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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): May 31, 1995
Technical Communications Corporation
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(Exact Name of Registrant as Specified in Its Charter)
Massachusetts 0-8588 04-2295040
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
100 Domino Drive
Concord, Massachusetts 01742
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(508) 287-5100
N/A
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
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As of May 23, 1995, Technical Communications Corporation (the "Company"),
Datotek, Inc. ("Datotek") and AT&T Corp. ("AT&T") entered into an Asset Purchase
Agreement (the "Agreement"). The transactions contemplated by the Agreement
were completed at a closing held on May 31, 1995.
Pursuant to the Agreement, Datotek sold, licensed, transferred, conveyed
and assigned to TCC, and TCC purchased from Datotek, the assets used in
Datotek's secure communications business. These assets consist of inventory,
equipment, machinery, licenses of certain specified intellectual property, and
certain specified contracts, accounts receivable, trade accounts payable and
warranty reserves, etc. The purchase price was $4,250,000, subject to specified
adjustments which will be made on or before ninety (90) days after the closing
date. The purchase price roughly corresponds to the value of the Datotek
business and the values of certain items reflected on Datotek's financial
statements. The Company borrowed approximately $2,250,000 from the First
National Bank of Boston and Wainwright Bank and Trust Company as part of the
consideration paid. The Company will dispose of certain surplus or obsolete
assets, and continue to use the remaining assets purchased in the transaction in
the secure communications business.
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Item 7. Financial Statements and Exhibits
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It is impracticable for the Company to provide the required financial
statements for the acquired business at the time this Report on Form 8-K is
being filed. The Company expects that the required financial statements will be
filed on or about August 11, 1995.
Item No. Name of Agreement
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2 Asset Purchase Agreement by and among
Technical Communications Corporation,
Datotek, Inc. and AT&T Corp.
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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.
Technical Communications Corporation
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(Registrant)
By: /s/ Graham R. Briggs
________________________________
Date: June 12, 1995 Graham R. Briggs, Vice Presi-
dent, Finance & Administration
(Principal Financial And Account-
ing Officer and Duly Authorized
Officer)
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ASSET PURCHASE AGREEMENT
------------------------
THIS AGREEMENT made and entered into as of this 23rd day of May, 1995, by
and between Datotek, Inc., a Texas corporation ("Datotek"), AT&T Corp., a New
York corporation ("AT&T"), and Technical Communications Corporation, a
Massachusetts corporation ("TCC").
W I T N E S E T H:
WHEREAS, Datotek is engaged in the telecommunications business (such
business, excluding Datotek's Advanced Cellular Privacy Systems business, is
hereinafter referred to as "Datotek's Business" or the "Datotek Business"), with
its offices at 3801 Realty Road, Dallas, Texas (said offices being hereinafter
called the "Datotek Location"); and
WHEREAS, Datotek wishes to sell, and TCC desires to purchase Datotek's
Business and the assets relating thereto as more particularly set forth herein;
and
WHEREAS, AT&T is the owner of all the issued and outstanding capital stock
of Datotek.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties intending to be legally bound, agree as follows:
1. Assets and Liabilities.
----------------------
1.01 Excluded Assets. Any assets which are not expressly set forth
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in Schedule 1.02 to the Disclosure Letter are excluded from this transaction
(the "Excluded Assets").
1.02 Assets to be Conveyed. Subject to the terms and conditions
---------------------
hereinafter set forth, Datotek shall sell, license transfer, convey and assign
to TCC, and TCC will purchase from Datotek, for the consideration hereinafter
set forth, on the Closing Date (as hereinafter defined) the assets of Datotek
set forth in Schedule 1.02A to the Disclosure Letter. In addition, subject to
the terms and conditions hereinafter set forth, Datotek shall sell, license,
transfer, convey and assign to TCC the contracts identified in Schedule 3.10 of
the Disclosure Letter and the licenses, permits and contracts identified in
Schedule 3.11 of the Disclosure Letter (hereinafter collectively called the
"Purchased Assets"). The parties acknowledge that Schedule 1.02A to the
Disclosure Letter reflects the Purchased Assets as of April 30, 1995, and
subject to the terms and conditions of this Agreement, may be different on the
Closing Date.
In addition, Datotek assigns to TCC all right, title, and interest in
and to the copyrights contained in the works set forth in Schedule 1.02(c) to
the Disclosure Letter, throughout the world. This assignment includes all moral
rights; Datotek waives any moral rights in and to the works set forth in
Schedule 1.02(c) to the Disclosure Letter.
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1.03 TCC's Assumption of Liabilities. At and conditioned on the
-------------------------------
Closing, TCC shall assume and agree to pay or otherwise discharge the following:
(a) all trade accounts payable and warranty reserves of Datotek as of
the Closing Date, which are set forth on Schedule 1.03 of the Disclosure
Letter, and commissions that relate to contracts set forth in Schedule 3.10
to the Disclosure Letter or accounts receivable, the proceeds of which are
received by TCC from any source after the Closing. Schedule 1.03 to the
Disclosure Letter reflects the trade accounts payable, warranty reserves
and said commissions as of April 30, 1995, and subject to the terms and
conditions of this Agreement, may be different on the Closing Date.
(b) all contractual liabilities and obligations arising under
contracts listed in Schedule 1.02 of the Disclosure Letter which have been
assigned to TCC;
(c) all liabilities and obligations relating to the Purchased Assets
which (i) are expressly assumed by TCC or (ii) arise from or relate to the
Purchased Assets or the operation of the Datotek Business after the Closing
Date and which did not result from acts or omissions of Datotek;
(d) any sales, transfer, excise or use taxes in connection with the
purchase by TCC of the Purchased Assets;
(e) TCC shall not assume nor be liable for any liability of Datotek
in respect of:
(i) Any profit derived from the sale provided for by this
Agreement;
(ii) The preparation or filing of Datotek's tax returns or the
payment of any Federal or state income or similar taxes levied,
assessed or imposed upon Datotek or its property. Datotek shall
assume all liability for the filing and the correctness of all
Datotek's income tax returns, and the payment of all taxes reported or
to be reported therein;
(iii) Wages, commissions (except to the extent that such
commissions relate to contracts set forth in Schedule 3.10 to the
Disclosure Letter or accounts receivable, the proceeds of which are
received by TCC from any source after the Closing), bonuses, vacation,
severance, and other similar forms of compensation owing to or accrued
by Datotek's employees, or any other labor-related obligations or
liabilities arising out of any person's employment with Datotek;
(iv) Inter-company payables;
(v) Real property or leases for real property; or
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(vi) Datotek's expenses in connection with this transaction; and
(f) Notwithstanding the agreement to assume liabilities and
obligations as provided above, the sole obligation of TCC hereunder shall
be to assume and to pay such liabilities and assume such obligations or to
indemnify Datotek or AT&T for its failure to so assume and pay the same,
and, without limiting the generality of the foregoing, nothing in this
Agreement shall be construed as conferring upon any third person, other
than the parties hereto and their respective permitted successors in
interest and assigns, any right, remedy or claim, under or by reason of
this Agreement.
2. Purchase Price and Payment. The purchase price to be paid by TCC to
--------------------------
Datotek for the Purchased Assets (the "Purchase Price") shall consist of the
following:
(a) On the Closing Date, TCC shall pay Datotek the sum of $4,250,000
by certified check or wire transfer pursuant to wiring instructions
furnished by Datotek (the "Closing Purchase Price"). The Closing Purchase
Price shall be increased or decreased, as the case may be, at the Closing,
dollar-for-dollar by the amount, if any, by which each of the trade
accounts receivable, trade payables, inventory, equipment and fixed assets,
net of allowances, reserves or depreciation, as the case may be, reflected
on Datotek's balance sheet as of December 31, 1994, attached hereto as
Schedule 1.02B to the Disclosure Letter (the "Balance Sheet") vary from the
amounts reflected on the Pro Forma Closing Balance Sheet. In addition, the
Closing Purchase Price shall be decreased dollar-for-dollar by the amount
of customer deposits reflected on the Pro Forma Closing Balance Sheet (the
amount of any such adjustment to the Closing Purchase Price being
hereinafter referred to as the "Preliminary Closing Adjustment").
(b) The Closing Purchase Price shall be further increased or
decreased, as the case may be, dollar-for-dollar by the amount, if any, by
which each of the trade accounts receivable, trade payables, inventory,
equipment and fixed assets, net of allowances, reserves or depreciation, as
the case may be, reflected on the Balance Sheet vary from the amounts
reflected on the Closing Balance Sheet. In addition, the Closing Purchase
Price shall be further increased or decreased, dollar-for-dollar, by the
amount by which customer deposits on the Closing Balance Sheet are less
than or greater than the amounts shown on the Pro Forma Closing Balance
Sheet.The amount of any such adjustments to the Closing Purchase Price
being hereinafter referred to as the "Final Post-Closing Adjustment").
Datotek or TCC shall remit to the other, as the case may be, the Final
Post-Closing Adjustment within five (5) days after the amount has been
determined in accordance with the terms of Section 2(d) hereof.
