SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 14, 1994
SENSORMATIC ELECTRONICS CORPORATION
(Exact name of registrant as specified in charter)
Delaware 0-3953 34-1024665
(State or other jurisdic- (Commission file (IRS employer
tion of incorporation) number) identification No.)
500 N.W. 12th Avenue
Deerfield Beach, Florida 33442
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(305) 420-2000
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
On August 14, 1994, the Company entered into an Agreement
and Plan of Merger with Knogo Corporation ("Knogo") and Knogo's
wholly-owned subsidiary, Knogo North America Inc. ("Knogo North
America"), providing for the merger (the "Merger") of Knogo with
and into the Company. The agreement contemplates that immediately
prior to the Merger, Knogo's operations in the United States,
Puerto Rico and Canada will be contributed to Knogo North America
and the stock of Knogo North America distributed to Knogo's stock-
holders or otherwise disposed of (the "Divestiture"), so that
pursuant to the Merger, Knogo's businesses outside the United
States, Puerto Rico and Canada will be combined with those of the
Company.
Pursuant to the agreement, following the Divestiture and
upon the effectiveness of the Merger, each share of Knogo common
stock will be exchanged for the Company's Common Stock having a
value (based on the average of the closing prices of the Company's
Common Stock for the twenty trading days preceding the merger) of
$18, which value would be increased, in the event such average
closing price exceeds $33, by .273 times the amount of such excess.
The Company has the right to pay all or a portion of the merger
consideration in cash in the event that such average closing price
of its Common Stock is less than $28, subject, however, to Knogo's
right in such event to require that the merger consideration be
paid entirely in the Company's Common Stock at a fixed valuation of
$28 per share.
Consummation of the Merger is subject to the expiration
of applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, approval of Knogo's shareholders and
certain other conditions. The agreement also has provisions for
the payment of break-up fees, under certain conditions, payable by
either party should the transaction fail to close.
In addition to a Contribution and Divestiture Agreement
governing the assets contributed by Knogo to Knogo North America
and the related liabilities to be assumed by Knogo North America,
it is contemplated by the agreement that under a Supply Agreement,
the Company will purchase certain products from Knogo North America
over a term of 30 months. It is also contemplated that the parties
will enter into a License Agreement governing the use of certain
patent rights and technology.
Knogo is an international, New York-based company engaged
primarily in the business of manufacturing, marketing and servicing
electronic article surveillance systems employing swept radio
frequency, dual radio frequency and magnetic technologies. Knogo
also markets closed circuit video systems. Knogo's worldwide
revenues for the fiscal year ended February 28, 1994 were $89.3
million, with net income of $3.6 million or $0.65 per share. The
Knogo operations being acquired by the Company pursuant to the
Merger posted revenues of $70.7 million for the same period.
<PAGE>
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 thereunto duly authorized.
Dated: August 24, 1994
SENSORMATIC ELECTRONICS CORPORATION
By:/s/ Miguel A. Flores
Miguel A. Flores
Vice President and Treasurer
<PAGE>
Exhibit Index
Exhibit
Number Description
2.1 Agreement and Plan of Merger ("Merger
Agreement") dated August 14, 1994,
between Sensormatic Electronics
Corporation, Knogo Corporation
("Knogo") and Knogo North America,
Inc. ("Knogo North America")
(including Exhibit A - Delaware
Certificate of Merger; Exhibit B - New
York Certificate of Merger; and
Exhibit C - Form of Contribution and
Divestiture Agreement (the "Divesti-
ture Agreement") between Knogo and
Knogo North America)
2.2 Form of License Agreement between
Knogo and Knogo North America
(Exhibit B to Divestiture Agreement)
2.3 Form of Supply Agreement between Knogo
and Knogo North America (Exhibit C to
Divestiture Agreement)
(Schedules are not included. Copies
will be furnished supplementally to
the Securities and Exchange Commission
upon request.)
AGREEMENT AND PLAN OF MERGER
Dated as of August 14, 1994
among
SENSORMATIC ELECTRONICS CORPORATION,
KNOGO CORPORATION
and
KNOGO NORTH AMERICA INC.
<PAGE>
Table of Contents
1. The Merger
1.1 The Merger
1.2 Effect of the Merger
1.3 Certificate of Incorporation and By-laws of Surviving
Corporation
1.4 Sensormatic Common Stock.
1.5 Conversion, Exchange and Cancellation of
Company Shares
1.6 Exchange of Certificates; Fractional Shares
1.7 Dissenting Shares
1.8 Stock Transfer Books
1.9 Treatment of Company Common Stock Options
1.10 Closing
1.11 Alternative Merger
2. Divestiture of Knewco.
2.1 Transfer of Assets
2.2 Assumption of Liabilities
2.3 Other Provisions
2.4 Spin-Off or Sale
2.5 Additional Agreements
3. Representations and Warranties of the Company
3.1 Due Incorporation and Qualification of the Company.
3.2 Capitalization
3.3 Subsidiaries.
3.4 Authority; Due Authorization; Valid Obligation;
Fairness Opinion
3.5 No Conflicts or Defaults
3.6 Copies of Charter Documents and Stock Records
3.7 Authorizations
3.8 Periodic Filings; Financial Statements
3.9 Assets
3.10 Ordinary Course; No Material Adverse Effect
3.11 Permits; Compliance with Law
3.12 Taxes
3.13 Employee Benefits
3.14 Litigation
3.15 Agreements and Commitments
3.16 Intellectual Property
3.17 Brokers
3.18 Information Supplied
3.19 Disposition by Stockholders
3.20 Miscellaneous
4. Representations and Warranties of Sensormatic
4.1 Due Incorporation and Qualification
4.2 Authority; Due Authorization; Valid Obligation
4.3 No Conflicts or Defaults
4.4 Authorizations
4.5 Litigation
4.6 SEC Documents
4.7 Ordinary Course; No Material Adverse Change
4.8 Registration Statement
4.9 Sensormatic Common Stock
4.10 Miscellaneous
5. Pre-Closing Agreements
5.1 Preserve the Company's Business
5.2 Preserve Accuracy of Representations and Warranties;
Updates
5.3 Further Investigation and Information
5.4 Consents, Waivers and Filings
5.5 Subsequent Filings
5.6 Preparation of Registration Statement
5.7 Accountants' Letters
5.8 Stockholders' Meeting
5.9 No Solicitation
5.10 Board Actions.
5.11 Certain Tax Matters
6. Conditions to the Obligations of Sensormatic
6.1 Due Performance; Accuracy of Representations and
Warranties
6.2 Corporate Action
6.3 Agreements
6.4 Rights
6.5 Legal Opinions
6.6 Registration Statement
6.7 Governmental Action; No Prohibition
6.8 Resignations
7. Conditions to the Obligations of the Company
7.1 Due Performance; Accuracy of Representations and
Warranties
7.2 Corporate Action
7.3 Agreements
7.4 Legal Opinions
7.5 Registration Statement; NYSE Listing
7.6 Governmental Action; No Prohibition.
7.7 Release of Lien
8. Termination; Amendment; Waiver
8.1 Termination
8.2 Effect of Termination; Representations and Warranties
8.3 Amendment; Extension; Waiver
9. Further Assurances
10. Delayed Transfers
10.1 Pending Transfers
10.2 Prohibited Transfers
10.3 Cooperation
11. Miscellaneous
11.1 Entire Agreement
11.2 Communications
11.3 No Assignment; Successors and Assigns
11.4 Public Announcements
11.5 Survival of Representations, Warranties and
Agreements
11.6 Expenses
11.7 Alternate Structures
11.8 Governing Law; Consent to Jurisdiction
11.9 Savings Clause
11.10 Counterparts
11.11 Construction
11.12 Valuation Disputes
Exhibits:
Exhibit A - Form of Delaware Certificate of Merger
Exhibit B - Form of New York Certificate of Merger
Exhibit C - Form of Contribution and Divestiture Agreement
Schedules:
Item 3.1(b) -- Qualifications to do Business
Item 3.3(a) -- Subsidiaries
Item 3.5 -- Conflicting Agreements, Etc.
Item 3.7 -- Consents and Authorizations
Item 3.8(c) -- Consolidating Financial Statements
Item 3.8(d) -- Liabilities
Item 3.9(a) -- Liens
Item 3.9(b) -- Realty
Item 3.10 -- Exceptions to Ordinary Course
Item 3.11(a) -- Permits
Item 3.11(b) -- Foreign Product Approvals, Registrations,
Certifications
Item 3.12 -- Tax Matters
Item 3.13(a) -- Company Benefit Plans
Item 3.13(b) -- Union Benefit Plans
Item 3.14 -- Litigation
Item 3.15(a) -- Listed Instruments
Item 3.15(b) -- Union and Collective Bargaining Contracts
Item 3.16 -- Intellectual Property Claims
Item 3.17 -- Brokers or Advisors
Schedule 4.4 -- Sensormatic Consents and Authorizations
Schedule 6.5 -- Matters for Opinion of the Company's
Counsel
Schedule 7.4 -- Matters for Opinion of Sensormatic's
Counsel
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 14,
1994, among SENSORMATIC ELECTRONICS CORPORATION, a Delaware
corporation ("Sensormatic"), KNOGO CORPORATION, a New York
corporation (the "Company"), and KNOGO NORTH AMERICA INC., a
Delaware corporation ("Knewco").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of
Sensormatic, the Company and Knewco have approved this Agreement
and the merger of the Company with and into Sensormatic pursuant to
the terms and conditions this Agreement; and
WHEREAS, the parties intend that the Merger (as such
term is defined in Section 1.1) qualify as a tax-free reorga-
nization under Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, it is a condition to the Merger that certain
of the assets and liabilities of the Company relating to its
operations in the United States, Canada and Puerto Rico be assigned
to or assumed by Knewco, and that the stock of Knewco be
distributed to the stockholders of the Company or sold immediately
prior to the Merger, as contemplated by Section 2 and in accordance
with the Divestiture Agreement referred to therein (the
"Divestiture"); and
WHEREAS, the Company is engaged principally in the
business of developing, manufacturing and marketing electronic
article surveillance, closed-circuit television and other products
to deter and detect shoplifting and employee theft (the
"Business");
NOW, THEREFORE, in consideration of the mutual rep-
resentations, warranties, covenants and agreements contained
herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. The Merger.
1.1 The Merger. On the Closing Date (as such term
is defined in Section 1.10) or as soon as practicable thereafter,
and subject to the terms and conditions of this Agreement, the
parties shall file a Certificate of Merger substantially in the
form of Exhibit A (the "Delaware Certificate of Merger") with the
Secretary of State of the State of Delaware under the General
Corporation Law of the State of Delaware (the "GCL") and a
Certificate of Merger substantially in the form of Exhibit B (the
"New York Certificate of Merger") with the Secretary of State of
the State of New York under the Business Corporation Law of the
State of New York (the "BCL"). Effective as of the filing of the
Delaware Certificate of Merger (the "Effective Time"), the Company
shall be merged with and into Sensormatic (the "Merger"). Upon and
following the Merger, the separate existence of the Company shall
cease and Sensormatic shall continue as the surviving corporation
(the "Surviving Corporation").
1.2 Effect of the Merger. The separate corporate
existence of Sensormatic, as the Surviving Corporation, with all
its purposes, objects, rights, privileges, powers, certificates and
franchises, shall continue unimpaired by the Merger. The Surviving
Corporation shall succeed, insofar as permitted by law, to all
rights, assets, liabilities and obligations of the Company in
accordance with the GCL and the BCL.
1.3 Certificate of Incorporation and By-laws of Sur-
viving Corporation.
(a) From and after the Effective Time until further
amended in accordance with the GCL, the Certificate of Incor-
poration of Sensormatic, as in effect at the Effective Time, shall
be the Certificate of Incorporation of the Surviving Corporation.
(b) The By-laws of Sensormatic, as in effect at the
Effective Time, shall be the By-laws of the Surviving Corporation
until altered, amended or repealed in accordance with law.
(c) The directors and officers of Sensormatic as of
the Effective Time shall be the directors and officers of the
Surviving Corporation.
1.4 Sensormatic Common Stock. At the Effective
Time, each issued and outstanding share of Sensormatic Common Stock
shall remain outstanding as one validly issued, fully paid and non-
assessable share of Common Stock, par value $.01 per share, of the
Surviving Corporation.
1.5 Conversion, Exchange and Cancellation of Company
Shares.
(a) At the Effective Time, by virtue of the Merger
and without any action on the part of the holders thereof, each
share of Common Stock, par value $.01 per share, of the Company,
including any Rights (as such term is defined in Section 3.2)
incident thereto (each such share, together with its related
Rights, being referred to herein as a "Company Share" and,
collectively, as the "Company Shares"), issued and outstanding
immediately prior to the Effective Time (other than Company Shares,
if any, to be cancelled pursuant to Section 1.5(b) and other than
the Dissenting Shares, as defined in Section 1.7, except as set
forth therein) shall be converted into the right to receive the
Merger Consideration per Share (as hereinafter defined). Except as
provided below in this paragraph, the term "Merger Consideration
per Share" shall mean that fraction of a share of Common Stock, par
value $.01 per share, of Sensormatic (the "Sensormatic Common
Stock") as shall be equal to the quotient resulting from dividing
the Exchange Value (as hereinafter defined) by the Average Closing
Price (as hereinafter defined), rounded to not more than four
decimal places, together with the Escrow Interest (as defined
below), if applicable. For all purposes of this Agreement, (i) the
"Average Closing Price" shall mean the average of the closing
prices (last sale) of Sensormatic Common Stock on the New York
Stock Exchange for each of the twenty trading days immediately
prior to the date on which the Effective Time occurs and (ii) the
"Exchange Value" shall mean $18.00, increased, if the Average
Closing Price as of the date on which the Effective Time occurs is
greater than $33.00, by 0.273 times the excess of such Average
Closing Price over $33.00, and subject to further adjustment as
provided below in this Section 1.5(a). Notwithstanding the
foregoing, if the Average Closing Price as of the date on which the
Effective Time occurs is less than $28.00: Sensormatic shall have
the right, in its sole discretion, to pay some or all of the merger
consideration hereunder in cash or a combination of cash and
Sensormatic Common Stock, such that (x) that fraction of a share of
Sensormatic Common Stock issued in the exchange for each Company
Share, multiplied by the Average Closing Price, plus (y) the amount
of cash delivered in the exchange with respect to such Company
Share, shall be equal in the aggregate to the Exchange Value;
provided, however, that the Company nevertheless may require that
the Merger Consideration per Share be paid entirely in Sensormatic
Common Stock with the Average Closing Price for purposes of this
Section 1.5(a) being deemed to equal $28.00. In the event that
Sensormatic pays all or some of the Merger Consideration per Share
in cash pursuant to the preceding sentence, the term "Merger
Consideration per Share" shall be deemed to refer to the combi-
nation of cash and Sensormatic Common Stock to be exchanged for
each Company Share pursuant to the preceding sentence, together
with the Escrow Interest, if applicable.
For purposes of determining the Merger Consideration
per Share, the Exchange Value as otherwise determined above
pursuant to this Section 1.5(a) shall be subject to adjustment as
follows:
(1) In the event that the terms of the Divestiture
Agreement, License Agreement or Supply Agreement are amended in
order to facilitate the consummation of the transactions contem-
plated hereby or otherwise, the Exchange Value shall, to the extent
that such amendments have an impact on the value of the Company and
the Acquired Subsidiaries, be appropriately adjusted prior to the
Closing Date by mutual agreement of Sensormatic and the Company,
or, if mutual agreement cannot be achieved, pursuant to Section
11.12.
(2) In the event of a Knewco Sale (as defined in
Section 2.4), the proceeds of which are retained by the Company
through the consummation of the Merger, the Exchange Value shall be
appropriately increased on a per share basis to reflect the after-
tax net proceeds thereof retained by the Company in an amount equal
to the amount of such net proceeds, net of the Company's effective
tax rate. In the event that the proceeds of the Knewco Sale
include securities or other non-cash consideration, Sensormatic may
require the sale of such securities or non-cash consideration in a
commercially reasonable manner to fix the value thereof for the
purposes of this clause (2) or, in lieu of increasing the Merger
Consideration per Share with respect thereto, the distribution of
such securities or other consideration to the holders of Company
Shares. Any dispute as to the proper amount of the foregoing
adjustment, including the computation of after-tax net proceeds,
shall be resolved pursuant to Section 11.12.
(3) In the event that the Annual Revenues (as defined
below) in the countries in which the Escrowed Businesses, as
defined in Section 10.2, if any, are organized exceed in the
aggregate $15,000,000, the Exchange Value as otherwise determined
above shall be reduced by an amount equal to the Exchange Value
times a fraction, the numerator of which is the aggregate Annual
Revenues for the countries in which such Escrowed Businesses are
organized and the denominator of which is the Total Annual Revenues
(as defined below). If this clause (3) is applicable, the Merger
Consideration per Share shall also include a pro rata interest (the
"Escrow Interest") in the Deferred Merger Consideration (as such
term is defined in Section 10.2(b)) equal to 1.00 divided by the
total number of Company Shares outstanding immediately prior to the
Effective Time (excluding Company Shares to be cancelled pursuant
to Section 1.5(b) hereof and Dissenting Shares excluded from
operation of this Section 1 pursuant to Section 1.7) (the
"Outstanding Shares"). Deferred Merger Consideration shall be
released from escrow as required by Sections 10.2(c), 10.2(d)(i)
and 10.2(e) and delivered to the Company's stockholders as provided
in such Sections. The "Annual Revenues" for each country are as
indicated on line 16 of the FAS 13 Schedule (as defined in Section
3.8(c)) and the "Total Annual Revenues" shall equal the sum of the
Annual Revenues set forth on the FAS 13 Schedule excluding the
Annual Revenues listed for the United States and Canada.
As of the Effective Time, each stockholder of the
Company shall be entitled to receive (i) a whole number of shares
of Sensormatic Common Stock determined by multiplying the number of
Company Shares held by such stockholder by that fraction of a share
of Sensormatic Common Stock included in the Merger Consideration
per Share, (ii) an amount of cash determined by multiplying the
number of Company Shares held by such stockholder by the amount of
cash included in the Merger Consideration per Share, and (iii) cash
for any fractional share resulting from such multiplication in the
amount determined pursuant to Section 1.5(c). As of the Effective
Time, all Company Shares shall be converted into the right to
receive Sensormatic Common Stock and cash as hereinabove set forth,
and each holder of a certificate representing any Company Shares
shall cease to have any rights with respect thereto, except the
right to receive the shares of Sensormatic Common Stock and cash to
be issued in exchange therefor (and cash in lieu of any fractional
share) upon surrender of such certificate in accordance with
Section 1.6, together with the Escrow Interest, if any.
(b) All Company Shares, if any, that are owned by the
Company as treasury stock as of the Effective Time shall be
cancelled and retired and shall cease to exist and no stock of
Sensormatic or other consideration shall be delivered in exchange
therefor.
(c) Neither certificates nor scrip for fractional
shares of Sensormatic Common Stock will be issued in connection
with the Merger, but in lieu thereof, each holder of Company Shares
otherwise entitled to a fractional share of Sensormatic Common
Stock pursuant to Section 1.5(a) shall be paid in cash an amount
equal to such fraction multiplied by the Average Closing Price,
without any interest thereon. No fractional share interest shall
entitle the owner thereof to vote or to any rights of a stockholder
of Sensormatic.
(d) If, between the date of this Agreement and the
Effective Time, the outstanding shares of Sensormatic Common Stock
shall have been changed into a different number of shares or a
different class by reason of any reclassification, recapitaliza-
tion, split-up, combination, exchange of shares or readjustment,
distribution other than Sensormatic's regular quarterly dividend or
a stock dividend thereon shall be declared with a record date
within said period, such that the amount of the Merger
Consideration per Share as calculated in accordance with Section
1.5(a) would be affected thereby, the Merger Consideration per
Share shall be correspondingly adjusted.
1.6 Exchange of Certificates; Fractional Shares.
(a) After the Effective Time, subject to the filing of
the New York Certificate with the Secretary of State of the State
of New York, each holder of a certificate(s) formerly evidencing
Company Shares which have been converted pursuant to Section
1.5(a), upon surrender of the same to The First National Bank of
Boston or another exchange agent appointed by Sensormatic (the
"Exchange Agent") as provided in Section 1.6(d), shall be entitled
to receive in exchange therefor (i) a certificate(s) representing
the number of whole shares of Sensormatic Common Stock into which
such Company Shares shall have been converted pursuant to
Section 1.5(a), (ii) any cash payable with respect to such Company
Shares pursuant to Section 1.5(a), and (iii) cash in lieu of any
fractional share of Sensormatic Common Stock into which such
Company Shares would have otherwise been converted, as provided in
Section 1.5(c). In addition, if applicable, each holder of Company
Shares as of the Effective Time shall be entitled to the Escrow
Interest times the number of Company Shares held by such holder,
which interest shall be non-certificated and non-transferable (with
certain limited exceptions to be agreed upon by the parties), and
shall be subject to such further terms and conditions as shall be
determined by the parties hereto.
(b) Until surrendered to the Exchange Agent pursuant
to Section 1.6(a), each certificate formerly evidencing Company
Shares which have been converted pursuant to Section 1.5(a) will be
deemed for all corporate purposes of Sensormatic to evidence
ownership of the number of whole shares of Sensormatic Common Stock
into which Company Shares formerly evidenced by such certificate
were converted and the right to receive any cash included in the
merger consideration, cash for fractional shares and any applicable
Escrow Interest, as provided in Section 1.5; provided, however,
that until such certificate is so surrendered, no dividend payable
to holders of record of Sensormatic Common Stock as of any date
subsequent to the Effective Time shall be paid to the holder of
such certificate in respect of the shares of Sensormatic Common
Stock evidenced thereby and such holder shall not be entitled to
vote such shares of Sensormatic Common Stock. Upon surrender of a
certificate formerly evidencing Company Shares which have been so
converted, there shall be paid to the record holder of any
certificates of Sensormatic Common Stock issued in exchange there-
for, without interest thereon, any dividends and other
distributions which between the Effective Time and the time of such
surrender shall have become payable with respect to the number of
whole shares of Sensormatic Common Stock represented thereby.
(c) Sensormatic shall deposit with the Exchange Agent,
as promptly as practicable and in no event later than three busi-
ness days following the Effective Time, the number of shares of
Sensormatic Common Stock, and, as and when requested by the
Exchange Agent, the aggregate amount of cash (in immediately
available funds) to which holders of Company Shares shall be
entitled at the Effective Time pursuant to Section 1.5. Any
interest on the amount so deposited shall be payable to
Sensormatic.
(d) Promptly after the Effective Time, the Exchange
Agent shall send a notice and a transmittal form to each holder of
certificates formerly evidencing Company Shares (other than
certificates formerly evidencing Company Shares to be canceled
pursuant to Section 1.5(b) or Dissenting Shares excluded from
operation of this Section 1 pursuant to Section 1.7) advising such
holder of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent such certificates for exchange
into certificates evidencing Sensormatic Common Stock and/or cash
as contemplated by Section 1.5(a). The notice and transmittal form
provided for in this Section 1.6(d) shall be sent by the Exchange
Agent to the address for each holder of Company Shares contained in
the stock record books of the Company immediately prior to the
Effective Time. Each holder of certificates formerly evidencing
Company Shares, upon proper surrender thereof to the Exchange Agent
together and in accordance with such transmittal form, shall be
entitled to receive in exchange therefor, certificates evidencing
the number of whole shares of Sensormatic Common Stock and/or cash
as contemplated by Section 1.5(a) to which such holder is entitled
hereunder. Notwithstanding the foregoing, neither the Exchange
Agent nor any party shall be liable to a holder of certificates
formerly evidencing Company Shares for any amount which may be
required to be paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) If any certificate evidencing shares of
Sensormatic Common Stock or cash is to be delivered to a person or
entity other than the person or entity in whose name the
certificates surrendered in exchange therefor are registered, it
shall be a condition to the issuance of such certificate evidencing
shares of Sensormatic Common Stock and the payment of such cash
that the certificates so surrendered shall be properly endorsed or
accompanied by appropriate stock powers and otherwise in proper
form for transfer, that such transfer otherwise be proper and that
the person or entity requesting such transfer pay to the Exchange
Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Exchange Agent
that such taxes have been paid or are not required to be paid.
(f) In the event any certificate theretofore repre-
senting Company Shares shall have been lost, stolen or destroyed,
upon the making of an appropriate affidavit of that fact by the
Company stockholder claiming such certificate to be lost, stolen or
destroyed, Sensormatic will issue in exchange for such lost, stolen
or destroyed certificate a certificate evidencing the number of
whole shares of Sensormatic Common Stock and/or deliver cash as
provided in Section 1.5(a) to which such person or entity is
entitled hereunder, provided, that when authorizing such issue of
the certificate representing shares of Sensormatic Common Stock
and/or delivery of such cash, the Board of Directors of Sensormatic
may, in its discretion and as a condition precedent to the issuance
thereof, require the claiming person or entity to give Sensormatic
a bond or indemnification in such sum as Sensormatic may reasonably
direct as indemnity against any claim that may be made against
Sensormatic with respect to the certificate alleged to have been
lost, stolen or destroyed.
(g) Any portion of the merger consideration made
available to the Exchange Agent pursuant to Section 1.6(c) that
remains unclaimed by the holders of Company Shares entitled thereto
six months after the Effective Time shall be returned to
Sensormatic and any shareholder of the Company who has not
exchanged his Company Shares in accordance with this Section 1.6
prior to that time shall thereafter look only to Sensormatic for
payment of the merger consideration in respect of his Company
Shares. Notwithstanding the foregoing, Sensormatic shall not be
liable to any shareholder of the Company for any amount paid to a
public official pursuant to applicable abandoned property, escheat
or similar laws.
(h) Any portion of the merger consideration made
available to the Exchange Agent pursuant to this Section 1.6 to pay
for Shares for which appraisal rights shall have been perfected
shall be returned to Sensormatic, upon demand.
1.7 Dissenting Shares. Notwithstanding any contrary
provision of this Section 1, Company Shares outstanding immediately
prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Company Shares in accordance with
Sections 623 and 910 of the BCL ("Dissenting Shares") shall not be
converted into a right to receive Sensormatic Common Stock and cash
in lieu of fractional shares as provided in Section 1.5, unless
such holder withdraws or otherwise loses his right to appraisal
pursuant to the applicable provisions of the BCL. If after the
Effective Time such holder withdraws or otherwise loses his right
to appraisal, such Company Shares shall be treated as if they had
been converted as of the Effective Time into a right to receive
Sensormatic Common Stock and/or cash and any applicable Escrow
Interest, as provided in Section 1.5. The Company shall give
Sensormatic prompt notice of any demands received by the Company
for appraisal of Shares, and Sensormatic shall have the right to
participate in all negotiations and proceedings with respect to
such demands. The Company shall not, except with the prior written
consent of Sensormatic, make any payment with respect to, or settle
or offer to settle, any such demands.
1.8 Stock Transfer Books. There shall be no regis-
tration of transfers of Company Shares on the stock transfer books
of the Company after the close of business on the day prior to the
Closing Date.
1.9 Treatment of Company Common Stock Options. Each
stock option for employees and non-employee directors of the
Company (a "Company Option") outstanding as of the Effective Time
shall be treated as provided below:
(a) Each Company Option shall be cancelled as of the
Effective Time and each holder of such a Company Option (a
"Holder") shall (subject to the terms of Section 1.9(d) and (h)
below) become entitled to receive two substitute options
("Substitute Options"), one of which (the "Substitute Sensormatic
Option") shall be a non-qualified stock option to purchase
Sensormatic Common Stock and the other of which (the "Substitute
Knewco Option") shall be a non-qualified stock option under the
stock option plan to be adopted by Knewco on or before the date on
which the Effective Time occurs. A Substitute Sensormatic Option
shall have the terms specified in Section 1.9(b) and a Substitute
Knewco Option shall have the terms specified in Section 1.9(c).
(b) A Substitute Sensormatic Option shall (i) be an
option to acquire the Sensormatic Share Amount (as defined below)
with respect to the relevant Company Option minus any fractional
share (which fractional share shall be settled in cash as provided
in Section 1.9(f)), (ii) have an exercise price per share equal to
the Sensormatic Portion (as defined below) divided by the
Sensormatic Share Amount and (iii) as to all other terms (including
when and the extent to which it is exercisable or non-exercisable)
be identical to the relevant Company Option, except (x) if such
Substitute Sensormatic Option shall be granted under a Sensormatic
stock option plan, such Substitute Sensormatic Option shall be
subject to such amendments as shall be determined by Sensormatic in
order to conform such option to the terms of such plan, and (y) as
otherwise provided in the last sentence of Section 1.9(g).
(c) A Substitute Knewco Option shall (i) be an
option to acquire the Knewco Share Amount (as defined below) with
respect to the relevant Company Option minus any fractional share
(which fractional share shall be settled in cash as provided in
Section 1.9(f)), (ii) have an exercise price per share equal to the
Knewco Portion (as defined below) divided by the Knewco Share
Amount and (iii) as to all other terms (including when and the
extent to which it is exercisable or non-exercisable) be identical
to the relevant Company Option, except as otherwise provided in the
last sentence of Section 1.9(g).
(d) If a Holder becomes an employee or director of
Knewco immediately after the Effective Time then, in lieu of
receiving a Substitute Sensormatic Option, such Holder shall
receive the number of shares of Sensormatic Common Stock (and/or
cash, in the same proportion as the cash included in the Merger
Consideration per Share) as shall be equal to the Spread (as
defined below) of the Substitute Sensormatic Option that would have
been issued to such Holder but for this Section 1.9(d) divided by
the Sensormatic Value (as defined below); provided that in lieu of
any fraction of a share of Sensormatic Common Stock such Holder
shall receive the corresponding fraction of the Sensormatic Value
in cash. If a Holder becomes an employee of the Surviving
Corporation immediately after the Effective Time then, in lieu of
receiving a Substitute Knewco Option, such Holder shall receive the
number of shares of Knewco common stock as shall be equal to the
Spread of the Substitute Knewco Option that would have been issued
to such Holder but for this Section 1.9(d), divided by the Knewco
Value (as defined below); provided that in lieu of any fraction of
a share of Knewco common stock such Holder shall receive the
corresponding fraction of the Knewco Value in cash. The "Spread"
for a Substitute Option shall equal (i) the number of Sensormatic
or Knewco shares subject thereto multiplied by (ii) the excess, if
any, of the Sensormatic Value (in the case of a Substitute
Sensormatic Option) or the Knewco Value (in the case of a
Substitute Knewco Option) over the exercise price of such
Substitute Option. Notwithstanding the foregoing, if a Holder who
becomes an employee of the Surviving Corporation has his employment
with the Surviving Corporation terminated by the Surviving
Corporation on or before the 30th day after the date on which the
Effective Time occurs, then the Substitute Sensormatic Option to be
issued to such Holder shall be automatically cancelled and such
Holder shall receive the number of shares of Sensormatic Common
Stock (and cash in proportion to the cash included in the Merger
Consideration per Share) equal to the Spread of such Substitute
Sensormatic Option divided by the Sensormatic Value; provided that
in lieu of any fraction of a share of Sensormatic Common Stock such
Holder shall receive the corresponding fraction of the Sensormatic
Value in cash. Options held by the Estate of Arthur Minasy shall
be treated in accordance with the preceding sentence, subject to
Section 1.9(i).
