<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
October 27, 1997
ELECTRONIC DESIGNS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
Delaware 0-21305 04-3298416
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION) NUMBER)
</TABLE>
One Research Drive, Westborough, Massachusetts 01581
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(508) 366-5151
(Registrant's Telephone Number, Including Area Code)
(Former name, Former Address and Former Fiscal Year, if Changed since last
Report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Electronic Designs, Inc. (the "Company") sold the assets of its Crystallume
Diamond Technology Division ("Crystallume") pursuant to an Asset Purchase
Agreement executed on October 27, 1997 with Advanced Refractory Technologies,
Inc. ("ART") (the "Agreement"), a New York corporation located in Buffalo, NY.
Under the terms of the Agreement, the assets sold to ART include all of the
intellectual property, manufacturing equipment, inventories and specified
contracts related to Crystallume's synthetic diamond films and coating business.
ART is assuming none of the liabilities of the Company, whether related to
Crystallume assets or not, except that it is assuming the obligation to perform
under the acquired contracts with the Crystallume customers, facility lessor,
and equipment lessors.
The purchase price consisted of: $500,000 in cash paid at closing; $625,000 plus
9 1/2% simple interest, payable over three years; and an agreement for future
payments based on product and license revenues earned by ART using Crystallume's
intellectual property over the next five and seven years, respectively.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
b. PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma financial information has been prepared to
give effect to the sale of Crystallume pursuant to the Agreement between the
Company and ART that is described further in Item 2 above.
The unaudited pro forma balance sheet as of June 29, 1997 has been prepared as
if the sale of Crystallume was completed on that date and is based upon the
unaudited consolidated balance sheet of the Company included within its Form
10-QSB for the quarterly period ended June 29, 1997 (which is incorporated by
reference herein). The unaudited pro forma statement of operations for the year
ended September 30, 1996 has been prepared as if the sale of Crystallume was
completed on October 1, 1995 and is based upon the audited consolidated
statement of operations of the Company included within its Form 10-KSB for the
fiscal year ended September 30, 1996 (which is incorporated by reference
herein). The unaudited pro forma statement of operations for the nine month
periods ended June 29, 1997 and June 30, 1996 have not been presented within
this Form 8-K as the unaudited statement of operations for those periods,
included within the Form 10-QSB referred to above, reflects Crystallume as a
discontinued operation in accordance with Accounting Principles Board Opinion
No. 30 ("APB 30"). The unaudited pro forma statement of operations for the
fiscal years ended September 30, 1995 and 1994 have not been presented within
this Form 8-K as during those years the Company's operations consisted solely of
Crystallume and, as a result, such pro forma information is not considered by
the Company to be meaningful.
The unaudited pro forma financial information is presented for illustrative
purposes only and does not purport to be indicative of the results which
actually would have been obtained had the sale of Crystallume been effected on
the dates indicated above nor is it indicative of the results which may be
obtained in any future period.
<PAGE> 3
<TABLE>
<CAPTION>
Sequentially
Numbered
Description Page
- ----------- ----
<S> <C>
Unaudited Pro Forma Balance Sheet as of June 29, 1997 F-1
Unaudited Pro Forma Statement of Operations for the year ended
September 30, 1996 F-2
Notes to Pro Forma Financial Information F-3
</TABLE>
c. EXHIBITS
2.1 Asset Purchase Agreement, dated as of October 1, 1997, by and between
the Company and ART.
10.1 Royalty Agreement, dated October 27, 1997, by and between the Company
and ART.
10.2 Confidentiality/Noncompetition Agreement, dated October 27, 1997, by
and between the Company and ART.
10.3 Security Agreement, dated October 27, 1997, by and between the Company
and ART.
<PAGE> 4
ELECTRONIC DESIGNS, INC.
UNAUDITED PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 29, 1997
--------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,073,000 $ 242,000 (a) $ 4,315,000
Accounts receivable, net 7,817,000 -- 7,817,000
Inventories 5,916,000 -- 5,916,000
Assets of discontinued operations 1,656,000 (1,656,000)(b) --
Prepaid expenses and other assets 101,000 101,000
---------------------------------------------
Total current assets 19,563,000 (1,414,000) 18,149,000
Property and equipment, net 2,066,000 -- 2,066,000
Other assets 20,000 625,000 (c) 645,000
Intangible assets, net 1,512,000 -- 1,512,000
---------------------------------------------
$ 23,161,000 $ (789,000) $ 22,372,000
=============================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,189,000 $ -- $ 1,189,000
Accounts payable 4,928,000 -- 4,928,000
Accrued expenses and other liabilities 2,069,000 379,000 (d) 2,448,000
Provision for loss on disposal of discontinued operations 776,000 (776,000)(e) --
---------------------------------------------
Total current liabilities 8,962,000 (397,000) 8,565,000
Deferred rent 134,000 (134,000)(d) --
Long-term debt, net of current portion 2,539,000 -- 2,539,000
---------------------------------------------
Total liabiities 11,635,000 (531,000) 11,104,000
---------------------------------------------
Shareholders' equity:
Common Stock 71,000 -- 71,000
Additional paid in capital 26,983,000 -- 26,983,000
Treasury stock (27,000) -- (27,000)
Accumulated deficit (15,501,000) (258,000)(f) (15,759,000)
---------------------------------------------
Total shareholders' equity 11,526,000 (258,000) 11,268,000
---------------------------------------------
$ 23,161,000 $ (789,000) $ 22,372,000
=============================================
</TABLE>
F-1
<PAGE> 5
ELECTRONIC DESIGNS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996
----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS(e) PRO FORMA
---------- -------------- ---------
<S> <C> <C> <C>
Revenues $58,654,000 $(1,176,000) $57,478,000
Cost of revenues 41,705,000 (1,061,000) 40,644,000
----------- ----------- -----------
Gross profit 16,949,000 (115,000) 16,834,000
Operating expenses:
Research and development 2,579,000 (733,000) 1,846,000
Selling, general and administrative 9,087,000 (526,000) 8,561,000
Restructuring 590,000 (590,000) --
Amortization of intangible assets 469,000 -- 469,000
----------- ----------- -----------
12,725,000 (1,849,000) 10,876,000
----------- ----------- -----------
Income from operations 4,224,000 1,734,000 5,958,000
----------- ----------- -----------
Other income (expense):
Interest income 53,000 -- 53,000
Interest expense (893,000) 133,000 (760,000)
----------- ----------- -----------
(840,000) 133,000 (707,000)
----------- ----------- -----------
Income before income taxes 3,384,000 1,867,000 5,251,000
Provision for income taxes 576,000 126,000 702,000
----------- ----------- -----------
New income $ 2,808,000 $ 1,741,000 $ 4,549,000
=========== =========== ===========
New income per share $ 0.38 $ 0.56
=========== ===========
Weighted average common shares and equivalents 9,795,000 9,795,000
=========== ===========
</TABLE>
F-2
<PAGE> 6
ELECTRONIC DESIGNS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information gives effect to the following
unaudited pro forma adjustments:
(a) Represents the net increase in cash as a result of the sale and
consists of the cash portion of the selling price received at closing,
less cash costs (paid prior to closing) associated with the Company's
buyout of certain equipment leases which occurred prior to the sale of
such equipment to ART.
(b) Represents the net book value of the assets sold to ART, consisting
primarily of manufacturing equipment. Consistent with the provisions of
APB 30, the assets held for sale had been separately classified in the
Company's balance sheet since its May 1997 commitment to dispose of
Crystallume.
(c) Represents the deferred portion of the selling price, to be received as
follows: $250,000 on October 1, 1998; $250,000 on October 1, 1999; and
$125,000 on October 1, 2000.
(d) Represents the reclassification of certain Crystallume-related
liabilities that will remain outstanding after the close of the
transaction. With the exception of the deferred rent liability, these
liabilities were originally included in the provision for loss on
disposal of discontinued operations and consist primarily of
transaction costs associated with the sale and other
Crystallume-related liabilities retained by the Company.
(e) Represents the realization of the loss on disposal of discontinued
operations upon the closing of the transaction.
(f) Represents an adjustment to the original provision for loss on disposal
of discontinued operations recorded by the Company during the third
quarter of fiscal 1997. This adjustment was recorded by the Company
during the fourth quarter of fiscal 1997 and consists primarily of
costs associated with the buyout of certain equipment leases which
occurred prior to sale of such equipment to ART.
(g) Represents the pro forma removal of Crystallume's historical operating
results for the year ended September 30, 1996.
F-3
<PAGE> 7
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.
ELECTRONIC DESIGNS, INC.
Dated: November 12, 1997 By: /s/ Frank D. Edwards
----------------- --------------------------------
Frank D. Edwards
Senior Vice President of
Finance and Chief Financial
Officer
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
- ------ ----------- --------
<S> <C> <C>
2.1 Asset Purchase Agreement, dated as of October 1,1997, by
and between the Company and ART.
10.1 Royalty Agreement, dated October 27, 1997, by and between
the Company and ART.
10.2 Confidentiality/ Noncompetition Agreement, dated October
27, 1997, by and between the Company and ART.
10.3 Security Agreement, dated October 27,1997, by and between
the Company and ART.
</TABLE>
F-4
<PAGE> 1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as of
the 1st day of October, 1997 ("Effective Date"), by and between ELECTRONIC
DESIGNS, INC., a corporation organized and existing under the laws of the State
of Delaware with its principal place of business at One Research Drive,
Westborough, Massachusetts ("Seller"), and ADVANCED REFRACTORY TECHNOLOGIES,
INC., a corporation organized and existing under the laws of the State of New
York with its principal place of business at 699 Hertel Avenue, Buffalo, New
York ("Buyer").
WHEREAS Seller is engaged in the synthetic diamond films and coating
business and the manufacture of diamond using chemical vapor deposition at 3506
Bassett Street, Santa Clara, California 95054 (the "Premises") ("Crystallume
Business");
WHEREAS Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, substantially all of the rights, properties and assets of Seller
which are necessary or used in connection with the Crystallume Business, upon
the terms and conditions set forth herein; and
WHEREAS Seller reserves no right, title or interest in or to the
Crystallume Business other than as provided in the Security Agreement (as
hereinafter defined) and the Royalty Agreement (as hereinafter defined).
NOW THEREFORE, in consideration of the representations, warranties and
agreements of the parties hereto (individually, a "Party"; collectively, the
"Parties") hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly acknowledged, the Parties
hereby agree as follows:
ARTICLE 1
<PAGE> 2
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets. Subject to the terms and conditions of
this Agreement, Buyer hereby agrees to purchase, accept and acquire from Seller,
and Seller hereby agrees to sell, transfer, assign, convey and deliver to Buyer
(or Buyer's assignee), at the Closing (as hereinafter defined), all right, title
and interest of Seller in and to all of the rights, properties and assets of
every kind and type, tangible and intangible, real and personal, which are
necessary or used for the operation of the Crystallume Business or otherwise
primarily relate to the Crystallume Business, as owned or held by Seller,
wherever located, free and clear of all liens and encumbrances of any kind other
than the Assumed Liabilities (as hereinafter defined), but excluding the
Excluded Assets (as hereinafter defined), (collectively, the "Purchased
Assets"). Without in any way limiting the generality of the foregoing, the
Purchased Assets shall include, without limitation, all right, title and
interest of any kind owned or held by Seller in or to the following:
a. Inventory - the supplies, raw materials, work-in-process,
finished goods inventories, including, without limitation, all materials and
goods in transit and at all locations, set forth on Schedule 1.1a attached
hereto and made a part hereof, adjusted to reflect changes in the level and
composition of such inventories occurring in the ordinary course of business
since, October 21, 1997 (collectively, the "Inventory");
b. Technical Documentation - all technical and descriptive documents
and materials relating to the acquisition, design, development, maintenance,
practice or use of the Intellectual Property (as hereinafter defined), as set
forth on Schedule 1.1b attached hereto and made a part hereof (the "Technical
Documentation");
2
<PAGE> 3
c. Machinery and Equipment - those items of equipment, machinery,
tools, data processing hardware and the like of every description and kind, and
all replacement and component parts and supplies therefor, including, without
limitation, Seller's rights under all related warranties, set forth on Schedule
1.1.c attached hereto and made a part hereof (collectively, the "Machinery and
Equipment");
d. Furniture and Fixtures - those items of furniture and fixtures,
leasehold improvements, and all other tangible personal property of every
description and kind, set forth on Schedule 1.1.d attached hereto and made a
part hereof, adjusted to reflect changes in such items occurring in the ordinary
course of business since October 21, 1997 (collectively, the "Furniture and
Fixtures");
e. Assumed Leases - [Reserved];
f. Assumed Leases and Contracts - all of Seller's right, title and
interest in and to those contracts, agreements, understandings, purchase orders,
licenses, equipment leases, commitments and arrangements, set forth on Schedule
1.1.f attached hereto and made a part hereof (collectively, the "Assumed Leases
and Contracts");
g. Business Records - all business and marketing books, records,
documents and files, including, without limitation, operating records, asset
ledgers, inventory records, customer lists, supplier lists, employment and
consulting agreements, supplier lists, information and data respecting leased or
owned equipment, correspondence and mailing lists, advertising materials and
brochures and other business records, relating to the ownership or use of any of
the Purchased Assets, but excluding the Retained Business Records (as
hereinafter defined), (collectively, the "Business Records");
3
<PAGE> 4
h. Assumed Authorizations - all of Seller's right, title and
interest in and to those approvals, authorizations, certifications, consents,
variances, permissions, orders, waivers, licenses, accreditations, permits and
the like to or from, or filings, registration, notices, recordings or the like
to or with, any Government Authorities or other Persons, set forth on Schedule
1.1h attached hereto and made a part hereof (collectively, the "Assumed
Authorizations");
i. Purchased Intellectual Property - those patents, patent
applications, trademarks, service marks, trade names, copyrights, software,
technologies, formulas, compositions, processes, inventions, trade secrets,
know-how, mask works, ideas, improvements, concepts, information, methods,
studies, data, confidential and/or proprietary information (including, without
limitation, registrations, licenses and applications pertaining thereto) and
other intellectual property rights owned by Seller as set forth on Schedule 1.1i
attached hereto and made a part hereof (collectively, the "Purchased
Intellectual Property");
j. Licensed Intellectual Property - those rights to practice and use
the patents, patent applications, licenses, trademarks, service marks, trade
names, copyrights, software, technologies, formulas, compositions, processes,
inventions, trade secrets, know-how, mask works, ideas, improvements, concepts,
information, methods, studies, data, confidential information (including,
without limitation, registrations, licenses and applications pertaining thereto)
and other intellectual property rights and other proprietary information or
intangible property of any kind licensed by Seller from a Person, as provided in
those licenses and other agreements identified on Schedule 1.1j attached hereto
and made a part hereof (collectively, the "Licensed Intellectual Property");
4
<PAGE> 5
k. Claims - [Reserved];
l. Prepaid Expenses and Deposits - those prepaid expenses, security
deposits and other deposits of Seller, as set forth on Schedule 1.1l attached
hereto and made a part hereof (collectively, the "Prepaid Expenses");
m. Warranties - all express and implied warranties inuring to the
benefit of Seller and any and all rights and claims thereunder in each case
related to the ownership or use of any of the Purchased Assets, and all other
guarantees, warranties, indemnities, licenses and similar rights in favor of
Seller with respect to the ownership or use of any of the Purchased Assets;
n. Telephone Numbers - all telephone numbers used by Seller relating
primarily to the operation of the Crystallume Business, to the extent
transferable;
o. Goodwill - all goodwill and going concern value related to the
Crystallume Business (collectively, the "Goodwill"); and
p. Customers/Suppliers Records - all Business Records pertaining to
Seller's customers set forth on Schedule 1.1p attached hereto and made a part
hereof (collectively, the "Customers") or Seller's suppliers set forth on
Schedule 1.1p (collectively, the "Suppliers"), and all of Seller's rights and
benefits accruing under any and all agreements, arrangements or understandings
with any Customer or Supplier.
1.2 Intent of the Parties. The Schedules to this Agreement are intended to
be complete. To the extent any Purchased Asset is not properly itemized or does
not appear on the applicable Schedule where required, then, unless this
Agreement or any Schedule provides otherwise, such Purchased Asset shall
nonetheless be deemed transferred to Buyer at Closing.
5
<PAGE> 6
1.3 Excluded Assets. The following assets of Seller (collectively, the
"Excluded Assets") shall be retained by Seller and shall not be included in the
Purchased Assets, and Buyer is not purchasing or assuming any debt, obligation
or liability of any kind of Seller with respect to, any of the following: (a)
cash; (b) accounts receivable; (c) Seller's central financial, administrative
and similar books and records which do not relate primarily to the operation of
the Crystallume Business or the ownership or the use of any Purchased Asset
("Retained Business Records"); (d) any asset of Seller's Employee Benefit Plans
(as hereinafter defined); (e) all other assets which are not covered by the
scope of Section 1.1 or which are not deemed transferred under Section 1.2 ; and
(f) any claims ("Retained Claims") relating to Seller's operation of the
Crystallume Business prior to the Closing or Seller's use or ownership of any of
the Purchased Assets prior to the Closing, only for the sole and limited purpose
of and only to the extent necessary for, defending or asserting directly-related
counterclaims with respect to, any action or proceeding brought by any Person
against Seller after the Closing; provided, however, notwithstanding anything to
the contrary contained herein, Seller's retention and use of the Retained Claims
shall not in any way adversely effect Buyer's operation of the Crystallume
Business or Buyer's use or ownership of any Purchased Asset.
1.4 Reservation of Certain Rights by Seller. Seller does not reserve or
retain any right, title or interest of any kind in or to the Crystallume
Business or any of the Purchased Assets, except as otherwise expressly set forth
in the Security Agreement, the Royalty Agreement or Section 1.3.
1.5 Bulk Sales Compliance. With regard to the transactions contemplated in
this Agreement or in any other Covered Agreement, Buyer hereby waives compliance
by Seller under
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<PAGE> 7
any bulk transfer or similar law of any jurisdiction, subject to the
indemnification provided by Seller under Article 12.
ARTICLE 2
ASSUMPTION OF LIABILITIES
2.1 Enumeration of Assumed Liabilities. At the Closing, in consideration
of the sale and assignment by Seller of the Assumed Leases and Contracts and in
reliance upon Seller's representations and warranties contained in Section 4.10,
subject to Section 2.2, Buyer shall assume and become liable for and shall
thereafter pay, perform, assume or discharge, all debts, obligations and
liabilities of Seller under the Assumed Leases and Contracts which arise or
accrue after the Closing (collectively, the "Assumed Liabilities"). The Assumed
Liabilities do not include any debt, obligation or liability of Seller not
specifically and expressly assumed by Buyer in this Section 2.1. Subject to the
express exclusions set forth in Section 2.2, the Assumed Liabilities shall
consist only of the following:
a. Assumed Liabilities - all Assumed Liabilities, except to the
extent attributable to: (1) any breach or default by Seller under any of the
Assumed Liabilities (other than as set forth on Schedule 2.1 attached hereto and
made a part hereof); or (2) any material liability or obligation outside the
ordinary course of business not disclosed by Seller pursuant to this Agreement;
and
b. Other Liabilities - any other liabilities specifically set forth
on Schedule 2.1.
7
<PAGE> 8
2.2 No Other Assumption. Notwithstanding anything to the contrary
contained herein, except as otherwise specifically and expressly provided in
Section 2.1, the Parties expressly agree and acknowledge that:
a. Buyer shall not be responsible or liable for, nor does Buyer
assume or become liable for or agree to pay, perform, assume or discharge, any
debts, obligations or liabilities of Seller of any type or description
whatsoever, whether such debts, obligations or liabilities are: (1) related or
unrelated to the Crystallume Business, any of the Purchased Assets or the
transactions contemplated in this Agreement or in any other Covered Agreement
(as hereinafter defined) in Section 10.7; or (2) known or unknown, absolute or
contingent, direct or indirect, and regardless of when or how any such debts,
obligations or liabilities have heretofore arisen or may hereafter arise; and
b. Seller shall remain fully responsible and liable for any
and all debts, obligations or liabilities of Seller of any type or
description whatsoever.
