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): November 17, 1997
SMITH CORONA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-10281 51-0286862
- -------- ------- ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
839 Route 13 South, Cortland, New York 13045
(Address of principal executive offices) (zip code)
(607) 753-6011
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
DESCRIPTION OF TRANSACTION
On November 24, 1997, Smith Corona Corporation (the "Company")
completed the sale (the "Sale") of its manufacturing operations to
The MATCO Electronics Group, Inc. ("MATCO"). In addition, the
Company entered into a long-term manufacturing agreement with MATCO
pursuant to which MATCO will manufacture Smith Corona brand name
products, including typewriters and related supplies and
accessories. The Sale included the purchase by MATCO of (i)
certain property, plant and equipment used in the manufacturing
operations, (ii) all the outstanding common stock of Smith Corona
de Mexico, S.A. de C.V., the Company's Mexican subsidiary, and
(iii) raw material and work-in-process inventories. The net
proceeds from the Sale, estimated at $14.2 million are subject to
the terms of the Stock Purchase Agreement, the Asset Purchase
Agreement and the Contract Manufacturing Agreement, copies of which
are attached hereto as Exhibits 10.1, 10.2 and 10.3, respectively.
The net gain on the Sale, originally estimated at $1.5 million, has
been revised to $3.7 million which will be recognized in the
quarter ended December 31, 1997.
Item 7. Financial Statements and Exhibits
PRO FORMA FINANCIAL STATEMENTS
The following pro forma financial statements give effect for the
Sale and are presented for illustrative purposes only. These pro
forma financial statements are not necessarily indicative of the
operating results and financial position that might have been
achieved had the Sale occurred as of an earlier date, nor are they
necessarily indicative of operating results and financial position
which may occur in the future.
A pro forma balance sheet is provided as of September 30, 1997
giving effect to the Sale as though it had been consummated on that
date. Pro forma income statements are provided for the three month
period ended September 30, 1997, and the year ended June 30, 1997,
giving effect to the Sale as though it had occurred at the
beginning of each period presented.
<PAGE>
The historical financial statements as of and for the three months
ended September 30, 1997 have been prepared in accordance with
generally accepted accounting principles applicable to interim
financial reporting and, in the opinion of management, include all
adjustments necessary for a fair presentation of financial
information for such interim periods. The historical statement of
income for the year ended June 30, 1997 is derived from the
historical consolidated financial statements of Smith Corona
Corporation and should be read in conjunction with the 1997 Annual
Report on Form 10-K.
SMITH CORONA CORPORATION AND SUBSIDIARIES
PRO FORMA BALANCE SHEET
September 30, 1997
($ in thousands)
<TABLE>
<S> <C> <C> <C> <C>
Pro Forma (unaudited)
Disposal of
Manufacturing
Actual Operations Adjustments Adjusted
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $19,016 $ (25) $14,206 (B) $33,197
Accounts receivable 11,233 (71) (18)(C) 11,144
Inventories 11,208 (4,285)(A) - 6,923
Prepaid expenses and
other current assets 4,124 (199) - 3,925
Total current assets 45,581 (4,580) 14,188 55,189
Property, plant and
equipment, net 12,168 (6,923) - 5,245
Other assets 670 (240) - 423
TOTAL $58,419 $(11,743) $14,188 $60,864
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Trade payables $ 5,732 $ (159) - $ 5,573
Accrued liabilities 10,647 (382) $ 298(C) 10,563
Income taxes payable 4,212 (147) - 4,065
Total current liabilities 20,591 (688) 298 20,201
Pension liability 4,789 - - 4,789
Postretirement benefits 5,429 - - 5,429
Other long-term liabilities 2,645 - - 2,645
Total liabilities 33,454 (688) 298 33,064
Stockholders' equity:
Common stock-2,790,907
shares issued and
outstanding 3 - - 3
Additional paid-in capital 55,169 - - 55,169
Deferred compensation (203) - - (203)
Accumulated deficit (30,004) (11,055) 13,890 (27,169)
Total stockholders' equity 24,965 (11,055) 13,890 27,800
TOTAL $58,419 $(11,743) $14,188 $60,864
</TABLE>
See accompanying notes to pro forma financial statements.
SMITH CORONA CORPORATION AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
($ in thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C>
Pro Forma (unaudited)
Disposal of
Manufacturing
Actual Operations Adjustments Adjusted
(unaudited)
Net sales $14,792 - - $14,792
Cost of goods sold 11,541 $ 45 - 11,586
Gross margin 3,251 (45) - 3,206
Selling, general and
administrative expenses 4,792 - - 4,792
Reorganization costs 61 - - 61
Other expense (income) (100) - - (100)
Operating income (loss) (1,502) (45) - 1,547
Interest (income) expense (194) 1 - (193)
Income (loss) before
income taxes (1,308) (46) - (1,354)
Income taxes (benefit) 151 (45) - 106
Net income (loss) $(1,459) $ (1) - $(1,460)
Income (loss) per common
and common equivalent
share:
Net income (loss) per
common and common
equivalent share $ (.53) $ - $ - $ (.53)
Weighted average common
and common equivalent
shares outstanding
(in thousands) 2,753 2,753 - 2,753
</TABLE>
See accompanying notes to pro forma financial statements.
SMITH CORONA CORPORATION AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED JUNE 30, 1997
($ in thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C>
Pro Forma (unaudited)
Disposal of
Manufacturing
Actual Operations Adjustments Adjusted
(unaudited)
Net sales $77,313 - - $77,313
Cost of goods sold 59,403 $ 230 - 59,633
Gross margin 17,910 (230) - 17,680
Selling, general and
administrative expenses 12,754 - - 12,754
Reorganization costs 5,864 - - 5,864
Other expense (income) 150 - - 150
Operating income (loss) (858) (230) - (1,088)
Interest (income) expense (326) 4 - (322)
Income (loss) before
income taxes (532) (234) - (766)
Income taxes (benefit) 263 (97) - 166
Income (loss) before
extraordinary gain $ (795) $(137) - $ (932)
Income (loss) per common
and common equivalent
share:
Income (loss) before
extraordinary gain $ (.32) $(.05) $ - $ (.37)
Weighted average common and
common equivalent shares
outstanding
(in thousands) 2,524 2,524 - 2,524
</TABLE>
See accompanying notes to pro forma financial statements.
SMITH CORONA CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Note 1. BASIS OF PRESENTATION
The pro forma financial statements are presented for illustrative purposes
only, giving effect for the sale of the manufacturing operations (the
"Sale") to the MATCO Electronics Group, Inc. ("MATCO"). The pro forma
income statements, and the historical statements from which they are
derived, present only income before extraordinary items and, therefore, do
not include discontinued operations, extraordinary items, and the
cumulative effects of accounting changes. The pro forma income statements
do not include the gain on the Sale of $3.7 million. Such gain will be
recorded by the Company in the quarter ended December 31, 1997.
The pro forma balance sheet as of September 30, 1997 includes the impact of
all transactions, whether of a recurring or nonrecurring nature, that can
be reasonably estimated and should be reflected as of that date.
Note 2. PRO FORMA ADJUSTMENTS
Pro forma adjustments include amounts as follows ($ in thousands):
Pro Forma Balance Sheet
(A) The purchase by MATCO of raw material and work-in-process
inventories will be funded as such inventories are projected
to be used in production.
(B) Net proceeds from the Sale
(C) Write-off of certain assets and accrual of employees'
termination pay.
Note 3. INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Historical and pro forma Income (Loss) per common and common equivalent
share for the three months ended September 30, 1997 and the twelve months
ended June 30, 1997 have been calculated based upon 2,752,505 and 2,524,126
shares of common stock outstanding, respectively.
EXHIBITS
10.1 Stock Purchase Agreement among Smith Corona Corporation and W.
Michael Driscoll, as Sellers and The MATCO Electronics Group, Inc.
and U.S. Assemblies San Diego, Inc., as Buyers dated as of November
24, 1997.
10.2 Asset Purchase Agreement among Smith Corona Corporation, as Seller,
U.S. Assemblies San Diego, Inc., as Buyer, and The MATCO Electronics
Group, Inc., as Guarantor dated as of November 14, 1997.
10.3 Contract Manufacturing Agreement, The MATCO Electronics Group, Inc.
and Smith Corona Corporation dated November 24, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: December 9, 1997 SMITH CORONA CORPORATION
By: /s/ John A. Piontkowski
John A. Piontkowski
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
By: /s/ Martin D. Wilson
Martin D. Wilson
Vice President/Controller
(Principal Accounting Officer)
Exhibit Index
10.1 Stock Purchase Agreement among Smith Corona Corporation and W.
Michael Driscoll, as Sellers and The MATCO Electronics Group, Inc.
and U.S. Assemblies San Diego, Inc., as Buyers dated as of November
24, 1997.
10.2 Asset Purchase Agreement among Smith Corona Corporation, as Seller,
U.S. Assemblies San Diego, Inc., as Buyer, and The MATCO Electronics
Group, Inc., as Guarantor dated as of November 14, 1997.
10.3 Contract Manufacturing Agreement, The MATCO Electronics Group, Inc.
and Smith Corona Corporation dated November 24, 1997. (A)
(A) [***] Confidential portions of this exhibit have been omitted and
filed separately with the Securities and Exchange Commission with a
request for confidential treatment pursuant to Rule 24b-2.
Exhibit 10.1
__________________________________________________________
STOCK PURCHASE AGREEMENT
Among
SMITH CORONA CORPORATION and
W. MICHAEL DRISCOLL, as Sellers
and
THE MATCO ELECTRONICS GROUP, INC. and
U.S. ASSEMBLIES SAN DIEGO, INC., as Buyers
Dated as of November 24, 1997
__________________________________________________________
_
TABLE OF CONTENTS
Page
ARTICLE I SALE AND PURCHASE OF SHARE 1
SECTION 1.01 SALE OF THE SHARES. 1
SECTION 1.02 PURCHASE PRICE AND PAYMENT FOR SHARES. 1
SECTION 1.03 DELIVERY OF THE SHARES. 1
ARTICLE II
CLOSING 2
SECTION 2.01 CLOSING. 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS 2
SECTION 3.01 CORPORATE ORGANIZATION AND AUTHORITY OF SCC. 2
SECTION 3.02 CORPORATE ORGANIZATION AND AUTHORITY OF SCM. 2
SECTION 3.03 SUBSIDIARIES AND EQUITY INVESTMENTS. 3
SECTION 3.04 OWNERSHIP OF SHARES. 3
SECTION 3.05 CAPITALIZATION. 3
SECTION 3.06 NO VIOLATION; CONSENTS AND APPROVALS. 3
SECTION 3.07 FINANCIAL STATEMENTS. 4
SECTION 3.08 TITLE TO PROPERTIES; ABSENCE OF LIENS. 4
SECTION 3.09 LITIGATION. 4
SECTION 3.10 COMPLIANCE WITH LAW. 4
SECTION 3.11 CONTRACTS. 4
SECTION 3.12 TAX MATTERS 5
SECTION 3.13 CERTAIN EVENTS. 6
SECTION 3.14 ENVIRONMENTAL MATTERS. 6
SECTION 3.15 MACHINERY AND EQUIPMENT. 7
SECTION 3.16 EMPLOYEES; LABOR RELATIONS. 7
SECTION 3.17 DIRECTORS AND OFFICERS. 7
SECTION 3.18 SUPPLIERS. 8
SECTION 3.19 CERTAIN TRANSACTIONS. 8
SECTION 3.20 DISCLAIMER OF OTHER REPRESENTATIONS AND
WARRANTIES; BEST KNOWLEDGE; DISCLOSURE. 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYERS 9
SECTION 4.01 ORGANIZATION. 9
SECTION 4.02 CORPORATE AUTHORITY. 9
SECTION 4.03 NO VIOLATION; CONSENTS AND APPROVALS. 9
SECTION 4.04 INVESTMENT INTENT. 10
SECTION 4.05 LITIGATION. 10
ARTICLE V
CERTAIN COVENANTS AND AGREEMENTS OF SELLERS AND BUYERS 10
SECTION 5.01 TAX COVENANTS. 10
SECTION 5.02 EXPENSES AND FINDERS' FEES. 13
SECTION 5.03 ACCESS TO INFORMATION AND CONFIDENTIALITY 13
SECTION 5.04 PRESS RELEASES. 13
SECTION 5.05 BOOKS AND RECORDS. 13
SECTION 5.06 USE OF NAMES. 14
SECTION 5.07 OFFICERS AND DIRECTORS. 14
ARTICLE VI
CONDITIONS PRECEDENT OF BUYERS 15
SECTION 6.01 OPINION OF COUNSEL. 15
SECTION 6.02 CLOSING DOCUMENTATION. 15
SECTION 6.03 APPROVAL OF LEGAL MATTERS. 15
SECTION 6.04 OTHER AGREEMENTS. 15
SECTION 6.0 CONSENTS. 16
ARTICLE VII
CONDITIONS PRECEDENT OF SELLERS 16
SECTION 7.01 OPINION OF COUNSEL. 16
SECTION 7.02 CLOSING DOCUMENTATION. 16
SECTION 7.03 APPROVAL OF LEGAL MATTERS. 16
SECTION 7.04 OTHER AGREEMENTS. 16
SECTION 7.05 CONSENTS. 17
ARTICLE VIII
INDEMNIFICATION 17
SECTION 8.01 INDEMNIFICATION BY SCC. 17
SECTION 8.02 INDEMNIFICATION BY BUYERS. 18
SECTION 8.03 REMEDIES. 19
SECTION 8.04 PERIOD OF INDEMNITY. 19
SECTION 8.05 CERTAIN LIMITATIONS. 19
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES 20
SECTION 9.01 REPRESENTATIONS AND WARRANTIES. 20
ARTICLE X
MISCELLANEOUS 20
SECTION 10.01 COOPERATION. 20
SECTION 10.02 WAIVER. 20
SECTION 10.03 NOTICES. 21
SECTION 10.04 GOVERNING LAW AND CONSENT TO JURISDICTION 22
SECTION 10.05 COUNTERPARTS. 22
SECTION 10.06 HEADINGS. 22
SECTION 10.07 ENTIRE AGREEMENT. 22
SECTION 10.08 AMENDMENT AND MODIFICATION. 22
SECTION 10.09 BINDING EFFECT; BENEFITS. 22
SECTION 10.10 ASSIGNABILITY. 23
LIST OF SCHEDULES AND EXHIBITS
Schedule 3.06 No Violations, Consents
Schedule 3.08 Title to Properties
Schedule 3.09 Litigation
Schedule 3.11 Contracts
Schedule 3.12 Tax Matters
Schedule 3.13 Certain Events
Schedule 3.14(c) Environmental Actions, Claims,
Notifications, Etc.
Schedule 3.14(d) Releases of Hazardous Substances,
Governmental Liens Resulting from
Releases or Clean-ups
Schedule 3.16 Employees; Labor Relations
Schedule 3.17 Directors and Officers
Schedule 3.18 Suppliers
Schedule 3.19 Certain Transactions
Schedule 3.20 Persons with Knowledge
Schedule 4.03 No Violations, Consents
Schedule 4.05 Litigation
Schedule 5.02 Finders' Fees
Exhibit A Opinion of Seller's Counsel
Exhibit B Opinion of Buyer's Counsel
STOCK PURCHASE AGREEMENT dated as of November 24, 1997
(together with the Schedules and Exhibits attached hereto,
the "Agreement") among SMITH CORONA CORPORATION, a Delaware
corporation ("SCC"), W. MICHAEL DRISCOLL ("Driscoll," and
together with SCC, "Sellers"), THE MATCO ELECTRONICS GROUP,
INC., a Delaware corporation ("MEG") and U.S. ASSEMBLIES SAN
DIEGO, INC., a Delaware corporation ("Assemblies," and
together with MEG, "Buyers").
W I T N E S S E T H:
WHEREAS, SCC and Driscoll are the beneficial and record
holders of all of the shares of capital stock (the "Shares")
of Smith Corona De Mexico, S.A. De C.V. ("SCM"); and
WHEREAS, Sellers wish to sell and Buyers wish to purchase
the Shares and the parties wish to consummate the other
transactions herein provided, all upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in reliance upon the representations and
warranties made herein and in consideration of the mutual
agreements herein contained, the parties agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
Section 1.01 Sale of the Shares.
At the Closing provided for in Section 2.01, Sellers
shall sell the Shares to Buyers and Buyers shall purchase the
Shares for the purchase price provided in Section 1.02.
Section 1.02 Purchase Price and Payment for Shares.
(a)
Purchase Price. As full consideration to be paid
by Buyers, the aggregate purchase price for the Shares is
$2,000,000, (the "Purchase Price").
(b)
Payment of Purchase Price. (i) At the Closing,
Buyers shall deliver to the escrow agent an amount equal to
the Purchase Price in immediately available funds by wire
transfer to an account designated by the escrow agent.
Section 1.03 Delivery of the Shares.
At the Closing, Sellers will deliver to the escrow agent
stock certificates, in form suitable for transfer, registered
in the name of Sellers, evidencing the Shares, with an
executed blank stock transfer power attached, and with all
necessary stock transfer tax stamps attached thereto.
Sellers further agree that, from and after the Closing,
they will execute and deliver to Buyers such additional
instruments and documents and take such further action as
Buyers may reasonably require in order to more fully vest,
record and/or perfect Buyers' title to, or interest in, the
Shares.
ARTICLE II
CLOSING
Section 2.01 Closing.
The closing of the transactions provided for herein (the
"Closing") will take place at the offices of Winthrop,
Stimson, Putnam & Roberts, Financial Centre, 695 East Main
Street, Stamford, Connecticut at 10:00 A.M. (local time) on
November 24, 1997 (the "Closing Date") or at such other
place, time and date as may be agreed upon by Buyers and
Sellers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Subject to the Schedules attached hereto and referred to
below, SCC (and with regard to Sections 3.01, 3.04 and 3.06,
Driscoll as to himself only and not as to SCC) represents and
warrants, to Buyers that:
Section 3.01 Corporate Organization and Authority of
SCC.
SCC is a corporation duly organized and validly existing
under the laws of the State of Delaware. SCC has full
corporate power and authority to enter into this Agreement
and all other documents required to be entered into hereunder
(this Agreement, collectively with such other documents, the
"Documents") and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance
by SCC of the Documents have been duly authorized by all
requisite corporate action. The Documents have been duly
executed and delivered by SCC and Driscoll, and (assuming due
execution and delivery by Buyers) the Documents constitute
the valid and binding obligations of SCC and Driscoll,
enforceable in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights
generally or by general equitable principles.
Section 3.02 Corporate Organization and Authority of
SCM.
SCM is a corporation duly organized, validly existing
and in good standing under the laws of the United Mexican
States and has all corporate power and authority to carry on
its business as now being conducted and to own its properties
and is duly licensed or qualified and in good standing as a
foreign corporation in each jurisdiction in which it is
required to be so licensed or so qualified. SCM has
heretofore delivered or made available to Buyers complete and
correct copies of the certificate of incorporation, by-laws
or similar corporate organizational documents of SCM as
currently in effect.
Section 3.03 Subsidiaries and Equity Investments.
SCM has no Subsidiaries (as defined below) and is not a
general partner in any partnership or coventurer in any joint
venture or other business enterprise. The term "Subsidiary"
means any corporation of which SCM, directly or indirectly,
owns or controls capital stock representing more than fifty
percent of the general voting power under ordinary
circumstances of such corporation.
Section 3.04 Ownership of Shares.
SCC and Driscoll are the lawful record and beneficial
owners of the Shares. SCC and Driscoll own the Shares free
and clear of all Encumbrances (as defined below) except for
restrictions on transfer under the laws of the United States
of America, United Mexican States and any applicable state
securities laws. SCC and
Driscoll will deliver beneficial and legal, valid and
indefeasible title to such Shares as contemplated under
Section 1.03 hereof to Buyers, free and clear of all
Encumbrances except for restrictions on transfer under
applicable securities laws.
Section 3.05 Capitalization.
The authorized capital of SCM consists of 308,000 shares
of common stock, par value 50 pesos per share (the "Common
Stock"), of which 308,000 shares are issued and outstanding
and no shares are reflected on the books and records of SCM
as treasury shares. All such issued and outstanding shares of
Common Stock are duly authorized and validly issued, fully
paid, nonassessable and were not issued in violation of any
preemptive rights. There are no outstanding options,
warrants or other rights of any kind to acquire any
additional shares of capital stock of SCM or securities
convertible into or exchangeable for, or which otherwise
confer on the holder thereof any right to acquire, any such
additional shares, nor is SCM committed to issue any such
option, warrant, right or security.
Section 3.06 No Violation; Consents and Approvals.
Except as disclosed in Schedule 3.06, neither SCC nor
Driscoll is subject to or bound by any provision of:
(a) any law, statute, rule, regulation or judicial
or administrative decision,
(b) any articles or certificate of incorporation or
bylaws or other similar organization documents,
(c) any mortgage, deed of trust, lease, note,
shareholders' agreement, bond, indenture, other instrument or
agreement, license, permit, trust, custodianship, other
restriction, or
(d) any judgment, order, writ, injunction or decree
of any court, governmental body, administrative agency or
arbitrator,
that would prevent or be violated by or that would result in
the creation of any material Encumbrance (as defined below) as
a result of, or, with respect to material agreements, under
which there would be a default or right of termination, as a
result, of the execution, delivery and performance by such
Seller of the Documents and the consummation of the
transactions contemplated thereby. Except as disclosed in
Schedule 3.06, no consent, approval or authorization of or
declaration or filing with any individual, corporation,
partnership, trust or unincorporated organization or any
government or any agency or political subdivision thereof (a
"Person") is required for the valid execution, delivery and
performance by such Seller of the Documents and the
consummation of the transactions contemplated thereby.
Section 3.07 Financial Statements.