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(c) On or prior to the Closing, Datotek and TCC shall jointly prepare
a pro forma balance sheet of Datotek dated as of April 30, 1995 in
accordance with generally accepted accounting principles consistently
applied and consistent with Datotek's historical accounting practices,
reflecting the Purchased Assets and the Assumed Liabilities (the "Pro Forma
Closing Balance Sheet"), which Pro Forma Closing Balance Sheet shall be
utilized to compute any Preliminary Closing Adjustments and assist Datotek
in the preparation of the Closing Balance Sheet as hereinafter provided.
(d) For purposes of determining the Post-Closing Adjustment, as soon
as practicable after the Closing Date, but in any event within ninety (90)
days of the Closing Date, Datotek shall furnish TCC with an audited balance
sheet of Datotek as of the close of business on the Closing Date (or a
different mutually agreed upon "effective date") reflecting the Purchased
Assets and the Assumed Liabilities (the "Closing Balance Sheet"), prepared
by Datotek in accordance with generally accepted accounting principles and
consistent with Datotek's historical accounting practices, together with
all work papers and other materials used by Datotek to prepare the Closing
Balance Sheet. Datotek shall permit Arthur Andersen, LLP to review its
preparation of the Closing Balance Sheet, if requested by TCC. After TCC
receives the Closing Balance Sheet, if TCC does not object to all or any
portion thereof by furnishing Datotek a written notice of objection ("TCC
Objection Notice"), which TCC Objection Notice shall set forth TCC's
objections or questions in reasonable detail, within thirty (30) days after
the date of TCC's receipt thereof, then the amounts reflected on the
Closing Balance Sheet shall be deemed conclusive and binding upon the
parties for purposes of determining the Post-Closing Adjustment. By prior
agreement, the method of valuing inventory and fixed assets as stated on
the December 31, 1994 balance sheet is accepted by the parties and shall
not be subject to dispute. Furthermore, the Closing Balance Sheet shall be
adjusted for any damage which may occur to the Purchased Assets after the
date of this Agreement but prior to the Closing Date. If, however, TCC
objects in a timely manner as aforesaid, then Datotek and TCC shall
promptly endeavor to agree on the disputed amounts in the Closing Balance
Sheet. If a written agreement as to all disputed amounts has not been
reached by Datotek and TCC within fifteen (15) days after the date of
Datotek's receipt of TCC Objection Notice, then the matter shall be
submitted to a so-called big six accounting firm selected by TCC,
reasonably approved by AT&T, and not used by TCC, AT&T or Datotek, whose
determination shall be final and binding upon the parties, and whose fees
shall be borne equally by Datotek and TCC.
3. Warranties and Representations of Datotek and AT&T. Datotek and AT&T,
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jointly and severally, represent and warrant to and agree with TCC as follows:
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3.01 Organization and Qualification of Datotek. Datotek is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and is qualified to do business and in good standing in
all jurisdictions in which the ownership of assets or the nature and conduct of
its business requires such qualification and where the failure to be so
qualified might result in a material adverse change in the business, financial
condition or prospects of Datotek. Datotek has all requisite power to own its
property and to carry on its business as presently conducted, and Datotek has
complete and unrestricted power to perform this Agreement and to sell, assign,
transfer, convey and deliver all of the Purchased Assets as contemplated by this
Agreement except as elsewhere set forth herein and in the attached Schedules.
3.02 Authority of AT&T. AT&T has full power, authority and capacity
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to enter into this Agreement and to carry out its obligations contemplated
hereby.
3.03 Binding Effect. This Agreement and all other agreements,
--------------
documents and instruments executed pursuant hereto are and will be the valid and
binding obligations of Datotek or AT&T, as applicable, enforceable in accordance
with their terms, and the execution, delivery and performance of this Agreement,
and such other agreements, documents and instruments and the transactions
contemplated hereunder, have been duly and validly authorized by Datotek's
stockholder and Board of Directors.
3.04 Datotek Financial Statements. Datotek has delivered to TCC
----------------------------
copies of its unaudited financial statements (i.e., balance sheets and
statements of income) for (i) the fiscal years ended December 31, 1992, 1993,
and 1994 prepared by Datotek (said unaudited financial statements for the fiscal
year ended December 31, 1994 is for the "traditional" Datotek Business only) and
(ii) unaudited monthly financial statements for the period January 1, 1995
through the end of the calendar month preceding the Closing (collectively the
"Financial Statements"). The Financial Statements, as provided in Schedule 3.04
of the Disclosure Letter, were prepared for internal use. To the best of
Datotek's knowledge, they are true, accurate, and complete in all material
respects, and present fairly the financial position and results of operations of
Datotek (or, in the case of the fiscal year 1994 financial statements, of
Datotek's "traditional" Business) as of the respective periods to which they
relate, subject to the effect of pushdown accounting and any adjustment as a
result of the audit by Coopers and Lybrand and the absence of footnote
disclosure.
3.05 Conflicts. Except as set forth in Schedule 3.05 of the
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Disclosure Letter, the execution and delivery of this Agreement and the
performance of the transactions contemplated hereby does not constitute a
violation of, and is not, a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or give rise to any right of
termination, cancellation or acceleration under, or conflict with the terms of
the Articles of Incorporation or By-Laws of Datotek, or any contract, lease,
indenture, agreement, order, judgment or decree to
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which Datotek or AT&T is a party or by which any of them is bound or to which
any of the Purchased Assets being transferred hereunder are subject and does not
violate or constitute a default under any statute, rule, regulation, ordinance,
or order, of any governmental, judicial or arbitral body, in each case in a
manner which would have a material adverse effect on the Datotek Business, the
Purchased Assets or the transactions contemplated by this Agreement.
3.06 No Undisclosed Liabilities. Except to the extent reflected or
--------------------------
reserved against in Datotek's balance sheets of December 31, 1994, or otherwise
expressly stated in the Agreement, Datotek as of such dates had no liabilities
or obligations of any nature, whether accrued, absolute, contingent, or
otherwise, including without limitation tax liabilities, due or to become due
and whether incurred in respect of or measured by Datotek's income for any
period prior to such dates, or arising out of transactions entered into or any
state of facts existing prior thereto which affect the Purchased Assets or
Datotek's Business. The parties making these representations do not know, nor
have reasonable grounds to know, of any basis for the assertion against Datotek
as of December 31, 1994 of any liability or obligation of any nature which
affect the Purchased Assets or Datotek's Business which is not reflected or
reserved against in the balance sheet of December 31, 1994.
3.07 Absence of Certain Changes. Except for changes relating to or
--------------------------
arising as a result of the transactions contemplated by this Agreement, or the
sale of Datotek's Advanced Cellular Privacy Systems Business, since January 1,
1994, there has not been any damage, destruction or loss materially adversely
affecting the Purchased Assets or Datotek's Business, nor any labor trouble, nor
any event or condition of any character materially and adversely affecting the
Purchased Assets or Datotek's Business, nor any change in Datotek's financial
condition, assets, liabilities, or business which has been materially adverse
and which affect the Purchased Assets or Datotek's Business; and since January
1, 1994, the Datotek Business has been operated in the ordinary and normal
course and there has been no material change in the operation of Datotek's
Business. Without limiting the generality of the foregoing, except as set forth
in the Financial Statements or Schedule 3.07 of the Disclosure Letter, since
January 1, 1994, Datotek has not:
(a) Sold, leased or otherwise disposed of any of its material
property or assets used in the Datotek Business, real, personal or mixed,
tangible or intangible, except in the ordinary course of business, or
permitted, caused, or allowed any of such properties or assets, to be
mortgaged, pledged or subjected to any lien or encumbrance.
(b) Made any change in accounting principles, methods or practices,
payment and processing practices or policies regarding intercompany
transactions, except for such changes as were necessary to conform with
GAAP.
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(c) Agreed, whether in writing or otherwise, to take any action
described in this Section 3.07.
3.08 Title. Datotek has, and will transfer to TCC on the Closing
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Date, good, clear, record, merchantable and marketable title to all of the
Purchased Assets, free and clear of all liens, encumbrances, and agreements of
every kind, nature and description except for the intellectual property being
licensed pursuant to the License Agreement set forth in Schedule 8.04(c) of the
Disclosure Letter and except as set forth on Schedule 3.08 of the Disclosure
Letter.
3.09 Tangible Property. Except as set forth in Schedule 3.09 of the
-----------------
Disclosure Letter, the Purchased Assets listed in Schedule 1.02 of the
Disclosure Letter constitute in all material respects all of the assets used and
utilized by Datotek in the conduct of Datotek's Business in the normal course.
All such assets are in good operating order, repair and condition (reasonable
wear and tear excepted) and conform in all material respects to all applicable
Federal, state and local laws, ordinances and regulations. Set forth in
Schedule 3.09 of the Disclosure Letter is a list of capital assets and inventory
acquired by Datotek on or after January 1, 1995 which total, individually or in
the aggregate, more than $10,000.