(e) As used herein,
(i) "Company Value" shall mean $10.50;
(ii) "Knewco Percentage" shall mean the percentage
(stated as a decimal) equal to the Knewco Value divided by the
Company Value; and
(iii) "Knewco Portion" shall mean, with respect to
each Company Option, the total exercise price under such
Company Option multiplied by the Knewco Percentage;
(iv) "Knewco Share Amount" shall mean, with respect
to each Company Option, the number of Knewco Shares (including
any fractional shares) that would have been issued in the
Knewco Stock Distribution to a shareholder owning the number
of Company Shares subject to such Company Option.
(v) "Knewco Value" shall mean the average of the
closing prices, if available, and otherwise the average of the
high and low sale prices, of Knewco Common Stock for the first
10 business days following the Effective Time;
(vi) "Sensormatic Percentage" shall mean 1.00 minus
the Knewco Percentage;
(vii) "Sensormatic Portion" shall mean, with respect
to each Company Option, the total exercise price under such
Company Option multiplied by the Sensormatic Percentage;
(viii) "Sensormatic Share Amount" shall mean, with
respect to each Company Option, the number of shares of
Sensormatic Common Stock (including any fractional shares)
that equals the number of Company Shares subject to such
Company Option multiplied by the Merger Consideration per
Share, calculated as if the entire Merger Consideration per
Share were payable in Sensormatic Common Stock;
(ix) "Sensormatic Value" shall mean the Average
Closing Price;
(f) Any fractional share that would be subject to a
Substitute Option shall instead be settled in cash by the payment
to the relevant Holder of the Spread for an option that is
identical to such Substitute Option in all respects except that it
relates only to such fractional share.
(g) Following the 10th business day after the date on
which the Effective Time occurs, Sensormatic and Knewco shall
promptly calculate the terms of all Substitute Options and
thereafter shall promptly send to the respective Holders thereof
confirmation of such terms, issue to such Holders any shares to be
issued under Section 1.9(d) and make any cash payments to such
Holders to be made under Section 1.9(d) or (e). If any Company
Option would have expired on or after the date on which the
Effective Time occurs and prior to the 15th business day following
such date, then the expiration date of the Substitute Option for
such Company Option shall expire on such 15th business day.
(h) Notwithstanding anything herein to the contrary, if
the Divestiture is effected by a Knewco Sale on or before the date
on which the Effective Time occurs, then each Holder shall only
receive a Substitute Sensormatic Option, in which case the
Sensormatic Portion shall equal the total exercise price under the
relevant Company Option and the Sensormatic Percentage shall be
1.00.
(i) Notwithstanding anything herein to the contrary, no
transaction shall be effected under this Section 1.9 that would
result in a violation of Section 16(b) of the Securities Exchange
Act of 1934, as amended. The parties shall make such arrangements
as may be required to provide the same economic result to the
affected party without occasioning any such violation.
(j) If any Deferred Merger Consideration is placed in
escrow pursuant to Section 10.2, then as of the Effective Time
and/or from time to time thereafter, if and when any such Deferred
Merger Consideration is delivered to the former Company
stockholders pursuant to Section 10.2, appropriate adjustments
shall be made to provide equitable treatment of outstanding
Substitute Sensormatic Options and to prior holders of exercised
Substitute Sensormatic Options.
1.10 Closing. Subject to Section 8.1, the closing of the
transactions contemplated by this Agreement (other than the
Divestiture, which shall occur prior thereto as contemplated by
Section 2) (the "Closing") shall take place at 8:45 a.m. on a date
to be specified by the parties (the "Closing Date"), which shall be
not more than five business days after all of the conditions
precedent set forth in Sections 6 and 7 to be satisfied prior to
the Closing have been satisfied or waived, at the offices of
Christy & Viener, or such other date, time and place as is agreed
to by the parties (including any postponement or adjournment of a
previously scheduled date). At the Closing, the Company and Knewco
shall execute and deliver the certificates, documents and
instruments contemplated to be delivered by the Company pursuant to
Section 6, and Sensormatic shall execute and deliver the
certificates, documents and instruments contemplated to be
delivered by it pursuant to Section 7. The Delaware Certificate of
Merger shall be filed with the Secretary of State of the State of
Delaware, and the New York Certificate of Merger shall be filed
with the Secretary of State of the State of New York, immediately
following the Closing on the Closing Date or as soon thereafter as
is practicable.
1.11 Alternative Merger. Notwithstanding any contrary
provision of this Section 1, in the event that Sensormatic deter-
mines to pay a substantial amount of the merger consideration in
cash, as permitted under Section 1.5(a), and reasonably determines,
in consultation with its and the Company's counsel, that in such
event consummation of the Merger in accordance with Sections 1.1
through 1.4 may not qualify as a tax-free reorganization under the
applicable provisions of the Code, at Sensormatic's request, the
Merger shall be effected, in lieu of the transactions contemplated
by Sections 1.1 through 1.4, in accordance with this Section 1.11
(the "Alternative Merger"), as follows:
(a) A newly-formed New York corporation which is a
wholly-owned subsidiary of Sensormatic (the "Merger Sub") shall be
merged with and into the Company. The Effective Time for the
Alternative Merger shall be the time of the filing with the New
York Secretary of State of a Certificate of Merger with respect to
the Alternative Merger. Upon and following the Alternative Merger,
the separate existence of the Merger Sub shall cease and the
Company shall continue as the Surviving Corporation.
(b) All of the provisions of Section 1.5(a) with respect
to the merger consideration shall be applicable, as set forth
therein.
(c) From and after the Effective Time of the Alternative
Merger until further amended in accordance with the BCL, the
Certificate of Incorporation of the Company, as in effect at the
Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation.
(d) The By-laws of the Company, as in effect at the
Effective Time, shall be the By-laws of the Surviving Corporation
until altered, amended or repealed in accordance with law.
(e) The directors and officers of Merger Sub as of the
Effective Time shall be the directors and officers of the Surviving
Corporation.
(f) At the Effective Time, each issued and outstanding
shares of Common Stock, par value $.01 per share, of Merger Sub
shall remain outstanding as one fully paid and non-assessable share
of Common Stock, par value $0.1 per share, of the Surviving
Corporation. Each certificate theretofore representing shares of
Common Stock of Merger Sub shall continue to represent the same
number of issued and outstanding, fully paid and non-assessable
shares of the Surviving Corporation.
(g) If the Alterative Merger is consummated, references
elsewhere in this Agreement to the "Merger" shall be deemed to
refer to the Alternative Merger, adjusted as appropriate to reflect
the form of the Alternative Merger as contemplated hereby.
2. Divestiture of Knewco.
2.1 Transfer of Assets. Prior to the Closing, and in
any event following the satisfaction of all other conditions to the
Merger (other than those contemplated by Sections 6.8 and 7.7), the
Company shall contribute, convey, assign, transfer and deliver
(collectively, "contribute") to Knewco all of the right, title and
interest of the Company in and to the business operations and
related goodwill of the Company in the United States, Canada and
Puerto Rico (the "Knewco Territory"), the Company's assets and
properties located in the Knewco Territory related to such business
operations and the stock of Knogo Caribe, Inc. ("Caribe")
(exclusive of the "SuperStrip" technology and certain financial
assets of Caribe), subject to and as more particularly described in
the Contribution and Divestiture Agreement (the "Divestiture
Agreement") to be entered into between the Company and Knewco
substantially in the form attached hereto as Exhibit C (the
"Divested Assets").
2.2 Assumption of Liabilities. Simultaneously with the
contribution of the Divested Assets contemplated by Section 2.1, as
contemplated by the Divestiture Agreement, Knewco shall assume and
agree to pay, perform and discharge such obligations and lia-
bilities (including contingent liabilities) of the Company directly
relating to the employees retained by it, its customers in the
Knewco Territory, the Company's products sold or leased to such
customers and the Company's assets and properties located in the
Knewco Territory, subject to and as more particularly described in
the Divestiture Agreement (the "Divested Liabilities").
2.3 Other Provisions. The Divestiture Agreement shall
contain further provisions relating to the Divestiture and the
dealings between Knewco and the Company following the Divestiture,
including, without limitation, obligations of Knewco as to non-
competition, confidentiality and indemnification. Following the
Effective Time, Sensormatic, as the Surviving Corporation, shall
succeed to and be entitled to all rights, benefits and remedies of,
and shall be subject to all obligations of, the Company under the
Divestiture Agreement.
2.4 Spin-Off or Sale. As contemplated by the
Divestiture Agreement, after the contribution of the Divested
Assets to Knewco and assumption of the Divested Liabilities by
Knewco, and prior to the Closing, the Company shall either (i)
distribute to its stockholders, in a spin-off intended to be tax-
free under Section 355 of the Code, the shares of Knewco (the
"Knewco Stock Distribution") or (ii) sell the shares of Knewco (a
"Knewco Sale"), in either case subject to and as contemplated by
the terms of the Divestiture Agreement. The sale of all or
substantially all of Knewco's assets or other alternative forms of
the sale of Knewco may be agreed upon by the parties, subject to
Section 11.7. In no event shall the Knewco Sale or any alternative
transaction cause the Company (or Sensormatic) to control another
entity, or impair or delay consummation of the Merger, as
contemplated by this Agreement. The purchaser or other successor
of Knewco shall acknowledge and accept the Divestiture Agreement,
License Agreement (referred to in Section 2.5) and Supply Agreement
(referred to in Section 2.5), as contemplated by the Divestiture
Agreement. For all purposes of this Agreement, the term
"Divestiture" shall include either a Knewco Stock Distribution or a
Knewco Sale. In the event of a Knewco Sale, the Merger
Consideration per Share shall be increased to reflect the net
after-tax proceeds of such sale, as contemplated by Section
1.5(a)(2).
2.5 Additional Agreements. In connection with the
Divestiture, Knewco and the Company will also enter into a Supply
Agreement relating to the supply of the Company's products manu-
factured by Knewco to Sensormatic (the "Supply Agreement") and a
License Agreement providing, among other things, for the grant to
the Company of rights to manufacture the Company's products for use
and sale outside the Knewco Territory and the grant to Knewco of
non-exclusive rights in the SuperStrip technology for manufacture,
use and sale in the Knewco Territory (the "License Agreement"),
substantially in the forms attached as exhibits to the Divestiture
Agreement. Upon consummation of the Merger, Sensormatic will
succeed to the rights and obligations of the Company under the
foregoing agreements.
3. Representations and Warranties of the Company.
The Company and Knewco, jointly and severally, represent
and warrant to Sensormatic as follows:
3.1 Due Incorporation and Qualification of the Company.
(a) The Company is, and will be at the Effective Time, a
corporation duly incorporated, validly existing and in good
standing under the laws of New York, and Knewco is, and will be at
the Effective Time, a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware, each with
full corporate power and authority to own, lease and operate its
properties and to carry on its business in the places and in the
manner as currently conducted. The Company has all material
governmental licenses, authorizations, consents and approvals
(collectively, "Permits") required to carry on its businesses as
now conducted.
(b) Set forth in Item 3.1(b) of the Disclosure Schedule
attached hereto and made a part hereof (the "Disclosure Schedule")
is a list of all jurisdictions in which the Company is qualified to
do business and is in good standing as a foreign corporation, which
are the only jurisdictions in which such qualification is necessary
except for jurisdictions where the failure to so qualify would not
have a material adverse effect on the business, condition
(financial or otherwise) or results of operations of the Company
and its consolidated Subsidiaries (as such term is defined in
Section 3.3(a)), considered as a whole, but not including the
assets and business to be included in Knewco pursuant to the
Divestiture (such a material adverse effect with respect to the
Company and its Subsidiaries being hereinafter referred to as a
"Material Adverse Effect").
3.2 Capitalization. The authorized capital stock of the
Company consists of 20,000,000 shares of Common Stock, $.01 par
value, 2,800,000 shares of Preferred Stock, $.01 par value, and
200,000 shares of Participating Cumulative Preferred Shares Series
A, $.01 par value. As July 13, 1994, there were 5,410,146 Company
Shares outstanding, 821,075 Company Shares reserved for issuance
upon exercise of outstanding Company Options, and no Company
Shares were held in the treasury of the Company. No shares of
Preferred Stock of the Company were outstanding as of such date.
All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and
nonassessable, and were not issued in violation of any preemptive
rights. Except as set forth in this Section 3.2, except for the
Rights issued pursuant to the Company's Rights Agreement dated as
of July 27, 1987, as amended as of December 1, 1987 (the "Rights"),
a copy of which has been furnished to Sensormatic, and except for
changes since June 28, 1994 resulting from the exercise of Company
Options outstanding on such date, there are, and will be at the
Effective Time, outstanding (i) no shares of capital stock or other
voting securities of the Company, (ii) no securities convertible
into or exchangeable for shares of capital stock or voting
securities of the Company, and (iii) no options, warrants or other
rights to acquire from the Company or any Subsidiary, and no
obligation of the Company or any Subsidiary to issue, any capital
stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company
(collectively "Company Securities"). There are no outstanding
obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any Company Securities.
3.3 Subsidiaries.
(a) Set forth in Item 3.3(a) of the Disclosure Schedule
is a list of all direct and indirect subsidiaries of the Company
and any other entities which the Company otherwise controls or in
which it has an investment or ownership interest (collectively, the
"Subsidiaries"), showing the date and jurisdiction of incorporation
of each thereof and the Company's percentage beneficial interest
therein (and, if less than 100%, the holders of the remaining
interests). Each of the Subsidiaries is, and will be at the
Effective Time, a corporation or other entity as reflected in Item
3.3(a) duly organized, validly existing and in good standing in its
jurisdiction of organization, with full corporate power and
authority to own, lease and operate its properties and to carry on
its business in the places and in the manner as currently
conducted. The Company's interests in its respective Subsidiaries
(except for directors' qualifying shares in de minimis amounts) are
owned free and clear of all liens, encumbrances, equities, restric-
tions, adverse interests and claims ("Liens"), other than those
created under this Agreement or referred to in Section 3.9(a).
Each Subsidiary is duly qualified to do business as a foreign
corporation in each jurisdiction where the character of the
property owned or leased by it or the nature of its activities make
such qualification necessary, except for those jurisdictions where
failure to be so qualified could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect. References in this Agreement to "the Company" shall be
deemed to refer to the Company and its Subsidiaries collectively,
unless otherwise noted or required by the context. Subsidiaries
other than Knewco and Caribe are sometimes referred to herein as
"Acquired Subsidiaries".
(b) There are, and will be at the Effective Time,
(i) no securities of the Company or any Subsidiary convertible into
or exchangeable for capital stock or other ownership interests in
any Subsidiary, (ii) no options, warrants or other rights to
acquire from the Company or any Subsidiary, and no other obligation
of the Company or any Subsidiary to issue, any capital stock of or
other ownership interests in, or any securities convertible into or
exchangeable for any capital stock of or ownership interests in,
any Subsidiary; and (iii) no securities of any Subsidiary other
than capital stock of such Subsidiary owned by the Company
(collectively "Subsidiary Securities"). There are, and will be at
the Effective Time, no outstanding obligations of the Company or
any Subsidiary to repurchase, redeem or otherwise acquire any
outstanding Subsidiary Securities.
3.4 Authority; Due Authorization; Valid Obligation;
Fairness Opinion.
(a) The Company and Knewco have, and will have at the
Effective Time, all requisite corporate power and authority to exe-
cute and deliver this Agreement and the further agreements
contemplated by this agreement to be executed and delivered by them
(the "Additional Agreements") and to consummate the transactions
contemplated hereby and thereby. The Board of Directors of the
Company has unanimously approved the Merger and this Agreement.
Except for the approval of the Merger by the Company's stockholders
as required by the BCL, the Company and Knewco have taken all cor-
porate action necessary for the execution and delivery by them of
this Agreement and the Additional Agreements and the consummation
of the transactions contemplated hereby and thereby. In addition,
the Board of Directors has taken all requisite action such that (i)
the supermajority provisions of Article NINTH of the Company's
Certificate of Incorporation will not be applicable to the Merger
and (ii) the freezeout and special shareholder voting requirements
imposed by Section 912 of the BCL will not be applicable to the
Merger.
(b) This Agreement constitutes, and will constitute at
the Effective Time, the valid and binding obligation of the Company
and Knewco, enforceable against the Company and Knewco in
accordance with its terms. When executed and delivered by the
Company and Knewco, the respective Additional Agreements to which
they are parties will constitute the valid and binding obligations
of the Company and Knewco, enforceable against the Company and
Knewco, respectively, in accordance with their respective terms.
(c) The Board of Directors of the Company has received
the opinion of Smith Barney Inc. to the effect that, as of the date
hereof, the consideration to be received by the holders of Company
Shares in the Merger and shares of Knewco to be received by them
pursuant to the Divestiture (if applicable), taken together, are
fair to such holders from a financial point of view (copies of
which have been delivered to Sensormatic), and such opinion has not
been withdrawn, revoked or modified in any material respect.
3.5 No Conflicts or Defaults. The execution and de-
livery of this Agreement and the Additional Agreements and the con-
summation of the transactions contemplated hereby do not and shall
not (a) contravene the Certificate of Incorporation or By-laws of
the Company or any Subsidiary; or (b) except as set forth in Item
3.5 of the Disclosure Schedule, with or without the giving of
notice or the passage of time, or both, (i) violate or conflict
with, or result in a breach of, or a default or loss of rights
under, any agreement, mortgage, indenture, lease, instrument,
permit or license to which the Company or any Subsidiary is a party
or by which it or any of its assets is bound, or any judgment, or-
der or decree, to which it or any of its assets is subject,
(ii) result in the creation of, or give any party the right to
create, any Lien upon the Company, any Acquired Subsidiary or any
of their respective assets or (iii) terminate or give any party the
right to terminate, abandon or refuse to perform any agreement,
arrangement or commitment to which the Company or any Acquired
Subsidiary is a party or by which any of them or their assets are
bound, except any such violation, conflict, breach, default, loss
of rights, Lien, termination or failure of performance referred to
in this clause (b) as will not, singly or in the aggregate,
(x) have a Material Adverse Effect or (y) materially adversely
affect the consummation of the transactions contemplated by this
Agreement.
3.6 Copies of Charter Documents and Stock Records.
(a) Correct and complete copies of the Certificate of
Incorporation, By-laws and other organizational or governing
instruments of the Company and each Subsidiary, in each case as
amended to the date hereof, have been furnished to Sensormatic by
the Company. Such documents contain full details of the rights and
restrictions attached to the share capital of each Acquired
Subsidiary and have attached to them copies of all resolutions and
agreements as are required by applicable law to be delivered to any
Secretary of State, Registrar of Companies or similar governmental
official or office.
(b) The Company has made available to Sensormatic
correct and complete copies of the minute books, stock ledgers or
other statutory books of the Company and each Subsidiary.
3.7 Authorizations. No authorization, approval, order,
license, permit or consent of, or filing or registration with, any
federal, state, foreign, provincial or local court or governmental
authority, or consent of any other party, is required in connection
with the execution, delivery and performance by the Company or
Knewco of this Agreement, the Additional Agreements and/or the
Merger, except (a) as set forth in Item 3.7 of the Disclosure
Schedule, (b) the filing of Delaware Certificate of Merger with the
Secretary of State of the State of Delaware and the New York
Certificate of Merger with the Secretary of State of the State of
New York (and receipt of clearance from the New York State
Department of Taxation), (c) any filing required to be made, and
the expiration or termination of any applicable waiting period,
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
the regulations thereunder with respect to the transactions con-
templated by this Agreement (the "HSR Conditions"), (d) any
applicable European regulatory approvals or consents, (e) the
filing and distribution to the Company stockholders of the Proxy
Statement (as such term is defined in Section 3.18) and any
applicable registration with respect to the stock of Knewco issued
pursuant to the Knewco Stock Distribution, (f) approval and
adoption of this Agreement and the Merger by the Company's stock-
holders and (g) such other authorizations, approvals, licenses,
permits, consents, filings or registrations which, if not obtained
or made, the failure to obtain or make would not have a Material
Adverse Effect or materially adversely affect the consummation of
the transactions contemplated by this Agreement.
3.8 Periodic Filings; Financial Statements.
(a) The Company has furnished to Sensormatic true and
complete copies of its (i) Annual Reports on Form 10-K and Annual
Reports to Shareholders for each of the three fiscal years ended
February 28, 1994 as filed with the Securities and Exchange
Commission (the "SEC"), (ii) its Quarterly Reports on Form 10-Q for
the quarter ended May 31, 1994, as filed with the SEC, (iii) the
proxy statements relating to the meetings of the Company's
stockholders on August 26th, 1993 and August 15, 1994, and (iv) all
other reports or registration statements filed by the Company with
the SEC since February 29, 1992 (collectively, the "Company SEC
Documents"). As of their respective dates, all of the Company SEC
Documents complied in all material respects with the Securities and
Exchange Act of 1934 (the "Exchange Act") or Securities Act of 1933
(the "Securities Act"), as applicable, and the applicable rules and
regulations of the SEC thereunder, and none of the Company SEC
Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circum-
stances under which they were made, not misleading. All material
agreements, contracts and other documents required to be filed as
exhibits to any of the Company SEC Documents have been so filed.
(b) The audited consolidated financial statements and
unaudited interim financial statements of the Company included in
the Company SEC Documents (collectively, the "Financial State-
ments") were prepared in accordance with U.S. generally accepted
accounting principles applied on a consistent basis, are recon-
cilable to the books and records of the Company and present fairly
the financial position of the Company as at the dates thereof and
the results of its operations, cash flows and changes in financial
position for the periods then ended, except, in the case of such
unaudited financial statements, for the omission of footnote
information and for year end audit adjustments which are not,
singly or in the aggregate, material.
(c) Except as described in Item 3.8(c) of the Disclosure
Schedule, the consolidating financial statements of the Company for
the fiscal year ended February 28, 1994 and the fiscal quarter
ended May 31, 1994, and the FAS 13 calculation of total revenues by
country for the fiscal year ended February 28, 1994 (the "FAS 13
Schedule") as previously furnished by the Company to Sensormatic,
including the respective balance sheets of the Acquired
Subsidiaries as of May 31, 1994 included therein (the "Acquired
Subsidiary Balance Sheets"), are reconcilable to the Financial
Statements and the books and records of the Company, present fairly
the matters referred to therein, and, except as to the FAS 13
Schedule, were prepared on a basis consistent with past practice.
(d) As of May 31, 1994, except as set forth in Item
3.8(d) of the Disclosure Schedule, neither the Company nor any
Subsidiary had any material liabilities of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to
become due ("Liabilities"), material to the Company and required by
GAAP to be so disclosed or provided for, which were not disclosed
or provided for in the unaudited consolidated balance sheet of the
Company as of May 31, 1994, included in the Company's Report on
Form 10-Q for the fiscal quarter then ended or the notes thereto
(including the notes to the audited consolidated financial
statements of the Company as of February 28, 1994 included in the
Company's Annual Report on Form 10-K for the fiscal year then
ended) (the "May Balance Sheet") and the applicable Acquired
Subsidiary Balance Sheets. From May 31, 1994 through the date of
this Agreement, except as set forth in Item 3.8(d) of the
Disclosure Schedule, to the Company's knowledge, neither the
Company nor any Subsidiary has incurred any such liabilities or
contingent liabilities outside of the ordinary course of business,
which, individually or in the aggregate, are likely to have a
Material Adverse Effect, other than the Merger and the transactions
contemplated hereby (and the Company's investigation of alternative
transactions). All such liabilities or contingent liabilities
since May 31, 1994 are fully reflected or reserved on the books and
records of the Company or the applicable Subsidiaries, as the case
may be.
(e) The books and records of each Acquired Subsidiary
are up-to-date and have been maintained in all material respects in
accordance with all applicable local accounting and filing
requirements on a proper and consistent basis and in all material
respects contain a complete and accurate record of all matters
required to be dealt with therein.
3.9 Assets.
(a) Set forth in Item 3.9(a) of the Disclosure Schedule
is a complete and correct list of all material Liens to which the
Company's or any Subsidiary's assets are subject.
(b) Set forth in Item 3.9(b) of the Disclosure Schedule
is a list of all real property owned or leased by the Company
anywhere in the world (the "Realty"), identifying which of the
Realty is to be divested pursuant to the Divestiture. All material
leases pursuant to which the Company or any Subsidiary leases real
or personal property from others are in good standing, valid and
effective in accordance with their respective terms.
3.10 Ordinary Course; No Material Adverse Effect.
Except as set forth in Item 3.10 of the Disclosure Schedule, since
May 31, 1994, other than the Merger and the transactions
contemplated hereby (and the Company's investigation of alternative
transactions), the Company has conducted the Business and main-
tained its assets substantially in the same manner as previously
conducted or maintained and solely in the ordinary course; has not,
to the Company's knowledge, suffered a Material Adverse Effect
through the date of this Agreement; and has not taken any action
which if taken after the date hereof would constitute a breach of
Section 5.1.
3.11 Permits; Compliance with Law.
(a) Except as set forth in Item 3.11(a) of the
Disclosure Schedule, no Permits required for or applicable to the
operations of the Company and the Acquired Subsidiaries outside the
Knewco Territory will terminate as a result of the transactions
contemplated by this Agreement, except any such Permits the
termination of which will not, singly or in the aggregate, have a
Material Adverse Effect.
(b) The plants, structures and equipment, whether owned
or leased, which are currently used by the Company conform to all
applicable laws, orders, regulations, ordinances or governmental or
contractual requirements relating to their construction, use and
operation, including, without limitation, all laws concerning the
disposal or release of hazardous substances, public health and
safety, or pollution or protection of the environment, except any
such instances of noncompliance as do not, singly or in the aggre-
gate, have a Material Adverse Effect. Except for violations that,
individually or in the aggregate, do not and are not likely to have
a Material Adverse Effect, the Business has not been, and is not
being, conducted in violation of any law, ordinance, rule or
regulation.
3.12 Taxes.
(a) The Company and each Subsidiary has filed all
federal, state, foreign, provincial and local returns, notices,
reports and computations (collectively, "returns") which were
required to be filed prior to the date hereof in respect of all
forms of taxation, whether direct or indirect and whether levied by
reference to income, profits, gains (capital or otherwise), with-
holding, payroll, property, value-added, sales, use, supplies, net
wealth, net worth, asset value, turnover, added value, benefits
provided or deemed by applicable law to be provided to employees or
any other matter, and statutory, franchise, governmental, state,
provincial, local governmental or municipal impositions, duties,
contributions and levies (including, without limitation, social
security contributions), customs, import and excise taxes, duties
and assessments in each case, whenever imposed and in respect of
any person (including an obligation to contribute to the payment of
Taxes (as hereinafter defined) on a consolidated, combined or
unitary basis) (together, and together with any related penalties,
fines, charges, costs and interest, "Taxes"). Each such return is
complete and accurate in all material respects, and the Company has
paid or made provision in the May Balance Sheet (and the Acquired
Subsidiaries have paid or made provision in their respective
Acquired Subsidiary Balance Sheets) or, since May 31, 1994, in
their respective books and records for (i) payment of all Taxes
shown to be due on such returns or reports, (ii) assessments
received with respect thereto, and (iii) any Taxes which otherwise
may be due with respect to periods ending on or prior to the date
hereof, other than such Taxes as are being contested in good faith
and for which adequate reserves have been established and reflected
on the May Balance Sheet or as described in Item 3.12(a) of the
Disclosure Schedule. Notwithstanding the foregoing, in the event
the Company failed to file any non-material foreign, state, local
or provincial returns, or failed to pay any related Taxes (provided
the amounts thereof are not, singly or in the aggregate, material),
this representation shall not be deemed to have been breached.
Except as set forth in Item 3.12(a) of the Disclosure Schedule,
neither the Company nor any subsidiary has received notice of any
claims pending or threatened for taxes against the Company or any
Subsidiary for periods ending on or before the date hereof. Except
as set forth in Item 3.12(a) of the Disclosure Schedule, no tax
return of the Company or any Subsidiary is currently under audit or
examination by any governmental authority, or, to the Company's
knowledge, proposed to be audited or examined, and the Company does
not know of any threatened Tax claims or assessments against the
Company or any of the Subsidiaries. The Company has not received
notice of any proposed deficiency with respect to any of its income
tax returns.
(b) Each Acquired Subsidiary has been resident for
taxation purposes in its country of incorporation (or, as
appropriate, the country of which the State or Province in which it
is incorporated forms part) and nowhere else at all times since its
incorporation and will be so resident at the Effective Time. Each
Acquired Subsidiary and any other company which has been treated as
a member of the same group of companies as any Acquired Subsidiary
for the purpose of value added or similar Taxes (including turnover
Taxes) has complied in all material respects with all statutory
requirements, orders, provisions, directions or conditions relating
to such value added or turnover taxes, including the terms of any
agreement reached with any appropriate taxation authority.
(c) Each of the Acquired Subsidiaries (other than Knogo
Equipamentos de Seguranca, Lda.) and Caribe have engaged and will
have engaged in the active conduct of a trade or business within
the meaning of Code Section 355(b) throughout the five-year period
ending at the Effective Time. The assets transferred to Knewco
(other than the stock of Caribe) as provided in Section 2 hereof
and the Divestiture Agreement shall constitute a trade or business
within the meaning of Code Section 355(b) that was actively
conducted throughout the five-year period ending at the Effective
Time. Except as set forth in Item 3.12(c) of the Disclosure
Schedule, neither the Company nor any Subsidiary acquired an active
trade or business that represents more than 50% of the assets of
the Company or such Subsidiary, as applicable, during the five-year
period ending as of the Effective Time. Provided the Knewco Stock
Distribution occurs, each of Knewco and Caribe intends to engage in
the active conduct of a trade or business within the meaning of
Code Section 355(b) after the Effective Time.