SCM has delivered to Buyers the unaudited balance sheet of
SCM as of October 31, 1997 and the related unaudited income
statement for the fiscal year then ended (including the notes
thereto and any other information included therein).
Section 3.08 Title to Properties; Absence of Liens.
SCM has good and valid title to, or subsisting leasehold
interests in, all of its properties and assets, real or
personal, free and clear of any pledges, liens, charges,
encumbrances, easements, defects, security interests, claims,
options and restrictions of every kind ("Encumbrances").
Section 3.09 Litigation.
Except as disclosed in Schedule 3.09, there is no action,
suit, proceeding or investigation as of the date hereof
pending or, to the best knowledge of SCC, threatened against
SCM at law, in equity or otherwise, in, before, or by any
court of competent jurisdiction.
Section 3.10 Compliance with Law.
To the best knowledge of SCC the business of SCM is being
conducted in compliance with all laws, ordinances and
regulations of any governmental entity applicable to SCM. To
the best knowledge of SCC, all governmental approvals, permits
and licenses required by SCM in connection with the conduct of
its business have been obtained and are in full force and
effect and are being complied with in all material respects.
Section 3.11 Contracts.
Except as set forth in Schedule 3.11, and except for
contracts made in the ordinary and usual course of business or
in connection with this Agreement and the transactions
contemplated hereby, SCM is not as of the date hereof a party
to, or bound by, any contract of any kind to be performed
after the Closing Date pursuant to which SCM is obligated to
expend more than $5,000 in any twelve-month period and which
is not subject to cancellation by SCM without penalty or
increased cost.
Section 3.12 Tax Matters
(a) For purposes of this Agreement,
(i) "Tax" or "Taxes" shall mean any federal,
state, local, foreign or other taxes (including, without
limitation, income (net or gross), gross receipts,
profits, alternative or add-on minimum, franchise,
license, capital, capital stock, intangible, services,
premium, mining, transfer, sales, use, ad valorem,
payroll, wage, severance, employment, occupation,
property (real or personal), windfall profits, import,
excise, custom, stamp, withholding or estimated taxes),
fees, duties, assessments, withholdings or governmental
charges of any kind whatsoever (including interest,
penalties, additions to tax or additional amounts with
respect to such items) and shall include Transfer
Pricing;
(ii) "Pre-Closing Periods" shall mean all Tax
periods ending on or before the Closing Date and, with
respect to any Tax period that includes but does not end
on the Closing Date, the portion of such period that
ends on and includes the Closing Date;
(iii) "Returns" shall mean all returns,
declarations, reports, estimates, information returns
and statements of any nature regarding Taxes required to
be filed by any person or entity and relating to SCM;
(iv) "Code" shall mean the Internal Revenue Code
of 1986, as amended, or, if appropriate, any predecessor
statute; and
(v) the term "Tax deficiency" shall include a
reduction in any net operating losses.
(b) Except as disclosed in Schedule 3.12:
(i) all material Returns for all Pre-Closing
Periods required to be filed by SCM have been or will be
filed when due in timely fashion;
(ii) all Taxes shown on such Returns have been or
will be paid when due in timely fashion;
(iii) the charges, accruals and reserves for Taxes
due, or accrued but not yet due, relating to the income,
properties or operations of SCM for any Pre-Closing
Period as reflected on its books (including, without
limitation, its unaudited balance sheet as of October
31, 1997, are adequate to cover such Taxes;
(iv) to the best knowledge of SCC, there is no
action, suit, proceeding, investigation, audit or claim
now pending regarding any Taxes relating the income,
properties or operations of SCM for any Pre-Closing
Period;
(v) there are no agreements for the extension of
the time for assessment of any Taxes relating to the
income, properties or operations of SCM for any Pre
Closing Period; and
(vi) all Taxes relating to the income, properties
or operations of SCM which it is required by law to
withhold or collect have been duly withheld or
collected, and have been timely paid over to the proper
authorities to the extent due and payable.
Section 3.13 Certain Events.
Except as disclosed in Schedule 3.13, since October 31,
1997 and through the date hereof, SCM has not:
(a) changed its stated capital, redeemed any of
its Common Stock, modified any of the rights relating to the
Shares or changed its certificate of incorporation or by-
laws;
(b) acquired or disposed of any shares or
interests in other companies, partnerships or other entities;
(c) made any capital commitment concerning fixed
assets; or
(d) made or been the subject of other material
changes or events of which SCC is aware and which are not in
the ordinary course of business of SCM.
Section 3.14 Environmental Matters.
(a) As of the date of this Agreement, SCM has
obtained or applied for all permits, licenses and other such
authorizations required to be obtained for the operation of
the business of SCM under currently applicable federal, state
and local laws relating to pollution or protection of the
environment (the "Environmental Laws");
(b) To the best knowledge of SCC, SCM is, as of
the date of this Agreement, (A) in material compliance with
all material terms and conditions of the permits, licenses
and authorizations required by Environmental Laws, and (B) in
compliance with all other material limitations, restrictions,
conditions, standards, prohibitions, requirements and
obligations, contained in the Environmental Laws presently in
effect;
(c) As of the date of this Agreement, except as
disclosed in Schedule 3.14(c), there are no civil, criminal
or administrative actions, suits, hearings, proceedings,
written notices of violation, claims or demands pending or,
to the best knowledge of SCC, threatened against SCM under
the Environmental Laws; and
(d) As of the date of this Agreement, except as
disclosed in Schedule 3.14(d), to the best knowledge of SCC,
SCM has not had any reportable discharge or release of
hazardous substances as that term is defined under any
applicable Environmental Laws which has not been handled in
accordance with applicable law.
Section 3.15 Machinery and Equipment.
The equipment which is currently being used in
the manufacturing processes if taken together with the assets
of SCC being transferred pursuant to the Asset Purchase
Agreement (as defined below) are adequate to conduct the
business of SCM as currently being conducted, and are in good
operating condition, maintenance and repair, taking into
account the age thereof.
Section 3.16 Employees; Labor Relations.
As of November 1, 1997, SCM employed a total
of approximately 700 employees (the "Employees"). As of the
date hereof, except as set forth on Schedule 3.16 attached
hereto, (a) SCM is not delinquent in the payment (i) to or on
behalf of its past or present Employees of any wages,
salaries, commissions, bonuses, benefit plan contributions or
other compensation for all periods prior to the date hereof,
or (ii) of any material amount which is due and payable with
regard to any Employee to any state or state fund pursuant to
any workers' compensation statute, rule or regulation or any
amount which is due and payable to any workers' compensation
claimant or any other party arising under or with respect to
a claim that has been filed under state statutes and approved
in the ordinary course in accordance with SCM's policies
regarding workers' compensation and/or any applicable state
statute or administrative procedure; (b) to the best
knowledge of SCC, there is no unfair labor practice charge or
complaint against SCM; (c) there is no labor strike, dispute,
slowdown or stoppage actually in progress or, to the best
knowledge of SCC, threatened against SCM; (d) there are no
collective bargaining agreements currently in effect between
SCM and labor unions or organizations representing any
Employees; and (e) no material grievance or arbitration
proceedings are pending relating to SCM.
Section 3.17 Directors and Officers.
Set forth on Schedule 3.17 hereto is a list of the names
and titles of each director and officer of SCM.
Section 3.18 Suppliers.
Schedule 3.18 hereto contains a list as of the date
hereof of SCM's suppliers .
Section 3.19 Certain Transactions.
Except as set forth in Schedule 3.19, there are no
transactions between SCM or SCC (including SCC's affiliates),
and SCM's or SCC's (including SCC's affiliates) directors,
officers or salaried employees, or the family members or
affiliates of any of the above (other than for services as
employees, officers and directors), including, without
limitation, any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or
otherwise requiring payments to or from, SCC or SCM to any
such officer, director or salaried employee, family member,
or affiliate or any corporation, partnership, trust or other
entity in which such family member, affiliate, officer,
director or employee has a substantial interest or is a
shareholder, officer, director, trustee or partner.
Section 3.20 Disclaimer of Other Representations and
Warranties; Best Knowledge; Disclosure.
(a)
Sellers do not make, and have not made, any
representations or warranties relating to Sellers or
otherwise in connection with the transactions contemplated
hereby other than those expressly set out herein which are
made by Sellers. Without limiting the generality of the
foregoing, Sellers have not made, and shall not be deemed to
have made, any representations or warranties in any
presentation of the business of Sellers in connection with
the transactions contemplated hereby, and no statement
contained in any such presentation shall be deemed a
representation or warranty hereunder or otherwise. It is
understood that any cost estimates, projections, forecasts or
other predictions, any data, any financial information or any
memoranda or offering materials or presentations are not and
shall not be deemed to be or to include representations or
warranties of Sellers. No person has been authorized by
Sellers to make any representation or warranty relating to
Sellers or otherwise in connection with the transactions
contemplated hereby and, if made, such representation or
warranty must not be relied upon as having been authorized by
Sellers.
(b) Whenever a representation or warranty made by
SCC herein refers to the best knowledge of SCC, such
knowledge shall be deemed to consist only of the actual
knowledge of any of those persons listed on Schedule 3.20.
SCC has not undertaken, nor shall SCC have any duty to
undertake, any investigation concerning any matter as to
which a representation or warranty is made as to the best
knowledge of SCC.
(c) Notwithstanding anything to the contrary
contained in this Agreement or in any Schedule, any
information disclosed in one Schedule shall be deemed to be
disclosed in all Schedules. Certain information set forth in
the Schedules is included solely for informational purposes
and may not be required to be disclosed pursuant to this
Agreement. The disclosure of any information shall not be
deemed to constitute an acknowledgment that such information
is required to be disclosed in connection with the
representations and warranties
made by Sellers and in this Agreement or is material, nor
shall such information be deemed to establish a standard of
materiality.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYERS
Subject to the Schedules attached hereto and referred to
below, each Buyer as to itself only and not as to the other
Buyer represents and warrants to Sellers that:
Section 4.01 Organization.
Each Buyer is a corporation duly organized and validly
existing and in good standing under the laws of the State of
Delaware.
Section 4.02 Corporate Authority.
Each Buyer has full corporate power and authority to
enter into the Documents and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and
performance by Buyers of the Documents have been duly
authorized by all requisite corporate action. The Documents
have been duly executed and delivered by each Buyer, and
(assuming due execution and delivery by Sellers) the
Documents constitute the valid and binding obligations of
each Buyer, enforceable in accordance with their terms,
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting
creditors' rights generally or by general equitable
principles.
Section 4.03 No Violation; Consents and Approvals.
Except as disclosed in Schedule 4.03, neither Buyer is
subject to or bound by any provision of:
(a) any law, statute, rule, regulation or judicial
or administrative decision,
(b) any articles or certificate of incorporation
or bylaws or other organization documents,
(c) any mortgage, deed of trust, lease, note,
shareholders' agreement, bond, indenture, other instrument or
agreement, license, permit, trust, custodianship, other
restriction, or
(d) any judgment, order, writ, injunction or
decree of any court, governmental body, administrative agency
or arbitrator,
that would prevent or be violated by or that would result in
the creation of any material Encumbrance as a result of, or,
with respect to material agreements, under which there would
be a default or right of termination as a result of, the
execution, delivery and performance by such Buyer of the
Documents and the consummation of transactions contemplated
thereby. Except as disclosed in Schedule 4.03, no consent,
approval or authorization of or declaration or filing with any
Person is required for the valid execution, delivery and
performance by such Buyer of the Documents and the
consummation of the transactions contemplated thereby.
Section 4.04 Investment Intent.
Each Buyer is acquiring the Shares for its own account for
investment and not with a view to any distribution thereof.
Section 4.05 Litigation.
Except as disclosed in Schedule 4.05, there is no
action, suit, proceeding or investigation as of the date
hereof pending, or to the best knowledge of Buyers,
threatened against Buyers at law, in equity or otherwise,
in, before, or by any court of competent jurisdiction.
ARTICLE V
CERTAIN COVENANTS AND AGREEMENTS
OF SELLERS AND BUYERS
Section 5.01 Tax Covenants.
(a) SCC shall timely prepare and file, or cause to
be prepared and filed, all Returns of SCM for all taxable
periods ending on or prior to the Closing Date and timely pay,
or cause to be paid, when due all Taxes relating to such
Returns. Such Returns shall be prepared or completed in a
manner consistent with prior practice of SCM with respect to
Returns concerning the income, properties or operations of SCM
(including elections and accounting methods and conventions),
except as otherwise required by law or regulation or otherwise
agreed to by Buyers prior to the filing thereof.
(b) Any Taxes with respect to SCM that relate to a
tax period beginning before the Closing Date and ending after
the Closing Date (an "Overlap Period") shall be apportioned
between SCC and Buyers, (i) in the case of real and personal
property Taxes (and any other Taxes not measured or
measurable, in whole or in part, by net or gross income or
receipts), on a per diem basis and, (ii) in the case of other
Taxes, as determined from the books and records of SCM during
the portion of such period ending on the Closing Date and the
portion of such period beginning on the day following the
Closing Date consistent with the past practices of SCC.
Buyers shall cause SCM to file any Returns for any Overlap
Period, and Buyers shall pay, or cause to be paid, all state,
local or foreign Taxes shown as due on any such Returns. Tax
Returns prepared and filed by Buyers for an Overlap Period
shall be prepared in a manner consistent with past practices
employed by SCC, including election, accounting methodologies
and asset write-off periods, except as otherwise required by
law or regulation or otherwise agreed to by SCC in writing
prior to the filing thereof, and shall not inappropriately
shift items of income, gain, deduction, loss or credit into
either the Pre-Closing Tax Period or the Post-Closing Tax
Period. Buyers shall provide SCC with a copy of such Overlap
Period Tax Returns (and supporting schedules) in the form
proposed to be filed at least twenty (20) days in advance of
the due date (including extensions) for such Overlap Period
Tax Returns. SCC shall pay Buyers their share of any such
Overlap Period Taxes (to the extent SCC is liable therefor in
accordance with this Section 5.01(b) and to the extent not
already paid or reserved for by SCC) due pursuant to the
filing of any such Returns under the provisions of this
Section 5.01(b) within fifteen (15) business days after
receipt
of notice of such filing by Buyers, which notice shall set
forth in reasonable detail the calculations regarding SCC's
share of such Taxes.
(c) SCC shall have the right to represent the
interests of SCM in any Tax audit or administrative or court
proceeding relating to Returns described in Section 5.01(a)
with respect to which SCC may be liable for Taxes pursuant to
this Agreement (including any such proceedings relating to
SCM);
provided, however, that Buyers shall have the right to
participate at their own expense in any such audit or
proceeding to the extent that any such audit or proceeding may
affect the Tax liability of Buyers, any of its affiliates or
SCM for any period ending after the Closing Date and to employ
counsel of its choice at its own expense for purposes of such
participation. Notwithstanding anything to the contrary
contained or implied in this Agreement, without the prior
written approval of Buyers, which approval shall not be
unreasonably withheld, neither SCC nor any of its affiliates
shall agree or consent to compromise or settle, either
administratively or after the commencement of litigation, any
issue or claim arising in any such audit or proceeding, or
otherwise agree or consent to any Tax liability, to the extent
that any such compromise, settlement, consent or agreement may
affect the Tax liability of Buyers, any of their respective
affiliates or SCM for any period ending after the Closing
Date.
(d) Buyers shall promptly notify SCC in writing
upon
receipt by Buyers, any of their respective affiliates or SCM
of notice of any pending or threatened Tax audits or
assessments relating to the income, properties or operations
of SCM, in each case for Pre-Closing Periods only, so long as
Pre-Closing Periods remain open; provided, however, that
failure by Buyers to comply with this Section 5.01(d) shall
not affect Buyers' right to indemnification relating to Taxes
if such failure does not prejudice the rights of SCC. SCC
shall promptly notify Buyers in writing upon receipt by SCC or
any of its affiliates of notice of any pending or threatened
Tax audits or assessments relating to
the income, properties or operations of SCM, in each case for
PreClosing Periods only.
(e) Neither SCC nor any of its affiliates shall,
without the prior written consent of Buyers, file, or cause to
be filed, any amended Return or claim for Tax refund, with
respect to SCM for any Pre-Closing Period, to the extent that
any such filing may affect the Tax liability of Buyers, any of
their respective affiliates or SCM for any period ending after
the Closing Date (including, but not limited to, the
imposition of Tax deficiencies, the reduction of asset basis
or cost adjustments, the lengthening of any amortization or
depreciation periods, the denial of amortization or
depreciation deductions, or the reduction of loss or credit
carryforwards).
(f) If Buyers or any of their respective affiliates
(including SCM) receive a refund of any Taxes directly
relating to the Pre-Closing Tax Period of SCM or if SCC or any
of its affiliates receives a refund of any Taxes of SCM
directly relating to any taxable period beginning after the
Closing Date or the portion of any Overlap Period beginning on
the day after the Closing Date (collectively, the "Post-
Closing Tax Period") (including without limitation any refund
relating to a carryback of credits or limitation of any refund
relating to a carryback of credits or losses from a Post-
Closing Tax Period to a PreClosing Tax Period), the party
receiving such refund shall, within thirty (30) days after
receipt of such refund, remit such refund (net of any Tax cost
relating thereto) to SCC, in the case of Taxes relating to the
Pre-Closing Tax Period, or Buyers, in the case of Taxes
relating to the Post-Closing Tax Period. For the purposes of
this Section 5.01(f), the term "refund" shall include a
reduction in Tax and the use of an overpayment as a credit or
other Tax offset, and the receipt of a refund shall be deemed
to occur upon the filing of a return or an adjustment thereto
utilizing such reduction, overpayment or offset or upon the
receipt of cash.
(g) After the Closing Date, Buyers and SCC shall
provide each other, and Buyers shall cause SCM to provide
SCC, with such cooperation and information relating to SCM as
either party reasonably may request in (A) filing any Return,
amended Return or claim for refund, (B) determining any Tax
liability or a right to refund of Taxes, (C) conducting or
defending any audit or other proceeding in respect of Taxes
or (D) effectuating the terms of this Agreement. The parties
shall retain, and Buyers shall cause SCM to retain, all
Returns, schedules and work papers, and all material records
and other documents relating thereto, until the expiration of
the statute of limitations (and, to the extent notified by
any party, any extensions thereof) of the taxable years to
which such Returns and other documents relate and, unless
such Returns and other documents are offered and delivered to
SCC or Buyers, as applicable, until the final determination
of any Tax in respect of such years. Any information
obtained under this Section 5.01 shall be kept confidential,
except as may be otherwise necessary in connection with
filing any Return, amended Return, or claim for refund,
determining any Tax liability or right to refund of Taxes, or
in conducting or defending any audit or other proceeding in
respect of Taxes. Notwithstanding the foregoing, neither SCC
nor Buyers, nor any of their respective affiliates, shall be
required unreasonably to prepare any document, or determine
any information not then in its possession, in response to a
request under this Section 5.01(g).
Section 5.02 Expenses and Finders' Fees.
Each Buyer and each Seller will bear its own expenses in
connection with this Agreement and its performance. Each
Seller, on the one hand, and each Buyer, on the other hand,
each represent and warrant to the other that, except as set
forth on Schedule 5.02, the negotiations relative to this
Agreement and
the transactions contemplated hereby have been carried on in
such a manner as not to give rise to any valid claims against
the other party for a brokerage commission, finder's fee or
other like payment.
Section 5.03 Access to Information and Confidentiality
Buyers and the Sellers hereby confirm the terms and
provisions of that certain Confidentiality Agreement executed
by SCC and MEG dated as of July 31, 1996 (the
"Confidentiality Agreement") and hereby incorporate the
Confidentiality Agreement herein, in its entirety, by this
reference and intend to be bound by the terms thereof.
Buyers and the Sellers further acknowledge and agree that all
information provided to the Buyers hereunder shall constitute
Confidential Information (as such term is defined in the
Confidentiality Agreement), and that the provisions of this
Section 5.03, including the terms and provisions of the
Confidentiality Agreement, shall survive the termination of
this Agreement for any reason before Closing.
Section 5.04 Press Releases.
Except as required by law or stock exchange regulation,
any public announcements regarding the transactions
contemplated hereby shall be made only with the mutual
consent of Buyers and Sellers.
Section 5.05 Books and Records.
Buyers will, and will cause SCM to, retain all books,
records and other documents pertaining to the business of SCM
in existence on the Closing Date for a period of seven (7)
years from the Closing Date and to make the same available
after the Closing Date for such seven (7) year period for
inspection and copying by SCC at SCC's expense during the
normal business hours of SCM, upon reasonable request and
upon reasonable advance notice. No such books, records or
documents shall be destroyed by SCM without first advising
SCC in writing and giving SCC a reasonable opportunity to
obtain possession thereof. Without limiting the generality
of the foregoing, Buyers will, and will cause SCM to make
available to SCC and its representatives all information
deemed necessary or desirable by SCC in preparing its
financial statements and Returns and conducting any audits in
connection therewith.
Section 5.06 Use of Names.
Anything herein to the contrary notwithstanding, and
subject to rights granted to MEG in the Manufacturing
Agreement (as defined below), neither Buyer shall acquire any
interest in or right to use the name Smith Corona or any
derivatives thereof, or the respective trademarks and logos
of SCC and SCC's group of companies is being transferred
hereunder (collectively, the "Names and Logos"). Buyers
agree that they will, as promptly as practicable but in any
event within sixty (60) days following the Closing Date,
eliminate the Names and Logos from the name of SCM and remove
or obliterate all such Names and Logos from all signs,
purchase orders, invoices, sales orders, labels, letterheads,
shipping documents and other materials used by them or any of
their affiliates (including but not limited to SCM).