3.10 Contracts.
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(a) Accurate, correct and complete copies of each written contract
and written summaries of each oral contract which is part of the Purchased
Assets or Datotek's Business as of April 30, 1995 have been delivered by
Datotek to TCC and are identified in Schedule 3.10 to the Disclosure
Letter. Prior to the Closing, Datotek will provide to TCC an accurate,
correct and complete list, and make available to TCC at Datotek's offices
accurate, correct and complete copies, of all written contracts and written
summaries of each such oral contract entered into by Datotek from the date
hereof through the Closing Date which is part of the Purchased Assets or
Datotek's Business.
(b) Datotek is not in default in the performance of any of its
obligations under any of the contracts which are part of the Purchased
Assets or Datotek's Business, and all such contracts are in full force and
effect. The contracts which constitute part of the Purchased Assets or
Datotek's Business have not been impaired by any acts or omissions of
Datotek or its agents or employees, and said contracts will not be modified
by Datotek or AT&T without TCC's prior written consent.
3.11 Consents; Transferability.
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(a) Other than as set forth in Schedule 3.11 of the Disclosure
Letter, no notice to, filing with, or consent of, any person is necessary
for the consummation by Datotek of the transactions contemplated by this
Agreement.
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(b) Subject to obtaining the consents set forth in Schedule 3.11 of
the Disclosure Letter, the interest of Datotek in all claims, contracts,
licenses and commitments which are part of the Purchased Assets shall not
be terminated or defaulted in any manner whatsoever by the consummation of
the transactions contemplated hereby, and such claims, contracts, licenses,
commitments and assets shall be the property of TCC immediately thereafter
(subject to the provisions of Section 5.04 hereof), and TCC shall have all
of the right, title and interest which Datotek had available to it prior to
the consummation of the transactions contemplated hereby in and to such
claims, contracts, licenses, commitments and assets which are part of the
Purchased Assets. The interest of Datotek in all claims, contracts,
licenses and commitments which are part of the Purchased Assets is
sufficient to allow Datotek to operate Datotek's Business, as currently
conducted by Datotek.
(c) Schedule 3.11 of the Disclosure Letter sets forth all licenses,
permits and contracts which are part of the Purchased Assets which
terminate or become renewable at any time prior to April 30, 1996 and,
except as set forth in Schedule 3.11 of the Disclosure Letter, to Datotek's
best knowledge, except for purchase orders and purchase contracts that by
their nature are not renewable there are no facts or circumstances
currently in existence which are reasonably likely to prevent TCC from
renewing each such license, permit and contract.
3.12 Inventory and Receivables. The inventory which is part of the
-------------------------
Purchased Assets is adequate and sufficient in all material respects for the
conduct of Datotek's Business in the normal course, and all inventories of
Datotek are in good, useable, and merchantable condition. The trade accounts
receivable of Datotek, including without limitation, the trade accounts
receivable set forth on the Financial Statements included as Schedule 3.04 of
the Disclosure Letter, and the trade accounts receivable of Datotek as will be
set forth in its books and records as of the Closing Date are lawful and valid,
have arisen out of transactions in the ordinary course of business, have
sufficient consideration, and are not subject to any offset, allowance, credit,
refund, counterclaim or similar diminution or discount, whether customary in the
trade or otherwise, except to the extent specifically set forth and reserved
against on the Closing Balance Sheet.
3.13 Customers and Suppliers. Schedule 3.13 of the Disclosure Letter
-----------------------
sets forth an accurate, correct and complete list (including the name of the
customers, gross revenues derived, or purchases made, in the fiscal years ended
December 31, 1993 and 1994 and last work date) of the twenty (20) largest
customers (in terms of gross revenues) of Datotek, and the ten (10) largest
suppliers (in terms of purchases) to Datotek, on a consolidated basis, for each
of the fiscal years ended December 31, 1993 and 1994. To the best knowledge of
Datotek, no claim has been asserted
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against Datotek for renegotiation or price redetermination of any contract or
receivable constituting part of the Purchased Assets, and there are no facts
upon which any such claim currently could be properly based. Except as described
in Schedule 3.13 of the Disclosure Letter, to the best knowledge of AT&T and
Datotek, there are no written or oral arrangements, agreements or understandings
with customers and suppliers which a customer or supplier of Datotek believes
will modify the payment, purchase or return terms of Datotek. Except as
described in Schedule 3.13 of the Disclosure Letter, Datotek does not have any
direct or indirect interest in any customer, supplier or competitor of Datotek,
or any person with whom Datotek is doing business.
3.14 Confidential Information, Secrecy Agreements and Classified
-----------------------------------------------------------
Information.
- - -----------
(a) Except as set forth in Schedule 3.14 of the Disclosure Letter,
neither Datotek nor AT&T has disclosed any proprietary or confidential
information, materials or documents with respect to the Purchased Assets or
Datotek's Business (except customary sales literature) to any third party
which would permit such party to manufacture the products which are part of
the Datotek Business or the Purchased Assets.
(b) At the Closing, Datotek shall (i) use its reasonable best efforts
to obtain approval to disclose to TCC all of its rights and obligations
under any secrecy, non-disclosure or non-competition agreements or similar
agreements entered into by Datotek with respect to the Purchased Assets or
Datotek's Business (the "Secrecy Agreements"); and (ii) assist TCC in
obtaining the assignment to it of the Secrecy Agreements. True and
complete copies of the Secrecy Agreements for which Datotek has obtained
approval shall be furnished to TCC prior to the Closing.
(c) None of the Purchased Assets requires the use of so-called U.S. or
foreign government classified contracts or information, nor, to the best of
Datotek's knowledge, information which will not be able to be disclosed to
TCC pursuant to confidentiality or Secrecy Agreements.
3.15 Compliance with Laws. Except as set forth in Schedule 3.15 of
--------------------
the Disclosure Letter, Datotek's Business and the Purchased Assets are in
compliance in all material respects with all applicable federal, state, local or
foreign laws, regulations, orders, judgments and decrees, including without
limitation those relating, without limitation, to the environment, anti-
competitive practices, discrimination, the Foreign Corrupt Practices Act, the
export of goods or services, employment, or health and safety. To the best of
Datotek's knowledge, Datotek has not been charged or threatened with, nor is
under any investigation with respect to, any charge concerning any such
violations.
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3.16 Employees.
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(a) Set forth on Schedule 3.16 of the Disclosure Letter attached
hereto and made a part hereof is the names of all of Datotek's employees,
their rate of compensation, and the job performed or position held by each
such person. At TCC's request, Datotek or AT&T will use its reasonable
best efforts to assist TCC in hiring any of such employees.
(b) Datotek shall be responsible for any termination of the employment
of all of the employees, shall make all payments to the employees for
wages, commissions (except to the extent that such commissions relate to
contracts identified in Schedule 3.10 to the Disclosure Letter or accounts
receivable, the proceeds of which will be received by TCC from any source
after the Closing), bonuses, vacation, severance, and other similar forms
of compensation, where applicable, owing to or accrued by the employees
prior to and up to the Closing Date, except to the extent that any of the
foregoing are being disputed by Datotek in good faith. TCC shall not be
obligated to Datotek or any other party for any labor-related or ERISA
obligations or liabilities arising out of any person's employment with
Datotek.
(c) There are no pending labor problems of any kind at Datotek's place
of business which may affect this transaction or the transfer of the
Purchased Assets or Datotek's Business.
3.17 Litigation. Except as set forth in Schedule 3.17 of the
----------
Disclosure Letter, there is no suit, action or legal, administrative,
arbitration or other proceedings of any nature pending, or to the knowledge of
Datotek or AT&T threatened, against Datotek or AT&T which affects in any way the
legality or validity of this Agreement, the transactions contemplated hereby, or
the Purchased Assets or which might materially and adversely affect the
enjoyment or use thereof by TCC and there is not any factual basis known to
Datotek or AT&T for any such suit, action or proceeding.
3.18 Taxes. None of the Purchased Assets are assets that TCC shall be
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required to treat as being owned by another person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately before the enactment of the Tax Reform Act of 1986, or is "tax-
exempt use property" within the meaning of Section 168(h)(1) of the Code.
3.19 Affiliate Contracts. Except as set forth in Schedule 3.19 of the
-------------------
Disclosure Letter, Datotek has not entered into, and none of the Purchased
Assets made use or consist of, any agreements with officers, directors or
employees of Datotek, or affiliates (other than from or as a result of being a
wholly-owned subsidiary of AT&T) of any of the foregoing.
3.20 Licenses and Permits. Schedule 3.20 of the Disclosure Letter
--------------------
contains an accurate, correct and complete list (including the name of the
licensor, a summary of the license and the date of expiration or renewal), as of
the date hereof, of all
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material licenses and permits (except those included as part of the License
Agreement set forth as Schedule 8.04(c) to the Disclosure Letter and except any
patent licenses between AT&T and third parties to which Datotek is a beneficiary
thereof) which are used in Datotek's Business, as currently conducted by
Datotek. All of the licenses and permits set forth in Schedule 3.20 of the
Disclosure Letter are valid and in full force and effect and there are no
pending or, to the best knowledge of Datotek, threatened proceedings which could
result in the termination, revocation, limitation or impairment of any such
licenses and permits. Such licenses and permits are sufficient to enable Datotek
to own and conduct Datotek's Business, as currently conducted by Datotek.
