigned; provided, however,
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nothing herein shall be deemed to prohibit Seller from granting a security
interest in the Note and its rights thereunder or the exercise of the right of
the secured party.
Section 17.3. Entire Agreement.
This instrument and the schedules and exhibits referred to
herein contain the entire agreement of the parties hereto with respect to the
purchase of the Purchased Assets and the other transactions contemplated herein
and supersede all prior written or oral commitments, arrangements or
understandings with respect thereto. There are no restrictions, agreements,
promises, representations, warranties, covenants or undertakings other than
those referenced herein. Any reference herein to this Agreement shall be deemed
to include the schedules and exhibits hereto.
Section 17.4. Headings.
The descriptive headings in the Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
Section 17.5. Confidential Information: Publicity.
Any confidential information obtained by any party hereto from
any other shall not be disclosed or used by any such party should such
transactions not be effected, and each party shall return to the other all
documents and written information obtained from such other party. The parties
agree that, except as required by law, they will not make any public disclosure
of the transactions contemplated by this Agreement, without the prior written
approval of the content of such disclosure from each other, which approval will
not be unreasonably withheld.
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Section 17.6. Notices.
Any notice, request, information or other document to be given
hereunder to either of the parties by the other shall be in writing and
delivered personally or sent by certified mail, postage prepaid, as follows:
If to Seller:
Dynamotion Corp.
1739 E. Edinger Avenue
Santa Ana, CA 92705
Attention:Jon Hopper, President,
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, 17th Floor
Costa Mesa, CA 92626
Attention: Scott N. Leslie
ATI
180 Broad St
Carlstadt, NJ 07072
Attention: Dr. Alfred Thumim
President
with a copy to:
Michael S. Goodman, Esq.
M. Goodman & Associates P.C.
East 80 Route 4 - Suite 100
Paramus, NJ 07652
Either party may change the address to which notices are to be
sent to it by giving written notice of such change of address to the other party
in the manner herein provided for giving notice.
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Section 17.7. Counterparts.
This Agreement may be executed in any number of counterparts,
and each such counterpart hereof shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one agreement.
Section 17.8. 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 successors and permitted assigns, and they shall not be construed as
conferring any rights on any other persons.
Section 17.9. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of California. All actions and proceedings
with respect to the rights of parties under this Agreement and under the
Finished Goods Agreement shall be conducted in a Court of competent jurisdiction
in the State of New Jersey.
Section 17.10 Severability.
If any one or more of the provisions of this Agreement shall
be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
Dynamotion/ATI Corp.
By_____________________________________
Jon R. Hopper, President
Advanced Technology, Inc.
By_____________________________________
Dr. Alfred I. Thumim, President
25
<PAGE> 26
EXHIBIT A
FINISHED GOODS AGREEMENT
THIS FINISHED GOODS AGREEMENT ("Agreement") is made as of
the 20th day of August, 1996, by and between DYNAMOTION/ATI CORP., a New York
corporation with offices at 1639 East Edinger Avenue, Santa Ana, CA 92705
("Seller"), and Advanced Technology Inc., a New Jersey Corporation, with offices
at 180 Broad Street, Carlstadt, NJ 07072 ("Purchaser").
RECITALS
A. Concurrently with the execution of this Agreement, Seller is selling
to Purchaser certain of Seller's assets pursuant to that certain Purchase and
Sale Agreement dated of even date herewith (the "Purchase Agreement").
B. It is a condition to the consummation of the transactions
contemplated by the Purchase Agreement that the parties enter into this
Agreement.
C. Pursuant to the Purchase Agreement, Seller retained the finished
goods inventory related to the Business (as defined in the Purchase Agreement),
which finished goods inventory is described on Exhibit A hereto (such inventory
is referred to herein as the "Machines").
D. The parties desire to provide for the sale of the Machines on the
terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
<PAGE> 27
1. Completion. Seller agrees to complete the Machine referenced as
not completed on Exhibit A on or before August 31, 1996. Seller certifies that
other Machines described on Exhibit A hereto are complete. Seller shall make the
Machines available for sale in a manner consistent with its past practice.
2. Title. Seller shall retain title to each Machine until such
Machine is sold to Purchaser as provided hereunder. At the time of sale, title
(which Seller represents will be free from all liens and encumbrances) and risk
of loss shall pass to Purchaser.
3. Inspection. Purchaser shall have the right to inspect the
Machines at reasonable intervals during the normal business hours of the
facilities where the Machines are located upon 48 hours prior notice to Seller.
4. Sales, Installation and Warranty. Purchaser shall be
responsible for selling and installing the Machines at its own expense.
Purchaser shall provide the customer purchasing the Machine with a warranty
similar to the warranty annexed hereto and made a part hereof as Exhibit B,
which warranty is Seller's existing form of warranty and Purchaser shall be
responsible at its own expense for any service required under the warranty.
Seller warrants to Purchaser that the Machines to be purchased by Purchaser
hereunder will, prior to such purchase, have undergone and successfully
completed the testing described on Exhibit C hereto, which testing represents
Seller's standard testing procedure for machines of this type. Seller shall
provide Purchaser with a certification that such testing has been successfully
completed. EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT PROVIDED IN THE
PRECEDING SENTENCE, THE MACHINES ARE BEING PURCHASED BY PURCHASER "AS IS, WHERE
IS" AND SELLER MAKES NO REPRESENTATIONS OR
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WARRANTIES, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE MACHINES OR THEIR
MERCHANTABILITY, CONDITION, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
5. Shipping Expenses. Seller shall have no responsibility for
expenses associated with shipping the Machines. If, notwithstanding the
foregoing, Seller elects, with the consent of Purchaser, to incur any such
expenses, Purchaser agrees to reimburse Seller for any amounts paid with respect
to shipping of the Machines. Such reimbursement amounts shall be paid within ten
(10) after Purchaser's receipt of any invoice for such amounts.
6. Machines Sold to Customers. The price paid by Purchaser for
each Machine sold to a customer on or before December 31, 1996, shall be seventy
(70%) percent of the greater of (i) the price charged to the customer for such
Machine or (ii) the gross target sales price for such Machine listed on the
Finished Goods Inventory attached as Exhibit A hereto. Purchaser shall be
responsible for collection of the purchase price from the customer and any
failure of the customer to make any payment shall have no effect on the
obligation of Purchaser to pay Seller. Purchaser shall pay Seller for any
Machine purchased by a customer within thirty (30) days following customer
acceptance (as defined below) of the Machine but in any event not later than
seventy-five (75) days following shipment of the Machine. The term "customer
acceptance" with respect to any Machine shall mean that the customer accepts
such machine as (a) having no defective parts, (b) performing in accordance with
normal specifications and (c) being free of any defects which may arise from
Seller's normal production practices, but it does not mean that the customer has
accepted the Machine as complying with any representations which
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are beyond Seller's normal specifications for the Machine. If a customer rejects
a Machine prior to December 31, 1996 due to a failure of the Machine to satisfy
any requirement set forth in clause (a), (b) or (c) of this Section 6 and such
failure is so significant that the Machine cannot be repaired at the customer's
location, (i) Seller shall accept return of such Machine, (ii) Seller shall
certify to Buyer that just prior to any subsequent purchase of such returned
Machine by Buyer such Machine successfully completed the testing procedure
referenced on Exhibit C, and (iii) Buyer shall be responsible at its own expense
for return of such Machine to Seller. In the case of any other customer
rejection of a Machine, Seller shall not be required to accept return of such
Machine or have any responsibility for repair thereof but rather Buyer shall be
responsible for repair and shall, if necessary, accept return of such Machine at
its own expense. Buyer agrees that it will sell all Machines of a particular
model before it shall have the right to sell any of such model produced by
Buyer.
7. Machines Not Sold to Customers. Purchaser shall purchase from
Seller any Machines not sold to customers on or before December 31, 1996. The
purchase price for any such Machines shall be seventy (70%) percent of the
aggregate price for such Machines listed on the Router Finished Goods Worksheet
attached as Exhibit D hereto. Such Machines shall be purchased by issuance of a
purchase order. The purchase price shall be paid as follows:
The purchase price for five (5) Machines less the number of Machines as have
been sold to customers (and not returned) prior to December 31, 1996, shall be
paid for on or
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before December 31, 1996. The purchase price for the balance of the Machines
shall be paid for as follows:
Thirty (30%) Percent of the purchase price on December 31, 1996;
Forty (40%) Percent of the purchase price on March 31, 1997; and
Thirty (30%) Percent of the purchase price on June 30, 1997.
No interest shall accrue on any deferred portion of the purchase price.
If a customer rejects a Machine purchased by Buyer pursuant to
this Section 7 due to a failure of the Machine to satisfy any requirement set
forth in clause (a), (b) or (c) of Section 6 hereof and such failure is so
significant that the Machine cannot be repaired at the customer's location, (i)
Seller shall accept return of such Machine, (ii) Seller shall certify to Buyer
that, just prior to return to Buyer (as described below), such Machine
successfully completed the testing procedure referenced on Exhibit C, and (iii)
Buyer shall be responsible at its own expense for return of such Machine to
Seller. Buyer agrees to accept from Seller any Machine returned by a customer as
provided in the preceding sentence as soon as Seller certifies successful
completion of the testing procedure referenced on Exhibit C with respect to such
Machine. In the case of any other customer rejection of a Machine purchased by
Buyer on December 31, 1996, Seller shall not be required to accept return of
such Machine or have any responsibility for repair thereof but rather Buyer
shall be responsible for repair and shall, if necessary, accept return of such
Machine at its own expense.