Notwithstanding anything herein to the contrary, Buyers agree
that after the Closing Date they will neither use, nor permit
any of their affiliates (including but not limited to SCM) to
use, (i) any purchase orders, invoices, sales orders,
letterheads or shipping documents existing on the date
hereof, which bear any of the Names and Logos or any name or
logo confusingly similar thereto, without first obliterating
or covering such Name or Logo, or (ii) any such materials not
in existence on the Closing Date which bear such Name or
Logo. At SCC's request, Buyers will cooperate, and will cause
each of their affiliates (including but not limited to SCM)
to cooperate, in taking all steps reasonably necessary in any
jurisdiction to preserve for SCC and, where appropriate,
assign to SCC, all right, title and interest in and to such
Names and Logos, the registration and usage thereof and the
goodwill associated therewith. Buyers will not, and will
cause each of their affiliates (including but not limited to
SCM) not to, misappropriate, misrepresent or otherwise
infringe, abuse or diminish the value of such Names and
Logos.
Section 5.07 Officers and Directors.
Buyers shall cause SCM, as soon as practicable after the
Closing Date, to (i) remove the existing officers and
directors of SCM and appoint new officers and directors and
(ii) approve capital reduction.
ARTICLE VI
CONDITIONS PRECEDENT OF BUYERS
Buyers need not consummate the transactions contemplated
by this Agreement unless the following conditions shall be
fulfilled or waived by Buyers
Section 6.01 Opinion of Counsel.
Buyers shall have been furnished with opinions dated the
Closing Date of Winthrop, Stimson, Putnam & Roberts and Baker
& McKenzie, counsel for Sellers, substantially in the form
attached hereto as Exhibit A.
Section 6.02 Closing Documentation.
Buyers shall have received the following documents,
agreements and instruments from Sellers:
(a) the stock certificate(s) representing the
Shares described in Section 1.03 hereof;
(b) a certificate dated as of a recent date from
the Secretary of State of the State of Delaware to the effect
that SCC is duly incorporated and in good standing in such
state;
(c) evidence, reasonably satisfactory to Buyers,
of
the authority and incumbency of the persons acting on behalf
of Sellers in connection with the execution of any document
delivered in connection with this Agreement;
(d) such other instruments and documents as Buyers
shall reasonably request not inconsistent with the provisions
hereof; and
(e) all original corporate documentation including
Certificates of Incorporation for SCM together with stock
transfer ledgers, minute books and all prior records of the
company in existence at the time of the closing included but
not limited to environmental records, tax records, customs
and export records.
Section 6.03 Approval of Legal Matters.
The form of all instruments, certificates and documents
to be executed and delivered by Sellers to Buyers pursuant to
this Agreement and all legal matters in respect of the
transactions as herein contemplated shall be reasonably
satisfactory to Buyers and their counsel, none of whose
approval shall be unreasonably withheld or delayed.
Section 6.04 Other Agreements.
The following documents shall have been entered into
simultaneously herewith: the Asset Purchase Agreement dated
the date hereof among MEG, Assemblies and SCC (the "Asset
Purchase Agreement"), the Contract Manufacturing Agreement
dated the date hereof between MEG and SCC (the "Manufacturing
Agreement") and the Sublease dated the date hereof between
Assemblies and SCC (the "Sublease").
Section 6.05 Consents.
Buyers shall have obtained consents from all parties set
forth on Schedule 4.03.
ARTICLE VII
CONDITIONS PRECEDENT OF SELLERS
Sellers need not consummate the transactions
contemplated by this Agreement unless the following
conditions shall be fulfilled or waived by Sellers:
Section 7.01 Opinion of Counsel.
Sellers shall have been furnished with an opinion dated
the Closing Date of Deily, Dautel & Mooney, LLP, counsel for
Buyers, substantially in the form attached hereto as Exhibit
B.
Section 7.02 Closing Documentation.
Sellers shall have received the following documents,
agreements and instruments from Buyers:
(a) payment of the Purchase Price pursuant to
Section 1.02 hereof;
(b) certificates dated as of a recent date from
the Secretary of State of the State of Delaware to the effect
that each Buyer is duly incorporated and in good standing in
such state;
(c) evidence, reasonably satisfactory to Sellers,
of the authority and incumbency of the persons acting on
behalf of Buyers in connection with the execution of any
document delivered in connection with this Agreement; and
(d) such other instruments and documents as
Sellers shall reasonably request not inconsistent with the
provisions hereof.
Section 7.03 Approval of Legal Matters.
The form of all certificates, instruments and documents
to be executed and delivered by Buyers to Sellers pursuant to
this Agreement and all legal matters in respect of the
transactions as herein contemplated shall be reasonably
satisfactory to Sellers and their counsel, none of whose
approval shall be unreasonably withheld or delayed.
Section 7.04 Other Agreements.
The following documents shall have been entered into
simultaneously herewith: the Asset Purchase Agreement, the
Manufacturing Agreement and the Sublease.
Section 7.05 Consents.
Sellers shall have obtained consents from all the parties
set forth on Schedule 3.06.
ARTICLE VIII
INDEMNIFICATION
Section 8.01 Indemnification by SCC.
SCC hereby agrees to defend, indemnify and hold harmless
Buyers, and their respective successors, assigns and
affiliates (collectively, the "Buyer Indemnitees") from and
against any and all losses, deficiencies, liabilities,
damages, assessments, judgments, costs and expenses,
including attorneys' fees (both those incurred in connection
with the defense or prosecution of the indefinable claim and
those incurred in connection with the enforcement of this
provision), (collectively, "Buyer Losses"), caused by,
resulting from or arising out of:
(a) (i) breaches of the representations and
warranties hereunder on the part of Sellers; (ii) failures by
Sellers to perform or otherwise fulfill any undertaking or
other agreement or obligation hereunder; (iii) any value
added taxes ("VAT") or similar taxes assessed by the United
Mexican States by reason of the sale of the Shares hereunder
or any claim with regard to Transfer Pricing for any Pre-
Closing Tax Period; (iv) any claims which may be brought by a
Management Employee (as defined in the Asset Purchase
Agreement) against SCM, or Buyers, or any of their
subsidiaries or related entities, which claims arise out of
such Management Employee's employment or separation from
employment from SCC prior to the Closing; (v) any "Continuing
Obligations" as that term is defined in a Release Agreement
dated March 13, 1997, addressed to Smith Corona Corporation
and executed by The Chase Manhattan Bank (successor by merger
to Chemical Bank), Bank of America Illinois, and others, as
to which Release Agreement SCC hereby warrants full
compliance by all parties with all conditions precedent and,
further, warrants as fully effective as of the date of this
Agreement; and/or (vi) any claims, expenses or damages that
may be brought against SCM or Buyers subsequent to the
Closing, alleging an event of default under the terms of the
lease between SCM, as lessee, and Inmobiliaria Mex-Hong, S.A.
De C.V., as lessor, by reason of the sale or transfer of the
Shares to the Buyers including but not limited to claims for
termination of said lease (SCC's indemnity shall include
necessary costs of relocation and related expenses); and/or
(b) any and all actions, suits, proceedings,
claims, demands, incident to any of the foregoing or such
indemnification; provided, however, that if any claim,
liability, demand, assessment, action, suit or proceeding
shall be asserted in respect of which a Buyer Indemnitee
proposes to
demand indemnification ("Buyer Indemnified Claims"), such
Buyer Indemnitee shall notify SCC thereof, provided, further,
however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the
extent the indemnifying party shall have been actually
prejudiced as a result of such failure. Subject to rights of
or duties to any insurer or other third Person having
liability therefor, SCC shall have the right promptly upon
receipt of such notice to assume the control of the defense,
compromise or settlement of any such Buyer Indemnified Claims
arising out of a lawsuit or claim brought by a third party
(provided that any compromise or settlement must be
reasonably approved by Buyers), including, at its own
expense, employment of counsel reasonably satisfactory to
Buyers; provided, however, that if SCC shall have exercised
its right to assume such control, Buyers may, in their sole
discretion and at their expense, employ counsel to represent
them (in addition to counsel employed by SCC) in any such
matter, and in such event counsel selected by SCC shall be
required to cooperate with such counsel of Buyers in such
defense, compromise or settlement.
Section 8.02 Indemnification by Buyers.
Each Buyer, severally and not jointly, hereby agrees to
defend, indemnify and hold harmless Sellers and their
respective successors, assigns and affiliates (collectively,
"Seller Indemnitees") from and against any and all losses,
deficiencies, liabilities, damages, assessments, judgments,
costs and expenses, including attorneys' fees (both those
incurred in connection with the defense or prosecution of the
indefinable claim and those incurred in connection with the
enforcement of this provision) (collectively, "Seller
Losses"), resulting from or arising out of:
(a) (i) breaches of representations and warranties
hereunder on the part of Buyers; (ii) failures by Buyers to
perform or otherwise fulfill any undertaking or agreement or
obligation hereunder; (iii) any action, suit, proceeding or
claim against any Seller Indemnitees with respect to
Employees incident to events arising on or after the Closing
Date including but not limited to (A) termination of
employment; (B) changes in compensation or terms and
conditions of employment; and (C) changes in or failure to
comply with the terms of any employee benefit or compensation
plans or programs (or any legal requirement applicable
thereto); (iv) any claims which may be brought by a
Management Employee against SCC, or any of its subsidiaries
or related entities, which claims arise out of such
Management Employee's employment or separation from
employment from SCM, or Buyers subsequent to the Closing;
and/or (v) any claims that may be brought against SCC for
performance under SCC's guarantee of the lease between SCM,
as lessee, and Inmobiliaria Mex-Hong, S.A. De C.V., as
lessor; and/or
(b) any and all actions, suits, proceedings,
claims and demands incident to any of the foregoing or such
indemnification; provided, however, that if any claim,
liability, demand, assessment, action, suit or proceeding
shall be asserted in respect of which such Seller Indemnitee
proposes to demand indemnification ("Seller Indemnified
Claims"), such Seller Indemnitee shall notify Buyers thereof,
provided, further, however, that failure to give such
notification shall not affect the indemnification provided
hereunder except to the extent the indemnifying party shall
have been actually prejudiced as a result of such failure.
Subject to rights of or duties to any insurer or other third
Person having liability therefor, Buyers shall have the right
promptly upon receipt of
such notice to assume the control of the defense, compromise
or settlement of any such Seller Indemnified Claims arising
out of a lawsuit or claim brought by a third party (provided
that any compromise or settlement must be reasonably approved
by Sellers) including, at their own expense, employment of
counsel reasonably satisfactory to Sellers; provided,
however, that if Buyers shall have exercised their right to
assume such control, Sellers may, in their sole discretion
and at their expense, employ counsel to represent them (in
addition to counsel employed by Buyers) in any such matter,
and in such event counsel selected by Buyers shall be
required to cooperate with such counsel of Sellers in such
defense, compromise or settlement.
Section 8.03 Remedies.
Except for the right to seek to specifically enforce the
covenants hereunder, and except as specifically provided in
this Agreement, the sole and exclusive remedy of both Buyers
and Sellers hereunder shall be restricted to the
indemnification rights set forth in this Article VIII.
Section 8.04 Period of Indemnity.
The indemnities contained in this Article VIII shall
expire one (1) year from the Closing Date, except with
respect to Sellers' indemnity for VAT, which will expire five
(5) years after the Closing Date, and except with respect to
Sellers' and Buyers' indemnity for Management Employees'
claims which will expire three (3) years after the Closing
Date and except with respect to the representations and
warranties made in Section 3.12 which indemnities shall
survive until the expiration of the applicable tax statutes
of limitation plus a period of sixty (60) days, and except
with respect to Buyer Losses or Seller Losses as to which
notice has been given pursuant to Sections 8.01 or 8.02
within such period, in which case the
indemnification period shall be extended until final
resolution of such losses.
Section 8.05 Certain Limitations.
(a) Notwithstanding any other provision hereof, in
no event shall SCC be liable for or obligated to indemnify
Buyers from and against any consequential, indirect or
special damages, including, without limitation, lost profits,
business interruption and loss of business opportunities or
goodwill. This exclusion of any such consequential, indirect
or special damages shall apply whether the action in recovery
of damages is sought based on contract, tort (including sole,
concurrent or other negligence or strict liability), statute
or otherwise. To the extent permitted by law, any statutory
remedies which are inconsistent with this Section 8.05(a) are
hereby waived by Buyers.
(b) SCC's obligation to indemnify for Buyer Losses
under Section 8.01 of this Agreement shall accrue only if the
aggregate of all such Buyer Losses exceeds Fifty Thousand
Dollars ($50,000) and then SCC shall be liable for such Buyer
Losses only to the extent that they exceed such amount with
the exception of Sellers' obligation to indemnify for Buyer
Losses in the nature of Management Employee claims set forth
in subsection 8.01(a)(iv) above, which obligation will be
without monetary limit or threshold.
(c) SCC's obligation to indemnify for Buyer Losses
shall be limited to an amount or amounts in the aggregate
equal to one hundred percent (100%) of the Purchase Price.
(d) If on the Closing Date either party (the
"first party") has actual knowledge of the untruth,
inaccuracy or breach of any representation or warranty by the
other party contained in this Agreement or the Documents,
then any liability, obligation, claim, loss, cost, damage and
expense, including attorneys fees and disbursements, arising
out of or resulting therefrom shall not be included as part
of Losses of the first party and the other party shall have
no obligation to indemnify the first party therefor.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 9.01 Representations and Warranties.
The representations and warranties of the parties
contained herein shall survive the Closing to the extent
provided in Section 8.04.
ARTICLE X
MISCELLANEOUS
Section 10.01 Cooperation.
Each of the parties hereto shall use its reasonable
efforts to take or cause to be taken all actions, to
cooperate with the other party hereto, with respect to all
actions, and to do or cause to be done all things necessary,
proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
Section 10.02 Waiver.
Any failure of Sellers to comply with any of their
obligations or agreements herein contained may be waived only
in writing by Buyers. Any failure of Buyers to comply with
any of their obligations or agreements herein contained may
be waived only in writing by Sellers.
Section 10.03 Notices.
All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given upon
receipt of: hand delivery; certified or registered mail,
return receipt requested; or telecopy transmission with
confirmation of receipt:
(i) If to Buyers, to:
The Matco Electronics Group, Inc.
320 North Jensen Road
Vestal, New York 13850
Telecopier: (607) 729-8973
Telephone: (607) 729-8981
Attention: Lawrence Davis
U.S. Assemblies San Diego, Inc.
320 North Jensen Road
Vestal,New York 13850
Telecopier: (607) 729-8973
Telephone: (607) 729-8981
Attention: Lawrence Davis
(with a copy to):
Deily, Dautel & Mooney, LLP
8 Thurlow Terrace
Albany, New York 12203-1006
Telecopier: (518) 436-8278
Telephone: (518) 436-0344
Attention: Jonathan D. Deily, Esq.
(ii) If to Sellers, to:
Smith Corona Corporation
839 Route 13 South
Cortland, New York 13045-0990
Telecopier: (607) 753-8769
Telephone: (607) 753-6011
Attention: W. Michael Driscoll
(with a copy to):
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
Stamford, CT 06904
Telecopier: (203) 965-8226
Telephone: (203) 348-2300
Attention: G. William Sisley,Esq.
Such names and addresses may be changed by written notice to
each person listed above.
Section 10.04 Governing Law and Consent to Jurisdiction.
(a) This Agreement shall be governed by and
construed in accordance with the internal substantive laws
and not the choice of law rules of the State of New York.
(b) Any judicial proceeding brought with respect
to this Agreement must be brought in any court of competent
jurisdiction in the State of New York, and, by execution and
delivery of this Agreement, each party (i) accepts, generally
and unconditionally, the exclusive jurisdiction of such
courts and any related appellate court, and irrevocably
agrees to be bound by any judgment rendered thereby in
connection with this Agreement and (ii) irrevocably waives
any objection it may now or hereafter have as to the venue of
any such suit, action or proceeding brought in such a court
or that such court is an inconvenient forum. THE PARTIES
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO
WHICH THEY ARE BOTH PARTIES INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT.
Section 10.05 Counterparts.
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same
instrument.
Section 10.06 Headings.
The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 10.07 Entire Agreement.
This Agreement, including the Exhibits and Schedules
hereto and the documents referred to herein, embodies the
entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein. This
Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
Section 10.08 Amendment and Modification.
This Agreement may be amended or modified only by written
agreement of the parties hereto.
Section 10.09 Binding Effect; Benefits.
This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective
successors and assigns; nothing in this Agreement, express or
implied, is intended to confer on any Person other than the
parties hereto and their respective successors and assigns
(and, to the extent provided in Sections 8.01 and 8.02, the
other Buyer Indemnitees and Seller Indemnitees) any rights,
remedies, obligations or liabilities under or by reason of
this Agreement.
Section 10.10 Assignability.
This Agreement shall not be assignable by any party
hereto without the prior written consent of the other party.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
THE MATCO ELECTRONICS GROUP, INC.
By: /s/ Lawrence Davis
Name: Lawrence Davis
Title: Treasurer/CFO
U.S. ASSEMBLIES SAN DIEGO, INC.
By: /s/ Lawrence Davis
Name: Lawrence Davis
Title: Vice President and Secretary
SMITH CORONA CORPORATION
By: /s/ W. Michael Driscoll
Name: W. Michael Driscoll Title:
Chief Executive Officer
/s/ W/ Michael Driscoll
W. Michael Driscoll
Schedule 3.06
No Violations; Consents
Violations: none.
Consents: none.
Schedule 3.09
Litigation
SCM is a defendant or plaintiff in various legal actions
that have arisen in the ordinary course of business, the
ultimate resolution of which will not have a material
adverse effect on either SCM's financial position or
results of operation.
Schedule 3.12
Tax Matters
None.
Schedule 3.13
Certain Events
None.
Schedule 3.14(c)
Environmental Actions, Claims, Notifications, Etc.
None.
Schedule 3.14(d)
Releases of Hazardous Substances, Governmental Liens
Resulting from Releases or Clean-ups
None.
Schedule 3.16
Employees; Labor Relations
None.
Schedule 3.17
Directors and Officers
Board of Directors
W. Michael Driscoll
Director; President of the Board of Directors
John A. Piontkowski Director
Michael W. Chernago Director
Officers
Robert Weber
Director of Smith Corona De Mexico, De C.V.
Lynn Knopp
Vice President of Operations
Michael W. Chernago
Secretary
John A. Piontkowski
Treasurer
Schedule 3.18
Suppliers
Both Buyer and Seller are in possession of identical
printed copies of the computer report Suppliers of the
Business, Date 11/12/97 Time 5:26 P.M. which is hereby
incorporated by reference into this Schedule.
Schedule 3.19
Certain Transactions
None.
Schedule 3.20
Persons with Knowledge
W. Michael Driscoll: President and Chief Executive Officer of SCC
John A. Piontkowski: Executive Vice President, Chief
Financial Officer and Assistant Secretary of SCC
Michael W. Chernago: Vice President of Operations of SCC
Martin D. Wilson: Vice President/Controller of SCC
Schedule 4.03
No Violations; Consents
Violations - none.
Consents_Bank of Canada syndicate
GE Capital Corp.
Schedule 4.05
Litigation
None.
Schedule 5.02
Finder's Fees
None.
Exhibit A Opinion
of Seller's Counsel
Exhibit B
Opinion of Buyer's Counsel
Exhibit 10.2
___________________________________________________________
ASSET PURCHASE AGREEMENT
Among
SMITH CORONA
CORPORATION, as
Seller,
U.S. ASSEMBLIES SAN DIEGO, INC., as Buyer
and THE MATCO ELECTRONICS GROUP, INC., as
Guarantor
Dated as of November 14, 1997
___________________________________________________________
TABLE OF CONTENTS
Page ARTICLE I
SALE AND PURCHASE OF ASSETS
SECTION 1.01 SALE OF THE ASSETS 1
SECTION 1.02 PURCHASE PRICE AND PAYMENT FOR2
SECTION 1.03 DELIVERY OF THE ASSETS 2
SECTION 1.04 POST-CLOSING EMPLOYMENT OF
SELLER'S EMPLOYEES 2
ARTICLE II
CLOSING
SECTION 2.01 CLOSING 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 3.01 CORPORATE ORGANIZATION 3
SECTION 3.02 CORPORATE AUTHORITY 3
SECTION 3.03 NO VIOLATION; CONSENTS AND APPROVALS 3
SECTION 3.04 TITLE TO ASSETS; ABSENCE OF LIENS 4
SECTION 3.05 LITIGATION 4
SECTION 3.06 COMPLIANCE WITH LAW 4
SECTION 3.07 CONTRACTS 5
SECTION 3.08 MAINTENANCE OF THE ASSETS 5
SECTION 3.09 EMPLOYEES; LABOR RELATIONS 5
SECTION 3.10 SUPPLIERS 5
SECTION 3.11 CERTAIN TRANSACTIONS 6
SECTION 3.12 DISCLAIMER OF OTHER REPRESENTATIONS
AND WARRANTIES; BEST KNOWLEDGE;
DISCLOSURE 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.01 CORPORATE ORGANIZATION 7
SECTION 4.02 CORPORATE AUTHORITY 7
SECTION 4.03 NO VIOLATION; CONSENTS AND APPROVALS 7
SECTION 4.04 LITIGATION 8
ARTICLE V
CERTAIN COVENANTS AND
AGREEMENTS OF SELLER, BUYER
AND GUARANTOR
SECTION 5.01 EXPENSES AND FINDERS' FEES 8
SECTION 5.02 CONFIDENTIALITY 8
SECTION 5.03 PRESS RELEASES 9
SECTION 5.04 BOOKS AND RECORDS 9
SECTION 5.05 USE OF NAMES 9
ARTICLE VI
CONDITIONS PRECEDENT OF BUYER AND GUARANTOR
SECTION 6.01 OPINION OF COUNSEL 10
SECTION 6.02 CLOSING DOCUMENTATION. 10
10SECTION 6.03 APPROVAL OF LEGAL MATTERS. 10
SECTION 6.04 OTHER AGREEMENTS. 11
SECTION 6.05 CONSENTS. 11
ARTICLE VII CONDITIONS PRECEDENT OF SELLER
SECTION 7.01 OPINION OF COUNSEL. 11
SECTION 7.02 CLOSING DOCUMENTATION. 11
SECTION 7.03 APPROVAL OF LEGAL MATTERS. 12
SECTION 7.04 OTHER AGREEMENTS. 12
SECTION 7.05 CONSENTS. 12
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01 INDEMNIFICATION BY SELLER. 12
SECTION 8.02 INDEMNIFICATION BY BUYER AND
GUARANTOR. 13
SECTION 8.03 REMEDIES. 14
SECTION 8.04 PERIOD OF INDEMNITY. 14
SECTION 8.05 CERTAIN LIMITATIONS. 14
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
SECTION 9.01 REPRESENTATIONS AND WARRANTIES. 15
ARTICLE X
MISCELLANEOUS
SECTION 10.01 COOPERATION. 15
SECTION 10.02 WAIVER. 15
SECTION 10.03 NOTICES. 15
SECTION 10.04 GOVERNING LAW AND CONSENT TO
JURISDICTION. 17
SECTION 10.05 COUNTERPARTS. 17
SECTION 10.06 HEADINGS. 17
SECTION 10.07 ENTIRE AGREEMENT. 17
SECTION 10.08 AMENDMENT AND MODIFICATION. 17
SECTION 10.09 BINDING EFFECT; BENEFITS. 17
SECTION 10.10 ASSIGNABILITY. 18
SECTION 10.11 GUARANTEE. 18
LIST OF SCHEDULES AND EXHIBITS
Schedule 1.01(a) Assets and Retained
Assets
Schedule 1.01(b) Assumed Liabilities
Schedule 1.04 Management Employees
Schedule 3.03 No Violations;Consents
Schedule 3.04 Encumbrances
Schedule 3.05 Litigation
Schedule 3.07 Contracts
Schedule 3.09 Employees; Labor Relations
Schedule 3.10 Suppliers
Schedule 3.11 Certain Transactions
Schedule 3.12 Persons with "Knowledge"
Schedule 4.03 No Violations; Consents
Schedule 4.04 Litigation
Schedule 5.01 Finders' Fees
Exhibit A Bill of Sale
Exhibit B Assignment and Assumption Agreement
Exhibit C Opinion of Seller's Counsel
Exhibit D Opinion of Buyer's Counsel
ASSET PURCHASE AGREEMENT dated as of November 14, 1997
(together with the Schedules and Exhibits attached hereto,
the "Agreement") between SMITH CORONA CORPORATION, a
Delaware corporation ("SCC" or "Seller"), U.S. ASSEMBLIES
SAN DIEGO, INC., a Delaware corporation ("Buyer"), and The
Matco Electronics Group, Inc., a Delaware corporation
("Guarantor").