3.21 Guaranty of AT&T. All of the obligations of Datotek to TCC under
----------------
this Agreement and under any agreement or document executed in connection
herewith shall be guaranteed by AT&T, pursuant to the terms of a guaranty in the
form of Schedule 8.04(d) of the Disclosure Letter (the "Guaranty").
3.22 Insurance. Datotek's Business and the Purchased Assets are
---------
"self-insured" by AT&T.
3.23 Product Matters.
---------------
(a) All instances of product warranty claims involving amounts in
excess of $5,000 per occurrence that have occurred and for which notice has
been received by Datotek within the past two (2) years are listed on
Schedule 3.23 of the Disclosure Letter.
(b) All instances of product liability matters involving amounts in
excess of $5,000 that have occurred and for which notice has been received
by Datotek since the date AT&T acquired Datotek are also listed on Schedule
3.23 of the Disclosure Letter.
(c) To the knowledge of Datotek, no facts or circumstances exist that
would cause a material product warranty claim or product liability matter
to occur with respect to Datotek's products sold prior to the Closing for
which TCC is responsible.
3.24 Product Specifications. To the knowledge of Datotek, Datotek's
----------------------
products which are part of the Purchased Assets or Datotek's Business meet all
product and/or process specifications that they purport or are required to meet.
3.25 Distribution, OEM Arrangements, etc.
------------------------------------
(a) Schedule 3.25 of the Disclosure Letter:
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(i) lists all persons or entities that purchased from Datotek
Datotek's products or AT&T-SCS products identified on Appendix A of
the exclusive Distribution Agreement attached as Exhibit 8.04(b)
(hereinafter the "AT&T-SCS Products") as distributors since January 1,
1992;
(ii) lists all persons or entities for whom Datotek serves as an
original equipment manufacturer ("OEM");
(iii) lists all persons or entities which serve as a manufacturer's
representative for Datotek's products; and
(iv) describes and sets forth the terms of the arrangement or
agreement (written or oral) with each such distributor or
manufacturer's representative party for whom Datotek serves as an OEM.
(b) Except as specifically indicated on Schedule 3.25 of the
Disclosure Letter, there are no other persons or entities who have been
granted the right to purchase Datotek Products from Datotek for resale or
to serve as a distributor of Datotek's Products or granted the right by
Datotek to serve as a distributor of AT&T-SCS Products.
(c) Except as specifically set forth on Schedule 3.25 of the
Disclosure Letter, all contracts with Datotek's distributors or
manufacturer's representatives and/or parties for whom Datotek serves as an
OEM can be terminated by Datotek upon ninety (90) days' notice, with or
without cause, without liability, penalty or premium of any nature
whatsoever.
3.26 Intellectual Property. All intellectual property which is used
---------------------
by Datotek in connection with the Purchased Assets or Datotek's Business is
identified and licensed in the License Agreement referred to in Section 8.04(c).
3.27 Limitations on TCC Liabilities. The parties acknowledge that TCC
------------------------------
is only assuming the obligations and liabilities set forth in Section 1.03, and
except as explicitly provided for herein, TCC shall not be obligated to Datotek,
AT&T or any other party for any claims resulting from lawsuits referenced in
this Agreement, labor-related or ERISA obligations, any employee-related or
environmental liabilities, or foreign, federal, state income taxes or, except to
the extent the liability or obligations arose from or relate to the Purchased
Assets or the operation of the Datotek Business after the Closing Date and which
did not result from acts or omissions of Datotek.
3.28 Disclosure. No representation or warranty made in this Agreement
----------
or in any written statement or certificate furnished or to be furnished to TCC
pursuant hereto knowingly contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
therein not misleading.
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<PAGE>
Disclosure by AT&T or Datotek with respect to any item on the
Disclosure Schedule delivered pursuant to this Agreement at or prior to the
Closing Date shall be disclosure as to all such items to the extent that the
context of such disclosure is sufficient to notify TCC of the disclosure.
4. TCC's Warranties and Representations. TCC represents and warrants and
------------------------------------
agrees with Datotek as follows:
4.01 Organization and Qualification. TCC is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has all requisite power to conduct its
business and perform the transactions contemplated hereby. TCC is duly
qualified to do business and in good standing in each jurisdiction where the
conduct of its business or the nature of its assets requires such qualification
and where the failure to be so qualified might result in a material adverse
change in the business, financial condition or prospects of TCC. TCC has
complete and unrestricted power to perform this Agreement, to accept the
conveyance of all of the Purchased Assets, and to make all payments and perform
all of its obligations as contemplated by this Agreement.
4.02 Binding Effect. This Agreement is the valid and binding
--------------
obligation of TCC enforceable in accordance with its terms and the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby have been duly and validly authorized and approved by TCC's Board of
Directors.
4.03 Conflicts. The execution and delivery of this Agreement and the
---------
performance of the transactions contemplated hereby does not, and will not,
constitute a violation of, and is not, and will not be, a default under or
conflict with the terms of the Articles of Organization or By-laws of TCC, or
any contract, lease, indenture, agreement, order, judgment or decree to which
TCC is a party or by which it is bound and does not, and will not, to the best
of TCC's knowledge, violate or constitute a default under any statute, rule,
regulation, order or ordinance of any governmental, judicial or arbitral body,
in each case in a manner which would have a material adverse effect on the
transactions contemplated by this Agreement.
4.04 Litigation. There is no suit, action or legal, administrative,
----------
arbitration or other proceeding of any nature pending, or to the knowledge of
TCC threatened, against TCC which affects in any way the legality or validity of
this Agreement, the transactions contemplated hereby, or the enjoyment or use of
the Purchased Assets by TCC, and there is not any factual basis known to TCC for
any such suit, action or proceeding.
4.05 Disclosure. No representation or warranty made in this
----------
Agreement, or in any written statement or certificate furnished, or to be
furnished to Datotek or AT&T pursuant hereto knowingly contains any untrue
statement of material fact or omits or shall omit to state a material fact
necessary to make the statements contained therein not misleading.
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5. Covenants of Datotek and AT&T. Datotek and AT&T, jointly and
-----------------------------
severally, covenant and agree that:
5.01. Conduct of Business. Between the date of this Agreement and the
-------------------
Closing Date, Datotek shall:
(a) except as specifically consented to and approved by TCC in
writing, operate Datotek's Business in the ordinary course, perform all of
its obligations, and use its best efforts to preserve for the benefit of
TCC all of its customers, clients and suppliers and Datotek's goodwill;
(b) furnish to TCC, upon request, full information pertinent to any
covenant, provision, representation, warranty or condition hereof, or to
any matter in connection with Datotek's Business and, at all reasonable
times and as often as TCC shall reasonably request, permit any authorized
representative designated by TCC to visit and inspect any of Datotek's
properties, including its books (and to make extracts therefrom), and to
discuss its affairs, finances and accounts with its officers, directors,
employees and accountants; and
(c) promptly upon the occurrence of, or promptly upon AT&T or Datotek
becoming aware of the impending or threatened occurrence of any event which
would cause or constitute a breach, or would have caused or constituted a
breach had such event occurred or been known to AT&T or Datotek prior to
the date hereof, of any of the representations and warranties of AT&T or
Datotek contained in or referred to in this Agreement, AT&T or Datotek
shall give detailed written notice thereof to TCC and shall use its
reasonable best efforts to prevent or promptly remedy the same.
5.02 Negative Covenants. Between the date of this Agreement and the
------------------
Closing Date, AT&T and Datotek shall consult with TCC on a regular basis with
respect to all decisions which might affect the Purchased Assets or Datotek's
Business and Datotek or AT&T shall not, without the express permission of TCC,
(a) conduct Datotek's Business except in the ordinary course; or
(b) make any purchase, sale or disposition of any asset which is part
of the Purchased Assets other than in the ordinary course of business,
purchase any capital asset or inventory needed to conduct Datotek's
Business or become subject to any liability or obligation costing more than
$10,000, or mortgage, pledge, subject to a lien or otherwise encumber any
of the Purchased Assets.
5.03 Acquisition Transactions. After the date hereof and prior to the
------------------------
Closing Date or earlier termination of this Agreement, unless TCC shall
otherwise agree in writing, neither AT&T nor Datotek shall initiate, solicit,
negotiate, encourage, or provide confidential information to facilitate, and
neither AT&T nor
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Datotek shall (a) cause any officer, director or employee of, or any attorney,
accountant or other agent retained by, Datotek or AT&T and (b) use its best
efforts to cause any investment banker retained by Datotek or AT&T, not to
initiate, solicit, negotiate, encourage, or provide confidential information to
facilitate, any proposal or offer to acquire all or any substantial part of the
business and properties of Datotek, or capital stock of Datotek, whether by
merger, purchase of assets, tender offer or otherwise, whether for cash,
securities or any other consideration or combination thereof.