2.3 Delivery of Assignment and Assumption Agreement. At the Closing, Buyer
and Seller shall each execute and deliver an assignment and assumption agreement
with regard to the assignment by Seller and the assumption by Buyer of the
Assumed Liabilities, which shall be in form and substance mutually satisfactory
to the Parties and their respective counsel, in their respective sole
discretion.
ARTICLE 3
PRICE AND PAYMENT
3.1 Purchase Price. Subject to the terms and conditions of this Agreement,
the aggregate purchase price payable by Buyer to Seller for the Purchased Assets
and in
8
<PAGE> 9
consideration for the Covered Agreements ("Purchase Price"), shall be as
follows: (a) the sum of FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($500,000.00),
payable as provided in Section 3.2(a); and (b) the Royalty payable as provided
in Section 3.2(b).
3.2 Payment of Purchase Price. The Purchase Price shall be payable to
Seller, as follows: (a) wire transfer by Buyer at the Closing of FIVE HUNDRED
THOUSAND AND 00/100 DOLLARS ($500,000.00) in immediately available funds to an
account designated in writing by Seller; and (b) Buyer's agreement for the
payment of the Royalty provided for in Section 2, Section 3 and Section 4 of the
Royalty Agreement (as hereinafter defined).
3.3 Proration. The items set forth on Schedule 3.3 attached hereto and
made a part hereof relating to the Purchased Assets and Assumed Liabilities
shall be prorated as of the Closing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer, as follows:
4.1 Standing. Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Seller has all
requisite corporate power and authority to conduct and operate the Crystallume
Business as is now being conducted and as presently contemplated to be
conducted, and to carry out the transactions contemplated in this Agreement and
in any other Covered Agreement to which Seller is a party. Seller is qualified
to do business in each of the jurisdictions in which the character of its assets
or the nature of its activities makes such qualification in such jurisdictions
necessary, except where the failure to so
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<PAGE> 10
qualify would not have a material adverse effect, financial or otherwise, on the
operation of the Crystallume Business or the ownership or use of any Purchased
Assets.
4.2 Authority. The execution and delivery of this Agreement and the other
Covered Agreements to which it is a party and the consummation of the
transactions contemplated herein and therein have been duly authorized by all
necessary corporate action of Seller, including, without limitation, Seller's
Board of Directors, and Seller has all requisite corporate power and authority
to execute and deliver this Agreement and the other Covered Agreements to which
it is a party. This Agreement and the other Covered Agreements to which it is a
party have been duly executed and delivered by Seller and constitute legal,
valid and binding agreements of Seller enforceable in accordance with their
respective terms (except as the enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights or the
application of equitable principles in any action, legal or equitable or except
as to the enforceability of any noncompetition provision in the
Confidentiality/Noncompetition Agreement (as hereinafter defined)). Seller has
full power and authority to perform its obligations under this Agreement and the
other Covered Agreements to which it is a party and the transactions
contemplated herein and therein.
4.3 No Conflicts. Neither the execution and delivery of this Agreement or
any other Covered Agreement to which it is a party, nor the performance of this
Agreement or any other Covered Agreement to which it is a party, nor the
consummation of the transactions contemplated herein or therein, will: (a)
conflict with or constitute a breach of or a default under, or an event which,
with or without notice or lapse of time, or both, would be a breach of, default
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under or violation of: (1) Seller's Certificate of Incorporation or By-Laws; or
(2) any agreement, document, indenture, mortgage or other instrument or
undertaking to which Seller is a party or to which any of its properties is
subject, which breach, default or violation would have a material adverse
effect, financial or otherwise, on Seller's operation of the Crystallume
Business or ownership or use of any of the Purchased Assets or would be a
material violation of any Applicable Law; or (b) result in the creation or
imposition of any lien or encumbrance of any kind upon the Crystallume Business
or any of the Purchased Assets.
4.4 Consents. Except as set forth on Schedule 4.4 attached hereto and made
a part hereof, no Consent is necessary or required in connection with the valid
execution, delivery and performance of this Agreement or any other Covered
Agreement to which Seller is a party or the consummation of any of the
transactions contemplated herein or therein.
4.5 Title to Purchased Assets. At the Closing, Seller shall have good and
marketable title to the Purchased Assets (other than the Licensed Intellectual
Property) and shall possess the right or license to practice, use and sublicense
the Licensed Intellectual Property, all free and clear of all liens or
encumbrances of any kind.
4.6 Premises.
a. Zoning - To Seller's best knowledge, the Premises is properly
zoned for its present use and is in compliance with all Applicable Law.
b. Buildings - To Seller's best knowledge, except for matters which
shall not have a material adverse effect on the Purchased Assets, all buildings,
structures and other improvements located on the Premises: (1) are in good
working condition, ordinary wear and
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tear excepted; (2) are structurally sound; and (3) contain mechanical and other
systems which are in good working condition, ordinary wear and tear excepted.
4.7 Inventory/ Machinery and Equipment/Furniture and Fixtures. The
Inventory, the Machinery and Equipment and the Furniture and Fixtures are
being purchased "AS IS, WHERE IS."
4.8 Intellectual Property.
a. Third Party License Agreements - All of the material oral and
written contracts, agreements, understandings, arrangements and licenses to
which Seller is a party under which Seller is granted the right to practice, use
and/or sublicense the Licensed Intellectual Property (collectively, the "Third
Party License Agreements") are listed on Schedule 4.8 attached hereto and made a
part hereof. Seller has previously delivered to Buyer true, correct and complete
copies of all written Third Party License Agreements. None of the Purchased
Intellectual Property or the Licensed Intellectual Property has been obtained by
Seller pursuant to a Third Party License Agreement except as set forth on
Schedule 4.8.
Except as set forth on Schedule 4.8:
(1) Pursuant to the Third Party License Agreements, Seller has
the right to use the Licensed Intellectual Property (as provided in the
respective Third Party License Agreement) and to assign to Buyer all of Seller's
right, title and interest in and to the Licensed Intellectual Property, free and
clear of all liens, encumbrances, claims, challenges, conditions and
restrictions of any kind.
(2) To Seller's best knowledge, each licensor of Licensed
Intellectual Property ("Third Party Licensor"): (a) is the sole and exclusive
owner of all right, title and
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interest of any kind in the respective Licensed Intellectual Property, free and
clear of all liens, encumbrances, claims, challenges, conditions and
restrictions of any kind; and (b) has not granted any right, title or interest
of any kind therein to any other Person other than Seller in violation of the
terms of any Third Party License Agreement.
(3) Prior to the Closing, to the extent required Seller shall
obtain the Consent of each Third Party Licensor to the assignment of the
respective Licensed Intellectual Property, which Consent shall be in form and
substance satisfactory to Buyer and its counsel, in their respective sole
discretion.
(4) All royalties, fees, charges and any other amounts payable
by or on behalf of, or to or for the account of, Seller with respect to any
Third Party License Agreement have been fully paid to date by Seller.
(5) All reports required by any party pursuant to any Third
Party License Agreement have been timely and accurately made, in all material
respects, by the party to date in accordance with the terms of the respective
Third Party License Agreements.
b. Ownership - The Purchased Intellectual Property and the Licensed
Intellectual Property are collectively referred to as the "Intellectual
Property". Except as otherwise provided on Schedule 4.8:
(1) Purchased Intellectual Property - As to the Purchased
Intellectual Property: (a) Seller is the sole and exclusive owner of all right,
title and interest of any kind in and to the Purchased Intellectual Property,
free and clear of all liens, encumbrances, claims, challenges, conditions and
restrictions of any kind; and (b) Seller has not granted any right, title or
interest of any kind in or to the Purchased Intellectual Property to any Person.
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(2) Licensed Intellectual Property - As to the Licensed
Intellectual Property: (a) Seller is the sole and exclusive owner of all right,
title and interest of any kind in and to its rights in the Licensed Intellectual
Property, free and clear of all liens, encumbrances, claims, challenges,
conditions and restrictions of any kind; and (b) Seller has not granted any
right, title or interest of any kind in or to the Licensed Intellectual Property
to any Person.
c. Scope - The Intellectual Property constitutes all of the material
intellectual property rights and licenses which are currently used in the
operation of the Crystallume Business or the ownership or use of any Purchased
Asset and which are all those required or necessary for the operation of the
Crystallume Business as currently being conducted.
d. Protection -
(1) Seller Confidential Information - Other than Intellectual
Property subject to a validly existing registration of an intellectual property
right, to Seller's best knowledge, no Intellectual Property, including, without
limitation, trade secrets, know-how, confidential information and proprietary
information (collectively, "Seller Confidential Information") has been disclosed
to any Person under circumstances that may result in the loss of its
confidential or proprietary status, and which if disclosed would have a material
adverse effect on the Crystallume Business or any Purchased Asset. Seller has
taken reasonable precautions to protect the confidentiality of all material
Seller Confidential Information. Each Employee (as hereinafter defined) and any
other Person who has had authorized access to any Seller Confidential
Information has executed a written agreement requiring the respective Employee
or Person to maintain the confidential and proprietary status thereof. All
contracts, agreements, understandings, arrangements and licenses to which Seller
is a party relating to any Seller
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Confidential Information (collectively, the "Nondisclosure Agreements") are
listed or described on Schedule 1.1f. Seller has previously delivered to Buyer
true, correct and complete copies of all written Nondisclosure Agreements listed
on Schedule 1.1f.
(2) Confidential Information of Other Persons - Neither Seller
nor, to Seller's best knowledge, any of Seller's shareholders, officers,
directors, agents or Employees, has made any unauthorized use of any
intellectual property right necessary, used or useful for the ownership or use
of any of the Purchased Assets or the operation of the Crystallume Business,
both as proposed and as presently conducted (other than intellectual property
subject to a validly existing registration of an intellectual property right),
including, without limitation, trade secrets, know-how, confidential information
or proprietary information of any Person (collectively, the "Third Party
Confidential Information"), including, without limitation, any Third Party
Confidential Information of any former employers.
e. Trade Secrets - [Reserved].
f. No Infringement -
(1) Of Third Party Rights - To Seller's best knowledge,
neither the Intellectual Property nor any of the products manufactured or
services provided by Seller using any of the Intellectual Property: (a)
infringes in any way upon any patent, patent application, license, know-how,
copyright, trademark, service mark, trade name, trade secret or any other
intellectual property right of any kind of any Person; or (b) constitutes a
wrongful use of any confidential information or proprietary information of any
Person.
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(2) By Third Parties - To Seller's best knowledge, none of the
Intellectual Property is being infringed, or otherwise used or available for
use, by any Person in any way.
g. Intellectual Property Litigation - There is not now pending and,
to Seller's best knowledge, there is not threatened nor is there any basis for,
any claim, demand, litigation, arbitration, action, suit, inquiry, investigation
or proceeding by or before any Government Authority to which Seller is or will
be a party, and which: (1) challenges or asserts any conflicting right or claim
as to the validity, ownership or any other right, title or interest of Seller in
or to the Intellectual Property; (2) asserts or claims that the Intellectual
Property or any of the products manufactured or services provided by Seller
using any of the Intellectual Property: (a) infringes in any way upon any
patent, patent application, license, know-how, copyright, trademark, service
mark, trade name, trade secret or any other intellectual property right of any
kind of any Person; (b) constitutes a wrongful use of any confidential
information or proprietary information of any Person; or (c) constitutes a
proceeding relating to the Intellectual Property, either inter parte or ex
parte, including, without limitation, any re-examination, interference,
opposition or cancellation proceeding, which is pending in or before any
Government Authority, including, without limitation, the United States Patent
and Trademark Office, the United States Copyright Office or any foreign
counterpart thereof.
h. Registration - Those patents, patent applications, trademarks,
service marks and copyrights and other intellectual property which have been
identified on Schedule 1.1i as having been registered with, filed and/or issued
by, as the case may be, have been duly registered with, filed and/or issued by,
as the case may be, the United States Patent and
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Trademark Office, the United States Copyright Office or such other filing
offices, domestic or foreign, of any applicable Government Authority, and all
such registrations, filings, issuances and other actions remain in full force
and effect and none has been invalidated, abandoned or forfeited in any way.
i. Personnel Agreements - All personnel, including Employees,
agents, consultants and contractors who have contributed to or participated in
the conception or development of any of the Intellectual Property on behalf of
Seller, either: (1) have been party to a "work-for-hire" arrangement or
agreement with Seller that has accorded Seller full, effective, exclusive and
original ownership of all tangible and intangible property rights thereby
arising; or (2) have executed appropriate instruments of assignment in favor of
Seller as assignee that have conveyed to Seller full, effective and exclusive
ownership of all tangible and intangible property rights thereby arising.
4.9 Adequacy of Technical Documentation. [Reserved].
4.10 Leases and Contracts.
a. Schedule - All of the material contracts, agreements,
understandings, arrangements, commitments, leases, licenses and purchase orders
to which Seller is a party or by which Seller is bound in connection with the
operation of the Crystallume Business or the ownership or use of any of the
Purchased Assets, but excluding the Excluded Assets, (collectively, the "Leases
and Contracts") are listed on Schedule 4.10 attached hereto and made a part
hereof. Seller has previously delivered to Buyer true, correct and complete
copies of all Leases and Contracts. Except for the Assumed Liabilities, all
Leases and Contracts are, and shall
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remain, the sole obligation of Seller. There are no Leases and Contracts to
which any Affiliate of Seller is a party.
b. Status - Except as set forth on Schedule 4.10:
(1) each Assumed Lease and Contract is in full force and
effect and is a legal, valid and binding agreement of Seller enforceable as to
Seller in accordance with its respective terms;
(2) neither Seller nor, to Seller's best knowledge, any other
party to any Assumed Lease and Contract is in breach of or default under (nor
has a default been asserted by any party under) any Assumed Lease and Contract,
which breach or default may have a material adverse effect, financial or
otherwise, on the Crystallume Business or any of the Purchased Assets;
(3) there has not occurred any event with respect to Seller
nor, to Seller's best knowledge, with respect to any other party to any Assumed
Lease and Contract, which, after the giving of notice or the lapse of time, or
both, would constitute a default under or result in a breach of any Assumed
Lease and Contract, which breach or default would have a material adverse
effect, financial or otherwise, on the Crystallume Business or any Purchased
Asset;
(4) no Assumed Lease and Contract will be subject to amendment
or termination as a result of the consummation of transactions contemplated in
this Agreement or in any other Covered Agreement;
(5) Seller has received no notice of any counterclaim or
offset under any Assumed Lease and Contract from any party thereto;
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(6) there does not exist any lien or encumbrance of any kind
of any Person created or suffered to exist on any interest of Seller under any
Assumed Lease and Contract;
(7) the assignment to Buyer of the Assumed Leases and
Contracts will not breach, amend or terminate any of the Assumed Leases and
Contracts, and such assignment will transfer and convey to Buyer all of Seller's
right, title and interest therein;
(8) no party to any Assumed Lease and Contract has indicated
its intention to withhold consent or otherwise to object to assignment of such
Assumed Lease and Contract to Buyer; and
(9) no Assumed Lease and Contract contains any
change-in-control, term or other term or condition that will become applicable
upon consummation of the transactions contemplated in this Agreement or in any
other Covered Agreement.
c. No contracts or other agreements relating primarily to the
Crystallume Business or any of the Purchased Assets are currently being
negotiated by Seller, other than this Agreement, the other Covered Agreements
and any other contracts or agreements necessary for Seller to deliver the
Purchased Assets to Buyer free and clear of all liens and encumbrances.
4.11 Authorizations.
a. Schedule - All of the material permits, licenses, variances,
certificates, consents, registrations, accreditations, authorizations,
approvals, filings, orders, waivers, memberships and other licenses required or
necessary under Applicable Law for the operation of the Crystallume Business or
the ownership or use of any of the Purchased Assets (collectively, the
"Authorizations") are listed on Schedule 4.11 attached hereto and made a part
hereof. Seller
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has not received any notice from any Government Authority or any other Person to
the effect (and has no reason to believe) that any additional permits, licenses,
variances, certificates, consents, accreditations, authorizations, approvals,
filings, orders, waivers, registrations, memberships or other licenses are
required or necessary under any Applicable Law for the operation of the
Crystallume Business or the ownership or use of any of the Purchased Assets.
Seller has previously delivered to Buyer true, correct and complete copies of
any and all written Authorizations. Except for the Assumed Authorizations, all
Authorizations of Seller relating to the Crystallume Business or any of the
Purchased Assets are and shall remain, the sole property and obligation of
Seller. There do not exist any waivers or exemptions relating to any of the
Authorizations.
b. Status - Except as set forth on Schedule 4.11:
(1) each Assumed Authorization is in full force and effect and
is legal, valid, binding and enforceable as to Seller in accordance with its
respective terms;
(2) Seller is not in violation of or default under (nor has a
default been asserted against Seller under) any Assumed Authorization, which
violation or default may have a material adverse effect, financial or otherwise,
on the Crystallume Business or any of the Purchased Assets;
(3) no Assumed Authorization will be subject to amendment or
termination as a result of the consummation of the transactions contemplated in
this Agreement or in any other Covered Agreement;
(4) the assignment to Buyer pursuant to this Agreement of the
Assumed Authorizations will not amend or terminate any of the Assumed
Authorizations, and
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such assignment will transfer and convey to Buyer all of Seller's right, title
and interest thereunder; and
(5) no party to any Assumed Authorization has indicated its
intention to withhold consent or otherwise to object to assignment of such
Assumed Authorizations to Buyer.
4.12 Financial Statements. Seller has delivered to Buyer true, correct and
complete copies of the following: Unaudited Statements of Revenue and Expenses
for the Crystallume Business for the years ending on September 30, 1997,
September 30, 1996 and September 30, 1995 (collectively, the "Financial
Statements"). The accounting policies, principles and procedures applied in
preparing the Financial Statements are set forth on Schedule 4.12 attached
hereto and made a part hereof. The Financial Statements are based on the books
and records of Seller.
4.13 Absence of Certain Changes. Except as described on Schedule 4.13
attached hereto and made a part hereof, since September 30, 1997, with respect
to the Crystallume Business or any of the Purchased Assets, Seller has not:
a. [Reserved];
b. entered into any transaction which is material to the
operation of the Crystallume Business, except in the
ordinary course of business;
c. suffered any material adverse change in the Purchased
Assets or the Crystallume Business;
d. [Reserved];
e. [Reserved]; or
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f. made or suffered any amendment or termination or any material
Lease and Contract or any material Authorization, or canceled,
modified or waived any substantial debt or claim held by it or
waived any right of substantial value, whether or not in the
ordinary course of business.
4.14 Taxes.
a. Tax Return Filings - Seller has duly and timely filed any and all
tax returns, filings and reports (collectively, the "Tax Returns") required to
be filed by it pursuant to any Applicable Law with any Government Authority
("Tax Authority"), including, without limitation, any and all foreign, federal,
state and local tax returns, filings and reports with respect to income taxes,
franchise taxes, Payroll Taxes (as hereinafter defined), unemployment insurance
taxes, sales taxes and use taxes, and all Tax Returns are, and will be, true,
correct and complete in all respects and do properly reflect any and all tax
liabilities of Seller for the periods covered thereby.
b. Tax Return Payments - Seller has duly and timely paid any and all
foreign, federal, state and local: (1) income, franchise, payroll, unemployment
insurance, sales and use taxes; (2) assessments, interest, penalties and
deficiencies; (3) fees and charges of any Government Authority; and (4) duties
or impositions of any Government Authority; which are reflected as payable on
any Tax Returns, which are claimed to be due by any Tax Authority or which
Seller is obligated to withhold from amounts owing to any Employee
(collectively, the "Taxes"), except for those amounts being contested in good
faith by Seller in appropriate proceedings for which appropriate amounts have
been reserved.