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8. Default. In the event that Purchaser fails to pay when due any
amount owing to Seller under the Note (as defined in the Purchase Agreement) or
any amount owing to Seller under this Agreement, Seller shall have the right to
refuse to sell to Purchaser any Machine until all payment defaults under the
Note and this Agreement have been cured; provided, however, Seller shall be
required to sell Machines to Purchaser if such non-payment is based upon a good
faith dispute with respect to the entire amount not being paid. If the entire
amount of any payment default under the Note or this Agreement is not the
subject of a good faith dispute and such default is not cured within 120 days,
Seller shall have the right to sell the Machines to any buyer notwithstanding
the restrictions set forth in Section 12.2 of the Purchase Agreement.
9. General Provisions.
9.1 Security. The parties acknowledge that Purchaser's obligations
under this Agreement are secured by (i) that certain Security Agreement of even
date herewith executed by Purchaser in favor of Seller and (ii) that certain
Pledge Agreement of even date herewith executed by Alfred Thumim and Sherry
Lahav in favor of Seller.
9.2 Notices. Any and all notices and communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
personally, at the time of receipt if by telegram, telex, facsimile or similar
means of communication, or three (3) days after mailing when deposited in the
United States mail, first class postage prepaid, addressed to the parties at the
addresses set forth immediately following the
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signatures of the parties hereto or to such other addresses as either of the
parties hereto may from time to time in writing designate to the other party
hereto.
9.3 Severability. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not be affected thereby.
9.4 Relationship of Parties. Nothing contained in this Agreement
shall be deemed or construed to create the relationship of principal and agent
or of partnership or joint venture, and neither party shall hold itself out as
an agent, legal representative, partner, subsidiary or joint venturer of the
other. Neither party shall have any right to bind the other party, or to make
any representations or warranties or to perform any act on behalf of the other
party, except as authorized in writing by such other party in its sole
discretion.
9.5 Assignment. This Agreement and the rights and obligations
hereunder may not be assigned without the consent of the other party, except
that Seller shall be entitled to assign its rights hereunder to a financial
institution as security for its obligations to such institution or as part of a
transfer of Seller's business.
9.6 Entire Agreement; Captions. This Agreement, together with the
documents referenced herein, contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior written or
oral commitments, arrangements or understandings with respect thereto. This
Agreement may be modified, and any of its provisions waived, only by a written
instrument duly executed by the parties hereto. The captions in this Agreement
are for convenience of reference only, do
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not form a part hereof and do not in any way modify, interpret or construe the
intentions of the parties.
9.7 Attorneys' Fees. In the event of a dispute related to this
Agreement or any action to enforce its provisions, the prevailing party shall be
entitled to recover from the other party its costs and reasonable attorneys'
fees.
9.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
be considered one and the same instrument.
9.9 Governing Law. This Agreement shall be governed by the laws of
the State of California, without giving effect to its conflict of laws rules.
Any actions or proceedings under this Agreement shall take place in a court of
competent jurisdiction in the State of New Jersey.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
SELLER:
DYNAMOTION/ATI CORP.
By:_________________________
Jon R. Hopper, President
ADDRESS:
1639 East Edinger Avenue
Santa Ana, CA 92705
ADVANCED TECHNOLOGY INC.
By:__________________________
Alfred Thumim
ADDRESS:
180 Broad Street
Carlstadt, NJ 07072
Attention: Dr. Alfred Thumim
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EXHIBIT B
SECURED PROMISSORY NOTE
$800,000.00 August 20, 1996
Advanced Technology Inc., a New Jersey corporation
(the "Corporation"), hereby promises to pay to Dynamotion/ATI Corp., a New York
corporation (the "Holder"), at 1639 East Edinger Avenue, Santa Ana, California
92705, the aggregate principal amount of Eight Hundred Thousand and No/100
Dollars ($800,000.00) together with interest thereon calculated from the date
hereof in accordance with the provisions of Section 1 herein.
This Secured Promissory Note (this "Note") is issued pursuant to
the terms and conditions of that certain Purchase and Sale Agreement of even
date herewith (the "Purchase Agreement"), between the Corporation and the
Holder. This Note is secured pursuant to (i) that certain Security Agreement of
even date herewith (the "Security Agreement") by the Corporation in favor of the
Holder, and (ii) that certain Pledge Agreement of even date herewith (the
"Pledge Agreement") by Alfred Thumim and Jack Lahav (the "Pledgors") in favor of
the Holder. Substantially concurrently with the execution of this Note, the
Corporation and Holder are entering into a Finished Goods Agreement (the
"Finished Goods Agreement").
1. Payment of Principal and Interest. Interest will accrue on the
outstanding principal amount of this Note on a daily basis at the rate equal to
the "Prime Rate" as published in the West Coast edition of the Wall Street
Journal. In the event The Wall Street Journal (i) publishes more than any one
Prime Rate, the higher or highest of such rates shall apply or (ii) publishes a
retraction or correction of any such rate, the rate reported in such retraction
or correction shall apply. In the event that the Prime Rate is, from time to
time hereafter, changed, adjustment in the rate of interest payable hereunder
shall be made on the effective date of such change. Accrued interest shall be
payable commencing December 31, 1996 and continuing thereafter quarterly on the
last day of each March, June, September and December until this Note is paid in
full.
On the tenth day of each calendar month, the Corporation shall
pay to the Holder an amount equal to
<PAGE> 36
fifteen percent of the "gross revenue" of the Corporation for the immediately
preceding month. Each such installment, when paid, shall be credited against
remaining principal. As used herein, "gross revenue" shall mean all gross
revenue of the Corporation, calculated in accordance with generally accepted
accounting principles consistently applied and on the same basis as historically
used by Holder, with only an appropriate deduction for amortization of warranty
reserves.
Notwithstanding the foregoing, all outstanding principal and
accrued interest under this Note shall be due and payable on December 31, 1997.
All payments made hereunder shall be in United States currency
drawn on a United States bank, unless otherwise specifically agreed upon by the
Holder.
2. Records and Inspection. The Corporation shall keep accurate
books of account and records concerning its business operations. On or before
the tenth day of each calendar month after the date hereof, the Corporation
shall submit to the Holder a statement certified by the Corporation's Chief
Financial Officer setting forth the Corporation's gross revenue for the
preceding month and the calculation of the payment due pursuant to Section 1
hereof. Within ninety (90) days after the end of each calendar year during the
term hereof, the Corporation shall submit to the Holder an audited or reviewed
financial statement for the preceding calendar year. Upon the request of the
Holder, the Corporation shall permit the Holder's outside certified public
accountants or another party mutually acceptable to the Corporation and the
Holder, with prior reasonable notice to the Corporation and subject to
reasonable confidentiality agreements, to examine and inspect the Corporation's
books of account and records during the Corporation's normal business hours. If
any such examination reveals a difference in the amount due to the Holder
hereunder for any quarterly period of greater than three percent and which
difference is also greater than $3,000, then the Corporation shall bear the cost
of such examination. The receipt and/or acceptance by the Holder of any of the
statements furnished or amounts paid hereunder to the Holder (or the cashing of
any checks paid hereunder) shall not preclude the Holder from questioning the
correctness thereof at any time and, in the event that any inconsistencies or
mistakes are discovered in such statements or payments, they shall immediately
be rectified by the Corporation and the appropriate payment shall be made.
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<PAGE> 37
3. Optional Prepayments. The Corporation may, at any time and
from time to time without premium or penalty, prepay all or a portion of the
outstanding principal amount of this Note and any accrued and unpaid interest
thereon.
4. Defaults and Remedies.
(a) Definition. For the purposes of this Note, an "Event of
Default" will be deemed to have occurred if:
(i) the Corporation shall fail to pay any principal or
interest under this Note when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of maturity
or at any other date fixed for payment or shall fail to pay any amount
owing under the Finished Goods Agreement and in either case such failure is
not cured within three (3) business days after the delivery of notice of
such failure to the Corporation;
(ii) a default in the performance of any other covenant or
agreement contained in this Note, the Purchase Agreement, the Security
Agreement, the Finished Goods Agreement or the Pledge Agreement occurs
which if subject to being cured is not cured within ten (10) after the
delivery of notice of such failure to the Corporation;
(iii) any representation or warranty made by or on behalf
of the Corporation in the Purchase Agreement, the Security Agreement or the
Finished Goods Agreement or by or on behalf of the Pledgors in the Pledge
Agreement or in any document or instrument delivered pursuant to or in
connection with such agreements shall prove to have been untrue or
misleading in any material respect as of the date it was made, furnished or
delivered and which, if subject to being cured, is not cured within ten
(10) after the delivery of notice of such failure to the Corporation;
(iv) any of the following shall occur or exist with
respect to the Corporation:
(A) its commencement of a voluntary case under Title
11 of the United States Code as from time to time in effect, or its
authorizing, by appropriate proceedings of its board of directors or
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other governing body, the commencement of such a voluntary case;
(B) its filing an answer or other pleading admitting
or failing to deny the material allegations of a petition filed against it
commencing an involuntary case under said Title 11, or seeking, consenting
to or acquiescing in the relief therein provided, or its failing to timely
controvert the material allegations of any such petition;
(C) the entry of an order for relief against it in any
involuntary case commenced under said Title 11 which remains undischarged
or unstayed for more than thirty (30) days;
(D) its seeking relief as a debtor under any
applicable law, other than said Title 11, of any jurisdiction relating to
the liquidation or reorganization of debtors or to the modification or
alteration of the rights of creditors, or its consenting to or acquiescing
in such relief;
(E) entry of an order by a court of competent
jurisdiction finding it to be bankrupt or insolvent or ordering or
approving its liquidation, reorganization or any modification or alteration
of the rights of its creditors which remains undischarged or unstayed for
more than thirty (30) days;
(F) the entry of an order by a court of competent
jurisdiction assuming custody of, or appointing a receiver or other
custodian for, all or a substantial part of its property which remains
undischarged or unstayed for more than thirty (30) days; or
(G) its making an assignment for the benefit of, or
entering into a composition with, its creditors, or appointing or
consenting to the appointment of a receiver or other custodian for all or a
substantial part of its property; or
(v) there occurs an Event of Default under and as defined
in either the Security Agreement or the Pledge Agreement.