5.04 Consent of Third Parties; Further Assurances.
--------------------------------------------
(a) From time to time following the Closing, AT&T and Datotek shall
execute and deliver, or cause to be executed and delivered, to TCC such
additional instruments of conveyance and transfer as TCC may reasonably
request or as may be otherwise necessary to more effectively convey or
transfer to, and vest in, TCC and put TCC in possession of, any part of the
Purchased Assets.
(b) Nothing in this Agreement shall be construed as an attempt or
agreement to assign any Purchased Asset, including any license,
certificate, approval, authorization, agreement, contract, lease, or other
right, which by its terms or by law is nonassignable without the consent of
third persons unless and until such consent shall be given ("Nonassignable
Assets"). AT&T and Datotek agree to cooperate with TCC at its request in
endeavoring to obtain such consent promptly; provided, however, that such
cooperation shall not require AT&T and Datotek to remain secondarily liable
with respect to any Nonassignable Asset. To the extent permitted by
applicable law, in the event consents to the assignment thereof cannot be
obtained, such Nonassignable Assets shall be held, as and from the Closing
Date, by AT&T and Datotek in trust for TCC and the covenants and
obligations thereunder shall be performed by TCC in AT&T's and Datotek's
name and all benefits and obligations existing thereunder shall be for
TCC's account. Each of AT&T and Datotek shall take or cause to be taken
such action in its name or otherwise as TCC may reasonably request so as to
provide TCC with the benefits of the Nonassignable Assets and to effect
collection of money or other consideration to become due and payable under
the Nonassignable Assets, and each of AT&T and Datotek shall promptly pay
over to TCC all money or other consideration received by it in respect to
all Nonassignable Assets. As of and from the Closing Date, AT&T and
Datotek authorize TCC, to the extent permitted by applicable law and the
terms of the Nonassignable Assets, at TCC's expense, to perform all the
obligations and receive all the benefits of AT&T and Datotek under the
Nonassignable Assets and appoint TCC their attorney-in-fact to act in their
name, on their behalf with respect thereto.
5.05 Other Covenants. AT&T or Datotek shall not make any disclosure
---------------
after the Closing Date which would have been in
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violation of Section 3.14(a) hereof if made prior to the Closing Date.
6. Covenants of TCC. TCC covenants and agrees that:
----------------
(a) promptly upon the occurrence of, and promptly TCC becoming aware
of the impending or threatened occurrence of any event which would cause or
constitute a breach, or would have caused or constituted a breach had such
event occurred or been known to TCC prior to the date hereof, of any of the
representations and warranties of TCC contained in or referred to in this
Agreement, TCC shall give detailed written notice thereof to AT&T and
Datotek and shall use its best efforts to prevent or promptly remedy the
same; and
(b) TCC shall be responsible for customer claims relating to services
rendered by Datotek prior to the Closing and customer claims relating to,
returns of, or products of Datotek sold and shipped by Datotek prior to the
Closing Date which are covered by Datotek's standard warranty or service
terms and which are part of the Purchased Assets. AT&T or Datotek shall be
responsible for all AT&T initiated product recalls or responses to
extraordinary problems (such determination to be made in good faith and in
the reasonable opinion of AT&T) relating to services or products of
Datotek.
7. Termination of Agreement. At any time prior to the Closing Date, this
------------------------
Agreement may be terminated (i) by mutual consent of the parties, (ii) by the
nonbreaching party if there has been a material misrepresentation, breach of
warranty or breach of covenant by the other party in its representations,
warranties and covenants set forth herein, or (iii) by the nonbreaching party if
the conditions stated in Section 8 have not been satisfied at or prior to the
Closing Date, or (iv) by the nonbreaching party if the Closing Date has not
occurred by June 2, 1995 and this Agreement has not been extended by agreement
of the parties.
8. Closing and Deliveries.
----------------------
8.01 Time and Place. The date of the closing (the "Closing Date")
--------------
shall be at 10:00 a.m. on June 2, 1995 or such other date mutually agreed to by
TCC and Datotek, and the closing (the "Closing") shall take place at the offices
of Posternak, Blankstein & Lund, 100 Charles River Plaza, Boston, Massachusetts
02114.
8.02 Conditions to TCC's Obligations. The obligations of TCC to
-------------------------------
consummate the Closing and the transactions contemplated by this Agreement are
subject to the satisfaction (unless waived by TCC) on or prior to the Closing
Date of each of the following conditions:
(a) Representations and Warranties. All representations and
------------------------------
warranties of AT&T and Datotek set forth in this Agreement and in any
statement, certificate or other instrument
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<PAGE>
delivered to Buyer pursuant hereto shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects on and as of the Closing Date.
(b) No Adverse Change. There shall not have been any damage to or
-----------------
loss or destruction of any of the Purchased Assets, which had, in the
aggregate, a material adverse effect on the Purchase Assets taken as a
whole, or any material adverse change in the condition (financial or
otherwise) or operations of Datotek's Business.
(c) Compliance with Agreement. AT&T and Datotek shall have performed
-------------------------
and complied with all of their respective obligations under this Agreement
which are to be performed or complied with by them on or prior to the
Closing Date.
(d) No Litigation. No investigation, suit, action or other
-------------
proceeding shall be threatened or pending before any court or governmental
agency which seeks to restrain or prohibit or obtain damages or other
relief in connection with the performance of this Agreement or the
consummation of the transactions contemplated hereby.
(e) Deliveries. AT&T and Datotek shall have delivered to TCC all of
----------
the items listed in Section 8.04 hereof.
8.03 Conditions to AT&T's and Datotek's Obligations. The obligations
----------------------------------------------
of AT&T and Datotek to consummate the Closing and the transactions contemplated
by this Agreement are subject to the satisfaction (unless waived by AT&T and
Datotek) on or prior to the Closing Date of each of the following conditions:
(a) Representations and Warranties. All representations and
------------------------------
warranties of TCC set forth in this Agreement and in any statement,
certificate or other instrument delivered to AT&T and Datotek pursuant
hereto shall have been true and correct in all material respects when made
and shall be true and correct in all material respects on and as of the
Closing Date.
(b) Compliance with Agreement. TCC shall have performed and complied
-------------------------
with all of the obligations under this Agreement which are to be performed
or complied with by it on or prior to the Closing Date.
(c) No Litigation. No investigation, suit, action or other
-------------
proceeding shall be threatened or pending before any court or governmental
agency which seeks to restrain or prohibit or obtain damages or other
relief in connection with the performance of this Agreement or the
consummation of the transactions contemplated hereby.
(d) Deliveries. TCC shall have delivered to AT&T and Datotek all of
----------
the items listed in Section 8.05 hereof.
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8.04 Deliveries by Datotek and AT&T. At the Closing, Datotek and AT&T
------------------------------
shall deliver to TCC the following:
(a) Assignment and Bill of Sale and other instruments of assignment
and transfer, with full warranty covenants in a form usual and normal and
satisfactory to TCC's counsel, covering all of the Purchased Assets to be
transferred hereunder.
(b) The exclusive Distribution Agreement in the form of Schedule
8.04(b) of the Disclosure Letter, executed by AT&T.
(c) The License Agreement in the form of Schedule 8.04(c) of the
Disclosure Letter, executed by Datotek.
(d) The Guaranty in the form of Schedule 8.04(d) of the Disclosure
Letter, duly executed by AT&T.
(e) The Assumption Agreement in the form of Schedule 8.04(e) of the
Disclosure Letter executed by Datotek with respect to all of Datotek's
contracts included as part of the Purchased Assets, together with written
consents to the assignments thereof to TCC for all such contracts where TCC
determines such consents to be required or desirable.
(f) Certificates of the legal existence, good standing of, and
payment of taxes by Datotek issued by the State of Texas.
(g) Certificates of the votes of AT&T and the Board of Directors of
Datotek authorizing, approving, and directing the execution, delivery and
performance by Datotek of this Agreement and the transactions contemplated
hereby.
(h) The opinion of AT&T's legal counsel, in the form of Schedule
8.04(h) of the Disclosure Letter.
(i) The trademark Assignment Agreement in the form of Schedule
8.04(i) of the Disclosure Letter duly executed by Datotek.
(j) Written consent to TCC's exclusive use of the name "Datotek."
(k) An Amendment to the Articles of Incorporation of Datotek, in form
suitable for filing with the Secretary of State of the State of Texas,
changing the corporate name of Datotek to a name not including the word
"Datotek".
(l) A certificate of each of the Chairman of the Board, President or
authorized representative of Datotek and an authorized representative of
AT&T as to the provisions of Section 8.02(a).
(m) The Non-exclusive Distribution Agreement in the form of Schedule
8.04(m) of the Disclosure Letter, executed by
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AT&T.