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c. No Notice - Seller has received no notice of any deficiency or
assessment from any Tax Authority that has not been paid in full, or notice of
claim, audit, action, suit, proceeding or investigation with respect to Taxes
due or claimed to be due from Seller pursuant to any Tax Return filed or
required to be filed by Seller, except for those amounts being contested in good
faith by Seller in appropriate proceedings for which appropriate amounts have
been reserved. No assessment of any additional Taxes that pursuant to any
Applicable Law should have been reported, paid or accrued, is expected by
Seller.
d. [Reserved].
4.15 Major Customers and Suppliers. Schedule 4.15 lists the name, address,
telephone number and contact of each Supplier and Customer to whom Seller paid
or billed, as the case may be, in the aggregate Ten Thousand Dollars
($10,000.00) or more during its most recent fiscal year.
4.16 Litigation. There is not now pending and, to Seller's best knowledge,
there is not threatened nor is there any basis for, any claim, demand,
litigation, arbitration, action, suit, inquiry, investigation or proceeding by
or before any Government Authority to which Seller is or may be a party, and
which: (a) may result in a material adverse effect, financial or otherwise, on
the Crystallume Business or any of the Purchased Assets; (b) may threaten the
validity of this Agreement or any other Covered Agreement; or (c) seeks to
prevent, or if successful would prevent, Seller from consummating any of the
transactions contemplated in this Agreement or in any other Covered Agreement.
Neither Seller, the Crystallume Business nor any of the Purchased Assets is
subject to any judgment, decree, injunction, rule, decision or order of any
Government Authority having, or which, insofar as can be foreseen in the future,
may have, any
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material adverse effect, financial or otherwise, on the Crystallume Business or
any of the Purchased Assets.
4.17 [Reserved].
4.18 Compliance with Law.
a. Seller has complied in all material respects with all Applicable
Law relating to the Crystallume Business or any of the Purchased Assets, and no
claims have been made to or against Seller by any Person to the contrary. Seller
has received no notice of any violation of or noncompliance with any Applicable
Law applicable to the Crystallume Business or any of the Purchased Assets which
has not been cured, the violation of, or noncompliance with, would have a
material adverse effect, financial or otherwise, on the Crystallume Business or
the Purchased Assets.
b. Neither Seller nor, to Seller's best knowledge, any of Seller's
officers, directors, employees, agents or Affiliates, has, directly or
indirectly, made or agreed to make, any kickback, bribe, gift or other payment
to any Person for referring, recommending or arranging business with, to or for
Seller.
4.19 Environmental.
a. Seller has complied in all material respects with each
Environmental and Safety Law (as hereinafter defined) with respect to the
operation of the Crystallume Business and the ownership and use of the Purchased
Assets.
b. Except as disclosed on Schedule 1.1h or Schedule 4.19 attached
hereto and made a part hereof, Seller has obtained and is presently operating in
compliance in all respects with all Authorizations necessary under any
Environmental and Safety Law for the operation of
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the Crystallume Business or the ownership or use of any of the Purchased Assets
except in such respects as would not have a material adverse effect, financial
or otherwise, on the Crystallume Business or any Purchased Asset.
c. To Seller's best knowledge, all Authorizations relating to any
Environmental and Safety Law can be transferred or reissued, if necessary, to
Buyer, and Seller knows of no reason why any such Authorization will not be
renewed upon expiration of its respective current term without imposition of
less favorable requirements than those currently in effect.
d. Seller has received no Environmental Notice from any Person with
respect to the operation of the Crystallume Business or the ownership or use of
any of the Purchased Assets relating in any way to any Environmental and Safety
Law or the Release (as hereinafter defined) of any Hazardous Material (as
hereinafter defined) or Chemical Substance (as hereinafter defined).
e. To Seller's best knowledge, there has been no Release of any
Hazardous Material or Chemical Substance in a quantity or concentration at, on,
under, upon, in, near, beneath or about the Premises which would constitute an
Environmental Compliance Liability.
f. There is not now pending and, to Seller's best knowledge, there
is not threatened nor is there any basis for, any claim, demand, litigation,
arbitration, action, suit, inquiry, investigation or proceeding by or before any
Government Authority or any other Person, to which Seller is or may be a party,
and which: (1) may result in a material adverse effect, financial or otherwise,
on the Crystallume Business or any of the Purchased Assets; and (2) arises out
of, relates to or results from: (x) the violation or alleged violation of any
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Environmental and Safety Law; (y) the presence of any Hazardous Material and/or
Chemical Substance at, on, under, upon, in, near, beneath or about the Premises;
or (z) exposure to any Hazardous Material or Chemical Substance.
g. To Seller's best knowledge, there are no Hazardous Materials or
Chemical Substances in any inactive, closed or abandoned storage or disposal
areas or facilities at, on, under, upon, in, near, beneath or about the
Premises.
h. To Seller's best knowledge, the Premises is not listed in the
Registry of Inactive Hazardous Waste Disposal Sites maintained by the State of
California or any of its political subdivisions or the National Priorities List
of Inactive Hazardous Waste Disposal Sites maintained by the U.S. Environmental
Protection Agency.
i. Seller is in compliance with any and all occupational safety and
health standards required by the Environmental and Safety Law for the operation
of the Crystallume Business or the ownership or use of any of the Purchased
Assets, except in such respects as would not have a material adverse effect,
financial or otherwise, on the Crystallume Business or any Purchased Assets, and
Seller has received no notice of any work-related chronic illness or injury to
any of its Employees, except accidents accurately reported in its OSHA 200 Log,
a copy of which Seller has provided to Buyer.
j. To the extent controlled or directed by Seller, the discharge of
process wastes to any publicly-owned treatment works ("POTW") made in connection
with the operation of the Crystallume Business or the ownership or use of any of
the Purchased Assets, is in all respects in compliance with all of the
requirements of the POTW and the Government Authority
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responsible for its operation, including, without limitation, any and all
applicable pre-treatment requirements.
k. To Seller's best knowledge, Seller has complied with any and all
applicable pre-transfer notification requirements of all Environmental and
Safety Laws necessary to allow for the transfer and sale of the Purchased Assets
and the assignment and assumption of the assumed Authorizations to Buyer.
l. Definitions. The following terms shall have the respective
meanings set forth below:
(1) "Chemical Substance" means any substance, including,
without limitation, any pollutant, contaminant, chemical, raw material,
intermediate product or by-product, solid, toxic or hazardous substance,
material or waste, solid waste, petroleum or any fraction thereof, asbestos or
asbestos-containing material, radon, urea-formaldehyde or polyurethane foam and
polychlorinated biphenyls, including, without limitation, all substances,
materials and wastes which are identified or regulated under any Hazardous
Materials Law, including, without limitation, any rule or regulation promulgated
by the State of California or any of its political subdivisions.
(2) "Environment" means any real property and the plant,
facilities, improvements and fixtures located thereon, including, without
limitation, ambient air, surface water, drinking water, ground water, land
surface, sub-surface strata, stream and river sediment.
(3) "Environmental Conditions" means any and all circumstances
with respect to soil, surface waters, ground waters, ponds, stream and river
sediment, ambient air and similar environmental media, both on-site and off-site
of the Premises, that may require remedial
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action and/or that may result in claims or demands by and/or liabilities to, any
Government Authority and any other Person.
(4) "Environmental Compliance Liability" means any and all
liabilities arising under or related to any and all Environmental and Safety Law
relating to the operation of the Crystallume Business or the ownership or use of
any of the Purchased Assets, which may result in claims or demands by and/or
liabilities to any Persons, including, without limitation, any Government
Authority, for failure to comply with the requirements of any Environmental and
Safety Law.
(5) "Environmental Notice" means any summons, citation,
directive, order, claim, litigation, pleading, investigation, proceeding,
judgment, letter or any other written or oral communication from the United
States Environmental Protection Agency ("USEPA"), the State of California or any
of its political subdivisions or any other Government Authority or other Person
with respect to: (a) any act or omission which has resulted in or which may
result in the Release of any Hazardous Material or Chemical Substance into the
Environment; or (b) any other violation or alleged violation of Environmental
and Safety Law.
(6) "Environmental and Safety Law" means any Applicable Law
relating to pollution, protection or clean-up of the Environment attributable to
any Hazardous Material or Chemical Substance, including, without limitation, any
Hazardous Materials Law relating to: (a) the Release, containment, removal,
remediation, response, clean-up or abatement of any type of Hazardous Material
or Chemical Substance; (b) the manufacture, generation, formulation, processing,
labeling, distribution, introduction into commerce, use, treatment, handling,
storage, recycling, disposal or transportation of any Hazardous Material or
Chemical
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Substance; (c) the exposure of any Person, including, without limitation,
employees, to any Hazardous Material or Chemical Substance; and (d) the physical
structure or condition of a building, facility, fixture or other structure,
including, without limitation, those relating to the management, use, storage,
disposal, clean-up or removal of asbestos, asbestos-containing materials,
polychlorinated biphenyls or any other Hazardous Material or Chemical Substance.
(7) "Hazardous Material" means any and all substances,
including, without limitation, asbestos, the group of organic compounds known as
polychlorinated biphenyls, flammable material, explosives, radioactive
materials, chemicals known to cause cancer or reproductive toxicity, pollutants,
effluents, contaminants, emissions or related materials and any items included
in the definition of hazardous or toxic waste, materials or substances under any
Hazardous Materials Law. It is the intent of the Parties to construe the term
"Hazardous Material" in its broadest possible sense.
(8) "Hazardous Materials Law" means any and all Applicable Law
relating to the Environment and Environmental Conditions, including, without
limitation, the Resource Conservation and Recovery Act of 1976 ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"),
the Hazardous Materials Transportation Act ("HMTA"), the Clean Water Act
("CWA"), the Toxic Substances Control Act ("TSCA"), the Safe Drinking Water Act
("SDWA"), the National Environmental Policy Act ("NEPA"), the Occupational
Safety and Health Act ("OSHA"), the Federal Insecticide, Fungicide and
Rodenticide Act ("FIFRA"), the Emergency Planning and Community Right to Know
Act ("EPCRA"), the Noise Control Act ("NCA") and all regulations, orders and
decrees
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and other Applicable Law now or hereafter promulgated thereunder. It is the
intent of the Parties to construe the term "Hazardous Materials Law" in its
broadest possible sense.
(9) "Environmental Permit" means any and all permits,
licenses, variances, certificates, consents, authorizations, approvals,
registrations or other licenses issued or granted by any Government Authority
pursuant to any Environmental and Safety Law, required for the operation of the
Crystallume Business or the ownership or use of any of the Purchased Assets, as
of the Closing Date.
(10) "Release" means any and all spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing of any Hazardous Material or Chemical Substance of any kind into
the Environment, including, without limitation, the abandonment or discarding of
barrels, containers, tanks or other receptacles containing or previously
containing any Hazardous Material and/or Chemical Substance.
4.20 Employment Laws and Contracts. To Seller's best knowledge, Seller has
complied in all material respects with all Applicable Law and all Leases and
Contracts pertaining to the employment of any and all current and former
employees of Seller employed in the operation of the Crystallume Business
(collectively, the "Employees"), including, without limitation, any Applicable
Law or any of the Leases and Contracts relating to wages, hours, benefits,
collective bargaining, payment of withholding taxes, discrimination in
employment or employment practices, workers' compensation, occupational safety
and health standards, labor relations, equal employment, fair employment
practices and any other employment practices or acts (collectively the
"Employment Laws and Contracts"). There is not now pending and, to Seller's best
knowledge, there is not threatened nor is there any basis for, any claim,
demand,
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litigation, arbitration, action, suit, inquiry, investigation or proceeding by
or before any Government Authority to which Seller or any officer, director,
employee, shareholder or Affiliate of Seller is or may be a party, with regard
to the operation of the Crystallume Business or the ownership or use of any of
the Purchased Assets, arising out of or relating to any of the Employment Laws
and Contracts.
4.21 Employees.
a. List - Schedule 4.21 attached hereto and made a part hereof sets
forth a true, correct and complete list of any and all Employees employed in the
operation of the Crystallume Business during the Twelve (12) month period prior
to Closing.
b. Employment Contract - Each Employee who has entered into an
employment contract which contract remains in effect through the Closing
("Employment Contract") with Seller is identified on Schedule 4.21, and Seller
has provided a true, correct and complete copy of each such Employment Contract
to Buyer.
c. Termination - Seller shall terminate all of its Employees at or
prior to the Closing and shall provide Buyer with copies of any and all related
correspondence and notices required under Applicable Law, including, without
limitation, COBRA (as hereinafter defined) and HIPPA (as hereinafter defined)
notices and benefit termination notices. Other than the Assumed Liabilities, the
Parties expressly agree that Seller shall remain responsible and liable for all
of the following as they relate to Seller's employment of the Employees: (1)
salaries, bonuses, wages and benefits; (2) Payroll Taxes (as hereinafter
defined); (3) accrued sick leave, holiday, vacation and severance benefits; (4)
health care benefits; and (5) any other compensation and other fringe benefits.
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4.22 Labor Matters. Seller is not now, and has not been during the last
Five (5) years, a party to or bound by any labor contract, collective bargaining
agreement, letter of understanding or any other arrangement, formal or informal,
with any labor union or organization which obligates Seller to compensate its
Employees at prevailing rates or union scale, nor are any of its Employees
represented by any labor union or organization, and there are no labor unions or
other organizations representing, purporting to represent or attempting to
represent any Employee. There is not now pending or, to Seller's best knowledge,
threatened, and there has not been during the last Five (5) years, any labor
dispute, labor strike, unfair labor practice complaint, organizational attempt,
slow-down, picketing, work stoppage, concerted refusal to work overtime or other
similar labor activity with respect to any Employee or any labor union
organizing activity or any boycott or informational or other picketing or
leafleting with regard to labor matters, directed against Seller or any other
Person, with respect to the Crystallume Business or any of the Purchased Assets.
There are no labor disputes currently subject to any grievance procedure,
action, suit, claim, arbitration or litigation of any kind and there is no
representation petition pending or threatened with respect to any Employee.
4.23 Payroll Taxes. All amounts required to be withheld by Seller from its
Employees for any and all foreign, federal, state or local income, social
security, unemployment insurance or other employment taxes (collectively, the
"Payroll Taxes") through and including the Closing, have been withheld and were
either paid to the appropriate Government Authority or set aside for such
purpose, in accordance with all Applicable Law. All amounts required to be paid
by Seller representing its share of the payments of Payroll Taxes through and
including the Closing have
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been paid to the appropriate Government Authority or set aside for such purpose,
in accordance with all Applicable Law.
4.24 COBRA/HIPPA. Seller has complied in all material respects with any
and all applicable provisions of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA") and the Health Insurance Portability and
Accountability Act of 1996 ("HIPPA") with respect to any and all Employees or
any qualified beneficiary of any Employee.
4.25 WARN Notification. The sale of the Purchased Assets will not result
in any mass layoff or plant closings within the meaning of the Worker Adjustment
and Retraining Notification Act or any law, rule or regulation of the State of
California or any of its political subdivisions.
4.26 ERISA. Schedule 4.26 attached hereto and made a part hereof contains
a true, correct and complete list of any and all Employee Benefit Plans, whether
formal or informal, whether oral or written, and whether covering one or more
individuals, which are sponsored or maintained by Seller with respect to its
Employees. For the purposes hereof, the term "Employee Benefit Plan" means any
and all plans, funds, programs, policies, arrangements, practices, customs and
understandings providing benefits of economic value to any Employee or present
or former beneficiary, dependent, or assignee of any Employee, whether or not
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and each bonus, incentive or deferred compensation, severance,
termination, retention, change of control, stock option, stock appreciation,
stock purchase, phantom stock or other equity-based performance plan. Without
limitation, the term "Employee Benefit Plan" includes any and all employee
welfare benefit plans within the meaning of Section 3(1) of ERISA and all
employee pension
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benefit plans within the meaning of Section 3(2) of ERISA. Seller has provided
true, correct and complete copies of all written Employee Benefit Plans and
written descriptions of all oral Employee Benefit Plans to Buyer. Seller has not
communicated to any Employee any intention or commitment to modify any Employee
Benefit Plan or to establish or implement any other employee or retiree benefit
or compensation arrangement. Seller is not transferring any asset of any
Employee Benefit Plan to Buyer and Buyer is assuming any debt, liability or
obligation of any kind of Seller with respect to any Employee Benefit Plan.
4.27 Insurance. Schedule 4.27 attached hereto and made a part hereof is a
true, correct and complete list of any and all insurance policies and other
insurance coverages and arrangements, including, without limitation, self
insurance and risk retention arrangements, of Seller relating to the operation
of the Crystallume Business or the ownership or use of any Purchased Assets, in
effect at any time during the Twelve (12) months prior to Closing.
4.28 Brokers. Except as disclosed on Schedule 4.28 attached hereto and
made a part hereof, no agent, finder, broker, investment banker or other Person
acting under the authority of Seller is or will be entitled to any broker's fee
or finder's fee or any other commission or similar fee, directly or indirectly,
from Buyer or any Affiliate of Buyer as a result of the transactions
contemplated in this Agreement or in any other Covered Agreement.
4.29 Related Party Transactions. Except as set forth on Schedule 4.29
attached hereto and made a part hereof, with respect to or involving the
Crystallume Business, any of the Purchased Assets or any Assumed Liabilities,
Seller is not a party to any Lease and Contract, directly or indirectly,
(collectively, "Related Party Contracts"), with: (a) any Affiliate of Seller;
(b) any employee, officer or director of Seller or any Affiliate of Seller; or
(c) any Affiliate of
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any employee, officer or director of Seller (collectively, the "Related
Parties") or any member of the immediate family of any Related Party or any
entity in which any Related Party has a material financial interest. Each
Related Party Contract was entered into by Seller in the ordinary course of
business upon terms that are fair and reasonable without regard to the status
and relationship of such other parties.
4.30 [Reserved].
4.31 Location of Purchased Assets. All of the Furniture and Fixtures,
Machinery and Equipment, Inventory, Business Records and Technical
Documentation are located at the Premises.
4.32 [Reserved].
4.33 General Warranty. No representation or warranty by Seller in this
Agreement or in any other Covered Agreement to which it is a party, and no
statement contained in any document, instrument or certificate furnished to
Buyer by Seller in connection with the transactions contemplated in this
Agreement or in any other Covered Agreement to which Seller is a party, contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained or incorporated herein or therein not
misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Standing. Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York.
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5.2 Authority. The execution and delivery of this Agreement and the other
Covered Agreements to which it is a party and the consummation of the
transactions contemplated herein and therein have been duly authorized by all
necessary corporate action of Buyer, including, without limitation, Buyer's
Board of Directors, and Buyer has all requisite corporate power and authority to
execute and deliver this Agreement and the other Covered Agreements to which it
is a party. This Agreement and the other Covered Agreements to which it is a
party have been duly executed and delivered by Buyer and constitute legal, valid
and binding agreements of Buyer enforceable in accordance with their respective
terms (except as the enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights or the application of
equitable principles in any action, legal or equitable or except as to the
enforceability of any noncompetition provision in the
Confidentiality/Noncompetition Agreement). Buyer has full power and authority to
perform its obligations under this Agreement and the other Covered Agreements to
which it is a party and the transactions contemplated herein and therein.
5.3 No Conflicts. Neither the execution and delivery of this Agreement or
any other Covered Agreement to which it is a party, nor the performance of this
Agreement or any other Covered Agreement to which it is a party, nor the
consummation of the transactions contemplated herein or therein, will: (a)
conflict with or constitute a breach of or a default under, or an event which,
with or without notice or lapse of time, or both, would be a breach of, default
under or violation of: (1) Buyer's Certificate of Incorporation or By-Laws; or
(2) any agreement, document, indenture, mortgage or other instrument or
undertaking to which Buyer is a party or to
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which any of its properties is subject, which breach, default or violation would
have a material adverse effect, financial or otherwise, on Buyer.