W I T N E S S E T H:
WHEREAS, Seller is the owner of certain machinery,
equipment, leasehold improvements and other assets used in
connection with the business of manufacturing typewriters
and related supplies and contract manufacturing generally
(the "Business");
WHEREAS, Seller wishes to sell and Buyer wishes to
purchase the Assets (as defined below) and Buyer wishes to
assume certain specified liabilities and obligations of
Seller and the parties wish to consummate the other
transactions herein provided, all upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in reliance upon the representations and
warranties made herein and in consideration of the
mutual agreements herein contained, the parties
agree as follows: ARTICLE I
SALE AND PURCHASE OF ASSETS
Section 1.01 Sale of the Assets.
At the Closing provided for in Section 2.01:
(a)
Seller shall sell the assets set forth on
Schedule 1.01(a) (the "Assets," provided however that
Assets shall not include the retained assets set forth on
Schedule 1.01(a), the "Retained Assets") and Buyer shall
purchase the Assets for the purchase price provided in
Section 1.02; and
(b)
Buyer shall assume and undertake to perform the
liabilities and obligations of Seller specifically
described on Schedule 1.01(b) hereto (such
liabilities and obligations being
hereinafter referred to as the "Assumed Liabilities").
Other than the Assumed Liabilities, Buyer shall not assume
or be responsible for, and Seller shall retain and remain
responsible for, any and all obligations and liabilities of
Seller of any nature whatsoever, whether past, current or
future, whether accrued, contingent, known or unknown.
Section 1.02 Purchase Price and Payment for
Assets.
(a)
Purchase Price. In addition to the assumption by
Buyer of the Assumed Liabilities, as full consideration to
be paid by Buyer, the aggregate purchase price for the
Assets is $9,000,000, (the "Purchase Price"); and
(b)
Payment of Purchase Price. At the Closing, Buyer
shall deliver to Seller an amount equal to the Purchase
Price in immediately available funds by wire transfer to an
account designated by Seller.
Section 1.03 Delivery of the Assets.
At the Closing, Seller will deliver to Buyer a Bill of
Sale, substantially in the form of Exhibit A hereto (the
"Bill of Sale"), and such other endorsements, certificates
of title, assignments and other good and sufficient
instruments of conveyance and transfer, as shall be
necessary to vest in Buyer good, valid, marketable and
insurable title to the Assets in accordance herewith.
Buyer acknowledges and agrees that the Assets presently
are, and shall remain in the possession of SCM, and that
Seller shall have no obligation to deliver the Assets since
the Assets are already in the possession of SCM.
Seller further agrees that, from and after the Closing, it
will execute and deliver to Buyer such additional
instruments and documents and take such further action as
Buyer may reasonably require in order to more fully vest,
record and/or perfect Buyer's title to, or interest in, the
Assets.
Section 1.04 Post-Closing Employment of Seller's
Employees.
Buyer shall use its best efforts to offer to the
employees listed on Schedule 1.04 (the "Management
Employees") positions within Buyer's organization. Buyer
shall use its best efforts to hire and retain all current
Management Employees pursuant to its currently effective
employment practices consistent with compensation and
benefits offered by Buyer generally. If any Management
Employee refuses Buyer's offer of employment, and if
Seller, either by (i) applying its severance policy in a
manner consistent with past practices, or (ii) as a result
of litigation, pays severance to such Management Employee,
then Buyer agrees not to hire, employ or retain such
Management Employee in any capacity whatsoever, including
as an advisor, consultant or leased employee, for a period
of three years after
the Closing Date unless Buyer first reimburses Seller for
the amount of severance paid to the Management Employee
plus simple interest at the rate of eight (8%) percent per
year. Buyer shall require any Management Employee who
accepts its offer of employment to voluntarily resign or
retire from Seller. ARTICLE II
CLOSING
Section 2.01 Closing.
The closing of the transactions provided for herein (the
"Closing") will take place at the offices of Winthrop,
Stimson, Putnam & Roberts, Financial Centre, 695 East Main
Street, Stamford, Connecticut at 10:00 A.M. (local time) on
November 14, 1997 (the "Closing Date") or at such other
place, time and date as may be agreed upon by Buyer and
Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the Schedules attached hereto and referred
to below, Seller represents and warrants, to Buyer and
Guarantor that:
Section 3.01 Corporate Organization.
Seller is a corporation duly organized and validly existing
under the laws of the State of Delaware. Section 3.02
Corporate Authority.
Seller has full corporate power and authority to enter into
this Agreement and all other documents required to be
entered into hereunder (this Agreement, collectively with
such other documents, the "Documents") and to consummate
the transactions contemplated thereby. The execution,
delivery and performance by Seller of the Documents have
been duly authorized by all requisite corporate action.
The Documents have been duly executed and delivered by
Seller, and (assuming due execution and delivery by Buyer
and Guarantor) the Documents constitute the valid and
binding obligations of Seller, enforceable in accordance
with their terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally or by
general equitable principles.
Section 3.03 No Violation; Consents and Approvals.
Except as disclosed in Schedule 3.03, Seller is not subject
to or bound by any provision of:
(a)
any law, statute, rule, regulation or judicial or
administrative decision,
(b)
any articles or certificate of incorporation or
by laws or other similar organization documents,
(c)
any mortgage, deed of trust, lease, note,
shareholders' agreement, bond, indenture, other instrument
or agreement, license, permit, trust, custodianship, other
restriction, or
(d)
any judgment, order, writ, injunction or decree
of any court, governmental body, administrative agency or
arbitrator,
that would prevent or be violated by or that would result
in the creation of any material Encumbrance (as defined
below) as a result of, or, with respect to material
agreements, under which there would be a default or right
of termination as a result of, the execution, delivery and
performance by Seller of the Documents and the consummation
of the transactions contemplated thereby. Except as
disclosed in Schedule 3.03, no consent, approval or
authorization of or
declaration or filing with any individual, corporation,
partnership, trust or unincorporated organization or any
government or any agency or political subdivision thereof
(a "Person") is required for the valid execution, delivery
and performance by Seller of the Documents and the
consummation of the transactions contemplated thereby.
Seller agrees to obtain all necessary consents
required for Seller to obtain full benefit of any leasehold
interest assigned or transferred pursuant hereto. Seller
hereby represents and warrants that all leases subject to
this Agreement are assignable by their terms or if not
assignable by their terms then Seller shall obtain the
written consent of the Lessor to such transfer as
contemplated under the terms of this Agreement. All such
leases sought to be transferred by the Seller are disclosed
in Schedule 3.03.
Section 3.04 Title to Assets; Absence of Liens.
Seller has good and valid title to, or subsisting leasehold
interests in, all of the Assets free and clear of any
pledges, liens, charges, encumbrances, easements, defects,
security interests, claims, options and restrictions of every kind
(collectively, "Encumbrances"). Seller will deliver to
Buyer title to the Assets free and clear of all
Encumbrances.
Section 3.05 Litigation.
Except as disclosed in Schedule 3.05, there is no action,
suit, proceeding or investigation as of the date hereof
pending or, to the best knowledge of Seller after due
inquiry, threatened against Seller at law, in equity or
otherwise, in, before, or by any court of competent
jurisdiction.
Section 3.06 Compliance with Law.
To the best knowledge of Seller after due inquiry, the
Business is being conducted in compliance with all laws,
ordinances and regulations of any governmental entity
applicable to Seller including Seller's obligation to
comply with the applicable laws and regulations of the
United Mexican States regulating or effecting Seller or its
subsidiary Smith Corona de Mexico, S.A. de C.V. ("SCM").
To the best knowledge of Seller, all governmental
approvals, permits and licenses required by Seller in
connection with the conduct of the Business have been
obtained and are in full force and effect and are being
complied with in all material respects.
Section 3.07 Contracts.
Except as set forth in Schedule 3.07, and except for
contracts made in the ordinary and usual course of business
or in connection with this Agreement and the transactions
contemplated hereby, Seller is not as of the date hereof a
party to, or bound by, any contract of any kind to be
performed after the Closing Date pursuant to which Seller
is obligated to expend more than $5,000 in any twelve-month
period and which is not subject to cancellation by Seller
without penalty or increased cost.
Section 3.08 Maintenance of the Assets.
The Assets which are currently being used in the
manufacturing processes if taken together with the assets
of SCM are adequate to conduct the Business as currently
being conducted, and are in good operating condition,
maintenance and repair, taking into account the age
thereof.
Section 3.09 Employees; Labor Relations.
As of November 1, 1997, Seller employed a total of 27
employees with respect to the Business (the "Employees").
As of the date hereof, except as set forth on Schedule 3.09
attached hereto, (a) Seller is not delinquent in the
payment (i) to or on behalf of its past or present
Employees of any wages, salaries, commissions, bonuses,
benefit plan contributions or other compensation for all
periods prior to the date hereof, or (ii) of any material
amount which is due and payable with regard to any Employee
to any state or state fund pursuant to any workers'
compensation statute, rule or regulation or any amount
which is due and payable to any workers' compensation
claimant or any other party arising under or with respect
to a claim that has been filed under state statutes and
approved in the ordinary course in accordance with Seller's
policies regarding workers' compensation and/or any
applicable state statute or administrative procedure; (b)
to the best knowledge of Seller, there is no unfair labor
practice charge or complaint against the Business pending
before the National Labor Relations Board; (c) there is no
labor strike, dispute, slowdown or stoppage actually in
progress or, to the best knowledge of Seller, threatened
against the Business; (d) there are no collective
bargaining agreements currently in effect between the
Business and labor unions or organizations representing any
Employees;
and (e) no material grievance or arbitration proceedings
are pending relating to the Business.
Section 3.10 Suppliers.
Schedule 3.10 hereto contains a list as of the date hereof
of suppliers of the Business (in dollar volume).
Section 3.11 Certain Transactions.
Except as set forth in Schedule 3.11, there are no
transactions between SCM or SCC (including SCC's
affiliates), and SCM's or SCC's (including SCC's
affiliates) directors, officers or salaried employees, or
the family members or affiliates of any of the above (other
than for services as employees, officers and directors),
including, without limitation, any contract, agreement or
other arrangement providing for the furnishing of services
to or by, providing for rental of real or personal property
to or from, or otherwise requiring payments to or from, SCC
or SCM to any such officer, director or salaried employee,
family member, or affiliate or any corporation,
partnership, trust or other entity in which such family
member, affiliate, officer, director or employee has a
substantial interest or is a shareholder, officer,
director, trustee or partner.
Section 3.12 Disclaimer of Other Representations and
Warranties; Best Knowledge; Disclosure.
(a)
Seller does not make, and has not made, any
representations or warranties relating to Seller or
otherwise in connection with the transactions contemplated
hereby other than those expressly set out herein which are
made by Seller. Without limiting the generality of the
foregoing, Seller has not made, and shall not be deemed to
have made, any representations or warranties in any
presentation of the Business in connection with the
transactions contemplated hereby, and no statement
contained in any such presentation shall be deemed a
representation or warranty hereunder or otherwise. It is
understood that any cost estimates, projections, forecasts
or other predictions, any data, any financial information
or any memoranda or offering materials or presentations are
not and shall not be deemed to be or to include
representations or warranties of Seller. No person has
been authorized by Seller to make any representation or
warranty relating to Seller or otherwise in connection with
the transactions contemplated hereby and, if made, such
representation or warranty must not be relied upon as
having been authorized by Seller.
(b)
Whenever a representation or warranty made by
Seller herein refers to the best knowledge of Seller, such
knowledge shall be deemed to consist only of the actual
knowledge of any of those persons listed on Schedule 3.12.
Seller has not undertaken, nor shall Seller have any duty
to undertake, any investigation concerning any matter as
to which a representation or warranty is made as to the
best knowledge of Seller.
(c)
Notwithstanding anything to the contrary
contained in this Agreement or in any Schedule, any
information disclosed in one Schedule shall be deemed to be
disclosed in all Schedules. Certain information set forth
in the Schedules is included solely for informational
purposes and may not be required to be disclosed pursuant
to this Agreement. The disclosure of any information shall
not be deemed to constitute an acknowledgment
that such information is required to be disclosed in
connection with the representations and warranties made by
Seller in this Agreement or is material, nor shall such
information be deemed to establish a standard of
materiality.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Subject to the Schedules attached hereto and referred
to below, each of Buyer and Guarantor, as to itself only
and not as to the other, represents and warrants to Seller
that:
Section 4.01 Corporate Organization.
Each of Buyer and Guarantor is a corporation duly organized
and validly existing and in good standing under the laws of
the State of Delaware.
Section 4.02 Corporate Authority.
Each of Buyer and Guarantor has full corporate power and
authority to enter into the Documents and to consummate the
transactions contemplated thereby. The execution, delivery
and performance by Buyer and Guarantor of the Documents
have been duly authorized by all requisite corporate
action. The Documents have been duly executed and
delivered by Buyer and Guarantor, and (assuming due
execution and delivery by Seller) the Documents constitute
the valid and binding obligations of Buyer and Guarantor,
enforceable in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar
laws affecting creditors' rights generally or by general
equitable principles.
Section 4.03 No Violation; Consents and Approvals.
Except as disclosed in Schedule 4.03, neither Buyer nor
Guarantor is subject to or bound by any provision of:
(a)
any law, statute, rule, regulation or judicial or
administrative decision,
(b)
any articles or certificate of incorporation or
by laws or other organization documents,
(c)
any mortgage, deed of trust, lease, note,
shareholders' agreement, bond, indenture, other instrument
or agreement, license, permit, trust, custodianship, other
restriction, or
(d)
any judgment, order, writ, injunction or decree
of any court, governmental body, administrative agency or
arbitrator, that would prevent or be violated by or that would result
in the creation of any material Encumbrance as a result of,
or, with respect to material agreements, under which there
would be a default or right of termination as a result of,
the execution, delivery and performance by Buyer or
Guarantor of the Documents and the consummation of
transactions contemplated thereby. Except as disclosed in
Schedule 4.03, no consent, approval or authorization of or
declaration or filing with any Person is required for the
valid execution, delivery and performance by Buyer or
Guarantor of the Documents and the consummation of the
transactions contemplated thereby.
Section 4.04 Litigation.
Except as disclosed in Schedule 4.04, there is no action,
suit, proceeding or investigation as of the date hereof
pending or, to the best knowledge of Buyer or Guarantor
after due inquiry, threatened against Buyer or Guarantor at law,
in equity or otherwise, in, before, or by any court of competent
jurisdiction.
ARTICLE V
CERTAIN COVENANTS AND AGREEMENTS
OF SELLER, BUYER AND GUARANTOR
Section 5.01 Expenses and Finders' Fees.
Buyer, Guarantor and Seller will each bear its own expenses
in connection with this Agreement and its performance.
Seller, on the one hand, and Buyer and Guarantor, on the
other hand, each represent and warrant to the other that,
except as set forth on Schedule 5.01, the negotiations
relative to this Agreement and the transactions
contemplated hereby have been carried on in such a manner
as not to give rise to any valid claims against the other
party for a brokerage commission, finder's fee or other
like payment.
Section 5.02 Confidentiality.
Buyer, Guarantor and Seller hereby confirm the terms and
provisions of that certain Confidentiality Agreement
executed by SCC and Guarantor dated as of July 31, 1996
(the "Confidentiality Agreement") and hereby incorporate the
Confidentiality Agreement herein, in its entirety, by this
reference and intend to be bound by the terms thereof.
Buyer, Guarantor and Seller further acknowledge and agree
that all information provided to Buyer and Guarantor
hereunder shall constitute Confidential Information (as
such term is defined in the Confidentiality Agreement), and
that the provisions of this Section 5.02, including the
terms and provisions of the Confidentiality Agreement,
shall survive the termination of this Agreement for any
reason before Closing.
Section 5.03 Press Releases.
Except as required by law or stock exchange regulation, any
public announcements regarding the transactions
contemplated hereby shall be made only with the mutual
consent of Buyer, Guarantor and Seller.
Section 5.04 Books and Records.
Buyer will retain all books, records and other documents
pertaining to the Assets and Assumed Liabilities in
existence on the Closing Date for a period of seven (7)
years from the Closing Date and to make the same available
after the Closing Date for such seven (7) year period for
inspection and copying by Seller at Seller's expense during
the normal business hours of the Business, upon reasonable
request and upon reasonable advance notice. No such books,
records or documents shall be destroyed by the Business
without first advising Seller in writing and giving Seller
a reasonable opportunity to obtain possession thereof.
Without limiting the generality of the foregoing, Buyer
will make available to Seller and its representatives all
information deemed necessary or desirable by Seller in
preparing its financial statements and Returns and
conducting any audits in connection therewith.
Section 5.05 Use of Names.
Anything herein to the contrary notwithstanding, and
subject to rights granted to Guarantor in the Manufacturing
Agreement (as defined below), neither Buyer nor Guarantor
shall acquire any interest in or right to use the name
Smith Corona or any derivatives thereof, or the respective
trademarks and logos of Seller and Seller's group of
companies is being transferred hereunder (collectively, the
"Names and Logos"). Buyer and Guarantor each agree that it
will, as promptly as practicable but in any event within
sixty (60) days following the Closing Date, remove or
obliterate all Names and Logos from all signs, purchase
orders, invoices, sales orders, labels, letterheads,
shipping documents and other materials used by it or any of its
affiliates. Notwithstanding anything herein to the
contrary, Buyer and Guarantor each agree that after the
Closing Date it will neither use, nor permit any of its
affiliates to use, (i) any purchase orders, invoices, sales
orders, letterheads or shipping documents existing on the
date hereof, which bear any of the Names and Logos or any
name or logo confusingly similar thereto, without first
obliterating or covering such Name or Logo, or (ii) any
such materials not in existence on the Closing Date which
bear such Name or Logo. At Seller's request, Buyer and
Guarantor each will cooperate, and will cause each of its
affiliates to cooperate, in taking all steps reasonably
necessary in any jurisdiction to preserve for Seller and,
where appropriate, assign to Seller, all
right, title and interest in and to such Names and Logos,
the registration and usage thereof and the goodwill
associated therewith. Buyer and Guarantor each will not,
and will cause each of its affiliates not to,
misappropriate, misrepresent or otherwise infringe, abuse
or diminish the value of such Names and Logos.
ARTICLE VI
CONDITIONS PRECEDENT OF BUYER AND GUARANTOR
Neither Buyer nor Guarantor need consummate the
transactions contemplated by this Agreement unless the
following conditions shall be fulfilled or waived by both
Buyer and Guarantor:
Section 6.01 Opinion of Counsel.
Buyer and Guarantor shall have been furnished with an
opinion dated the Closing Date of Winthrop, Stimson, Putnam
& Roberts, counsel for Seller, substantially in the form
attached hereto as Exhibit C.
Section 6.02 Closing Documentation.
Buyer and Guarantor shall have received the following
documents, agreements and instruments from Seller:
(a)
Bill of Sale and such other endorsements,
certificates of title, assignments as shall be
reasonably requested by Buyer or Guarantor;
(b)
a certificate dated as of a recent date from the
Secretary of State of the State of Delaware to the effect
that Seller is duly incorporated and in good standing in
such state;
(c)
evidence, reasonably satisfactory to Buyer and
Guarantor, of the authority and incumbency of the persons
acting on behalf of Seller in connection with the execution
of any document delivered in connection with this
Agreement; and
(d)
such other instruments and documents as Buyer and
Guarantor shall reasonably request not inconsistent with
the provisions hereof.