(n) Such other and further documents, instruments and certificates
not inconsistent with the provisions of this Agreement, executed by Datotek
and/or AT&T, as TCC shall reasonably require to carry out and effectuate
the purposes and terms of this Agreement and all previously undelivered
items required to be delivered by Datotek before the Closing.
8.05 Deliveries by TCC. At the Closing TCC shall deliver to Datotek
-----------------
the following:
(a) The Purchase Price Payment to Datotek provided for in Section 2
hereof by certified check or wire transfer.
(b) The exclusive Distribution Agreement and the Non-exclusive
Distribution Agreement in the form of Schedule 8.04(b) and Schedule
8.04(m), respectively, of the Disclosure Letter executed by TCC.
(c) The License Agreement in the form of Schedule 8.04(c) of the
Disclosure Letter executed by TCC.
(d) The Assumption Agreement with respect to the contracts, in the
form of Schedule 8.04(e) of the Disclosure Letter, duly executed by TCC.
(e) Certificate of the votes of the Board of Directors of TCC
authorizing and approving this Agreement and the consummation of the
transactions contemplated hereby.
(f) Certificate of legal existence and good standing of TCC issued by
the Secretary of State of the Commonwealth of Massachusetts.
(g) The opinion of Messrs. Posternak, Blankstein & Lund, in the form
of Schedule 8.05(g) of the Disclosure Letter.
(h) A certificate of the President of TCC as to the provisions of
Section 8.03(a).
(i) Such other and further documents, instruments and certificates
not inconsistent with the provisions of this Agreement, executed by TCC, as
Datotek shall reasonably require to carry out and effectuate the purposes
and terms of this Agreement.
9. Post-Closing.
------------
(a) AT&T will deliver to TCC copies of Datotek's audited financial
statements (i.e., balance sheets as of December 31, 1993 and December 31,
1994 and statements of income, retained earnings, and cash flow for the
fiscal years ending December 31, 1992, 1993, and 1994) prepared by Coopers
and Lybrand within sixty (60) days after the Closing. AT&T will also
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deliver to TCC copies of Datotek's unaudited financial statements (i.e.,
balance sheet as of March 31, 1995 and statemetns of income, retained
earnings, and cash flow for the three months ended March 31, 1994 and 1995)
within sixty (60) days after the closing. The audited and unaudited
financial statements referred to herein will have been prepared in
accordance with Form 8-K of the Securities and Exchange Commission and any
applicable rules and regulations thereto, will have been prepared in
accordance with generally accepted accounting principles, will be true,
accurate and complete in all material respects, and will present fairly the
financial position, results of operations, retained earnings, and cash
flows of Datotek as at the respective dates and for the respective periods
to which they relate. The auditors' opinion relating to the audited
financials referred to herein must be unqualified. AT&T acknowledges that
TCC is a public company, is required to file Form 8-K in connection with
this transaction, and that such financial statements are required to be
filed with the Securities and Exchange Commission pursuant to Form 8-K.
(b) Subsequent to the Closing Date, TCC shall have the right and
authority to collect all receivables and other items transferred and
assigned to it by Datotek hereunder and to endorse the name of Datotek on
any checks received on account of such receivables or other items, and
Datotek and AT&T each agree that it will promptly transfer or deliver to
TCC from time to time, any cash or other property that Datotek or AT&T may
receive with respect to any claims, contracts, licenses, leases,
commitments, sales orders, purchase orders, receivables of any character or
any other items required to be transferred by it to TCC pursuant to the
provisions hereof. TCC agrees that it will promptly deliver to Datotek or
AT&T any property belonging to Datotek or AT&T that TCC may receive which
are not part of the Purchased Assets.
10. Preservation of Books and Records. For a period of seven (7) years
---------------------------------
after the Closing Date, TCC will preserve the books and records of Datotek
delivered to it, and Datotek shall similarly make available to TCC any records
which TCC permits Datotek to retain. Each party will make such books and
records available to the other party at all reasonable times and permit the
other party to make extracts from or copies of all such records.
11. Non-Competition Agreement. In order to induce TCC to purchase the
-------------------------
Purchased Assets and Datotek Business pursuant to this Agreement, each of
Datotek and AT&T agrees to the following restrictive covenants and agreements,
which covenants are not severable from the purchase and sale of the Purchased
Assets and Datotek Business hereunder and which are included to protect the
value of the Purchased Assets and Datotek Business and to insure to TCC the
benefit of the full value thereof. Accordingly, each of Datotek (which term
shall include any successor, parent, subsidiary or affiliated legal entity of
Datotek for the purposes of this Section 11) and AT&T agrees that it will not,
at any time for a period of five (5) years after the Closing Date, directly or
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indirectly, own, manage, operate, join, control or participate in, or be
connected as a partner, joint venturer, contractor, or otherwise in any manner
with any business engaged in the design, manufacture or sale of the products set
forth in Schedule 11 of the Disclosure Letter. Each of AT&T and Datotek further
agrees that it will not license Technical Information as that term is defined in
the License Agreement set forth in Schedule 8.04(c) to the Disclosure Letter to
any party other than TCC for the purpose of manufacturing the products set forth
in Schedule 11 of the Disclosure Letter. Datotek further agrees that it will no
longer be engaged, directly or indirectly, in any business providing security or
encryption for telecommunications products or services. Notwithstanding the
foregoing, AT&T may continue to develop, manufacture and market other secure
communications products or services not set forth in said Schedule. Without
limiting the generality of the foregoing, and within the time periods
hereinbefore set forth, Datotek and AT&T agree that they shall not for any
purpose whatsoever use the name "Datotek" or any combination thereof, except for
the benefit of TCC, and then only in accordance with the directions from time to
time of the Board of Directors of TCC. Each of Datotek and AT&T acknowledges
and agrees that the remedy at law for any breach or threat of breach of the
foregoing agreements by it will be inadequate and that TCC shall be entitled to
injunctive relief in addition to any rights or remedies available to it for any
breach or threat of breach hereof. The foregoing covenants shall be deemed to
be severable and if the same be held invalid by reason of length of time or area
or scope covered, or all of them, each of Datotek and AT&T agrees that such
length of time or area or scope covered, or any of them, shall be reduced to the
extent necessary to cure such invalidity and the provisions hereof shall be
enforceable to the fullest extent permitted by law.
Notwithstanding any other provision of this Agreement, AT&T and McCaw
Cellular Communications Inc. shall be free to fulfill their obligations to offer
common carrier tariffed and cellular communications services to any party,
including any competitors of TCC, and such services may include the technical
and marketing support that customarily accompanies such services. In addition,
nothing herein shall be construed to limit or restrict the rights of each party
to quote, offer to sell, lease or license or to sell, lease or license or resell
(including providing necessary support to resellers) to any other party any
products and/or services which are regularly offered for sale and which are not
unique to this Agreement.
12. Survival of Representations.
---------------------------
12.01 Survival of Representations. All representations, warranties,
---------------------------
covenants, obligations and agreements made by any party in this Agreement, in
the Disclosure Letter, or any materials or documentation delivered by either
party to the other party pursuant to this Agreement are material, shall be
deemed to have been relied upon by the other party, and shall survive the
Closing, regardless of any investigations, and shall not merge in the
performance of
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any obligation by either party hereto; provided, however, that any claim for a
breach of any representation, warranty, agreement, covenant or obligation must
be made within one full calendar year after the Closing Date; provided, further,
however, with respect to any claim for indemnity on account of a tax liability,
a claim by a taxing authority, employment liabilities, or environmental
liabilities claims must be made within the applicable statute of limitations,
plus any extensions under applicable law, plus thirty (30) days.
12.02 Statements as Representations. All statements by TCC, Datotek
-----------------------------
or AT&T contained in any certificate, the Disclosure Letter, list, document or
other writing delivered pursuant to this Agreement shall be deemed
representations and warranties within the meaning of Section 12.01 hereof.
13. Indemnification/Claims Resolution - Datotek & AT&T.
--------------------------------------------------
13.01 Indemnification by Datotek and AT&T. Datotek and AT&T, jointly
-----------------------------------
and severally, shall indemnify TCC and hold TCC harmless at all times after the
Closing Date against and in respect of any of the following:
(a) Any and all liabilities and obligations of, or claims against,
TCC with respect to the Purchased Assets being purchased by TCC hereunder
or related to Datotek's Business other than (i) as expressly assumed by TCC
under or pursuant to the terms of this Agreement or (ii) which arose from
or relate to the Purchased Assets or the operation of the Datotek Business
after the Closing Date and which did not result from acts or omissions of
Datotek,
(b) Any and all damage or deficiency resulting from any
misrepresentation, breach of warranty, or non-fulfillment of any obligation
on the part of Datotek or AT&T under this Agreement or Disclosure Letter to
this Agreement or from any misrepresentation in or omission from any
Disclosure Letter to this Agreement, certificates or other instrument
furnished to TCC hereunder, or pursuant hereto,
(c) Any and all damages or losses resulting from any breach by, or
default of, Datotek under any contract assigned to TCC pursuant to this
Agreement,
(d) Any and all damage or deficiency resulting from any lien or
encumbrance against the Purchased Assets being transferred to TCC pursuant
hereto arising after the Closing Date out of, or based upon, any claim
against Datotek or AT&T not expressly assumed by TCC pursuant hereto, and
(e) All demands, assessments, judgments, costs, and legal and other
expenses arising from or in connection with any action, suit, proceeding or
claim incident to any of the foregoing.