5.4 Consents. Except as set forth on Schedule 5.4 attached hereto and made
a part hereof, no Consent is necessary or required in connection with the valid
execution, delivery and performance of this Agreement or any other Covered
Agreement to which Buyer is a party or the consummation of any of the
transactions contemplated herein or therein.
5.5 Brokers. No agent, finder, broker, investment banker or other Person
acting under the authority of Buyer is or will be entitled to any broker's fee
or finder's fee or any other commission or similar fee, directly or indirectly,
from Seller or any Affiliate of Seller as a result of the transactions
contemplated in this Agreement or in any other Covered Agreement.
5.6 General Warranty. No representation or warranty by Buyer in this
Agreement or in any other Covered Agreement to which it is a party, and no
statement contained in any document, instrument or certificate furnished to
Seller by Buyer in connection with the transactions contemplated in this
Agreement or in any other Covered Agreement to which Buyer is a party, contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained or incorporated herein or therein not
misleading.
ARTICLE 6
[Reserved]
ARTICLE 7
COVENANTS OF SELLER AND BUYER
7.1 Covenants of Seller.
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a. Due Diligence - From the date of this Agreement through the
Closing, Seller, upon Buyer's prior reasonable notice, shall provide Buyer and
its employees, agents, advisors, attorneys and accountants (collectively, the
"Representatives") with: (a) the opportunity to inspect Seller's legal,
financial and operating condition relating to the Crystallume Business or any
Purchased Asset; (b) complete access to all of Seller's books, records,
facilities and other properties as they relate to the Crystallume Business or
any Purchased Assets; and (c) the ability to discuss matters relating thereto
with officers and employees of Seller, as well as the Seller's accountants and
attorneys. Such due diligence review shall be conducted during Seller's normal
business hours in such a manner as to minimize any disruption of the day-to-day
operations of Seller.
b. [Reserved].
c. [Reserved].
d. Assumed Government Contracts --
(1) General - As promptly as practicable after the Closing,
Seller shall use commercially reasonable best efforts to obtain such Consents as
may be required for the transfer by Seller to Buyer of all Assumed Contracts set
forth in Paragraph 3 of Schedule 1.1f, which Assumed Contracts cannot as a
matter of Applicable Law be assigned by Seller to Buyer at or prior to the
Closing (collectively, the "Assumed Government Contracts"). Seller agrees that
it will enter into all novation or other agreements required by Applicable Law
with respect to any such Assumed Government Contract which requires such
novation or other agreement prior to transfer to Buyer. Buyer covenants that it
will reasonably cooperate with Seller in such effort but such cooperation shall
not include the payment by Buyer of any money or consideration to obtain
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any such Consent, novation or other agreement. Seller shall keep Buyer
reasonably informed as to the status and progress of obtaining all such
Consents, novations and other agreements.
(2) No Transfer - This Agreement shall not constitute an
agreement to assign any Assumed Government Contract or any claim, right or
benefit arising thereunder or resulting therefrom, if an assignment without the
consent of a third party or without novation or other agreement of the same,
would constitute a breach or violation thereof or affect adversely the rights of
Seller or Buyer thereunder. If a Consent, novation or other agreement is
required in order to transfer and assign any interest in any Assumed Government
Contract to Buyer, and such Consent, novation or other agreement is not obtained
by Seller prior to the Closing, or if an attempted assignment would be
ineffective or would adversely affect Seller's ability to convey the benefit of
such Assumed Government Contract to Buyer, then: (1) Buyer shall be entitled to
all benefits of each such Assumed Government Contract accruing on or after the
Effective Date; (2) Buyer shall assume as an Assumed Liability all liabilities
relating to or arising out of or incurred in connection with each such Assumed
Government Contract which accrue and relate to periods, circumstances and events
on or after the Effective Date; (3) Seller shall continue to deal with the other
contracting party(ies) as the prime contracting party; and (4) Seller shall
cooperate with Buyer until such Consent, novation or other agreement is obtained
or effected in any lawful arrangement so that Buyer shall receive all of
Seller's right, title, and interest in all benefits under any such Assumed
Government Contracts. Seller shall promptly assign to Buyer each such Assumed
Government Contract after receipt of the appropriate Consent, novation or other
agreement.
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(3) Collection of Receivables - From and after the Closing,
Seller shall, unless Buyer otherwise requests, act on Buyer's behalf for the
limited purpose of collecting any and all accounts receivable relating to any
Assumed Government Contracts accruing on or after the Effective Date which have
not been transferred to Buyer, and shall immediately deliver to Buyer the gross
proceeds of such collection without deduction or set-off.
e. [Reserved].
f. Access - Seller agrees that for the Ten (10) year period after
the Closing, Buyer and its Representatives shall be permitted access during
normal business hours and upon prior reasonable notice for reasonable purposes
to inspect and make copies of all Retained Business Records.
g. [Reserved].
h. Consents - Except as provided in Section 7.1d or Schedule 9.8
attached hereto and made a part hereof, Seller shall obtain prior to Closing all
Consents and give all notices required by it to consummate the transactions
contemplated in this Agreement or in any other Covered Agreement to which it is
a party. As to the Consents set forth in Schedule 9.8, Seller shall use its
commercially reasonable best efforts to obtain all of such Consents after the
Closing, or as provided in Schedule 9.8.
7.2 Covenants of Buyer.
a. Access - Buyer agrees that for the Ten (10) year period after the
Closing, Seller and its Representatives shall be permitted access during normal
business hours and upon prior reasonable notice for reasonable purposes to
inspect and make copies of all Business Records.
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b. Cooperation - Buyer shall reasonably cooperate with Seller, as
provided in Section 15.19, with respect to Section 7.1d, but such cooperation
shall not include the payment by Buyer of any money or consideration to obtain
any such Consent, novation or other agreement.
c. Offers of Employment - Buyer shall offer employment commencing on
the Closing Date, to the individuals listed on Schedule 7.2c attached hereto and
made a part hereof, at the respective salary, vacation benefits and health
insurance set forth on Schedule 7.2c with respect to such individuals. Any
employees hired by Buyer shall be entitled to participate on the same terms and
conditions in employee benefit plans which are made available generally to
employees of Buyer. Buyer shall also offer employment agreements in
substantially the form of Exhibit A and Exhibit B attached hereto and made a
part hereof (collectively, the "Employment Agreements") to John A. Herb and
Firooz Nasser-Faili, respectively.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Seller's obligation to consummate the transactions contemplated in this
Agreement and in any other Covered Agreement to which it is a party is subject
to the satisfaction on or before the Closing of each of the following conditions
(the fulfillment of each of which may be waived by Seller):
8.1 Compliance. Buyer shall have performed and complied in all material
respects, with all agreements and covenants required by this Agreement and all
other Covered Agreements to which Buyer is a party, to be performed and complied
with by Buyer prior to the Closing.
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8.2 Other Covered Agreements. Buyer shall have executed and delivered the
other Covered Agreements to which it is a party and shall have performed and
complied with all of the agreements, representations and warranties made by it
therein.
8.3 Authorization. All corporate and other proceedings necessary to be
taken by Buyer in connection with the authorization, execution and delivery of
this Agreement and all other Covered Agreements to which it is a party and the
authorization of all transactions contemplated herein and therein, shall be
reasonably satisfactory in form and substance to Seller and its counsel.
8.4 Accuracy. The representations and warranties of Buyer in this
Agreement shall be true, correct and complete in all material respects on the
date of this Agreement and as of the Closing Date as if made on the Closing
Date.
8.5 Other Deliverables. Buyer shall have delivered to Seller,
reasonably satisfactory to Seller in form and substance in each case:
a. an Officer's Certificate, dated as of the Closing Date,
stating that the conditions specified in Sections 8.1, 8.3
and 8.4 have been satisfied;
b. incumbency certificates for Buyer's officers executing this
Agreement or any other Covered Agreement;
c. a copy of the Resolutions adopted by Buyer's Board of
Directors authorizing the execution, delivery and
performance of this Agreement and the other Covered
Agreements to which Buyer is a party and the transactions
contemplated herein and therein; and
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d. such other instruments and documents as are: (1) required by
any provision of this Agreement or any other Covered Agreement
to which Buyer is a party; or (2) reasonably necessary in the
opinion of Seller or its counsel to effect performance by
Buyer of this Agreement or any other Covered Agreement to
which Buyer is a party.
8.6 Purchase Price. The Purchase Price shall have been paid by
Buyer, as set forth in Section 3.2(a).
8.7 Litigation. No action or proceeding shall be pending or threatened by
or before any Government Authority to restrain or prohibit or to recover damages
in respect of the consummation of any or all of the transactions contemplated
herein, nor shall there by any other action or proceeding pending or threatened,
which action or other proceeding may, in the reasonable opinion of Seller,
result in a decision, ruling, or finding that, individually or in the aggregate,
has or may reasonably be expected to have, a material adverse effect on the
validity or enforceability of this Agreement or on the ability of Buyer to
perform its obligations under this Agreement.
8.8 Employment Agreements. Buyer shall have offered the Employment
Agreements in substantially the form of Exhibit A and Exhibit B to John A.
Herb and Firooz Nasser-Faili, respectively.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Buyer's obligation to consummate the transactions contemplated in this
Agreement and in any other Covered Agreement to which it is a party is subject
to the satisfaction on or before
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the Closing of each of the following conditions (the fulfillment of each of
which may be waived by Buyer):
9.1 Compliance. Seller shall have performed and complied in all material
respects, with all agreements and covenants required by this Agreement and all
other Covered Agreements to which Seller is a party, to be performed and
complied with by Seller prior to the Closing.
9.2 Other Covered Agreements. Seller shall have executed and delivered the
other Covered Agreements to which it is a party and shall have performed and
complied with all of the agreements, representations and warranties made by it
therein.
9.3 Authorization. All corporate and other proceedings necessary to be
taken by Seller in connection with the authorization, execution and delivery of
this Agreement and all other Covered Agreements to which it is a party and the
authorization of all transactions contemplated herein and therein, shall be
reasonably satisfactory in form and substance to Buyer and its counsel.
9.4 Accuracy. The representations and warranties of Seller in this
Agreement shall be true, correct and complete in all material respects on the
date of this Agreement and as of the Closing Date as if made on the Closing
Date.
9.5 Other Deliverables. Seller shall have delivered to Buyer,
reasonably satisfactory to Buyer in form and substance in each case:
a. an Officer's Certificate of Seller, dated as of the Closing
Date, stating that the conditions specified in Sections
9.1, 9.3 and 9.4 have been satisfied;
b. incumbency certificates for the officers of Seller
executing this Agreement or any other Covered Agreement;
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c. a copy of the Resolutions adopted by the Board of Directors
of Seller authorizing the execution, delivery and
performance of this Agreement and the other Covered
Agreements to which it is a party and the transactions
contemplated herein;
d. a certificate of the Secretary of State of the State of
Delaware, dated as of a recent date, attesting to the good
standing of Seller in Delaware, dated as of a recent date;
e. a certificate of the Secretary of State of the State of
California attesting to the good standing of Seller in
California and a California Tax Status Certificate, both
dated as of a recent date;
f. a certificate of the Secretary of State of the Commonwealth
of Massachusetts, dated as of a recent date, attesting to
the good standing of Seller in Massachusetts, dated as of a
recent date;
g. an original counterpart (or copy if no original counterpart
is in Seller's possession or control) of each Assumed Lease
and Contract and each Assumed Authorization, including,
without limitation, all amendments or modifications,
through the Closing; and
h. such other instruments and documents as are: (1) required by
any provision of this Agreement or any other Covered Agreement
to which Seller is a party; or (2) reasonably necessary in the
opinion of Buyer or its counsel, in their respective sole
discretion, to effect performance by Seller of this Agreement
or any other Covered Agreement to which it is a party.
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9.6 Opinion of Counsel. At the Closing, Buyer shall receive an opinion of
counsel to Seller in the form attached hereto and made a part hereof as
Exhibit F.
9.7 [Reserved].
9.8 Consents. Seller shall have provided to Buyer any and all necessary
Consents (except as otherwise provided in Section 7.1d or as otherwise provided
on Schedule 9.8 attached hereto and made a part hereof) to the transfer to Buyer
of the Purchased Assets and to the assignment and assumption of each of the
Assumed Liabilities and each of the Assumed Authorizations to Buyer, which
Consents shall be satisfactory to Buyer and its counsel, in their respective
sole discretion.
9.9 [Reserved].
9.10 Litigation. No action or proceeding shall be pending or threatened by
or before any Government Authority to restrain or prohibit or to recover damages
in respect of the consummation of any or all of the transactions contemplated
herein, nor shall there by any other action or proceeding pending or threatened,
which action or other proceeding may, in the reasonable opinion of Buyer, result
in a decision, ruling, or finding that, individually or in the aggregate, has or
may reasonably be expected to have, a material adverse effect on the validity or
enforceability of this Agreement, on the ability of Seller to perform its
obligations under this Agreement or on the condition of the Crystallume Business
or any of the Purchased Assets.
9.11 [Reserved].
9.12 Lease. [Reserved].
9.13 Subtenant Waiver. [Reserved].
ARTICLE 10
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CLOSING
10.1 Closing. The transactions contemplated in this Agreement and all
other Covered Agreements shall be closed on October 27, 1997 (or such other date
as the Parties shall mutually agree) at the offices of Goodwin, Procter & Hoar
LLP, Exchange Place, Boston, Massachusetts at 10:00 a.m. (Throughout this
Agreement, such event is referred to as the "Closing" and such date and time are
collectively referred to as the "Closing Date".)
10.2 Asset Transfer. At the Closing, Seller shall deliver the Purchased
Assets to Buyer and shall transfer the Purchased Assets to Buyer by warranty
bill of sale, assignments and such other documents of transfer as are reasonably
required by Buyer or Buyer's counsel, in their respective sole discretion, to
accomplish the transactions contemplated in this Agreement or in any other
Covered Agreement.
10.3 Royalty Agreement. Seller and Buyer each agrees to execute and
deliver at the Closing a royalty agreement in substantially the form attached
hereto and made a part hereof as Exhibit C ("Royalty Agreement").
10.4 Security Agreement. Seller and Buyer each agrees to execute and
deliver at the Closing a security agreement in substantially the form attached
hereto and made a part hereof as Exhibit D ("Security Agreement").
10.5 Confidentiality/Noncompetition Agreement. Seller and Buyer each
agrees to execute and deliver at the Closing a confidentiality/noncompetition
agreement in substantially the form attached hereto and made a part hereof as
Exhibit E ("Confidentiality/Noncompetition Agreement").
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10.6 Employment Agreements. Seller agrees to use its commercially
reasonable best efforts to have John A. Herb and Firooz Nasser-Faili each
execute and deliver at the Closing employment agreements in substantially the
forms attached hereto and made a part hereof as Exhibit A and Exhibit B,
respectively.
10.7 Covered Agreements. The term "Covered Agreements" means each of the
following: (a) this Agreement; (b) the Royalty Agreement; (c) the Security
Agreement; (d) the Confidentiality/Noncompetition Agreement; (e) the Exhibits
and the Schedules in this Agreement and in any other Covered Agreement; and (f)
any other agreement, instrument or document delivered or required to be
delivered by Seller or Buyer pursuant to this Agreement or any other agreement
described in this Section 10.7.
ARTICLE 11
COVENANTS OF SELLER AND BUYER FOLLOWING CLOSING
11.1 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Purchased Assets in the manner set forth on Schedule 11.1 attached
hereto and made a part hereof ("Allocation"). To the extent that the
transactions contemplated in this Agreement or in any other Covered Agreement
are required to be reported on any Tax Return of Buyer or Seller, each Party
agrees that, to the extent not prohibited by Applicable Law, it will report such
transactions as a purchase and sale of property, and that it will allocate for
purposes of Section 1060 of the Internal Revenue Code of 1986, as amended, the
portion of the Purchase Price as set forth on Schedule 11.1 to the Purchased
Assets set forth on Schedule 11.1, and neither Party shall take a position
inconsistent with the Allocation.
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11.2 Sales/Use Taxes. Seller shall be liable for, and shall timely pay,
any and all sales taxes, use taxes and any similar taxes, fees or charges levied
or imposed by any Government Authority as a result of the sale and transfer of
any of the Purchased Assets, and shall provide Buyer with satisfactory written
evidence that such taxes, fees and charges have been timely paid.
ARTICLE 12
INDEMNIFICATION
12.1 Agreement by Seller to Indemnify.
a. Seller shall, regardless of any investigation made at any time by
or on behalf of Buyer or any information that Buyer may have, promptly
indemnify, defend and hold harmless, Buyer, its Affiliates, and their respective
directors, officers, employees, shareholders and agents (collectively, the
"Buyer Indemnitees") with respect to the aggregate of all "Indemnifiable Damages
of Buyer". For purposes of this Section 12.1, "Indemnifiable Damages of Buyer"
shall mean the aggregate of all claims, losses, costs, judgments, deficiencies,
penalties, obligations, liabilities, damages (including, without limitation,
indirect, special, incidental and consequential damages), fines, expenses
(including, without limitation, reasonable attorneys' fees and disbursements and
costs of any bonds necessary to release any attachments of the Purchased Assets
or to stay any judgments or perfect any appeals) or diminution in value
(collectively, the "Claims"), whether or not any of the Claims result from third
party claims or result from the assertion of any of Buyer's rights hereunder,
incurred or suffered by any of the Buyer Indemnitees, directly or indirectly,
arising out of or relating to:
(1) any breach of or default in the observance or
performance of any agreement made by Seller in this
Agreement or Seller's failure to
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fulfill any other obligation which it is required to
perform or observe in this Agreement;
(2) any inaccuracy in any, breach of any, or false or
fraudulent, representation or warranty made by Seller
in this Agreement;
(3) the operation of the Crystallume Business or the
ownership or use of any Purchased Asset, prior to the
Closing;
(4) the failure of Seller to pay, discharge or perform any
of the debts, obligations or liabilities of Seller other
than the Assumed Liabilities;
(5) any product liability claim with respect to products
manufactured or sold, or services performed, by Seller
prior to the Closing;
(6) any product or service warranties, indemnities or
guarantees with respect to products manufactured or sold
or services performed, by Seller prior to Closing;
(7) any environmental action, claim or proceeding with
respect to the Premises, any Purchased Asset or the
Crystallume Business as to which Buyer is or may become
subject, including, without limitation, as a potentially
responsible party, which environmental action, claim or
proceeding arises from or relates to any act or omission
of any Person during the period of time during which
Seller occupied the Premises prior to Closing;
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(8) as to any transaction contemplated in this Agreement,
the failure of either Party to comply with the
provisions of Article 6 of the California Uniform
Commercial Code or any similar "bulk sales" law or
similar Applicable Law relating to bulk sales or notices
to creditors, or any debt, liability or obligation with
respect thereto or arising thereunder; or
(9) the investigation or defense of any Claim which is made
or brought against any of the Buyer Indemnitees relating
to any of the Indemnifiable Damages of Buyer.