(b) Consequences of Events of Default.
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<PAGE> 39
(i) If an Event of Default (other than an Event of Default
specified in clause (a)(iv) above) occurs and is continuing, the Holder of
this Note may declare the unpaid principal and accrued interest on this
Note to be due and payable; provided that if an Event of Default specified
in clause (a)(iv) of this Section 4 occurs, such an amount shall ipso facto
become and be immediately due and payable without any declaration or other
act on the part of the Holder hereof. In addition, if an Event of Default
involves the non-payment of principal or interest hereunder, the
outstanding principal balance and all accrued and unpaid interest on the
date of the Event of Default shall bear interest from such date and for so
long as such Event of Default continues at a rate equal to three percent
over the then Prime Rate compounded annually, but not in excess of the
maximum allowable rate.
5. Costs and Expenses. The Corporation agrees to pay, immediately
upon demand, all costs and expenses of Holder incurred in the collection or
administration of this Note or the protection of its rights under this Note
including, without limitation, reasonable attorneys' fees and disbursements.
6. Waiver. The Corporation for itself, its legal representatives,
successors and assigns, respectively, waives presentment, demand, protest and
notice of dishonor.
7. Governing Law. This Note and the rights and obligations of the
parties hereto shall be governed by and construed and enforced in accordance
with the laws of the State of California. Any actions or proceedings under this
Agreement shall take place in a court of competent jurisdiction in the State of
New Jersey.
8. Amendments and Waiver. No course of dealing between the
Corporation and any holder of this Note and no failure or delay on the part of
any holder of this Note in exercising any right under this Note shall operate as
a waiver of the rights of any holder of this Note, nor shall any single or
partial exercise of any right hereunder prevent any other or further exercise of
such right or of any other right. No covenant or other provision of this Note
may be changed, and no default or Event of Default in connection herewith may be
waived, otherwise than by a written instrument signed by the party consenting to
such change or waiving such default or Event of Default.
-5-
<PAGE> 40
9. Assignment. No voluntary assignment or transfer of this Note
may be made by the Holder without the consent of the Corporation; provided,
however, that nothing contained herein shall prevent (i) the Holder from making
a collateral assignment of this Note to its lender, (ii) the Holder from
granting a security interest in this Note or its rights under this Note or (iii)
the holder of the collateral assignment or security interest from exercising its
rights with respect to this Note.
10. Offset. The Corporation's right of offset with respect to
this Note is subject to that certain letter agreement of even date herewith
between the Holder and the Corporation.
[Signature Page Follows]
<PAGE> 41
IN WITNESS WHEREOF, the Corporation has executed
and delivered this Note on the date hereof.
"CORPORATION"
ADVANCED TECHNOLOGY INC., a New
Jersey corporation
By:_______________________________
Dr. Alfred I. Thumim, President
<PAGE> 42
EXHIBIT C
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made and entered
into as of August 20, 1996, by and between Advanced Technology Inc., a New
Jersey corporation (the "Debtor"), and Dynamotion/ATI Corp., a New York
corporation (the "Secured Party").
RECITALS
A. Concurrently herewith, the Secured Party has agreed to sell
certain of its assets to the Debtor pursuant to (i) that certain Purchase and
Sale Agreement, and (ii) that certain Finished Goods Agreement, both of even
date herewith (collectively, the "Purchase Agreements");
B. In consideration of the transfer of assets pursuant to the
Purchase and Sale Agreement, the Debtor has delivered to Secured Party that
certain Secured Promissory Note of even date herewith in the principal amount of
$800,000 (the "Note"); and
C. The Debtor desires to provide security to Secured Party for
its obligations under the Note and the Purchase Agreements, and the Secured
Party desires to obtain such security on the terms and conditions contained
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings:
1.1 "Collateral" means the following:
(a) All accounts receivable and other accounts of the Debtor
including, but not limited to, all present and future accounts, chattel paper,
security agreements, liens and pledges (whether voluntary or involuntary), debts
secured thereby, documents, notes, drafts, instruments and all other rights to
the payment of money, whether due or to become due and whether or not earned by
performance;
(b) All cash, bank deposits, deposit accounts, checks,
certificates of deposit, checking and savings accounts, bankers' acceptances,
letters of credit, United States obligations, state and municipal obligations,
obligations of
<PAGE> 43
foreign governments and subdivisions thereof, commercial paper, marketable
securities, notes, bonds debentures of and claims against corporations, joint
ventures, persons, partnerships, and other entities of every description, and
all other like documents and instruments, whether now owned or hereafter
acquired;
(c) All present and hereafter acquired goods and equipment
wherever located, including but not limited to machinery and machine tools with
motors, controls, attachments, parts tools and accessories incidental thereto;
all present and future furniture, furnishings, fixtures and motor vehicles,
tools, dies, drawings, blueprints, catalogs and computer programs;
(d) All inventory now existing or hereafter acquired,
including, without limitation, all goods, merchandise, raw materials, goods in
process, finished and unfinished goods and other tangible personal property held
for sale or lease or furnished or to be furnished under contracts of service or
used or consumed in the Debtor's business, wherever located whether in the
possession of the Debtor, warehouseman, bailee or any other person;
(e) All present and hereafter acquired patents, patent
applications, patent licenses, trademarks (and all goodwill of the Debtor
connected with the use of, and symbolized by, such trademarks), copyrights,
trade secrets, proprietary or confidential information, inventions and technical
information, procedures, designs, knowledge, know-how, software, drawings and
all remedies, records and data related to any of the foregoing, and all contract
rights, leases, and general intangibles;
(f) All present and future books and records pertaining to
the foregoing; and
(g) All substitutions, replacements, additions and proceeds
to or of any of the foregoing, including but not limited to money, deposit
accounts, goods, choses in action, causes of action and other tangible or
intangible property received upon the sale or disposition of the foregoing.
1.2 "Event of Default" has the meaning given to that term in
Section 7.
1.3 "Obligations" means (a) any and all obligations, debts,
liabilities and indebtedness of any kind or nature whatsoever arising under this
Agreement, the Note or the Purchase Agreements, whether due or not due, absolute
or contingent, liquidated or unliquidated, (b) prompt and complete performance
of each covenant, agreement, obligation or promise of the Debtor contained in
this Agreement, the Note or the Purchase Agreements,
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<PAGE> 44
(c) performance of each covenant, agreement, obligation, or promise contained in
any and all amendments, modifications, renewals and/or extensions of any of the
foregoing, and (d) all other obligations and liabilities of the Debtor to
Secured Party of any kind and nature, whether heretofore, now or hereafter made,
incurred or created.
2. Grant of Security Interest. To secure the payment and
performance by the Debtor of the Obligations, the Debtor hereby grants, assigns
and transfers to the Secured Party a continuing security interest in all of the
Debtor's right, title and interest in and to the Collateral.
3. Representations and Warranties. The Debtor hereby represents
and warrants to the Secured Party as follows:
3.1 Organization and Powers. The Debtor is a corporation
duly organized and validly existing under the laws of the State of New Jersey.
The Debtor has all requisite power and authority to own and operate its
properties, to carry on its business as now conducted and to enter into and
perform this Agreement.
3.2 Good Standing. The Debtor has made all corporate filings
and is in good standing in the State of New Jersey and in each other
jurisdiction in which the character of the property it owns or the nature of the
business it transacts makes such filings necessary and where the failure to make
such filings would have a material adverse effect on the business, operations,
assets or condition (financial or otherwise) of the Debtor.
3.3 Debtor's Address. The Debtor's chief executive office
and principal place of business is located at 180 Broad Street, Carlstadt, New
Jersey.
3.4 No Conflict. Neither the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby nor the
fulfillment of or compliance with the terms and conditions of this Agreement
conflicts with or shall result in a breach of the terms, conditions or
provisions of the Articles of Incorporation or Bylaws of the Debtor.
3.5 Location of Collateral. Within thirty (30) days of the
date hereof, the Debtor will move the Collateral to and will thereafter maintain
the Collateral at the address specified in Section 3.3. Debtor shall not move
the Collateral from such address without thirty (30) days written notice to
Secured Party.
-3-
<PAGE> 45
3.6 Validity and Priority of Security Interest. This
Agreement creates a valid security interest in favor of the Secured Party in the
Collateral as it shall exist from time to time and, upon (i) the filing of
appropriate UCC-1's with the California Secretary of State and the New Jersey
Secretary of State and (b) the filing of the Patent Security Agreement (as
defined in Section 4.4 hereof) with the United States Patent and Trademark
Office, the Secured Party shall have a first priority security interest in the
Collateral, except as provided in Section 6 below.
3.7 Name of Debtor. Unless the Debtor notifies the Secured
Party in writing to the contrary, the Debtor shall not conduct its business
under any name or style other than its name set forth on the first page of this
Agreement and the alternate name "ATI."