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13.02 Reimbursement and Offset. Subject to the provisions of Section
------------------------
13.03 below, TCC shall be reimbursed by Datotek and AT&T, and each of them, on
demand for any payment made by it or any loss, damage, cost or expense suffered
by it at any time after the Closing Date with respect to any liability or claim
to which the foregoing indemnity relates (without regard to the after tax effect
upon TCC of any such payment, loss, damage, cost or expense). In addition, TCC
shall have the right to set off and deduct any payment made by it or loss
suffered by it with respect to any liability or claim to which the indemnity
provided for in Section 13.01 above relates against the amount of any obligation
of TCC to Datotek and/or AT&T, and their respective heirs, executors,
administrators, successors and assigns, whether under this Agreement, any
agreement executed pursuant hereto or otherwise.
13.03 Claims. Should any claim be made by a person not a party to
------
this Agreement with respect to any matter to which the indemnity under Section
13.01 relates, TCC shall give Datotek and AT&T prompt written notice of any such
claim. Notice shall in all events be considered prompt if given (a) no later
than thirty (30) days after TCC learns of the facts upon which it will claim
such indemnification or (b) earlier, if necessary to allow for sufficient time
for AT&T and Datotek to exercise its rights pursuant to this Paragraph. Datotek
and AT&T shall thereafter defend or settle any such claim, at their sole
expense, on their own behalf and with counsel of their own choosing, which
counsel shall be reasonably satisfactory to TCC. In such defense or settlement
of any claim, TCC shall cooperate with and assist Datotek and AT&T to the
maximum extent reasonably possible and may participate therein with its own
counsel. TCC's written consent shall be a requirement to a settlement or
disposition thereof, if such settlement or disposition shall result in any
liability to, equitable relief against or material adverse business effect on
TCC, which consent shall not be unreasonably withheld. Any payment resulting
from such defense or settlement, together with the total expense thereof, shall
be binding on Datotek and AT&T, for the purposes of this Section 13. Failure to
give prompt notice shall not constitute a defense, in whole or in part, to any
claim for indemnification by TCC, except only to the extent that such failure by
TCC shall result in a material prejudice to Datotek or AT&T. Notwithstanding
the foregoing, if Datotek and AT&T do not assume defense of a claim, TCC may,
after not less than thirty (30) days written notice to Datotek and AT&T,
contest, compromise or settle such claim in the exercise of reasonable judgment,
provided, however, that the consent of AT&T and Datotek shall be required if
such compromise or settlement shall result in any liability to, equitable relief
against or material adverse effect on AT&T and Datotek, which consent shall not
be unreasonably withheld.
13.04 The indemnification provided for hereunder shall be the sole
and exclusive remedy after the Closing Date for damages available to the parties
to this Agreement for breach of any of the terms, conditions, representations or
warranties contained herein or any right, claim or action arising from the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, TCC expressly waive, release, and agree not to make
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any claim against AT&T and Datotek, except for indemnification claims made
pursuant hereto, for the recovery of any cost damages, whether directly or by
way of contribution.
Notwithstanding anything contained in the Agreement to the contrary,
no party shall be liable to any other party for indirect, special, punitive or
consequential loss or damage (including any loss of revenue or profit) arising
out of this Agreement. All parties shall mitigate their damages.
14. Indemnification/Claims Resolution - TCC.
---------------------------------------
14.01 Indemnification by TCC. TCC shall indemnify Datotek and AT&T
----------------------
and hold Datotek and AT&T harmless at all times after the Closing Date against
and in respect of any of the following:
(a) Any and all liabilities and obligations of Datotek and AT&T
arising after the Closing Date and expressly assumed by TCC under this
Agreement and/or under the contracts assigned to and assumed by TCC under
Section 3.10 of this Agreement.
(b) Any and all damage or deficiency resulting from any
misrepresentation, breach of warranty, or non- fulfillment of any
obligation on the part of TCC under this Agreement or the Disclosure Letter
to this Agreement or from any misrepresentation in or omission from any
Disclosure Letter to this Agreement, certificates or other instrument
furnished to Datotek and AT&T hereunder, or pursuant hereto ,
(c) Any and all damages or losses resulting from any breach by, or
default of, TCC under any contract assigned to TCC pursuant to Section 3.10
hereof,
(d) All demands, assessments, judgments, costs, and legal and other
expenses arising from or in connection with any action, suit, proceeding or
claim incident to any of the foregoing.
14.02 Reimbursement and Offset. Subject to the provisions of Section
------------------------
14.03 below, AT&T or Datotek shall be reimbursed by TCC, on demand for any
payment made by them or any loss, damage, cost or expense suffered by them at
any time after the Closing Date with respect to any liability or claim to which
the foregoing indemnity relates (without regard to the after tax effect upon
AT&T or Datotek of any such payment, loss, damage, cost or expense). In
addition, AT&T or Datotek shall have the right to set off and deduct any payment
made by it or loss suffered by it with respect to any liability or claim to
which the indemnity provided for in Section 14.01 above relates against the
amount of any obligation of TCC to Datotek and/or AT&T to TCC, and their
respective heirs, executors, administrators, successors and assigns, whether
under this Agreement, any agreement executed pursuant hereto or otherwise.
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14.03 Claims. Should any claim be made by a person not a party to
------
this Agreement with respect to any matter to which the indemnity under Section
14.01 relates, AT&T shall give TCC prompt written notice of any such claim.
Notice shall in all events be considered prompt if given (a) no later than
thirty (30) days after AT&T or Datotek learns of the facts upon which it will
claim such indemnification or (b) earlier, if necessary to allow for sufficient
time for TCC to exercise its rights pursuant to this Paragraph. TCC shall
thereafter defend or settle any such claim, at its sole expense, on its own
behalf and with counsel of its own choosing, which counsel shall be reasonably
satisfactory to AT&T and Datotek. In such defense or settlement of any claim,
AT&T and Datotek shall cooperate with and assist TCC to the maximum extent
reasonably possible and may participate therein with its own counsel. AT&T and
Datotek's written consent shall be a requirement to a settlement or disposition
thereof, if such settlement or disposition shall result in any liability to,
equitable relief against or material adverse business effect on AT&T and
Datotek, which consent shall not be unreasonably withheld. Any payment
resulting from such defense or settlement, together with the total expense
thereof, shall be binding on TCC, for the purposes of this Section 14. Failure
to give prompt notice shall not constitute a defense, in whole or in part, to
any claim for indemnification by AT&T and Datotek, except only to the extent
that such failure by AT&T and Datotek shall result in a material prejudice to
TCC. Notwithstanding the foregoing, if TCC does not assume defense of a claim,
AT&T and Datotek may, after not less than thirty (30) days written notice to
TCC, contest, compromise or settle such claim in the exercise of reasonable
judgment, provided, however, that the consent of TCC shall be required if such
compromise or settlement shall result in any liability to, equitable relief
against or material adverse effect on TCC, which consent shall not be
unreasonably withheld.
14.04 The indemnification provided for hereunder shall be the sole
and exclusive remedy after the Closing Date for damages available to the parties
to this Agreement for breach of any of the terms, conditions, representations or
warranties contained herein or any right, claim or action arising from the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, TCC expressly waives, releases, and agrees not to make any claim
against AT&T or Datotek except for indemnification claims made pursuant hereto,
for the recovery of any cost damages, whether directly or by way of
contribution.
Notwithstanding anything contained in the Agreement to the contrary,
no party shall be liable to any other party for indirect, special, punitive or
consequential loss or damage (including any loss of revenue or profit) arising
out of this Agreement. All parties shall mitigate their damages.
15. Repurchase of Certain Accounts Receivable.
-----------------------------------------
15.01 With respect to the trade accounts receivable set forth in
Schedule 15 of the Disclosure letter, Datotek and AT&T hereby agree to
repurchase such accounts after the date indicated,
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provided that in each case TCC has used reasonable efforts (such efforts not to
include retaining collection firms, attorneys, etc) to collect such account.
15.02 In each case, TCC shall be paid the full face amount of any
such account receivable, less any proceeds received by TCC since the Closing
Date.
16. Limitation on Claims. TCC shall be entitled to payment to the extent
--------------------
that (a) any individual claim is equal to at least $1,000, and (b) the aggregate
amount of all claims for exceeds $10,000. Notwithstanding anything to the
contrary set forth herein or in any of the agreements entered into pursuant to
this Agreement, no party shall be entitled to indemnification or payment
pursuant to Sections 13, 14, 15 or 16 hereof or pursuant to the License
Agreement referred in Section 8.04(c) hereof in excess of $2,250,000 with the
indemnification under this Section reduced dollar for dollar by any payments TCC
receives (either from customers, AT&T or Datotek) under Section 15.