(d) So far as the Company is aware, except as set forth
on Schedule 3.12(d) of the Disclosure Schedule, no material
deduction or other taxation benefit in respect of any Taxes has
been claimed and/or given to the Company or any Acquired Company
which could or might be effectively withdrawn, postponed,
restricted or otherwise lost as a result of any act, omission,
event or circumstance arising in the ordinary course of business,
or as a result of the transactions contemplated hereby. Neither
the Company nor any Acquired Subsidiary has made or filed for, nor
is it required by any law or regulation to make or file for, any
change of accounting method that will result in its reporting
taxable income for any period after the Effective Time.
3.13 Employee Benefits.
(a) The Company's Retirement Savings 401(k) Plan (the
"401(k) Plan") is the only "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) maintained by the Company or any
Subsidiary or to which the Company or any Subsidiary has any
liability or obligation. The 401(k) Plan and each bonus, pension,
retirement, profit sharing, deferred compensation, stock ownership,
stock bonus, stock option, phantom stock, retirement, vacation,
disability, death benefit, unemployment, hospitalization, medical,
severance, or other plan, or agreement providing benefits to any
current or former employees, officers or directors of the Company
or any Subsidiary or to which the Company or any Subsidiary has any
liability or obligation (collectively, the "Company Benefit
Plans"), and any related trust, complies currently, and has
complied at all times in the past, both as to form and operation,
in all material respects with the terms of such Company Benefit
Plan and with the applicable provisions of ERISA, the Code and
other applicable United States or foreign laws. All necessary
government approvals for each Company Benefit Plan have been or
will be obtained on a timely basis. The Company has no liability
(contingent or otherwise) with respect to any terminated Company
Benefit Plan. Except as set forth in Item 3.13(a) of the
Disclosure Schedule, since March 1, 1992, neither the Company nor
any Subsidiary has amended any Company Benefit Plan to include any
provision that would apply in the event of a change of control of
the Company or a Subsidiary or which would materially increase the
cost of such Company Benefit Plan.
(b) Set forth in Item 3.13(b) of the Disclosure
Schedule is a list of all union retirement, pension, or welfare
plans to which the Company or any Subsidiary is obligated to
contribute. The Company does not maintain, and is not obligated to
maintain, any "multi employer plan" (as such term is defined in
Section 4001(a)(3) of ERISA).
(c) The Company and each Acquired Subsidiary has, in
relation to each of its employees (and to the extent relevant, to
each of its former employees), complied in all material respects
with all obligations imposed on it by Article 119 of the Treaty of
Rome and all statutes, regulations and codes of conduct and
practice relevant to the relations between it and its employees or
any trade union and has maintained current, adequate and suitable
records regarding the service of each of its employees, and all
collective agreements and current customs and practices dealing
with such relations or the conditions of service of its employees.
3.14 Litigation. Except as described in Item 3.14 of
the Disclosure Schedule, there is no claim, action, suit,
proceeding, investigation or criminal proceeding, at law or in
equity, before any national, state or provincial, local or other
governmental authority, court, arbitration tribunal or other forum
(collectively, "Proceedings") pending against the Company, and the
Company has not received notice of any threatened Proceedings,
which, if adversely determined, would, singly or in the aggregate,
have a Material Adverse Effect or would materially adversely affect
consummation of the transactions contemplated by this Agreement, or
which challenges the validity or propriety of the transactions con-
templated by this Agreement. There is no material outstanding and
unsatisfied judgment, order, writ, ruling, injunction, stipulation
or decree of any court, arbitrator or governmental authority
against or relating to the Company or its assets.
3.15 Agreements and Commitments.
(a) Set forth in Item 3.15(a) of the Disclosure Sched-
ule is a complete list of all of the following instruments to which
the Company or any Subsidiary is a party ("Listed Instruments"):
(i) each employment, consulting, severance or other similar
agreement (including any "golden parachute" or similar arrangement)
with any employee, consultant, sales or manufacturers representa-
tive, officer, director or stockholder of the Company (or any
company which is controlled by any such individual) whose total
rate of annual remuneration, including the fair market value of all
non-cash "personal benefits" received by any such individual or
company, exceeds $100,000; (ii) each lease requiring the payment of
rentals aggregating at least $100,000 per annum, pursuant to which
real or personal property is leased to the Company; (iii) each
loan, guaranty or other agreement or instrument evidencing
indebtedness for monies borrowed by or credit available to the
Company, including any "off balance sheet" financings (such as
factoring, sale of accounts receivable, leases or other accounts
(with or without recourse), "swaps", etc.), or any guaranty of an
obligation by the Company, in excess of $100,000; (iv) each
distribution, dealership, franchise or similar agreement; (v) each
partnership, joint venture, shareholders or similar agreement;
(vi) any licenses to or by the Company of Intellectual Property (as
such term is defined in Section 3.16) which are material to the
Business; (vii) any covenants not to compete or similar
restrictions on the conduct of the Business; and (viii) each other
contract, commitment or understanding (not disclosed in any other
Item of the Disclosure Schedule or in the notes to the Financial
Statements), and which (i) involves in excess of $100,000, and
(ii) was entered into other than in the ordinary course of
business.
Except as set forth in the applicable Item of the
Disclosure Schedule, (x) a true and complete copy of each written
Listed Instrument has been furnished to Sensormatic, (y) none of
the Listed Instruments (other than any thereof to be assigned to
and assumed by Knewco) will be subject to termination or renego-
tiation as a result of the consummation of the transactions
contemplated by this Agreement and (z) the Company is not in breach
or default in any material respect under any of the Listed Instru-
ments, except any such termination, renegotiation, breach or
default as will not, singly or in the aggregate, have a Material
Adverse Effect. The Company has no knowledge of any other material
breach or default under any Listed Instrument by any other party
thereto or by any other person, firm or corporation bound thereby.
(b) Set forth in Item 3.15(b) of the Disclosure
Schedule is a correct and complete list of any union or collective
bargaining contracts with respect to any employees of the Company
or any Subsidiary, and except as set forth in Item 3.15(b) of the
Disclosure Schedule, there has not been, nor has the Company
received written notice threatening, any representational or
organizational activity, strike, slowdown, picketing or work
stoppage by any union or other group of employees against the
Company or any Subsidiary.
3.16 Intellectual Property. The Company owns or has
valid and enforceable rights with respect to all inventions,
improvements, discoveries, processes, formulae, know-how, infor-
mation, tooling and other designs, specifications, computer
software programs, processes, algorithms, related documentation,
patents, patent applications, and trademarks, trade names, service
marks and copyrights (whether or not registered) and any
registrations or applications for the registration of any thereof
and all rights of similar or equivalent effect however or wherever
arising (together, the "Intellectual Property") which are necessary
and sufficient in all material respects to conduct the Business as
currently conducted or proposed to be conducted throughout the
world. The Company holds the Intellectual Property owned by it
free of any Liens or contractual or other restrictions other than
the rights of licensors. All written or oral agreements or other
instruments to which the Company is a party which relate in whole
or in part to any Intellectual Property are listed under Section
3.15(a). Any authors or other co-holders of any such Intellectual
Property have assigned all of their rights therein to the Company.
The Company is the exclusive owner of the Knewco Patent Rights and
Product Technology (as such terms are defined in the License
Agreement) and has the unrestricted right to license the same to
Sensormatic. The Knewco Patent Rights are the only United States
and Canadian patent rights with respect to the Products (as such
term is defined in the License Agreement) and the Product
Technology and the Trademarks (as such term is defined in the
License Agreement) are the only trademarks used by the Company in
the United States and Canada with respect to the Products. Except
as set forth in Item 3.16 of the Disclosure Schedule, the Company
has not received any claims that it or its Intellectual Property
has infringed the rights of any third party.
3.17 Brokers. Except as set forth in Item 3.17 of the
Disclosure Schedule, no broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connec-
tion with the transactions described in this Agreement based upon
arrangements made by or on behalf of the Company or any stockholder
thereof.
3.18 Information Supplied. None of the information to
be supplied by or on behalf of the Company for inclusion or incor-
poration by reference in the Registration Statement on Form S-4
(the "Registration Statement") to be filed with the SEC by
Sensormatic in connection with the issuance of shares of
Sensormatic Common Stock in the Merger, including the Proxy
Statement of the Company with respect to the Merger to be included
therein (the "Proxy Statement"), and including any amendments or
supplements thereto, shall, at the time the Registration Statement
becomes effective under the Securities Act, the time of mailing of
such Proxy Statement to the stockholders of the Company or, in the
case of any subsequent amendment or supplement thereto, the date
thereof, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.19 Disposition by Stockholders. There is no plan or
intention on the part of the Company stockholders who own five
percent or more of the Company Shares (as of the date of this
Agreement and as of the Closing Date), and to the best of the
knowledge of management of the Company, on the part of the
remaining Company stockholders (as of the date of this Agreement
and as of the Closing Date), to sell, exchange or otherwise dispose
of (a) stock of the Company (prior to the Effective Time, by
exercise of dissenters rights, or otherwise), (b) shares of Knewco
received by them pursuant to the Divestiture, or (c) shares of
Sensormatic received by them pursuant to the Merger (including
fractional shares), so that those Company stockholders shall
retain, in the aggregate, less than (i) 50% of the stock of Knewco,
or (ii) a number of shares of Sensormatic having a value that is
equal to 50% of the value of the Company immediately after the
Divestiture.
3.20 Miscellaneous. To the Company's knowledge, all
representations and warranties of the Company set forth in this
Agreement, all information set forth by the Company in the
Disclosure Schedule or any schedules or exhibits hereto or thereto,
and all written responses of the Company to Sensormatic pursuant to
Sensormatic's written requests for other information, were, as of
the date of which they were made or given, true, accurate and
complete in all material respects and not misleading in any
material respect. For purposes of this Section 3.20, materiality
shall be determined in relation to the Company and its consolidated
subsidiaries, considered as a whole, but not including the assets
and business to be included in Knewco pursuant to the Divestiture.
4. Representations and Warranties of Sensormatic.
Sensormatic represents and warrants to the Company as follows:
4.1 Due Incorporation and Qualification. Sensormatic
is, and will be at the Effective Time, a corporation duly incor-
porated, validly existing and in good standing under the laws of
the State of Delaware, with full corporate power and authority to
own, lease and operate its properties and to carry on its busi-
nesses in the places and in the manner currently conducted and all
material Permits required to conduct its business as now conducted.
Sensormatic is qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which the nature of
the activities conducted by it or the character of the properties
owned or leased by it makes such qualification necessary and the
failure to so qualify would have a material adverse effect on the
business, condition (financial or otherwise) or results of
operations of Sensormatic and its subsidiaries, considered as a
whole.
4.2 Authority; Due Authorization; Valid Obligation.
Sensormatic has, and will have at the Effective Time, all requisite
corporate power and authority to execute and deliver this Agreement
and the Additional Agreements to which it is a party and to consum-
mate the transactions contemplated hereby and thereby. Sensormatic
has taken all corporate action necessary for the execution and
delivery by it of this Agreement and such Additional Agreements and
for the consummation of the transactions contemplated hereby and
thereby, and this Agreement constitutes and will constitute at the
Effective Time, and such Additional Agreements, when executed and
delivered, will constitute, the valid and binding obligations of
Sensormatic, enforceable against Sensormatic in accordance with
their respective terms.
4.3 No Conflicts or Defaults. The execution and de-
livery by Sensormatic of this Agreement and the Additional
Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby do not and shall not
(a) contravene the Certificate of Incorporation or By-Laws of
Sensormatic or (b) with or without the giving of notice or the
passage of time, or both, (i) violate or conflict with, or result
in a breach of, or a default or loss of rights under, any material
agreement, mortgage, indenture, lease, instrument, permit or
license to which Sensormatic is a party or by which it or any
material portion of its assets are bound, or any judgment, order or
decree to which it or any material portion of its assets are sub-
ject, (ii) result in the creation of, or give any party the right
to create, any Lien upon any material portion of its assets, or
(iii) terminate or give any party the right to terminate, abandon
or refuse to perform any agreement, arrangement or commitment to
which Sensormatic is a party or by which it or any of its assets is
bound, except any such violation conflict, breach, default, loss of
rights, Lien, termination or failure of performance referred to in
this clause (b) as will not, singly or in the aggregate, (x) have a
material adverse effect on the business, condition (financial or
otherwise) or results of operations of Sensormatic and its
consolidated subsidiaries, considered as a whole, or (y) materially
adversely affect the consummation of the transactions contemplated
by this Agreement.
4.4 Authorizations. Except as set forth in
Schedule 4.4, no authorization, approval, order, license, permit or
consent of, or filing or registration with, any federal, state,
foreign, provincial or local court or governmental authority, or
consent of any other party, is required in connection with the
execution, delivery and performance by Sensormatic of this
Agreement and the Additional Agreements to which it is a party,
except for (a) the filing of the Delaware Certificate of Merger
with the Secretary of State of the State of Delaware and the New
York Certificate of Merger with the Secretary of State of the State
of New York (and receipt of clearance from the New York State
Department of Taxation), (b) the HSR Conditions, (c) any applicable
European regulatory approvals or consents, (d) the filing and
effectiveness of the Registration Statement under the Securities
Act, (e) such filings or registrations as may be required by appli-
cable state securities or "blue sky" laws, (f) approval and
adoption of this Agreement and the Merger by the Company's
stockholders, or (f) such other authorizations, approvals,
licenses, permits, consents, filings or registrations which, if not
obtained or made, the failure to obtain or make would not have a
material adverse effect on the business, financial condition or
results of operations of Sensormatic and its subsidiaries,
considered as a whole, or materially adversely affect the
consummation of the transactions contemplated by this Agreement.
4.5 Litigation. There are no Proceedings pending
against Sensormatic, and Sensormatic has not received notice of any
threatened Proceedings against it which, if adversely determined,
would, singly or in the aggregate, have a material adverse effect
on the business, condition (financial or otherwise) or results of
operations of Sensormatic and its subsidiaries, considered as a
whole, or would materially adversely affect consummation of the
transactions contemplated by this Agreement, or which challenges
the validity or propriety of the transactions contemplated by this
Agreement.
4.6 SEC Documents. Sensormatic has furnished to the
Company true and complete copies of each report, registration
statement and definitive proxy statement filed by Sensormatic with
the SEC since June 30, 1993 (the "Sensormatic SEC Documents"),
which are all of the documents that Sensormatic was required to
file with the SEC since such date. As of their respective dates,
the Sensormatic SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as
applicable, and the applicable rules and regulations of the SEC
thereunder, and none of the Sensormatic SEC Documents contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the state-
ments therein, in light of the circumstances under which they were
made, not misleading. All material agreements, contracts and other
documents required to be filed as exhibits to any of the -
Sensormatic SEC Documents have been so filed. The consolidated
financial statements of Sensormatic contained in the Sensormatic
SEC Documents were prepared in accordance with U.S. generally
accepted accounting principles applied on a consistent basis during
the periods involved and fairly present the consolidated financial
position of Sensormatic and its consolidated subsidiaries as at the
dates indicated and the consolidated results of operations and
consolidated cash flows of Sensormatic and its consolidated
subsidiaries for the periods then ended, except as indicated in the
notes thereto, and except, in the case of unaudited interim finan-
cial statements, for the omission of footnote information and year-
end audit adjustments which are not, singly or in the aggregate,
material.
4.7 Ordinary Course; No Material Adverse Change. Since
March 31, 1994, except as reflected in the Sensormatic SEC
Documents, Sensormatic has conducted its business and maintained
its assets substantially in the same manner as previously conducted
or maintained and solely in the ordinary course, and, to
Sensormatic's knowledge, from March 31, 1994 through the date of
this Agreement, there has not been any material adverse change in
the business, condition (financial or otherwise) or results of
operations of Sensormatic and its consolidated subsidiaries,
considered as a whole.
4.8 Registration Statement. None of the information
included or incorporated by reference in the Registration Statement
shall, at the time the Registration Statement becomes effective
under the Securities Act or the date of such information
incorporated by reference, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, except that no representation or warranty is made by
Sensormatic with respect to statements made or incorporated by
reference in the Registration Statement based upon information
supplied by the Company for inclusion therein.
4.9 Sensormatic Common Stock. At the Effective Time,
the Sensormatic Common Stock to be issued pursuant to the Merger
(i) will have been duly authorized and validly issued, will be
fully paid and non-assessable and will not be issued in violation
of any preemptive rights, (ii) will be registered under the
Securities Act pursuant to the Registration Statement, and
(iii) will have been approved for listing on the NYSE, subject to
notice of issuance.
4.10 Miscellaneous. To Sensormatic's knowledge, all
representations and warranties of Sensormatic set forth in this
Agreement and all information set forth by Sensormatic in any sche-
dules or exhibits hereto or thereto were, as of the date on which
they were made or given, true and complete in all material respects
and no such representation, warranty or information contains or
contained any untrue statement of a material fact or omits or
omitted any material fact necessary in order to make such
representation or warranty, in light of the circumstances under
which it is made, not false or misleading. For purposes of this
Section 4.10, materiality shall be determined in relation to
Sensormatic and its consolidated subsidiaries, considered as a
whole.
5. Pre-Closing Agreements.
5.1 Preserve the Company's Business. Between the date
of this Agreement and the Effective Time, the Company shall, in all
material respects, except in connection with the Divestiture and/or
its exploration of the sale of Knewco in accordance with this
Agreement and the Divestiture Agreement, or actions to be taken
pursuant to the express provisions of this Agreement, (a) preserve
substantially intact the business organization of the Company and
use its reasonable best efforts to keep available the services of
the Company's present officers and key employees and preserve the
Company's present relationships with persons having significant
business relations therewith and (b) conduct the Company's Business
only in the ordinary course. Without limiting the generality of
the foregoing, except in connection with the Divestiture and/or its
exploration of the sale of Knewco in accordance with this Agreement
and the Divestiture Agreement, or actions to be taken pursuant to
the express provisions of this Agreement, the Company shall not,
and shall not permit any Subsidiary to, without the prior written
consent of Sensormatic in each instance, (i) except pursuant to
Company Options in effect on the date hereof, issue any shares of
its capital stock, any security convertible into or exchangeable
for its capital stock or any option, warrant or other right to
acquire its capital stock, (ii) declare, set aside, or pay any
dividend or make any distribution with respect to any Company
Shares or other capital stock of the Company or any Subsidiaries,
except from any Subsidiary to the Company or any Acquired
Subsidiary, (iii) directly or indirectly redeem, purchase or
otherwise acquire or commit to acquire any Company Shares or other
capital stock or other ownership interest of any party (except
transfers among the Subsidiaries and the Company, other than to
Knewco or Caribe), (iv) effect a split or reclassification of its
capital stock, or a recapitalization, (v) amend its Certificate of
Incorporation or By-laws, (vi) except as required by law, (A) grant
or make any change in control, severance or termination payments to
any officer or employee except pursuant to plans or agreements in
existence on the date hereof, (B) enter into any option,
employment, deferred compensation or other similar agreement (or
enter into any amendment to any such existing agreement) with any
officer, director, employee or consultant, (C) increase benefits
payable under any existing severance or termination pay policies or
agreements, or (D) pay, provide for, or grant any increase in (or
commit, orally or in writing, to increase) the rate or terms
(including, without limitation, any acceleration of the right to
receive payment) of compensation payable to or to become payable
to, or of any bonus, insurance, pension or other employee benefit
plan benefitting any director, officer, employee or consultant,
except for normal merit and cost of living increases, and except as
required by the terms of contracts or agreements in effect on the
date hereof, (vii) merge or consolidate with any other corporation
or acquire a material amount of assets constituting all or
substantially all of the assets of any person, or otherwise enter
into any material transaction, contract or commitment other than in
the ordinary course of business, (viii) assume or guarantee any
debt for borrowed money other than in the ordinary course of
business, on terms consistent with past practice, (ix) sell, lease,
license, encumber or otherwise dispose of any material properties
or assets other than the sale or lease of inventory in the ordinary
course and consistent with past practice, (x) make any revaluation
of the assets of the Company or any of its Subsidiaries, including,
without limitation, write-downs of inventory or write-offs of
accounts receivable, other than in the ordinary course of business
and consistent with past practice, or (xi) except as required by
GAAP, change any of its accounting methods, principles or
practices. The Company shall use its best efforts to maintain in
full force and effect insurance policies providing coverage and
amounts of coverage comparable to the coverage and amounts of
coverage provided under the policies of insurance now in effect for
the Company. In addition, during such period, Sensormatic shall be
consulted as to all substantive operational decisions of the
Company (excepting matters relating to its operations in the Knewco
Territory), and the Company shall keep Sensormatic fully informed,
and provide to Sensormatic such access to its premises, employees
and information as it requests, with respect to the Company's
business outside the Knewco Territory.
5.2 Preserve Accuracy of Representations and War-
ranties; Updates. Between the date of this Agreement and the
Effective Time, each of the Company, Sensormatic and Knewco shall
refrain from taking, without the prior written consent in each
instance of Sensormatic or the Company, as applicable, any action
which would render any of the representations or warranties set
forth in Sections 3 or 4 inaccurate in any material respect as of
the Effective Time, and shall notify the other promptly of the oc-
currence of any matter, event or change in circumstances known to
it after the date hereof that would have been required to be dis-
closed by it hereunder if it had occurred on or prior to the date
hereof. Between the date of this Agreement and the Effective Time,
the Company shall supply to Sensormatic or its representatives, on
a monthly basis, copies of all internally generated financial
statements, and such additional sales reports and financial and
business information (other than detailed information relating to
the operations of the Business in the Knewco Territory) as
Sensormatic may reasonably request, which shall be prepared in a
manner consistent with the manner in which they are now prepared.
5.3 Further Investigation and Information. Between the
date of this Agreement and the Effective Time, each of the Company
and Sensormatic shall give to the other and its respective repre-
sentatives full access during normal business hours, on reasonable
prior notice, to such of their premises, files, books, records and
employees as are reasonably required for due diligence purposes in
connection with the transactions contemplated hereby, and shall
cause their officers, employees and representatives to furnish such
financial, operating and other data and information relevant to
such purposes as the other shall from time to time reasonably
request; provided, however, that any such investigation shall be
conducted in such manner as not to interfere unreasonably with the
operation of the other party's business. Any information obtained
in the course of such investigation shall be subject to the
confidentiality agreements entered into or to be entered into
between the Company and Sensormatic.
5.4 Consents, Waivers and Filings. Upon the terms and
subject to the conditions set forth in this Agreement, the Company,
Sensormatic and Knewco shall use their respective best efforts to
take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing,
all things, reasonably necessary or desirable to consummate in an
expeditious manner the Merger, the Divestiture and the other
transactions contemplated by this Agreement. Without limiting the
foregoing, the parties shall cooperate to obtain from all relevant
third parties and governmental authorities, including any trade
unions or work councils, all consents and waivers to, and permits,
authorizations and licenses for, the transactions contemplated by
this Agreement that may be required under any agreement, lease,
financing arrangement, license, Permit or other instrument or under
any applicable law, rule or regulation, and to attempt to remove or
vacate any legal prohibition or impediment to the consummation of
the transactions contemplated hereby, including any of the matters
referred to in Sections 6.7, 7.6 and 10.
5.5 Subsequent Filings. Prior to the Effective Time,
the Company shall timely and properly file with the SEC all Company
SEC Documents required to be filed by the Company under the
Exchange Act and the rules and regulations promulgated thereunder
and will promptly deliver to Sensormatic copies of each such report
filed with the SEC.
5.6 Preparation of Registration Statement. Sensormatic
shall promptly prepare and file with the SEC the Registration
Statement with respect to the Merger and shall use all reasonable
efforts to have the Registration Statement declared effective under
the Securities Act promptly after it is filed. Sensormatic shall
also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be
taken under any applicable state securities laws in connection with
the issuance of Sensormatic Common Stock in the Merger. The
Company shall cooperate with Sensormatic in the preparation of, and
furnish such information concerning the Company as may be required
to be included in, the Registration Statement (including the Proxy
Statement included therein) or otherwise reasonably requested by
Sensormatic, and take such actions as may reasonably be requested
by Sensormatic in connection with the filing of the Registration
Statement and any related "blue sky" filings and in causing the
same to become effective. In the event that more than 90 days will
have elapsed between the date of this Agreement and the mailing of
the Proxy Statement, or if otherwise required to effect the
Registration of the Sensormatic Common Stock pursuant to the
Registration Statement, and if requested by Sensormatic, the
Company will request its financial advisor to confirm in writing,
for inclusion in the Proxy Statement, that nothing has come to its
attention that would cause it to withdraw or modify its financial
opinion in any material respect.
5.7 Accountants' Letters. Sensormatic and the Company
shall each use reasonable efforts to have their respective inde-
pendent auditors deliver to the other a letter, addressed to the
other and dated a date within two business days prior to the date
that the Registration Statement becomes effective, in form and sub-
stance reasonably acceptable to the other and customary in scope
and substance for letters delivered by independent public accoun-
tants in connection with registration statements such as the
Registration Statement.
5.8 Stockholders' Meeting. The Company shall call a
meeting of the stockholders of the Company to be held within thirty
days after the effectiveness of the Registration Statement or such
earlier or later date as may be agreed upon by the Company and -
Sensormatic, for the purpose of voting upon the adoption of this
Agreement and in connection therewith shall furnish the Proxy
Statement to such stockholders in accordance with the proxy rules
under the Exchange Act and use its reasonable best efforts to cause
them to approve and adopt the Merger and this Agreement as required
under Section 903 of the BCL; and the Board of Directors of the
Company shall recommend to the Company stockholders that they
approve and adopt this Agreement.
5.9 No Solicitation. The Company shall not, directly
or indirectly, through any officer, director, employee, agent or
otherwise, solicit or initiate the submission of proposals or
offers from any person relating to any acquisition, purchase or
sale of all or a material amount of the assets of, or any
securities of, or any merger, consolidation or business
combination, liquidation, reorganization or similar transaction
with, the Company or any material Acquired Subsidiaries (an
"Acquisition Transaction"), or otherwise participate in such a
proposal or offer. Notwithstanding the foregoing, (i) the Company
may furnish information concerning its business, properties or
assets which prior thereto had been furnished to Sensormatic to a
person or group that makes a bona fide inquiry or proposal
concerning any Acquisition Transaction, subject to a
confidentiality agreement on terms substantially the same as that
entered into between Sensormatic and the Company, and (ii) the
Company may enter into discussions or negotiations with any such
person or group concerning any proposed Acquisition Transaction, if
the Board of Directors of the Company determines in good faith that
(A) such person or group has the ability to consummate an
Acquisition Transaction that is more favorable to the Company
stockholders than the transactions contemplated by this Agreement
and (B) that providing such information or entering into such
discussions or negotiations will be in the best interests of the
Company and its stockholders. In addition, the Company shall be
authorized to explore potential transactions for the sale of the
Knewco stock, provided that such transactions and the negotiations
of the Company with respect thereto cannot reasonably be expected
to impair or interfere with, or delay the consummation of, the
transactions contemplated by this Agreement. The Company shall
immediately advise Sensormatic of any inquiries or proposals
relating to an Acquisition Transaction, including without
limitation any offer contemplated by the following sentence, and of
the commencement of any discussions or negotiations concerning any
proposed Acquisition Transaction. Subject to Section 11.6, the
Company may terminate this Agreement prior to the stockholder
meeting contemplated by Section 5.8 upon receipt of a firm written
offer to consummate such an Acquisition Transaction, if the Board
of Directors of the Company has determined in good faith that such
termination is in the best interests of the Company and its
stockholders and, after receipt of the written opinion of counsel
to such effect, that their fiduciary duties require that this
Agreement be terminated. Nothing contained herein shall be
construed to prohibit the Company from taking and disclosing to its
stockholders a position as contemplated by Rule 14e-2 promulgated
under the Exchange Act, or from making such other disclosure to
stockholders which, in the judgment of the Company, on advice of
counsel, may be required by law.
5.10 Board Actions. The Board of Directors of the
Company shall take all possible action on its part (i) such that
the Merger will not be deemed a "Change in Control" for purposes of
the Company's Plan for Severance Compensation or any similar plan
or agreement (other than the employment agreements of Messrs.
Nicolette and Abbott), and will not give rise to rights to
severance payments in the event of the termination of any employees
of the Company following the Merger pursuant to any such plans or
agreements or otherwise and (ii) to confirm that the Rights will
not be triggered prior to consummation of the Merger.
5.11 Certain Tax Matters. The Company will use its best
efforts to ensure that, in the event the Divestiture is effected
through the Knewco Stock Distribution, the fair market value of the
assets of the Company other than (i) the capital stock of Acquired
Subsidiaries that have actively engaged during the five-year period
ending on the Effective Time in a trade or business within the
meaning of Section 355(b) of the Code (as interpreted by the
Internal Revenue Service in its rulings guidelines, where
applicable) and (ii) operating assets other than working capital,
shall not exceed 10% of the net fair market value of the Company's
total assets immediately following the effectiveness of the
Divestiture.
6. Conditions to the Obligations of Sensormatic. The
obligations of Sensormatic under Section 1 of this Agreement are
subject to the satisfaction, at or prior to the Effective Time, of
the following conditions:
6.1 Due Performance; Accuracy of Representations and
Warranties. The Company and Knewco shall have performed in all
material respects all obligations required by this Agreement to be
performed by it at or prior to the Effective Time. All
representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects.
Sensormatic shall have received a certificate executed by the chief
executive officer and the chief financial officer of each of the
Company and Knewco, to the effect set forth in this Section 6.1,
with respect to the Company's and Knewco's representations and
warranties and due performance of and compliance with its
obligations and conditions.
6.2 Corporate Action. The Merger and this Agreement
shall have been approved and adopted by the vote required by
Section 903 of the BCL. Sensormatic shall have received copies,
certified by the Secretary of the Company, of the resolutions of
(i) the Board of Directors of the Company authorizing and approving
the Merger and the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (ii) the
requisite majority under applicable law of the stockholders of the
Company approving and adopting the this Agreement.
6.3 Agreements.
(a) The Divestiture Agreement shall have been executed
and delivered by the Company and Knewco and the Divestiture shall
have occurred in all respects in accordance therewith.
(b) The Company and Knewco shall have executed and
delivered the Supply Agreement and the License Agreement.
6.4 Rights. The Rights shall be extinguished in the
Merger.
6.5 Legal Opinions.
(a) Sensormatic shall have received an opinion of
Stroock & Stroock & Lavan, counsel for the Company, dated the
Effective Time, reasonably satisfactory in form and substance to
counsel for Sensormatic and covering the matters set forth on
Schedule 6.5.