4. Covenants. The Debtor hereby covenants with the Secured Party,
until the payment in full of the Obligations, as follows:
4.1 Change of Address. The Debtor shall notify the Secured
Party prior to changing its name or chief executive office and principal place
of business from the location set forth in Section 3.3 of this Agreement.
4.2 Additional Filings. The Debtor shall cooper- ate with
the Secured Party in preparing, executing and filing all financing statements,
continuation statements and instruments necessary to provide the Secured Party
continuously with a prior perfected security interest in the Collateral. The
Debtor shall furnish to the Secured Party upon request copies of any financing
statements, continuation statements or other instruments creating and perfecting
a security interest of the Secured Party in the Collateral.
4.3 Records of Collateral. The Debtor at all times shall
keep accurate and complete records with respect to the Collateral, including an
up-to-date list describing the accounts receivable and the names and addresses
of all account debtors in reasonable detail, and agrees that the representatives
of the Secured Party shall have the right, at any time during normal business
hours or any other reasonable time, and from time to time, to call at the
Debtor's place or places of business where the records pertaining to the
Collateral may be kept and to inspect such records and to make abstracts
therefrom or copies thereof; in addition, the Debtor shall furnish the Secured
Party with periodic reports as to the Collateral, in such form and detail and at
such times as the Secured Party may reasonably require.
-4-
<PAGE> 46
4.4 Patent Covenants. The Debtor shall concurrently with the
execution of this Agreement deliver to Secured Party a Patent Security Agreement
in substantially the form of Annex "A" hereto (the "Patent Security Agreement")
and all other documents, instruments and other items as may be necessary for
Secured Party to file the Patent Security Agreement with the United States
Patent and Trademark Office and any similar domestic or foreign office,
department or agency. If, before the Obligations are paid in full, the Debtor
obtains any new patents or patent applications or becomes a licensee under any
patent licenses, Debtor shall give Secured Party prompt written notice thereof
and shall amend the Patent Security Agreement to include any such item.
5. Notices. The Debtor covenants that, as soon as practicable,
and in any event within three (3) days, it shall notify the Secured Party of the
following:
5.1 Event of Default. The occurrence or non- occurrence of
any event which constitutes, or which with the passage of time would constitute,
an Event of Default under this Agreement.
5.2 Legal Process. Any attachment or other legal process
levied against any of the Collateral.
5.3 Information Regarding Collateral. Any information
received by the Debtor relevant to the Collateral which may in any manner
substantially adversely affect the value of the Collateral or the rights and
remedies of the Secured Party with respect thereto.
5.4 Material Adverse Change. Any material adverse change in
the business, assets or condition (financial or otherwise) of the Debtor.
Any notice delivered pursuant to this Section 5 shall set forth the nature of
such matter and the action which the Debtor proposes to take with respect to
such matter.
6. Subordination. The Secured Party hereby agrees that the
security interest granted hereby shall be self- subordinating to any security
interest in the Collateral granted by the Debtor to Fimanor Financial
Management, A.G., or a successor unaffiliated institutional secured lender of
the Company, to the extent of the first $1,000,000 of the Debtor's obligation to
such lender.
7. Events of Default and Remedies.
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<PAGE> 47
7.1 Events of Default. The occurrence of any of the
following events is an "Event of Default" hereunder:
(a) Failure to Pay. The Debtor fails to pay when due
any of the Obligations after the lapse of any applicable cure period.
(b) Event of Default Under Note. There occurs any Event
of Default under and as defined in the Note.
(c) Involuntary Proceedings. Without the application or
consent of the Debtor (i) a receiver, trustee, custodian or similar officer is
appointed for the Debtor or for any substantial part of its property, or (ii)
any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceedings under the laws of any
jurisdiction is instituted (by petition, application, or otherwise) against the
Debtor and such appointment or proceedings remains unstayed or undismissed for a
period of thirty (30) days.
(d) Voluntary Proceedings. The Debtor (i) admits in
writing its inability to pay its debts when due, or (ii) makes an assignment for
the benefit of creditors, or (iii) applies for or consents to the appointment of
any receiver, trustee, custodian or similar officer for the Debtor or for any
substantial part of its property, or (iv) institutes (by petition, application,
or otherwise) or consents to any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceedings under the laws of any jurisdiction against the Debtor or (v)
approves or adopts any resolution or otherwise authorizes action to approve any
of the foregoing.
7.2 Remedies on Default. Upon the occurrence of any Event of
Default, the Secured Party may, at its option, without notice to or demand on
the Debtor, declare all Obligations immediately due and payable (provided that
the Obligations shall automatically become due and payable upon an Event of
Default specified in subsections (d) and (e) of Section 7.1), and the Secured
Party shall have all rights and remedies of a secured party under the Uniform
Commercial Code and other applicable law as well as the following rights and
remedies, all of which may be exercised with or without further notice to the
Debtor, at the Secured Party's sole option and as the Secured Party in its sole
discretion may deem advisable:
a. To notify any and all obligors on the Collateral that the
same has been assigned to the Secured Party and that all payments thereof are to
be made directly to the Secured Party;
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<PAGE> 48
b. To settle, compromise or release, on terms acceptable to
the Secured Party, in whole or in part, any amounts owing on the Collateral, and
to extend the time of payment, make allowances and adjustments and to issue
credits in the Secured Party's name or in the name of the Debtor in respect
thereof;
c. To sell or otherwise dispose of the Collateral or any
part thereof, either at public or private sale, on credit or otherwise, with or
without representations or warranties, and upon such terms as shall be
acceptable to Secured Party;
d. Remove the Collateral from any premises where the same
may be located, as well as all documents, instruments, files and records
relating to the Collateral, and the Secured Party may, at the Debtor's expense,
use the supplies and space of the Debtor at its places of business as may be
necessary to properly administer and control the Collateral or the handling of
collections and realizations thereon; and
e. Take or bring, in the Secured Party's name or in the name
of the Debtor, all steps, actions, suits or proceedings deemed by the Secured
Parties necessary or desirable to effect collection of or to realize upon the
Collateral.
The net cash proceeds resulting from the collection,
liquidation, sale or other disposition of the Collateral shall be applied first
to the expenses (including all attorneys' fees) of retaking, holding, storing,
processing and preparing for sale, selling, collecting, liquidating and the
like, and then to the satisfaction of all Obligations secured hereby,
application as to any particular obligation or indebtedness or against principal
or interest to be in the Secured Party's sole discretion. The Debtor shall be
liable to the Secured Party and shall pay to the Secured Party on demand any
deficiency which may remain after such sale, disposition, collection or
liquidation of Collateral.
The Secured Party shall have the right to enforce one or
more remedies provided by this Section 7.2 successively or concurrently, and
such action shall not prevent the Secured Party from pursuing any other remedies
which it may have.
8. MISCELLANEOUS.
8.1 Headings. Section and other headings contained in this
Agreement are solely for the convenience of the parties hereto and shall not be
held to define, construe or limit the meaning of any of the provisions of this
Agreement.
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<PAGE> 49
8.2 Governing Law. The laws of the State of California shall
govern the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties hereto. Any actions or
proceedings under this Agreement shall take place in a court of competent
jurisdiction in the State of New Jersey.
8.3 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties.
8.4 Binding Effect; Parties in Interest. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Nothing in this Agreement, expressed or
implied, is intended to confer upon any person or entity other than the parties
hereto any rights or remedies under or by reason of this Agreement.
8.5 Notices. All notices and other communications required
or which may be given hereunder shall be in writing and shall be deemed
effectively given or received for all purposes only (i) when presented
personally, (ii) on receipt when mailed by U.S. first class mail, registered or
certified, postage prepaid, return receipt requested, (iii) one day after being
sent if sent by professional overnight courier or messenger service guaranteeing
one-day delivery with receipt confirmed by the courier, or (iv) on the date of
transmission if sent by telegram, telex, telecopy or other means of electronic
"hard copy" transmission, with receipt confirmed by answer back or otherwise,
addressed as follows:
If to the Debtor:
Advanced Technology Inc.
180 Broad Street
Carlstadt, New Jersey 07072
Facsimile No.: (201) 935-0104
Attention: Dr. Alfred Thumim, President
With a copy to:
M. Goodman & Associates, P.C.
East 80 Route 4
Suite 100
Paramus, New Jersey 07652
Facsimile No.: (201) 712-9775
Attention Michael S. Goodman, Esq.
-8-
<PAGE> 50
If to the Secured Party:
Dynamotion/ATI Corp.
1639 East Edinger Avenue
Santa Ana, California 92705
Facsimile No.: (714) 541-0307
Attention: Jon R. Hopper, President
With a copy to:
Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, 17th Floor
Costa Mesa, California 92626
Facsimile No.: (714) 979-1921
Attention: Scott N. Leslie, Esq.
or such other address as shall be furnished in writing by either party (with
respect to such party's address) to the other party pursuant to this Section .
8.6 Expenses. Each party shall bear the expenses
(including, without limitation, attorneys' fees) incurred by it in connection
with the negotiation, execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement.
8.7 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original instrument and
together shall constitute the entire Agreement.
8.8 Amendments and Waivers. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the parties
hereto. No action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by that party of its or any other party's compliance with
any representations or warranties or any terms and provisions contained herein.
The waiver by any party of a breach or default in the observance and performance
of any terms or provisions hereof shall not operate or be construed as a waiver
of any subsequent breach or default.
8.9 Attorneys' Fees. In the event any party files suit or
takes other action to enforce any of the terms of this Agreement, the prevailing
party shall be entitled to recover its attorneys' fees and costs from the other
party.
8.10 Gender and Number. At each place in this Agreement
where the context so requires, the masculine gender
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<PAGE> 51
includes the feminine and neuter and the singular includes the plural and vice
versa.