17. Brokerage. Each party represents and warrants to the other that it
---------
has not engaged the services of any broker or finder hereunder in connection
with the transactions provided for in this Agreement and agrees to indemnify and
hold the other party harmless against any claims for brokers' or finders' fees
or compensation in connection with the transaction herein provided for by any
person, firm or corporation claiming a right to same because of having been
engaged by or having served such party.
18. Public Announcements. TCC, AT&T and Datotek will consult with each
--------------------
other before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and, except
as may be required by applicable law, will not issue any such press release or
make any such public statement without the consent of the other such party as to
the form, content, dissemination and timing thereof. Notwithstanding anything
to the contrary in this Section 18, TCC shall not be restricted from making any
public announcement or preparing and filing any disclosure report which it
determines to be necessary to comply with its disclosure obligations under any
Federal or state securities laws.
19. Miscellaneous Provisions.
------------------------
19.01 Expenses. Except as otherwise expressly provided herein, TCC
--------
shall be responsible for its own fees and expenses, and AT&T shall be
responsible for Datotek's and AT&T's fees and expenses, in connection with the
execution and delivery of this Agreement and the performance of their
obligations hereunder.
19.02 Benefit. This Agreement shall be binding upon and inure to the
-------
benefit of the parties hereto, and their respective heirs, executors,
administrators, successors and assigns. This Agreement may not be assigned by
Datotek or AT&T. TCC shall have
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the right to assign this Agreement and its obligations, rights and benefits
pursuant to this Agreement to any subsidiary or affiliate.
19.03 Notice. All necessary notices, payments, demands and requests
------
shall be in writing and shall be deemed duly given if mailed by certified mail,
postage prepaid, return receipt requested, by nationally recognized overnight
courier or delivered by hand with receipt acknowledged in writing, and addressed
as follows:
IF TO DATOTEK: Datotek, Inc.
3801 Realty Road
Dallas, Texas 75244-4376
Attention: Richard Bowers
and Thomas A. Brooks
IF TO AT&T: AT&T
10 Independence Blvd.
Room 4A71
Warren, New Jersey 07054
Attention: William Osl
WITH A COPY TO: AT&T Law Division
8403 Colesville Road
Silver Spring, Maryland 20910
Attention: Nathaniel Friends
IF TO TCC: Technical Communications Corporation
100 Domino Drive
Concord, Massachusetts
Attention: Philip A. Phalon
WITH A COPY TO: Lawrence A. Kletter, Esq.
Posternak, Blankstein & Lund
100 Charles River Plaza
Boston, MA 02114
Either party may change its address for notice by giving notice of change
of address in the manner set forth above.
19.04 Headings. The headings of the Sections of this Agreement are
--------
for convenience of reference only and do not form a part hereof and in no way
modify, interpret or construe the meanings of the parties.
19.05 Tax Reporting. The parties hereto agree and acknowledge that
-------------
the determination of the price for each of the Purchased Assets being sold by
Datotek to TCC, and the price of the Distribution Agreement and License
Agreement, as set forth in this Agreement, is the result of arms-length
negotiations between the parties, and the parties agree and warrant and
represent to each other, that their respective tax returns and those of any
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parent, subsidiary or affiliated entity shall report the transactions
contemplated by this Agreement in accordance with the characterization and
allocated prices of the various assets set forth in this Agreement. TCC and
Datotek will (a) mutually agree within ninety (90) days from the Closing Date
upon an allocation (the "Allocation") of the purchase price (as determined for
tax purposes) among the Purchased Assets, the covenant not to compete set forth
in Section 11 and any agreements contemplated by this Agreement, in accordance
with the provisions of Section 1060 of the Code and the Treasury regulations
thereunder and (b) cooperate in the preparation of IRS Form 8594 (which shall be
derived from the Allocation) for timely filing in each of their respective
federal income tax returns. Unless otherwise prohibited by law, all federal,
state and local, and foreign tax returns of TCC, Datotek and their affiliates
shall be filed consistently with the Allocation and neither party will take any
positions inconsistent with such Allocation.
19.06 Entire Agreement. This Agreement, together with the Disclosure
----------------
Letter, sets forth the entire agreement and understanding between the parties as
to the subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings with respect hereto. This Agreement and said
Disclosure Letter may not be amended, changed or modified except by a written
instrument duly executed by the parties hereof which references this Agreement.
19.07 Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the Commonwealth of
Massachusetts. The parties hereto consent to the jurisdiction of the courts of
the Commonwealth of Massachusetts and the United States District Court for
Massachusetts, as well as the jurisdiction of all courts from which an appeal
may be taken from such courts, for the purposes of any suit, action or other
proceeding relating to this Agreement or with respect to any transaction
contemplated hereby, and expressly waive any and all objections the parties
hereto may have as to the venue of such courts to settle or adjudicate any claim
or controversy arising hereunder, with respect to any transaction contemplated
hereby. The parties hereto further agree, to the fullest extent permitted by
law, that a summons or complaint commencing an action or proceeding in any of
such courts shall be served properly and shall confer personal jurisdiction if
served personally or by registered or certified mail to these addresses
hereinabove set forth or as otherwise provided by the laws of the Commonwealth
of Massachusetts.
19.08 Further Assurances. Datotek and AT&T agree that they will,
------------------
without further consideration, from time to time hereafter, and at their own
expense, execute and deliver such other documents, and take such other actions,
as may reasonably be requested in order to more effectively consummate the
transactions contemplated hereby, and confirm and assure to TCC title to all the
Purchased Assets being transferred hereunder. The provisions hereof shall
survive the Closing.
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<PAGE>
19.09 Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
19.10 No Third Party Beneficiaries. Nothing in this Agreement,
----------------------------
express or implied, is intended to or shall (a) confer on any person other than
the parties hereto and their respective successors or assigns any rights
(including third-party beneficiary rights), remedies, obligations of liabilities
under or by reason of this Agreement or (b) constitute the parties hereto as
partners or as participants in a joint venture. This Agreement shall not
provide third parties with any remedy, claim, liability, reimbursement, cause of
action or other right in excess of those existing without reference to the terms
of this Agreement.
20. Post Closing Access to the Datotek Location.
-------------------------------------------
20.01 Post Closing Access. For a period of up to ninety (90) days
-------------------
after the Closing Date, Datotek shall provide access to the Datotek Location to
TCC's employees, invitees, agents and contractors for purposes of enabling TCC
to fill certain purchase orders and remove any of the Purchased Assets located
at the Datotek Location. TCC shall be provided with keys and any other things
necessary for unrestricted access to the Datotek Location. Each party shall
ensure that the other party's operations at the Datotek Location shall not be
unreasonably interfered with.
20.02 Consideration. For and in consideration of the post-closing
-------------
access provided for in Section 20.01, TCC shall pay Datotek the monthly amount
of $30,000. TCC shall pay Datotek such monthly amount on the first day of each
month in advance without notice, deduction or rights of set off, provided,
however, that the first monthly payment shall be made as a credit for the
benefit of Datotek as part of the monetary adjustments on the Closing Date. In
the event TCC completely ceases access to the Datotek Location prior to the
expiration of an entire month, the monthly payment amount for such partially
accessed month shall be prorated for the actual number of days of access. TCC
shall also reimburse Datotek for all long distance charges associated with
telephone calls by TCC's employees, invitees, agents and contractors.
20.03 Indemnification. During any period of access pursuant to
---------------
Section 20.01, each party shall indemnify, defend and hold harmless the other
party from and against any and all loss, cost, claim, damage, liability and
expense (including, without limitation, reasonable attorneys fees) arising out
of or in any way connected with such party's activities at the Datotek Location.
20.04 Insurance. During any period of access pursuant to Section
---------
20.01, TCC shall maintain, at its expense,
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comprehensive general liability insurance covering injuries occurring on the
Datotek Location, which shall provide for a combined coverage for bodily injury
and property damage in an amount not less than One Million Dollars
($1,000,000.00). TCC shall name Datotek and AT&T as additional insureds on such
insurance policy(ies).
20.05 Repair or Damage. TCC shall, at its own expense, promptly
----------------
repair any damage caused to the Datotek Location in connection with (a) its
access pursuant to Section 20.01 and (b) the performance of any removal of the
Purchased Assets. AT&T or Datotek shall, at its own expense, promptly repair
any damage caused to the Purchased Assets by their agents, employees, invitees
and contractors.
20.06 No Landlord/Tenant Relationship. Nothing contained in this
-------------------------------
Article 20 shall be deemed to create a landlord/tenant relationship among
Datotek, AT&T and TCC.
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IN WITNESS WHEREOF, the parties have executed or caused this Agreement to
be executed under seal as of the day and year first above written.
DATOTEK: DATOTEK, INC.
By:_______________________________
Name:
Title:
AT&T AT&T CORP.
By:_______________________________
Name:
Title:
TCC: TECHNICAL COMMUNICATIONS CORPORATION
By:_______________________________
Name:
Title:
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