Section 6.03 Approval of Legal Matters.
The form of all instruments, certificates and documents to
be executed and delivered by Seller to Buyer and Guarantor
pursuant to this Agreement and all legal matters in respect
of the transactions as herein contemplated shall be
reasonably satisfactory to Buyer, Guarantor and their
counsel, none of whose approval shall be unreasonably
withheld or delayed.
Section 6.04 Other Agreements.
The following documents shall have been entered into
simultaneously herewith: the Stock Purchase Agreement dated
the date hereof among Seller, W. Michael Driscoll, Buyer
and Guarantor (the "Stock Purchase Agreement"), the
Contract Manufacturing Agreement dated the date hereof
between Guarantor and Seller (the "Manufacturing
Agreement"), the Assignment and Assumption Agreement dated
the date hereof among Seller, Buyer and Guarantor in the
form attached hereto as Exhibit B (the "Assignment and
Assumption Agreement") and the Sublease dated the date
hereof between Buyer and Seller (the "Sublease").
Section 6.05 Consents.
Buyer and Guarantor shall have obtained consents from all
the parties set forth on Schedule 4.03.
ARTICLE VII
CONDITIONS PRECEDENT OF SELLER
Seller need not consummate the transactions
contemplated by this Agreement unless the following
conditions shall be fulfilled or waived by Seller:
Section 7.01 Opinion of Counsel.
Seller shall have been furnished with an opinion dated the
Closing Date of Deily, Dautel & Mooney, LLP, counsel for
Buyer and Guarantor, substantially in the form attached
hereto as Exhibit D.
Section 7.02 Closing Documentation.
Seller shall have received the following documents,
agreements and instruments from Buyer and Guarantor, where
applicable:
(a)
payment of the Purchase Price pursuant to Section 1.02 hereof;
(b)
certificate dated as of a recent date from the
Secretary of State of the State of Delaware to the effect
that Buyer and Guarantor each is duly incorporated and in
good standing in such state;
(c) evidence, reasonably satisfactory to
Seller, of the authority and incumbency of the persons
acting on behalf of Buyer and Guarantor in connection with
the execution of any document delivered in connection with
this Agreement; and
(d)
such other instruments and documents as Seller
shall reasonably request not inconsistent with the
provisions hereof.
Section 7.03 Approval of Legal Matters.
The form of all certificates, instruments and documents to
be executed and delivered by Buyer and Guarantor to Seller
pursuant to this Agreement and all legal matters in respect
of the transactions as herein contemplated shall be
reasonably satisfactory to Seller and its counsel, neither
of whose approval shall be unreasonably withheld or
delayed.
Section 7.04 Other Agreements.
The following documents shall have been entered into
simultaneously herewith: the Stock Purchase Agreement, the
Manufacturing Agreement, the Assignment and Assumption
Agreement and the Sublease.
Section 7.05 Consents.
Seller shall have obtained consents from all the parties
set forth on Schedule 3.03.
ARTICLE VIII
INDEMNIFICATION
Section 8.01 Indemnification by Seller.
Seller hereby agrees to defend, indemnify and hold harmless
Buyer and Guarantor, their respective successors, assigns
and affiliates (collectively, the "Buyer Indemnitees") from
and against any and all losses, deficiencies, liabilities,
damages, assessments, judgments, costs and expenses,
including attorneys' fees (both those incurred in
connection with the defense or prosecution of the
indemnifiable claim and those incurred in connection with
the enforcement of this provision), (collectively, "Buyer
Losses"), caused by, resulting from or arising out of:
(a)
(i) breaches of the representations and
warranties hereunder on the part of Seller; (ii) failures
by Seller to perform or otherwise fulfill any undertaking
or other agreement or obligation hereunder; (iii) any value
added taxes ("VAT") or similar taxes assessed by the United
Mexican States by reason of the sale of the Assets
hereunder; and/or (iv) any claims which may be brought by a
Management Employee
against SCM, Buyer or Guarantor, or any of their
subsidiaries or related entities, which claims arise out of
such Management Employee's employment or separation from
employment from SCC prior to the Closing; and/or
(b)
any and all actions, suits, proceedings, claims,
demands, incident to any of the foregoing or such
indemnification; provided, however, that if any claim, liability, demand,
assessment, action, suit or proceeding shall be asserted in
respect of which a Buyer Indemnitee proposes to demand
indemnification ("Buyer Indemnified Claims"), such Buyer
Indemnitee shall notify Seller thereof, provided, further,
however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the
extent the indemnifying party shall have been actually
prejudiced as a result of such failure. Subject to rights
of or duties to any insurer or other third Person having
liability therefor, Seller shall have the right promptly
upon receipt of such notice to assume the control of the
defense, compromise or settlement of any such Buyer
Indemnified Claims arising out of a lawsuit or claim
brought by a third party (provided that any compromise or
settlement must be reasonably approved by Buyer),
including, at its own expense, employment of counsel
reasonably satisfactory to Buyer; provided, however, that
if Seller shall have exercised its right to assume such
control, Buyer may, in its sole discretion and at its
expense, employ counsel to represent it (in addition to
counsel employed by Seller) in any such matter, and in such
event counsel selected by Seller shall be required to
cooperate with such counsel of Buyer in such defense,
compromise or settlement.
Section 8.02 Indemnification by Buyer and Guarantor.
Buyer and Guarantor hereby agree to defend, indemnify and
hold harmless Seller and its successors, assigns and
affiliates (collectively, "Seller Indemnitees") from and
against any and all losses, deficiencies, liabilities,
damages, assessments, judgments, costs and expenses,
including attorneys' fees (both those incurred in
connection with the defense or prosecution of the
indemnifiable claim and those incurred in connection with
the enforcement of this provision) (collectively, "Seller
Losses"), resulting from or arising out of:
(a)
(i) breaches of representations and warranties
hereunder on the part of Buyer or Guarantor, (ii) failures
by Buyer or Guarantor to perform or otherwise fulfill any
undertaking or agreement or obligation hereunder and/or
(iii) any claims which may be brought by a Management
Employee against SCC, or any of its subsidiaries or related
entities, which claims arise out of such Management
Employee's employment or separation from employment from
SCM, Buyer or Guarantor subsequent to the Closing; and/or
(b)
any and all actions, suits, proceedings, claims
and demands incident to any of the foregoing or such
indemnification;
provided, however, that if any claim, liability, demand,
assessment, action, suit or proceeding shall be asserted in
respect of which such Seller Indemnitee proposes to demand
indemnification ("Seller Indemnified Claims"), such Seller
Indemnitee shall notify Buyer thereof, provided, further,
however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the
extent the indemnifying party shall have been actually
prejudiced as a result of such failure. Subject to rights
of or duties to any insurer or other third Person having
liability therefor, Buyer shall have the right promptly
upon receipt of such notice to assume the control of the
defense, compromise or settlement of any such Seller
Indemnified Claims arising out of a lawsuit or claim
brought by a third party (provided that any compromise or
settlement must be reasonably approved by Seller)
including, at its own expense, employment of counsel
reasonably satisfactory to Seller; provided, however, that
if Buyer shall have exercised its right to assume such
control, Seller may, in its sole discretion
and at its expense, employ counsel to represent it (in
addition to counsel employed by Buyer) in any such matter,
and in such event counsel selected by Buyer shall be
required to cooperate with such counsel of Seller in such
defense, compromise or settlement.
Section 8.03 Remedies.
Except for the right to seek to specifically enforce the
covenants hereunder, and except as specifically provided in
this Agreement, the sole and exclusive remedy of Buyer,
Guarantor and Seller hereunder shall be restricted to the
indemnification rights set forth in this Article VIII.
Section 8.04 Period of Indemnity.
The indemnities contained in this Article VIII shall expire
one (1) year from the Closing Date, except with respect to
Seller's indemnity for VAT, which will expire five (5)
years from the Closing Date, and except with respect to
Seller's, Buyer's and Guarantor's indemnity for Management
Employees' claims which will expire three (3) years after
the Closing Date and except with respect to Buyer Losses or
Seller Losses as to which notice has been given pursuant to
Sections 8.01 or 8.02 within such period, in which case the
indemnification period shall be extended until final
resolution of such losses.
Section 8.05 Certain Limitations.
(a)
Notwithstanding any other provision hereof, in
no event shall Seller be liable for or obligated to
indemnify Buyer and Guarantor from and against any
consequential, indirect or special damages, including,
without limitation, lost profits, business interruption and
loss of business opportunities or goodwill. This exclusion
of any such consequential, indirect or special damages
shall apply whether the action in recovery of damages is
sought based on contract,
tort (including sole, concurrent or other negligence or
strict liability), statute or otherwise. To the extent
permitted by law, any statutory remedies which are
inconsistent with this Section 8.05(a) are hereby waived by
Buyer and Guarantor.
(b)
Seller's obligation to indemnify for Buyer Losses
under Section 8.01 of this Agreement shall accrue only if
the aggregate of all such Buyer Losses exceeds Fifty
Thousand Dollars ($50,000) and then Seller shall be liable
for such Buyer Losses only to the extent that they exceed
such amount, with the exception of Seller's obligation to
indemnify for Buyer Losses in the nature of Management
Employee claims set forth in subsection 8.01(a)(iv) above,
which obligation will be without monetary limit or
threshold.
(c)
Seller's obligation to indemnify for Buyer Losses
shall be limited to an amount or amounts in the aggregate
equal to fifty percent (50%) of the total Purchase Price.
(d)
If on the Closing Date either party (the "first
party") has actual knowledge of the untruth, inaccuracy or
breach of any representation or warranty by the other party
contained in this Agreement or the Documents, then any liability,
obligation, claim, loss, cost, damage and expense, including attorneys
fees and disbursements, arising out of or resulting
therefrom shall not be included as part of Losses of the
first party and the other party shall have no obligation to
indemnify the first party therefor.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 9.01 Representations and Warranties.
The representations and warranties of the parties contained
herein shall survive the Closing to the extent provided in
Section 8.04.
ARTICLE X
MISCELLANEOUS
Section 10.01 Cooperation.
Each of the parties hereto shall use its reasonable efforts
to take or cause to be taken all actions, to cooperate with
the other party hereto, with respect to all actions, and to
do or cause to be done all things necessary, proper or
advisable to consummate and make effective the transactions
contemplated by this Agreement.
Section 10.02 Waiver.
Any failure of Seller to comply with any of its obligations
or agreements herein contained may be waived only in
writing by Buyer and Guarantor. Any failure of Buyer or
Guarantor to comply with any of its obligations or
agreements herein contained may be waived only in writing
by Seller.
Section 10.03 Notices.
All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given
upon receipt of: hand delivery; certified or registered
mail, return receipt requested; or telecopy transmission
with confirmation of receipt:
(i)
If to Buyer or Guarantor, to:
U.S. Assemblies San Diego, Inc.
or The Matco Electronics Group, Inc.
320 North Jensen Road Vestal, New York
13850 Telecopier: (607) 729-8973
Telephone: (607) 729-8981
Attention: Lawrence Davis
(with a copy to):
Deily, Dautel & Mooney,LLP
8 Thurlow Terrace
Albany, New York 12203-1006
Telecopier: (518) 436-8278
Telephone: (518) 436-0344
Attention: Jonathan D. Deily Esq.
(ii)
If to Seller, to:
Smith Corona Corporation
839 Route 13 South
Cortland, New York 13045-0990
Telecopier: (607) 753-8769
Telephone: (607) 753-6011
Attention: W. Michael Driscoll
(with a copy to):
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
Stamford, CT 06904
Telecopier: (203) 965-8226
Telephone: (203) 348-2300
Attention: G. William Sisley, Esq.
Such names and addresses may be changed by written notice
to each person listed above.
Section 10.04 Governing Law and Consent to Jurisdiction.
(a)
This Agreement shall be governed by and construed
in accordance with the internal substantive laws and not
the choice of law rules of the State of New York.
(b)
Any judicial proceeding brought with respect to
this Agreement must be brought in any court of competent
jurisdiction in the State of New York, and, by execution
and delivery of this Agreement, each party (i) accepts,
generally and unconditionally, the exclusive jurisdiction
of such courts and any related appellate court, and
irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement and (ii)
irrevocably waives any objection it may now or hereafter
have as to the venue of any such suit, action or proceeding
brought in such a court or that such court is an
inconvenient forum. THE PARTIES HEREBY WAIVE TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE BOTH PARTIES
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
AGREEMENT.
Section 10.05 Counterparts.
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the
same instrument.
Section 10.06 Headings.
The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 10.07 Entire Agreement.
This Agreement, including the Exhibits and Schedules hereto
and the documents referred to herein, embodies the entire
agreement and understanding of the parties hereto in respect
of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
Section 10.08 Amendment and Modification.
This Agreement may be amended or modified only by written
agreement of the parties hereto.
Section 10.09 Binding Effect; Benefits.
This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and
assigns; nothing in this Agreement, express or implied, is
intended to confer on any Person other than the parties hereto
and their respective successors and assigns (and, to the
extent provided in Sections 8.01 and 8.02, the other
Buyer Indemnitees and Seller Indemnitees) any rights,
remedies, obligations or
liabilities under or by reason of this Agreement. Section
10.10 Assignability.
This Agreement shall not be assignable by any party hereto
without the prior written consent of the other party.
Section 10.11 Guarantee.
Guarantor hereby approves the transactions contemplated by
this Agreement and hereby agrees to be jointly and severally
liable along with Buyer for each and every one of Buyer's
obligations hereunder to the same extent that Buyer is liable,
as a co obligor and not as a surety or guarantor.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
U.S. ASSEMBLIES SAN DIEGO, INC.
By: /s/ Lawrence E. Davis
Name: Lawrence E. Davis
Title: Vice President and Secretary
THE MATCO ELECTRONICS GROUP, INC.
By: /s/Lawrence E. Davis
Name: Lawrence E. Davis
Title: Treasurer/CFO
SMITH CORONA CORPORATION
By: /s/ W. Michael Driscoll
Name: W. Michael Driscoll
Title: Chief Executive Officer
Schedule 1.01(a)
Assets
Contracts identified as "MAT" on Schedule 3.07.
Machinery, equipment, leasehold improvements and other assets
used in connection with the business of manufacturing
manufacturing generally, presently located in Tijuana,
Mexico and described in the computer report Smith
Corona Corporation Sold Assets, Date 11/12/97 Time
3:22 P.M. Both Buyer and Seller are in possession of
identical printed copies of such computer report,
which is hereby incorporated by reference into this Schedule.
Retained Assets
Patents and trademarks including the name "Smith Corona".
Product specifications, drawings and bills of material
related to the production of typewriters, personal
word processors, headsets and supplies and
accessories.
Contracts identified as "SCC" on Schedule 3.07
Tooling, dies, jigs, gages and fixtures related to the
production of typewriters, personal word processors,
headsets and supplies and accessories. Property,
plant and equipment related to the distribution
California. Both Buyer and Seller are in possession
of identical printed copies of the computer report
Smith Corona Corporation Retained Assets Date
11/12/97 Time 3:27 P.M., which is hereby incorporated
by reference into this Schedule.
Schedule 1.01(b)
Assumed Liabilities
None.
Schedule 1.04
Management Employees
Robert Weber
Alberto Garcia
Daniel Roy
Basil Chinsee
Schedule 3.03
No Violations;
Consents
Violations - none.
Consents are needed from:
Congress Financial Corporation
805 Properties (San Diego landlord)
Schedule 3.04
Encumbrances
Congress Financial Corporation has a lien on all of
Seller's now owned and hereafter acquired accounts,
contract rights, general intangibles, documents,
instruments, chattel paper, inventory, equipment,
fixtures, and other property, and the
proceeds/products hereof. This lien will be released
from the Assets before the Closing.
Schedule 3.05
Litigation
SCC was the owner of manufacturing facilities in Groton,
New York (the "Groton Site") and Cortlandville, New York
(the "Cortlandville Site" and together, the "Owner/Operator
Sites"). SCC's liability, if any, at the Owner/Operator
Sites stems from groundwater contamination at the
Cortlandville Site and soil contamination at the Groton
Site.
SCC was served in June 1992 with a summons and complaint
and, in June 1994, with an amended complaint in a
contribution action brought by five private plaintiffs in
the United States District Court for the Northern District
of New York pursuant to the federal Comprehensive
Environmental Response, Compensation and Liability Act and
certain state law theories (the "Copper Industries
action"). The amended complaint sought contribution or
reimbursement for response costs incurred to date, and to
be incurred in the future, for the remediation of a site in
Cortland, New York known as the "Rosen Site". Claims
concerning the Rosen Site were filed against the
Environmental Protection Agency, the United States
Department of the Interior, the New York Department of
Environmental Conservation ("DEC"), the New York Department
of Health ("DOH") and certain plaintiffs and defendants in
the Copper Industries action. SCC entered into a written
agreement with the United States (on behalf of the DEC and
DOH) , and the five Copper Industries plaintiffs dated as
of February 14, 1997 (the "Rosen Site Settlement"). The
Rosen Site Settlement was approved by the Bankruptcy Court
on May 29, 1997 after all the conditions precedent to the
settlement had been satisfied.
SCC is also a defendant or plaintiff in various other legal
actions that have arisen in the ordinary course of
business, the ultimate resolution of which will not have a
material adverse effect on either SCC's financial position
or results of operation.
Schedule 3.07
Contracts
Both Buyer and Seller are in possession of identical
printed copies of the computer report Contracts for
Maintenance, Services, Rentals and Leases Dated
11/13/97, which is hereby incorporated by reference
into this Schedule.
Schedule 3.09
Employees; Labor Relations
None.
Schedule 3.10
Suppliers
Both Buyer and Seller are in possession of identical
printed copies of the computer report Suppliers of
the Business Date 11/12/97 Time 5:26 P.M., which is
hereby incorporated by reference into this Schedule.
Schedule 3.11
Certain Transactions
None.
Schedule 3.12
Persons with "Knowledge"
W. Michael Driscoll President and Chief Executive Officer
John A. Piontkowski Executive Vice President, Chief Financial Officer and
Assistant Secretary
Michael W. Chernago Vice President/Operations
Martin D. Wilson Vice President/Controller
Schedule
4.03 No
Violations;
Consents
Violations - none.
Consents are needed from:
Bank of Canada syndicate
GE Capital Corp.
Schedule
4.04
Litigation
None.
Schedule 5.0
Finders' Fees
None.
Exhibit A
Bill of Sale
Exhibit B
Assignment and Assumption Agreement
Exhibit C
Opinion of Seller's Counsel
Exhibit D
Opinion of Buyer's Counsel
EXHIBIT 10.3
C O N F I D E N T I A L T R E
A T M E N T
CONTRACT MANUFACTURING AGREEMENT
MATCO ELECTRONICS GROUP AND SMITH CORONA
Version 8.0 11/14/97 1:00 PM
TABLE OF CONTENTS
SECTION: PAGE
PREFACE 3
1. AGREEMENT TO MANUFACTURE 3
2. PRICING 4
3. PURCHASING AND CANCELLATIONS 7
4. PAYMENT AND SHIPPING TERMS 11
5. ACCEPTANCE, INSPECTION, AND WARRANTY 12
6. ENGINEERING 15
7. TERMINATION 16
8. INDEMNIFICATION 18
9. CONFIDENTIAL AND PROPRIETARY INFORMATION 19
10. LICENSED PROPERTY 20
MISCELLANEOUS 21
Confidential portions of this exhibit have been omitted and
filed separately with the Securities and Exchange Commission
with a request for confidential treatment pursuant to Rule
24b-2. The location of an omitted portion is indicated by
[*******].
LIST OF EXHIBITS
SECTION: PAGE
EXHIBIT A: THE PRODUCTS 25
EXHIBIT E: THE PRICING MODEL 25
EXHIBIT B: THE MANUFACTURING SPECIFICATIONS 30
EXHIBIT C: THE QUALITY STANDARDS 31
EXHIBIT D: THE APPROVED SUPPLIERS 32
EXHIBIT F: THE MASTER SCHEDULE 33
EXHIBIT G: THE TOOL MAINTENANCE SCHEDULE 34
EXHIBIT H: THE LICENSED PROPERTY 36
EXHIBIT I THE WARRANTY RETURN HISTORY 37
EXHIBIT J THE ADVANCED MATERIAL PURCHASES 38
WITH BLANKET APPROVALS BY COMMODITY
EXHIBIT K THE PREPAID RAW MATERIALS 39
EXHIBIT L THE SUBCONTRACT CUSTOMER ORDERS 40
EXHIBIT M THE PURCHASE ORDERS 41
EXHIBIT N THE QUALITY ASSURANCE REPORT 42
EXHIBIT O ACCEPTANCE SAMPLING PLANS 43
PREFACE
This Agreement is entered into as of 12:01 AM EST November
24, 1997 (the "Effective Date"), by and between Smith Corona
Corporation, a Delaware corporation, having its principle
place of business at 839 Route 13 South, Cortland, NY 13045,
(hereafter referred to as "Purchaser" and/or "SCC") and the
MATCO Electronics Group, Inc., a New York corporation having
its principle place of business at 320 North Jensen Road,
Vestal, NY 13850 (hereafter referred to as "Seller" and/or
"MEG").
Whereas, SCC desires to have MEG manufacture, test and
otherwise produce all products presently manufactured by SCC
at its Tijuana, MX facility as more fully itemized on
Exhibit A annexed hereto (the "Products"), and
Whereas, MEG is willing to manufacture, test and otherwise
produce all such Products pursuant to the terms and
conditions of this agreement,
Now therefore, in the consideration of the mutual covenants
and promises contained herein, the parties agree as follows:
SECTION 1.0 - AGREEMENT TO MANUFACTURE
1.1 Term
The initial term of this Agreement shall commence on
the Effective Date and continue in effect for a period of
five (5) years, unless sooner terminated pursuant to the
provisions of Section 7 hereof.