8.11 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions,
and this Agreement shall be construed in all respects as if any invalid or
unenforceable provision were omitted.
8.12 Holidays. If any date on which action is to be taken
under this Agreement occurs, or if any period during which action is to be taken
under this Agreement ends, on a Saturday, Sunday or Federal Reserve Bank
holiday, the date or period shall be extended to the next succeeding day which
is not a Saturday, Sunday or Federal Reserve Bank holiday.
8.13 Further Action. Each party agrees to perform any
further acts and to execute and deliver any other documents which may be
reasonably necessary to effect the provisions of this Agreement.
8.14 Survival of Warranties. All agreements, representations
and warranties made in this Agreement shall survive the execution and delivery
of this Agreement and shall continue until any and all Obligations have been
paid and performed in full.
[Signatures follow]
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<PAGE> 52
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date and year first above written.
"DEBTOR"
Advanced Technology Inc., a
New Jersey corporation
By: ____________________________
Dr. Alfred Thumim, President
"SECURED PARTY"
Dynamotion/ATI Corp., a New
York corporation
By: ____________________________
Jon R. Hopper, President
-11-
<PAGE> 53
ANNEX "A"
PATENT SECURITY AGREEMENT
WHEREAS, Advanced Technology Inc., a New Jersey corporation (the
"Debtor"), owns the patents listed on Schedule 1 annexed hereto (the "Collateral
Patents"); and
WHEREAS, the Debtor and Dynamotion ATI/Corp., a New York
corporation (the "Secured Party"), are parties to that certain Purchase and Sale
Agreement dated as of August 20, 1996 and certain related agreements of even
date therewith, providing for certain obligations of the Debtor to the Secured
Party; and
WHEREAS, pursuant to the terms of a Security Agreement dated as
of August 20, 1996 (as the same may be amended and in effect from time to time,
the "Security Agreement"), between the Debtor and the Secured Party, the Debtor
has granted to the Secured Party security interests in certain assets of the
Debtor, including all right, title and interest of the Debtor in, to and under
the Collateral Patents and all hereafter acquired patents, patent applications
and patent licenses, and all products and proceeds thereof, to secure the
payment of all Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Debtor does hereby grant
to the Secured Party a continuing security interest in all of the Debtor's
right, title and interest in, to and under the following (all of the following
items or types of property being herein collectively referred to as the "Patent
Collateral"), whether presently existing or hereafter created or acquired:
(a) the Collateral Patents and all hereafter acquired patents, patent
applications and patent licenses, together with any re-issues,
continuations or extensions thereof, and
(b) all products and proceeds of the foregoing, including, without
limitation, any claim by the Debtor against third parties for
past, present or future infringement of any patent.
This security interest is granted in conjunction with the
security interests granted to the Secured Party pursuant to the Security
Agreement. The Debtor hereby acknowledges and affirms that the rights and
remedies of the Secured Party with respect to the security interest in the
Patent Collateral made and granted hereby are more fully set forth in the
Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.
<PAGE> 54
IN WITNESS WHEREOF, the Debtor has caused this Patent Security
Agreement to be duly executed by its duly authorized officers as of the 20th day
of August, 1996.
Advanced Technology Inc., a
New Jersey corporation
By: _______________________________
Dr. Alfred I. Thumim, President
ACKNOWLEDGED:
Dynamotion/ATI Corp., a New
York corporation
By: ____________________________
Jon R. Hopper, President
2
<PAGE> 55
Schedule 1
to Patent
Security Agreement
PATENTS
U.S. Patent No. Date Issued Related Foreign Patents
4,909,681 Mar. 20, 1990
PATENT APPLICATIONS
NONE
PATENT LICENSES
NONE
<PAGE> 56
EXHIBIT D
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement"), dated as of
the 20th day of August, 1996, is entered into by and between Alfred Thumim and
Sherry Lahav (collectively, "Pledgors") and Dynamotion/ATI Corp., a New York
corporation ("Secured Party").
RECITALS
A. Concurrently herewith, Advanced Technology Inc., a New
Jersey corporation (the "Company"), has purchased certain assets from Secured
Party pursuant to (i) that certain Purchase and Sale Agreement, and (ii) that
certain Finished Goods Agreement, both of even date herewith (collectively, the
"Purchase Agreements");
B. Under the terms of the Purchase and Sale Agreement, the
Company has delivered to Secured Party a promissory note in the principal amount
of $800,000 (the "Note"); and
C. Pledgors own all of the outstanding shares (the "Pledged
Shares") of the capital stock of the Company;
D. As an inducement for Secured Party to enter into the
Purchase Agreements, and in order to secure the Company's obligations under the
Note and the Purchase Agreements, Pledgors are willing to grant to Secured
Party, and Secured Party is desirous of obtaining from Pledgors, a pledge of the
Pledged Shares second in priority (to the extent set forth herein) to the lien
of Fimanor Financial Management, A. G. or a successor unaffiliated institutional
secured lender of the Company ("Company Lender") and on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. Pledge of Stock.
1.1 Pledge. Pledgors hereby pledge, grant a security
interest in, assign, transfer and deliver unto Secured Party and its successors
and assigns, as collateral security for the payment and performance by the
Company of the Obligations (as defined under Section 2 hereof), the Pledged
Shares. Pledgors have, prior hereto or concurrently herewith, delivered to
Michael S. Goodman, as agent for the Secured Party and the Company Lender
("Agent"), the certificates evidencing the Pledged Shares,
<PAGE> 57
accompanied by stock powers duly executed in blank. Concurrently herewith,
Pledgors have delivered to Secured Party a duly executed Collateral Agent
Agreement in form attached hereto as Exhibit "A". The Pledged Shares, together
with all other certificates, shares, securities, properties or monies as may
from time to time be pledged hereunder pursuant to the terms of Section 1.2
below shall be collectively referred to herein as the "Collateral."
1.2 Additional Property. In addition to the Pledged
Shares, Pledgors also pledge hereunder as additional collateral security for the
payment and performance by the Company of the Obligations, any and all
additional or other securities, rights or property to which a registered owner
of the Pledged Shares, or any of them, may become entitled by reason of such
ownership, including, without limitation, subscription rights, securities issued
in connection with a share dividend, stock split or in exchange or replacement
for the Pledged Shares, or any of them, in connection with any recapitalization
or other change in the capital structure of the Company, whether by merger,
consolidation, sale of assets, exchange of stock or any other manner whatsoever
and all dividends, distributions, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares.
1.3 Delivery of Additional Property. In the event
that Pledgors receive any of the securities described in Section 1.2 hereof (the
"Additional Pledged Securities") and/or any other property described in Section
1.2 hereof (the "Other Property"), Pledgors forthwith shall transfer and deliver
to Secured Party such Additional Pledged Securities (together with the
certificates evidencing the same, which shall be duly endorsed in blank or
accompanied by stock purchase powers duly executed in blank) and/or such Other
Property, all of which thereafter shall be held by Secured Party pursuant to the
terms of this Agreement as part of the Collateral; provided, however, that such
additional Pledged Securities and Other Property shall be delivered to Agent or
Company Lender so long as Company Lender has a first priority lien in the
Pledged Shares.
1.4 Transfer of Collateral. Until an Event of
Default, as defined in Section 5 below, shall have occurred, Pledgors shall
remain the record owner of the Pledged Shares and Additional Pledged Securities;
provided, however, that the Pledgors may transfer the Pledged Shares upon prior
written notice to Secured Party, provided that any Pledged Shares so transferred
shall remain pledged to Secured Party pursuant to this Agreement, and Pledgors
shall cause to be delivered to Secured Party the stock certificates evidencing
any Pledged Shares so transferred, accompanied by stock powers duly executed
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<PAGE> 58
in blank; provided, further, such stock certificates and stock powers shall be
delivered to Agent or Company Lender so long as Company Lender has a first
priority lien in the Pledged Shares. Upon an Event of Default, Secured Party may
cause the Pledged Shares and Additional Pledged Securities to be transferred,
registered or otherwise put into Secured Party's name or the name of the nominee
or nominees of Secured Party, and Pledgors shall take any steps deemed necessary
or helpful by Secured Party to cause such transfer or registration. Pledgors
hereby appoint Secured Party as Pledgors' true and lawful attorney-in-fact, with
full power of substitution, to act in Pledgors' capacity for the purpose of
signing and delivering all documents and taking such other action as Secured
Party shall deem necessary or advisable to give effect to the provisions of this
Section 1.4 and Section 6 hereof.
2. Obligations Secured. This Agreement is made and the pledge
herein is given to secure the Company's payment and performance of any and all
obligations, liabilities and indebtedness of the Company to Secured Party
pursuant to the terms of the Note and the Purchase Agreements (the
"Obligations").