(b) Sensormatic shall have received an opinion of
Christy & Viener, dated the Effective Time, to the effect that
(i) the contribution of assets (including the stock of Caribe) to
Knewco (the "Contribution") and the Divestiture will be treated for
federal income tax purposes as a reorganization within the meaning
of Section 368(a)(1)(D) of the Code; (ii) the Company will
recognize no gain or loss as a result of the Contribution;
(iii) the Company will recognize no gain or loss on the
distribution of the Knewco stock to its shareholders, as provided
in Section 355(c) of the Code; (iv) the Merger will be treated for
federal income tax purposes as a reorganization within the meaning
of Section 368(a)(1)(A) of the Code; and (v) no gain or loss will
be recognized by Sensormatic or the Company as a result of the
Merger (provided, that clauses (i) through (iii) shall be
applicable only in the event of a Knewco Stock Distribution);
provided, that delivery of the opinion contemplated by this
Section 6.5(b) shall not be a condition if Sensormatic shall have
elected to pay a substantial portion of the merger consideration in
cash. In rendering such opinion, Christy & Viener may receive and
rely upon representations contained in this Agreement and on
letters or certificates of Sensormatic, the Company, certain stock-
holders of the Company or others.
6.6 Registration Statement. The Registration Statement
shall have become effective under the Securities Act and shall not
be the subject of any stop order or proceedings seeking a stop
order.
6.7 Governmental Action; No Prohibition. The HSR
Conditions shall have been satisfied. No law, regulation, order,
decree or injunction binding on either of the parties shall then be
in effect which would prevent consummation of the Merger or make it
illegal, which (i) could not be avoided pursuant to Section 1.5(a),
Section 8.3(b) and/or Section 10 and (ii) the violation of which
would have material adverse consequences to either party.
6.8 Resignations. Sensormatic shall have received
resignations of such officers and directors of the Company and the
Acquired Subsidiaries as shall have been requested by Sensormatic.
7. Conditions to the Obligations of the Company. The
obligations of the Company under Section 1 of this Agreement are
subject to the satisfaction, at or prior to the Effective Time, of
the following conditions:
7.1 Due Performance; Accuracy of Representations and
Warranties. Sensormatic shall have performed in all material
respects all obligations required by this Agreement to be performed
by it at or prior to the Effective Time. All representations and
warranties of Sensormatic set forth in this Agreement shall be true
and correct in all material respects. The Company shall have re-
ceived a certificate executed by the chief executive officer and
chief operating officer of Sensormatic to the effect set forth in
this Section 7.1 with respect to Sensormatic's representations and
warranties and due performance of and compliance with its
obligations and conditions.
7.2 Corporate Action. The Merger and this Agreement
shall have been approved and adopted by the vote required by
Section 903 of the BCL. The Company shall have received copies of
the resolutions of the Boards of Directors or Executive Committee
of Sensormatic, certified by the Secretary of Sensormatic,
authorizing and approving the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby.
7.3 Agreements. Sensormatic shall have executed and
delivered its acknowledgement and acceptance, as of the Effective
Time, of the Supply Agreement and the License Agreement.
7.4 Legal Opinions.
(a) The Company shall have received an opinion of
Christy & Viener, counsel for Sensormatic, dated the Effective
Time, reasonably satisfactory in form and substance to counsel for
the Company and covering the matters set forth in Schedule 7.4.
(b) The Company shall have received an opinion of
Stroock & Stroock & Lavan, dated the Closing Date, to the effect
that (i) the Contribution and the Divestiture will be treated for
federal income tax purposes as a reorganization within the meaning
of Section 368(a)(1)(D) of the Code; (ii) the Company will
recognize no gain or loss as a result of the Contribution;
(iii) the Company will recognize no gain or loss on the
distribution of the Knewco stock to its shareholders, as provided
in Section 355(c) of the Code; (iv) the Merger will be treated for
federal income tax purposes as a reorganization within the meaning
of Section 368(a)(1)(A) of the Code; and (v) no gain or loss will
be recognized by Sensormatic or the Company as a result of the
Merger (provided, that clauses (i) through (iii) shall be
applicable only in the event of a Knewco Stock Distribution);
provided, that delivery of the opinion contemplated by this
Section 7.4(b) shall not be a condition if Sensormatic shall have
elected to pay more than 50% of the merger consideration in cash.
In rendering such opinion, Stroock & Stroock & Lavan may receive
and rely upon representations contained in this Agreement and on
letters or certificates of Sensormatic, the Company, certain
stockholders of the Company or others.
7.5 Registration Statement; NYSE Listing.
(a) The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order.
(b) The Shares of Sensormatic Common Stock issuable to
the Company stockholders pursuant to the Merger shall have been
approved for listing on the New York Stock Exchange, subject to
official notice of issuance.
7.6 Governmental Action; No Prohibition. The HSR
Conditions shall have been satisfied. No law, regulation, order,
decree or injunction binding on either of the parties shall then be
in effect which would prevent consummation of the Merger or make it
illegal, which (i) could not be avoided pursuant to Section 1.5(a),
Section 8.3(b) and/or Section 10 and (ii) the violation of which
would have material adverse consequences to either party.
7.7 Release of Lien. Arrangements satisfactory to the
Company shall have been made for the release of any bank Liens on
the Divested Assets.
8. Termination; Amendment; Waiver.
8.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time (a) by mutual written consent
of the Company and Sensormatic; (b) by either the Company or
Sensormatic by written notice to the other, if the transactions
contemplated by this Agreement shall not have been consummated on
or before the 270th day after the date hereof, (c) by the Company
at any time after the 120th day following the date hereof, if the
Company determines in good faith, concurred in by its counsel and
after consultation with Sensormatic and Sensormatic's counsel, that
the HSR Conditions are unlikely to be satisfied, (d) by either the
Company or Sensormatic, by written notice to the other, if the
Merger shall have been voted upon by the stockholders of the
Company at a meeting duly convened therefor or any adjournment
thereof and the vote shall not have been sufficient to satisfy the
applicable requirements of Section 903 of the BCL; (e) by the
Company, in accordance with Section 5.9; or (f) by Sensormatic, by
two business days' advance written notice to the Company, at any
time after the 15th business day following commencement by the
Company or its representatives of any discussions or negotiations,
or receipt by the Company of any offer, with respect to a potential
Acquisition Transaction, if following commencement of such
discussions or negotiations, or receipt of such offer, the Company
fails or delays to timely and diligently carry out any of its
obligations under Section 5 (such as cooperating in preparing and
making necessary filings, supplying information requested by
regulatory authorities, soliciting its stockholders, holding its
stockholders meeting or otherwise taking necessary and appropriate
steps to consummate the transactions contemplated hereby), which
failure or delay is attributable, in whole or in part, to the
Company's participation in such discussions or negotiations or
consideration of such offer, unless prior to the end of the two-
business day notice period following Sensormatic's giving of a
notice of termination hereunder, the Company notifies Sensormatic
that such discussions or negotiations have been terminated and any
such offer has been withdrawn or rejected.
8.2 Effect of Termination; Representations and
Warranties. In the event of termination of this Agreement in
accordance with Section 8.1, no party or parties hereto shall have
any liability or further obligation to the other party or parties
to this Agreement and Plan of Merger, except as provided in Section
11.6 and except that the foregoing shall not relieve any party of
liability for damages in the event of the breach by such party of
its obligations under this Agreement. No claim may be made by any
party hereto against any other party hereto or the affiliates,
stockholders, directors, officers, employees, counsel or agents of
any of them for any damages arising out of the breach or alleged
breach of any representations and warranties contained in this
Agreement or in any certificate or other document delivered
pursuant to or in connection with this Agreement, and each party
hereby waives, releases and agrees not to sue upon any such claim
for any such damages, whether or not accrued and whether or not
known or suspected to exist in its favor.
8.3 Amendment; Extension; Waiver.
(a) This Agreement (including the Exhibits hereto) may be
amended by the parties at any time before or after any required
approval of matters presented in connection with the Merger by the
Company's stockholders, except as precluded by the GCL or the BCL.
Any such amendment shall be in writing signed on behalf of each of
the parties. At any time prior to the Effective Time, either the
Company or Sensormatic may (i) extend the time for the performance
of any of the obligations or other acts of the other party,
(ii) waive any inaccuracies in the representations and warranties
of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (iii) waive compliance by
the other party with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in any
instrument in writing signed on behalf of such party. The failure
of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such
rights.
(b) Without limiting the provisions of Section 8.3(a),
the form of Divestiture Agreement attached hereto as Exhibit C,
including the various Exhibits, Annexes and Schedules thereto as of
the date hereof (as initialed or otherwise identified by the
parties), reflects the various assets and liabilities to be
included in the Divestiture or retained by the Company as of the
date hereof. The parties acknowledge that, prior to the
consummation of the Merger, the facts and circumstances reflected
in such form of Divestiture Agreement, and/or such Exhibits,
Annexes and Schedules, may change, possibly necessitating changes
on some or all of such items. The parties agree that any revision
of or amendment to the form of Divestiture Agreement (or the
License Agreement or Supply Agreement), or any Attachment, Schedule
or other attachment thereto, or the waiver of any provision
thereof, shall require the consent of Sensormatic and the Company
in each instance, provided, that the parties agree that if required
to facilitate the consummation of the transactions contemplated
hereby, they will, subject to the following sentence, make
appropriate amendments to such agreements and, if applicable, a
corresponding adjustment in the Merger Consideration per Share as
contemplated by Section 1.5(a). Notwithstanding the foregoing or
Section 1.5(a), neither party shall be required to make any such
amendment which materially diminishes the benefit of the
transactions contemplated by this Agreement and the Additional
Agreements and which is not readily quantifiable for purposes of
the adjustment contemplated by Section 1.5(a).
9. Further Assurances. Whenever reasonably requested
to do so by Sensormatic at or after the Effective Time, the Company
and the officers and directors of the Company last in office at or
prior to the Effective Time shall do, execute, acknowledge and
deliver all such acts, bills of sale, assignments, confirmations,
consents, other instruments of assignment, transfer and conveyance,
and any and all such further instruments and documents, in form
reasonably satisfactory to Sensormatic as shall be reasonably
necessary or advisable to carry out the intent of this Agreement
and to vest in the Surviving Corporation all the right, title and
interest of the Company in and to the Company's business and assets
(subject to the Divestiture).
10. Delayed Transfers.
10.1 Pending Transfers.
(a) In the event that, prior to the Closing Date, any
regulatory authority in any jurisdiction outside the United States
has commenced any proceeding or investigation or issued an
objection, or any other party has commenced an action in any such
jurisdiction, in respect of the transfer to Sensormatic of the
ownership (directly or through any Acquired Subsidiary) of the
capital stock of any Acquired Subsidiary ("Acquired Subsidiary
Stock") or any marketing rights and any other assets held by the
Company or any such Acquired Subsidiary in such jurisdiction
("Other Assets"), or other similar circumstances exist which lead
Sensormatic to determine, in its sole judgement, that it is not
advisable to proceed with the transfer of such ownership on the
Closing Date (any such proceeding, investigation, objection, action
or circumstances hereinafter referred to as a "Proceeding"; and any
acquisition of such Acquired Subsidiary Stock or Other Assets
hereinafter referred to as a "Pending Transfer"), then, upon the
request of Sensormatic, the Company shall transfer such Acquired
Subsidiary Stock or Other Assets to Knewco in trust for the Company
(and for Sensormatic as successor to the Company in the Merger) in
connection with the Divestiture or otherwise or to an escrow agent
or such other party as shall be designated by Sensormatic to hold
such Acquired Subsidiary Stock and Other Assets in trust for the
Company (and Sensormatic) pending either their transfer to
Sensormatic or their other disposition, as hereafter provided in
this Section 10.1 (Knewco or such escrow agent or other party, for
the purpose of this Section 10.1, being sometimes referred to as
the "Agent"), subject to the following provisions of this Section
10.1.
(b) Until a final disposition of such Acquired
Subsidiary Stock or Other Assets is effected pursuant to the
provisions of this Section 10.1, Knewco and the Agent, if any,
shall cooperate with Sensormatic in establishing any reasonable
interim arrangements in compliance with applicable law in each such
jurisdiction (such as contracting, licensing or leasing) so as to
provide to Sensormatic, to the extent requested by Sensormatic, the
economic benefits that are to be derived from (i) the business of
each Acquired Subsidiary that is the subject of a Pending Transfer,
and (ii) the Other Assets, and during such period the Agent shall
hold each such business, and all such Other Assets, in trust, and
such business shall be conducted, and such Other Assets shall be
utilized, to the greatest extent possible, for the account of
Sensormatic, or if Sensormatic is ultimately unable to successfully
consummate such Pending Transfer, for such party as Sensormatic
shall designate.
(c) At such time as Sensormatic requests with respect
to any such Pending Transfer, the Agent shall transfer to
Sensormatic either such Acquired Subsidiary Stock or all of the
Other Assets, to the greatest extent possible, in any case without
payment of additional consideration to Knewco.
(d) Upon the request of Sensormatic at any time and
from time to time, but in no event later than the first anniversary
of the Effective Time, the Agent shall promptly after any such
request or such anniversary date sell or otherwise dispose of (at
Sensormatic's expense, and in the manner, on the terms and to such
party or parties, as shall be directed by Sensormatic) the capital
stock or the assets of any such Acquired Subsidiary and any Other
Assets as have not been transferred to Sensormatic pursuant to
clause (iii) of Section 10.1(a), and the Agent shall hold in trust,
pending prompt transfer to Sensormatic, any proceeds received from
any such sale or disposition, net of any tax liability that the
Agent may have to bear in connection therewith. (Any such proceeds
retained for any tax liability of Knewco shall be transferred to
Knewco if held by an Agent other than Knewco.)
(e) Any expenses reasonably incurred by Knewco in
connection with the transactions contemplated by this Section 10.1
shall be borne by Sensormatic.
(f) No reduction of the merger consideration shall be
made as a result of any matter referred to in this Section 10.1 or
in Section 10.2, other than as expressly set forth in Section
1.5(a)(3) and 10.2 with respect to Escrowed Businesses having
aggregate annual revenues exceeding $15,000,000.
10.2 Prohibited Transfers.
(a) If on the Closing Date there shall be in effect a
law, regulation, order, decree or injunction binding on either of
the parties (a "Prohibition") which would prevent or make illegal
the transfer of ownership (directly or through any Acquired
Subsidiary) of the stock or assets of any Acquired Subsidiary
("Acquired Subsidiary Stock") to Sensormatic as contemplated in
this Agreement, then the Company shall transfer such Acquired
Subsidiary Stock (the "Escrowed Business") to an escrow agent
designated by Sensormatic and the Company (the "Escrow Agent") to
hold such Escrowed Business in trust for the Company or
Sensormatic, or, if Sensormatic makes an election under Section
10.2(d)(ii), for the Holders of Escrow Interests (as hereinafter
defined), as may be applicable, as hereinafter provided in this
Section 10.2. Until released, the Escrowed Businesses shall be
managed by such qualified management firm or person as Sensormatic
shall designate, with the approval of Knewco (which approval shall
not be unreasonably withheld) or, if the parties agree, by Knewco.
(b) In the event that the Escrowed Businesses referred
to above are organized in countries for which there are Annual
Revenues, in the aggregate, exceeding $15,000,000, and in
recognition of the effect thereof on the value of the Company as a
whole, the Exchange Value at the Effective Time shall be adjusted
as set forth in Section 1.5(a)(3) and such adjustment shall be
applicable to each Escrowed Business (and the respective country of
its organization) pro rata based on the respective Annual Revenues
for such country. In the event that the aggregate of such Annual
Revenues is less than $15,000,000, there will be no such adjustment
of the Exchange Value or the Merger Consideration per Share, all of
which shall be distributed to the Company shareholders at the
Effective Time (and in such case the disposition of the Escrowed
Businesses shall be dealt with in the manner set forth in Section
10.1).
In the event that there has been an adjustment in the
Exchange Value as contemplated in this Section 10.2(b) and Section
1.5(a)(3), Sensormatic shall deposit with the Escrow Agent, at the
Effective Time, the number of shares of Sensormatic Common Stock
(registered in the name of the Escrow Agent) and/or the amount of
cash that would have been included in the Merger Consideration per
Share at the Effective Time with respect to all of the Outstanding
Shares, but was not so included by virtue of any adjustment made
pursuant to Section 1.5(a)(3) (in the aggregate, the "Deferred
Merger Consideration"). (Any dividends or share distributions
payable on such Sensormatic Common Stock during the escrow period
shall be retained by the Escrow Agent and dealt with in the same
manner as the Sensormatic Common Stock pursuant to paragraphs (c),
(d) and (e) below and any cash held by the Escrow Agent shall bear
interest to be dealt with in the same manner as the cash on which
it accrued.)
(c) At such time as any Escrowed Business is able to be
transferred to Sensormatic, written notice of which shall be given
to the Escrow Agent, the Acquired Subsidiary Stock comprising such
Escrowed Business shall be delivered promptly to Sensormatic and
the Deferred Merger Consideration (including any dividends or other
distributions and interest relating thereto) applicable to such
Escrowed Business shall be delivered as soon as practicable to the
holders of the Company Shares as of the time of the Merger (or
their permitted successors or assigns). (Such holders and their
permitted successors and assigns are referred to in this Section
10.2 as the "Holders of Escrow Interests.")
(d) In the event that it is finally determined that any
Escrowed Business will not be transferred to Sensormatic, written
notice of which shall be given to the Escrow Agent, but in no event
later than the first anniversary of the Effective Time (unless such
period is extended by agreement between Knewco and Sensormatic,
which agreement will not be unreasonably withheld), the Escrow
Agent shall act with respect to the Escrowed Business or Businesses
and the Deferred Merger Consideration as provided below, at the
option of Sensormatic:
(i) If so directed by Sensormatic, the Escrow Agent
shall (x) deliver the Deferred Merger Consideration (including
dividends or other distributions and interest relating
thereto) relating to such Escrowed Business or Businesses as
soon as practicable to the Holders of Escrow Interests, (y)
sell or otherwise dispose of (at Sensormatic's expense, and in
the manner, on the terms and to such party or parties, as
shall be directed by Sensormatic) such Escrowed Business or
Businesses, and (z) deliver to Sensormatic the proceeds
received from the sale or other dispositions referred to in
clause (x) above (and any tax resulting from such sale or
other disposition shall be borne by Sensormatic); or
(ii) If not otherwise directed by Sensormatic pursuant
to clause (i) above, the Escrow Agent shall (x) deliver the
Escrowed Business or Businesses to Knewco on behalf of the
Holders of Escrow Interests and (y) return to Sensormatic any
Sensormatic Common Stock (including any dividends or other
distributions relating thereto) and any cash (including any
interest relating thereto) which had been held by the Escrow
Agent as Deferred Merger Consideration relating to such
Escrowed Business or Businesses.
(e) Notwithstanding anything to the contrary in this
Section 10.2, in the event that, at any time, there remain
unreleased Escrowed Businesses and Escrowed Businesses that have
been disposed of under Section 10.2(d) which are organized in
countries with Annual Revenues, in the aggregate, of less than
$15,000,000, written notice of which shall be given to the Escrow
Agent, then all Deferred Merger Consideration remaining (including
any dividends or other distributions or interest relating thereto)
shall be delivered as soon as practicable to the Holders of Escrow
Interests. Thereafter, the disposition of such remaining Escrowed
Businesses shall be dealt with in the manner set forth in Section
10.1.
10.3 Cooperation. Knewco and Sensormatic shall use
their best efforts to have any Proceeding or Prohibition referred
to in Sections 10.1 or 10.2 terminated, withdrawn or settled,
and/or obtain a favorable approval, consent, final judgment, order
or decree in connection with such proceeding in respect of and such
Pending Transfer or Escrowed Business.
11. Miscellaneous.
11.1 Entire Agreement. This Agreement, together with
the schedules hereto, the Disclosure Schedule and the exhibits
thereto, and together with the Divestiture Agreement, the Supply
Agreement and the License Agreement, sets forth the entire
understanding of the parties with respect to its subject matter,
merges and supersedes all prior and contemporaneous understandings
of the parties hereto with respect to its subject matter, except
any confidentiality agreements executed by the Company and
Sensormatic. Failure of any party to enforce any provision of this
Agreement shall not be construed as a waiver of its rights under
such or any other provision.
11.2 Communications. All notices, consents and other
communications given under this Agreement shall be in writing and
shall be deemed to have been duly given (a) when delivered by hand
or by Federal Express or a similar overnight courier to, (b) five
days after being deposited in any United States post office
enclosed in a postage prepaid registered or certified envelope
addressed to, or (c) when successfully transmitted by telecopier
(with a confirming copy of such communication to be sent as
provided in (a) or (b) above) to, the party for whom intended, at
the address or telecopier number for such party set forth below, or
to such other address or telecopier number as may be furnished by
such party by notice in the manner provided herein; provided,
however, that any notice of change of address or telecopier number
shall be effective only upon receipt.
If to Sensormatic:
Sensormatic Electronics Corporation
500 N.W. 12th Avenue
Deerfield Beach, Florida 33442
Attention: Corporate Counsel and Secretary
Facsimile No.: (305) 420-2561
and
Vice President of Corporate
Development
Facsimile No.: (305) 420-2964
With a copy to:
Christy & Viener
620 Fifth Avenue
New York, New York 10020
Attention: Jerome M. LeWine, Esq.
Facsimile No.: (212) 632-5555
If to the Company (prior to the Effective Time) or
Knewco:
Knogo Corporation
350 Wireless Boulevard
Hauppauge, New York 11788
Attention: Thomas A. Nicolette
Facsimile No.: (516) 232-2812
With a copy to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attention: David H. Kaufman
Facsimile No.: (212) 806-6006
11.3 No Assignment; Successors and Assigns. This
Agreement shall be binding on, enforceable against and inure to the
benefit of the parties hereto and their respective successors and
assigns, and nothing herein is intended to confer any right, remedy
or benefit upon any other person. Neither the Company nor Knewco,
on the one hand, nor Sensormatic, on the other, may assign its
rights or delegate its obligations under this Agreement without the
express written consent of Sensormatic or the Company, as
applicable.
11.4 Public Announcements. No public announcement or
disclosure with respect to this Agreement and the transactions con-
templated hereby shall be made for or on behalf of any party
without prior consultation with the other party.
11.5 Survival of Representations, Warranties and
Agreements. None of the representations and warranties made by the
Company, Sensormatic or Knewco in this Agreement, the Disclosure
Schedule or any document or certificate delivered pursuant hereto
shall survive the Effective Time. This Section 11.5 shall not
limit any covenant or agreement which by its terms contemplates
performance after the Effective Time.
11.6 Expenses.
(a) In the event the Merger occurs, Sensormatic shall
bear and pay all costs, expenses and fees incurred by the Company
related to the transactions contemplated herein (including a Knewco
Stock Distribution but not including a Knewco Sale), provided that
such costs shall be reasonable for transactions of this nature and
Sensormatic shall be kept fully informed of such costs periodically
as incurred. Except as otherwise provided in this Section 11.6,
each party hereto shall bear its own costs and expenses in
connection with this Agreement and the transactions contemplated
hereby.
(b) If this Agreement is terminated for any reason other
than any of the following: (i) a termination pursuant to clause
(a), (d), (e) or (f) of Section 8.1, (ii) a termination by
Sensormatic, based on the Company's failure to satisfy Section 6.1
and as permitted under Section 8.1(b), or (iii) as a result of the
occurrence of a Designated Event (as defined below); then
Sensormatic shall pay to the Company within 30 days after such
termination an amount equal to $10,000,000.
(c) If this Agreement is terminated as a result of the
occurrence of a Designated Event, then Sensormatic shall pay to the
Company within 30 days after such termination an amount equal to
$4,000,000. A "Designated Event" shall mean any of the following:
(i) the Company exercising its right to terminate this Agreement
pursuant to clause (c) of Section 8.1; (ii) the U.S. Federal Trade
Commission ("FTC") initiates any action or proceeding to enjoin the
consummation of the Merger and/or the Divestiture and,
notwithstanding the parties cooperating to the fullest extent and
taking all other actions to facilitate the merger transaction, the
FTC will not terminate such action or proceeding or allow the HSR
Condition to be satisfied, and this Agreement is terminated by
either party pursuant to clause (b) of Section 8.1 while the
foregoing continues to be the case; or (iii) the condition in the
second sentence of Section 6.7 or 7.6 is not satisfied and this
Agreement is terminated by either party pursuant to clause (b) of
Section 8.1 while such condition remains unsatisfied.
(d) If (i) this Agreement is terminated by the Company
pursuant to clause (e) of Section 8.1 or (ii) this Agreement is
terminated by Sensormatic, based on the Company's failure to
satisfy Section 6.1 and as permitted under clause (b) of Section
8.1, and an Acquisition Transaction is consummated with a third
party within 9 months of such termination, then the Company shall
pay to Sensormatic within 30 days after such termination (in the
case of clause (i)) or 30 days after such consummation (in the case
of clause (ii)) an amount equal to $4,000,000.
(e) In addition, if an Acquisition Transaction referred
to in Section 11.6(d) is consummated within 9 months after any
termination referred to in such Section, then the Company shall pay
to Sensormatic within 30 days after such consummation the Excess
Amount (as defined below). The "Excess Amount" equals (i) 50% of
the Excess Consideration (as defined below) minus (ii) $4,000,000.
The "Excess Consideration" shall equal (x) the aggregate fair
market value of the consideration received by the Company and/or
its shareholders as a result of an Acquisition Transaction
consummated with a third party minus (y) a sum equal to (A) the
product of (I) $18.00 plus the fair market value of a Knewco Share
as of the date hereof determined based on the assumption that the
Knewco Share Distribution had been effected as of the date hereof
substantially in accordance with the terms of the Contribution and
Divestiture Agreement multiplied by (II) the sum of the number of
Company Shares outstanding on the date hereof and the number of
Company Shares subject to Company Options outstanding on the date
hereof, minus (B) the aggregate exercise price under the Company
Options outstanding on the date hereof. Unless otherwise agreed by
the parties, the fair market value for purposes of this Section
11.6(e) shall be determined as provided in Section 11.12. If such
Acquisition Transaction involves less than all or substantially all
of the outstanding capital stock or assets of the Company, the
"aggregate fair market value" of the consideration received by the
Company and/or its shareholders in such transaction (as referred to
above in this Section 11.6(e)) shall be increased to an amount
equal to such consideration divided by the percentage of such stock
or assets of the Company acquired in such Acquisition Transaction
and multiplied by 100%.
11.7 Alternate Structures. The parties may, by mutual
agreement prior to the vote of the Company's Stockholders referred
to in Section 5.8, revise the form of the transactions contemplated
hereby. Without limiting the foregoing, if the Company reasonably
requests to effect the Knewco Sale in the form of a sale of all or
substantially all of the assets or other form other than the sale
of Knewco stock, the parties will cooperate to effect such
alternative form of transaction (and amend this Agreement and the
Additional Agreements accordingly), provided that the respective
rights and obligations of the Company, Sensormatic and Knewco (or a
successor) under this Agreement, the Additional Agreements and the
transactions contemplated hereby and thereby, as modified in order
to accommodate such alternative transaction, shall be the same in
all substantive respects as those contemplated by this Agreement
and the Additional Agreements in the case of a Knewco Sale.
11.8 Governing Law; Consent to Jurisdiction. This
Agreement shall in all respects be governed by and construed in
accordance with the laws of the State of New York. Each of the
parties hereto expressly and irrevocable submits to the non-
exclusive personal jurisdiction of the United States District
Court, Southern District of New York and to the jurisdiction of any
other competent court of the State of New York in connection with
all disputes arising out of or in connection with this Agreement or
the transactions contemplated herein. Each party hereby waives the
right to any other jurisdiction or venue to which any of them may
be entitled by reason of its present or future domicile. The
parties agree that service of process may be made by U.S.
registered mail, return receipt requested, to a party at its
address set forth in Section 11.2.
11.9 Savings Clause. If any provision of this Agreement
is held to be invalid or unenforceable by any court or tribunal of
competent jurisdiction, the remainder of this Agreement shall not
be affected thereby, and such provision shall be carried out as
nearly as possible according to its original terms and intent to
eliminate such invalidity or unenforceability.
11.10 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
11.11 Construction. Headings contained in this Agree-
ment are for convenience only and shall not be used in the
interpretation of this Agreement. References herein to the
Agreement shall be deemed to include all Schedules (including the
Disclosure Schedule) and Exhibits hereto, and references herein to
Sections, Schedules and Exhibits are to the sections, schedules and
exhibits of this Agreement. As used herein, the singular includes
the plural, and the masculine, feminine and neuter gender each
includes the others where the context so indicates.
11.12 Valuation Disputes. Any dispute as to the appro-
priate amount of any adjustment to the Merger Consideration per
Share and/or other adjustment or calculation contemplated by
Section 1.5(a) shall be resolved by the parties in consultation
with their respective financial advisors. If agreement cannot be
reached on that basis, the respective financial advisers of the
parties shall appoint a mutually acceptable investment banking firm
to resolve such dispute as promptly as is practicable, whose
determination shall be binding.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first set forth above.
SENSORMATIC ELECTRONICS CORPORATION
By:/s/ RONALD G. ASSAF
Ronald G. Assaf
Chairman of the Board
and President
KNOGO CORPORATION
By:/s/ THOMAS A. NICOLETTE
Thomas A. Nicolette
President
KNOGO NORTH AMERICA INC.
By:/s/ THOMAS A. NICOLETTE
Thomas A. Nicolette
President
<PAGE>
EXHIBIT A TO
MERGER AGREEMENT
[Form of Delaware Certificate of Merger]
CERTIFICATE OF MERGER
OF
SENSORMATIC ELECTRONICS CORPORATION
AND
KNOGO CORPORATION
The undersigned corporation, organized and
existing under and by virtue of the General Corporate Law of
the State of Delaware,
DOES HEREBY CERTIFY THAT:
(1) The name and state of incorporation of
each of the constituent corporations (the "Constituent
Corporations") are as follows:
(a) Sensormatic Electronics Corporation,
incorporated under the laws of the State of Delaware;
and
(b) Knogo Corporation, incorporated under
the laws of the State of New York ("Knogo
Corporation").
(2) An Agreement and Plan of Merger (the
"Agreement and Plan of Merger") has been approved, adopted,
certified, executed and acknowledged by each of the
Constituent Corporations in accordance with the provisions
of Section 252 of the General Corporation Law of the State
of Delaware (and by Knogo Corporation in accordance with the
laws of the State of New York, its State of Incorporation).
(3) The surviving corporation is Sensormatic
Electronics Corporation (the "Surviving Corporation").
(4) The Certificate of Incorporation of
Sensormatic Electronics Corporation shall be the Certificate
of Incorporation of the Surviving Corporation.