1.2 Renewal
This Agreement may be renewed for an additional five
(5) year term upon the mutual written agreement of the
parties provided the same is executed one hundred and
eighty (180) days prior to the expiration date of this
Agreement.
1.3 Scope of work
Subject to the terms and conditions hereof, SCC hereby
appoints MEG, and MEG hereby accepts such appointment, to
act as the sole manufacturer of the Products during the term
of this Agreement. MEG shall manufacture each of the
Products set forth on Exhibit A attached hereto and any
products which may, from time to time be added to Exhibit A
at the request of the SCC and agreement by MEG. Pricing for
such additional product will be established according to
paragraph 2.2 below, "New Product Pricing". MEG shall
manufacture components, assemblies, or all the Product(s) at
the Tijuana, MX facility, and/or with the prior written
approval of SCC, which will not be unreasonably withheld, at
one or more of MEG's affiliate's facilities (a "Facility").
An affiliate of MEG means any corporation, partnership or
other business entity which controls or is controlled by, or
is under common control with MEG. All Product will be
manufactured in accordance with the Manufacturing
Specifications provided by SCC as set forth in Exhibit B
attached hereto (the "Manufacturing Specifications"), and
the quality standards provided by SCC as set forth in
Exhibit C attached hereto (the "Quality Standards"), which
Manufacturing Specifications and Quality Standards may be
amended or modified from time to time by written mutual
agreement between MEG and SCC. MEG will use reasonable
efforts to comply with any additional, revised or amended
Manufacturing Specifications or Quality Standards. MEG
shall be responsible for purchasing the raw materials,
packaging and other components required to manufacture the
products (collectively, the "Raw Materials") from the
Approved Suppliers of such raw materials as set forth in
Exhibit D attached hereto (the "Approved Suppliers"). MEG
may use Raw Materials or suppliers not listed on Exhibit D
only with the prior written approval subject to SCC's
reasonable discretion, which approval will not be
unreasonably withheld. MEG shall be responsible for the
payment of all costs and expenses associated with the
purchase of Raw Materials and the transportation of the Raw
Materials to the Facility.
1.4 Exclusivity
SCC and MEG agree that SCC shall purchase all of its
manufactured Products as referenced in section 1.3 above for
the initial term of five (5) years and any renewal thereof
from MEG. SCC agrees to provide MEG with the opportunity to
quote the manufacturing cost of any product in which SCC
individually or as a joint developer/distributor may control
or direct the manufacturing thereof, for the term of the
Agreement, in which case MEG will respond within thirty (30)
days.
SECTION 2.0 - PRICING
2.1 Pricing Model
All pricing for the Products referenced in Exhibit A
shall be based on the Pricing Model defined in Exhibit E
attached hereto (the "Pricing Model"). Such pricing is
based on the annual volumes forecast by SCC. SCC
acknowledges that as an inducement for MEG to enter into
this contract, SCC is projecting certain minimum product
purchases . Price structures associated with this Agreement
are based upon MEG's reliance upon these minimum purchases
of Product and the resulting specific revenue commitments
thereby represented . During the term of the Agreement, the
pricing for Products set forth on Exhibit A and Exhibit E
may be adjusted upward from that set forth in the Pricing
Model for (i) adjustments in raw material and direct labor
expressly set forth below in 2.3, or (ii) inflationary or
other reasonable increases in the total pool of overhead
dollars, or (iii) reduction in SCC total dollar volume.
2.2 New Product Pricing
SCC may from time to time request pricing on new
product as described under paragraph 1.3 Scope of Work.
Upon receipt of prints, bills of material, and other
documentation as necessary, MEG agrees to quote pricing and
lead-time, based on the Pricing Model in a time period not
to exceed two weeks. Should such quotation be based on
advance information, MEG reserves the right to alter such
quotation based on the receipt of approved final
information. Upon the acceptance of the price and lead-time
by SCC, the pricing and effective date will be added to the
Pricing Model as set forth in Exhibit E attached hereto, and
the lead-time for the Product will be added to the Product
as set forth in Exhibit A attached hereto.
2.3 Annual Price Adjustments
SCC and MEG agree that annually the Pricing Model
will be adjusted based on SCC's projected volume of Product
for SCC's next fiscal year following the same methodology in
Exhibit E.5, E.6, E.7, E.8 except that the fixed overhead
rate shall be recalculated. MEG and SCC also agree to
perform an annual cost review during April of each year,
which will be a good faith review of changes in actual cost
of Raw Materials and direct labor. If MEG's actual Raw
Material costs for any Product are less than the same costs
as quoted by MEG in the prior year's selling price, the
selling price to SCC shall be reduced by [***] of the
decrease in such costs. If MEG's actual direct labor costs
for any Product, are less than the same costs quoted by MEG
in the prior year's price, then the selling price to SCC
shall be reduced by [***] of the decrease in such costs.
Such prices will become effective on the following July 1
(the start of SCC's fiscal year), and will be implemented by
the reissuance of the Pricing Model.
2.4 Pricing Adjustments, Raw Materials Increases
In the event there is a significant increase in the
cost of certain individual Raw Materials or a group of
substantially similar Raw Materials amounting to one-half
percent (0.5%) or more, of the material cost portion of any
Product as listed in the Pricing Model, MEG shall
immediately document such increase(s) to SCC. In that
event, both parties shall mutually pursue alternative
material in order to attempt to maintain the original cost.
If such alternative material cannot be found, MEG shall
provide SCC with new pricing and effective dates for
approval. Approval of new pricing for all Product affected
by the increased Raw Material cost shall not be unreasonably
withheld by SCC. In the event that approval is not given by
SCC within fifteen (15) days after notification, MEG, at its
option, may suspend production of the Product(s) affected.
Upon acceptance by SCC, the Pricing Model will be amended to
reflect such new pricing and effective date(s) for
Product(s) affected.
2.5 Price Adjustments, Product Quantities
SCC acknowledges that any significant reductions in
the purchases of any Product or any significant change in
the mix of the Products, or the discontinuance of any
Products resulting in a change in the projected revenue
stream, will result in a need to change both the existing
prices retroactively and the Pricing Model. It is
understood by both parties that prices are directly related
to the quantity of Products sold to SCC. Failure by SCC to
purchase the agreed on quantity of Product upon which
pricing in the Pricing Model is based, provided MEG is
prepared to manufacture and ship same quantity of Product,
may result in a retroactive unit price increase on Products
shipped by MEG. Conversely, exceeding the quantity of
Products upon which the Standard Cost in the Pricing Model
is based may result in a retroactive unit price decrease.
MEG and SCC agree to meet quarterly to review such quantity
changes which may result in price increases or decreases.
MEG agrees to offer price decreases and SCC agrees to accept
price increases as described above whenever the total
dollar volume of the quarter's business increases or
decreases by two percent (2%), except during the Initial
Period as defined by the Pricing Model in Exhibit E.
2.6 Economic Manufacturing Lot Sizes
Both parties recognize the need to build the Products
in economical manufacturing lot sizes in order to maintain
competitive prices. SCC agrees not to unreasonably withhold
its approval of a MEG request to build low volume Products
in advance of purchase order releases to maintain such
economical manufacturing lot sizes . It is understood MEG
does not desire to hold completed Product in its inventory.
Therefore, MEG will request to build low volume Products in
advance of Master Schedule requirements to maintain such
economical manufacturing lot sizes. Product run in economic
lot sizes approved by SCC will be shipped with the next
Master Schedule demand for that Product. Reference
paragraph 3.2 Master Schedule Releases. In addition, SCC
and MEG agree that quantities of less than 300 units of
current manufactured Product, in a single production run of
Product, will not be scheduled in the Master Schedule.
2.7 Access to Books and Records
SCC shall have reasonable access during normal
business hours, with prior agreed notice, to the books and
records of Assemblies de Mexico S. de R. L. de C. V.,
including the July 1 to June 30 total of factory overhead
dollars and standard earned direct labor hours for the sole
purpose of verifying the reasonableness of Product pricing.
SECTION 3.0 - PURCHASING AND CANCELLATIONS
3.1 Master Schedule
3.1.1 Master Schedule, Purpose
Commencing on the Effective Date of this Agreement
and continuing weekly thereafter throughout the term
hereof, SCC will issue a weekly Master Schedule ("Master
Schedule") covering specific Product requirements for a
minimum of twenty-six (26) weeks, the first of which is
attached hereto as Exhibit F. The purpose of the Master
Schedule is to plan the acquisition of Raw Materials and to
schedule the Facility using the Material Requirements
Planning System (hereafter "MRP") , in order to enable MEG
to meet SCC's delivery requirements, as well as to authorize
the procurement of Raw Material, the manufacture of Product,
and the shipment of Product as described in this section.
3.1.2 Master Schedule, The Frozen Zone
The first eight (8) weeks of each Master Schedule
issued will constitute firm commitments from SCC to accept
and firm commitments from MEG to deliver the Product in the
quantities and to the delivery schedule specified. This
eight (8) week period constitutes a frozen zone (the "Frozen
Zone") in which no changes will be made except as provided
under paragraph 3.3, Changes in Master Schedule. The
issuance of the Master Schedule weekly shall constitute and
have the same force and effect as the issuance of the
purchase order for the Product specified for the Frozen
Zone, and shall be non-cancelable.
3.1.3 Master Schedule, The Forecast
The eighteen (18) week period, defined as weeks
nine (9) through twenty-six (26) of the Master Schedule,
which directly follow the Frozen Zone will be deemed by both
parties to be Product specific forecasts (the "Forecast").
3.2 Master Schedule Releases
All Master Schedule Releases shall contain the
following information:
a. Type of Product by SCC item number
b. Quantity of Product to be delivered
c. Scheduled delivery dates
d. Reference to this Agreement
3.3 Changes in Master Schedule
MEG recognizes that SCC is engaged in the consumer
electronics business, which requires the ability to meet
rapidly changing customer requirements. MEG and SCC agree
to work together to meet these requirements.
3.3.1 SCC Requested Master Schedule Changes, Frozen Zone
From time to time SCC may request Master Schedule
changes within the Frozen Zone. SCC will document in
writing the requested change(s) to MEG. MEG agrees to
respond as soon as possible and on major changes no later
than within five (5) working days, accepting, modifying, or
rejecting the request. Upon written acceptance of MEG's
response, MEG will use its best efforts to comply with the
reschedule. Costs incurred by MEG as described in their
response will be paid for by SCC. SCC and MEG will work
together to minimize these costs.
3.3.2 MEG Requested Master Schedule Changes
Should Master Schedule changes be requested by MEG
and approved by SCC, the cost for such changes will be born
by MEG.
3.3.3 Failure to Issue Master Schedule Revisions
Should SCC fail to issue an updated Master
Schedule in any week, the entire Master Schedule will roll
week by week as if an update has been issued, with the prior
twenty-seventh week rolling to the twenty-sixth week etc.,
or if there was no forecast entered in the prior twenty-
seventh week, then the new twenty-sixth week should be in
all respects identical to the previous twenty-sixth week now
rolled to the twenty-fifth week. In the same manner the
twenty-seventh week rolls to the twenty-sixth week becoming
part of the Forecast, and the ninth week rolls into the
eighth week thereby becoming part of the Frozen Zone.
3.3.4 Master Schedule Decreases by SCC
Should the Master Schedule decrease, including but
not limited to the discontinuance of a Product, result in
the creation of excess or obsolete inventory, then the
provisions of paragraph 8.3 Inventory Indemnification shall
apply. For discontinuance of Raw Material, paragraph 6.1
Engineering Changes Proposed by SCC shall apply.
3.4 Acceptance/Rejection of SCC Requested Master Schedule
Changes
In addition to the criteria in paragraph 3.3, MEG
may, at its option, accept or reject any Master Schedule
change issued by SCC that is not in compliance with stated
Product Lead-time and/or Terms and Conditions of this
Agreement. MEG shall, however, use its best efforts to
comply with any such changes , and to work with SCC in a
Product Lead-time reduction program over the life of this
Agreement. MEG shall notify SCC of the rejection of any such
change(s) within three (3) working days of receipt of
request for such changes.
3.5 Advanced Material Purchases
3.5.1 Advanced Material Purchased - Raw Material Lead-times
MEG may be required to purchase certain Raw
Materials beyond sixteen (16) weeks of the Master Schedule
requirements, due to lead-time, lot size, or cost issues,
("Advanced Material Purchases"). The quantity of these
purchases shall be determined by using the annual forecast.
MEG shall request written authorization from SCC for the
procurement of these Advanced Material Purchases to the
specific planning leadtime plus an additional four (4) weeks
to cover the normal procurement ordering cycle, and SCC
shall be responsible for all such authorized purchases.
3.5.2 Advanced Material Purchases - SCC Requested Raw
Material
SCC may request that MEG purchase certain Raw
Materials for Product that SCC has not yet requested be
entered in the Master Schedule, and whose requirements,
therefore, are not shown in MRP. SCC shall provide MEG with
written authorization including the part number, the part
description, the part print, the approved manufacturer, the
approved manufacturer's part number, and any other purchase
specifications as may be required commercially to place a
purchase order for the specific Raw Material, the required
delivery dates and the corresponding required quantities.
MEG will provide reasonable efforts to purchase the
requested Raw Material in the quantities and by the dates
requested. In the event that MEG has received first
deliveries of such Raw Material at its Facility, and such
Raw Material has no requirements in the Master Schedule and
MRP, MEG, at its option, will request SCC issue a purchase
order to MEG for the total quantity and total cost of such
Raw Materials purchases.
3.5.3 Advanced Material Purchases - SCC Authorized
Personnel
SCC shall designate to MEG in writing the name of
the person authorized to approve Advanced Material Purchases
and an alternate in case that person is not available. No
other person(s) shall be authorized to approve Advanced
Material Purchases unless designated by SCC in writing.
Approval by an authorized person of SCC shall be binding
upon SCC and not subject to modification, rejection, or
reduction pursuant to the terms of this Agreement without
the written consent of MEG.
3.6 Spare Parts
MEG agrees to provide fabricated spare parts for the
Products purchased by SCC at SCC's written request for a
minimum of five (5) years after the discontinuance of the
Product or the expiration or termination of this Agreement,
whichever occurs first. Such spare parts shall be supplied
at actual cost plus five percent (5)%. Lead-time for such
spare parts should not exceed thirty (30) days from receipt
and acceptance of order by MEG. MEG agrees to provide
whatever assistance it can to SCC in the case of emergency
parts requirements without liability except as set forth
herein. In addition, MEG will maintain tooling licensed by
SCC to produce spare parts at SCC's sole cost and expense.
Parts other than fabricated spare parts shall be provided
within industry lead-times if not available in stock at
actual cost plus 5 percent (5%). MEG also agrees to
provide whatever assistance it can to SCC in obtaining any
parts other than fabricated parts, including but not limited
to attempting to identify replacements for obsolete
components, without liability except as set forth herein.
3.7 MEG Purchase of SCC Work in Process and Raw Materials
On the Effective Date of this Agreement, MEG agrees
to pay SCC an amount equal to the value at SCC's standard
costs, all of the rights, title and interests in the work-
in-process at the Tijuana, MX facility and Raw Materials,
together, sufficient in part or in total to fulfill the
requirements of the Product for the first quarter defined as
the first thirteen (13) weeks of the Master Schedule. At
the end of the first quarter, MEG and SCC will review MEG's
actual usage of SCC's Raw Materials during such quarter and
will review the requirements of the Product netted against
remaining on-hand inventory for Raw Materials for the next
thirteen (13) weeks of Master Schedule. SCC shall sell and
MEG shall buy such Raw Materials to the extent SCC has such
Raw Materials in its inventory. This will continue on a
quarterly basis until the final disposition of SCC's Raw
Material inventory. Coincident with each quarterly review,
SCC and MEG will jointly review remaining SCC Raw Material
inventory, and jointly identify Raw Material items that have
no requirements or have Raw Material inventory in excess of
a fifty-two (52) week Master Schedule as determined by MRP.
Such Raw Material shall then be promptly removed or disposed
of by SCC at SCC's expense.
3.8 Conversion of SCC Purchase Orders to MEG Purchase
Orders
On the first working day following the date this
Agreement is made public, under the direction of MEG, buyers
acting as agents of SCC and so designated by SCC in writing
will commence contacting suppliers holding SCC open purchase
orders for Raw Materials, with the intent to cancel purchase
order deliveries and quantities remaining, with delivery
dates following the Effective Date. Coincident with this
event, the same buyers acting on behalf of MEG will issue
MEG purchase orders replacing delivery and quantities
cancelled. Buyers will continue with this process acting
with reasonable diligence until all remaining SCC purchase
orders with open delivery dates and quantities have been
cancelled and replaced with MEG purchase orders.
Recognizing the lack of sufficient response time available
between the date this Agreement is made public, and the
Effective Date, and the need for confidentiality, SCC agrees
that during this transitional process, in order to avoid
potential disruption in the continuity of flow of Raw
Materials, the buyer, at MEG's discretion and with approval
of MEG's Director of Materials, shall have the right to
delay cancellation and reissue purchase orders for any
delivery and quantity. SCC hereby grants MEG blanket
approval for all Advanced Material Purchases pursuant to
section 3.5.1 which result from MEG issuing purchase orders
during the transition period for quantities of Raw Material
replacing SCC purchase orders for similar quantities of Raw
Material. The status of SCC open purchase orders on the
date this Agreement is made public is set forth in Exhibit M
(the "Purchase Orders for Raw Material").
3.9 Deliveries of Raw Material on SCC Purchase Orders After
the Effective Date
SCC and MEG agree that MEG will receive into its
inventory after the Effective Date, all valid deliveries and
quantities received against valid SCC purchase orders not
otherwise cancelled. SCC and MEG agree to meet weekly to
review and approve valid invoices for such purchase order
deliveries and quantities. Until the transition is
complete, SCC shall pay such purchase orders to invoice
terms and MEG shall pay SCC such purchase orders to the same
invoice terms for Raw Materials relating to the first
thirteen (13) weeks of the Master Schedule. All other Raw
Material shall be added to SCC's inventory. MEG agrees to
pay SCC for prepaid raw materials set forth in Exhibit K
(the "Prepaid Raw Materials") upon receipt of such Raw
Materials.
3.10 MEG Disposal of SCC Obsolescence - MEG Owned Inventory
Upon receipt of written instruction from SCC, MEG
will dispose of, and/or package and ship obsolete Raw
Material according to SCC's instructions. SCC will pay MEG
for the Raw Material owned by MEG at MEG's standard cost,
plus pay for all expenses incurred by MEG including but not
limited to picking, packing for shipment, shipping charges,
duties, brokerage fees, and disposal fees.
3.11 MEG Disposal of SCC Obsolescence - SCC Owned Inventory
Upon receipt of written instruction from SCC, MEG
will dispose of, and/or package and ship obsolete Raw
Material according to SCC's instructions. SCC will pay MEG
for all expenses incurred by MEG including but not limited
to picking, packing for shipment, shipping charges, duties,
brokerage fees, and disposal fees.
3.12 Raw Material for SCC Subcontract Customer Orders
MEG agrees to assume all obligations to complete
all subcontract customer orders for the products set forth
in Exhibit L, attached hereto (the "Subcontract Customer
Orders").
SECTION 4.0 - PAYMENT AND SHIPPING TERMS
4.1 Invoices and Payment
MEG shall invoice SCC upon shipment of Product or
upon a mutually agreed to invoicing schedule. Payment shall
be due and payable in US Dollars net 30 days from invoice
date. In the event SCC fails to make payment per the terms
of this Agreement: (1) delinquent payments shall bear
interest at the rate of one and one half percent (1.5%) per
month; (2) MEG may cease shipment to SCC immediately; and/or
(3) MEG may elect to make some or all future shipments
C.O.D. In the event of default by SCC, default provisions
under Section 7 apply.
2 Delivery of Product
4.2.1 Delivery to San Diego
Delivery of Product to SCC shall be F.O.B. SCC's
receiving dock located at 2055 Dublin Drive, Suite 102, San
Diego, California. Title and risk of loss for Products
shall pass to SCC upon receipt of Products by SCC. MEG
shall pay freight on all Products to SCC's receiving dock in
San Diego, California.
4.2.2 Shipment to other Destinations
SCC, at its election, may arrange for shipment of
Products to other destinations. In such event, MEG shall
deliver Product F.O.B. to SCC's shipping agent at the US
Port of Entry, Otay Mesa, CA. Title and risk of loss for
Products shall pass to SCC upon receipt of Products by SCC's
shipping agent. MEG shall pay freight on all Products to
SCC's shipping agent.
4.2.3 Licenses, Permits, Certificates, Fees and Duties
MEG shall have the responsibility of obtaining all
required licenses, approvals, and permits relating to the
export of goods from their country of origin, and shall pay
all export fees and duties. MEG shall also have the
responsibility to take all steps in order to obtain from
governmental authorities the import certificates and all
licenses, approvals, and permits required for importing
goods into the US.
4.3 Packaging
MEG shall package each unit of Product per SCC's
specifications.
4.4 Taxes
MEG shall be responsible for all applicable US,
federal, state, municipal and governmental taxes or duties,
as well as any taxes or duties imposed by the Government of
Mexico on Product manufactured under the terms of this
Agreement. SCC will cooperate with MEG or its agents,
employees, or professionals to minimize taxes or duties as
allowed by law. In addition SCC will verify, certify or
otherwise cooperate with the preparation and filing of any
applicable documentation to allow the reduction or
elimination of taxes or duties to the extent legally
permissible under applicable law.
SECTION 5.0 - ACCEPTANCE, INSPECTION, AND WARRANTY
5.1 Acceptance Criteria
The acceptance criteria shall be in conformance with
the Manufacturing Specifications, and Quality Standards.