12.2 Agreement by Buyer to Indemnify.
a. Buyer shall promptly indemnify, defend and hold harmless, Seller,
its Affiliates, and their respective directors, officers, employees,
shareholders and agents (collectively, the "Seller Indemnitees") with respect to
the aggregate of all "Indemnifiable Damages of Seller". For purposes of this
Section 12.2, "Indemnifiable Damages of Seller" shall mean the aggregate of all
Claims, whether or not any of the Claims result from third party claims or
result from the assertion of any of Seller's rights hereunder, incurred or
suffered by any of the Seller Indemnitees, directly or indirectly, arising out
of or relating to:
(1) any breach of or default in the observance or
performance of any agreement made by Buyer in this
Agreement, or Buyer's failure to fulfill any other
obligation which it is required to perform or observe in
this Agreement;
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(2) any inaccuracy in any, breach of any, or false or
fraudulent, representation or warranty made by Buyer
in this Agreement;
(3) the operation of the Crystallume Business or the
ownership or use of any Purchased Asset, subsequent to
the Closing, except to the extent such Claims result
from or arise out of or constitute Indemnifiable Damages
of Buyer;
(4) the failure of Buyer to pay, discharge or perform any
of the Assumed Liabilities;
(5) any product liability claim with respect to products
manufactured or sold, or services performed, by Buyer
after the Closing;
(6) any product or service warranties, indemnities or
guarantees with respect to products manufactured or sold
or services performed, by Buyer after Closing;
(7) any environmental action, claim or proceeding with
respect to the Premises, any Purchased Asset on the
Crystallume Business as to which Seller is or may become
subject, including, without limitation, as a potentially
responsible party, which environmental action, claim or
proceeding arises from or relates to any act or omission
of any Person during the Period of time during which
Buyer occupies the Premises after the Closing; or
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(8) the investigation or defense of any Claim which is made
or brought against any of the Seller Indemnitees
relating to any of the Indemnifiable Damages of Seller.
12.3 Rules Regarding Indemnification. The obligations and liabilities of
each Party which may be subject to indemnification liability under Section 12.1
or Section 12.2 ("Indemnifying Party") to the Buyer Indemnitees or Seller
Indemnitees, as the case may be ("Indemnified Party"), shall be subject to the
following terms and conditions:
a. Claims by Non-Parties - Promptly after receipt by an Indemnified
Party of notice of the commencement of any proceeding against it by a third
party ("Third Party Claim") which is likely to give rise to Indemnifiable
Damages of the Indemnified Party, the Indemnified Party shall give written
notice ("Notice of Third Party Claim") to the Indemnifying Party stating the
nature of such Claim, the amount thereof and a brief description of the facts
and circumstances relating thereto, to the extent known. The Notice of Third
Party Claim shall contain or be accompanied by all reasonably appropriate
documentation relating to the circumstances giving rise to the Claim, including,
without limitation, a copy of all pleadings and other papers served, if any. The
failure of an Indemnified Party to give such Notice of Third Party Claim to the
Indemnifying Party or delay in giving such Notice of Third Party Claim, will not
affect the validity or amount of the Claim and the indemnification obligations
of the Indemnifying Party will remain in effect as to such Claim, except to the
extent that the Indemnifying Party has been prejudiced in its defense by such
failure or delay. If within Thirty (30) days after receiving such Notice of
Third Party Claim, the Indemnifying Party advises the Indemnified Party that it
will provide indemnification and assume the defense at its expense, then
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so long as such defense is being conducted, the Indemnified Party shall not
settle or admit liability with respect to the Claim and shall provide the
Indemnifying Party and defending counsel reasonable assistance in defending the
Claim. If the Indemnifying Party assumes the defense, counsel shall be selected
by such Indemnifying Party, which counsel shall be reasonably acceptable to the
Indemnified Party, and if the Indemnified Party then retains its own counsel, it
shall do so at its own expense, and the Indemnifying Party shall have the right
to settle the Claim with the consent of the Indemnified Party, which consent
shall not be unreasonably withheld or delayed. If the Indemnified Party does not
receive a written notice of assumption of the defense as hereinabove provided
from the Indemnifying Party within Thirty (30) days after the Indemnifying
Party's receipt of such Notice of Third Party Claim, the Indemnifying Party will
be bound by any determination made in such proceeding or any compromise or
settlement affected by the Indemnified Party, and the Indemnified Party may
control the defense of such proceeding and, in its sole discretion, may settle
or admit liability.
b. Claims by a Party - The determination of a Claim asserted by one
or more of the Buyer Indemnitees or Seller Indemnitees, as the case may be,
hereunder (other than as set forth in Section 12.3a), shall be made as follows:
the Indemnified Party shall give prompt written notice to the Indemnifying Party
of any Claim by the Indemnified Party which has not been made pursuant to
Section 12.3a, stating the nature of such Claim, the amount thereof and a brief
description of the facts and circumstances relating thereto, to the extent
known. If the Indemnified Party does not receive a written objection to the
notice from the Indemnifying Party within Thirty (30) days after the
Indemnifying Party's receipt of such notice, the Claim shall be conclusively
presumed to be a liability of the Indemnifying Party in an amount equal to such
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Claim. If within the aforesaid Thirty (30) day period the Indemnified Party
shall have received written objection to the notice (which written objection
shall briefly describe the basis of the objection to the notice or the amount
thereof, all in good faith), then for a period of Sixty (60) days after the
receipt of such objection, the Parties shall attempt to settle the disputed
Claim as between the Indemnified Party and the Indemnifying Party. If the
Parties are unable to settle the disputed Claim, either Party may bring an
action on the dispute as provided in Section 15.20.
12.4 Set-off. Seller and Buyer each acknowledges and agrees that the
Royalty Agreement contains obligations arising out of the transactions described
in this Agreement. Seller and Buyer each acknowledges and agrees that the
Royalty Agreement contains obligations of Buyer to pay Seller certain sums of
money (any and all payments of whatever nature thereunder are referred to herein
collectively as the "Obligations"). After the Closing, Buyer shall have the
right to recoup and set-off against the Obligations with respect to any
Indemnifiable Damages of Buyer under Section 12.1 of the Agreement. Buyer shall
promptly so notify Seller of its intent to recoup and set-off against the
Obligations and shall provide Seller with the notice required by Section 12.3b.
If Seller reasonably disagrees with Buyer's intention to recoup and set-off as
set forth herein, Seller shall give written notice thereof to Buyer, within
Thirty (30) days after receipt of Buyer's notice. In such event, Buyer shall
make all required payments pursuant to the Obligations into an interest-bearing
escrow account of Marine Midland Bank, N.A. to be held by Marine Midland Bank,
N.A. for the benefit of the Parties as their interests may finally be determined
by a court of competent jurisdiction (as provided in Section 15.20), pending
resolution of this dispute between the Parties. If the Parties cannot
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resolve any such dispute within Thirty (30) days after notice is given by
Seller, any Party may bring an action on the dispute as provided in Section
15.20.
12.5 No Event of Default. Notwithstanding anything to the contrary
contained in this Agreement or in any other Covered Agreement, any right of
recoupment or set-off asserted in good faith by Buyer in substantial compliance
with Section 12.4 (including, without limitation, payment into escrow as
required thereunder) shall not be an event of default under this Agreement or
under any other Covered Agreement, even though it may ultimately be determined
by a court that such assertion was improperly made or that Buyer was not
reasonably entitled to assert such right.
12.6 Cumulative Rights and Remedies. The rights and remedies of the
Parties under this Article 12 shall be in addition to and cumulative of, and not
in lieu or exclusive of, any other rights or remedies of the Parties pursuant to
this Agreement or any other Covered Agreement, at law or in equity. The rights
and remedies of any Party based upon, arising out of or otherwise in respect of,
any inaccuracy in or breach of, any representation, warranty or agreement or
failure to fulfill any condition shall in no way be limited by the fact that the
act, omission, occurrence or other statement of facts upon which any claim for
such inaccuracy or breach is based may also be the subject matter of any other
representation, warranty or agreement as to which there is no inaccuracy or
breach.
12.7 Waiver. No representation or warranty of Seller herein shall be
affected or deemed waived by reason of any investigation made by or on behalf of
Buyer, including, without limitation, any investigation made by any of its
Representatives or by reason of the fact that
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Buyer or any of its Representatives knew or should have known that any such
representation or warranty is or may be inaccurate.
12.8 Limitations.
a. Threshold - No claim for indemnification under Article 12 of this
Agreement shall be payable by any Indemnifying Party or otherwise recoverable by
any Indemnified Party, by setoff or otherwise, until (and then only to the
extent that) the total of all Indemnifiable Damages of Buyer, or the total of
all Indemnifiable Damages of Seller, as the case may be, equals or exceeds Ten
Thousand Dollars ($10,000.00).
b. Time of Assertion - No claim for indemnification under Article 12
of this Agreement shall be payable by any Indemnifying Party or otherwise
recoverable by any Indemnified Party, by setoff or otherwise, with respect to
Claims as to which such Indemnifying Party has not received notice from the
Indemnified Party within Twelve (12) months after the Closing Date, except that
there shall be no limitation on the time during which indemnification may be
sought or obtained for: (1) Third Party Claims related to any debts, obligations
or liabilities of Seller of any kind other than the Assumed Liabilities; or (2)
any instance of fraud, intentional breach of a covenant or intentional
misrepresentation by any Party contained in or relating to this Agreement or any
other Covered Agreement.
c. Seller's Maximum Liability - Seller's maximum liability to
Buyer's Indemnitees for indemnification under this Article 12, exclusive of
Indemnifiable Damages of Buyer arising from fraud, intentional breach of a
covenant or intentional misrepresentation by Seller contained in or relating to
this Agreement or any other Covered Agreement, shall not exceed the Purchase
Price. Seller shall be liable to Buyer to the extent provided in Section 12.1,
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for Indemnifiable Damages of Buyer arising from fraud, intentional breach of a
covenant or intentional misrepresentation by Seller contained in or relating to
this Agreement or any Covered Agreement, without limitation.
d. Buyer's Maximum Liability - Buyer's maximum liability to Seller's
Indemnitees for indemnification under this Article 12, exclusive of
Indemnifiable Damages of Seller arising from fraud, intentional breach of a
covenant or intentional misrepresentation by Buyer contained in or relating to
this Agreement or any other Covered Agreement, shall not exceed (1) One Hundred
Thousand Dollars ($100,000.00); provided, however, notwithstanding the
immediately preceding limitation, (2) Buyer's maximum liability to Seller's
Indemnitees for indemnification pursuant to Section 12.2a(4) relating to arising
out of the failure of Buyer to pay, discharge or perform any of the Assumed
Liabilities arising out of that certain lease described in Schedule 1.1f,
Paragraph 1e shall not exceed an amount equal to the Purchase Price reduced by
Buyer's liability to Seller's Indemnitees pursuant to Section 12.8d(1). Buyer
shall be liable to Seller to the extent provided in Section 12.2, for
Indemnifiable Damages of Seller arising from fraud, intentional breach of a
covenant or intentional misrepresentation by Buyer contained in or relating to
this Agreement or any Covered Agreement, without limitation.
e. Exclusive Remedy - Notwithstanding anything to the contrary
contained in Section 12.6, the Parties acknowledge and agree that this Article
12 is the exclusive remedy of the Parties for damages for breach or
misrepresentation of or under this Agreement only (but not under any other
Covered Agreement), other than a claim of interpleader based on Buyer's failure
to discharge the Assumed Liabilities or Seller's failure to discharge any
liabilities of Seller other
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than the Assumed Liabilities; provided, however, the rights and remedies of the
Parties under any other Covered Agreement shall not be limited or affected in
any way.
ARTICLE 13
CONFIDENTIALITY
13.1 Existing Confidentiality Agreements.
a. Non-Disclosure Agreement - The Parties agree that as to that
certain Non-Disclosure Agreement by and between the Parties, dated January 31,
1995: (1) all duties and obligations of Buyer shall terminate at the Closing;
and (2) all duties and obligations of Seller shall survive the Closing, as
provided therein
b. Confidentiality Agreement - The Parties agree that as to that
certain Confidentiality Agreement by and between the Parties, dated May 27,
1997: (1) all duties and obligations of Buyer shall terminate at the Closing;
and (2) all duties and obligations of Seller shall survive the Closing, as
provided therein; provided, however, Section 6 of said Confidentiality Agreement
shall survive in accordance with its terms.
ARTICLE 14
[Reserved]
ARTICLE 15
MISCELLANEOUS
15.1 Entire Agreement. This Agreement and the other Covered Agreements
constitute the entire agreement by and between the Parties regarding the subject
matter contained herein and supersede all prior and contemporaneous undertakings
and agreements by and between the Parties, whether written or oral, with respect
to such subject matter.
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15.2 Amendment. This Agreement shall not be amended except by a
writing executed by both Parties.
15.3 Parties Bound. This Agreement shall be binding upon and shall inure
to the benefit of the Parties and their respective successors and permitted
assigns, subject to the restrictions against assignment provided in Section
15.4.
15.4 Assignment. This Agreement shall not be assignable by either Party
without the prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed; provided, however, Buyer shall have the right,
without obtaining Seller's prior written consent, upon prior notice to Seller,
to assign its rights under this Agreement to any Affiliate of Buyer. No
assignment of any rights under this Agreement relieves the assigning Party of
primary liability for its obligations under this Agreement, and as between the
Parties, the assigning Party shall continue to be liable for all of its
obligations under this Agreement as though no assignment has been made.
15.5 Counterparts. This Agreement may be executed simultaneously in Two
(2) or more counterparts, any of which shall be deemed an original, and all of
which together shall constitute one and the same instrument, notwithstanding
that both Parties are not a signatory to the original or the same counterpart.
15.6 Headings. The headings used herein are inserted for convenience only
and are in no way intended to describe, interpret, define or limit the scope,
extent or intent of this Agreement.
15.7 Waiver. Failure by either Party to insist upon strict performance of
any provision herein by the other Party shall not be deemed a waiver by such
Party of its rights or remedies or a
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waiver by it of any subsequent default by the other Party and no waiver shall be
effective unless it is in writing and duly executed by the Party entitled to
enforce the provision being waived.
15.8 Transaction Expenses. Each Party shall pay its own fees, costs and
expenses and those of its Representatives with respect to the transactions
contemplated in this Agreement and in any other Covered Agreement, and the
Closing.
15.9 Notices. All notices required or permitted hereunder shall be in
writing and shall be: (a) sent by telex or facsimile transmission (to be
effective when receipt is acknowledged unless sent after 5:00 p.m. on any
business day, in which event notice shall be deemed received on the next
business day); (b) personally delivered; (c) sent by certified mail, return
receipt requested; or (d) sent by a nationally recognized, commercial overnight
delivery service with provisions for a receipts, postage or delivery charges
prepaid, and, except as otherwise provided in Section 15.9(a), shall be deemed
given when personally delivered or when placed in the possession of such mail or
delivery service, and addressed to the Parties, as follows:
To Seller: Electronic Designs, Inc.
One Research Drive
Westborough, Massachusetts 01581
Attn.: Frank D. Edwards, Senior Vice President
Facsimile no.: (508) 366-1083
with a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
Attn.: Thomas P. Storer, P.C.
Facsimile no.: (617) 523-1231
To Buyer: Advanced Refractory Technologies, Inc.
699 Hertel Avenue
Buffalo, New York 14207
Attn.: Keith A. Blakely, President
Facsimile no.: (716) 875-3746
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with a copy to: Damon & Morey LLP
1000 Cathedral Place
298 Main Street
Buffalo, New York 14202-4096
Attn.: Gust P. Pullman, Esq.
Facsimile no.: (716) 856-5521
Notice of change of address shall be given in accordance with the terms of this
Section 15.9 and shall be effective only upon receipt.
15.10 Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York without giving effect
to the principles of conflicts of laws.
15.11 Public Announcements. Except for any announcement intended solely
for internal distribution by a Party or any disclosure required by legal,
accounting or regulatory requirements beyond the reasonable control of said
Party, any media release relating to this Agreement or any of the other Covered
Agreements by Buyer within the Ten (10) day period after the Closing shall be
coordinated with and approved in writing by Seller prior to the release thereof,
which approval shall not be unreasonably withheld or delayed.
15.12 Third-Party Beneficiaries. With the exception of: (a) the
Parties; and (b) the Buyer Indemnitees and the Seller Indemnitees (as
provided in Article 12), there shall exist no right of any Person to claim a
beneficial interest in this Agreement or any rights arising under this
Agreement.
15.13 Survivability. All representations, warranties and agreements
contained herein shall survive and continue to bind the Parties after the
execution and delivery of this Agreement and any other Covered Agreement, the
Closing, the termination or expiration of this Agreement and any other Covered
Agreement, and any investigation conducted by either Party, to the extent
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and for as long as may be necessary to give effect to the rights, duties and
obligations of the Parties pursuant to this Agreement, subject to any applicable
statutes of limitations.
15.14 [Reserved].
15.15 [Reserved].
15.16 Post-Closing Communications. Seller shall promptly notify and
provide to Buyer any correspondence or other communications received by Seller
after the Closing relating to the Crystallume Business or any of the Purchased
Assets.
15.17 Inconsistent Provisions. If any provision of this Agreement is
inconsistent with any provision of any other Covered Agreement, the
provisions of this Agreement shall be controlling.
15.18 Severability. If any provision of this Agreement is determined by a
court of competent jurisdiction to be illegal or unenforceable, such provision
shall be automatically reformed and construed so as to be valid, operative and
enforceable to the maximum extent permitted by law or equity while preserving
its original intent. The invalidity of any part of this Agreement shall not
render invalid the remainder of this Agreement.
15.19 Cooperation. If at any time either Party reasonably requests that
any further assignment, conveyance, agreement or assurance is necessary or
desirable to fully carry out the provisions of this Agreement and the
transactions contemplated in this Agreement or in any other Covered Agreement,
including, without limitation, the collection of accounts receivable due either
Party hereunder, then the other Party shall execute and deliver, or cause to be
executed and delivered, any and all proper assignments, conveyances, agreements
and assurances, and do or cause to be done all things necessary or desirable to
fully carry out the provisions of this
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Agreement and the other Covered Agreements and the transactions contemplated
herein and therein.
15.20 Disputes. Each Party agrees that any dispute or controversy arising
between the Parties hereunder shall be settled in an action commenced and
maintained in the United States District Court for the Southern District of New
York, or if said Court lacks subject matter jurisdiction, then in the New York
Supreme Court, County of New York, and each Party consents to personal
jurisdiction in such courts. Seller hereby designates Goodwin, Procter & Hoar
LLP, 599 Lexington Avenue, New York, New York 10022, as its authorized agent for
service of process within the State of New York.
ARTICLE 16
DEFINITIONS
16.1 Definitions. For purposes of this Agreement, the following terms
shall have the respective meanings set forth below:
a. "Affiliate" of a Person means any Person which Controls, is
Controlled by, or is under common Control with, such Person.
b. "Applicable Law" means any and all applicable laws, rules,
regulations, statutes, orders and ordinances of any Government Authority.
c. "Consent" means any consent, estoppel (or other) certificate,
approval, authorization, waiver, permit, grant, franchise, concession,
agreement, license, exemption or order of, registration, declaration or filing
with, or report, filing, registration or notice to, any Person, including,
without limitation, any Government Authority.
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d. "Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
e. "Government Authority" means any foreign, federal, state, local
or other government, governmental agency or authority or quasi-governmental
body, or any entity exercising any executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government, including, without
limitation, any government authority, agency, department, board, commission,
court or tribunal or arbitrator.
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IN WITNESS WHEREOF, each Party has caused this Asset Purchase Agreement to
be executed by its duly authorized officer on the day and year first above
written.
ELECTRONIC DESIGNS, INC.
By: /s/ Frank D. Edwards
---------------------------------------------
Frank D. Edwards, Senior Vice President
ADVANCED REFRACTORY TECHNOLOGIES, INC.