3. Representations and Warranties of Pledgors. Pledgors hereby
represent and warrant to Secured Party, jointly and severally, as follows:
3.1 Ownership of the Pledged Shares. Pledgors are the
beneficial and record owner of the Pledged Shares, and the Pledged Shares
constitute 100% of the issued and outstanding capital stock of the Company;
3.2 Ownership of the Additional Pledged Securities.
Pledgors shall be the beneficial and record owner of the Additional Pledged
Securities, when duly authorized and validly issued;
3.3 Liens, Claims, Encumbrances, Etc. Pledgors own
the Pledged Shares and shall own the Additional Pledged Securities, when duly
authorized and validly issued, free and clear of any liens, claims, encumbrances
or security interests of any kind or nature whatsoever;
3.4 Pledged Shares. The Pledged Shares are duly
authorized, validly issued, fully paid and nonassessable;
3.5 Additional Pledged Securities. When duly
authorized and validly issued, the Additional Pledged Securities shall be fully
paid and nonassessable;
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3.6 Other Agreements. Pledgors are not now, and
hereafter will not be, a party to or otherwise bound by any agreement, other
than this Agreement, which restricts in any manner the rights of any present or
future holder or owner, as the case may be, of the Collateral;
3.7 Authority. Pledgors are not precluded in any
manner whatsoever from executing, and each has the requisite authority to
execute, this Agreement, and to pledge, transfer and grant a security interest
and lien in the Collateral as contemplated herein, without the approval or
authorization of any other person, including any governmental or regulatory
authority whatsoever;
3.8 First Priority Lien. The pledge, assignment and
delivery of the Collateral pursuant to this Agreement will create a valid first
priority lien on and a first priority perfected security interest in the
Collateral pledged by Pledgors, and the proceeds thereof, securing the payment
of the Obligations; provided, however, that the Secured Party hereby agrees that
the security interest granted hereby shall be self- subordinated to the security
interest in the Collateral granted by the Company to Company Lender to the
extent of the first $1,000,000 of the Company's obligation to Company Lender;
and
3.9 Due Authorization. This Agreement has been duly
authorized, executed and delivered by Pledgors and constitutes a legal, valid
and binding obligation of Pledgors enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency, or other
similar laws affecting the rights of creditors generally or by the application
of general equity principles.
4. Covenants by Pledgors. Pledgors hereby jointly and
severally covenant and agree as follows:
4.1 Sale, Encumbrance, Etc. Not to sell, contract to
sell, encumber, hypothecate or permit or suffer any attachment, security
interest, lien or other encumbrance or judgment or other judicial or involuntary
lien against, or otherwise dispose of, the Collateral or any part thereof,
unless Pledgors shall have obtained the prior written consent of Secured Party;
4.2 Defense of Collateral. To defend, at Pledgors'
sole cost and expense, the Collateral against any and all liens, charges,
security interests and other encumbrances; and
4.3 Further Actions. At the request of Secured Party
at any time and from time to time, to execute all financing
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statements and other documents reasonably deemed necessary or advisable by
Secured Party to create and perfect a security interest in, or otherwise
relating to, the Collateral.
4.4 Outstanding Shares. As owners of 100% of the
outstanding capital stock of the Company, not to allow the Company to issue any
additional shares of capital stock, unless such shares are pledged to the
Secured Party pursuant hereto.
5. Events of Default. The occurrence of any of the following
shall constitute an event of default ("Event of Default") under this Agreement:
5.1 Default on the Obligations. The Company shall
default in the performance or observance of any of the Obligations after the
lapse of any applicable cure period; provided, however, that such default shall
only constitute an Event of Default hereunder if such default arises out of or
relates to the fraud or malfeasance of either of the Pledgors; or
5.2 Breach of Representation, Warranty or Covenant.
Any representation or warranty made by Pledgors herein shall be false in any
material respect on the date such representation or warranty was made or
thereafter become false in any material respect or Pledgors fail to fulfill
their respective obligations under any covenant made pursuant to this Agreement.
Notwithstanding the foregoing in this Section 5, no Event of
Default shall be deemed to have occurred or be continuing for so long as
Pledgors in good faith dispute whether the conditions of Sections 5.1 or 5.2
hereof exist. Upon any adjudication by a court of competent jurisdiction or
decision of any arbitrator or mediator that there exists an Event of Default,
Secured Party shall have all of the rights and remedies specified herein,
notwithstanding the pendency or any appeal, motion for a new trial or other
similar action in such case.
6. Rights of Secured Party Upon Default.
6.1 Rights and Remedies of Secured Party. Upon the
occurrence and during the continuance of any Event of Default, Secured Party
shall have all of the rights and remedies accorded to a secured party by law or
in equity. Without limiting the generality of the foregoing, upon the occurrence
and during the continuance of any Event of Default, Secured Party is entitled at
its option (i) to foreclose on the Collateral, and sell or otherwise dispose of
the Collateral pursuant to Division 9 of the California Uniform Commercial Code
(the "Code"); and (ii) to incur expenses, including without limitation,
reasonable attorneys' fees and costs, in the exercise of any right or remedy
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hereunder, the repayment of which by the Company or Pledgors is secured by this
Agreement.
6.2 Method of Sale. In furtherance of its rights
under Section 6.1 hereof, Secured Party shall have the right, without demand of
performance or other demand, advertisement or notice of any kind (except such
notices as may be required by law) to or upon the Pledgors or any other person
(all and each of which demands, advertisements and/or notices are hereby
expressly waived to the extent permitted by law), to proceed to forthwith sell,
assign, give option or options to purchase, contract to sell, or otherwise
dispose of and deliver the Collateral or any part thereof in one or more
portions at public or private sale or sales at Secured Party's offices or
elsewhere at such prices and on such terms (including, without limitation, a
requirement that any purchaser of all or any part of the Collateral shall be
required to purchase the securities constituting the Collateral solely for
investment and without any intention to make a distribution thereof) as Secured
Party in his sole and absolute discretion may deem best.
6.3 Cumulative Remedies. All of the Secured Party's
rights and remedies including but not limited to the foregoing, shall be
cumulative and not exclusive and shall be enforceable alternatively,
successively or concurrently as Secured Party may deem expedient.
6.4 Private Sales. Pledgors recognize that Secured
Party may be unable or unwilling to effect a public sale of all or a part of the
Collateral by reason of certain prohibitions contained in the Securities Act of
1933, as amended (the "Act"), and in applicable state securities laws, but may
be compelled or desire to resort to one or more private sales to a restricted
group of purchasers who will be obliged to agree, among other things, to acquire
the Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Pledgors agree that private sales so made may be
at prices and on other terms less favorable to the seller than if the Collateral
were sold at public sale, and that Secured Party has no obligation to delay the
sale of any Collateral for the period of time necessary to permit the
registration of the Collateral for public sale under the Act. Without limiting
the generality of the foregoing, Secured Party in its discretion may (x) in
accordance with applicable securities laws, proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Collateral or part thereof could be or shall have been filed under such Act
(or similar statute) (y) approach and negotiate with a single possible purchaser
to effect such sale, and (z) restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment and
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not with a view to the distribution or sale of such Collateral or part thereof.
Pledgors agree that a private sale or sales made under the foregoing
circumstances shall be deemed to have been made in a commercially reasonable
manner.
6.5 Consents. If any consent, approval or
authorization of any state, municipal or other governmental department, agency
or authority should be necessary to effectuate any sale or other disposition of
the Collateral, or any partial disposition of the Collateral, Pledgors will
execute all such applications and other instruments as may be reasonably
required in connection with securing any such consent, approval or
authorization, and will otherwise use his best efforts to secure the same.
6.6 Delivery. Upon any sale or other disposition,
Secured Party shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold or disposed of. Each purchaser at any
such sale or other disposition (including Secured Party) shall hold the
Collateral free from any claim or rights of whatever kind, including any equity
or right of redemption of Pledgors. Pledgors specifically waive all rights of
redemption, stay or appraisal which they had or may have under any rule of law
or statute now existing or hereafter adopted.
7. Voting Power and Other Rights.
7.1 Rights Prior to Default. Unless and until an
Event of Default has occurred and such Event of Default is continuing, Pledgors
shall have the right to exercise any and all voting, consensual and other powers
of ownership pertaining to the Pledged Shares and Additional Pledged Securities.
7.2 Rights Following Default. Upon the occurrence of
an Event of Default and so long as such Event of Default or any other Event of
Default is continuing, and whether or not Secured Party exercises any remedy of
Secured Party, Secured Party or its nominee or nominees shall, upon written
notice delivered to Pledgors and subject to the terms of this Agreement, have
the sole and exclusive right to exercise all voting, consensual and other powers
of ownership pertaining to the Pledged Shares and Additional Pledged Securities.
This Agreement shall constitute an irrevocable proxy, coupled with interest,
during the term hereof empowering Secured Party to exercise all voting rights
with respect to the Collateral upon the occurrence of an Event of Default and
the delivery by Secured Party of such written demand until and unless such Event
of Default shall have been cured or waived by Secured Party.
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8. Modification of Obligations. Pledgors authorize Secured
Party, without notice or demand and without affecting Pledgors' liability
hereunder or the enforceability hereof, or the validity of Secured Party's
security interest in the Collateral with respect to all Obligations, from time
to time to: (a) supplement, modify, amend, extend, renew, accelerate or
otherwise change the time for payment or the terms of the Obligations, including
increase or decrease of the rate of interest thereon; (b) supplement, modify,
amend or waive, or enter into or give any agreement, approval or consent with
respect to, the Obligations or any part thereof or any security therefore; (c)
accept partial payments on the Obligations; (d) receive and hold additional
security for the Obligations or any part thereof; (e) release, reconvey,
terminate, waive, abandon, subordinate, exchange, substitute, transfer and
enforce any security, and apply any security and direct the order or manner of
sale thereof as Secured Party in its sole discretion may determine; and (f)
release any party from any personal liability with respect to the Obligations or
any part thereof.
9. Waivers. Pledgors waive any defense arising by reason of
(i) any disability or other defense of the Company with respect to the
Obligations, (ii) the cessation from any cause whatsoever of the liability of
the Company, other than by reason of the full payment and discharge of all
Obligations, or (iii) any act or omission of Secured Party or others which
directly or indirectly results in or aids the discharge or release of the
Company or the Obligations by operation of law or otherwise. Until all of the
Obligations have been paid in full, neither of the Pledgors shall have any right
of subrogation and each waives any right to enforce any remedy which Secured
Party now have or may hereafter have against the Company. Pledgors waive all
set-offs and counterclaims and all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor,
and all other notices of any kind or nature whatsoever with respect to the
Obligations.