MEG shall be held responsible for material and workmanship
of the Product as defined in the Manufacturing
Specifications, the Quality Standards, and SCC's Defect
Classification Manual. MEG shall not be held responsible
for defects determined to be caused by the design of the
Product. Prior to production of any Product, SCC shall
provide MEG a written inspection procedure for each Product,
which shall become part of the Quality Standards.
5.2 Acceptance
SCC shall inspect incoming lots at its warehouse in
San Diego, CA and/or Cortland, NY, promptly after receipt of
the goods, in accordance to the audit inspection procedures
contained in the Quality Standards and acceptance sampling
plans and AQLs set forth in Exhibit N and attached hereto
(the "Acceptance Sampling Plans"). Should an incoming lot
fail the audit inspection for defects for which MEG is
responsible, SCC will promptly notify MEG. MEG will advise
of a disposition for that lot within five work days. Such
disposition may include by mutual agreement, use as is,
screen and repair at MEG expense, or return the lot for
repair at MEG expense.
5.3 Returned Products
Prior to returning any goods, SCC will obtain from
MEG a Return Material Authorization number (hereafter
"RMA"). Defects on returned goods will be documented by SCC
and forwarded to MEG at the time such RMA number is
requested.
5.4 Quality Audit
SCC reserves the right to inspect the Facility upon
reasonable notice. SCC also reserves the right to review
MEG's quality and production records and MEG's quality
system to ensure on-going Product quality.
5.5 Liability
MEG is responsible for all liabilities and defects
proven to be caused by MEG and will pay all costs associated
with correcting such defective Product. MEG's liability for
a breach of the above warranties will in no event exceed the
unit purchase price that has been paid by SCC for the
defective Products, and will not include consequential
damages caused by manufacturing defect. MEG and SCC agree
to cooperate fully in investigating and correcting such
defects.
5.6 Customer Warranty Returns - Typewriters Only
SCC has summarized its actual customer warranty
return history which occurred during the period immediately
preceding the Effective Date as set forth in Exhibit I
attached hereto (the "Warranty Return History"). SCC agrees
commencing with the Effective Date to record and summarize
customer warranty returns classifying defects by cause and
provide this information to MEG monthly, within fifteen (15)
days following each month closing. SCC and MEG agree to
jointly review such information on a quarterly basis. SCC
and MEG agree that for the purposes of monthly and annual
measurement of workmanship defects, MEG's responsibility
commences with the seventh month following the Effective
Date. If the average actual percentage of customer warranty
returns attributable to workmanship for a year is less than
or equal to the average actual percentage of customer
warranty returns attributable to workmanship for the
customer warranty return history for the highest year as set
forth in Exhibit I, no adjustment will be made. If the
average actual percentage of customer warranty returns
attributable to workmanship for a year is greater than the
average actual percentage of customer warranty returns
attributable to workmanship for the customer warranty return
history for the highest year as set forth in Exhibit I, MEG
will credit SCC with the computed portion of actual cost
incurred by SCC for this difference subject to limits set
forth in 5.5 above.
5.7 Epidemic Failure
Epidemic failure is defined as occurring when the
failure rate of a Product from a single cause during a
period one (1) year from the date of manufacture exceeds six
percent (6%). SCC will promptly notify MEG of such
occurrence. If it is determined that epidemic failure was
caused by MEG or that MEG knew or reasonably should have
known of the existence of the conditions causing the
epidemic failure, MEG and SCC shall immediately commence
discussion of the steps to be taken by MEG to remedy the
problem. After the remedy is agreed upon, MEG will
diligently pursue incorporating the modification remedying
the defect. MEG, at its option, will either replace the
Product at its expense, authorize the return of the Product
for repair at its expense, or supply SCC without charge all
necessary Raw Materials necessary to correct the problem and
reimburse SCC for reasonable repair labor, but will not be
held responsible for consequential damages arising from such
defects.
5.8 Warranty
MEG warrants to SCC that items assembled or
manufactured by MEG, or its subcontractors will conform to
the Manufacturing Specifications and the Quality Standards
and be free from defects in workmanship upon shipment from
MEG's factory. MEG's obligation under this warranty is
limited to replacing or repairing at its option, without
charge, any of said items which shall within one (1) year
after shipment be returned to MEG's factory, transportation
charges prepaid, and which shall after examination be
disclosed to MEG's satisfaction to be thus defective.
Components and other Raw Material (other than those supplied
by SCC) shall be warranted on a pass-through basis from the
component/raw material supplier to SCC.
5.9 Warranty Limitation
THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES
WHETHER STATUTORY, EXPRESS OR IMPLIED, INCLUDING IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR PARTICULAR
PURPOSE AND FOR ALL OTHER OBLIGATIONS OR LIABILITIES ON
MEG's PART. MEG NEITHER ASSUMES NOR AUTHORIZES ANY OTHER
PERSON TO ASSUME FOR MEG ANY OTHER LIABILITY IN CONNECTION
WITH THE SALE OF THE SAID ITEMS. THIS WARRANTY SHALL NOT
APPLY TO ANY OF SUCH PRODUCTS WHICH SHALL HAVE BEEN REPAIRED
OR ALTERED EXCEPT BY MEG OR WHICH SHALL HAVE BEEN SUBJECT TO
MISUSE, NEGLIGENCE OR ACCIDENT. MEG IS NOT LIABLE FOR
INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGE OF ANY KIND OR
FOR PERSONAL INJURY RESULTING DIRECTLY OR INDIRECTLY FROM
THE DESIGN, MATERIAL, OPERATION OR INSTALLATION OF THE ITEMS
BEING ASSEMBLED UNDER THIS AGREEMENT.
SECTION 6.0 - ENGINEERING
6.1 Engineering Changes Proposed by SCC
SCC may, during the term of this Agreement, request
changes in the specification of the Products by delivering
to MEG an Engineering Change Request (hereafter "ECR"),
describing the changes and the proposed effective date of
such changes. MEG will respond in writing, with such
response to include cost and delivery impact to affected
Product, and whether implementation will result in excess
parts and/or obsolete inventory or will require MEG to
terminate certain supply agreements with its third party
suppliers. Such response will be made by MEG to SCC within
five (5) working days. MEG will not be obligated to proceed
with the change until mutual agreement has been reached,
reduced to writing, signed by both parties and an
Engineering Change Notice (hereafter "ECN") is issued by
SCC. If SCC issues any such ECN, then within thirty (30)
days after the date of MEG's written request to SCC, SCC
will (a) pay MEG at actual cost for resulting excess and/or
obsolete inventory which the parties agree cannot be used by
MEG in other products or resold by MEG at its cost or
better, and (b) reimburse MEG for purchase order
cancellation charges which MEG cannot avoid using reasonable
commercial efforts. However, no SCC payment under clause
(a) or (b) is required for Advanced Material Purchases
unless such purchases were previously approved in writing by
SCC. The amounts to be reimbursed by SCC for cancellation
charges must be reasonable taking into consideration
component lead-time and assembly schedules. MEG will use
commercially reasonable efforts to minimize the amount of
SCC liability for compensation to be paid to MEG by SCC
under this Section.
6.2 Engineering Changes Proposed by MEG
MEG shall notify SCC of any proposed change and the
expected effect on the Product function and price with an
Engineering Change Request. SCC will process such ECRs in a
timely manner. If SCC agrees to the change, SCC will issue
an ECN as noted in Section 6.1. If SCC does not agree with
the change, the parties will work together to resolve the
disagreement. MEG will make no changes to the Product
without the expressed written consent of SCC, however MEG
may stop production of the affected Product prior to SCC
approving such requested change if in the opinion of MEG the
change is necessary to eliminate a defect in the Product as
defined in paragraphs 5.1, 5.2, and 5.4 of this agreement.
6.3 Test Program Approval
Any test programs which MEG develops, produces, or
procures shall be reviewed and approved by SCC for use by
MEG on the Products. This approval shall occur prior to
production use.
6.4 Raw Material Availability
If a Raw Material is not available from the approved
supplier, MEG shall immediately notify SCC of this
condition. MEG shall be relieved from its obligations to
produce affected Product until such time as SCC provides
approval of replacement or substitute Raw Material. SCC
approval shall be indicated by delivering an Engineering
Change Request and pricing pursuant to paragraph 6.1.
SECTION 7.0 - TERMINATION
7.1 - Conditions of Termination
This Agreement may only be terminated: (a) at any
time upon the mutual written agreement of both parties; (b)
by either party at any time upon failure of the other party
to perform any material obligation and to commence a cure of
such failure within five (5) days after receipt of written
notice from the non-defaulting party of each failure and
thereafter pursue efforts to cure diligently; or (c) the
entry of an Order of Bankruptcy Court of competent
jurisdiction rejecting this agreement.
7.2.1 Effect of Termination, SCC Obligations
SCC shall be liable, in the event of termination
except for termination by SCC because of failure of MEG to
perform as set forth in Section 7.1(b) or for termination at
the end of the term or renewal term as set forth in Sections
1.1 and 1.2 of this Agreement for:
a. Payment for all Products delivered to SCC, and in
transit, plus finished Products in inventory prior to, and
including, the effective date of termination at the pricing
applicable to the Product.
b. Payment for all "Work in Process" based upon
percentage of completion multiplied by the unit price of the
Product as listed in the Price Model, including Products
which were in process prior to receipt of notice of
cancellation and that could not be completed prior to the
date of termination. SCC may request MEG to complete and
deliver all Product including Work in Process.
c. Payment for the cost plus five percent (5%) mark up
of Raw Materials in house and those on order which cannot be
canceled and are related to the manufacture of the Products,
that fall within the sixteen (16) week period from receipt
of written notification, as well as any approved Advanced
Material Purchases made per Section 3.5.
d. Payment for any restocking charges, bill-backs and
cancellation charges charged to MEG by suppliers of
components ordered for the manufacture of Products.
e. Payment to MEG of any additional charges borne by
MEG arising from such termination in an amount to be
negotiated by the parties in good faith within fifteen (15)
days after the effective date of cancellation which will
include but not be limited to all severance costs required
by Mexican law to be paid to any and all MEG employees
subject to any reduction in labor force caused by
termination of this Agreement.
7.2.2 Effect of Termination, MEG Obligations
Except as provided for otherwise in this section,
MEG shall upon termination of this Agreement, return all SCC
property, including, but not limited to tools, gages, jigs,
and fixtures, equipment, documentation and instructions
necessary to the manufacture and testing of SCC Product.
SCC has the right to purchase any Raw Material, or Work in
Process ("Work in Process") specific to the Product at
actual cost.
7.3 Right of Manufacture
In the event that SCC files a petition under Chapter 7
or Chapter 11 of the US Bankruptcy Code where (a) this
Agreement is not assumed without modification; (b) a
liquidation plan is filed that involves the dissolution of
that portion of SCC's business related to the Products; or
(c) the Bankruptcy Trustee or SCC rejects this Agreement,
MEG is hereby granted the right to use any licensed tools,
jigs, gages, fixtures and equipment, the proprietary
Specifications and all other available SCC manufacturing
documents related to the Products and all other
manufacturing level documents relating to the production of
the Products together with all other documents and
intellectual property above the manufacturing level as may
be necessary to modify or correct the manufacturing process,
including without limitation software and the source codes
therein, which SCC owns or is otherwise authorized to
license to third parties to produce the Product for the sole
purpose of exhausting the Product specific components then
in MEG's inventory and selling such Products until MEG has
recouped the documented supplier invoice cost for such
inventory, any actual out-of-pocket expenses attributable to
cancellation charges paid for terminating Product specific
supply contracts and all undisputed amounts outstanding
invoiced by MEG to SCC for Product delivered to SCC prior to
such filing. SCC also hereby grants to MEG the right to use
any customer lists relating to sale of the Product for the
purposes described above. Such use and sales rights shall
be granted to MEG under a nonexclusive paid-up royalty-free
license (except for any royalties payable to third parties
which shall be paid by MEG) which shall, among other things,
prohibit disclosure or transfer of whatsoever nature or kind
of documentation to third parties, reserve all ownership
rights in the documentation to SCC and provide for
termination upon MEG's recoupment of the aforementioned
expenses and receivables, which amount shall be calculated,
agreed upon and plainly stated in such license. MEG
specifically agrees that it shall not use, display or
otherwise publish the trademark or trademarks of SCC or its
affiliates in any other circumstance or for any other
purpose. During the term of this Agreement and renewal
thereof, the aforementioned documentation and specifications
shall, at the option and expense of MEG, be deposited with
an escrow agent with SCC having no right to seek the return
thereof from the escrow agent until the earlier of the
expiration of this Agreement or the recoupment by MEG of its
costs, expenses and damages. Upon filing a Chapter 7
petition in bankruptcy by SCC, or if in a Chapter 11
proceeding a liquidating plan of reorganization is filed by
SCC or a Trustee of SCC rejects this Agreement, upon written
notice of any such occurrence by MEG to the escrow agent and
SCC, delivery of such documentation and specifications shall
be immediately made to MEG. MEG shall maintain the right to
use all licensed tooling and equipment as defined in
paragraph 9.3 without cost or charge by SCC with a purpose
of exercising its right to manufacture set forth above. On
recovery of all costs and damages allowable under this
Agreement said licensed property will be returned to SCC's
dominion and control at SCC's sole cost and expense. The
obligations contained in this paragraph shall be binding
upon SCC regardless of the rejection of this Agreement in
the context of a pending bankruptcy proceeding.
SECTION 8.0 - INDEMNIFICATION
8.1.1 Product Indemnification SCC
SCC agrees that it will fully indemnify MEG
against any and all claims, liabilities, damages, or causes
of action hereafter brought or asserted by any person or
entity arising out of the design, installation or use of any
Product(s) manufactured by MEG under this Agreement unless
such claim, liabilities, damages, or cause of action is a
result of MEG's failure to properly manufacture such
Product(s) per this Agreement. Such indemnification shall
include reasonable attorney's fees and all other costs
incurred by MEG in the defense of such claims, asserted
liabilities or causes of action.
8.1.2 Product Indemnification MEG
MEG agrees that it will fully indemnify SCC
against any and all claims, liabilities, damages, or causes
of action hereafter brought or asserted by any person or
entity arising out of defects in workmanship on any Product
manufactured by MEG under this Agreement, such claim,
liabilities, damages, or cause of action being a result of
MEG's failure to properly manufacture such Product(s) per
this Agreement. Such indemnification shall include
reasonable attorney's fees and all other costs incurred by
SCC in the defense of such claims, asserted liabilities or
causes of action.
8.2 Patents, Copyright, Trade Secret and Other Proprietary
Rights
SCC agrees to defend at its expense any suit brought
against MEG based upon a claim that Product(s) manufactured
by MEG under this Agreement infringe a patent, copyright,
trade secret and/or other proprietary right, foreign or
domestic, and to pay the amount of any settlement or the
costs and damages finally awarded, provided that MEG
promptly notifies SCC and provides SCC with reasonable
assistance in the defense of any such action.
8.3 Inventory Indemnification
The parties recognize that this Agreement may require
MEG to purchase materials unique to the production and
manufacture of the Product which constitute minimum
purchases, reel or package size differentials, non-
cancelable and non-returnable items for the Products. In
the event of a schedule decrease or discontinuance of a
Product, in order to provide assurance that MEG will
recover all of its investment should such a
change in the Master Schedule occur, then within thirty (30)
days after the date of MEG's written request to SCC
identifying such an event, SCC will (a) pay MEG at actual
cost for inventory which the parties agree cannot be used
by MEG in other products or resold by MEG at its cost or
better, and (b) reimburse MEG for purchase order
cancellation charges which MEG cannot avoid using reasonable
commercial efforts. However, no SCC payment under clause
(a) or (b) is required for Advance Material Purchases unless
previously approved in writing by SCC. The amounts to be
reimbursed by SCC for cancellation charges must be
reasonable taking into consideration component lead-time and
assembly schedules. MEG will use commercially reasonable
efforts to minimize the amount of SCC liability for
compensation to be paid to MEG by SCC under this section.
8.4 Process Indemnification
If a claim is made that the manufacture of Product or
use of any other proprietary right or use of any
manufacturing process prescribed by SCC to MEG hereunder
infringes any patent, copyright, or trade secret, and MEG is
in compliance with all Specifications issued by SCC, SCC
shall either procure a license for MEG to use such
intellectual property, redesign the specifications and
processes so that they are non-infringing, or defend against
such claim and indemnify and hold harmless MEG from damages
resulting from such claim. SCC shall have sole control of
any defense, settlement or compromise of such claim and MEG
shall provide all necessary assistance to SCC for that
purpose.
8.5 No Express or Implied License
Nothing in this Agreement will be construed as
granting to MEG or conferring on MEG any rights by license
or otherwise to SCC's patents, trademarks, copyrights or
other proprietary or confidential rights except as
specifically set forth in this Agreement or other written
agreements between the parties hereto.
SECTION 9.0 - CONFIDENTIAL AND PROPRIETARY INFORMATION
The parties acknowledge that in the course of
performance of these obligations under this Agreement, each
party may obtain certain confidential and proprietary
information of the other party, including without limitation
information concerning copyrighted works, patented or patent
pending investigations or developments, and general
information regarding such party's financial, business and
marketing procedures. The parties hereby mutually agree
that all such information communicated to it by the other
party in written form, or in oral form if reduced to writing
within 10 days, will be held in strict confidence and not
disclosed to any third parties, and each party will use all
reasonable efforts to protect against the unauthorized use
and disclosure of the confidential information of the other
party, provided that each party may disclose each others
confidential information to their respective responsible
employees, but only to the extent necessary to carry out the
purposes for which the confidential information was
disclosed, and each party agrees to instruct all such
employees not to disclose such confidential information to
third parties, including consultants, without the prior
written permission of the party disclosing such confidential
information. Each party further agrees not to use or allow
the use of any confidential information of the other party
disclosed to it except in accordance with the purpose of
this Agreement. The provisions of this section will not
extend to confidential information that is already known to
the receiving party at the time that it is disclosed to the
receiving party and which knowledge is not wrongfully
obtained, or which, before being divulged by the receiving
party, (a) has become publicly known through no wrongful act
of the receiving party, (b) had been rightfully received
from a third party without restriction on disclosure and
without a breach of the Agreement, (c) has been
independently developed by the receiving party, (d) has been
approved for release by written authorization of the
disclosing party, or (e) has been or must be disclosed by
reason of legal, accounting or regulatory requirements
beyond the reasonable control of the receiving party or the
disclosing party.
SECTION 10.0 - LICENSED PROPERTY
10.1 License to use Tooling
SCC shall deliver all tools, gages, jigs, fixtures
and equipment, the proprietary specifications and all other
available SCC manufacturing documents related to the Product
and all other manufacturing level documents relating to the
production of the Product to MEG, required to manufacture
the Products contemporaneously with the Effective Date as
set forth in Exhibit H attached hereto (the "Licensed
Property"). SCC hereby grants MEG a license (the "License")
to use the Licensed Property and all other documents and
intellectual property which SCC owns or is otherwise
authorized to license to third parties, as may be necessary
to manufacture the Products pursuant to the terms of this
Agreement. The License will terminate upon expiration or
termination of this Agreement, provided that nothing
contained in this paragraph shall modify, condition, limit,
or diminish MEG's rights as granted in paragraph 7.3 herein.
10.2 Maintenance and Repair of SCC Licensed Tooling
MEG will perform all routine tooling maintenance
and repair at no cost to SCC, such cost being included in
overhead rates in the Pricing Model. All other tooling
maintenance, repair, or alteration performed by MEG shall be
paid by SCC. MEG will obtain approval from SCC and SCC
reserves the right to make alternate arrangements for such
maintenance, repair, or alteration. MEG will submit and SCC
will approve a Tool Maintenance Schedule (the "Tool
Maintenance Schedule") as set forth in Exhibit G attached
hereto.
10.3 Capability and Capacity
SCC warrants that the Licensed Property together
with other assets purchased by MEG are sufficient in both
quantity and capability for the manufacturing of the
Products. SCC shall remain responsible during the term of
this Agreement to provide all tooling and fixtures necessary
for the manufacturing of the Products. In the event SCC
wishes MEG to manufacture new or additional Products, it
shall be responsible for providing tooling and fixtures
sufficiently in advance of the Product introduction date to
permit MEG to manufacture and deliver Product in conformity
with the lead-time requirements of this Agreement. Failure
of SCC to provide such tooling, gages, jigs, and fixtures
shall relieve MEG of its obligation to meet the Product
delivery schedule as set forth herein.
10.4 Notification
MEG shall notify SCC of any tooling approaching end
of life at least ninety (90) days before it believes the end
of life will occur.
10.5 MEG Produced or Modified Tooling and Fixtures
SCC may from time to time contract with MEG to
produce new tooling or fixtures or modify existing tooling
or fixtures as needed to manufacture the Products.
10.6 Property of SCC
All Licensed Property shall remain the property of
SCC. SCC shall be obligated to dispose of such items and
replace the same in the ordinary course of business. SCC
shall retain the risk of loss on said items and shall at all
times maintain an insurable interest therein. MEG shall
have no obligation to insure said items against loss or
damage.
10.7 Risk of Loss
SCC acknowledges as owner of the Licensed Property
that the risk of loss for said Licensed Property remains
solely with SCC. SCC also acknowledges that in the event of
loss or damage to the Licensed Property MEG may be precluded
from meeting the production schedule set forth in this
Agreement. SCC shall pursuant to the provisions of
paragraph 11.10 "Disaster Plan" make provisions which in its
sole discretion deems adequate to provide for the
replacement of Licensed Property and other proprietary
materials in the event of loss or damage.
SECTION 11.0 - MISCELLANEOUS
11.1 Entire Agreement
This Agreement and the exhibits enclosed shall
constitute the entire Agreement between the parties with
respect to the transactions contemplated hereby and
supersedes all prior agreements and understanding between
the parties relating to such transactions.