(5) The executed Agreement and Plan of Merger
is on file at the principal place of business of the
Surviving Corporation, the address of which is as follows:
Sensormatic Electronics Corporation
500 N.W. 12th Avenue
Deerfield Beach, Florida 33442
(6) A copy of the Agreement and Plan of Merger
will be furnished by the Surviving Corporation, on request
and without cost, to any stockholder of the Constituent
Corporations.
(7) The authorized capital stock of Knogo
Corporation consists of: 20,000,000 shares of Common Stock,
$.01 par value; 2,800,000 shares of Preferred Stock, $.01
par value; and 200,000 shares of Participating Cumulative
Preferred Shares Series A, $.01 par value.
Dated: , 1994
SENSORMATIC ELECTRONICS
CORPORATION
By:__________________________
Name:
Title:
Attest:
____________________________
Name:
Title:
<PAGE>
EXHIBIT B TO
MERGER AGREEMENT
[Form of New York Certificate of Merger]
CERTIFICATE OF MERGER
OF
KNOGO CORPORATION
AND
SENSORMATIC ELECTRONICS CORPORATION
INTO
SENSORMATIC ELECTRONICS CORPORATION
(Under Section 907 of the Business Corporation Law)
It is hereby certified, upon behalf of each of the
constituent corporations herein named, as follows:
FIRST: (a) The name of the domestic constituent
corporation is "Knogo Corporation" ("Knogo"). The date upon
which Knogo's certificate of incorporation was filed by the
Department of State of the State of New York is March 31,
1966.
(b) The name of the foreign constituent
corporation is "Sensormatic Electronics Corporation"
("Sensormatic", and together with Knogo, the "Constituent
Corporations"), which was incorporated in the State of
Delaware on May 27, 1968. An Application for Authority in
the State of New York of Sensormatic to transact business as
a foreign corporation therein was filed by the Department of
State of the State of New York on September 26, 1973.
SECOND: The Board of Directors of each of the
Constituent Corporations has adopted an Agreement and Plan of Merger
(the "Agreement and Plan of Merger") setting forth the terms and
conditions of the merger of said corporations (the "Merger").
Pursuant to the Merger, Knogo is being merged into Sensormatic, and
the surviving corporation shall be Sensormatic (the "Surviving
Corporation").
THIRD: As to each Constituent Corporation, the
Agreement and Plan of Merger sets forth the designation and number of
outstanding shares of each class and series, the specification of the
classes and series entitled to vote on the Agreement and Plan of
Merger, and the specification of each class and series entitled to
vote as a class on the Agreement and Plan of Merger, as follows:
Knogo Corporation
Designation of Number of Designation Classes and
each outstanding outstanding of class and series entitled
class and series shares of series enti- to vote as a
of shares each class tled to vote class
Common Stock __________ N/A All shares vote
Sensormatic Electronics Corporation
Designation of Number of Designation Classes and
each outstanding outstanding of class and series entitled
class and series shares of series enti- to vote as a
of shares each class tled to vote class
Common Stock __________ N/A All shares vote
FOURTH: The Merger was authorized in respect of Knogo
by the vote of the holders of at least two-thirds of all outstanding
shares of Knogo entitled to vote on the Agreement and Plan of Merger
under Knogo's certificate of incorporation and by the class vote of
the holders of at least a majority of all outstanding shares of each
class which are denied voting power under such certificate of
incorporation, but which are entitled to vote by class under paragraph
(a)(2) of Section 903 of the Business Corporation Law.
FIFTH: The Merger is permitted by the laws of the
State of Delaware, the jurisdiction of incorporation of Sensormatic,
and Sensormatic is in compliance with said laws.
SIXTH: The Surviving Corporation agrees that it may be
served with process in the State of New York in any action or special
proceeding for the enforcement of any liability or obligation of
Knogo, for the enforcement of any liability or obligation of
Sensormatic for which Sensormatic is previously amenable to suit in
the State of New York, and for the enforcement, as provided in the
Business Corporation Law of the State of New York, of the right of
shareholders of Knogo to receive payment for their shares against
Sensormatic.
SEVENTH: Sensormatic agrees that, subject to the
provisions of Section 623 of the Business Corporation Law of the State
of New York, it will promptly pay to the shareholders of Knogo the
amount, if any, to which they shall be entitled under the provisions
of the Business Corporation Law of the State of New York relating to
the rights of shareholders to receive payment for their shares.
EIGHTH: Sensormatic hereby designates the Secretary of
State of the State of New York as its agent upon whom process against
it may be served in the manner set forth in paragraph (b) of Section
306 of the Business Corporation Law of the State of New York in any
action or special proceeding. The post office address without the
State of New York to which the said Secretary of State shall mail a
copy of any process against Sensormatic served upon him is:
Sensormatic Electronics Corporation
500 N.W. 12th Avenue
Deerfield Beach, Florida 33442
IN WITNESS WHEREOF, we have subscribed this document
[on the date set forth below][on the date set forth opposite each of
our names below] and do hereby affirm, under the penalties of perjury,
that the statements contained therein have been examined by us and are
true and correct.
Date: _______________, 19__.
_________________________________
Thomas A. Nicolette
[Chairman of the Board of Directors,]
President and Chief Executive Officer
Knogo Corporation
and
_________________________________
[Name]
[Secretary/Assistant Secretary]
Knogo Corporation
_________________________________
Ronald G. Assaf
Chairman of the Board of Directors,
President and Chief Executive Officer
Sensormatic Electronics Corporation
and
_________________________________
[Name]
[Secretary/Assistant Secretary]
Sensormatic Electronics Corporation
INDIVIDUAL
<PAGE>
STATE OF )
) SS.:
COUNTY OF )
, being duly sworn, deposes and says that he
is one of the persons who signed the foregoing certificate of merger
on behalf of Sensormatic Electronics Corporation; that he signed said
certificate in the capacity set beneath his signature thereon; that he
has read the foregoing certificate and knows the contents thereof; and
that the statements contained therein are true to his own knowledge.
________________________________
[Name], [Capacity]
Subscribed and sworn to before
me on ________________, 1994.
______________________________
and
INDIVIDUAL
STATE OF )
) SS.:
COUNTY OF )
, being duly sworn, deposes and says that he
is one of the persons who signed the foregoing certificate of merger
on behalf of Knogo Corporation; that he signed said certificate in the
capacity set beneath his signature thereon; that he has read the
foregoing certificate and knows the contents thereof; and that the
statements contained therein are true to his own knowledge.
________________________________
[Name], [Capacity]
Subscribed and sworn to before
me on ________________, 1994.
______________________________
<PAGE>
EXHIBIT C TO
MERGER AGREEMENT
CONTRIBUTION AND DIVESTITURE AGREEMENT
CONTRIBUTION AND DIVESTITURE AGREEMENT dated as of
, 1994, among KNOGO CORPORATION, a New York corporation
(the "Company"), and KNOGO NORTH AMERICA INC., a Delaware
corporation and a wholly-owned subsidiary of the Company
("Knewco").
W I T N E S S E T H:
WHEREAS, the Company is engaged principally in the busi-
ness of developing, manufacturing and marketing electronic article
surveillance, closed circuit television and other products to deter
and detect shoplifting and employee theft (the "Business"); and
WHEREAS, the parties hereto are parties to the Merger
Agreement, dated as of August 14, 1994 (the "Merger Agreement"),
providing for the merger (the "Merger") of the Company with and
into Sensormatic Electronics Corporation, a Delaware corporation
("Sensormatic"); and
WHEREAS, it is contemplated that prior to the Merger, the
Company shall contribute to Knewco certain of its assets used in
the Business in the United States, Canada and Puerto Rico (the
"Knewco Territory") and the goodwill and operations of the Business
in the Knewco Territory, and that Knewco shall assume certain of
the liabilities relating to such assets and operations, as more
particularly set forth below; and
WHEREAS, it is further contemplated that following such
contribution and prior to the Effective Time (as such term is
defined in the Merger Agreement), the Company will divest itself of
the business of Knewco either by distributing all of the shares of
Common Stock, par value $.01 per share, of Knewco (the "Knewco
Common Stock") to its stockholders (the "Knewco Stock
Distribution") or selling all of the shares of Knewco Common Stock
to a third party (the "Knewco Sale"), or an alternative transaction
as contemplated in Section 11.7 of the Merger Agreement, in either
case as contemplated in Section 3 (the "Divestiture"), so that
after the Divestiture, the Company will own no shares of capital
stock of Knewco;
WHEREAS, it is the intention of the parties that
following the Divestiture, the Company will retain its assets used
in, and the goodwill and operations of, the Business outside the
Knewco Territory (the "Retained Operations"), retain the rights and
liabilities relating thereto and certain other liabilities, and
retain the worldwide rights to certain technology; and
WHEREAS, the parties intend that in the event of a Knewco
Stock Distribution, the transactions contemplated hereby qualify as
a tax-free reorganization and spin-off under Sections 368(a)(1)(D)
and 355 of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and in the other agreements and instruments
executed in connection with this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Contribution of Assets.
1.1 Contribution of Assets. On the Divestiture Date (as
such term is defined in Section 2.1), subject to the terms and con-
ditions of this Agreement, the Company shall contribute, convey,
assign, transfer and deliver (collectively, "contribute") to Knewco
all of the right, title and interest of the Company in and to the
business operations and related goodwill of the Company in the
Knewco Territory, and the Company's assets and properties located
in the Knewco Territory related to such Business operations, as
more particularly set forth below, subject to the exclusions set
forth in Section 1.2 (the "Contributed Assets"). The Contributed
Assets include the assets reflected on the pro forma balance sheet
of Knewco as of May 31, 1994 and the schedules thereto, set forth
as Annex A (the "May Pro Forma Balance Sheet"), and include also
assets acquired thereafter in the ordinary course of the Business
in the Knewco Territory and consistent with past practice, and in
accordance with the principles used to allocate assets for the
purposes of the Pro Forma Balance Sheet (the "Allocation
Principles"), (as such assets shall be reflected, as of the
Divestiture Date, on the Divestiture Date Balance Sheet (as defined
in Section 7.6)), and are comprised of:
(a) real property owned in fee and leases, easements and
other rights and interests in real property owned by others,
to the extent located in the Knewco Territory, including
without limitation the facilities located in Hauppaugue, New
York, as set forth in Schedule I (the "Contributed Realty");
(b) shares of all of the capital stock of Knogo Caribe
Inc. ("Caribe") (whose assets include the Cidra, Puerto Rico
manufacturing facility but will not include certain financial
assets to be transferred to the Company and/or its
subsidiaries as described in Section 1.6 (the "Caribe
Financial Assets");
(c) machinery, equipment, plant, vehicles, office furni-
ture and equipment, computer hardware, tools, spare parts,
other chattels, fixtures and leasehold improvements located in
the Knewco Territory;
(d) inventories of raw materials, supplies, work-in-
process and finished goods located in the Knewco Territory, in
amounts appropriate to the operations of Knewco in the Knewco
Territory;
(e) accounts receivable arising from the operations of
the Business in the Knewco Territory, as listed or described
on Schedule II, which shall not include any accounts
receivable due from any subsidiaries of the Company (other
than Caribe) (collectively, the "Acquired Subsidiaries") or
any accounts receivable from customers outside the Knewco
Territory or for products intended for use outside the Knewco
Territory;
(f) all purchase and other orders from, and agreements
with, customers relating to the sale, lease or maintenance of
products for use in the Knewco Territory;
(g) all other contracts, agreements, equipment leases,
licenses and other instruments relating to the operation of
the Business in the Knewco Territory, all material items of
which are listed or described on Schedule III (together with
the orders and agreements referred to in Section 1.1(f), the
"Assigned Instruments);
(h) United States and Canadian patents, trademark and
trade name registrations, all applications therefor on the
date hereof, and other intellectual property of the Company,
used or useful in the Business in the Knewco Territory, as
listed or described in Schedule IV, including without
limitation the right to file patents and patent applications
in the Knewco Territory corresponding to any of the patents
and patent applications of the Company outside the Knewco
Territory, or with respect to any intellectual property
retained by the Company, and all of the Company's right to use
the "Knogo" name and the Company's other trademarks and trade
names in the Knewco Territory, and any rights or licenses held
by the Company with respect to the use in the Knewco Territory
of such intellectual property owned by others (pursuant to
which Knewco shall have the exclusive right in the Knewco
Territory (including exclusivity as to the Company and
Sensormatic or any person claiming through either of them) to
make or have made, use, market, distribute, sell, lease,
install, service and maintain the Company's products and use
the "Knogo" name and the Company's other trademarks and trade
names in the Knewco Territory) (collectively, the "Contributed
Intellectual Property"), provided, however, that the foregoing
shall not include any patents or other intellectual property
relating to the "SuperStrip" technology, as identified on
Schedule V (collectively, the "SuperStrip Technology"), and
subject to certain rights relating thereto as set forth in the
License Agreement referred to in Section 2.2(j);
(i) originals or true and complete copies of books and
records, including customer and supplier lists, employee
records, tax records, credit files, quotations and bids, and
all sales literature and specifications relevant to the
operation of the Business in the Knewco Territory;
(j) all material governmental licenses, authorizations,
consents and approvals required to carry on the Business in
the Knewco Territory as now conducted, to the extent
transferable;
(k) cash and cash equivalents in an amount determined
pursuant to Section 1.5;
(l) prepaid expenses and deferred charges, as such
prepaid expenses are described on Schedule VI; and
(m) the goodwill of the Business in the Knewco
Territory,
all as the same exist on the date of this Agreement and shall exist
on the Divestiture Date, subject only to the disposition of any
assets in the ordinary course of business. No contract or
agreement which is by law not assignable without the consent of any
party thereto shall be deemed assigned pursuant to this Agreement
unless and until such consent (or a waiver therefrom) is given.
The Company agrees to use its best efforts to obtain prior to the
Divestiture Date all such consents and waivers. If any such
consent or waiver is not obtained before the Divestiture Date and
the Divestiture is nevertheless consummated, the Company agrees to
continue to use its best efforts to obtain all such consents or
waivers as have not been obtained prior to such date and further
agrees to cooperate with Knewco after such date in any reasonable
arrangement (such as subcontracting, sublicensing or subleasing)
designed to provide for Knewco, on terms no less favorable than the
Company is entitled to, the benefits under the applicable contract
or agreement, including, without limitation, enforcement, at the
cost and for the benefit of Knewco, of any and all rights of the
Company against any other party thereto arising out of the breach
or cancellation thereof by such party otherwise.
Failure to specifically identify on applicable Schedules
hereto any assets, property or rights of the Company that are
expressly intended to be contributed to Knewco pursuant to this
Agreement shall not exclude such assets, property or rights from
the Contributed Assets.
1.2 Excluded Assets. The Contributed Assets shall not
include, in addition to the Acquired Subsidiaries, any of the
assets of the Company used in or relating to the Business outside
of the Knewco Territory, including, without limitation, the
goodwill of the Business outside of the Knewco Territory
(collectively, the "Retained Assets"). Without limiting the
foregoing, the Company shall in all events retain, and the Retained
Assets shall include, all patents, trademark and trade name
registrations, all applications therefor pending on the date
hereof, and all other intellectual property used or useful in the
Business outside the Knewco Territory (pursuant to which the
Company shall have the exclusive right outside the Knewco Territory
(including exclusivity as to the Company and persons claiming
through the Company) to make or have made, use, market, distribute,
sell, lease, install, service or maintain the Company's products
outside the Knewco Territory), including without limitation (i) the
right to apply for, receive and own patents in any jurisdiction
outside the Knewco Territor(A)y corresponding to any of the patents
and patent applications included in the patent rights in the Knewco
Territory or other intellectual property included in the
Contributed Assets, (ii) all rights to the SuperStrip Technology
anywhere in the world, (iii) all know-how required for the
manufacture or supply of the products used in the operation of the
Business outside of the Knewco Territory, and (iv) the exclusive
right to use the "Knogo" name and the Company's trademarks and
trade names outside of the Knewco Territory (collectively, the
"Retained Intellectual Property"), certain rights relating to which
shall be the subject of the License Agreement. The parties hereto
acknowledge that they will own in common certain know-how and
technical information (not including any of the SuperStrip
Technology), which shall be included in both the Contributed
Intellectual Property and the Retained Intellectual Property (the
"Common Intellectual Property"). The Common Intellectual Property
shall be subject to the exclusive rights of Knewco inside the
Knewco Territory contemplated by Section 1.1(h) and the exclusive
rights of the Company outside the Knewco Territory contemplated by
this Section 1.2, and shall be further subject to the License
Agreement.
1.3 Assumption of Liabilities. In connection with the
contribution of the Contributed Assets, Knewco shall assume and
agree to pay, perform and discharge, as and when due, and shall
hold the Company harmless from, all of the liabilities (including
contingent liabilities) and obligations of the Company directly
relating to (i) the employees who become employees of Knewco in
connection with the Divestiture, (ii) Knewco's customers in the
Knewco Territory, (iii) the Company's products sold or leased to
such customers or (iv) the assets and properties of the Company
located in the Knewco Territory (the items referred to in clauses
(i) through (iv) being sometimes referred to herein as the "Knewco
Related Items") arising prior to and following the Divestiture
Date, except as expressly excluded below (the "Assumed
Liabilities"), including:
(a) current liabilities reflected on the May Pro Forma
Balance Sheet or accrued following the date thereof by the
Company in connection with the Business in the Knewco
Territory and in accordance with the Allocation Principles;
(b) payroll liabilities to employees of the Company
located in the Knewco Territory who become employees of Knewco
for services rendered prior to the Divestiture Date, and
benefit plan obligations, liabilities for accrued vacation,
sick and holiday time, all other compensation due to such
employees, and employment-related claims or liability to such
employees (Knewco shall not assume such employment-related
liabilities of employees of the Company who do not become
employed by Knewco);
(c) the Company's obligations under the Assigned
Instruments;
(d) any liability (including contingent liabilities) of
the Company with respect to any tort, product liability,
general liability or other claim directly relating to the
Knewco Related Items;
(e) any liability under any laws concerning the disposal
or release of hazardous substances, public health and safety,
or pollution or protection of the environment arising out of
or relating to any of the Contributed Realty;
(f) all warranty obligations for products of the Company
sold or delivered in the Knewco Territory or for use in the
Knewco Territory;
(g) any liability of the Company for fines, penalties,
damages or other like amounts payable by the Company to any
government or governmental agency or instrumentality directly
relating to the Knewco Related Items;
(h) real property, personal property, sales and payroll
taxes of the Company directly relating to the Knewco Related
Items; and
(i) all other liabilities and obligations arising out of
the operation of the business of Knewco following the
Divestiture Date.
Such liabilities, subject to the exclusions set forth below, are
referred to collectively as the "Assumed Liabilities". In no event
shall Knewco assume or be deemed to have assumed any of the
following debts, obligations, liabilities or commitments of the
Company:
(i) except as set forth in Section 1.3(h), any
liability for Taxes (as such term is defined in the Merger
Agreement) of the Company or any Acquired Subsidiary, and any
Taxes imposed on the Company or Caribe arising as a result of
the transfer of the Caribe Financial Assets as referred to in
Section 1.6 or the transactions contemplated by this Agreement
(other than pursuant to a Knewco Sale) or by the Merger
Agreement;
(ii) any obligations of the Company to the banks
listed on Schedule VII (the "Banks") arising under their
respective loans to the Company listed on Schedule VII (the
"Bank Loans");
(iii) except as provided in Section 1.3(b) and
Section 1.4, any liability to employees of the Company or to
any of the Company's employee benefit plans;
(iv) any liability of the Company or Knewco for
expenses reasonably incurred in negotiating, preparing or
consummating the Merger or the transactions contemplated in
this Agreement (including the Knewco Stock Distribution but
not including the Knewco Sale); or
(v) all other liabilities of the Company not
expressly assumed by Knewco as Assumed Liabilities.
Failure to specifically identify on applicable
Schedules hereto any liabilities or obligations of the Company that
are expressly intended to be assumed by Knewco pursuant to this
Agreement shall not exclude such liabilities or obligations from
the Assumed Liabilities.
1.4 Employee Benefit Plans.
(a) On or before the Divestiture Date, Knewco shall
adopt the Company Retirement Savings 401K Plan, subject to such
amendment as Knewco deems appropriate.
(b) Knewco will assume the currently existing
severance and vacation benefit arrangements covering the Company
employees who became Knewco employees immediately after the
Divestiture Date (each, a "Transferred Employee") and, for that
purpose, shall recognize service with the Company; provided,
however, that in the event any severance payments are made by the
Company in accordance with Section 1.4(c), service with the Company
shall not be recognized by Knewco for purposes of the severance
arrangements covering the recipients of such payments.
(c) The parties intend that, except as provided below,
no severance pay shall become payable as a result of the transfer
of the Transferred Employees to Knewco in connection with the
consummation of the transactions contemplated by this Agreement;
however, in the event that any severance pay shall become so
payable, such severance pay shall be paid by the Company. The
Company shall remain liable for the termination payments under the
employment contracts of Robert Abbott, Arthur J. Minasy, and Thomas
A. Nicolette, provided in the case of Mr. Nicolette that he enters
into an agreement with the Company to the effect that for a two-
year period (subject to such payments being made to him) he will
not compete with the Company other than on behalf of Knewco in the
Knewco Territory and to the extent Knewco is permitted to
hereunder.
(d) Knewco shall endeavor to establish as of or
promptly after the Divestiture Date medical, disability and life
insurance plans and other welfare benefits substantially comparable
in the aggregate to the corresponding insurance plans and welfare
benefits maintained and/or provided by the Company in favor of the
Transferred Employees.
1.5 Target Book Value; Adjustments. The net worth of
Knewco on the Divestiture Date shall equal $24,011,000.00, reduced
by the amount of any losses resulting from the Company's not
conducting its business in the Knewco Territory following the date
hereof in the ordinary course of business and consistent with past
practices and policies, other than the transactions contemplated by
this Agreement and the Merger Agreement, or as expressly consented
to by Sensormatic (the "Target Book Value"). For purposes of this
Section 1.5 and Section 7.6, neither the Target Book Value nor the
net worth of the Company at the Divestiture Date shall reflect
write-downs of the Company's assets which write-downs are not
reflected on the Pro Forma Balance Sheet. For purposes of
estimating the amount of cash and cash equivalents to be
contributed to Knewco for purposes of Section 1.1(k), the Company
and Knewco shall prepare an estimated balance sheet as of the
Divestiture Date, reasonably acceptable to Sensormatic, giving
effect to the contribution by the Company to Knewco of the
Contributed Assets (the "Contribution") (the "Estimated Balance
Sheet"). The Estimated Balance Sheet shall be prepared in
accordance with generally accepted United States accounting
principles consistently applied ("GAAP"), and the Allocation
Principles, and shall be consistent with the May Pro Forma Balance
Sheet. Based on the Estimated Balance Sheet, the cash and cash
equivalents to be contributed to Knewco shall be increased or
reduced in order that the net worth of Knewco as reflected on the
Estimated Balance Sheet shall equal the Target Book Value. In
addition to cash and cash equivalents, other current assets may be
reduced if required so that the net worth of Knewco as reflected on
the Estimated Balance Sheet will not exceed the Target Book Value.
Following the Divestiture Date, there shall be a final cash
adjustment as hereinafter set forth in Section 7.6.
1.6 Transfer of Caribe Financial Assets. Immediately
prior to the Contribution, Caribe shall transfer to the Company or
another subsidiary or subsidiaries certain cash, cash equivalents
and any other financial assets listed on Schedule VIII.
1.7 Issuance of Knewco Stock to the Company. If the
Divestiture shall be effected by the Knewco Stock Distribution,
Knewco shall issue to the Company, contemporaneously with the
contribution by the Company to Knewco of the Contributed Assets and
the assumption by Knewco of the Assumed Liabilities, as
contemplated in Sections 1.1 and 1.3, respectively, such additional
number of shares of Knewco Common Stock as may be required in order
for the Company to fulfill its obligations pursuant to Section 3.2
and any additional shares required in connection with outstanding
stock options of the Company.
1.8 Proceeds of Knewco Sale. If the Divestiture shall
be effected by the Knewco Sale, the proceeds shall be retained by
the Company and the Merger Consideration per Share (as defined in
the Merger Agreement) shall be increased in accordance with the
applicable provisions of the Merger Agreement.
2. Closing.
2.1 Closing; Divestiture Date. Subject to Section
11.1, the closing of the transactions contemplated in this Agree-
ment (the "Closing") shall take place at such place and on such
date (within three business days after all of the conditions
precedent set forth in Section 4 to be satisfied prior to the
Closing have been satisfied or waived) as shall be agreed upon by
the parties (the "Divestiture Date").
2.2 Company Deliveries. At the Closing, the Company
shall execute and deliver to Knewco:
(a) an Instrument of Assignment substantially in the
form of Exhibit A hereto (the "Instrument of Assignment");
(b) bargain and sale deeds with respect to such of the
Contributed Realty as is owned in fee by the Company;
(c) assignments of the leases included in the
Contributed Realty;
(d) duly executed assignments of the patent rights and
trademarks listed on Schedule IV;
(e) duly executed assignments of the Assigned
Instruments;
(f) a written acknowledgement by Banks that hold any
liens (the "Bank Liens") on the Contributed Assets arising
out of the Bank Loans that such Bank Liens will be released
upon consummation of the Merger;
(g) if the Divestiture shall be effected by the Knewco
Stock Distribution, a duly executed Distribution Agency
Agreement (the "Distribution Agency Agreement") between the
Company and transfer agent (the "Distribution Agent")
relating to the Knewco Stock Distribution;
(h) the Estimated Balance Sheet;
(i) cash and cash equivalents in an amount determined
pursuant to Section 1.5;
(j) a License Agreement substantially in the form of
Exhibit B hereto (the "License Agreement"); and
(k) a Supply Agreement substantially in the form of
Exhibit C hereto.
2.3 Knewco Deliveries. At the Closing, Knewco shall
execute and deliver to the Company:
(a) an Instrument of Assumption substantially in the
form of Exhibit D hereto (the "Instrument of Assumption");
(b) in each case where Knewco is a party to any
agreement or instrument referred to in Section 2.2, a duly
executed counterpart of such agreement or instrument;
(c) if the Divestiture shall be effected by the Knewco
Stock Distribution, a certificate or certificates
representing all of the outstanding shares of common stock
of Knewco, in the number determined in accordance with
Section 3.2(f), for delivery to the Distribution Agent for
distribution pursuant to the Distribution Agency Agreement;
and
(d) if the Divestiture shall be effected by the Knewco
Sale, a copy of all of the closing documents to such
transaction.
3. The Divestiture.
3.1 Cooperation Prior to the Divestiture. The Company
shall effect the Divestiture either through the Knewco Stock
Distribution, as contemplated in Section 3.2, or through the Knewco
Sale, as contemplated in Section 3.3. In either case, as promptly
as practical after the date hereof and prior to the commencement of
business on the Divestiture Date, the Company and Knewco shall take
all such action as may be necessary or appropriate to effect the
Divestiture through either of such transactions as determined by
the Company, including without limitation the specific actions set
forth in Section 3.2 or Section 3.3, as applicable.
3.2 The Knewco Stock Distribution.
(a) The Company and Knewco shall prepare, and Knewco
shall file with the Securities and Exchange Commission (the
"SEC"), a registration statement on Form 10 (the "Form 10")
to effect the registration of the Knewco Common Stock
pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder (the
"Exchange Act"). The Company and Knewco shall use
reasonable efforts to cause the Form 10 to be declared
effective under the Exchange Act or, if the Company
reasonably determines that the Knewco Stock Distribution may
not be effected without registering the Knewco Common Stock
pursuant to the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the
"Securities Act"), the Company shall use its best efforts to
cause the Knewco Common Stock to be registered pursuant to
the Securities Act, and thereafter effect the Knewco Stock
Distribution in accordance with the terms of this Agreement,
including, without limitation, by preparing and filing on an
appropriate form a registration statement under the
Securities Act covering the Knewco Common Stock and using
its best efforts to cause such registration statement to be
declared effective.
(b) The Company and Knewco shall cooperate in
preparing, filing with the SEC and causing to become
effective any registration statements or amendments thereto
which are appropriate to reflect the establishment of, or
amendments to, any employee benefit and other plans
contemplated in this Agreement to be in effect for Knewco.
(c) The Company and Knewco shall take all such action
as may be necessary or appropriate under any applicable
state securities or "Blue Sky" laws or other applicable laws
in connection with the transactions contemplated in this
Section 3.2.
(d) The Company and Knewco shall prepare, and Knewco
shall file and seek to make effective, an application to
permit listing or quotation of the Knewco Common Stock on
.
(e) The Company's Board of Directors (or any duly
appointed committee thereof) shall in its sole discretion
establish the record date for the Knewco Stock Distribution
(the "Distribution Record Date"), and the Divestiture Date
and any appropriate procedures in connection with the Knewco
Stock Distribution (subject in each case to the provisions
of applicable law); provided that in no event shall the
Knewco Stock Distribution occur prior to such time as (i)
the Form 10 (or other registration statement referred to in
Section 3.2(a)) shall have been declared effective by the
SEC, (ii) the Knewco Common Stock shall have been approved
for listing or quotation in accordance with Section 3.2(d)
and (iii) the conditions set forth in Section 4 have been
satisfied or waived.
(f) Subject to Section 4, following the Distribution
Record Date, but prior to the Divestiture Date, the Company
shall deliver to the Distribution Agent one or more share
certificates representing all of the outstanding shares of
Knewco Common Stock to be distributed in the Knewco Stock
Distribution and shall instruct the Distribution Agent to
distribute on the Divestiture Date one share of Knewco
Common Stock for each share of Common Stock, par value $.01
per share, of the Company, held by holders of record of such
stock on the Distribution Record Date. Knewco agrees to
provide all share certificates that the Distribution Agent
shall require in order to effect the Knewco Stock
Distribution. All shares of Knewco Common Stock issued in
the Knewco Stock Distribution shall be duly authorized,
validly issued, fully paid, non-assessable and free of
preemptive rights.
(g) Immediately upon consummation of the Knewco Stock
Distribution, the Company shall not hold or beneficially own
directly or indirectly any shares of Knewco Common Stock.
3.3 Knewco Sale.
(a) Subject to the provisions of Section 5.9 of the
Merger Agreement, the Company's Board of Directors (or any
duly appointed committee thereof) shall in its sole
discretion establish any appropriate procedures in
connection with the consideration and approval of proposals
to purchase Knewco pursuant to the Knewco Sale (subject in
each case to the provisions of applicable law) and shall
approve a suitable agreement of purchase and sale to effect
such transaction with a third party purchaser; however, any
such agreement shall not commit the Company to any liability
for representations or warranties, or any indemnity or any
other obligations, to the purchaser of Knewco that survive
the closing of such transaction, other than Sensormatic's
obligations under this Agreement, in accordance with the
terms hereof, and under the License Agreement and the Supply
Agreement, in accordance with their respective terms.