By:/s/ Keith A. Blakely
---------------------------------------------
Keith A. Blakely, President
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List of Schedules and Exhibits to
Asset Purchase Agreement
Schedule 1.1a - Inventory
Schedule 1.1b - Technical Documentation
Schedule 1.1c - Machinery and Equipment
Schedule 1.1d - Furniture & Fixtures
Schedule 1.1e - Assumed Leases
Schedule 1.1f - Assumed Leases and Contracts
Schedule 1.1h - Assumed Authorizations
Schedule 1.1i - Purchased Intellectual Property
Schedule 1.1j - Licensed Intellectual Property
Schedule 1.1l- Prepaid Expenses and Deposits
Schedule 1.1p - Customers/Suppliers Records
Schedule 2.1b - Assumed Liabilities
Schedule 3.3 - Proration
Schedule 4.4 - Consents (Sellers)
Schedule 4.8 - Intellectual Property
Schedule 4.10 - Leases and Contracts
Schedule 4.11 - Authorizations
Schedule 4.12 - Financial Statements
Schedule 4.13 - Absence of Certain Changes
Schedule 4.15 - Major Customers and Suppliers
Schedule 4.19 - Environmental
Schedule 4.21 - Employees
Schedule 4.26 - ERISA
Schedule 4.27 - Insurance
Schedule 4.28 - Brokers
Schedule 4.29 - Related Party Transactions
Schedule 5.4 - Consents of Buyer
Schedule 7.2c - Offers of Employment
Schedule 9.8 - Undelivered Consents
Schedule 11.1 - Allocation of Purchase Price
Exhibit A - Employment Agreement with John A. Herb
Exhibit B - Employment Agreement with Firooz Nasser-Faili
Exhibit C - Royalty Agreement
Exhibit D - Security Agreement
Exhibit E - Confidentiality/Noncompetition Agreement
Exhibit F - Opinion of Seller's Counsel
<PAGE> 1
ROYALTY AGREEMENT
THIS ROYALTY AGREEMENT ("Agreement") is made this 27th day of October,
1997, by and between ELECTRONIC DESIGNS, INC., a corporation organized and
existing under the laws of the State of Delaware with its principal place of
business at One Research Drive, Westborough, Massachusetts ("EDI"), and ADVANCED
REFRACTORY TECHNOLOGIES, INC., a corporation organized and existing under the
laws of the State of New York with its principal place of business at 699 Hertel
Avenue, Buffalo, New York ("ART").
WHEREAS EDI and ART are parties to that certain Asset Purchase Agreement,
dated as of October 1, 1997 ("Asset Purchase Agreement"), pursuant to which ART
has purchased from EDI the Purchased Assets (as defined in the Asset Purchase
Agreement);
WHEREAS EDI and ART are also parties to that certain
Confidentiality/Noncompetition Agreement, dated October 27, 1997
("Noncompetition Agreement"); and
WHEREAS, pursuant to Section 3.1 of the Asset Purchase Agreement, ART is
required to pay EDI the Royalty (as hereinafter defined).
NOW, THEREFORE, in consideration of the covenants contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto (individually, a "Party;" collectively,
the "Parties") hereby agree as follows:
1. Definitions. Unless otherwise expressly defined herein, all
capitalized terms used in this Agreement shall have the meanings ascribed to
them in the Asset Purchase Agreement. For purposes hereof, the capitalized
terms set forth below shall have the following meanings:
a. "ART Party" means ART or any ART Affiliate.
b. "Commission" means the Securities and Exchange Commission
or any successor to the functions of such agency.
<PAGE> 2
c. "Current Crystallume Product" means those certain products which
are the same as those products comprising the Inventory purchased by ART from
EDI pursuant to the Asset Purchase Agreement.
d. "Initial Public Offering" means the consummation of a primary
bona fide, firm commitment underwritten public offering on behalf of ART,
pursuant to a Registration Statement (as hereinafter defined) filed with and
declared effective by the Commission pursuant to the Securities Act (as
hereinafter defined).
e. "Intellectual Property" means the Purchased Intellectual Property
(as such term is defined in Section 1.1i of the Asset Purchase Agreement) and
the Licensed Intellectual Property (as such term is defined in Section 1.1j of
the Asset Purchase Agreement), collectively.
f. "Licensing Royalty Term" means the Seven (7) year period
commencing on the date hereof and expiring on September 30, 2004.
g. "Net Licensing Revenues" means the aggregate of any and all
consideration actually received by an ART Party (in good funds in the event the
consideration is money), pursuant to any license or sublicense of the
Intellectual Property, in whole or in part (collectively, the "Licenses"),
granted by an ART Party to any Person (other than an ART Party), after deducting
all of the following relating to each License:
(1) any and all domestic and foreign duties, taxes, charges
and other assessments of any kind (including, without
limitation, withholding taxes (net of United States tax
credits actually used by an ART Party), sales taxes, use
taxes and any interest, fines or penalties thereon),
directly or indirectly levied or imposed on an ART Party
by any Government Authority;
(2) any and all fees paid to independent brokers; and
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(3) any and all royalties or other fees or charges of any
kind paid by an ART Party to any Person with respect to
any licensed intellectual property or other rights of
such Person which are licensed or sublicensed in the
respective License.
h. "Net Product Sales Revenues" means the aggregate of any and all
consideration actually received by an ART Party (in good funds in the event the
consideration is money), for any Sales of Products, after deducting all
Qualifying Costs applicable to each Sale; provided, however, in the case of a
Sale of a Product by and between any ART Parties, such a Sale shall not be
considered to constitute Net Product Sales Revenues unless one of the ART
Parties is the end user of the Product. Notwithstanding anything to the contrary
contained herein, in the event of a Sale of a Product that is a part or
component of another product made, produced or manufactured by or for an ART
Party, Net Product Sales Revenues from such Sale shall be calculated on the
basis of the fair market value of the Product part or component, and not on the
price of the entire product.
i. "Products" means any product hereafter made, produced or
manufactured by or for an ART Party and sold by an ART Party to a Person (other
than an ART Party, unless the ART Party is the end user), which product: (1) is
a Current Crystallume Product; (2) contains or consists of Inventory purchased
by ART from EDI pursuant to the Asset Purchase Agreement; or (3) incorporates or
embodies, in whole or in part, a Current Crystallume Product or a product which
is made, produced or manufactured through use of the Intellectual Property, in
whole or in part; provided, however, under no circumstances shall Products be
deemed to include any product made, produced or manufactured by or for an ART
Party prior to the date hereof.
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j. "Qualifying Costs" means each of the following:
(1) any and all discounts in amounts customary in the
trade for quantity purchases, prompt payments and for
wholesalers and distributors;
(2) any and all credits or refunds, not exceeding the
original invoice amount, for claims or returns;
(3) any and all domestic and foreign duties, taxes, charges
and other assessments of any kind (including, without
limitation, withholding taxes (net of United States tax
credits actually used by an ART Party), sales taxes, use
taxes and any interests, fines or penalties thereon),
directly or indirectly levied or imposed on an ART Party
by any Government Authority;
(4) any and all freight, shipping and any other
transportation expenses and related transportation
insurance; and
(5) any and all sales commissions paid to independent
sales agents or brokers.
k. "Product Royalty Term" means the Five (5) year period commencing
on the date hereof and expiring on September 30, 2002.
l. "Registration Statement" means any registration statement filed
with the Commission in accordance with the Securities Act (as hereinafter
defined).
m. "Sale" means any bona fide transaction anywhere in the world for
which consideration is actually received by an ART Party (in good funds in the
event the consideration is money), from a Person (other than an ART Party,
unless the ART Party is the end user) for the sale of any Product(s) to any
Person (other than an ART Party, unless the ART Party is the end
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<PAGE> 5
user); provided, however, "Sale" shall not be deemed to cover any sale, transfer
or other disposition of a Product, in whole or in part, by and between any ART
Parties, unless an ART Party is the end user. A Sale of a Product shall be
deemed completed at the time the ART Party actually receives consideration (in
good funds in the event the consideration is money), from such a Person for the
Product.
n. "Securities Act" means the Securities Act of 1933, as amended, or
any federal statute which shall be enacted to take the place of such act,
together with all rules and regulations promulgated thereunder.
2. Product Royalty.
a. Calculation - Subject to the terms hereof, ART shall pay EDI a
royalty ("Product Royalty") equal to Two and One-Half Percent (2.5%) of any and
all Net Product Sales Revenues arising from Sales of Products made during the
Product Royalty Term.
b. Payment - Subject to the terms of Section 4, the Product Royalty
shall be calculated for the Twelve-month period ("Year") commencing October 1,
1997 and ending September 30, 1998 and each subsequent Year during the Product
Royalty Term, on the basis of Sales of Products made during such recently
completed Year, and shall be due and payable within Thirty (30) days after the
end of each Year of the Product Royalty Term.
3. Licensing Royalty.
a. Calculation - Subject to the terms hereof, ART shall also pay EDI
a royalty ("Licensing Royalty") equal to Thirty Percent (30%) of any and all Net
Licensing Revenues arising from any and all Licenses consummated during the
Licensing Royalty Term. (The Product Royalty and the Licensing Royalty are
collectively referred to herein as the "Royalty".)
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<PAGE> 6
b. Payment - Subject to the terms of Section 4, the Licensing
Royalty shall be calculated at the end of the first Year and each subsequent
Year during the Licensing Royalty Term, on the basis of Licenses consummated
during such recently completed Year, and shall be due and payable within Thirty
(30) days after the end of each Year of the Licensing Royalty Term.
4. Prepayment.
a. Amount - Subject to the terms of this Section 4, ART shall pay
EDI the following amounts ("Installments") as a prepayment against the
Royalties:
(1) TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) on
October 1, 1998;
(2) On October 1, 1999, an amount equal to: (a) TWO
HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00), less
the excess of
(x) the aggregate of all Royalties earned through
September 30, 1998, over
(y) TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00).
(3) On October 1, 2000, an amount equal to: (a) ONE
HUNDRED TWENTY-FIVE THOUSAND DOLLARS ($125,000.00),
less the excess of
(x) the aggregate of all Royalties earned through
September 30, 1999, over
(y) FIVE HUNDRED THOUSAND DOLLARS ($500,000.00).
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<PAGE> 7
The Installments (collectively, the "Prepayment") shall be deemed to be a
prepayment against which Royalties earned pursuant to this Agreement shall be
applied.
b. Interest - ART shall pay EDI interest at the rate of Nine and
One-Half Percent (9.5%) per year, noncompounded, simple interest, on each
respective Installment, on the respective Installment due dates provided in
Section 4a.
c. Credit Against Prepayment - Each Product Royalty and Licensing
Royalty due and payable hereunder shall be calculated at the end of the first
Year and each subsequent Year during the Product Royalty Term and the Licensing
Royalty Term, as the case may be, and shall be credited and applied against the
sum of all Installments and all interest paid by ART. In the event the sum of
the Product Royalty and the Licensing Royalty due and payable as to any Year
exceeds the sum of all Installments and all interest paid by ART, then ART shall
pay to EDI such excess no later than Thirty (30) days after the end of the
respective Year in which such excess occurs.
d. Limitation - The Prepayment shall be subject to the terms of
Section 1b of the Noncompetition Agreement, which terms are incorporated herein
by reference.
e. Security - ART's obligation to pay the Royalty shall be secured
by a security interest in the Intellectual Property, as set forth in that
certain security agreement by and between EDI and ART, dated October 27, 1997.
f. Initial Public Offering - In the event ART completes an Initial
Public Offering resulting in at least Ten Million Dollars ($10,000,000.00) in
gross proceeds, any unpaid Installments (of the Prepayment) shall be paid by ART
within Thirty (30) days of the successful completion of such Initial Public
Offering ("Early Payment Date"). ART shall also pay EDI interest at the rate of
Nine and One-Half Percent (9.5%) per annum through the Early Payment Date on all
such unpaid Installments.
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<PAGE> 8
g. Nonrefundable - Except as provided in Section 12.4 of the Asset
Purchase Agreement, or Sections 4d or Section 7 of this Agreement, the
Prepayment shall be nonrefundable.
5. Royalty Report. Each Product Royalty and Licensing Royalty payment by
ART hereunder shall be accompanied by a report certified by an ART officer,
describing each Product Sale and each License taken into account in calculating
the Product Royalty and the Licensing Royalty, respectively, and describing the
method and manner in which the Product Royalty and the Licensing Royalty were
calculated ("Royalty Report"). ART shall also maintain accurate and complete
books and records with respect to all material information used by ART in
calculating the amount of the Product Royalty and the Licensing Royalty payable
hereunder. All such books and records shall be retained by ART for a period of
not less than Four (4) years from the date of the Royalty Report to which such
books and records relate.
6. Audit. EDI shall have the right, for the period of Four (4) years from
the date of any Royalty Report, to verify the accuracy of information contained
therein and to utilize the services of its accountants and attorneys for such
purpose. ART agrees to reasonably cooperate with such verification activities
and to provide EDI and its representatives with reasonable access to the
relevant books and records of ART during normal business hours. In the event any
such inspection reveals an additional Product Royalty and/or Licensing Royalty
to be due and payable hereunder, EDI shall provide ART with notice of such
deficiency and ART shall promptly pay EDI such deficiency, with interest as
provided in Section 10. In the event that any such inspection reveals that the
Product Royalty or the Licensing Royalty has been underpaid by ART by an amount
in excess of Five Percent (5%) of the amount actually due and payable, ART shall
also reimburse EDI for all reasonable professional costs and expenses incurred
in connection with carrying out such inspection.
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<PAGE> 9
7. Right of Offset. Notwithstanding any provision hereof to the
contrary, any and all of the following: (a) Indemnifiable Damages of Buyer
(subject to Section 12.1 of Asset Purchase Agreement); and (b) any other
Claim incurred or suffered by Buyer, directly or indirectly, arising out of
or relating to:
(1) any breach of or default in the observance or performance of
any agreement made by Seller in this Agreement or any other
Covered Agreement (other than the Asset Purchase Agreement),
or Seller's failure to fulfill any other obligation which it
is required to perform or observed in this Agreement or any
other Covered Agreement (other than the Asset Purchase
Agreement);
(2) any inaccuracy in any, breach of any, or false or fraudulent,
representation or warranty made by Seller in this Agreement or
any other Covered Agreement (other than the Asset Purchase
Agreement); or
(3) the investigation or defense of any Claim which is made or
brought against Buyer relating to any (1) or (2) above;
may, at the election of ART, be applied as an offset against (and in reduction
of) any Installment or any Royalty payable hereunder. Prior to exercising such
right of offset, ART shall give EDI written notice of the circumstances giving
rise to such right of offset, which notice shall include copies of all pertinent
documentation relating thereto.
8. Acknowledgment. EDI acknowledges that each ART Party may use its
reasonable business judgment and complete discretion in deciding the manner and
extent to which it shall enter into any License or make, produce or manufacture
(or have made, produced or manufactured) Products, and/or make Sales of
Products, and no ART Party shall be subject to any duty of best efforts (or
otherwise) with respect thereto.
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<PAGE> 10
9. Currency. All Royalty payments hereunder shall be made in United States
Dollars by check payable to EDI. Royalties on Net Product Sales Revenues and Net
Licensing Revenues denominated in a currency other than United States Dollars
shall be payable based on the currency exchange rate in effect on the last
business day of the applicable Year, as reported in the Wall Street Journal.
10. Late Fee. Any Royalty payment not paid when due hereunder shall be
subject to a late payment charge equal to One Percent (1%) per month. In the
event that said late payment charge exceeds the maximum interest rate allowed by
Applicable Law, then said payment charge shall be deemed to be reduced to equal
the maximum interest rate allowed by Applicable Law.
11. Entire Agreement. This Agreement constitutes the entire agreement by
and between the Parties regarding the subject matter contained herein and
supersedes all prior and contemporaneous undertakings and agreements by and
between the Parties, whether written or oral, with respect to such subject
matter.
12. Amendment. This Agreement shall not be amended except by a writing
executed by both Parties.
13. Parties Bound. This Agreement shall be binding upon and shall
inure to the benefit of the Parties and their respective successors and
permitted assigns, subject to the restrictions against assignment provided in
Section 14.
14. Assignment. This Agreement shall not be assignable by either Party
without the prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed; provided, however, ART shall have the right,
without obtaining EDI's prior written consent, upon prior notice to EDI, to
assign its rights under this Agreement to any ART Affiliate; provided, further,
that EDI shall have the right, without obtaining ART's prior written consent but
upon prior written notice to ART, to assign all of its rights, duties and
obligations under this
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<PAGE> 11
Agreement to a Surviving Entity (as hereinafter defined), if: (a) through an
acquisition or merger (a "Corporate Event"), EDI is acquired by, or is merged
with and into, an entity ("Surviving Entity") which after such Corporate Event
will have revenues, net income and net assets at least equal to those of EDI at
the time of such Corporate Event; and (b) the Surviving Entity assumes all of
EDI's duties and obligations under each of the Covered Agreements.
Notwithstanding anything to the contrary contained herein, no assignment of any
rights, duties or obligations under this Agreement relieves the assigning Party
of primary liability for its duties and obligations under this Agreement, and as
between the Parties, the assigning Party shall continue to be liable for all of
its duties and obligations under this Agreement as though no assignment has been
made.
15. Counterparts. This Agreement may be executed simultaneously in Two (2)
or more counterparts, any of which shall be deemed an original, and all of which
together shall constitute one and the same instrument, notwithstanding that both
Parties are not a signatory to the original or the same counterpart.
16. Headings. The headings used herein are inserted for convenience only
and are in no way intended to describe, interpret, define or limit the scope,
extent or intent of this Agreement.
17. Waiver. Failure by either Party to insist upon strict performance of
any provision herein by the other Party shall not be deemed a waiver by such
Party of its rights or remedies or a waiver by it of any subsequent default by
the other Party and no waiver shall be effective unless it is in writing and
duly executed by the Party entitled to enforce the provision being waived.
18. Notices. All notices required or permitted hereunder shall be in
writing and shall be: (a) sent by telex or facsimile transmission (to be
effective when receipt is acknowledged unless sent after 5:00 p.m. on any
business day, in which event notice shall be deemed received
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<PAGE> 12
on the next business day); (b) personally delivered; (c) sent by certified mail,
return receipt requested; or (d) sent by a nationally recognized, commercial
overnight delivery service with provisions for a receipts, postage or delivery
charges prepaid, and, except as otherwise provided in Section 18(a), shall be
deemed given when personally delivered or when placed in the possession of such
mail or delivery service, and addressed to the Parties, as follows:
To EDI: Electronic Designs, Inc.
One Research Drive
Westborough, Massachusetts 01581
Attn.: Frank D. Edwards, Senior Vice President
Facsimile no.: (508) 366-1083
with a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
Attn.: Thomas P. Storer, P.C.
Facsimile no.: (617) 523-1231
To ART: Advanced Refractory Technologies, Inc.
699 Hertel Avenue
Buffalo, New York 14207
Attn.: Keith A. Blakely, President
Facsimile no.: (716) 875-3746
with a copy to: Damon & Morey LLP
1000 Cathedral Place
298 Main Street
Buffalo, New York 14202-4096
Attn.: Gust P. Pullman, Esq.
Facsimile no.: (716) 856-5521
Notice of change of address shall be given in accordance with the terms of this
Section 18 and shall be effective only upon receipt.
19. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of New York without giving effect to the
principles of conflicts of laws.
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<PAGE> 13
20. Severability. If any provision of this Agreement is determined by a
court of competent jurisdiction to be illegal or unenforceable, such provision
shall be automatically reformed and construed so as to be valid, operative and
enforceable to the maximum extent permitted by law or equity while preserving
its original intent. The invalidity of any part of this Agreement shall not
render invalid the remainder of this Agreement. The Parties acknowledge that use
of the defined term "Royalty" herein to define the payments hereunder is not
intended to affect the enforceability of this Agreement.
21. Cooperation. If at any time either Party reasonably requests that any
further agreement or assurance is reasonably necessary or desirable to fully
carry out the provisions of this Agreement and the transactions contemplated in
this Agreement, then the other Party shall execute and deliver, or cause to be
executed and delivered, any and all reasonably necessary agreements and
assurances, and do or cause to be done all things reasonably necessary or
desirable to fully carry out the provisions of this Agreement and the
transactions contemplated herein.