11.2 Order of Precedence
SCC and MEG shall comply with all terms and
conditions stated in the Agreement and in SCC's purchase
orders issued hereunder, including the specifications
contained therein. In the event of inconsistency, the order
of precedence shall be as follows:
(1) This Agreement
(2) The face of any purchase order issued by SCC
11.3 Amendment
No amendment, modification, termination, extension,
or renewal of any provisions of this Agreement shall be
binding upon either party unless made in writing and signed
by an authorized officer of each of the parties.
11.4 Severability
In case any one or more of the provisions contained
in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, except in
those instances where removal or elimination of such
invalid, illegal, or unenforceable provision or provisions
would result in a failure of consideration under this
Agreement, such invalidity, illegality or enforceability
shall not affect any other provision hereof, and this
Agreement shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein.
11.6 Headings and References
The headings and captions used in this Agreement
are used for convenience only and are not to be considered
in construing or interpreting this Agreement. All reference
in this Agreement to Sections, Paragraphs, and Exhibits
will, unless otherwise provided, refer to Sections and
Paragraphs hereof and Exhibits attached hereto, all of which
are incorporated herein by this reference.
11.7 Assignment
This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors
and permitted assigns. Neither party hereto shall in any
way sell, transfer, assign, or otherwise dispose of any of
the rights, privileges, duties and obligations granted or
imposed upon it under this Agreement; provided however, that
MEG shall have the right, with the prior consent of SCC,
which will not be unreasonably withheld, to assign its
right, duties and responsibilities under this Agreement to
any affiliate of MEG. Any assignment by MEG of its rights,
duties and responsibilities under this Agreement shall not
relieve MEG of such rights, duties, and responsibilities and
MEG shall guarantee performance by its affiliates of any
obligations hereunder.
11.8 Force Majeure
Neither party shall be liable for any delay in
performance or failure to perform, in whole or in part any
obligation under this Agreement, or for the delay in such
performance, to the extent that such failure to perform is
caused by circumstances beyond its reasonable control,
including but not limited to, labor dispute, strike, war or
act of war (whether an actual declaration is made or not),
insurrection, riot, civil commotion, act of public enemy,
accident, fire, flood, or any other act of God, act of any
governmental authority, judicial action, or similar causes,
provided the party who cannot perform or is delayed has used
its best efforts to procure performance or to overcome the
obstacles preventing performance. If an event of force
majeure occurs, the party experiencing the force majeure
shall promptly notify the other in writing.
11.9 Governing Law
This Agreement will be governed by and construed in
accordance with the laws of the State of New York. The
federal or state courts located in the State of New York
will have exclusive jurisdiction to hear any dispute under
this Agreement.
11.10 Disaster Plan
Each party shall procure and maintain in force
throughout the term of this Agreement and any renewal
thereof for its own benefit, (i) a commercial general
liability insurance policy and (ii) a property insurance
policy covering such party and its property in connection
with its activities hereunder. In the event the Facility is
damaged to the extent that MEG cannot perform its
obligations hereunder, MEG and SCC shall use their
respective best efforts to repair the Facility, replace
Licensed Property, or proprietary equipment, or processes as
soon as practicable, and until the Facility is so repaired
MEG shall transfer production activities to another MEG
facility pursuant to a Disaster Plan which would be
reasonably acceptable to SCC.
11.11 Relationship of the Parties
The parties relationship during the term of this
Agreement and under any purchase orders placed hereunder
will be that of independent contractors. Neither party has,
and will not represent that it has, any power, right or
authority to bind or to incur any charges or expenses on
behalf of the other party or in the other party's name
without the written consent of the other party.
11.12 Waiver
No waiver of any provision of this Agreement
shall be effective except by written agreement signed by
both parties. The failure by any party at any time to
require performance of the other party of any provision of
this Agreement will in no way affect the right of such party
thereafter to enforce the same provision, nor will the
waiver by any party of any breach of any provision hereof be
taken or held to be a waiver of the provision itself.
11.13 Notices and Consents
All notices and other communications required or
permitted under this Agreement will be in writing and will
be deemed given (i) when delivered personally, (ii) when
sent by confirmed telex or facsimile transmission, or (iii)
one (1) day after having been sent by commercial or
overnight courier with written verification of receipt. All
communications will be sent to the receiving party's address
as follows:
MEG's address/fax for notice - with a copy to -
MATCO Electronics Group, Inc. MATCO Electronics Group, Inc.
Attn: James Matthews, Sr. Attn: Mark Baldwin
320 North Jensen Road 320 North Jensen Road
Vestal, NY 13805 Vestal, NY 13805
Fax (607) 729-8981 Fax (607) 729-8981
SCC's address/fax for notice - with a copy to -
Smith Corona Corporation Smith Corona Corporation
Attn.: Michael Driscoll Attn: Michael Chernago
839 Route 13 South 839 Route 13 South
Cortland, NY 13045 Cortland, NY 13045
Fax (607) 758-5786 Fax (607) 758-5602
MEG or SCC may change the address or facsimile number to
which such communications are to be directed by giving
written notice to the other in the manner provided for in
this Agreement.
11.14 Attorney's Fees
If any action of law or equity is necessary to
enforce or interpret the terms of this Agreement, the
prevailing party will be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
11.15 Counterparts
This Agreement may be executed in two or more
counterparts, all of which together shall constitute one and
the same instrument.
11.16 Compliance with Laws
If either party violates any law, rule, or
ordinance of any national government or other political
subdivision with applicable jurisdiction including but not
limited to the United States, any state, or any other
governmental agency in the performance of this Agreement,
they will indemnify and hold the other party harmless for
any loss, cost, or expense resulting from such violation.
11.17 Gratuities
Each Party represents that is has not offered or
given and will not offer to give any employee, agent, or
representative of the other party any gratuity with a view
toward securing any business from such other party or
influencing such person with respect to the transaction of
business between the parties.
11.18 Finders or Brokers
The parties hereby state that no finders,
brokers or similar third parties have been used in
connection with this Agreement or renegotiations or other
discussions culminating in this Agreement. Each party
agrees to indemnify and hold the other harmless from any and
all claims asserted by any finder or broker purported to be
based on a relationship with a party hereto.
11.19 Limitation of Liability
In no event shall either party be liable to the
other for indirect, special or consequential damages or loss
of profits, arising out of or related to this Agreement, or
performance of breach thereof, (unless specified herein)
even if such party has been advised of the possibility of
such damages.
IN WITNESS THEREOF, the parties have duly executed this
Agreement on the date first
above written.
SMITH CORONA CORPORATION MATCO ELECTRONICS GROUP, INC.
By: W. Michael Driscoll By: Lawrence Davis
Title: Chief Executive Officer Title: Treasurer & CFO
Date: November 24, 1997 Date: November 24, 1997
EXHIBIT A: THE PRODUCT
EXHIBIT E: THE PRICING MODEL
[*******]. The Product and the Pricing Model have been
omitted due to their confidential nature and filed
separately with the Securites and Exchange Commission with a
request for confidential treatment pursuant to Rule 24b-2.
EXHIBIT B: THE MANUFACTURING SPECIFICATIONS
B.1 Engineering Specifications
Both MEG and SCC are in possession of identical
copies of the documents referenced below in this paragraph
as of the Effective Date. These documents have been
distributed as controlled documents under procedures
established prior to the Effective Date, which were designed
to insure that identical sets of these documents be
maintained in both the Tijuana, MX, and Cortland, NY,
locations. Engineering Specifications are written documents
including all engineering drawings, source approvals,
project releases, engineering change notices, safety agency
licenses (UL, ETL, CSA, TUV), as well as the configuration
control established by these documents to meet
electromagnetic emission specifications (FCC, TUV RF, DOC).
Revisions to these documents may be made from time to time
upon mutual written agreement by MEG and SCC utilizing the
same control document procedures as were utilized prior to
the Effective Date.
B.2 Fabrication an Assembly Routines
Complete identical sets of Fabrication and Assembly
Routines documenting the current processing specifications
and work instructions for all Products as of the Effective
Date will be printed and distributed to Tijuana, MX, and
Cortland, NY, locations. Revisions to these documents may
be made from time to time utilizing controlled document
distribution.
B.3 Pending Engineering Changes
Both MEG and SCC are in possession of identical printed
copies of the computer report provided by SCC and referenced
below, dated as of the Effective Date, and hereby
incorporated by reference into this Exhibit B. The subject
report lists changes approved and planned for future
implementation, but not yet implemented as of the Effective
Date and will indicate items with manufacturing
specifications currently under review and subject to change
in the future.
#4519-A & #4519-B WEEKLY PENDING CHANGE MASTER LIST
(A final computer report will be printed by SCC MIS as of
the Effective Date will be sent to Mike Chernago and Tom
Tuohy.)
EXHIBIT C: THE QUALITY STANDARDS
Both MEG and SCC are in possession of identical copies of
the control documents provided by SCC and referenced below,
as of the Effective Date, and hereby incorporated by
reference into this Exhibit C. Revisions to these documents
may be made from time to time upon mutual written agreement
by MEG and SCC.
QUALITY POLICY & PROCEDURE MANUAL - 11/03/97
DEFECT CLASSIFICATION MANUAL - 05/12/92
EXHIBIT D: THE APPROVED SUPPLIERS
Both MEG and SCC are in possession of identical copies of
the personal computer diskette provided by SCC with a
creation date of 10/20/97 01:46 PM. Both parties are
capable of producing a printed report from this diskette,
and have produced a printed copy with a print date of
11/13/97, which is hereby incorporated by reference into
this Exhibit D. The subject diskette contains personal
computer files and includes: Device, SCC Part Number, SCC
Part Description, Approved Supplier, and Approved Supplier's
Part Number. Additional suppliers and additional items may
be added at any time upon written approval by SCC
Engineering. Revisions to this diskette may be made and
issued on diskette from time to time by SCC Engineering.
SCC Approved Suppliers - Revision 2 (COMPON2)
EXHIBIT F: THE MASTER SCHEDULE
[*******]. The Master Schedule has been omitted due to its
confidential nature and filed separately with the Securities
and Exchange Commission with a request for confidential
treatment pursuant to Rule 24b-2.
EXHIBIT G: THE TOOL MAINTENANCE SCHEDULE
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Tool No Part No Description Est ToolLife Vendor Est Cost Est Cmpl
771939 [*******] New Tool Smith Corona [*******] 11/28/97
Tooling Group
72614-01 953022 [*******] [*******] Mold Tech.
69641-00 771821 [*******] [*******] [*******]
69636-00 771818 [*******] [*******] [*******]
[*******]
69636-01 771818 [*******] [*******] [*******]
[*******]
69636-02 771818 [*******] [*******] [*******]
[*******]
68601-03 773552 [*******] [*******] [*******]
60921-00 712751 [*******] [*******]
[*******]
72619-00 953070 [*******]
67046-00 745560 [*******] [*******]
[*******]
67046-01 745560 [*******] [*******]
[*******]
67046-04 745560 [*******] [*******]
[*******]
T-52099-00 778345 [*******] [*******] [*******]
T-52099-01 778345 [*******] [*******] [*******]
T-52098-00 778344 [*******] [*******] [*******]
T-52098-01 778344 [*******] [*******] [*******]
T-52096-01 778816 [*******] [*******] [*******]
[*******]
T-70187-01 778810 [*******] [*******] [*******]
[*******]
T-70186-01 778811 [*******] [*******] [*******]
[*******]
T-52096-01 778816 [*******] [*******] [*******]
[*******]
T-70187-01 778810 [*******] [*******] [*******]
[*******]
T-70186-01 778811 [*******] [*******] [*******]
[*******]
745061 [*******] [*******] A-1 engr [*******]
[*******]
745070 [*******] [*******] A-1 engr [*******]
[*******]
745071 [*******] [*******] A-1 engr [*******]
[*******]
745107 [*******] [*******] A-1 engr [*******]
[*******]
745121 [*******] [*******] A-1 engr [*******]
[*******]
745122 [*******] [*******] A-1 engr [*******]
[*******]
</TABLE>
EXHIBIT H: THE LICENSED PROPERTY
Both MEG and SCC are in possession of identical printed
copies of the computer report provided by SCC and referenced
below, dated 11/12/97 at 2:32 PM, and hereby incorporated by
reference into this Exhibit H. SCC is unable to provide any
listing except hard tooling and acknowledges that Exhibit H
is incomplete. Not included are all the jigs, fixtures,
inspection equipment and special tools which are used to
support the manufacture of current typewriters, accessories
and headsets set forth in Exhibit A and E.
Smith Corona Corporation
MEXICO TOOLS (510) - NBV
EXHIBIT I: THE WARRANTY RETURN HISTORY
PRODUCT RETURNS FY'91 - FY 98
US SALES vs. US RETURNS (ONE YEAR OFFSET)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
WORK-
TOTAL MANSHIP
US US RETURN DEFECT DEFECT
YEAR PRODUCT SALES RETURNS RATE RATE RATE
FY91 TW [**] [**]
PWP [**] [**]
TOTAL [**] [**]
FY92 TW [**] [**] [**] [**] [**]
PWP [**] [**] [**] [**] [**]
TOTAL [**] [**] [**] [**] [**]
FY93 TW [**] [**] [**] [**] [**]
PWP [**] [**] [**] [**] [**]
TOTAL [**] [**] [**] [**] [**]
FY94 TW [**] [**] [**] [**] [**]
PWP [**] [**] [**] [**] [**]
TOTAL [**] [**] [**] [**] [**]
FY95 TW [**] [**] [**] [**] [**]
PWP [**] [**] [**] [**] [**]
TOTAL [**] [**] [**] [**] [**]
FY96 TW [**] [**] [**] [**] [**]
PWP [**] [**] [**] [**] [**]
TOTAL [**] [**] [**] [**] [**]
FY97 TW [**] [**] [**] [**] [**]
PWP [**] [**] [**] [**] [**]
TOTAL [**] [**] [**] [**] [**]
FY98 TW [**] [**] [**] [**] [**]
EST TO
Y/E PWP [**] [**] [**] [**] [**]
TOTAL [**] [**] [**] [**] [**]
</TABLE>
EXHIBIT J: THE ADVANCED MATERIAL PURCHASES
WITH BLANKET APPROVALS BY COMMODITY
Pursuant to section 3.5.1 "Advanced Material Purchases - Raw
Material Lead-times," following is a list of Raw Materials
which SCC, as of the Effective Date, has given blanket
approval for Advance Material Purchases for the period
specified. Leadtime refers to planning leadtime which is
the buyer's stated leadtime plus ten (10) days for
planning/purchase order processing.
Descending Lead Time Sequence: Part
Number Sequnce:
<TABLE>
<S> <C> <C> <C> <C> <C>
PN Description LT PN Description LT
796254 Screw [**] 200100 IC [**]
790008 Screw [**] 701091 Screw [**]
782219 Screw [**] 713930 Nut [**]
781910 Screw [**] 753580 Shaft [**]
780424 Screw [**] 760819 Data Disk [**]
778807 Screw [**] 770173 Motor [**]
777240 Screw [**] 770183 Motor [**]
771789 Screw [**] 770297 Screw [**]
770672 Screw [**] 770492 Plunger [**]
770297 Screw [**] 770672 Screw [**]
713930 Nut [**] 771789 Screw [**]
701091 Screw [**] 774860 Motor [**]
770492 Plunger [**] 774861 Motor [**]
089100 Spec Shape Stl [**] 774871 Motor [**]
200100 IC [**] 774873 Motor [**]
782900 IC [**] 777240 Screw [**]
084191 Screw rod [**] 778807 Screw [**]
072530 Steel, zinc
coated [**] 780424 Screw [**]
072604 Steel, zinc
coated [**] 781910 Screw [**]
072510 Steel, zinc
coated [**] 782219 Screw [**]
072342 Steel, zinc
coated [**] 782900 IC [**]
095957 PC/ABS [**] 790008 Screw [**]
095956 PC/ABS [**] 796254 Screw [**]
095955 PC/ABS [**] 797157 Motor [**]
095953 PC/ABS [**] 922731 Linecord [**]
095683 Polycarbonate [**] 922762 Linecord [**]
095679 Polycarbonate [**] 922766 Linecord [**]
095081 Clr Polycar-
bonate [**] 922767 Linecord [**]
753580 Shaft [**] 953107 Motor [**]
922767 Linecord [**] 953108 Motor [**]
922766 Linecord [**] 072342 Steel, zinc
coated [**]
922762 Linecord [**] 072510 Steel, zinc
coated [**]
922731 Linecord [**] 072530 Steel, zinc
coated [**]
797157 Motor [**] 072604 Steel, zinc
coated [**]
770173 Motor [**] 083720 Screw rod [**]
770183 Motor [**] 083723 Screw rod [**]
774861 Motor [**] 084191 Screw rod [**]
774871 Motor [**] 089100 Spec Shape
Steel [**]
774873 Motor [**] 095081 Clr Polycar-
bonate [**]
953107 Motor [**] 095679 Polycarbonate [**]
953108 Motor [**] 095683 Polycarbonate [**]
083723 Screw rod [**] 095953 PC/ABS [**]
083720 Screw rod [**] 095955 PC/ABS [**]
774860 Motor [**] 095956 PC/ABS [**]
760819 Data Disk [**] 095957 PC/ABS [**]
</TABLE>
EXHIBIT K: THE PREPAID RAW MATERIALS
Both MEG and SCC are in possession of identical copies of
the Prepaid Raw Materials document, as of the Effective
Date, and hereby incorporated by reference into this Exhibit
K.
(A final list of SCC prepaid raw materials updated as of the
Effective Date will be reviewed and agreed to on the
Effective Date by Marty Wilson and Tom Tuohy.)
EXHIBIT L: THE SUBCONTRACT CUSTOMER ORDERS
[*******]. The Subcontract Customer Orders Schedule has
been omitted due to its confidential nature and filed
separately with the Securities and Exchange Commission with
a request for confidential treatment pursuant to Rule 24b-2.
EXHIBIT M: THE PURCHASE ORDERS FOR RAW MATERIAL
Both MEG and SCC are in possession of identical printed
copies of the computer report referenced below, dated as of
the date this Agreement is made public, and hereby
incorporated by reference into this Exhibit M. The subject
report lists status of all valid SCC purchase orders for Raw
Material as of the Effective Date of this Agreement.
#2603-A PURCHASE ORDER STATUS BY BUYER
(A computer report will be printed by SCC MIS as of the
Announcement Date will be sent to Mike Chernago and Tom
Tuohy. Another computer report will be printed by SCC MIS
as of the Effective Date will be sent to Mike Chernago and
Tom Tuohy.)
EXHIBIT N: THE QUALITY ASSURANCE ANNUAL REPORT
Both MEG and SCC are in possession of identical copies of a
report provided by SCC, which SCC represents as actual
quality measurements for the period January through
September of 1997 and referenced below, and hereby
incorporated by reference into this Exhibit N.
SMITH CORONA
QUALITY ASSURANCE ANNUAL REPORT
EXHIBIT O: ACCEPTANCE SAMPLING PLANS
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
TYPEWRITERS MIL STD 105D INSP PLAN "0" ACCEPTANCE INSP PLAN
[**]% AQL
# OF UNITS SAMPLE #DEFECTS #DEFECTS SAMPLE #DEFECTS #DEFECTS
IN LOT SIZE ACCEPT REJECT SIZE ACCEPT REJECT
RECEIVED # UNITS # UNITS (c=0) (c=1)
TO BE TO BE
INSPECTED INSPECTED
< 150 [**] [**] [**] [**] [**] [**]
151 - 280 [**] [**] [**] [**] [**] [**]
281 - 500 [**] [**] [**] [**] [**] [**]
501 - 1200 [**] [**] [**] [**] [**] [**]
1201 - 3000 [**] [**] [**] [**] [**] [**]
3001 > [**] [**] [**] [**] [**] [**]
ACCESSORIES MIL STD 105D INSP PLAN "0" ACCEPTANCE INSP PLAN
[**]% AQL
# OF UNITS SAMPLE #DEFECTS #DEFECTS SAMPLE #DEFECTS #DEFECTS
IN LOT SIZE ACCEPT REJECT SIZE ACCEPT REJECT
RECEIVED # UNITS # UNITS (c=0) (c=1)
TO BE TO BE
INSPECTED INSPECTED
< 3200 [**] [**] [**] [**] [**] [**]
3201 - 10000 [**] [**] [**] [**] [**] [**]
10001 - 35000 [**] [**] [**] [**] [**] [**]
35001 - 150000 [**] [**] [**] [**] [**] [**]
150000 > [**] [**] [**] [**] [**] [**]
HEADSETS MIL STD 105D INSP PLAN "0" ACCEPTANCE INSP PLAN
[**]% AQL
UNTIL 1-5-98# OF UNITS SAMPLE # DEFECTS # DEFECTS SAMPLE # DEFECTS # DEFECTS
THEN [**]% AQL IN LOT SIZE ACCEPT REJECT SIZE ACCEPT REJECT
RECEIVED # UNITS # UNITS (c=0) (c=1)
TO BE TO BE
INSPECTED INSPECTED
< 150 [**] [**] [**] [**] [**] [**]
151 - 280 [**] [**] [**] [**] [**] [**]
281 - 500 [**] [**] [**] [**] [**] [**]
501 - 1200 [**] [**] [**] [**] [**] [**]
1201 > [**] [**] [**] [**] [**] [**]
HEADSETS MIL STD 105D INSP PLAN "0" ACCEPTANCE INSP PLAN
[**]% AQL
# OF UNITS SAMPLE # DEFECTS #DEFECTS SAMPLE # DEFECTS # DEFECTS
IN LOT SIZE ACCEPT REJECT SIZE ACCEPT REJECT
RECEIVED # UNITS # UNITS (c=0) (c=1)
TO BE TO BE
INSPECTED INSPECTED
< 150 [**] [**] [**] [**] [**] [**]
151 - 280 [**] [**] [**] [**] [**] [**]
281 - 500 [**] [**] [**] [**] [**] [**]
501 - 1200 [**] [**] [**] [**] [**] [**]
1201 > [**] [**] [**] [**] [**] [**]
</TABLE>