(b) The Company shall cause the purchaser under the
Knewco Sale to acknowledge and accept this Agreement as
contemplated on the signature page hereof.
(c) The Company and Knewco shall take all such action
as may be necessary or appropriate under any applicable
federal securities laws, state securities or "Blue Sky"
laws, or other applicable laws in connection with the
transactions contemplated in this Section 3.3.
(d) Immediately upon the effectiveness of the Knewco
Sale, the Company shall not hold or beneficially own
directly or indirectly any equity interest in the
Contributed Assets.
3.4 Company Approval of Certain Knewco Actions.
Unless otherwise provided in this Agreement, the Company shall
cooperate with Knewco in effecting, and if so requested by Knewco
the Company shall, as the sole stockholder of Knewco, ratify any
actions that are reasonably necessary or desirable to be taken by
Knewco to effectuate, prior to the Divestiture Date, the
transactions contemplated in this Agreement in a manner consistent
with the terms of this Agreement, including, without limitation,
the following: (a) the preparation and approval of the Certificate
of Incorporation and By-laws of Knewco to be in effect at the
Divestiture Date; (b) the election or appointment of directors and
officers of Knewco to serve in such capacities commencing on the
Divestiture Date; (c) the adoption, preparation and implementation
of appropriate plans, agreements and arrangements for Knewco
employees and Knewco non-employee directors (including, without
limitation, plans, agreements or arrangements pursuant to which
securities of Knewco would be acquired by employees); (d) the
registration under applicable securities laws of any securities of
Knewco issued or distributed pursuant to Section 3.2 and any
securities issuable pursuant to employee benefit plans as
contemplated in clause (c) above; and (e) the adoption of an
appropriate purchase and sale agreement with a third party in
connection with a Knewco Sale.
3.5 Termination of Certain Claims.
(a) As of the effectiveness of the Divestiture, Knewco
shall have no claims against the Company based on any breach by the
Company or its affiliates of any obligations under this Agreement
that occurred prior to the effectiveness of the Divestiture, all of
such claims being hereby irrevocably waived and terminated as of
such time of effectiveness; provided that the foregoing shall not
limit the Company's liability for any breach by the Company or its
affiliates of any obligation under this Agreement that occurs
following the effectiveness of the Divestiture, including, without
limitation, the Company's obligation to indemnify Knewco as set
forth herein, or under the License Agreement and the Supply
Agreement.
(b) As of the effectiveness of the Divestiture, the
Company shall have no claims against Knewco based on any breach by
Knewco or its affiliates of any obligations under this Agreement
that occurred prior to the effectiveness of the Divestiture, all of
such claims being hereby irrevocably waived and terminated as of
such time of effectiveness; provided that the foregoing shall not
limit Knewco's liability for any breach by Knewco or its affiliates
of any obligation under this Agreement that occurs following the
effectiveness of the Divestiture, including, without limitation,
Knewco's obligation to indemnify the Company as set forth herein,
or under the License Agreement and the Supply Agreement.
4. Conditions.
4.1 General Condition. The respective obligations of
each party hereto to consummate the Divestiture and to perform all
other obligations set forth herein is subject to the satisfaction
or waiver (as provided for therein) of all of the conditions set
forth in Section 6 and Section 7 of the Merger Agreement (other
than the Divestiture and the conditions set forth in Sections 6.8
and 7.7 of the Merger Agreement).
4.2 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Divestiture and to
perform all other obligations set forth herein is subject to the
satisfaction of the condition that Knewco shall have effected its
assumption of the Assumed Liabilities, as contemplated in Section
1.3.
4.3 Conditions to the Obligations of Knewco. The
obligations of Knewco to consummate the transactions contemplated
herein and to perform all other obligations set forth herein is
subject to the satisfaction or waiver of the conditions that (a)
the Company shall have contributed to Knewco the Contributed
Assets, as contemplated in Section 1.1, and (b) the Company shall
have obtained an acknowledgement from the Banks with respect to the
release of the Bank Liens, as contemplated in Section 2.2(f).
5. Acts and Instruments of Transfer.
5.1 Acts and Instruments. Whenever reasonably requested
to do so by Knewco, on or after the Divestiture Date, the Company
shall do, execute, acknowledge and deliver all such acts, bills of
sale, assignments, confirmations, consents, other instruments of
assignment, transfer and conveyance, and any and all such further
instruments and documents, in form reasonably satisfactory to
Knewco and its counsel, as shall be reasonably necessary or
advisable to carry out the intent of this Agreement and to vest in
Knewco all the right, title and interest of the Company in and to
the Contributed Assets. The Company shall take such steps as may
be required to put Knewco in actual possession and control of the
Contributed Assets as of the time of Closing.
5.2 Authorization to Knewco. Without limiting in any
respect the right, title and interest in and to the Contributed
Assets to be acquired by Knewco hereunder, effective upon the
Closing, the Company hereby irrevocably authorizes Knewco, and its
successors and assigns: to demand and receive, from time to time,
any and all of the Contributed Assets, to give receipts and
releases for or in respect of the same, to collect, assert or
enforce any claim, right or title of any kind therein or thereto
and, for such purpose, from time to time, to institute and
prosecute in the name of the Company, or otherwise, any and all
proceedings at law, in equity or otherwise, which Knewco shall deem
expedient or desirable. The Company further agrees that Knewco
shall retain for its own account any amounts collected pursuant to
the foregoing authorization, and the Company agrees to pay to
Knewco, if and when received, any amounts which shall be received
by the Company after the Divestiture Date in respect of any
acquired Contributed Assets.
6. Correspondence and Records.
6.1 Correspondence. The Company hereby authorizes
Knewco, on and after the Divestiture Date, to receive and open mail
addressed to the Company and to deal with the contents thereof in a
responsible manner, provided that such mail relates (or reasonably
appears to relate) to the Business in the Knewco Territory, the
Contributed Assets or the Assumed Liabilities, but Knewco shall
deliver to the Company all other mail addressed to the Company
which is delivered to and received by it.
6.2 Referral of Orders. For a period of five years
beginning on the Divestiture Date, (i) Knewco agrees to use
reasonable efforts to refer to Sensormatic all orders and inquiries
with respect to any products related to the Business for use
outside of the Knewco Territory, and (ii) Sensormatic agrees to use
reasonable efforts to refer to Knewco all orders and inquiries
specifically referring to any products acquired with the Business
and marketed or manufactured by Knewco following the Divestiture
Date for delivery, or expressly intended for use, in the Knewco
Territory ("Knewco Products"); provided, however, that nothing in
this Agreement shall prohibit or in any way limit Sensormatic from
marketing, selling, leasing or in any other way dealing in any
products competitive with any of the Knewco Products anywhere in
the world, including the Knewco Territory.
6.3 Records. Knewco shall have the right to examine,
use and make excerpts from any corporate minute books, books of
account and other records and documents which are not included in
the Contributed Assets, or connected with or relating to any of the
Assumed Liabilities pursuant to this Agreement, and the Company
shall not destroy any such books or records without Knewco's
consent for seven years following the date of this Agreement. The
Company shall have the right to examine, use and make excerpts from
any books of account and other records and documents which are
transferred to Knewco pursuant to this Agreement for any purpose
connected with or relating to any event occurring prior to the
Divestiture Date, and Knewco shall not destroy any such books or
records without the Company's consent for seven years following the
date of this Agreement.
7. Other Agreements.
7.1 Release of Bank Liens. The Company will obtain the
release of Contributed Assets from the Bank Liens, following
consummation of the Merger.
7.2 Further Assurances. In addition to the actions
specifically provided for elsewhere in this Agreement, each of the
parties hereto shall use its best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things,
reasonably necessary, proper or advisable under applicable laws,
regulations and agreements to consummate and make effective the
transactions contemplated in this Agreement, including, without
limitation, using its best efforts to obtain the consents and
approvals to enter into any amendatory agreements and to make the
filings and applications necessary or desirable to have been
obtained, entered into or made in order to consummate the
transactions contemplated in this Agreement. Without limiting the
foregoing, Knewco shall provide such cooperation and assistance
(and that of its appropriate employees, if needed) as is reasonably
requested by Sensormatic, and at Sensormatic's expense, to file and
prosecute patent applications corresponding to any of the Retained
Intellectual Property in any jurisdiction outside of the Knewco
Territory, and any of the SuperStrip Technology anywhere in the
world, and to maintain any resulting patents in effect, including,
without limitation, execution of any such patent applications and
related documents and pleadings, and the giving of testimony.
7.3 Transition Services. Following the Divestiture Date
for a period of up to six months, Knewco will continue to provide
to the Company and its subsidiaries, and their respective
successors and assigns (each a "Knogo Entity"), as any such Knogo
Entity shall request, any or all administrative services or
functions, such as data processing, tax, accounting, insurance,
personnel, employee benefits and communications (collectively,
"Services") currently being provided by the Company and its
subsidiaries (other than Knewco and its subsidiaries), in
connection with the Business outside of the Knewco Territory,
except that each Knogo Entity shall have the right to not accept
any Services. During such period and thereafter as reasonably
requested by Sensormatic, Knewco will provide the services of its
appropriate personnel in connection with the preparation of any tax
filings of the Company or Sensormatic and Sensormatic's year-end
audit. Any of such Services shall be provided on a reasonable cost
basis and such cost basis shall be documented by Knewco at the
request of Sensormatic. Any Knogo Entity may terminate any
Services at any time upon 10 days prior written notice to Knewco.
At the request of Knewco, any Knogo Entity will enter into an
agreement satisfactory to Knewco, Sensormatic and such Knogo Entity
with respect to the provision of any Services that such Knogo
Entity may request.
7.4 Persons to be Employed by Knewco. Knewco shall
extend an offer of employment to each of the persons listed in
Schedule IX, each currently an employee of the Company, consisting
of approximately 200 people, commencing on the Divestiture Date and
in the capacity set forth on such Schedule opposite such person's
name or a comparable capacity.
7.5 Insurance.
(a) Knewco will endeavor to procure insurance having
terms, conditions, exclusions and limitations substantially
equivalent to the insurance coverages currently maintained by the
Company with respect to the property and Business in the Knewco
Territory and providing coverage with respect to the property,
business and operations of Knewco on and after the Divestiture Date
and with respect to any liabilities of Knewco caused by or arising
out of occurrences or events taking place on or after the
Divestiture Date.
(b) On or before the Divestiture Date the parties shall
arrange for Knewco to be protected, whether by means of liability
insurance coverage having terms, conditions, exclusions and
limitations substantially equivalent to the liability insurance
coverage currently maintained by the Company with respect to the
property and Business in the Knewco Territory or by other means,
with respect to any liabilities of Knewco caused by or arising out
of occurrences or events taking place prior to the Divestiture
Date; provided that (i) the cost of such protection shall be
reasonable and shall be for the Company's account and (ii) the
Company and Knewco shall consult with each other and their
respective insurance brokers in order to identify the most cost-
effective means of maintaining the level of insurance previously
maintained by the Company in the most cost-effective manner
(possibly including each other as named insureds under their
respective policies).
7.6 Post-Closing Adjustment.
(a) As promptly as practicable after the Divestiture
Date and in any event within 45 days thereafter, Knewco shall
prepare (with Sensormatic's cooperation, as appropriate) its
final balance sheet at the Divestiture Date (the "Divestiture
Date Balance Sheet"). The Divestiture Date Balance Sheet,
which shall be prepared in accordance with GAAP and the
Allocation Principles, and consistent with the Estimated
Balance Sheet, shall reflect, among other things, the net
worth of Knewco at the Divestiture Date after giving effect to
the Contribution (but without giving effect to any write-downs
described in Section 1.5). If Sensormatic and Knewco are in
agreement as to the net worth of Knewco, as reflected on the
Divestiture Date Balance Sheet, such net worth shall have been
finally determined in accordance with this Section 7.6 and,
accordingly, either Sensormatic or Knewco shall promptly pay
to the other the cash payment, if any, required pursuant to
Section 7.6(e). If Sensormatic and Knewco are not in
agreement on such net worth, they shall promptly thereafter
jointly instruct Deloitte & Touche ("Deloitte") to conduct an
audit or, if agreed to by the parties, a review of the
Divestiture Date Balance Sheet (the "Examination"). The
purpose of the Examination shall be to determine the net worth
of Knewco at the Divestiture Date after giving effect to the
Contribution and the amount of any adjustment in the amount of
cash or cash equivalents contributed to Knewco pursuant to
this Section 7.6.
(b) Sensormatic and Knewco shall jointly instruct
Deloitte to complete the Examination within 30 days after the
receipt of the Divestiture Date Balance Sheet as prepared by
Knewco and to render its report thereon (the "Report") to
Knewco and Sensormatic within such period. The Report shall
include, among other things, Deloitte's calculation of the net
worth of Knewco as reflected on the Divestiture Date Balance
Sheet. Sensormatic and Knewco shall jointly instruct Deloitte
to make its work papers with respect to the Examination and
the Report available to Knewco and its advisers and to
Sensormatic, Ernst & Young and Sensormatic's other advisers.
(c) The content and conclusions of the Report shall be
conclusive and binding on Sensormatic and Knewco unless either
one notifies the other and Deloitte that it disputes the
Report within 30 days after Deloitte's delivery of the Report
to it. If either Sensormatic or Knewco timely disputes the
Report, they shall promptly attempt to resolve any differences
between them with respect to the Report. If they are unable
to do so within 30 days after the date of the notice of
dispute, either Sensormatic or Knewco or both of them jointly
may submit the dispute to Price Waterhouse or, if they are
unable or unwilling to act, such other "Big Six" public
accounting firm as may be selected by the American Arbitration
Association (the "Second Auditor") for resolution. The
Second Auditor shall provide Sensormatic and Knewco with the
opportunity to present their respective positions with respect
to the dispute. The determination of the Second Auditor shall
be conclusion and binding on Sensormatic and Knewco, except in
the event of manifest error. In making such determination,
the Second Auditor shall be deemed to act as an expert and not
as an arbitrator.
(d) The charges of Deloitte in the conduct of the
Examination and the preparation of the Report shall be borne
by Sensormatic. The charges of the Second Auditor shall be
borne by Sensormatic and Knewco in the proportions determined
by the Second Auditor on the basis that each party shall bear
the cost of the Second Auditor's services which relate to the
amount of the disputed items that are resolved against it.
Such determination by the Second Auditor shall be binding on
Sensormatic and Knewco. Sensormatic and Knewco shall
cooperate with Deloitte and the Second Auditor in the conduct
of the Examination, the preparation of the Report and any
resolution of any dispute with respect thereto by the Second
Auditor.
(e) After the net worth of Knewco as reflected on the
Divestiture Date Balance Sheet has been finally determined in
accordance with this Section 7.6, (i) if such net worth
exceeds the Target Book Value, Knewco shall promptly make a
cash payment to Sensormatic in the amount of such excess, or
(ii) if the Target Book Value exceeds such net worth,
Sensormatic shall promptly make a cash payment to Knewco in
the amount of such excess.
7.7 Delayed Transfers Under Merger Agreement. In the
event that any Acquired Subsidiary (as defined in the Merger
Agreement) is managed by Knewco on an interim basis, or is
ultimately transferred to Knewco by the Escrow Agent pursuant to
Section 10.2 of the Merger Agreement, the parties agree that any
such Acquired Subsidiary shall be deemed to be covered by this
Agreement as if it were a subsidiary of Knewco, and that the Knewco
Territory, non-competition and other provisions of this Agreement
shall be modified by the parties as may be necessary to equitably
adjust their respective rights and obligations hereunder in order
to enable Knewco to operate the business of any such Acquired
Subsidiary. Knewco shall abide by Section 5.1 of the Merger
Agreement with respect to any such Acquired Subsidiary, unless and
until transferred to Knewco thereunder.
8. No Warranty. Except as set forth in Section 1.5 and
Section 7.1, the Company does not, in this Agreement or any other
agreement, instrument or document contemplated in this Agreement or
the Merger Agreement, make any representation or warranty, or
(except as expressly set forth herein) any covenant or agreement,
with respect to:
(a) the value of any asset or thing of value to be
transferred to Knewco;
(b) the freedom from encumbrance of any asset or thing
of value to be transferred to Knewco;
(c) the absence of defenses or freedom from
counterclaims with respect to any claim, including accounts
receivable, to be transferred to Knewco; or
(d) the legal sufficiency of any assignment, document or
instrument delivered hereunder to convey title to any asset or
thing of value upon its execution, delivery and filing.
All assets to be transferred to Knewco shall be transferred "AS IS,
WHERE IS" and Knewco shall bear the economic and legal risk that
any conveyance shall prove to be insufficient to vest in Knewco
good and marketable title, free and clear of any lien, claim,
equity or other encumbrance, provided that Knewco shall in any
event receive all of the Company's right, title and interest
therein.
9. Indemnification.
9.1 Indemnification of Knewco. The Company and
Sensormatic (as successor to the Company following the Merger)
jointly and severally shall indemnify, defend and hold harmless
Knewco from and against any loss, damage, liability or expense
(including any related costs and expenses referred to in Section
9.3) (collectively "Damages") (i) arising out or connected with any
breach of any covenant of the Company contained in this Agreement,
(ii) arising out of or in connection with any matter relating to
the Business (other than related to the Assumed Liabilities), or
(iii) arising out of or in connection with any matter which is
specifically set forth in Schedule X.
Without limiting the generality of the foregoing, the
Company and Sensormatic shall indemnify, defend and hold harmless
Knewco, each director, officer, employee, and agent of Knewco, and
each person, if any, who controls Knewco, within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, and each of the heirs, executors, successors and assigns of
any of the foregoing, from and against any and all Damages arising
out of or based upon any untrue statement or alleged untrue
statement of a material fact contained anywhere in the proxy
statement (the "Proxy Statement") pursuant to which the Board of
Directors of the Company shall solicit proxies to be voted for the
approval of the Merger and which shall also set forth appropriate
financial and other disclosure concerning the Divestiture, Knewco,
the Business, and certain other matters, and the Registration
Statement of which it forms a part (the "Registration Statement"),
but not as to any Knogo Information (as hereinafter defined)
included in the Proxy Statement or Registration Statement), or the
omission or alleged omission to state anywhere in the Proxy
Statement or the Registration Statement (other than in the Knogo
Information) a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
Knewco shall give the Company and Sensormatic prompt
notice of any claim, action, suit or proceeding which Knewco
believes might give rise to indemnification under this Section 9.1.
9.2 Indemnification of the Company and Sensormatic.
Knewco shall indemnify, defend and hold harmless the Company and
Sensormatic from and against any Damages (i) arising out or con-
nected with any breach of any covenant of Knewco contained in this
Agreement, (ii) arising out of or in connection with any Assumed
Liabilities, (iii) arising out of or in connection with the
Divestiture (except with respect to liabilities or obligations of
the Company or Sensormatic hereunder), or (iv) arising out of or in
connection with any matter which is specifically set forth in
Schedule XI.
Knewco shall indemnify, defend and hold harmless the
Company and Sensormatic, each of their respective subsidiaries,
each director, officer, employee and agent of each of the Company
and Sensormatic or any of their respective subsidiaries, and each
person, if any, who controls the Company and Sensormatic or any of
their respective subsidiaries within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act, and each
of the heirs, executors, successors and assigns of any of the
foregoing, from and against any and all Damages arising out of or
based upon any untrue statement or alleged untrue statement of a
material fact contained in any portion of the Proxy Statement or
the Registration Statement supplied by, or based on information
supplied by, the Company or Knewco, or any Form 10 (or other
registration statement referred to in Section 3.2(a)) of Knewco
(the "Knogo Information"), or the omission or alleged omission to
state in the Knogo Information a material fact required to be
stated therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
9.3 Related Costs and Expenses. Each indemnifying
party hereto (the "Indemnitor") shall, in addition to such
Indemnitor's obligations under Section 9.1 or 9.2, as applicable,
indemnify and hold harmless the indemnified party hereto (the
"Indemnitee") from, against and in respect of any and all actions,
suits, proceedings, demands, assessments, judgments, settlements,
costs (including reasonable attorneys' fees and disbursements) and
legal and other expenses incurred by the Indemnitee as a result of
any matter as to which the Indemnitee is entitled to
indemnification under such Sections, or in defending any
allegations or claims which, if true, would give rise to Damages
subject to indemnification thereunder, or incident to the
enforcement by the Indemnitee of this Section 9 (provided the
Indemnitee prevails in such action for enforcement).
9.4 Procedures for Asserting Claims, Etc. All claims
for indemnification under this Section 9 shall be asserted and
resolved as follows:
(a) In the event that any claim or demand for which an
Indemnitee would be entitled to indemnification pursuant to this
Section 9 is asserted against an Indemnitee or sought to be
collected from an Indemnitee by a third party, the Indemnitee shall
give the Indemnitor timely notice (to the extent practicable),
specifying the nature of such claims or demand and the amount or
the estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such claim
or demand) (the "Claim Notice"). For purposes of this Section
9.4(a), in the event that any such claim is asserted directly
against any Indemnitor, a Claim Notice shall be deemed to have been
given with respect to such claim by the Indemnitee, and the
Indemnitor shall promptly notify the Indemnitee of such claim and
of the Indemnitor's response under this Section 9.4(a). The
Indemnitor shall have 10 business days from receipt of the Claim
Notice (the "Notice Period") to notify the Indemnitee (i) whether
or not it acknowledges in full its liability to the Indemnitee
hereunder with respect to such claim or demand, and (ii) if the
Indemnitor acknowledges such liability, whether or not it desires,
at its sole cost and expense, to defend the Indemnitee against such
claim or demand. In the event that the Indemnitor notifies the
Indemnitee within the Notice Period (and not thereafter) that it
acknowledges in full such liability and desires to defend against
such claim or demand, then except as hereinafter provided, the
Indemnitor shall have the right to defend the claim using counsel
reasonably satisfactory to the Indemnitee; provided, however, that
such Indemnitee shall in any event have the right to defend any
claim with respect to which an adverse outcome could have a
material adverse effect on its business, condition (financial or
otherwise) or results of operations. The Indemnitee shall also
have the right to control the defense of any claim as to which the
Indemnitor does not timely acknowledge liability in full, or as to
which it does not timely notify the Indemnitee of its desire to
defend. The party not entitled to defend may participate in, but
not control, any such defense at its sole cost and expense.
(b) No settlement or compromise of any such claim or
demand, or any related action, suit or proceeding, shall be made
without the prior consent of the Indemnitor and the Indemnitee,
which consent shall not be unreasonably withheld by either of them.
(c) In the event that an Indemnitee should have a claim
against an Indemnitor hereunder which does not involve a claim or
demand being asserted against or sought to be collected from it by
a third party, such Indemnitee shall promptly send a Claim Notice
with respect to such claim to the Indemnitor.
10. Non-Competition and Confidentiality.
(a) Knewco agrees that, for a period of five years after
the Divestiture Date, it shall not, anywhere in the world outside
the Knewco Territory (or for such lesser area or such lesser period
as may be determined by a court of competent jurisdiction to be a
reasonable limitation on the competitive activity of Knewco),
directly or indirectly:
(i) market, distribute, sell, lease, install, service
or maintain any electronic article surveillance systems,
including re-usable tags, disposable labels and accessory
products used in such systems, closed circuit television
systems and products, and other products to deter and detect
shoplifting and employee theft (collectively, "Loss Prevention
Products") manufactured, marketed, sold or leased by the
Company prior to the Divestiture Date, or any improvements or
successors thereto (or license any Contributed Intellectual
Property);
(ii) otherwise engage in the business of or activities
relating to manufacturing, marketing, distributing, selling,
leasing, servicing or maintaining, or licensing, any Loss
Prevention Products whatsoever;
(iii) solicit or attempt to solicit business of any
customers of the Company or any Acquired Subsidiary (including
prospective customers solicited by the Company or any Acquired
Subsidiary) for Loss Prevention Products or related services
the same or similar to those offered, sold, produced or under
development by the Company or any Acquired Subsidiary as of
the date hereof;
(iv) otherwise divert or attempt to divert from any
Acquired Subsidiary any business whatsoever;
(v) solicit or attempt to solicit for any business
endeavor any employee of the Company or any Acquired
Subsidiary or any former employee of the Company or any
Acquired Subsidiary who becomes an employee of Sensormatic by
virtue of the Merger;
(vi) interfere with any business relationship between
the Company or any Acquired Subsidiary or Sensormatic, on the
one hand, and any other person, on the other hand; or
(vii) have any interest as a stockholder, partner, lender
or otherwise in, any person which is engaged in activities
which, if performed by Knewco, would violate this Section 10,
or permit or encourage any of its employees or employees to
engage in any such activity; provided, however, that the
foregoing shall not prevent Knewco from purchasing or owing up
to 2% of the voting securities of any corporation, the
securities of which are publicly traded, that may be deemed to
be in competition with Sensormatic outside of the Knewco
Territory.
In addition, at no time (either before or after the term herein-
above set forth) shall Knewco, or any successor thereto, do busi-
ness under the "Knogo" name or a name similar thereto outside the
Knewco Territory, or utilize the Company's other trademarks or
trade names outside the Knewco Territory.
In the event of a "Change of Control" of Knewco, either
pursuant to a Knewco Sale or following the date of this Agreement,
the obligations of Knewco under this Section 10(a) shall continue
with respect to Knewco's then existing trademarks, trade names and
products, and products subsequently developed which utilize any of
the Contributed Intellectual Property, but shall not be construed
to limit the activities of the acquiring person with respect to its
names and products, or new products developed by the combined
entity which do not utilize any of the Contributed Intellectual
Property.
As used in this Section 10(a), "Change of Control" means
any transaction or series of transactions pursuant to which (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes the "beneficial owner" (as such term is
defined in Rule 13(d) under the Exchange Act) of more than 50% of
the combined voting power of Knewco or (ii) the business, and
substantially all of the assets, of Knewco relating to the products
used in the Business that are included in the Contributed Assets
are sold or transferred to an unaffiliated third party.
(b) Knewco acknowledges that it and its employees have
become informed of, and had access to, in addition to the
Contributed Intellectual Property, other confidential information
of the Company including, without limitation, technical know-how
and other intellectual property, marketing plans and information,
pricing information, identity of customers and prospective custom-
ers with respect to the Business outside of the Knewco Territory,
and identity of suppliers, and that such information, even though
it may have been or may be developed or otherwise acquired by one
or more of such employees, was and is the property of the Company
except to the extent relating solely to the Business in the Knewco
Territory, and, to the extent not proprietary to Knewco by virtue
of this Agreement, Knewco shall, and shall use its reasonable best
efforts to cause any such employee to, hold the same in trust and
solely for the benefit of the Company or any successor or assign
thereof, including without limitation Sensormatic, except as
hereinafter set forth. Except in connection with the conduct of
Knewco's business in the Knewco Territory, Knewco shall not, and it
shall use its reasonable best efforts to cause its employees,
affiliates or agents not to, at any time reveal, report, publish,
transfer or otherwise disclose to any person, corporation or other
entity, or use any of the Company's confidential information,
except for such information which legally and legitimately is or
becomes of general public knowledge from authorized sources other
than Knewco or its employees, affiliates or assets or legitimately
acquired from third parties not under an obligation of
confidentiality to Sensormatic or the Company or can be
demonstrated to have been independently developed by Knewco after
the date hereof without reference to such confidential information.
(c) Because neither the Company (and Sensormatic, as
successor to the Company) nor Knewco have an adequate remedy at law
to protect their respective businesses from the other's competition
or to protect their respective interests in their respective trade
secrets, privileged, proprietary or confidential information
(including technical know-how) and similar commercial assets, each
of the Company (and, following the Effective Time, Sensormatic) and
Knewco shall be entitled to injunctive relief, in addition to such
other remedies and relief that would, in the event of a breach of
the provisions of this Section 10, be available to them. The
provisions of this Section 10 shall survive the Divestiture Date.
For purposes of this Section 10, the term "Sensormatic"
includes Sensormatic's subsidiaries, joint ventures and other
affiliates (including those acquired pursuant to the Merger).
11. Miscellaneous.
11.1 Termination. This Agreement (a) may be terminated
at any time prior to the Divestiture Date by mutual written consent
of the Company and Sensormatic, or (b) shall terminate upon
termination of the Merger Agreement prior to the Merger.
11.2 Entire Agreement. This Agreement, together with
the schedules and exhibits hereto, and together with the Merger
Agreement, the License Agreement and the Supply Agreement, to the
extent applicable, sets forth the entire understanding of the
parties with respect to its subject matter, merges and supersedes
all prior and contemporaneous understandings of the parties hereto
with respect to its subject matter, except any confidentiality
agreements executed by the Company and Sensormatic. Failure of any
party to enforce any provision of this Agreement shall not be con-
strued as a waiver of its rights under such or any other provision.
11.3 Amendments; Waivers. This Agreement (including the
Annex, Schedules and Exhibits hereto) may be amended by the parties
at any time prior to the Divestiture Date. Any such amendment
shall be in writing signed on behalf of the party or parties to be
charged. At any time prior to the Divestiture Date, either the
Company or Knewco may waive compliance by the other party with any
of the agreements or conditions contained in this Agreement. Any
agreement on the part of a party to any such waiver shall be valid
only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights.
11.4 Communications. All notices, consents and other
communications given under this Agreement shall be in writing and
shall be deemed to have been duly given (a) when delivered by hand
or by Federal Express or a similar overnight courier to, (b) five
days after being deposited in any United States post office
enclosed in a postage prepaid registered or certified envelope
addressed to, or (c) when successfully transmitted by telecopier
(with a confirming copy of such communication to be sent as
provided in (a) or (b) above) to, the party for whom intended, at
the address or telecopier number for such party set forth below, or
to such other address or telecopier number as may be furnished by
such party by notice in the manner provided herein; provided,
however, that any notice of change of address or telecopier number
shall be effective only upon receipt.
If to the Company:
Knogo Corporation
350 Wireless Boulevard
Happauge, New York 11788
Attention: Thomas A. Nicolette
Facsimile No.: (516) 232-2812
With a copy to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attention: David H. Kaufman
Facsimile No.: (212) 806-6006
If to Knewco:
Knogo North America Inc.