10. Termination of Agreement. Upon payment in full of any and
all Obligations, this Agreement and the security interest created hereby in
favor of Secured Party shall terminate, and Secured Party shall return all of
the Collateral then in its possession to Pledgors.
11. Amendments. The provisions of this Agreement may not be
waived, altered, amended or repealed in whole or in part except by the written
consent of all of the parties hereto.
12. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
shall together constitute one and the same instrument.
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<PAGE> 64
13. Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be fully
severable, this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of this Agreement,
and the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of each
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable.
14. Waiver. The failure or delay on the part of any party
hereto to exercise any right, remedy, power or privilege shall not operate as a
waiver thereof. Any waiver must be in writing and signed by the party making
such waiver. A written waiver of any default shall not operate as a waiver of
any other default or of the same type of default on a future occasion.
15. Successors and Assigns. This Agreement shall be binding on
and shall inure to the benefit of the parties hereto and their respective heirs,
legal representatives, and permitted successors and assigns.
16. Necessary Acts. Each party hereto shall perform any
further acts and execute and deliver any additional agree- ments, assignments or
documents that may be reasonably necessary to carry out the provisions or to
effectuate the purposes of this Agreement.
17. Governing Law. This Agreement shall be governed by,
interpreted under, and construed and enforced in accordance with, the internal
laws of the State of California. Any actions or proceedings under this Agreement
shall take place in a court of competent jurisdiction in the State of New
Jersey.
18. Attorneys' Fees and Costs. If any legal action or other
proceeding is brought in connection with this Agreement, the successful or
prevailing party, whether or not such party has instituted the action, shall be
entitled to recover from the non-prevailing party reasonable attorneys' fees and
other costs incurred in such action or proceeding, in addition to any other
relief to which it may be entitled.
19. Notices. All notices and other communications required or
which may be given hereunder shall be in writing and shall be deemed effectively
given or received for all purposes only (i) when presented personally, (ii) on
receipt when mailed
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by U.S. first class mail, registered or certified, postage prepaid, return
receipt requested, (iii) one day after being sent if sent by professional
overnight courier or messenger service guaranteeing one-day delivery with
receipt confirmed by the courier, or (iv) on the date of transmission if sent by
telegram, telex, telecopy or other means of electronic "hard copy" transmission,
with receipt confirmed by answer back or otherwise, addressed as follows (or
addressed as any party may subsequently designate by notice in accordance with
this Section 19):
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To Secured Party: Dynamotion/ATI Corp.
1639 East Edinger Avenue
Santa Ana, California 92705
Facsimile No.: (714) 541-0307
Attention: Jon R. Hopper, President
With a copy to: Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, 17th Floor
Costa Mesa, California 92626
Facsimile No.: (714) 979-1921
Attention: Scott N. Leslie, Esq.
To Pledgors: c/o Advanced Technology Inc.
180 Broad Street
Carlstadt, New Jersey 07072
Facsimile No.: (201) 935-0104
Attention: Dr. Alfred Thumim, President
With a copy to: M. Goodman & Associates, P.C.
East 80 Route 4
Suite 100
Paramus, New Jersey 07652
Facsimile No.: (201) 712-9775
Attention Michael S. Goodman, Esq.
20. Headings and Captions. The headings and captions used
herein are solely for the purpose of reference only and are not to be considered
in connection with the construction or interpretation of this Agreement.
21. Survival of Representations and Warranties. The
representations, warranties, covenants and agreements made herein shall survive
the execution and delivery of this Agreement.
22. Time of the Essence. Time is of the essence in the
performance of the terms and provisions of this Agreement.
23. Entire Agreement. This Agreement contains all of the
agreements of the paries hereto with respect to the matters contained herein and
no prior or contemporaneous agreement or understanding, oral or written,
pertaining to any such matters shall be effective for any purpose. No provision
of this Agreement may be amended or added to except by an agreement in writing
signed by the parties hereto or their respective successors in interest and
expressly stating that it is an amendment of this Agreement.
[Signatures follow]
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IN WITNESS WHEREOF, Pledgors and Secured Party have duly
executed this Stock Pledge Agreement as of the day and year first above written.
"SECURED PARTY"
Dynamotion/ATI Corp., a New
York corporation
By: __________________________
Kirk A. Waldron, Chief
Financial Officer
"PLEDGORS"
------------------------------
Dr. Alfred Thumim
------------------------------
Sherry Lahav
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<PAGE> 68
EXHIBIT "A"
Dynamotion/ATI Corp.
1639 East Edinger Avenue
Santa Ana, California 92705
August 20, 1996
Michael S. Goodman, Esq.
East 80 Route 4
Suite 100
Paramus, New Jersey 07652
Re: Appointment as Collateral Agent
Dear Mr. Goodman:
This is in reference to that certain Stock Pledge Agreement
dated August 20, 1996 (the "Pledge Agreement") by and between Alfred Thumim and
Sherry Lahav (collectively, "Pledgors") and Dynamotion/ATI Corp., a New York
corporation ("Secured Party"). Pursuant to the Pledge Agreement, Pledgors have
granted a security interest in all of the outstanding capital stock of Advanced
Technology Inc., a New Jersey corporation (the "Company"), to Secured Party,
subject and subordinate only to the lien granted or to be granted in favor of
Fimanor Financial Management, A.G. or another unaffiliated institutional secured
lender ("Company Lender") to the extent specified in the Pledge Agreement. In
order to perfect its security interest, Secured Party desires to appoint Michael
S. Goodman as its agent ("Agent") to hold the Collateral (as defined in the
Pledge Agreement).
Secured Party acknowledges and agrees that Agent shall posses
the Collateral in order to perfect the interest of Secured Party and Company
Lender. This will confirm that Agent shall act as agent for Secured Party in the
perfection of Secured Party's security interest in the Collateral, and that
Agent's possession of the Collateral shall be deemed by all parties hereto to
constitute possession by Secured Party. By their execution of this letter where
indicated below, Secured Party hereby appoints and Agent hereby accepts such
appointment to act as Secured Party's agent with respect to the Collateral as
specified herein. Upon the occurrence of any Event of Default (as defined in the
Pledge Agreement), Agent shall immediately release the Collateral to Secured
Party.
In the event that any Company Lender demands to possess the
Collateral in order to perfect its lien therein, Agent shall deliver the
Collateral to Company Lender only upon receipt of written acknowledgment from
such lender that it also holds such Collateral as agent for Secured Party in
order to perfect Secured
<PAGE> 69
Party's continuing lien. Such acknowledgment shall be in substantially the form
of this agreement. Such acknowledgment shall also contain a covenant of Company
Lender that such lender will, immediately upon the expiration of its security
interest in the Collateral, deliver all Collateral directly to Secured Party.
Agent shall provide or, in the event of the transfer of the
Collateral to Company Lender, Pledgors shall obtain, such evidence of the
continued possession of the Collateral by Agent or Company Lender as may be
reasonably requested by Secured Party from time to time. Secured Party hereby
acknowledges and agrees that neither Agent nor Company Lender shall have any
liability to Secured Party hereunder for any actions taken by Agent or Company
Lender in good faith.
In the event that Agent is the holder of the Collateral when
any dispute arises between Secured Party and Pledgors, Agent may file a suit in
interpleader and obtain an order from a court requiring the parties to
interplead and litigate in such court as to their claims and rights. In the
event such interpleader suit is brought, Agent shall be fully released and
discharged from all obligations to further perform any and all duties or
obligations imposed upon him. Upon the filing of such interpleader suit, Agent
shall have the right to act as counsel to Pledgors in any action or proceeding
or otherwise.
[Signatures follow]
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<PAGE> 70
"SECURED PARTY"
Dynamotion/ATI Corp., a New
York corporation
By: _______________________________
Kirk A. Waldron, Chief
Financial Officer
"PLEDGORS"
-----------------------------------
Dr. Alfred Thumim
-----------------------------------
Sherry Lahav
The undersigned hereby accepts his appointment as agent
for Dynamotion/ATI Corp. on the terms set forth above.
"AGENT"
-----------------------------------
Michael S. Goodman
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EXHIBIT E
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made as of this 20th
day of August, 1996, by and among ADVANCED TECHNOLOGY INC., a New Jersey
corporation ("Buyer"), DYNAMOTION/ATI CORP., a New York corporation ("Seller"),
and Michael S. Goodman ("Escrow Agent").
RECITALS
A. Concurrently with the execution of this Agreement, Buyer
and Seller are entering into an Purchase and Sale Agreement of even date
herewith (the "Purchase Agreement"), pursuant to which Buyer is purchasing
certain assets of Seller involved in the manufacture and marketing of certain
routers specifically referenced on Schedule A thereto (the "ATI Routers").
B. In accordance with the terms of Section 15 of the Purchase
Agreement, Seller has agreed that its PMC division will continue to supply
controllers for ATI Routers for a certain period (the "Controllers").
C. Seller and Buyer have agreed that certain documentation
with respect to the ATI Routers is to be deposited with and held by the Escrow
Agent in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and the
covenants and conditions contained herein, the parties hereto agree as follows:
1. Appointment of Escrow Agent. Buyer and Seller hereby
appoint and designate Escrow Agent to hold the Escrow Deposit (defined below) in
accordance with the terms and conditions of this Agreement, and Escrow Agent
agrees to so serve and agrees to be bound by the terms of, and perform all of
the duties assigned to it under, this Agreement.
2. Deposit of Technology. Within thirty days of the execution
of this Agreement, Seller shall deliver to Escrow Agent documents and
information consisting of copies of all drawings, designs and other relevant
technical information and proprietary information (the "Information") in legible
written form (the "Escrow Deposit").
<PAGE> 72
3. Duty of Escrow Agent. The Escrow Agent shall hold and keep
in safekeeping the Escrow Deposit until such time as (a) the Escrow Deposit is
delivered to Buyer in accordance with Section 4 below, or (b) the Escrow Agent
receives joint written instructions with respect to the disposition of the
Escrow Deposit from both Buyer and Seller. If the Escrow Deposit has not been
delivered to Buyer pursuant to Section 4 below and the Escrow Agent has not
received joint written instructions from Buyer and Seller with respect to the
disposition of the Escrow Deposit by August 19, 2001, this Escrow shall
terminate, and the Escrow Agent shall return the Escrow Deposit to Seller.
4. Release of Escrow Deposit.
4.1 Requests for Release. Seller agrees that Buyer
shall have the right to have the Escrow Deposit released to it for its use
solely pursuant to the license granted pursuant to the terms of Section 5
hereof, if Seller has ceased production and distribution of the Controllers to
Buyer for a period of thirty (30) days following a scheduled delivery date. In
such event, Buyer may submit a request for release of the Escrow Deposit to
Buyer by sending written notice (a "Request Notice") to Escrow Agent and Seller.
A Request Notice shall state the basis of the Request Notice and request that
Escrow Agent distribute the Escrow Deposit to Buyer. Escrow Agent, without
concerning itself with the explanation as to the basis for or the validity of
such Request Notice, shall (a) promptly forward a copy of such Request Notice to
Seller, and (b) comply with the terms of such Request Notice on a date which is
ten (10) days after forwarding such copy, unless, prior to such time, Escrow
Agent shall have received from Seller written notice (an "Objection Notice")
objecting to the release of the Escrow Deposit and setting forth a reasonably
detailed explanation of the grounds upon which such objection is being made.
Seller shall promptly send a copy of any Objection Notice to Buyer. In the event
Escrow Agent receives an Objection Notice, without concerning itself as to the
grounds for such objection, Escrow Agent shall (a) not release the Escrow
Deposit to Buyer, and (b) continue to hold the Escrow Deposit until such matter
has been resolved as provided in Section 4.2.
4.2 Disputes. In the event there is a dispute between
Buyer and Seller as to any release of the Escrow Deposit requested by Buyer
pursuant to Section 4.1,
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Buyer and Seller shall promptly meet and attempt in good faith to resolve such
dispute. If Buyer and Seller are able to resolve such dispute, they shall
deliver to Escrow Agent a notice signed by Buyer and Seller indicating the
resolution of such dispute and instructing Escrow Agent as to what action, if
any, should be taken. Escrow Agent shall comply with such instructions as soon
as practicable. In the event Buyer and Seller are unable to resolve such
dispute, Escrow Agent shall release the Escrow Deposit only in accordance with
the final judgment or a mandatory injunction issued by any court having
jurisdiction over it upon written notice from Buyer or Seller with simultaneous
notice to the other party, or upon joint written instructions from Buyer and
Seller. Such notice shall state that such final judgment has been made and shall
include appropriate evidence thereof.
4.3 Time Limit. Buyer shall be entitled to obtain
release of the Escrow Deposit only prior to August 19, 2001, at which time the
Escrow Deposit shall be returned to Seller.
5. Limited License of Information. Seller hereby grants to
Buyer a nonexclusive, nontransferable license to utilize the Information to
produce Controllers solely for Low Speed Routers (as defined in the Purchase
Agreement) manufactured and marketed by Buyer during the time beginning with the
release of the Escrow Deposit by the Escrow Agent in accordance with this
Agreement and continuing until August 19, 2001, at which time such license shall
cease and Buyer shall return the Escrow Deposit (and all copies or reproductions
of the same) to Seller. Notwithstanding the foregoing, Buyer may (i) transfer
its rights hereunder to any purchaser of substantially all of the business of
Buyer, whether through merger, sale of assets or other transaction, and (ii) may
sublicense its rights hereunder in order to manufacture Controllers solely for
Low Speed Routers to be marketed by Buyer, provided, in either case, that Buyer
shall not transfer or sublicense such rights to a direct competitor of Seller.
6. Responsibilities of Escrow Agent. Escrow Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, to which Buyer and Seller agree to be bound:
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<PAGE> 74
(i) Escrow Agent (a) may execute any document and
exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its agents and (b) shall not incur any
liability or responsibility in respect of any action taken, suffered or omitted
in good faith and without willful misconduct or gross negligence.
(ii) Escrow Agent's sole responsibility hereunder
shall be to hold the Escrow Deposit, to release the Escrow Deposit in accordance
with the terms of this Agreement, and otherwise to discharge its obligations
hereunder, and Escrow Agent shall have no implied duties or obligations
hereunder. Escrow Agent shall not be liable for any act performed in reliance on
any document, instrument or statement reasonably believed by it to be genuine.
Escrow Agent shall be entitled to rely upon the genuineness and validity of the
signatures of the authorized representatives of Buyer and Seller and to rely and
act or refrain from acting on the basis of any notice, instrument or other paper
reasonably believed by Escrow Agent to be genuine which is delivered in
accordance with the provisions hereof.
(iii) Buyer and Seller, jointly and severally,
covenant to indemnify Escrow Agent for, and to hold it harmless against, any
loss, liability or expense (including reasonable attorneys' fees) incurred
without willful misconduct or gross negligence on the part of Escrow Agent and
arising out of or in connection with the performance by Escrow Agent of its
duties under this Agreement.
(iv) Buyer and Seller agree that should any dispute
arise with respect to the distribution or right of possession of the Escrow
Deposit held by Escrow Agent hereunder, Escrow Agent is authorized to do either
or both of the following: (a) retain in its possession, without liability to
anyone, all or any part of the Escrow Deposit until such dispute shall have been
settled by mutual agreement among the parties concerned or a court of competent
jurisdiction shall have issued a final judgment with respect thereto, and (b)
file a suit in interpleader and obtain an order from a court requiring the
parties to interplead and litigate in such court as to their claims and rights.
In the event such interpleader suit is brought, Escrow Agent shall be fully
released and discharged from all obligations to further perform any and all
duties or obligations imposed upon it. Upon the filing of such interpleader
suit, Escrow
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Agent shall have the right to act as counsel to Buyer in any action or
proceeding or otherwise.
7. Termination and Amendment. This Agreement may be amended or
terminated only by execution of a written instrument signed by the parties
hereto.
8. General Provisions.
8.1 Notices. Any notice or other communica- tion
hereunder shall be given in writing and (i) served personally or (ii) delivered
by certified mail, postage prepaid, return receipt requested, addressed to the
following addresses:
<TABLE>
<CAPTION>
<S> <C>
If to Buyer: Advanced Technology Inc.
180 Broad Street
Carlstadt, New Jersey 07072
Facsimile No.: (201) 935-0104
Attention: Dr. Alfred Thumim, President
With a copy to: M. Goodman & Associates, P.C.
East 80 Route 4
Suite 100
Paramus, New Jersey 07652
Facsimile No.: (201) 712-9775
Attention Michael S. Goodman, Esq.
If to Seller: Dynamotion/ATI Corp.
1639 East Edinger Avenue
Santa Ana, California 92705
Facsimile No.: (714) 541-0307
Attention: Jon R. Hopper, President
With a copy to: Paul, Hastings, Janofsky & Walker LLP
Attn: Scott N. Leslie, Esq.
695 Town Center Drive, 17th Floor
Costa Mesa, CA 92626-1924
If to Escrow Agent: Michael S. Goodman
East 80 Route 4
Suite 100
Paramus, New Jersey 07652
Facsimile No.: (201) 712-9775
</TABLE>
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<PAGE> 76
or to such other address as any party shall designate to the others as provided
above. Notices shall be deemed received upon the earlier of (i) actual receipt
or (ii) three business days following mailing as provided above.
8.2 Entire Agreement. This Agreement and the
documents referenced herein contain the entire agreement between the parties
hereto relating to the subject matter hereof, and all prior or contemporaneous
agreements, understandings, representations and statements, oral or written,
with respect to the subject matter hereof are hereby superseded.
8.3 Governing Law. This Agreement shall be construed
and enforced in accordance with the laws of the State of California. Any actions
or proceedings under this Agreement shall take place in a court of competent
jurisdiction in the State of New Jersey.
8.4 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
8.5 Further Assurances. Without further
consideration, each of the parties hereto agrees to execute, acknowledge and
deliver such other documents and take such further actions as may be necessary
or advisable to carry out the purposes of this Agreement.
8.6 Attorneys' Fees. In the event of any dispute
between the parties hereto in connection with this Agreement, the prevailing
party shall be entitled to recover from the losing party all of its costs and
expenses, including, without limitation, court costs and attorneys' fees.
8.7 Counterparts. This Agreement may be executed in
one or more counterparts and each such counterpart shall be deemed an original,
but all of which taken together shall constitute one and the same agreement.
[Signatures follow]
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<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
"BUYER"
ADVANCED TECHNOLOGY INC.,
a New Jersey corporation
By:_____________________________________
Title:__________________________________
"SELLER"
DYNAMOTION/ATI CORP.
a New York corporation
By:_____________________________________
Jon R. Hopper, President
"ESCROW AGENT"
________________________________________
Michael S. Goodman
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