22. Survivability. Notwithstanding anything contained herein to the
contrary, all representations, warranties and agreements contained herein shall
survive and continue to bind the Parties after the execution and delivery of
this Agreement, the expiration or earlier termination of this Agreement, and any
investigation conducted by either Party, to the extent and for as long as may be
necessary to give effect to the rights, duties and obligations of the Parties
pursuant to this Agreement, subject to any applicable statute of limitations.
23. Disputes. Each Party agrees that any dispute or controversy arising
between the Parties hereunder shall be settled in an action commenced and
maintained in the United States District Court for the Southern District of New
York, or if said Court lacks subject matter jurisdiction, then in the New York
Supreme Court, County of New York, and each Party
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<PAGE> 14
consents to personal jurisdiction in such courts. EDI hereby designates Goodwin,
Procter & Hoar LLP, 599 Lexington Avenue, New York, New York 10022 as its
authorized agent for service of process within the State of New York.
24. Term. The term of this Agreement shall be the Product Royalty Term, as
to the Product Royalty, and shall be the Licensing Royalty Term, as to the
Licensing Royalty, unless earlier terminated as provided in Section 1b of the
Noncompetition Agreement.
25. Dedication. ART agrees to dedicate the services of One (1) member of
its senior management to the commercial exploitation of the Sale of Products and
the marketing of Licenses, as ART shall determine, in its sole reasonable
business judgment.
26. Disclaimer. Except as otherwise provided in this Agreement, the Asset
Purchase Agreement or any other Covered Agreement: (a) with respect to the
Intellectual Property, EDI makes no other representation or warranty, either
express or implied, including, without limitation, any representation or
warranty as to merchantability or fitness for a particular purpose; and (b) EDI
shall have no liability to ART for any indirect, special, incidental, or
consequential damages arising out of ART's use of the Intellectual Property.
IN WITNESS WHEREOF, the Parties have executed this Royalty Agreement by
their duly authorized officers on the day and year first above written.
ELECTRONIC DESIGNS, INC.
By: /s/ Frank D. Edwards
-------------------------------------------
Frank D. Edwards, Senior Vice President
ADVANCED REFRACTORY TECHNOLOGIES, INC.
By:/s/ Keith A. Blakely
--------------------------------------------
Keith A. Blakely, President
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<PAGE> 1
CONFIDENTIALITY/NONCOMPETITION AGREEMENT
THIS CONFIDENTIALITY/NONCOMPETITION AGREEMENT ("Agreement") is made this
27th day of October, 1997 by and between ELECTRONIC DESIGNS, INC., a corporation
organized and existing under the laws of the State of Delaware with its
principal place of business at One Research Drive, Westborough, Massachusetts
("Seller"), and ADVANCED REFRACTORY TECHNOLOGIES, INC., a corporation organized
and existing under the laws of the State of New York with its principal place of
business at 699 Hertel Avenue, Buffalo, New York ("Buyer").
WHEREAS Buyer and Seller are parties to that certain Asset Purchase
Agreement, dated as of October 27, 1997 ("Asset Purchase Agreement"), pursuant
to which Buyer purchased from Seller the Purchased Assets (as defined in the
Asset Purchase Agreement); and
WHEREAS, as an inducement to Buyer to purchase the Purchased Assets,
Seller agrees to refrain from competition with Buyer and to maintain the
confidentiality of the Confidential Information (as hereinafter defined), upon
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of Buyer entering into the Asset Purchase
Agreement, the covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby expressly
acknowledged, the parties hereto (individually, a "Party,"; collectively, the
"Parties") hereby agree as follows:
1. Noncompetition.
a. Scope - Seller agrees that, for a period of Seven (7) years after
the date of this Agreement ("Noncompetition Term"), neither Seller nor any
Affiliate (as defined in the
<PAGE> 2
Asset Purchase Agreement) of Seller shall, directly or indirectly, for its own
account or for the account of any third party (as owner, proprietor,
shareholder, joint venturer, partner, principal, consultant, agent or
otherwise):
(1) engage in or with or take part in, or own, operate,
manage, control, affiliate with, be employed by, provide
services to or otherwise participate in any way in the
business of, share in the earnings of or invest in the
stock, bonds or other securities of, any person,
corporation or other entity engaged in any way, directly
or indirectly, in any business competitive with or
substantially similar to the Crystallume Business (as
defined in the Asset Purchase Agreement);
(2) publish or disclose to any third party, the names of
any past or present customers of the Crystallume
Business;
(3) solicit for employment or employ any individual who
on the date of this Agreement is or thereafter
becomes an employee of Buyer; or
(4) with respect to any past or present customer of Seller's
Crystallume Business, either solicit the same in any
manner which could adversely affect Buyer in any way or
make statements to the same which disparage Buyer or its
operations in any way.
b. Limitation - If, prior to the expiration of the Noncompetition
Term, Seller or any Affiliate of Seller shall propose to engage in any of the
activities described in Section
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<PAGE> 3
1a(1) of this Agreement, then, Seller shall provide Buyer with Thirty (30) days
written notice prior to the commencement of any such competitive activity
("Commencement Date"), which notice shall describe such proposed competitive
activity in reasonable detail. Upon commencement of any such competitive
activity: (a) the restrictions upon Seller and Seller's Affiliates contained in
Section 1a(1) of this Agreement, and only such restrictions, shall terminate;
(b) Seller shall refund to Buyer the excess of: (1) the sum of all Installments
and all interest paid by Buyer, through the Commencement Date pursuant to that
certain Royalty Agreement by and between Buyer and Seller, dated of even date
herewith ("Royalty Agreement"), over (2) the aggregate of all Royalties earned
by Seller pursuant to the Royalty Agreement through the Commencement Date; (c)
any unpaid Installment, including interest, whether or not accrued, shall then
be immediately cancelled; and (d) the Royalty Agreement shall terminate.
2. Acknowledgments and Agreements. Seller acknowledges and agrees
that:
a. Valuable Consideration - The covenants and agreements of Seller
herein have been given for adequate and valuable consideration.
b. Necessary Protection - The restrictions and prohibitions
contained in this Agreement as to Seller are fair and reasonable in scope,
duration, geographic limitation and in all other respects, are necessary for the
protection of the legitimate business and commercial interests of Buyer, and
that the scope of such protection has been carefully considered by the Parties.
3. Confidential Information.
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<PAGE> 4
a. Access - Seller hereby acknowledges and agrees that it has had
access to or is aware of certain confidential and/or proprietary information (as
hereinafter defined in this Section 3 in more detail) concerning the operation
of the Crystallume Business, the ownership or use of any of the Purchased
Assets, or the affairs of Seller. Seller hereby undertakes and agrees that it
shall have a duty to Buyer to protect such information from use or disclosure,
as provided in this Section 3.
b. Definitions - For purposes of this Agreement, "Confidential
Information" shall mean any and all data or information which is regarded (or
should be regarded) as confidential and/or proprietary by Seller or which is
otherwise material to the operation of the Crystallume Business, the ownership
or use of any of the Purchased Assets or the affairs of Seller. "Confidential
Information" includes, without limitation, data, formulas, compositions,
processes, descriptions, plans, specifications, reports, studies, findings,
inventions, concepts, ideas, products, product designs, business records,
customer information, pricing information, financial information, costs, supply
information, computer programs, licenses, patent applications, trade secrets,
know-how, techniques, testing and other methods and techniques, marketing/sales
strategies, plans and promotions and any other intellectual property rights of
any kind, whether or not patentable or copyrightable. "Confidential Information"
also includes, without limitation, any and all forms, sketches, graphs,
equipment, drawings, photographs, designs, specifications, formulations,
flowsheets, descriptions, data, samples and other tangible materials, as well as
any and all observations, oral disclosures and any other information (in
whatever form) which may be perceived, reproduced, transmitted or communicated.
"Confidential Information" shall not include information which:
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<PAGE> 5
(1) was or is generally known to the public or becomes
generally known to the public through no act, failure to
act or breach on the part of Seller in violation of this
Agreement. (To the extent that Confidential Information
consists of a combination of elements individually known
to the public, this exclusion shall not apply if such
elements are not generally known to the public in such
combination);
(2) was or is rightfully furnished to Seller by a third
party without breaching any agreement, understanding or
confidential relationship with Buyer; or
(3) is required to be disclosed by Seller by judicial action
pursuant to an order of a Government Authority (as
defined in the Asset Purchase Agreement) having
jurisdiction thereof.
c. No Use - Seller shall not have any right of any kind to use any
Confidential Information in any way, except financial information relating to
the Crystallume Business used in the preparation of Seller's tax returns as
required by federal and state law.
d. Duty - Seller hereby agrees to: (1) maintain the Confidential
Information in strict secrecy so as to protect the confidential and proprietary
nature of the Confidential Information and to assure complete adherence to this
Agreement by Seller and Seller's Affiliates and their respective officers,
directors, shareholders, employees and representatives; and (2) not publish or
disclose the Confidential Information in any manner or form to any third party
for any reason.
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<PAGE> 6
e. Legal Disclosure - In the event disclosure of any Confidential
Information is required by any legal or regulatory statute, rule, order or
regulation ("Legal Order"), Seller shall provide Buyer with immediate written
notice of same so that Buyer may seek an appropriate protective order or other
remedy. In return, Buyer shall be required to provide Seller with prompt written
notice of its decision as to whether it will seek an appropriate protective
order or other remedy. In the event Buyer notifies Seller of its decision not to
seek a protective order or other remedy, Seller shall have the right to disclose
the Confidential Information required pursuant to the Legal Order, and Seller
shall be required to exercise its commercially reasonable best efforts to obtain
assurance that confidential treatment shall be afforded the Confidential
Information. If Buyer notifies Seller of its decision to seek a protective order
or other remedy, Seller, to the extent reasonably practical, shall not disclose
any part of the Confidential Information pending conclusion of any legal
proceedings regarding such disclosure. In the event that such protective order
or other remedy is not obtained, Seller shall disclose only such part of the
Confidential Information as is specifically required by the terms of the Legal
Order, and Seller shall exercise its commercially reasonable best efforts to
obtain assurance that confidential treatment shall be afforded the Confidential
Information.
4. Reformation. If any provision of this Agreement or the application
thereof to Seller shall, to any extent, be declared invalid or unenforceable,
the remainder of this Agreement or the application of such provision to
circumstances other than those to which it is held invalid or unenforceable
shall not be affected thereby, it being the agreement of the Parties that all
provisions of this Agreement shall be valid and enforceable to the fullest
extent permitted by law. Without limiting the generality of the immediately
preceding sentence, the Parties agree that in
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<PAGE> 7
the event any provision hereof shall be declared invalid or unenforceable
because it extends for too long a period of time or over too great a range of
activities or in too broad an area, it shall be interpreted to extend only over
the maximum period of time, range of activities or geographic areas as to which
it may be enforceable.
5. Remedies.
a. Equity - Seller acknowledges and agrees that in the event of a
breach or threatened breach of any covenant by it herein, irreparable harm will
result to Buyer and its business for which there is no adequate remedy at law,
and Seller agrees that in the event of any such breach or threatened breach,
Buyer shall be entitled, in addition to all other applicable remedies, to
specific performance of the terms of this Agreement and immediate injunctive
relief restraining Seller from activity constituting such breach or threatened
breach; provided, however, that the foregoing equitable remedies shall not apply
in the event of a breach by Seller of the agreement of Seller in Section 1a(1)
herein. Seller further agrees that in the event of such breach or threatened
breach, Seller shall reimburse Buyer for any and all costs and expenses,
including, without limitation, attorneys' fees and costs, incurred by Buyer in
enforcing any provisions of this Agreement. Nothing herein shall be construed as
prohibiting Buyer from pursuing any other remedies available to it for breach or
threatened breach of this Agreement, including, without limitation, the recovery
of damages from Seller.
b. Cumulative - No right or remedy herein conferred upon or reserved
to Buyer is exclusive of any right or remedy herein or permitted by law or
equity, but each shall be cumulative of every other right or remedy given
hereunder or now or hereafter existing at law or
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<PAGE> 8
in equity (or by statute or otherwise), and may be enforced concurrently
therewith or from time to time and as often as may be deemed expedient or
necessary by Buyer, in its sole discretion.
6. Survivability. Notwithstanding anything contained to the contrary in
this Agreement, in the Asset Purchase Agreement or in any other Covered
Agreement (as defined in the Asset Purchase Agreement), all representations,
warranties and agreements contained herein shall survive and continue to bind
the Parties after the execution and delivery of this Agreement, the expiration
of this Agreement, and any investigation conducted by either Party, to the
extent and for as long as may be necessary to give effect to the rights, duties
and obligations of the Parties pursuant to this Agreement, subject to any
applicable statute of limitations.
7. Entire Agreement. This Agreement constitutes the entire agreement by
and between the Parties regarding the subject matter contained herein and
supersedes all prior and contemporaneous undertakings and agreements by and
between the Parties, whether written or oral, with respect to such subject
matter.
8. Amendment. This Agreement shall not be amended except by a writing
executed by both Parties.
9. Parties Bound. This Agreement shall be binding upon and shall inure to
the benefit of the Parties and their respective successors and permitted
assigns, subject to the restrictions against assignment provided in Section 10.
10. Assignment. This Agreement shall not be assignable by Seller without
Buyer's prior written consent; provided, however, that EDI shall have the right,
without obtaining ART's prior written consent but upon prior written notice to
ART, to assign all of its rights, duties and obligations under this Agreement to
a Surviving Entity (as hereinafter defined), if: (a) through an
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<PAGE> 9
acquisition or merger (a "Corporate Event"), EDI is acquired by, or is merged
with and into, an entity ("Surviving Entity") which after such Corporate Event
will have revenues, net income and net assets at least equal to those of EDI at
the time of such Corporate Event; and (b) the Surviving Entity assumes all of
EDI's duties and obligations under each of the Covered Agreements. Buyer shall
have the right, without obtaining Seller's prior written consent, upon prior
notice to Seller, to assign its rights under this Agreement. Notwithstanding
anything to the contrary contained herein, no assignment of any rights, duties
or obligations under this Agreement relieves the assigning Party of primary
liability for its duties and obligations under this Agreement, and as between
the Parties, the assigning Party shall continue to be liable for all of its
duties and obligations under this Agreement as though no assignment has been
made.
11. Counterparts. This Agreement may be executed simultaneously in Two (2)
or more counterparts, any of which shall be deemed an original, and all of which
together shall constitute one and the same instrument, notwithstanding that both
Parties are not a signatory to the original or the same counterpart.
12. Headings. The headings used herein are inserted for convenience only
and are in no way intended to describe, interpret, define or limit the scope,
extent or intent of this Agreement.
13. Waiver. Failure by either Party to insist upon strict performance of
any provision herein by the other Party shall not be deemed a waiver by such
Party of its rights or remedies or a waiver by it of any subsequent default by
the other Party and no waiver shall be effective unless it is in writing and
duly executed by the Party entitled to enforce the provision being waived.
9
<PAGE> 10
14. Notices. All notices required or permitted hereunder shall be in
writing and shall be: (a) sent by telex or facsimile transmission (to be
effective when receipt is acknowledged unless sent after 5:00 p.m. on any
business day, in which event notice shall be deemed received on the next
business day); (b) personally delivered; (c) sent by certified mail, return
receipt requested; or (d) sent by a nationally recognized, commercial overnight
delivery service with provisions for a receipt, postage or delivery charges
prepaid, and, except as otherwise provided in Section 14(a), shall be deemed
given when personally delivered or when placed in the possession of such mail or
delivery service, and addressed to the Parties, as follows:
To Seller: Electronic Designs, Inc.
One Research Drive
Westborough, Massachusetts 01581
Attn.: Frank D. Edwards, Senior Vice President
Facsimile no.: (508) 366-1083
with a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
Attn.: Thomas P. Storer, P.C.
Facsimile no.: (617) 523-1231
To Buyer: Advanced Refractory Technologies, Inc.
699 Hertel Avenue
Buffalo, New York 14207
Attn.: Keith A. Blakely, President
Facsimile no.: (716) 875-3746
with a copy to: Damon & Morey LLP
1000 Cathedral Place
298 Main Street
Buffalo, New York 14202-4096
Attn.: Gust P. Pullman, Esq.
Facsimile no.: (716) 856-5521
10
<PAGE> 11
Notice of change of address shall be given in accordance with the terms of this
Section 14 and shall be effective only upon receipt.
15. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York without giving effect
to the principles of conflicts of laws.
16. Cooperation. If at any time either Party reasonably requests that any
further agreement or assurance is reasonably necessary or desirable to fully
carry out the provisions of this Agreement and the transactions contemplated in
this Agreement, then the other Party shall execute and deliver, or cause to be
executed and delivered, any and all reasonably necessary agreements and
assurances, and do or cause to be done all things reasonably necessary or
desirable to fully carry out the provisions of this Agreement and the
transactions contemplated herein.
IN WITNESS WHEREOF, the Parties have caused this
Confidentiality/Noncompetition Agreement to be executed by their duly authorized
officers on the day and year first above written.
ELECTRONIC DESIGNS, INC.
By: /s/ Frank D. Edwards
----------------------------------------
Frank D. Edwards, Senior Vice President
ADVANCED REFRACTORY TECHNOLOGIES, INC.
By: /s/ Keith A. Blakely
-----------------------------------------
Keith A. Blakely, President
11
<PAGE> 1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), dated October 27, 1997, is by
and between ADVANCED REFRACTORY TECHNOLOGIES, INC., a New York corporation with
its principal place of business at 699 Hertel Avenue, Buffalo, New York ("ART"
or "Debtor"), and ELECTRONIC DESIGNS, INC., a Delaware corporation with its
principal place of business at One Research Drive, Westborough, Massachusetts
("EDI" or "Secured Party").
PRELIMINARY STATEMENT:
A. ART and EDI entered into that certain Asset Purchase Agreement, dated
as of October 1, 1997 (the "Asset Purchase Agreement"), pursuant to which ART
purchased from EDI the Purchased Assets (the "Purchased Assets") in exchange
for: (a) FIVE HUNDRED THOUSAND AND 00/100 DOLLARS (500,000.00); and (b) payment
of a royalty as provided in that certain Royalty Agreement, dated October 27,
1997, by and between ART and EDI (the "Royalty Agreement").
B. Pursuant to the Royalty Agreement, to secure all payments due
thereunder to EDI, ART has agreed to grant to EDI a security interest in all of
the Intellectual Property (as defined herein), upon the terms and conditions
herein.
NOW, THEREFORE, in order to induce EDI to enter into the Asset Purchase
Agreement and the Royalty Agreement, the covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto (individually, a "Party;" collectively,
the "Parties") hereby agree as follows:
1. DEFINITIONS. All terms used herein which are defined in the New York
Uniform Commercial Code (the "Code") shall have the same meaning herein as in
the Code unless the context in which such terms are used herein indicates
otherwise. Unless otherwise expressly defined herein, all capitalized terms used
but not elsewhere defined in this Agreement shall have the respective meanings
ascribed to such terms in the Royalty Agreement or the Asset Purchase Agreement,
as the case may be.
2. SECURITY INTEREST. In order to secure the performance and payment of
all liabilities and obligations of Debtor under or related to the Royalty
Agreement (the "Debtor's Obligation" or "Obligation"), Debtor hereby grants to
Secured Party a security interest in certain intangible property and assets
described below (the "Collateral" or the "Intellectual Property"):
2.1 GENERAL INTANGIBLES/INTELLECTUAL PROPERTY. With respect to the
Purchased Assets, all intellectual property, including, without
limitation, (i) all patents and patent applications (including any and all
divisions, continuations, renewals,
<PAGE> 2
reissues, extensions, continuations-in-part, reexaminations or foreign
counterparts), trademarks, service marks, trade names, copyrights,
software, technologies, formulas, compositions, processes, inventions,
trade secrets, know-how, mask works, ideas, improvements, concepts,
information, methods, studies, data, confidential and/or proprietary
information (including, without limitation, registrations, licenses and
applications pertaining thereto) and other intellectual property rights,
which were purchased by Debtor from EDI pursuant to the Asset Purchase
Agreement, and (ii) all rights to practice and use the patents and patent
applications (including any and all divisions, continuations, renewals,
reissues, extensions, continuations-in-part, reexaminations or foreign
counterparts), licenses, trademarks, service marks, trade names,
copyrights, software, technologies, formulas, compositions, processes,
inventions, trade secrets, know-how, mask works, ideas, improvements,
concepts, information, methods, studies, data, confidential information
(including, without limitation, registrations, licenses and applications
pertaining thereto) and other intellectual property rights and other
proprietary information or intangible property of any kind licensed by EDI
and assigned to ART pursuant to the Asset Purchase Agreement.
2.2 PROCEEDS. All proceeds (including proceeds of insurance, eminent
domain and other governmental taking and tort claims) of the Intellectual
Property; and
2.3 BOOKS AND RECORDS. All of the books and records pertaining to
the Intellectual Property described in Sections 2.1 and 2.2 above (the
"Books and Records").
The security interest of Secured Party in the Collateral is intended to be a
first priority security interest superior and prior to all other liens and
encumbrances of any kind on the Collateral of the Debtor; provided, however, EDI
acknowledges that as of the date hereof the Collateral is subject to liens and
encumbrances created by or arising under EDI and it is EDI's responsibility to
satisfy and release all such liens and encumbrances.
3. REPRESENTATIONS AND WARRANTIES. Debtor hereby represents and warrants
to Secured Party as follows:
3.1 OWNERSHIP OF COLLATERAL. Upon consummation of the transactions
contemplated in the Asset Purchase Agreement, Debtor shall be the owner of
all of the Collateral, free from any liens and encumbrances of any kind
created by Debtor; provided, however, EDI acknowledges that as of the date
hereof the Collateral is subject to liens and encumbrances created by or
arising under EDI and it is EDI's responsibility to satisfy and release
all such liens and encumbrances.
3.2 PLACES OF BUSINESS. The location of the chief executive
office(s) of Debtor, all of the other places of business of Debtor, all
locations where the Books and
2
<PAGE> 3
Records are kept, and the location of the Intellectual Property are listed
on EXHIBIT A attached hereto and made a part hereof. Debtor shall not
without providing written notice to Secured Party change the location of
(i) its chief executive office(s), (ii) its Books and Records, or (iii)
any Intellectual Property.
3.3 TRADE OR ASSUMED NAMES. All trade or assumed names under which
Debtor has done business are listed in EXHIBIT B attached hereto and made
a part hereof.
3.4 FINANCING STATEMENTS AND COLLATERAL ASSIGNMENTS. Except for the
financing statements and collateral assignments of Secured Party
pertaining to the Debtor's Obligation, Debtor has not permitted there to
be filed a financing statement or any collateral assignment covering any
Collateral or any proceeds thereof in any public office.
4. AFFIRMATIVE COVENANTS. Until the Debtor's Obligation is paid and
performed in full, Debtor agrees that it will:
4.1 TAXES. Pay promptly when due all taxes, levies, assessments and
governmental charges upon and relating to any of the Collateral, income or
receipts of Debtor or otherwise for which Debtor is or may be liable;
provided, however, Debtor shall have the right to contest any such taxes,
levies, assessments and charges, in good faith.
4.2 INSURANCE. At its sole expense, keep the Collateral insured
against loss or damage by insurance policies, as Debtor, in its reasonable
business judgment, deems appropriate.
4.3 INTELLECTUAL PROPERTY.
4.3.1 PAYMENTS. Make all payments and perform all acts
reasonably necessary as Debtor, in its reasonable business judgment
shall determine, to maintain and preserve the Intellectual Property,
including, without limitation, filing of documents, renewals or
other information with any regulatory agency or any other Person.
4.3.2 NOTICE OF LICENSES. Promptly notify Secured Party, upon
execution of reasonably required confidentiality agreements, of new
licenses relating to the Intellectual Property and provide copies of
such licenses to Secured Party.
4.3.3 ACCURATE RECORDS. At all times keep accurate and
complete records of payment and performance by Debtor and other
Persons of their
3
<PAGE> 4
respective obligations with respect to the Intellectual Property and
permit Secured Party or any of its agents, upon execution of
reasonably requested confidentiality agreements and, during normal
business hours and upon prior reasonable notice for reasonable
purposes, to call at Debtor's place of business to inspect, audit,
check or make extracts from the books, records, correspondence or
other data relating to the Intellectual Property.
4.3.4 DEFAULTS, OTHER CLAIMS. Promptly inform Secured Party of
any default in payment or performance by Debtor or any other Person
of any obligation with respect to the Intellectual Property or of
claims made by others in regard to the Intellectual Property, if
either of which would have a material adverse effect on the Debtor.
4.4 COLLECTION OF PROCEEDS. Collect the proceeds of indebtedness
owing to Debtor by any Person with respect to any Intellectual Property.
4.5 FINANCING STATEMENTS, FURTHER ASSURANCES, DELIVERY OF
INSTRUMENTS. Concurrently with the execution of this Agreement, and from
time to time hereafter as requested by Secured Party, execute and deliver
to Secured Party such financing statements, continuation statements,
collateral assignments of patents and trademarks, termination statements,
amendments to any of the foregoing and other documents, in form reasonably
satisfactory to Secured Party, as Secured Party may reasonably require to
perfect and continue in effect the security interest of Secured Party
granted pursuant to this Agreement, to carry out the purposes of this
Agreement and to protect Secured Party's rights hereunder. Debtor, upon
demand, shall pay the cost of filing all such financing statements,
continuation statements, termination statements, amendments to any of the
foregoing and other documents. A carbon, photographic or other
reproduction of this Agreement may be filed as a financing statement.
5. NEGATIVE COVENANTS. Until the Debtor's Obligation is paid and performed
in full, Debtor agrees that it will not:
5.1 SALES AND TRANSFER OF COLLATERAL. Sell, lease, assign or
otherwise dispose of any of the Collateral; provided, however, the
foregoing shall not in any way restrict Debtor's right to grant business
of any kind to third parties with respect to the Intellectual Property or
to grant security interests or other liens and encumbrances subordinate to
the security interests granted to EDI hereunder (the "Subordinated
Liens").
5.2 MODIFICATION. Except in the ordinary course of business, change
in any material respect the terms of payment or performance of any
obligation with respect to the Intellectual Property without the prior
written consent of Secured Party, which consent shall not be unreasonably
withheld or delayed.
4
<PAGE> 5
6. PROTECTION OF COLLATERAL. In the event of any failure of Debtor to (i)
maintain in force and pay for any insurance which Debtor is required to provide
pursuant to this Agreement, (ii) keep the Collateral free from all liens and
encumbrances of any kind except for licenses related thereto, any liens or
encumbrances arising under this Agreement, and any liens or encumbrances
existing on the date hereof and any Subordinated Liens, (iii) pay when due all
taxes, levies and assessments on or in respect of the Collateral; provided
however, Debtor shall have the right to contest any such taxes, levies, and
assessments, in good faith, (iv) make in Debtor's reasonable business judgment
all payments and perform all acts on the part of Debtor required to be paid or
performed with respect to any of the Collateral, including, without limitation,
all expenses of protecting, storing, warehousing, insuring, handling and
maintaining the Collateral, and (v) keep fully and perform promptly any other of
the obligations of Debtor under this Agreement; the Secured Party, at its
option, upon prior written notice to Debtor, may (but shall not be required to)
procure and pay for such insurance, pay or contest or settle such liens or taxes
or any judgments based thereon or otherwise make good any other aforesaid
failure of Debtor. Debtor shall reimburse Secured Party promptly upon demand for
all sums paid or advanced on behalf of Debtor for any such purpose, together
with all reasonable costs, expenses and attorneys' fees paid or incurred by
Secured Party in connection therewith and interest at the rate of fifteen
percent (15%) per annum on all sums so paid or advanced from the date of such
payment or advancement until repaid to Secured Party. All such sums paid or
advanced by Secured Party, with interest thereon, immediately upon payment or
advancement thereof, shall be deemed to be part of the Debtor's Obligation
secured hereby.
7. EVENT OF DEFAULT. Debtor shall be in default under this Agreement upon
the non-payment of the Royalty for more than five (5) business days following
the date when due (an "Event of Default").
8. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default:
8.1 RIGHTS OF SECURED PARTY. Secured Party shall have all of the
rights and remedies of a secured party under the Code and all other rights
and remedies accorded to Secured Party, at equity or law, including,
without limitation, the right to apply for and have a receiver appointed
by a court of competent jurisdiction to manage, protect and preserve the
Collateral and to collect all revenues and profits thereof. Any notice of
sale or other disposition of Collateral given not less than ten (10)
business days prior to such proposed action shall constitute reasonable
and fair notice of such action. To the extent permitted by Applicable Law,
Secured Party may postpone or adjourn any such sale from time to time by
announcement at the time and place of sale stated in the notice of sale or
by announcement of any adjourned sale, without being required to give a
further notice of sale. Any such sale may be for cash or, unless
prohibited by Applicable Law, upon such credit or installment terms as
Secured Party shall determine. To the extent permitted by Applicable Law,
Debtor shall be credited with the net proceeds of such sale only when such
proceeds actually are received by Secured
5
<PAGE> 6
Party. Despite the consummation of any such sale, Debtor shall remain
liable for any deficiency on the Debtor's Obligation which remains
outstanding following any such sale. All net proceeds received pursuant to
a sale shall be applied to the amounts outstanding under the Royalty
Agreement, in such order as Secured Party, in its reasonable discretion
shall determine.
8.2 ASSEMBLY OF COLLATERAL. Upon the request of Secured Party,
Debtor shall assemble and make the Collateral available to Secured Party
at a place designated by Secured Party.
8.3 PROCEEDS. At the request of Secured Party, Debtor shall hold all
proceeds of the Collateral collected by Debtor in trust for Secured Party,
and promptly upon receipt thereof, turn over such proceeds to Secured
Party in substantially the form in which they were received.
8.4 OTHER RIGHTS. Secured Party, at its election, and without notice
to Debtor, may:
8.4.1 TERMINATE RIGHT OF COLLECTION. Terminate the right of
Debtor to collect the proceeds described in Section 8.3.
8.4.2 NOTIFICATION. Notify obligors to make all payments
directly to Secured Party.
8.4.3 COLLECTION OF PAYMENTS. Demand, sue for, collect or
receive, in the name of Debtor or Secured Party, any money or
property payable or receivable on any item of Collateral.
8.4.4 SETTLEMENT. Settle, release, compromise, adjust, sue
upon or otherwise enforce any item of Collateral as Secured Party
may reasonably determine.
8.4.5 MAIL OF DEBTOR; ENDORSEMENT OF CHECKS. For the purpose
of enforcing Secured Party's rights under this Agreement, endorse
notes, checks, drafts, money orders, documents of title or other
forms of payment on behalf and in the name of Debtor.
9. POWER OF ATTORNEY. To effectuate the rights and remedies of Secured
Party under this Agreement, Debtor hereby irrevocably appoints Secured Party its
attorney-in-fact, in the name of Debtor or in the name of Secured Party, to
execute and file from time to time financing statements, continuation
statements, termination statements and amendments thereto, covering the
Collateral, in form satisfactory to Secured Party. The power of attorney granted
pursuant to this Section 9 is coupled with an interest and shall be irrevocable
until the Debtor's
6
<PAGE> 7
Obligation has been paid and performed in full. Secured Party shall, prior to
the occurrence of an Event of Default, notify Debtor of any action Secured Party
takes pursuant to this Section 9.
10. CERTAIN AGREEMENTS OF DEBTOR.
10.1 WAIVER OF NOTICE. Debtor hereby waives notice of the acceptance
of this Agreement.
10.2 RIGHTS OF SECURED PARTY. Debtor agrees that Secured Party (i)
shall have no duty as to the collection or protection of the Collateral or
any income thereon, (ii) may exercise the rights and remedies of Secured
Party with respect to the Collateral without resort or regard to other
security or sources for payment and (iii) shall not be deemed to have
waived any of the rights or remedies granted to Secured Party hereunder
unless such waiver shall be in writing and shall be signed by Secured
Party. Debtor and Secured Party acknowledge their intent that, upon the
occurrence of an Event of Default, Secured Party shall receive, to the
fullest extent permitted by law and governmental policy, all rights
necessary or desirable to obtain, use or sell the Collateral, and to
exercise all remedies available to Secured Party under this Agreement, the
Code or other Applicable Law. Debtor and Secured Party further acknowledge
and agree that, in the event of changes in law or governmental policy
occurring subsequent to the date hereof that affect in any manner Secured
Party's rights of access to, or use or sale of the Collateral, or the
procedures necessary to enable Secured Party to obtain such rights of
access, use or sale, Secured Party and Debtor shall amend this Agreement,
in such manner as Secured Party reasonably shall request, in order to
provide Secured Party such rights to the greatest extent possible
consistent with then Applicable Law and governmental policy.
10.3 NO DELAY, SINGLE OR PARTIAL EXERCISE PERMITTED. No delay or
omission on the part of Secured Party in exercising any rights or remedies
contained herein shall operate as a waiver of such right or remedy or of
any other right or remedy, and no single or partial exercise of any right
or remedy shall preclude any other or further exercise thereof, or the
exercise of any other right or remedy. A waiver of any right or remedy on
any one occasion shall not be construed as a bar or waiver of any right or
remedy on future occasions, and no delay, omission, waiver or single or
partial exercise of any right or remedy shall be deemed to establish a
custom or course of dealing or performance between the parties hereto.
11. RIGHTS CUMULATIVE. All rights and remedies of Secured Party pursuant
to this Agreement, the Royalty Agreement, the Asset Purchase Agreement (except
as otherwise provided therein) or otherwise, shall be cumulative and
non-exclusive, and may be exercised singularly or concurrently.
12. SEVERABILITY. If any provision of this Agreement is determined by a
court of competent jurisdiction to be illegal or unenforceable, such provision
shall be automatically
7
<PAGE> 8
reformed and construed so as to be valid, operative and enforceable to the
maximum extent permitted by law or equity while preserving its original intent.
The invalidity of any part of this Agreement shall not render invalid the
remainder of this Agreement.
13. NOTICES. All notices required or permitted hereunder shall be in
writing and shall be: (a) sent by telex or facsimile transmission (to be
effective when receipt is acknowledged unless sent after 5:00 p.m. on any
business day, in which event notice shall be deemed received on the next
business day); (b) personally delivered; (c) sent by certified mail, return
receipt requested; or (d) sent by a nationally recognized, commercial overnight
delivery service with provisions for a receipt, postage or delivery charges
prepaid, and, except as otherwise provided in Section 13(a), shall be deemed
given when personally delivered or when placed in the possession of such mail or
delivery service, and addressed to the Parties, as follows:
To EDI: Electronic Designs, Inc.
One Research Drive
Westborough, Massachusetts 01581
Attn.: Frank D. Edwards, Senior Vice President
Facsimile no.: (508) 366-1083
with a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-1881
Attn.: Thomas P. Storer, P.C.
Facsimile no.: (617) 523-1231
To ART: Advanced Refractory Technologies, Inc.
699 Hertel Avenue
Buffalo, New York 14207
Attn.: Keith A. Blakely, President
Facsimile no.: (716) 875-3746
with a copy to: Damon & Morey LLP
1000 Cathedral Place
298 Main Street
Buffalo, New York 14202-4096
Attn.: Gust P. Pullman, Esq.
Facsimile No.: (716) 856-5521
Notice of change of address shall be given in accordance with the terms of this
Section 13 and shall be effective only upon receipt.
8
<PAGE> 9
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective successors and assigns of
Secured Party and Debtor.
15. HEADINGS. The headings used herein are inserted for convenience only
and are in no way intended to describe, interpret, define or limit the scope,
extent or intent of this Agreement.
16. COUNTERPARTS. This Agreement may be executed simultaneously in Two (2)
or more counterparts, any of which shall be deemed an original, and all of which
together shall constitute one and the same instrument, notwithstanding that both
Parties are not a signatory to the original or the same counterpart.
17. SURVIVABILITY. Notwithstanding anything contained herein to the
contrary, all representations, warranties and agreements contained herein shall
survive and continue to bind the Parties after the execution and delivery of
this Agreement, until the Obligation is paid and performed in full.
18. DEFEASANCE. Upon payment in full of the Obligation, Secured Party
shall, at Debtor's expense, release the security interest in the Intellectual
Property granted under this Agreement and execute and deliver such instruments
and other documents and take such further actions as may be reasonably requested
to carry out such release, including cancellation of this Agreement by written
notice, executed on behalf of Secured Party, to the U.S. Patent and Trademark
Office.
19. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of New York without giving effect to the
principles of conflicts of laws.
20. DISPUTES. Each Party agrees that any dispute or controversy arising
between the Parties hereunder shall be settled in an action commenced and
maintained in the United States District Court for the Southern District of New
York, or if said Court lacks subject matter jurisdiction, then in the New York
Supreme Court, County of New York, and each Party consents to personal
jurisdiction in such courts. EDI hereby designates Goodwin, Procter & Hoar LLP,
599 Lexington Avenue, New York, New York 10022 as its authorized agent for
service of process within the State of New York.
21. WAIVER OF RIGHT TO JURY TRIAL. SECURED PARTY AND DEBTOR ACKNOWLEDGE
AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT WOULD BE
BASED UPON DIFFICULT AND COMPLEX ISSUES AND THEREFORE, SECURED PARTY AND DEBTOR
AGREE THAT ANY COURT PROCEEDING ARISING OUT OF ANY SUCH CONTROVERSY WILL BE
TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
9
<PAGE> 10
22. SECURED PARTY'S RIGHT TO SPECIFIC PERFORMANCE. Debtor acknowledges and
agrees that in the event of a breach or threatened breach of any covenant by it
herein, irreparable harm will result to Secured Party and its business for which
there is no adequate remedy at law, and Debtor agrees that in the event of any
such breach or threatened breach, Secured Party shall be entitled, in addition
to all other applicable remedies, to specific performance of the terms of this
Agreement and immediate injunctive relief restraining Debtor from activity
constituting such breach or threatened breach. Nothing herein shall be construed
as prohibiting Secured Party from pursuing any other remedies available to it
for breach or threatened breach of this Agreement, including, without
limitation, the recovery of damages from Debtor.
23. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement by
and between the Parties regarding the subject matter contained herein and
supersedes all prior and contemporaneous undertakings and agreements by and
between the Parties, whether written or oral, with respect to such subject
matter.
24. AMENDMENT. This Agreement shall not be amended except by a writing
executed by both Parties.
[remainder of this page intentionally left blank]
10
<PAGE> 11
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized officers on the day and year first above written.
ELECTRONIC DESIGNS, INC.
By: /s/ Frank D. Edwards
----------------------------------------
Name: Frank D. Edwards
Title: Senior Vice President
ADVANCED REFRACTORY TECHNOLOGIES,
INC.
By: /s/ Keith A. Blakely
---------------------------------------
Name: Keith A. Blakely
Title: President
11
<PAGE> 12
EXHIBIT A
Location of Chief Executive Office(s),
Location of Other Places of Business,
Location of Books and Records, and
Location of Intellectual Property
Chief Executive Office 699 Hertel Avenue
Buffalo, NY
Other Places of Business 3506 Bassett Street
Santa Clara, CA 95054
Books and Records 3506 Bassett Street
Santa Clara, CA 95054
699 Hertel Avenue
Buffalo, NY
Location of Intellectual Property 3506 Bassett Street
Santa Clara, CA 95054
699 Hertel Avenue
Buffalo, NY
<PAGE> 13
EXHIBIT B
List of Trade Names
1. ART.