350 Wireless Boulevard
Happauge, New York 11788
Attention: Thomas A. Nicolette
Facsimile No.: (516) 232-2812
With a copy to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attention: David H. Kaufman
Facsimile No.: (212) 806-6006
If to Sensormatic:
Sensormatic Electronics Corporation
500 N.W. 12th Avenue
Deerfield Beach, Florida 33442
Attention: Corporate Counsel
Facsimile No.: (305) 420-2561
and
Vice President of Corporate
Development
Facsimile No.: (305) 420-2964
With a copy to:
Christy & Viener
620 Fifth Avenue
New York, New York 10020
Attention: Jerome M. LeWine
Facsimile No.: (212) 632-5555
11.5 Successors and Assigns. This Agreement shall be
binding on, enforceable against and inure to the benefit of the
parties hereto and their respective successors and permitted
assigns (including, without limitation, Sensormatic as the
successor to the Company pursuant to the Merger, and a purchaser of
Knewco pursuant to a Knewco Sale or subsequent successor to
Knewco's Business), and nothing herein is intended to confer any
right, remedy or benefit upon any other person. Except as
contemplated in the preceding sentence, Knewco may not assign its
rights or delegate its obligations under this Agreement without the
express written consent of Sensormatic or the Company, as
applicable.
11.6 Governing Law; Jurisdiction. This Agreement shall
in all respects be governed by and construed in accordance with the
laws of the State of New York. Each of the parties hereto
expressly and irrevocably submits to the non-exclusive personal
jurisdiction of the United States District Court, Southern District
of New York and to the jurisdiction of any other competent court of
the State of New York located in New York City in connection with
all disputes arising out of or in connection with this Agreement or
the transactions contemplated herein. Each party hereby waives the
right to any other jurisdiction or venue to which any of them may
be entitled by reason of its present or future domicile. The
parties agree that service of process may be made by U.S.
registered mail, return receipt requested, to a party at its
address set forth in Section 11.4.
11.7 Savings Clause. If any provision of this Agreement
is held to be invalid or unenforceable by any court or tribunal of
competent jurisdiction, the remainder of this Agreement shall not
be affected thereby, and such provision shall be carried out as
nearly as possible according to its original terms and intent to
eliminate such invalidity or unenforceability.
11.8 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
11.9 Construction. Headings contained in this Agreement
are for convenience only and shall not be used in the
interpretation of this Agreement. References herein to the
Agreement shall be deemed to include all Schedules and Exhibits
hereto, and references herein to Annexes, Sections, Schedules and
Exhibits are to the sections, schedules and exhibits of this
Agreement. As used herein, the singular includes the plural, and
the masculine, feminine and neuter gender each includes the others
where the context so indicates.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first set forth above.
KNOGO CORPORATION
By:
Thomas A. Nicolette
President
KNOGO NORTH AMERICA INC.
By:
Thomas A. Nicolette
President
Effective as of the Effective Time of the Merger,
Sensormatic Electronics Corporation, as successor to Knogo
Corporation, shall become a party to the foregoing Contribution and
Divestiture Agreement and hereby acknowledges and accepts such
Agreement.
SENSORMATIC ELECTRONICS CORPORATION
By:
Name:
Title:
At the effective time of a Knewco Sale, the under-
signed, as the purchaser and successor to Knogo North America Inc.,
hereby acknowledges and accepts the foregoing Contribution and
Divestiture Agreement and agrees to be bound by the terms thereof
and of the License Agreement, the Supply Agreement and the other
documents and instruments referred to therein.
[PURCHASER IN A KNEWCO SALE]
By:
Name:
Title:
<PAGE>
List of Annexes, Schedules and Exhibits
Annex A - Pro Forma Balance Sheet
Schedules:
Schedule I - Contributed Realty
Schedule II - Accounts Receivable
Schedule III - Assigned Instruments
Schedule IV - Contributed Intellectual Property
Schedule V - SuperStrip Technology
Schedule VI - Prepaid Expenses and Deferred Charges
Schedule VII - Bank Loans
Schedule VIII - Caribe Financial Assets
Schedule IX - Knewco Employees Following Divestiture
Schedule X - Certain Matters for Which Knewco is
Indemnified
Schedule XI - Certain Matters for Which Sensormatic and the
Company are Indemnified
Exhibits:
Exhibit A - Form of Instrument of Assignment
Exhibit B - Form of License Agreement
Exhibit C - Form of Supply Agreement
Exhibit D - Form of Instrument of Assumption
<PAGE>
EXHIBIT A TO
DIVESTURE AGREEMENT
ProForma Balance Sheet
As of 5/30/94
(all numbers in thousands)
ProForma
ASSETS As of 5/30/94
_____________
Cash
$1,513
Accounts receivable, gross 4,963
Allowance for doubtful accounts (1,290)
______
Accounts receivable, net 3,673
Other receivables 295
Prepaid expenses 533
NISTL 2,144
Security devices
________________
Under lease, gross 1,203
Allowance for depreciation (636)
______
Under lease, net 567
Inventory (est.) 5,803
______
Total security devices, net 6,370
Fixed assets
_____________
Machinery & equipment 5,592
Furniture & fixtures 2,775
Leasehold Improvement 42
Buildings 9,843
Land 3,099
Fixed assets, gross 21,351
Accumulated depreciation (7,515)
______
Total fixed assets, net 13,836
Intangibles, net (est.) 500
Deferred charges, net 298
Intercompany receivables, net 0
_______
TOTAL ASSETS $29,162
=======
LIABILITIES & EQUITY As of 5/30/94
_____________
Debt 0
Accounts payable 1,003
Accrued liabilities` 3,815
Taxes payable 0
Deferred lease rental 337
_______
Total liabilities 5,157
Book value 24,011
_______
TOTAL LIABILITIES & EQUITY $29,162
=======
EXHIBIT B TO
DIVESTITURE AGREEMENT
LICENSE AGREEMENT
AGREEMENT, dated as of , 1994, between KNOGO NORTH
AMERICA INC., a Delaware corporation ("Knewco"), and KNOGO CORPORATION,
a New York corporation ("Knogo").
W I T N E S S E T H :
WHEREAS, Knogo and Knewco are parties to the Contribution and
Divestiture Agreement, dated as of , 1994 (the "Divestiture
Agreement"), pursuant to which Knewco was formed to continue Knogo's
business operations in the Knewco Territory (as defined below);
WHEREAS, Knogo and Knewco, together with Sensormatic
Electronics Corporation, a Delaware corporation ("Sensormatic"), are
parties to the Agreement and Plan of Merger dated as of August 14, 1994
between Sensormatic, Knogo and Knewco (the "Merger Agreement"), pursuant
to which Knogo is to be merged with and into Sensormatic;
WHEREAS, pursuant to the Divestiture Agreement, certain patent
rights, technology and other assets of Knogo were transferred to Knewco;
WHEREAS, Knogo wishes to license from Knewco such patent
rights and technology, subject to the terms and conditions of this
Agreement, and Knewco is willing to grant such license;
WHEREAS, as contemplated in the Divestiture Agreement, the
SuperStrip Patent Rights and SuperStrip Technology (as defined below)
were retained by Knogo, and such technology may be utilized in the
manufacture, sale and promotion of material with particular application
to source labelling and source embedding;
WHEREAS, Knewco wishes to obtain a non-exclusive license from
Knogo to the SuperStrip Patent Rights and the SuperStrip Technology in
the Knewco Territory, subject to the terms and conditions of this
Agreement, and Knogo is willing to grant such license;
WHEREAS, it is contemplated that Sensormatic will succeed to
the rights of Knogo pursuant to the Merger Agreement; and
WHEREAS, the execution and delivery of this Agreement is a
condition to the respective obligations of the parties under the Merger
Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the
following terms have the following meanings:
(a) "Affiliate" means an entity controlled by, controlling or
under common control with a specified entity. As used herein, the term
"control" includes, but is not limited to, the right to vote directly or
indirectly 50% or more of the voting stock of an entity or the right to
direct or influence significantly such entity's management or policies.
(b) "Change of Control" means any transaction or series of
transactions pursuant to which (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act")) becomes the "beneficial owner" (as such term is defined
in Rule 13(d) under the Exchange Act) of more than 50% of the combined
voting power of Knewco or (ii) the business, and substantially all of
the assets, of Knewco relating to the Products are sold or transferred
to an unaffiliated third party.
(c) "Knewco Patent Rights" means (i) all the United States
and Canadian patents and patent applications with respect to the
Products and the Product Technology, as listed on Schedule I, (ii) any
continuation, continuation-in-part or division of any such patent
application and any patents issuing on any thereof, (iii) any reissues,
extensions or renewals of any patents referred to in clauses (i) or (ii)
of this Section 1(c) and (iv) any patent application filed at any time
hereafter by or on behalf of Knewco in the United States or Canada, and
any patent issued thereon, with respect to any Product Technology.
(d) "Knewco Territory" means the United States of America,
Puerto Rico and Canada.
(e) "Pinned Wall Patent Rights" means (i) the United States
and Canadian patents and patent applications listed on Schedule II, (ii)
any continuation, continuation-in-part or division of any such patent
application and any patents issuing on any thereof, and (iii) any
reissues, extensions or renewals of any patents referred to in clauses
(i) or (ii) of this Section 1(e).
(f) "Products" means the Products currently marketed by
Knewco or Knogo, including those listed on Schedule III, and including
all parts and components thereof. If applicable, Products shall include
any Product embodying a Product Improvement as contemplated by this
Agreement.
(g) "Product Technology" means concepts, ideas, inventions,
designs, devices, processes, technical information and know-how, whether
or not described in the Knewco Patent Rights or constituting trade
secrets, existing on the date hereof, and which relate to the design,
manufacture, use, installation, service or maintenance of Products, and
all written or electronic expressions or embodiments thereof, including,
without limitation, prototypes, schematics, plans, designs, blue-prints,
drawings, specifications, software, algorithms, manuals, notebooks and
records.
(h) "Product Improvements" means all improvements, modifi-
cations, developments, revisions or enhancements of any Product or of
the means of manufacturing such Product, whether or not covered by a
patent, including without limitation improvements to Products which
enhance performance, durability or quality, expand applications for use
or reduce cost of manufacture, which are developed or acquired by any
party (by purchase, license or otherwise), alone or together with
others, and embodied in such party's Products or used in the manufacture
thereof.
(i) "SuperStrip" means the SuperStrip material described in
Schedule IV.
(j) "SuperStrip Improvements" means all improvements,
modifications, developments, revisions or enhancements of SuperStrip
material or of the means of manufacturing such material, whether or not
covered by a patent, including without limitation improvements to such
material which enhance performance, durability or quality, expand
applications for use or reduce cost of manufacture, which are developed
or acquired by any party (by purchase, license or otherwise), alone or
together with others, and embodied in the SuperStrip material sold by
such party or used in the manufacture thereof.
(k) "SuperStrip Patent Rights" means (i) the United States,
Canadian and other foreign patents and patent applications listed on
Schedule IV and any additional corresponding foreign patent applications
filed after the date hereof, (ii) any continuation, continuation-in-part
or division of any such patent applications and any patents issuing on
any thereof and (iii) any reissues, extensions or renewals of any
patents referred to in clauses (i) or (ii) of this Section 1(k).
(l) "SuperStrip Technology" means concepts, ideas,
inventions, designs, devices, processes, technical information and know-
how, whether or not described in the SuperStrip Patent Rights or
constituting trade secrets, existing on the date hereof, and which
relate to the design, manufacture or use of SuperStrip material or any
SuperStrip label product, and all written or electronic expressions or
embodiments thereof, including, without limitation, prototypes,
schematics, plans, designs, blue-prints, drawings, specifications,
software, algorithms, manuals, notebooks and records.
(m) "Trademarks" means such trademarks, trade names, service
marks, slogans, labels, logos and other trade identifying symbols,
whether or not registered with any governmental authority, which at any
time have been used, or developed for use, in connection with the
Products by Knogo or Knewco. A list of the Trademarks is set forth in
Schedule V.
Unless otherwise required by the context, references to
"Knogo" in this Agreement shall be deemed to refer also to Sensormatic
as the successor to Knogo pursuant to the Merger Agreement.
2. Product License and Technology Transfer.
(a) Grant of Product License. Pursuant to the Divestiture
Agreement, Knewco obtained the Knewco Patent Rights and all rights to
the Product Technology in the Knewco Territory, and Knogo retained all
corresponding patent rights and all rights to the Product Technology
outside the Knewco Territory. In order to permit Knogo to produce
products in the Knewco Territory, Knewco, subject to the terms and
conditions of this Agreement, grants to Knogo a fully-paid, perpetual,
non-exclusive right and license, with the right to sublicense others, to
practice and use the Knewco Patent Rights and the Product Technology in
the Knewco Territory to use, make and have made Products, provided that
such Products are marketed, distributed, sold or leased outside of the
Knewco Territory for use outside of the Knewco Territory.
(b) Further Assistance. In order to assist Sensormatic, as
successor to Knogo, in establishing its own capacity to manufacture
Products, Knewco shall:
(i) transfer to Sensormatic, not later than 10 days
after the date hereof, the Product Technology by delivering copies
of all existing written or electronic expressions or embodiments
thereof, including, without limitation, prototypes, schematics,
plans, designs, blue-prints, drawings, specifications, software,
algorithms, manuals, notebooks and records, and including bills of
materials and components for each Product, specifying the sources
of supply of each thereof. Knewco agrees that (A) prior to the
date of delivery it shall reduce to writing all Product Technology
which has not heretofore been expressed in written or electronic
form, (B) all such writings shall be in English and (C) all
expressions and embodiments delivered to Sensormatic shall together
constitute a clear and complete description of all of the Product
Technology sufficient to provide Sensormatic with all information
reasonably required by it for the manufacture (including the
design, manufacture and operation of related tooling, equipment and
processes), testing, installation, service and maintenance of the
Products by Sensormatic;
(ii) conduct, without charge and at times reasonably
requested by Sensormatic, six to ten training sessions with respect
to the Products and the Product Technology for Sensormatic
personnel at Knewco's facilities in Cidra, Puerto Rico; and
(iii) during the 18 months following the date of this
Agreement, make available, as requested by Sensormatic and without
charge, at Sensormatic's manufacturing facilities or other
locations, the services of its engineering, manufacturing and
service personnel, up to a maximum of 500 man-hours over such 18
months, with respect to all aspects of the manufacture (including
the design, manufacture and operation of related tooling, equipment
and processes), testing, installation, service and maintenance of
the Products. If requested by Sensormatic, such services may
include plant tours and inspection of manufacturing equipment and
processes at Knewco's facilities. If Sensormatic requests such
services in excess of such 500 man-hours, Knewco shall provide them
to Sensormatic at a daily rate of approximately $500 calculated on
the basis of the annual salary and other direct employment costs of
the individuals involved, plus reasonable out-of-pocket expenses.
3. Trademark License. Knewco grants to Knogo a fully-paid,
perpetual, non-exclusive right and license within the Knewco Territory,
with the right to sublicense others, to apply the Trademarks to Products
and any other products, provided that such Products and other products
are marketed, distributed, sold or leased outside of the Knewco
Territory for use outside of the Knewco Territory. This license shall
be subject to an obligation by Knogo to maintain the quality of the
products marketed, distributed, sold or leased under this trademark
license at reasonable standards established by Knewco. Knewco reserves
the right to inspect the quality of such products during the term of
this license.
4. SuperStrip License; Supply.
(a) Subject to the terms and conditions of this Agreement,
Knogo grants to Knewco a fully-paid, perpetual, non-exclusive right and
license, to practice and use the SuperStrip Patent Rights and the
SuperStrip Technology in the Knewco Territory to use, make, have made,
market, distribute, sell or lease SuperStrip in the Knewco Territory for
use in the Knewco Territory. Knewco shall have the further right and
license to make or have made SuperStrip outside the Knewco Territory, but
only for marketing, distribution, sale or use inside the Knewco Territory,
and provided Knewco notifies Sensormatic of the location of such manufacture
and the identity of the manufacturer. Knewco shall have no right to grant a
sublicense to others under the foregoing license, except for the purpose of
having SuperStrip made for Knewco in accordance with this Section 4(a).
(b) If a Change of Control of Knewco occurs, Knewco or its
successor shall have the following additional rights with respect to the
SuperStrip Patent Rights and SuperStrip Technology. If Sensormatic or
any of its Affiliates, before or after such Change of Control, assigns
rights in or licenses the SuperStrip Patent Rights or SuperStrip
Technology to a party which is not its Affiliate (other than a
distributor or dealer of Sensormatic or a party which manufactures,
installs or services SuperStrip for Sensormatic, any of its Affiliates
or any customers of Sensormatic or of its Affiliates for affixing on or
incorporating into such customers' own products), Knewco or such
successor shall have the further right to obtain a non-exclusive license
outside of the Knewco Territory under the SuperStrip Patent Rights and -
SuperStrip Technology on the most favorable terms granted to any such
non-Affiliate licensee, provided that Knewco or its successor meets and
accepts all essential economic and other terms and conditions of such
third-party license.
(c) If Sensormatic chooses to manufacture the SuperStrip
material or to have such material manufactured by others under contract
to Sensormatic, Sensormatic shall, as requested by Knewco, either: (i)
supply to Knewco its requirements for such material at the following
prices: (A) during the period commencing on the date hereof and ending
on the fifth anniversary of the date hereof, a price equal to
Sensormatic's Cost (as defined below), and (B) during the five-year
period thereafter, a price equal to the lesser of (1) Sensormatic's Cost
plus 10% and (2) the most favorable prices granted by Sensormatic to any
of its customers, dealers and distributors (excluding any trial prices
or isolated transactions); or (ii) permit Knewco to purchase its
requirements for such material directly from Sensormatic's supplier,
subject in either case to reasonable arrangements governing orders,
payment, forecasts, availability, term and the like. For purposes of
this Section 4(c), "Sensormatic's Cost" shall mean the total material,
components, labor and direct, manufacturing-related overhead costs
(exclusive of research and development expenses) incurred by Sensormatic
in producing the SuperStrip material sold to Knewco, determined on a
basis consistent with Sensormatic's determination of such cost used in
its financial statements and in accordance with generally accepted
accounting principles consistently applied over all periods.
Notwithstanding the foregoing, if a Change of Control of Knewco occurs,
Sensormatic shall, as requested by Knewco or its successor, either: (i)
supply to Knewco, or its successor, its requirements for such material
at a price equal to Sensormatic's Cost plus 10% for the period
commencing on the date of effectiveness of such Change of Control and
ending on the second anniversary thereof; or (ii) supply to Knewco, or
its successor, its requirements for such material for the period
commencing on the date of effectiveness of such Change of Control and
ending on the fifth anniversary thereof, at the most favorable prices
granted by Sensormatic to any of its customers, dealers and distributors
(excluding any trial prices or isolated transactions), provided that in
no event shall the term of the foregoing agreement exceed ten years from
the date of this Agreement, and subject in either case to reasonable
arrangements governing orders, payment, forecasts, availability, term
and the like.
(d) If Knewco chooses to manufacture the SuperStrip material
or to have such material manufactured by others under contract to
Knewco, Knewco shall, as requested by Sensormatic, either: (i) supply
to Sensormatic its requirements for such material at a price equal to
Knewco's Cost (as defined below); or (ii) permit Sensormatic to purchase
its requirements for such material directly from Knewco's supplier,
subject in either case to reasonable arrangements governing orders,
payment, forecasts, availability, term and the like. For purposes of
this Section 4(d), "Knewco's Cost" shall mean the total material, com-
ponents, labor and direct, manufacturing-related overhead costs
(exclusive of research and development expenses) incurred by Knewco in
producing the SuperStrip material sold to Sensormatic, determined on a
basis consistent with Knewco's determination of such cost used in its
financial statements and in accordance with generally accepted
accounting principles consistently applied over all periods. The term
of the foregoing agreement shall be five years from the date hereof.
5. Improvements; Other Matters.
(a) Knewco grants to Knogo a fully paid, non-exclusive, per-
petual right and license, including the right to sublicense others,
under any and all applicable existing or future patents and patent
applications or otherwise, (i) to practice and use in the Knewco
Territory any Product Improvements developed or acquired by Knewco or
any of its Affiliates on or before the fifth anniversary of the date
hereof, in order to use, make or have made Products embodying such
Product Improvements, provided that such Products embodying such Product
Improvements are marketed, distributed, sold or leased outside of the
Knewco Territory for use outside of the Knewco Territory, and (ii) to
practice and use any such Product Improvements to make or have made,
use, market, distribute, sell, lease, install, service and maintain
Products embodying such Product Improvements outside of the Knewco
Territory for use outside of the Knewco Territory. Notwithstanding the
foregoing, in the case of any Improvements obtained by Knewco from third
parties, this license shall be subject to the payment by Knogo of any
royalty payable by Knewco with respect to a like use by Knewco.
(b) Knogo grants to Knewco a fully-paid, non-exclusive, per-
petual right and license, including the right to sublicense others,
under any and all applicable existing or future patents and patent
applications or otherwise, to practice and use in the Knewco Territory
any Product Improvements developed or acquired by Knogo or any of its
Affiliates on or before the fifth anniversary of the date hereof, to
make or have made, use, market, distribute, sell, lease, install, ser-
vice and maintain Products embodying such Product Improvements within
the Knewco Territory for use within the Knewco Territory.
Notwithstanding the foregoing, in the case of any Improvements obtained
by Knogo from third parties, this license shall be subject to the
payment by Knewco of any royalty payable by Knogo with respect to a like
use by Knogo.
(c) Knewco grants to Knogo a fully-paid, non-exclusive,
perpetual right and license, including the right to sublicense others,
under any and all applicable existing or future patents and patent
applications or otherwise, to practice and use anywhere in the world any
SuperStrip Improvements developed or acquired by Knewco or any of its
Affiliates on or before the fifth anniversary of the date hereof, to
make or have made, use, market, distribute or sell SuperStrip material
embodying such SuperStrip Improvements anywhere in the world. Notwith-
standing the foregoing, in the case of any SuperStrip Improvements
obtained by Knewco from third parties, this license shall be subject to
the payment by Knogo of any royalty payable by Knewco with respect to a
like use by Knewco.
(d) Knogo grants to Knewco a fully-paid, non-exclusive,
perpetual right and license under any and all applicable existing or
future patents and patent applications or otherwise, to practice and use
in the Knewco Territory any SuperStrip Improvements developed or
acquired by Knogo or any of its Affiliates on or before the fifth
anniversary of the date hereof, to make or have made, use, market,
distribute and sell SuperStrip material embodying such SuperStrip
Improvements within the Knewco Territory for use within the Knewco
Territory or pursuant to a license, if any, granted under Section 4(b).
Notwithstanding the foregoing, in the case of any Improvements obtained
by Knogo from third parties, this license shall be subject to the
payment by Knewco of any royalty payable by Knogo with respect to a like
use by Knogo. Knewco shall have no right to grant a sublicense to
others under the foregoing license, except for the purpose of having
SuperStrip material embodying such SuperStrip Improvements made by
Knewco in accordance with this Section 5(d).
(e) Neither Knogo nor Knewco shall have any liability to the
other or any party claiming through the other for any infringement or
misappropriation claims made by any third parties regarding Product
Improvements or SuperStrip Improvements licensed by it pursuant to this
Section 5 or any other rights licensed by a party hereto to the other
under this Agreement, including the licenses pursuant to Sections 2(a)
and 4. The initial express confirmation of a grant of a license to
Product Improvements or SuperStrip Improvements pursuant to this Section
5 may, however, be relied on by the licensee and any sublicensee as
evidencing an absence of any knowledge or belief on the part of the
licensor that the subject matter of the licensor's Product Improvements
or SuperStrip Improvements violates any third party's patent or other
intellectual property rights.
(f) The Divestiture Agreement provides that Knewco shall have
all rights in the Product Technology required for its business in the
Knewco Territory and that Knogo shall have all rights in the Product
Technology required for its business outside the Knewco Territory. For
avoidance of doubt, each party hereto also grants to the other fully-
paid, non-exclusive, perpetual license in the granting party's Product
Technology, which license shall be subject to the same provisions and
limitations as to practice and use as are set forth in Sections 5(a) (in
the case of such license granted to Knogo) and 5(b) (in the case of such
license to Knewco).
6. Sales to Manufacturers for Source Labelling. Not-
withstanding any territorial restriction in any license granted under
Section 2(a), 4(a) or 5 of this Agreement, (i) Knewco shall have the
further right and license to sell SuperStrip or, if applicable, other
label material included in Products, to manufacturers or distributors of
merchandise located outside the Knewco Territory, but only to be
embedded in or affixed to such merchandise for source labelling
purposes, and only if such merchandise is to be sold by such
manufacturers or distributors for sale and use in the Knewco Territory,
and (ii) Sensormatic shall have the further right and license to sell
any such label material included in Products to manufacturers or
distributors of merchandise located inside the Knewco Territory, but
only to be embedded in or affixed to such merchandise for source
labelling purposes, and only if such merchandise is to be sold by such
manufacturers or distributors for sale and use outside the Knewco
Territory. (Sensormatic has such rights in the Knewco Territory with
respect to SuperStrip, as provided in the Divestiture Agreement.) It
shall be a condition to the respective foregoing rights that each such
manufacturer or distributor agrees in writing to be bound by the
foregoing restriction applicable to the party from which such
manufacturer or distributor purchases such material.
7. Certain Patent Matters. Sensormatic shall not assert the
Pinned Wall Patent Rights against Knewco or any of its Affiliates of
which it owns a majority of the voting power, or customers, with respect
to the manufacture, sale or use of SuperStrip material in the Knewco
Territory for use in the Knewco Territory. The foregoing agreement
shall not apply to any successor or assign of Knewco and shall terminate
and become void in the event of a Change of Control of Knewco.
8. Confidentiality.
(a) Confidentiality. Each of the parties understands and ac-
knowledges (i) that as a result of the transactions contemplated by this
Agreement, each of them may become informed of, and have access to,
confidential information regarding inventions, trade secrets, technical
information, know-how, plans, specifications and other information
respecting Products, Product Technology, Improvements, SuperStrip and
SuperStrip Technology, and (ii) that such information is held by it in
trust and solely for the benefit of the parties in accordance with their
respective interests pursuant to this Agreement and any other written
agreement between them. The parties shall not, at any time, reveal, re-
port, publish, transfer or otherwise disclose to any person or entity,
or use, any of the other's confidential information, except for use as
contemplated by this Agreement or such other agreements. This Section 8
shall not be construed to restrict Knogo's or Sensormatic's disclosure
or use of any information acquired or obtained by it other than pursuant
to this Agreement, including without limitation any information acquired
by Knogo pursuant to the Divestiture Agreement or any information
acquired or obtained by Sensormatic in the course of its business.
The foregoing obligations of confidentiality shall not apply
to information of a party which lawfully comes into the possession of
the receiving party and which (i) is received from a third party without
violation of any confidentiality obligations in favor of the other party
with respect to such information, (ii) can be demonstrated to have been
previously known to the receiving party, (iii) is or becomes part of
public or industry knowledge through no conduct of the receiving party
or (iv) can be demonstrated to have been independently developed by the
receiving party.
(b) Permitted Disclosure. The foregoing shall not prohibit
the disclosure by either party of confidential information to its
employees who have a need to know such information for the purposes of
this Agreement or to its counsel, so long as such persons shall be
obligated to hold such information in confidence to the same extent as
provided herein.
(c) Special Precautions. On the written request of either
party, the other shall forthwith adopt any special precautions as may be
reasonably necessary to prevent any unauthorized disclosure of any of
the requesting party's confidential information and shall cause its
employees, agents and associates to forthwith adopt such special
precautions. If the adoption of such precautions would involve unusual
expense, the requesting party shall bear the cost incurred by the other
in adopting such precautions.
(d) Injunctive Relief. Because neither party would have an
adequate remedy at law to protect its business from the unfair com-
petition of the other or to protect its interests in its confidential
information and similar commercial assets, each of them shall be
entitled to injunctive relief, in addition to such remedies and relief
that would, in the event of a breach of the provisions of this Section 8
by the other, be available to it. In the event of such a breach, in
addition to any other remedies, either party, as the case may be, shall
be entitled to receive from the breaching party payment of, or
reimbursement for, its reasonable attorneys' fees and disbursements
incurred in enforcing any such provision.
(e) Survival. The provisions of this Section 8 shall survive
any termination of this Agreement.
9. Arbitration.
(a) General. Any controversy or claim arising out of or
relating to this Agreement shall be settled by arbitration before a
single arbitrator in New York, New York, in accordance with the Commer-
cial Arbitration Rules of the American Arbitration Association. Any
decision or award of the arbitrator shall be binding on the parties.
Judgment on any award rendered by the arbitrator may be entered in any
court of competent jurisdiction.
(b) Procedure. Each party consents to the jurisdiction of
such arbitration and to such venue. The arbitrator shall apply the law
of the State of New York, exclusive of conflict of laws principles, to
any dispute. Nothing in this Agreement shall require the arbitration of
disputes between the parties that arise from actions, suits or
proceedings instituted by third parties. Knogo appoints Messrs. Christy
& Viener, 620 Fifth Avenue, New York, New York 10020, Attention: Kenneth
W. Taber, Esq., and Knewco appoints Messrs. Stroock & Stroock & Lavan,
Seven Hanover Square, New York, New York 10004, Attention: David H.
Kaufman, Esq., as their respective attorneys-in-fact and authorized
agents solely to receive on their behalf, service of any demands for, or
any notice with respect to, arbitration hereunder or any service of
process. Service on either of such attorneys-in-fact may be made by
registered or certified mail or by personal delivery, in any case return
receipt requested, and shall be effective as service on either party, as
the case may be. Nothing herein shall be deemed to affect any right to
serve any such demand, notice or process in any other manner permitted
under applicable law.
10. Delayed Transfers Under Merger Agreement. In the event that
ownership of any Acquired Subsidiary (as defined in the Merger Agreement) is
managed by Knewco on an interim basis, or is ultimately transferred to Knewco
by the Escrow Agent pursuant to Section 10.2 of the Merger Agreement, the
parties agree that any such Acquired Subsidiary shall be deemed to be covered
by this Agreement as if it were a subsidiary of Knewco, and that the Knewco
Territory, a non-competition and other provisions of this Agreement shall
be modified by the parties as may be necessary to equitably adjust their
respective rights and obligations in order to enable Knogo to operate with
respect to the business of any such Acquired Subsidiary. Knewco shall
abide by Section 5.1 of the Merger Agreement with respect to any such
Acquired Subsidiary, unless and until transferred to Knewco thereunder.
11. Non-Agency. For all purposes of this Agreement, each
party shall be an independent contractor, and not an agent, partner or
joint venturer, of the other.
12. No Assignment. Neither party shall assign, subcontract
or otherwise transfer this Agreement or any right or interest in or to
this Agreement without the prior consent of the other, except that
either party may assign this Agreement to any parent corporation or
wholly-owned subsidiary or to any successor to all or a substantial
portion of its business.
13. Communications. All notices, consents and other
communications given under this Agreement shall be in writing and shall
be deemed to have been duly given (a) when delivered by hand or by
Federal Express or a similar overnight courier to, (b) five days after
being deposited in any United States post office enclosed in an airmail
postage prepaid registered or certified envelope addressed to, or (c)
when successfully transmitted by facsimile (with a confirming copy of
such communication to be sent as provided in (a) or (b) above) to, the
party for whom intended, at the address or facsimile number for such
party set forth below, or to such other address or facsimile number as
may be furnished by such party by notice in the manner provided herein;
provided, however, that any notice of change of address or facsimile
number shall be effective only upon receipt.
If to Knogo or Sensormatic:
Sensormatic Electronics Corporation
500 N.W. 12th Avenue
Deerfield Beach, Florida 33442
Attention: Corporate Counsel
Facsimile No.: (305) 420-2561
and
Vice President of Corporate Development
Facsimile No.: (305) 420-2964
With a copy to:
Christy & Viener
620 Fifth Avenue
New York, New York 10020
Attention: Jerome M. LeWine, Esq.
Facsimile No.: (212) 632-5555
If to Knewco:
Knogo North America Inc.
350 Wireless Boulevard
Hauppauge, New York 11788
Attention: Thomas A. Nicolette
Facsimile No.: (516) 232-2812
With a copy to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attention: David H. Kaufman, Esq.
Facsimile No.: (212) 806-6006
14. Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to its subject matter, merges
and supersedes all prior and contemporaneous understandings with respect
to its subject matter and may not be waived or modified, in whole or in
part, except by a writing signed by each of the parties. No waiver of
any provision of this Agreement in any instance shall be deemed to be a
waiver of the same or any other provision in any other instance.
Failure of any party to enforce any provision of this Agreement shall
not be construed as a waiver of its rights under such or any other provision.
15. Successors and Assigns. This Agreement shall be binding
on, enforceable against and inure to the benefit of, the parties and
their respective successors and assigns, and nothing herein is intended
to confer any right, remedy or benefit upon any other person.
16. Governing Law. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of
New York applicable to agreements made and fully to be performed in such
state, without giving effect to conflicts of law principles.
17. Construction. Headings used in this Agreement are for
convenience only and shall not be used in the interpretation of this
Agreement. References herein to Sections and Schedules are to the
sections and exhibits of this Agreement. As used herein, the singular
includes the plural.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first set forth above.
KNOGO CORPORATION
By
Thomas A. Nicolette
President
KNOGO NORTH AMERICA INC.
By
Thomas A. Nicolette
President
Effective as of the Effective Time under the Merger
Agreement, Sensormatic Electronics Corporation, as successor to Knogo
Corporation, shall become a party to the foregoing License Agreement and
acknowledges and accepts such Agreement.
SENSORMATIC ELECTRONICS CORPORATION
By
Name:
Title:
EXHIBIT C TO
DIVESTITURE AGREEMENT
SUPPLY AGREEMENT
AGREEMENT, dated as of , 1994, between KNOGO CORPORATION,
a New York corporation ("Knogo"), and KNOGO NORTH AMERICA INC., a Delaware
corporation ("Knewco").
W I T N E S S E T H :
WHEREAS, Knogo and Knewco are parties to the Contribution and
Divestiture Agreement dated as of , 1994 (the "Divestiture
Agreement"), pursuant to which Knewco was formed to continue Knogo's
business operations in the United States, Canada and Puerto Rico (the
"Knewco Territory");
WHEREAS, Knewco and Knogo, together with Sensormatic Electronics
Corporation ("Sensormatic"), are parties to the Agreement and Plan of
Merger, dated as of August 14, 1994 ("Merger Agreement"), pursuant to which
Knogo is to be merged with and into Sensormatic;
WHEREAS, Sensormatic, as the successor to Knogo pursuant to the
Merger, will retain Knogo's business outside the Knewco Territory and will
be selling, leasing and servicing the Products (as defined below) of Knogo
in Europe and other locations;
WHEREAS, Sensormatic ultimately intends to manufacture the Knogo
Products in its own facilities, but requires time to make that transition;
WHEREAS, Knewco will own and operate a manufacturing facility in
Puerto Rico that manufactures the Products previously manufactured and
distributed by Knogo, both for the Knewco Territory and other locations,
and desires a transition period to replace the volume of Products sold
outside the Knewco Territory with increased sales in the Knewco Territory
to avoid loss of revenue and increased costs; and
WHEREAS, the execution and delivery of this Supply Agreement is
in the mutual interest of the parties in effecting an orderly transition of
the Products to Sensormatic outside the Knewco Territory, and therefore is
a condition to the respective obligations of the parties under the Merger
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements set
forth herein, the parties agree as follows:
1. Definitions.
(a) "Affiliate" means an entity controlled by, controlling or
under common control with a specified entity. As used herein, the term
"control" includes, but is not limited to, the right to vote directly or
indirectly 50% or more of the voting stock of an entity or the right to
direct or influence significantly such entity's management or policies.
(b) "Change of Control" means any transaction or series of
transactions pursuant to which (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act")) becomes the "beneficial owner" (as such term is defined in
Rule 13(d) under the Exchange Act) of more than 50% of the combined voting
power of Knewco or (ii) the business, and substantially all of the assets,
of Knewco relating to the Products are sold or transferred to unaffiliated
third party.
(c) "Gross Profit Margin" means the Net Revenue received by Knewco
from the sale of Products to Knogo, less the Costs of such Products. For
this purpose:
(i) "Net Revenue" means all revenue actually received by
Knewco on its sales of Products to Knogo, exclusive of any amounts
received for (A) sales, use or other taxes (but not income taxes) paid
or payable in respect of such sales or (B) separately stated charges
for freight, shipping and insurance, and net of any credits for
returns and allowances; and
(ii) "Costs" means the total material, components, labor and
direct, manufacturing-related overhead costs (exclusive of research
and development expenses) incurred by Knewco in producing the Products
sold to Knogo, determined on a basis consistent with Knewco's (and
Knogo's, as Knewco's predecessor company's) determination of product
cost used in its financial statements and in accordance with generally
accepted accounting principles consistently applied over all periods.
(d) "Knewco Territory" means the United States of America,
Puerto Rico, and Canada.
(e) "License Agreement" means the License Agreement of even
date herewith between Knogo and Knewco.
(f) " P roducts" means (i) all of the systems, tags,
detachers, accessories, other devices and spare parts manufactured and
marketed by Knewco as of the date hereof, as listed in Exhibit A, and (ii)
any modified, improved or successor models or versions thereof manufactured
or marketed by Knewco during the term of this Agreement.
(g) "Price List" means Knewco's list of the Products and
their prices to Knogo and/or Sensormatic hereunder, as in effect from time
to time. The Price List in effect as of the date of this Agreement is set
forth in Exhibit A.
(h) "Quarter" means each calendar quarter during the Term
(as defined below), except that, if the date of this Agreement is other
than the first day of a calendar quarter, the first Quarter of the Term
shall commence on the date hereof and shall terminate on the last day of
the calendar quarter in which such commencement date occurs and the last
Quarter shall terminate on the date set forth in Section 2.
(i) "Term" means the term of this Agreement, as provided in
Section 2.
Unless otherwise required by the context, references in this
Agreement to "Knogo" shall be deemed to refer also to Sensormatic as the
successor to Knogo pursuant to the Merger Agreement.
2. Term. The term of this Agreement shall commence on the
date hereof and shall continue for a period of 30 months through ,
1997, unless earlier terminated pursuant to the provisions of Section
4(d)(ii), Section 8 or Section 9.
3. Supply and Disposition of the Products.
(i) S u pply. During the Term and
subject to the terms and conditions of
this Agreement, Knewco shall sell to
Knogo Products ordered by Knogo. Such
Products shall be generally of the same
quality and type as are marketed and
sold by Knewco in the Knewco Territory,
subject to regional variation and/or
modifications requested by customers.
Knogo shall have the right to market,
sell, lease, use, install, service and
otherwise deal with the Products
throughout the world, except for the
Knewco Territory.
(ii) No Prohibition. Nothing in this
Agreement shall prohibit or in any way
limit Knogo, or Sensormatic as successor
to Knogo, from selling, leasing or in
any other way dealing in any products
(other than the Products) which are
competitive with any of the Products
anywhere in the world, including the
Knewco Territory.
4. Minimum Purchases.
(a) Quarterly Minimums. During the following periods
within the Term, Knogo shall purchase from Knewco Products in the following
monthly and quarterly aggregate dollar amounts:
Monthly Orders Minimum Dollar
Period (Plus or Minus 25%) Amount Per Quarter
First 12 Months $1,000,000 $3,000,000
Next 18 Months 667,000 2,000,000
A Product shall be considered to have been purchased for purposes of
satisfying the minimum dollar amount for any Quarter (or month referred to
in Section 4(c)) (a "Minimum") if it is ordered in such Quarter (or month)
for shipment within not more than 90 days after the date of the order (or
such longer period as Knewco may accept) and is paid for in full within 30
days after Knogo's receipt of Knewco's invoice therefor rendered pursuant
to Section 5(c). If the Term commences on a date other than the first day
of a calendar quarter, the Minimums for the first and last Quarters shall
be appropriately prorated and the Minimum for the fifth Quarter shall equal
(i) the sum of (A) $3,000,000 times the number of days in the fifth Quarter
prior to the first anniversary date of this Agreement plus (B) $2,000,000
times the number of days in the balance of the fifth Quarter, with such sum
(ii) divided by the total number of days in the fifth Quarter.
(b) Cumulative Credits. In determining whether Knogo has
satisfied the Minimum for any Quarter (a "Subject Quarter") or month
referred to in Section 4(c), all or any portion of any purchases of
Products by Knogo in any prior Quarters in excess of the Minimums
applicable to such prior Quarters may be credited, at Knogo's option,
against the Minimum for the Subject Quarter or any month thereof.
(c) Monthly Orders. For each full calendar month during
the first twelve months following the date of this Agreement, Knogo shall
purchase not less than an aggregate of $750,000 of Products in such month
(subject to any credits permitted under Section 4(b)) and may not purchase
in excess of $1,250,000 in the aggregate of Products in such month unless
Knewco accepts orders for such excess (as governed by Section 5(e)). For
each full calendar month during the next eighteen months following the date
of this Agreement, Knogo shall purchase not less than an aggregate of
$500,000 of Products in such month (subject to any credits permitted under
Section 4(b)) and may not purchase in excess of $833,000 in the aggregate
of Products in such month unless Knewco accepts orders for such excess (as
governed by Section 5(e)). For any partial month included in any quarter,
the foregoing upper and lower limits shall be adjusted pro rata based on
the number of days in such month divided by 30.
(d) Failure to Satisfy Minimums.
(i) If Knogo fails to satisfy the Minimums for any
Quarter (after giving effect to the provisions of Section 4(b)),
and such failure is not attributable to any of the force majeure
circumstances set forth in Section 7 or to any failure by Knewco
to fulfill Knogo's orders for Products on a timely basis (in
which case the provisions of Section 4(d)(iv) shall apply),
Knewco shall notify Knogo of such failure and the amount of the
aggregate deficiency. Within 30 days of the date of such notice,
Knogo shall cure such failure by, at its option, (A) purchasing
Products in the full dollar amount of the deficiency (subject, in
the case of this clause (A), to any applicable monthly limit
unless waived by Knewco), or (B) paying to Knewco liquidated
damages in an amount equal to 35% of such deficiency (provided,
that this clause (B) shall apply to the extent that the cure
under clause (A) cannot be effected by reason of the applicable
monthly limits). Notwithstanding the preceding sentence, it
is the intention of the parties that, while Sensormatic, as the
successor in interest to Knogo, shall have its own manufacturing
capacity for Products, it shall, to the extent of the quarterly
Minimums provided for in this Agreement, fulfill such requirements
by purchasing Products from Knewco in such minimum amounts,
rather than from its own production. Accordingly, to the
extent that Sensormatic fails to meet its Minimum for any
Quarter because it contemporaneously produces Products for itself
rather than purchasing them from Knewco pursuant to this Agreement,
the amount payable under clause (B) of this Section 4(d)(i)
in order to cure any such default shall be equal to 50% of the
deficiency attributable to such production by Sensormatic.
(ii) If Knogo fails to cure pursuant to Section 4(d)(i),
such failure shall constitute a default under this Agreement and
Knewco shall have the right to (A) terminate this Agreement on
not less than 15 days' notice to Knogo and (B) receive from Knogo
payment within 15 days of Knewco's demand therefor of an amount
of liquidated damages equal to (x) the amount referred to in
clause (B) of Section 4(d)(i), plus (y) 35% of the Minimums for
the remainder of the Term (after giving credit for any purchases
of Products by Knogo following the end of the Quarter in which
the deficiency occurred), with the amounts described in clause
(y) to be discounted to net present value using the then current
prime rate as announced by Citibank, N.A. from time to time at
its New York headquarters as its base rate for corporate loans.
For this purpose, each Minimum shall be discounted from the last
day of the Quarter to which it relates.
(iii) If Knogo pays liquidated damages to Knewco with
respect to a Quarter pursuant to clause (B) of Section 4(d)(i),
and with respect to any subsequent Quarter makes purchases in
excess of the Minimums for that Quarter, Knogo shall have the
right, at its option, to require Knewco to reimburse Knogo for
such liquidated damages payment to the extent of $0.35 for each
$1.00 of such excess purchases.
(iv) If Knewco fails to ship all or any part of any
order by Knogo for Products within 15 days after the shipment
date specified therefor in such order, Knogo may (A) re-submit
the order for the unshipped portion thereof, at the prices
applicable to the order when originally submitted and for
delivery at any time specified in the re-submitted order, or (B)
cancel the unshipped portion of the order. In either case, the
Products subject to the re-ordered or cancelled portion of the
order shall be treated as having been purchased within the
Quarter in which the order was originally submitted and shall be
credited against the Minimum for such Quarter, as if shipped and
paid for by Knogo, for all purposes of this Section 4.
(e) Exclusive Remedies. If Knogo pays in full the
liquidated damages calculated pursuant to Section 4(d), such liquidated
damages and termination of this Agreement shall be Knewco's sole remedies,
at law and at equity, for Knogo's failure to satisfy any Minimum. The par-
ties agree that any such failure by Knogo could cause losses to Knewco that
would be difficult or impossible to calculate accurately. Accordingly,
with the intention of providing a fair and reasonable method of calculating
the amount of such losses, and to impose damages which would not be
disproportionate to such losses, the parties agree that Knogo shall pay the
amount calculated pursuant to Section 4(d) in the event of such a failure
to satisfy Minimums, as liquidated damages, and not as a penalty.
5. Purchase and Sale of Products.
(a) General. All purchases of Products by Knogo from
Knewco shall be governed by the terms and conditions set forth in this
Agreement.
(b) Prices. Prices for the Products shall be as set forth
in the Price List, the initial form of which is set forth in Exhibit A.
All prices set forth in the Price List shall be F.O.B. Knewco's Puerto Rico
plant. Following the first 12 months of the Term, Knewco may increase the
prices on the Price List at any time, but not more than twice in any 12-
month period. Any such price increases shall be effective 30 days after
the date of the notice thereof given by Knewco to Knogo (provided, that in
the case of written proposals issued by Knogo to customers or potential
customers as of the date of such notice, Knogo shall have the right to
place orders arising out of such proposals at the pre-increase prices for
up to 90 days after the date of such notice). Any orders placed by Knogo
with Knewco prior to the expiration of such 30-day period (or 90-day
period, if applicable pursuant to the preceding sentence) shall be
fulfilled by Knewco at the pre-increase prices.
It is the intention of the parties that the prices for the
Products shall provide Knewco with an average 35% Gross Profit Margin on
sales of Products to Knogo. Accordingly, Knewco may raise prices only if
increases in Costs decrease Knewco's Gross Profit Margin on sales to Knogo
below the 35% level and only to the extent necessary to restore the Gross
Profit Margin to such level. Further, Knewco shall decrease its prices
whenever decreases in Costs increase Knewco's Gross Profit Margin on sales
to Knogo above the 35% level and only to the extent necessary to restore
the Gross Profit Margin to such level. At Knogo's request, Knewco will
permit Knogo's independent certified public accountants to examine Knewco's
pertinent books and records (including, without limitation, the work papers
of Knewco and its auditors used in the determination and audit review of
Knewco's Costs) solely to verify Knewco's Costs and Knewco's right to
increase prices or obligation to decrease prices pursuant to this Section
5(b) and whether or not the amount of any such increase or decrease is
correct under the foregoing criteria. Such accountants shall maintain the
confidentiality of such information and shall not disclose the same to
Knogo (except as to their conclusions).
(c) Invoices and Payment. Knewco shall issue invoices to
Knogo on shipment of Products ordered by Knogo. Each invoice shall state
the purchase price for each Product shipped, and shall separately state all
charges for freight, shipping and insurance if paid in the first instance
by Knewco any applicable charges for taxes. Knogo shall pay the full
amount of each invoice within 30 days after the date of the invoice, at
such place as Knewco designates, except to the extent relating to non-
conforming Products which Knogo rejects pursuant to Section 5(i) or to the
extent that Knogo in good faith disputes amounts shown in the invoice. All
invoices shall be expressed and shall be paid in U.S. dollars.
(d) Forecasts. Not later than 30 days prior to the
beginning of each Quarter during the Term (other than the first Quarter),
Knogo shall furnish to Knewco a written, non-binding forecast, by Product
number, of Knogo's anticipated purchases during such Quarter, with
projected shipment dates.
(e) Orders. All orders for Products submitted by Knogo
shall be in writing and may be submitted by facsimile transmission. All
orders shall in all respects be consistent with the terms and conditions of
this Agreement, and no inconsistent term contained in any order shall be
effective to modify or supplement the provisions of this Agreement unless
agreed to by Knewco. To facilitate Knewco's production scheduling, Knogo
shall submit each order at least 90 days prior to the requested shipment
date. No order shall be binding on Knewco until received and accepted by
it at its principal office, but Knewco shall have the right to reject an
order or a divisible portion thereof only if inconsistent with the
provisions of this Agreement (including without limitation Section 4(c)) or
if Knogo is then in material default of its obligations under this
Agreement. Knewco shall reply to orders in writing (which may be by
facsimile transmission) within five days after its receipt of orders. Any
order not rejected by Knewco within such period shall be deemed accepted.
If any provision of Knewco's reply is inconsistent with any provision of
this Agreement, the latter shall govern.
(f) Change Orders. Without affecting the minimum purchase
requirements under Section 4, Knogo shall have the right to submit change
orders to Knewco at any time prior to the 15th day before the requested
date of Product shipment stated in the original order. Such changes may
postpone delivery, provided that the rescheduled delivery date is within
the Term, or to reduce the quantity of Products originally ordered by up to
25%.
(g) Deliveries. Knewco shall use its best efforts to
deliver all Products ordered by Knogo on the shipment dates specified in
Knogo's orders and shall deliver all Products not later than 10 days after
such dates. Knewco shall deliver all Products ordered by Knogo, F.O.B.
Knewco's Puerto Rico plant, to such carriers as are specified by Knogo,
suitably packed for shipment in Knewco's standard containers marked for
shipment to such destinations as shall be specified by Knogo in its orders.
Unless otherwise instructed by Knogo, Knogo shall select the carrier in
each instance. All freight, insurance and other shipping expenses,
including the cost of any special packaging requested by Knogo, shall be
borne by Knogo.
(h) Risk of Loss. Title and risk of loss for all Products
shall pass to Knogo on Knewco's delivery of the Products to the carrier
designated by Knogo.
(i) Rejection of Products. Knogo shall inspect all
Products promptly on receipt thereof and may reject any Products that are
not in conformity with the applicable order, are damaged or which do not
meet the applicable manufacturer's specifications therefor. Any Product
not rejected in writing within 45 days after receipt shall be deemed to
have been accepted by Knogo. Knogo shall have the right to return any
properly rejected Product, for full credit against the invoiced amount
therefor, and in accordance with any reasonable return procedure on which
the parties shall agree. Any such return shall be at the expense of Knewco
and Knewco shall promptly repair or replace and reship to Knogo all re-
jected Products at Knewco's sole expense.
(j) Taxes and Duties; Permits. Knogo shall be responsible
for all sales, use, value-added and other similar taxes, other than income
taxes, payable by Knewco, in respect of the sale of the Products by Knewco
to Knogo, and shall also be responsible for all tariffs, duties and like
charges assessed with respect to the shipment, export, import, sale, lease
and other disposition of the Products by Knogo. Knogo shall be responsible
for and shall obtain all governmental permits, authorizations, approvals
and licenses, if any, required in order to sell or lease the Products
anywhere outside the Knewco Territory.
(k) Trademarks. Knewco shall manufacture the Products
bearing such trademarks, service marks, tradenames, logos and other symbols
(together, "Marks") of Knogo or Knewco, or without any such Marks, as
specified by Knogo from time to time, on reasonable notice to Knewco.
(l) Manuals. Knewco shall include with each Product
delivered to Knogo such end user installation, operation and other
instructions and manuals as it normally includes with Products delivered to
others. Further, Knewco shall at all times provide Knogo with a reasonable
number of copies of all installation, operation and other instructions and
manuals as Knogo shall reasonably require in order to properly market,
install, service, maintain and repair the Products.
6. Warranty and Limitation of Liability.
(a) Warranty. Knewco warrants that each Product shall be
free of defects in material and workmanship and shall meet all applicable
specifications therefor. This warranty shall commence on receipt by Knogo
of the Product and shall remain in effect until the completion of the
installation of the Product at the customer's location and the acceptance
thereof by the customer or one year from such receipt, whichever is
earlier, which effectiveness shall survive any termination of this
Agreement. Knewco shall promptly repair, or at its option, replace, any
defective Product free of charge and shall ship all repaired or replacement
Products to Knogo at Knewco's sole expense for freight, insurance and any
applicable duties or tariffs. Alternatively, Knewco may direct Knogo to
effect any required repairs itself. In such event, Knewco shall reimburse
Knogo's reasonable costs in effecting such repairs by credit against
invoices for Products shipped to Knogo or by payment to Knogo within 30
days of Knogo's invoices to Knewco therefor. This warranty shall not apply
to any Products that are subjected to improper, installation, unauthorized
alteration, misuse or abuse.
To obtain warranty service, Knogo must notify Knewco of any
claimed defect within 45 days after Knogo's discovery of the defect and, in
any event, within the warranty period referred to above. Knogo shall hold
the defective Product unless and until instructed by Knewco to return it to
Knewco, which return shall be at Knewco's expense.
EXCEPT FOR THE EXPRESS WARRANTY MADE ABOVE, KNEWCO MAKES NO
WARRANTY AS TO ANY PRODUCT (OTHER THAN THE WARRANTY OF TITLE), EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event
shall Knewco be liable for any incidental, consequential, special or
indirect damages suffered by Knogo or any of its employees or agents in
connection with the sale, lease or other disposition or use of the
Products.
7. Force Majeure; Allocations. Neither party shall be
liable to the other by reason of any failure to perform, or any delay or
nonconformity in the performance of, its obligations hereunder (other than
monetary amounts due and payable), and neither party shall attempt to hold
t h e other liable in any respect for any such failure, delay or
nonconformity, caused by any event of force majeure or other contingency
beyond its control, including, without limitation, fire, explosion, labor
dispute, casualty or accident, restraints affecting, or failure of,
shipping or transportation facilities, earthquake or other natural calam-
ity, lack or failure of sources of supply of labor, raw materials,
components or power, war, civil commotion or acts of any governmental or
supranational legal authority (including the failure of governments to
certify the Products or to approve their sale in jurisdictions in which
such certifications or approvals are required, if such failure has a
material effect on the ability of Knogo to satisfy any Minimums). Such
force majeure contingencies shall excuse performance only so long as they
exist, and the party whose performance had been excused by virtue thereof
shall as promptly as is practicable resume performance of its obligations
hereunder. In the event that, due to force majeure contingencies or lack
of production capacity caused by other reasons, Knewco is unable to
completely fulfill all orders placed with it by Knewco and others, Knewco
shall make a reasonable allocation between its own needs and Knogo's
orders.
8. Change of Control of Knewco. In the event of any
Change of Control of Knewco during the term of this Agreement, the term of
this Agreement shall end on the first anniversary of the date hereof, or at
the end of six months after such Change of Control, whichever is later,
provided, however, that this Agreement shall terminate in any event no
later than , 1997.
9. Termination.
( a ) Grounds for Termination. In addition to the
termination provisions of Section 4(d) and Section 8, each party shall have
the right to terminate this Agreement, at any time, on notice to the other,
if:
(i) the other party breaches its obligations
under this Agreement in any material respect and such breach is
not cured within 30 days after the non-breaching party gives the
breaching party notice thereof or, if the breach is of a nature
such that it cannot be cured within 30 days, the other party
diligently institutes steps to cure such breach within such 30-
day period and thereafter diligently prosecutes such cure to
completion; or
(ii) (A) a court of competent jurisdiction enters a
decree or order of relief (I) in respect of the other party in
any voluntary or involuntary case or proceeding under any
bankruptcy, insolvency or similar law, as now or hereafter in
effect, or (II) appointing a receiver, liquidator, assignee,
trustee or similar official of the other party or any substantial
part of its assets, and such decree or order is consented to by
the other party or continues unstayed and in effect for a period
of 60 consecutive days, or (B) the other party makes a general
assignment for the benefit of creditors.
(b) No Election of Remedies. Any termination of this
Agreement pursuant to this Section 9 shall be in addition to and shall not
be exclusive of any other rights or remedies either party may have on
account of any breach or default of the other.
(c) Effect of Termination. The termination of this
Agreement pursuant to Section 4(d), Section 8 or this Section 9 shall not
terminate Knogo's obligation to make any payments for Products shipped
prior to the date of the termination or to pay liquidated damages, if any,
which are payable pursuant to Section 4(d), nor shall it terminate Knewco's
obligation to fulfill orders placed prior to the date of termination if
Knogo is not then in default hereunder or Knogo's obligation to make any
payments for Products shipped to fulfill such orders.
10. Arbitration.
(a) General. Any controversy or claim arising out of or
relating to this Agreement shall be settled by arbitration before a single
arbitrator in New York, New York, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. Any decision or
award of the arbitrator shall be binding on the parties. Judgment on any
award rendered by the arbitrator may be entered in any court of competent
jurisdiction.
(b) Procedure. Each party consents to the jurisdiction of
such arbitration and to such venue. The arbitrator shall apply the law of
the State of New York, exclusive of conflict of laws principles, to any
dispute. Nothing in this Agreement shall require the arbitration of dis-
putes between the parties that arise from actions, suits or proceedings
instituted by third parties. Knogo appoints Messrs. Christy & Viener, 620
Fifth Avenue, New York, New York 10020, Attention: Kenneth W. Taber, Esq.,
and Knewco appoints Messrs. Stroock & Stroock & Lavan, Seven Hanover
Square, New York, New York 10004, Attention: David H. Kaufman, Esq., as
their respective attorneys-in-fact and authorized agents solely to receive
on their behalf, service of any demands for, or any notice with respect to,
arbitration hereunder or any service of process. Service on either of such
attorneys-in-fact may be made by registered or certified mail or by
personal delivery, in any case return receipt requested, and shall be ef-
fective as service on either party, as the case may be. Nothing herein
shall be deemed to affect any right to serve any such demand, notice or
process in any other manner permitted under applicable law.
11. Non-Agency. For all purposes of this Agreement, each
party shall be an independent contractor, and not an agent, partner or
joint venturer, of the other.
12. No Assignment. Neither party shall assign, subcontract
or otherwise transfer this Agreement or any right or interest in or to this
Agreement without the prior consent of the other, except that either party
may assign this Agreement to any parent corporation or wholly-owned
subsidiary or to any successor to all or a substantial portion of its
business.
13. Communications. All notices, consents and other
communications given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered by hand or by Federal
Express or a similar overnight courier to, (b) seven days after being
deposited in any United States post office enclosed in an airmail postage
prepaid registered or certified envelope addressed to, or (c) when
successfully transmitted by facsimile (with a confirming copy of such com-
munication to be sent as provided in (a) or (b) above) to, the party for
whom intended, at the address or facsimile number for such party set forth
below, or to such other address or facsimile number as may be furnished by
such party by notice in the manner provided herein; provided, however,
that any notice of change of address or facsimile number shall be effective
only upon receipt.
If to Knogo or Sensormatic:
Sensormatic Electronics Corporation
500 N.W. 12th Avenue
Deerfield Beach, Florida 33442
Attention: Corporate Counsel
Facsimile No.: (305) 420-2561
and
Vice President of Corporate Development
Facsimile No.: (305) 420-2964
With a copy to:
Christy & Viener
620 Fifth Avenue
New York, New York 10020
Attention: Jerome M. LeWine, Esq.
Facsimile No.: (212) 632-5555
If to Knewco:
Knogo North America Inc.
350 Wireless Boulevard
Hauppauge, New York 11788
Attention: Thomas A. Nicolette
Facsimile No.: (516) 232-2812
With a copy to:
Stroock & Stroock & Lavan
Steven Hanover Square
New York, New York 10004
Attention: David H. Kaufman
Facsimile No.: (212) 806-6006
14. Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to its subject matter, merges and
supersedes all prior and contemporaneous understandings with respect to its
subject matter and may not be waived or modified, in whole or in part,
except by a writing signed by each of the parties. No waiver of any pro-
vision of this Agreement in any instance shall be deemed to be a waiver of
the same or any other provision in any other instance. Failure of any
party to enforce any provision of this Agreement shall not be construed as
a waiver of its rights under such or any other provision.
15. Successors and Assigns. This Agreement shall be
binding on, enforceable against and inure to the benefit of, the parties
and their respective permitted successors and assigns, and nothing herein
is intended to confer any right, remedy or benefit upon any other person.
16. Governing Law. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of New
York applicable to agreements made and fully to be performed in such state,
without giving effect to conflicts of law principles.
17. Construction. Headings used in this Agreement are for
convenience only and shall not be used in the interpretation of this
Agreement. References herein to Sections and Exhibits are to the sections
and exhibits of this Agreement. As used herein, the singular includes the
plural.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first set forth above.
KNOGO CORPORATION
By
Thomas A. Nicolette
President
KNOGO NORTH AMERICA INC.
By
Thomas A. Nicolette
President
Effective as of the Effective Time under the Merger Agreement,
Sensormatic Electronics Corporation, as successor to Knogo Corporation,
shall become a party to the foregoing Supply Agreement and hereby
acknowledges and accepts such Agreement.
SENSORMATIC ELECTRONICS CORPORATION
By
Name:
Title:
