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Exhibit 2(j)
ASSET PURCHASE AGREEMENT
Between
INSILCO CORPORATION
and
FRANKLIN ELECTRONIC PUBLISHERS, INCORPORATED
Dated as of October 4, 1996
TABLE OF CONTENTS
Page
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ARTICLE I
Transactions
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SECTION 1.01. Purchase and Sale 1
SECTION 1.02. Acquired Assets 1
SECTION 1.03. Assumed Liabilities 4
SECTION 1.04. Consents of Third Parties 6
SECTION 1.05. Receivable and Inventory Adjustments. 6
ARTICLE II
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The Closing
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SECTION 2.01. Closing Date 7
SECTION 2.02. Transactions To Be Effected at the
Closing 7
ARTICLE III
Representations and Warranties of Seller
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SECTION 3.01. Organization, Standing and Power 8
SECTION 3.02. Authority; Execution and Delivery;
Enforceability 8
SECTION 3.03. No Conflicts; Consents 9
SECTION 3.04. Liabilities of the Business 9
SECTION 3.05. Title to Assets 10
SECTION 3.06. Intellectual Property 10
SECTION 3.07. Contracts 11
SECTION 3.08. Personal Property 13
SECTION 3.09. Permits 13
SECTION 3.10. Taxes 13
SECTION 3.11. Proceedings 14
SECTION 3.12. Compliance with Applicable Laws 14
SECTION 3.13. Effect of Transaction 15
SECTION 3.14. Acquired Assets 15
SECTION 3.15. Disclaimer 15
ARTICLE IV
Representations and Warranties of Purchaser
-------------------------------------------
SECTION 4.01. Organization, Standing and Power 15
SECTION 4.02. Authority; Execution and Delivery; and
Enforceability 16
SECTION 4.03. No Conflicts; Consent 16
ARTICLE V
Covenants
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SECTION 5.01. Confidentiality 16
SECTION 5.02. Expenses; Transfer Taxes 17
SECTION 5.03. Brokers or Finders 17
SECTION 5.04. Collection of Receivables 18
SECTION 5.05. Employee Matters; WARN Act 18
SECTION 5.06. Post-Closing Cooperation 18
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SECTION 5.07. Publicity 19
SECTION 5.08. Agreement Not To Compete 20
SECTION 5.09. Seller's Representations Modified by
Purchaser's Knowledge 21
SECTION 5.10. Bulk Transfer Laws 21
SECTION 5.11. Further Assurances 21
SECTION 5.12. Returned Inventory 21
SECTION 5.13. Letters of Credit 22
SECTION 5.14. Rolodex Programs. 22
SECTION 5.15. Trademark Covenants. 22
SECTION 5.16. Transfer of Inventory. 22
ARTICLE VI
Indemnification
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SECTION 6.01. Indemnification by Seller 23
SECTION 6.02. Indemnification by Purchaser 24
SECTION 6.03. Termination of Indemnification 24
SECTION 6.04. Procedures 24
SECTION 6.05. Survival 27
ARTICLE VII
General Provisions
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SECTION 7.01. Assignment 27
SECTION 7.02. No Third-Party Beneficiaries 28
SECTION 7.03. Notices 28
SECTION 7.04. Interpretation; Exhibits and
Schedules; Certain Definitions 29
SECTION 7.05. Counterparts 31
SECTION 7.06. Entire Agreement 31
SECTION 7.07. Severability 31
SECTION 7.08. Governing Law 31
SECTION 7.09. Amendments and Waivers 32
ASSET PURCHASE AGREEMENT, dated as of October 4, 1996, between INSILCO
CORPORATION, a Delaware corporation ("Seller"), and FRANKLIN ELECTRONIC
PUBLISHERS, INCORPORATED, a Pennsylvania corporation ("Purchaser").
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, substantially all the assets of the Rolodex(REGISTERED
TRADEMARK) electronic products business of Seller (the "Business"), and a
perpetual, exclusive, fully paid up license to use the "Rolodex" trademark in
connection with the Business and the manufacture and distribution
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of "Electronic Products" (as defined in the License Agreement), upon the terms
and subject to the conditions of this Agreement and the License Agreement.
Capitalized terms referenced in Section 7.04(c) are defined in the Sections set
forth therein.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
Transactions
------------
SECTION 1.01. Purchase and Sale. On the terms and subject to the
conditions of this Agreement, at the Closing, Seller shall sell, assign,
transfer, convey and deliver to Purchaser, and Purchaser shall purchase from
Seller, all the right, title and interest of Seller in, to and under the
Acquired Assets, for an aggregate purchase price of $15,767,387 (the "Purchase
Price"), payable as set forth in Section 2.02, and the assumption of the Assumed
Liabilities. The purchase and sale of the Acquired Assets and the assumption of
the Assumed Liabilities is referred to in this Agreement as the "Acquisition".
SECTION 1.02. Acquired Assets. (a) The term "Acquired Assets" means
all the business, properties, assets, goodwill and rights of Seller of whatever
kind and nature, real or personal, tangible or intangible, that are owned,
leased or licensed by Seller on the Closing Date and used, held for use or
intended to be used primarily (except as provided below) in the operation or
conduct of the Business, other than the Excluded Assets, including:
(i) all raw materials, work-in-process, finished goods, supplies,
parts, spare parts and other inventories of Seller that on the Closing Date
are used, held for use or intended to be used primarily in the operation or
conduct of the Business, including, without limitation, those listed as of
September 29, 1996 on Schedule 1.02(a)(i) (collectively, the "Inventory");
(ii) the tangible personal property and interests therein (including
all machinery, tooling, equipment, furniture and vehicles) of Seller listed
on Schedule 1.02(a)(ii) and all other tangible personal property that on
the Closing Date is used primarily in the operation or conduct of the
Business (the "Personal Property");
(iii) all trade accounts receivable of Seller on the Closing Date
arising out of the operation or conduct of the Business, including, without
limitation, those listed as of
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September 29, 1996 on Schedule 1.02(a)(iii)-A, other than trade accounts
receivable owed by the customers listed on Schedule 1.02(a)(iii)-B
("Receivables");
(iv) all patents (including all reissues, divisions, continuations and
extensions thereof) patent applications, trademarks, trademark
registrations, trademark applications, servicemarks, trade names, business
names, brand names, copyrights, copyright registrations, designs, design
registrations, and all rights to any of the foregoing ("Intellectual
Property"), of Seller that are listed on Schedule 3.06 and all other items
of Intellectual Property that are used primarily in the operation or
conduct of the Business (the "Assigned Intellectual Property"), other than
any right, title and interest of Seller in and to the name and ▇▇▇▇
"Rolodex(REGISTERED TRADEMARK)";
(v) all trade secrets, confidential information, inventions, know-how,
formulae, processes, procedures, research records, records of inventions,
test information, market surveys and marketing know-how of Seller that are
used primarily in the operation or conduct of the Business (the
"Technology);
(vi) all Permits of Seller that are listed on Schedule 3.09 and all
other Permits that are used, held for use or intended to be used primarily
in the operation or conduct of the Business (the "Assigned Permits");
(vii) all contracts, leases, licenses, indentures, agreements,
commitments and all other legally binding arrangements, whether oral or
written ("Contracts"), to which Seller is a party or by which Seller is
bound that are listed in Schedule 3.07, including the License of July 1996,
granted to Tele-Art, Limited, a corporation organized under the laws of
Hong Kong ("Tele-Art"), to sell "Rolodex(REGISTERED TRADEMARK)" branded
products to Radio Shack (the "Tele-Art License"), and the Repair Agreement
between Tele-Art and Seller (the "Tele-Art Repair Agreement") (together
with the Tele-Art License, the "Tele-Art Contracts"), all purchase and
sales orders to the extent they relate to the Business, and all other
Contracts to which Seller is a party or by which Seller is bound that are
used, held for use or intended to be used primarily in, or that arise
primarily out of, the operation or conduct of the Business (the "Assigned
Contracts");
(viii) all rights, claims and credits relating to, but only to the
extent relating to, any other Acquired Asset or any Assumed Liability,
including any such items arising under insurance policies, and all
guarantees, warranties,
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indemnities and similar rights in favor of Seller relating to, but only to
the extent relating to, any other Acquired Asset or any Assumed Liability;
(ix) all books of account, ledgers, financial and accounting records,
files, invoices, customers' and suppliers' lists, distribution lists,
billing records, sales and promotional literature, manuals, customer and
supplier correspondence (in all cases, in any form or medium) of Seller
that are used, held for use or intended to be used exclusively in, or that
arise exclusively out of, the conduct or operation of the Business (the
"Records");
(x) the receivables due Seller from Tele-Art, except for the royalty
receivables, if any, due to Seller on account of Tele-Art's sales of
electronic products to RadioShack prior to the Closing; and
(xi) all goodwill generated by, and associated with,
the Business.
(b) The term "Excluded Assets" means:
(i) all assets identified in Schedule 1.02(b)(i);
(ii) all real property, leaseholds and other interests
in real property of Seller;
(iii) all cash, cash equivalents, cash refunds and
securities of Seller;
(iv) all rights, claims and credits of Seller relating to any Excluded
Asset or any Excluded Liability, including any such items arising under
insurance policies, and all guarantees, warranties, indemnities and similar
rights in favor of Seller in respect of any Excluded Asset or any Excluded
Liability;
(v) all personnel records of current or former employees of Seller;
(vi) all the assets of the Seller Pension Plans;
(vii) all rights of Seller under this Agreement and the other
agreements and instruments executed and delivered in connection with this
Agreement (the "Ancillary Agreements");
(viii) all records pertaining to the Excluded Assets
or the Excluded Liabilities;
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(ix) all records prepared solely in connection with
the sale of the Business to Purchaser; and
(x) all Tax returns of Seller.
SECTION 1.03. Assumed Liabilities. (a) The term "Assumed Liabilities"
means all the following liabilities, obligations and commitments of Seller:
(i) all accounts payable, if any, and accrued expenses of Seller
arising out of the operation or conduct of the Business prior to the
Closing, but only to the extent they do not exceed $150,489 in the
aggregate;
(ii) all liabilities, obligations and commitments of Seller under the
Assigned Contracts and Assigned Permits, whether such liabilities,
obligations and commitments relate to a period prior to or from and after
the Closing, but not any such liabilities, obligations or commitments
arising out of any breach by Seller of any Assigned Contract (other than
the Tele-Art Contracts) prior to the Closing other than those liabilities,
obligations or commitments that would constitute Assumed Liabilities under
clause (i) or (iii) of this Section 1.03(a);
(iii) all liabilities, obligations and commitments of Seller for
product warranty and consumer or customer return, replacement or service
obligations and any other liabilities, obligations and commitments of
Seller that relate to, or that arise out of products manufactured, shipped
or sold by or on behalf of Seller on or prior to the Closing Date
(including claims of negligence, personal injury (except as otherwise
provided in Section 1.03(b)(viii)), product damage, product liability,
product warranties, strict liability, product recall or any other claims
(but excluding workers' compensation or employer's liability)), whether
such liabilities, obligations or commitments relate to or arise out of
accidents, injuries or losses occurring on or prior to or after the Closing
Date; and
(iv) all liabilities obligations and commitments of Seller expressly
assumed by Purchaser in this Agreement.
(b) The term "Excluded Liabilities" means:
(i) all liabilities, obligations and commitments of Seller relating to
or arising out of the Business or any Acquired Asset, whether express or
implied, liquidated, absolute, accrued, contingent or otherwise or known or
unknown, and based upon, arising out of, or resulting from
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any fact, circumstance, occurrence, condition, act or omission existing on
or occurring prior to the Closing, except as set forth in Section 1.03(a);
(ii) all liabilities, obligations and commitments of Seller arising
out of any breach by Seller of any Assigned Contract (other than the
Tele-Art Contracts) prior to the Closing other than liabilities,
obligations and commitments which would constitute Assumed Liabilities
under clause (i) or (iii) of Section 1.03(a).
(iii) all liabilities, obligations and commitments of Seller arising
out of (A) any suit, action or proceeding ("Proceeding") pending as of the
Closing Date or (B) any violation by Seller or any of its affiliates of any
Applicable Law prior to the Closing;
(iv) all accounts payable and accrued expenses of Seller (including
outstanding checks not settled as of the Closing) to the extent they exceed
$150,489 in the aggregate;
(v) all liabilities, obligations and commitments of Seller that relate
primarily to, or that arise primarily out of, any Excluded Asset other than
those liabilities, obligations or commitments that would constitute Assumed
Liabilities under clause (i) or (iii) of Section 1.03(a);
(vi) all liabilities, obligations and commitments for Taxes, whether
or not accrued, assessed or currently due and payable, (A) of Seller or (B)
relating to the operation or ownership of the Business or the Acquired
Assets for any Tax period (or portion thereof) ending prior to the Closing
Date (for purposes of this provision, all personal property Taxes and
similar ad valorem obligations levied with respect to the Acquired Assets
for a Tax period that includes (but does not end on) the Closing Date shall
be apportioned between Seller and Purchaser based upon the number of days
of such period included in the pre-Closing Tax period and the number of
days of such Tax period from and after the Closing Date);
(vii) all liabilities, obligations and commitments of
Seller arising under any Seller Pension Plan or Seller
Benefit Plan;
(viii) any liability for personal injury arising out of any product
manufactured, shipped or sold by or on behalf of Seller on or prior to the
Closing Date the claim for which injury is asserted in writing within nine
months following the Closing; and
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(ix) all liabilities, obligations and commitments of Seller that
relate to, or that arise out of, the employment or the termination of the
employment with Seller of any employee or former employee of the Business
(including as a result of the transactions contemplated by this Agreement).
SECTION 1.04. Consents of Third Parties. (a) Notwithstanding anything
in this Agreement to the contrary, this Agreement shall not constitute an
agreement to assign any asset or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment thereof, without
the consent of a third party, would constitute a breach or other contravention
thereof, would be ineffective with respect to any party thereto or would in any
way adversely affect the rights of Seller or, upon transfer, Purchaser
thereunder; and any transfer or assignment by Seller to, or any assumption by,
Purchaser of any interest in, or liability, obligation or commitment under, any
such asset that requires the consent of a third party shall be made subject to
such consent being obtained. To the extent any Assigned Contract may not be
assigned to Purchaser by reason of the absence of any such consent and the
Purchaser does not otherwise get any benefit of such Assigned Contract,
Purchaser shall not be required to assume any Assumed Liabilities arising under
such Assigned Contract other than those liabilities, obligations or commitments
that would constitute Assumed Liabilities under clause (i) or (iii) of Section
1.03(a).
(b) If any such consent is not obtained prior to the Closing, Seller
and Purchaser shall cooperate (at each party's expense) in any lawful and
reasonable arrangement reasonably proposed by Purchaser under which Purchaser
shall obtain the economic claims, rights and benefits under the asset, claim or
right with respect to which the consent has not been obtained in accordance with
this Agreement, including subcontracting, sublicensing or subleasing to
Purchaser and enforcement of any and all rights of Seller against the other
party thereto arising out of a breach or cancellation thereof by the other
party; provided, however, that the parties shall not be required to pay or
commit to pay any amount to (or incur any obligation in favor of) any person
from whom any such consent may be required (other than nominal filing or
application fees).
SECTION 1.05. Receivable and Inventory Adjustments. (a) Within 30 days
after the Closing, Seller shall prepare and deliver to Purchaser a certificate
setting forth (i) the amount of any trade accounts receivable of Seller arising
out of the operation or conduct of the Business that were created by Seller
between September 30, 1996 and October 4, 1996 and that were included in the
Acquired Assets and (ii) the amount of trade accounts receivables set forth on
Schedule 1.02(a)(iii)-A that were collected between September 30, 1996 and
October 4, 1996
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(net of any applicable reserves). The difference between the two amounts, which
may be a positive number (if the amount referred to in clause (i) is greater
than the amount referred to in clause (ii)) or a negative number (if the
opposite is true), is herein referred to as the "Receivable Difference."
(b) A count of the Inventory shall be conducted by Purchaser, at
Purchaser's expense, as promptly as shall be practicable following the Closing
Date in accordance with the procedures set forth in Exhibit I. Purchaser shall
deliver to Seller a certificate of such count. Seller and its independent
auditors shall be allowed to observe such count. If there is any difference
between (i) the amount of Inventory shown on the certificate and (ii) the amount
of inventory set forth on Schedule 1.02(a)(i), such difference shall be valued
by Seller in accordance with the principles set forth in Exhibit F. Such
difference in value, which may be a positive number (if the amount referred to
in clause (i) is greater than the amount referred to in clause (ii)) or negative
number (if the opposite is true), is herein referred to as the "Inventory
Difference."
(c) If the sum of the Receivable Difference and Inventory Difference
is a negative number, then the amount of such sum shall be paid by Seller to
Purchaser, but only to the extent such amount exceeds $225,000. If the sum of
the Receivable Difference and the Inventory Difference is a positive number,
then the amount of such sum shall be paid by Purchaser to Seller, but only to
the extent such amount exceeds $225,000.
ARTICLE II
The Closing
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SECTION 2.01. Closing Date. The closing of the Acquisition (the
"Closing") shall take place at the offices of Rosenman & Colin LLP, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. on the date hereof. The date on
which the Closing occurs is referred to in this Agreement as the "Closing Date".
SECTION 2.02. Transactions To Be Effected at the Closing. At the
Closing:
(a) Seller shall deliver to Purchaser bills of sale, assignments and
other instruments of transfer relating to the Acquired Assets in the
respective forms set forth in Exhibit A;
(b) Purchaser shall deliver to Seller at the Closing
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(i) payment, by wire transfer to a bank account designated in writing by
Seller at least two business days prior to the Closing Date, immediately
available funds in the amount of $15,767,387 and (ii) the assumption
agreements and other instruments of assumption providing for the assumption
of the Assumed Liabilities in the respective forms set forth in Exhibit B;
(c) Purchaser and Seller shall execute a license
agreement (the "License Agreement") in the form set forth in
Exhibit C;
(d) Seller shall execute and deliver to Purchaser the letters to the
United States Customs Service attached as Exhibits D-1 and D-2 authorizing
the importation by Purchaser or any authorized sublicensee of Electronic
Products or Covered Books bearing the Licensed Marks into the United States
under Recorded Trademark 95-00049; and
(e) Purchaser and Seller shall execute and deliver an interim license
agreement in the form set forth in Exhibit E.
ARTICLE III
Representations and Warranties of Seller
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Seller represents and warrants to Purchaser as follows:
SECTION 3.01. Organization, Standing and Power. Seller is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority necessary to enable it to
own, lease or otherwise hold the properties and assets of, and to conduct the
operations of, the Business. None of the affiliates of Seller is presently or
has in the past been engaged in the operation or conduct of the Business or
owns, leases or licenses any of the Acquired Assets.
SECTION 3.02. Authority; Execution and Delivery; Enforceability.
Seller has full corporate power and authority to execute this Agreement and the
Ancillary Agreements to which it is, or is specified to be, a party and to
consummate the Acquisition and the other transactions contemplated hereby and
thereby. The execution and delivery by Seller of this Agreement and the
Ancillary Agreements to which it is, or is specified to be, a party and the
consummation by Seller of the Acquisition and the other transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action. Seller has
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duly executed and delivered this Agreement and prior to the Closing will have
duly executed and delivered each Ancillary Agreement to which it is, or is
specified to be, a party, and this Agreement constitutes, and each Ancillary
Agreement to which it is, or is specified to be, a party will after the Closing
constitute, its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3.03. No Conflicts; Consents. Except as set forth in Schedule
3.03 or except as would not have a Business Material Adverse Effect, the
execution and delivery by Seller of this Agreement do not, the execution and
delivery by Seller of each Ancillary Agreement to which it is, or is specified
to be, a party will not, and the consummation of the Acquisition and the other
transactions contemplated hereby and thereby and compliance with the terms
hereof and thereof will not result in any violation of or default (with or
without notice or lapse of time, or both) under any provision of (i) the
certificate of incorporation or by-laws of Seller, or (ii) any judgment, order
or decree ("Judgment") or statute, law (including common law) ordinance, rule or
regulation ("Applicable Law") applicable to Seller or its properties or assets.
Except as set forth in Schedule 3.03, no consent, approval, license, permit,
order or authorization ("Consent") of, or registration, declaration or filing
with, any Federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "Governmental Entity") is
required to be obtained or made by or with respect to Seller in connection with
the execution, delivery and performance of this Agreement or any Ancillary
Agreement or the consummation of the Acquisition or the other transactions
contemplated hereby and thereby other than compliance with and filings under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and other than
consents the lack of which would not have a Business Material Adverse Effect.
SECTION 3.04. Liabilities of the Business. The Business does not have
any liabilities or obligations of any nature (whether accrued, absolute,
contingent, unasserted or otherwise) required by generally accepted accounting
principles to be reflected on a balance sheet of the Business or in the notes
thereto, except (i) as disclosed or referred to in Schedule 3.04 or any other
Schedule hereto (or in any of the documents listed in a Schedule hereto), (ii)
for liabilities and obligations incurred in the ordinary course of the Business
consistent with past practice, (iii) for Taxes, (iv) for liabilities and
obligations which are not required to be disclosed in a Schedule hereto (as for
example because the making of the representation or warranty is disclaimed or
because the
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liability involved an amount which is less than the threshold above which
disclosure is required) and (v) for liabilities or obligations which would not
have a Business Material Adverse Effect.
SECTION 3.05. Title to Assets. Seller has good and valid title to all
the Acquired Assets, in each case free and clear of all mortgages, liens,
security interests, charges, easements, leases, subleases, rights of way,
options, claims or encumbrances of any kind (collectively, "Liens"), except (i)
mechanics', carriers', workmen's, repairmen's or other like Liens arising or
incurred in the ordinary course of business, Liens arising under original
purchase price conditional sales contracts and equipment leases with third
parties entered into in the ordinary course of business and liens for Taxes that
are not due and payable or that may thereafter be paid without penalty, and (ii)
other imperfections of title or encumbrances, if any, that do not, individually
or in the aggregate, materially impair the continued use and operation of the
assets to which they relate in the conduct of the Business as presently
conducted (the Liens described in clauses (i) and (ii) above are referred to
collectively as "Permitted Liens"). Purchaser will acquire the Acquired Assets
free and clear of all Liens other than Permitted Liens.
SECTION 3.06. Intellectual Property. (a) Schedule 3.06 sets forth a
true and complete list of all Intellectual Property, owned, used, filed by or
licensed to Seller and used, held for use or intended to be used primarily in
the operation or conduct of the Business, other than Intellectual Property that,
individually and in the aggregate, is not material to the conduct of the
Business as presently conducted. There is no Assigned Intellectual Property that
is registered or subject to an application for registration. Except as set forth
in Schedule 3.06, (i) Seller is the sole and exclusive owner of or has the right
to use, execute, reproduce, display, perform, modify, enhance, distribute,
prepare derivative works of and sublicense, without payment to any other person,
all the Assigned Intellectual Property, except where the failure to have such
rights would not have a Business Material Adverse Effect, and the consummation
of the Acquisition and the other transactions contemplated hereby does not and
will not conflict with, alter or impair any such rights in a way that would have
a Business Material Adverse Effect, (ii) during the past three years, Seller and
its affiliates have not received any written communication from any person
asserting any ownership interest in any material Assigned Intellectual Property,
(iii) Seller has no knowledge of any impediment to use the Licensed Marks in the
United States, Canada or the European Community countries and (iv) Seller has
the right to grant Purchaser a license in and to the Licensed Marks in the
"Territory" (as defined in the License Agreement) as
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provided in the License Agreement.
(b) Except as set forth in Schedule 3.06, Seller has not granted any
written license of any kind relating to any Technology or Assigned Intellectual
Property or the marketing or distribution thereof. Seller is not bound by or a
party to any option, license or agreement of any kind relating to the Assigned
Intellectual Property for the use of such Assigned Intellectual Property in the
conduct of the Business, except as set forth in Schedule 3.06 and except for
"shrink-wrap" license agreements relating to computer software licensed in the
ordinary course of Business. The conduct of the Business as presently conducted
does not violate, conflict with or infringe the Intellectual Property of any
other person, except for such violations, conflicts or infringements that,
individually or in the aggregate, would not have a material adverse effect on
the business, assets, financial condition or results of operations of the
Business, on the ability of Seller to perform its obligations under this
Agreement and the Ancillary Agreements or on the ability of Seller to consummate
the Acquisition and the other transactions contemplated hereby (a "Business
Material Adverse Effect"). Except as set forth in Schedule 3.06 or except as
would not have a Business Material Adverse Effect, (i) no claims are pending or,
to the knowledge of Seller, threatened, against Seller or any of its affiliates
by any person with respect to the ownership, validity, enforceability, or use in
the Business of any Assigned Intellectual Property and (ii) during the past
three years, Seller and its affiliates have not received any written
communication alleging that Seller or any of its affiliates has in the conduct
of the Business violated any rights relating to Intellectual Property of any
person.
SECTION 3.07. Contracts. (a) Except as set forth in Schedule 3.07 and
except for Contracts relating solely to Excluded Assets, Seller is not a party
to or bound by any Contract that is used, held for use or intended for use
primarily in, or that arises primarily out of, the operation or conduct of the
Business and that is:
(i) a collective bargaining agreement or other Con
tract with any labor organization, union or association;
(ii) a covenant not to compete or other covenant of Seller restricting
the development, manufacture, marketing or distribution of the products and
services of the Business;
(iii) a lease, sublease or similar Contract with any person under
which (A) Seller is lessee of, or holds or uses, any machinery, equipment,
vehicle or other tangible personal property owned by any person or (B)
Seller is a
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lessor or sublessor of, or makes available for use by any person, any
tangible personal property owned or leased by Seller, which in any such
case has an aggregate future liability or receivable, as the case may be,
in excess of $50,000 per annum and is not terminable by Seller by notice of
not more than 60 days for a cost of less than $50,000;
(iv) (A) a continuing Contract for the future purchase of materials,
supplies or equipment, (B) a management, service, consulting or other
similar Contract or (C) an advertising agreement or arrangement, in any
such case that has an aggregate future liability to any person in excess of
$50,000 per annum and is not terminable by Seller by notice of not more
than 60 days for a cost of less than $50,000;
(v) a Contract granting a Lien upon any Acquired
Asset;
(vi) a confidentiality agreement which would bind the
Purchaser with respect to information supplied to the
Business;
(vii) a Contract (including a purchase order) involving payment by
Seller of more than $50,000 (unless terminable without payment or penalty
upon no more than 60 days' notice), other than purchase orders entered into
in the ordinary course of the Business;
(viii) a Contract (including a sales order) involving the obligation
of Seller to deliver products or services for payment of more than $50,000
or extending for a term more than 90 days from the date of this Agreement
(unless terminable without payment or penalty upon no more than 60 days'
notice), other than sales orders entered into in the ordinary course of the
Business;
(ix) a Contract for the sale of any Acquired Asset (other than
inventory sales in the ordinary course of business) or the grant of any
preferential rights to purchase any Acquired Asset;
(x) a Contract with any Governmental Entity;
(xi) a Contract for any joint venture, partnership or
similar arrangement;
(xii) a Contract providing for the services of any dealer,
distributor, sales representative, franchisee or similar representative
involving the payment or receipt over the life of such Contract in excess
of $50,000 by Seller; or
16
(xiii) a Contract other than as set forth above to which Seller is a
party or by which it or any of its assets or businesses is bound or subject
that is material to the Business or the use or operation of the Acquired
Assets.
(b) Except as set forth in Schedule 3.07, all Assigned Contracts are
valid, binding and in full force and effect and are enforceable by Seller in
accordance with their respective terms, except for such failures to be valid,
binding, in full force and effect or enforceable that, individually or in the
aggregate, would not have a Business Material Adverse Effect. Except as set
forth in Schedule 3.07, Seller has performed all obligations required to be
performed by it to date under the Assigned Contracts, and it is not (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any respect thereunder and, to the knowledge of Seller, no other party to any
Assigned Contract is (with or without the lapse of time or the giving of notice,
or both) in breach or default in any respect thereunder, except for such
noncompliance, breaches and defaults that, individually or in the aggregate,
would not have a Business Material Adverse Effect. Seller has not within the
last six months, except as disclosed in Schedule 3.07, received any written
notice of the intention of any party to terminate any Assigned Contract.
Complete and correct copies of all Contracts listed in Schedule 3.07, together
with all modifications and amendments thereto, have been made available to
Purchaser.
SECTION 3.08. Personal Property. Except as would not have a Business
Material Adverse Effect, the Personal Property which is in Seller's personal
possession is in good working order (ordinary wear and tear excepted), is free
from any material defect and has been maintained in all material respects in
accordance with the past practice of the Business and generally accepted
industry practice, and no repairs, replacements or regularly scheduled
maintenance relating to any such item has been deferred.
SECTION 3.09. Permits. Schedule 3.09 sets forth all material
certificates, licenses, permits, authorizations and approvals ("Permits") issued
or granted to Seller by Governmental Entities that are necessary for the conduct
of the Business. All such Permits are validly held by Seller, and Seller has
complied with all terms and conditions thereof, except where such failure to
comply would not have a Business Material Adverse Effect. Seller has not
received written notice of any Proceedings relating to the revocation or
modification of any such Permits the loss of which, individually or in the
aggregate, would have a Business Material Adverse Effect. Except as set forth in
Schedule 3.09 or as would not have a Business Material Adverse Effect, none of
such Permits will be subject to suspension,
17
modification, revocation or nonrenewal as a result of the execution and delivery
of this Agreement or the consummation of the Acquisition.
SECTION 3.10. Taxes. (a) For purposes of this Agreement:
"Tax" shall mean (i) any tax, governmental fee or other like
assessment or charge of any kind whatsoever (including any tax imposed under
Subtitle A of the Code and any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by Seller,
payroll, employment, excise, severance, stamp, capital stock, occupation,
property, environmental or windfall profit tax, premium, custom, duty or other
tax), together with any interest, penalty, addition to tax or additional amount
due from, or in respect of, Seller imposed by any Governmental Entity
responsible for the imposition of any such tax (a "Taxing Authority"), (ii) any
liability for the payment of any amount of the type described in clause (i)
above as a result of Seller being a member of an affiliated, consolidated or
combined group with any other corporation at any time on or prior to the Closing
Date and (iii) any liability of Seller with respect to the payment of any
amounts of the type described in clause (i) or (ii) above as a result of any
express or implied obligation to indemnify any other person.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
(b) (i) None of the Acquired Assets is "tax exempt use property"
within the meaning of Section 168(h) of the Code and (ii) none of the Acquired
Assets is a lease made pursuant to Section 168(f)(8) of the Internal Revenue
Code of 1954.
(c) Seller is not a "foreign person" within the meaning of Section
1445 of the Code.
SECTION 3.11. Proceedings. Schedule 3.11 sets forth a list of all
pending Proceedings against Seller arising out of the conduct of the Business or
against or affecting any Acquired Asset or that relate to the transactions
contemplated by this Agreement, other than claims for product warranty and
consumer or customer return, replacement or service obligations. Except as set
forth in Schedule 3.11, (i) none of the Proceedings listed in Schedule 3.11 as
to which there is at least a reasonable possibility of adverse determination
would have, if so determined, individually or in the aggregate, a Business
Material Adverse Effect, (ii) to the knowledge of Seller, Seller is not a party
or subject to or in default under any Judgment applicable
18
to the conduct of the Business or any Acquired Asset or Assumed Liability, and
(iii) there is not any Proceeding by Seller pending, or which Seller intends to
initiate, against any other Person arising out of the conduct of the Business.
SECTION 3.12. Compliance with Applicable Laws. The Business is in
compliance with all Applicable Laws, including those relating to occupational
health and safety, except where such failure to comply would not have a Business
Material Adverse Effect. Seller has not received any written communication
during the past three years from a Governmental Entity that alleges that the
Business is not in compliance with any Applicable Laws which non-compliance
would have a Business Material Adverse Effect. Seller has not received any
written notice that any investigation or review by any Governmental Entity with
respect to any Acquired Asset or the Business is pending or that any such
investigation or review is contemplated the outcome of which would have a
Business Material Adverse Effect.
SECTION 3.13. Effect of Transaction. No creditor, employee, client,
customer or other person having a material business relationship with the
Business informed Seller in writing that such person intends to change such
relationship because of the purchase and sale of the Business or the
consummation of any other transaction contemplated hereby, which change,
individually or in the aggregate with other such changes, would have a Business
Material Adverse Effect.
SECTION 3.14. Acquired Assets. The Acquired Assets comprise all the
assets that are owned, leased or licensed by Seller and are used, held for use
or intended to be used primarily in the conduct of the Business, other than the
Excluded Assets and except as otherwise provided in Section 1.02(a).
SECTION 3.15. Disclaimer. Except as set forth in this Article III,
Seller makes no representation or warranty, express or implied. In any event,
(i) Seller makes no representation or warranty with respect to the Tele-Art
Contracts (except that the Tele-Art Contracts were duly authorized, executed and
delivered by Seller, constitute legal, valid and binding agreements of Seller
and have not been modified or amended except as stated in Schedule 3.07), (ii)
Seller makes no warranty of merchantability, suitability or fitness for a
particular purpose, or quality, with respect to any of the tangible assets being
so transferred, or as to the condition or workmanship thereof or the absence of
any defect therein, whether latent or patent and (iii) Seller makes no
representation or warranty regarding the net assets or financial condition of
the Business on the Closing Date or any date prior thereto.
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ARTICLE IV
Representations and Warranties of Purchaser
-------------------------------------------
Purchaser hereby represents and warrants to Seller as follows:
SECTION 4.01. Organization, Standing and Power. Purchaser is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full corporate power and authority
necessary to enable it to own, lease or otherwise hold its properties and assets
and to carry on its business as presently conducted.
SECTION 4.02. Authority; Execution and Delivery; and Enforceability.
Purchaser has full corporate power and authority to execute this Agreement and
the Ancillary Agreements to which it is, or is specified to be, a party and to
consummate the Acquisition and the other transactions contemplated hereby and
thereby. The execution and delivery by Purchaser of this Agreement and the
Ancillary Agreements to which it is, or is specified to be, a party and the
consummation by Purchaser of the Acquisition and the other transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action. Purchaser has duly executed and delivered this Agreement and
prior to the Closing will have duly executed and delivered each Ancillary
Agreement to which it is, or is specified to be, a party, and this Agreement
constitutes, and each Ancillary Agreement to which it is, or is specified to be,
a party will after the Closing constitute, its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
SECTION 4.03. No Conflicts; Consent. The execution and delivery by
Purchaser of this Agreement do not, the execution and delivery by Purchaser of
each Ancillary Agreement to which it is, or is specified to be, a party will
not, and the consummation of the Acquisition and the other transactions
contemplated hereby and thereby and compliance by Purchaser with the terms
hereof and thereof will not result in any violation of or default (with or
without notice or lapse of time, or both) under any provision of (i) the
certificate of incorporation or by-laws of Purchaser or (ii) any Judgment or
Applicable Law applicable to Purchaser or its properties or assets. No Consent
of or registration, declaration or filing with any Governmental Entity is
required to be obtained or made by or with respect to Purchaser in connection
with the execution, delivery and performance of this Agreement or any Ancillary
Agreement or the consummation of the Acquisition or the other transactions
contemplated hereby and thereby, other than compliance with and filings under
the HSR Act and the Exchange Act.
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ARTICLE V
Covenants
---------
SECTION 5.01. Confidentiality. (a) Purchaser acknowledges that the
information provided to it in connection with the Acquisition and the
consummation of the other transactions contemplated hereby was subject to the
terms of a confidentiality agreement dated July 16, 1996, between Purchaser and
Seller (the "Confidentiality Agreement"), the terms of which are incorporated
herein by reference. Effective upon the Closing, the Confidentiality Agreement
shall terminate, except with respect to information provided to Purchaser that
does not relate to the Business.
(b) Seller shall keep confidential all information relating to the
Business, except (i) as required by law or administrative or legal process, and
(ii) information that is available to the public on the Closing Date, or
thereafter becomes available to the public other than as a result of a breach of
this Section 5.01(b); provided that the foregoing restrictions shall not apply
to, and nothing herein shall be construed as prohibiting Seller from using or
disclosing, confidential information in connection with (i) any claim against
Seller or for which Seller is responsible, whether by a third party or by
Purchaser, or (ii) the performance by Seller of its obligations, or the
assertion by Seller of any of its rights or remedies under, this Agreement or
any Ancillary Agreement. The covenant set forth in this Section 5.01(b) shall
terminate three years after the Closing Date.
SECTION 5.02. Expenses; Transfer Taxes. (a) Except as otherwise
provided in this Agreement, all costs and expenses incurred in connection with
this Agreement and the Ancillary Agreements and the transactions contemplated
hereby and thereby shall be paid by the party incurring such expense.
(b) All Transfer Taxes applicable to the conveyance and transfer from
Seller to Purchaser of the Acquired Assets and any other transfer or documentary
Taxes or any filing or recording fees applicable to such conveyance and transfer
shall be paid by Seller and Purchaser in equal shares. Each party shall use
reasonable efforts to avail the parties of any available exemptions from any
such Taxes or fees, and to cooperate with the other parties in providing any
information and documentation that may be necessary to obtain such exemptions.
(c) The term "Transfer Taxes" means all liabilities,
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obligations and commitments for transfer, documentary, sales, use, registration,
value-added and other similar Taxes and related amounts (including any
penalties, interest and additions to Tax) incurred in connection with this
Agreement, the Ancillary Agreements, the Acquisition and the other transactions
contemplated hereby and thereby.
SECTION 5.03. Brokers or Finders. Each of Purchaser and Seller
represent, as to itself and its affiliates, that no agent, broker, investment
banker or other firm or person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement.
SECTION 5.04. Collection of Receivables. From and after the Closing,
Purchaser shall have the right and authority to collect for its own account all
Receivables and other items that are included in the Acquired Assets and to
endorse with the name of Seller, as applicable, any checks or drafts received
with respect to any Receivables or such other items. Seller shall promptly
deliver to Purchaser any cash or other property received by it or any affiliate
from any person with respect to the Receivables and such other items included in
the Acquired Assets, including any amounts payable as interest received from
such person. Purchaser shall promptly deliver to Seller any cash or other
property received by it or any affiliate from any person with respect to any
other business or assets of Seller other than the Business and the Acquired
Assets, including the Excluded Assets and any related items, including any
amounts payable as interest received from such person.
SECTION 5.05. Employee Matters; WARN Act. Purchaser does not have any
obligation to offer employment with Purchaser or the Business to any current or
former employee (each an "Employee") of the Business. If Purchaser does elect to
make any such offers, the recipients thereof and the terms of employment offered
shall be at the sole and absolute discretion of Purchaser. Seller shall comply
with the Worker Adjustment and Retraining Notification Act to the extent
applicable to the Acquisition and related matters.
SECTION 5.06. Post-Closing Cooperation. (a) Purchaser and Seller shall
cooperate with each other for a period of one year after the Closing to ensure
the orderly transition of the Business from Seller to Purchaser and to minimize
any disruption to the Business and the other respective businesses of Seller and
Purchaser that might result from the transactions contemplated hereby. After the
Closing, upon reasonable written notice, Purchaser and Seller shall furnish or
cause to be furnished to each other and their employees, counsel, auditors and
representatives access, during normal business hours, to such
22
information and assistance (to the extent within the control of such party)
relating to the Business as is reasonably necessary for financial reporting and
accounting matters.
(b) After the Closing, upon reasonable written notice, Purchaser and
Seller shall furnish or cause to be furnished to each other as promptly as
practicable, such information and assistance (to the extent within the control
of such party) relating to the Acquired Assets (including access to books and
records) as is reasonably necessary for the filing of all Tax returns, and
making of any election related to Taxes, the preparation for any audit by any
Taxing Authority, and the prosecution or defense of any claim, suit or
proceeding relating to any Tax return.
(c) Each party shall reimburse the other for reasonable out-of-pocket
costs and expenses incurred in assisting the other pursuant to this Section
5.06. Neither party shall be required by this Section 5.06 to take any action
that would unreasonably interfere with the conduct of its business or
unreasonably disrupt its normal operations (or, in the case of Purchaser, the
Business).
(d) Seller will provide Purchaser and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., P.C. ("FR &
Co.") access to Seller's books, records and employees and KPMG Peat Marwick LLP
("KPMG") and its working papers (subject to Purchaser and FR & Co. signing a
letter in favor of KPMG in the form of Exhibit H) relating to the Business,
which is reasonably required in connection with the audit of the financial
statements of the Business as of and for the year ended December 31, 1995.
(e) For a period of seven years from the Closing Date:
(i) Purchaser shall not dispose of or destroy any of the books and
records of the Business relating to periods prior to the Closing ("Books
and Records") without first offering to turn over possession thereof to
Seller by written notice to Seller at least 30 days prior to the proposed
date of such disposition or destruction.
(ii) Purchaser shall allow Seller and its agents access to all Books
and Records during normal working hours at Purchaser's principal place of
business or at any location where any Books and Records are stored, and
Seller shall have the right, at its own expense, to make copies of any
Books and Records; provided, however, that any such access or copying shall
be had or done in such a manner so as not to interfere with the normal
conduct of Purchaser's business.
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(iii) Purchaser shall make available to Seller upon written request
(A) copies of any Books and Records, (B) Purchaser's personnel to assist
Seller in locating and obtaining any Books and Records, and (C) any of
Purchaser's personnel whose assistance or participation is reasonably
required by Seller or any of its affiliates in anticipation of, or
preparation for, existing or future litigation, Tax returns or other
matters in which Seller or any of its affiliates is involved. Seller shall
reimburse Purchaser for the reasonable out-of-pocket expenses incurred by
it in performing the covenants contained in this Section 5.06.
SECTION 5.07. Publicity. No public release or announcement concerning
the transactions contemplated hereby shall be issued by any party without the
prior consent of the other party (which consent shall not be unreasonably
withheld), except as such release or announcement may be required by law or the
rules or regulations of any United States or foreign securities exchange, in
which case the party required to make the release or announcement shall give the
other party notice in advance of such issuance; provided, however, that Seller
or Purchaser may make internal announcements to its employees that are
consistent with the parties' prior public disclosures regarding the transactions
contemplated hereby after reasonable prior notice to and consultation with the
other.
SECTION 5.08. Agreement Not To Compete. (a) Seller understands that
Purchaser shall be entitled to protect and preserve the going concern value of
the Business to the extent permitted by law and that Purchaser would not have
entered into this Agreement absent the provisions of this Section 5.08 and,
therefore, for a period of five years from the Closing, Seller shall not, and
shall cause each of its affiliates that it controls not to, directly or
indirectly:
(i) (A) engage in the manufacture or sale of Electronic Products,
including goods or services of the type sold by the Business at any time
within the two year period ending on the date of the Closing ("Competitive
Activities"), or (B) solicit any customer or prospective customer of the
Business to purchase any goods or services of the type sold by the Business
at any time within the two year period ending on the date of Closing; or
(ii) establish or acquire any business that engages in
Competitive Activities; provided, however, that nothing herein shall
preclude Seller from acquiring any interest in any business (the "Acquired
Business") some or all of the operations of which would constitute
Competitive Activities so long as (x) the annual revenues attributable to
the Competitive Activities do not exceed 10% of the
24
annual revenues of the Acquired Business, or (y) if they do, Seller divests
itself of the Competitive Activities as soon as practicable, but not later
than 18 months, after such acquisition.
(b) Section 5.08(a) shall be deemed not breached as a result of the
ownership by Seller or any of its affiliates of: (i) less than an aggregate of
5% of any class of stock of a person engaged, directly or indirectly, in
Competitive Activities; provided, however, that such stock is listed on a
national securities exchange or traded in the NASDAQ National Market System; or
(ii) less than 5% in value of any instrument of indebtedness of a person
engaged, directly or indirectly, in Competitive Activities.
(c) Notwithstanding any other provision of this Agreement, it is
understood and agreed that the remedy of indemnity payments pursuant to Article
VI and other remedies at law would be inadequate in the case of any breach of
the covenants contained in Section 5.08(a) and, accordingly, Purchaser shall be
entitled to equitable relief, including the remedy of specific performance, with
respect to any breach or attempted breach of such covenants.
SECTION 5.09. Seller's Representations Modified by Purchaser's
Knowledge. Purchaser hereby agrees that to the extent any representation or
warranty of Seller made herein or in any Ancillary Agreement is, to the
knowledge of Purchaser acquired prior to the Closing, untrue or incorrect, (i)
Purchaser shall have no rights thereunder by reason of such untruth or
inaccuracy, and (ii) any such representation or warranty by Seller shall be
deemed to be amended to the extent necessary to render it consistent with such
knowledge of Purchaser.
SECTION 5.10. Bulk Transfer Laws. Purchaser hereby waives compliance
by Seller with the provisions of any so-called "bulk transfer law" of any
jurisdiction in connection with the sale of the Acquired Assets to Purchaser.
SECTION 5.11. Further Assurances. From time to time, as and when
requested by any party, and at the requesting party's expense, each party shall
execute and deliver, or cause to be executed and delivered, all such documents
and instruments and shall take, or cause to be taken, all such further or other
actions (subject to Section 1.04(b)), and without incurring any legal liability
beyond that provided for in this Agreement, as such other party may reasonably
deem necessary or desirable to consummate the transactions contemplated by this
Agreement. The foregoing shall include such additional documents as may be
requested by Purchaser to facilitate the importation under the "Licensed Marks"
(as defined in the License Agreement) of
25
Electronic Products or "Covered Books" (as defined in the License Agreement)
into the United States or any other country.
SECTION 5.12. Returned Inventory. If a customer, listed on Schedule
1.02(a)(iii)-B as a customer the receivables of which are not included in the
Acquired Assets, returns any item sold by the Business and takes, or requests
that Seller grant such customer, a credit therefor, Purchaser shall, within five
days of demand therefor from Seller (which demand shall be accompanied by the
customer's request or demand for a credit) pay to Seller an amount equal to the
cost of the item returned calculated in accordance with the principles set forth
in Exhibit F for the determination of the cost of inventory. If the credit taken
against Seller is attributable to Purchaser's sales, Purchaser will reimburse
Seller for the full amount of the credit taken. If the item was returned to
Seller rather than to Purchaser, Seller shall promptly send such item to
Purchaser. An item shall be deemed to have been sold by the Business if the
return takes place within 90 days of the Closing and shall be deemed to have
been sold by Purchaser if the return takes place after 90 days following the
Closing.
SECTION 5.13. Letters of Credit. As promptly as shall be practicable
after the Closing (and in any event within two business days), Purchaser shall
deliver to Seller back-up letters of credit and similar instruments, in an
aggregate principal amount and with terms and from banks or other financial
institutions or surety companies in each case reasonably satisfactory to Seller,
to collateralize the letters of credit or similar instruments of Seller with
respect to the Business listed in Exhibit G.
SECTION 5.14 Rolodex Programs. Seller has entered into customer
programs with respect to the sale of Rolodex(REGISTERED TRADEMARK) products,
including the Business' products, which are listed on Schedule 3.07 (the
"Programs"). Purchaser agrees to honor the terms of the Programs (but not any
extensions or amendments thereof entered into after the Closing) and will pay or
grant to such customer any rebate, allowance, credit or other charge under the
Programs allocable to sales made by the Business from and after the Closing
Date, or reimburse Seller for any rebate or allowance under the Programs paid by
Seller or credit or other charge taken under the Programs against Seller by such
customer, with respect to sales made by the Business from and after the Closing
Date. Seller agrees to reimburse Purchaser for any rebate or allowance under the
Programs paid by Purchaser or credit or other charge under the Programs taken
against Purchaser by such customer, with respect to sales made by Seller from
and after the Closing Date.
SECTION 5.15 Trademark Covenants. Seller agrees that,
26
so long as the License Agreement is in effect, it shall not use the "Trademark"
(as defined in the License Agreement), or grant any right to any third party to
use the Trademark, at any time. Seller further agrees that, so long as the
License Agreement is in effect, it shall not use the Rolodex(REGISTERED
TRADEMARK) ▇▇▇▇ in connection with the manufacture, packaging, distribution,
importation or sale of Electronic Products, or grant any right to any third
party to use the Rolodex(REGISTERED TRADEMARK) ▇▇▇▇ in connection with the
manufacture, packaging, distribution, importation or sale of Electronic
Products, at any time. Notwithstanding anything herein to the contrary, Seller
shall be permitted to use, and to grant any right to any third party to use, the
Rolodex(REGISTERED TRADEMARK) ▇▇▇▇ (but not the Trademark) on an electronic
device which primarily functions as a business card reader or business card
scanner irrespective of the input or output means.
SECTION 5.16 Transfer of Inventory. Purchaser agrees to take physical
possession of the Inventory as promptly as shall be practicable after the
Closing (and in any event within 30 days). Seller agrees that, pending such
physical transfer, it will store the Inventory rent-free at the locations at
which the Inventory is located at the Closing, and will cooperate with Purchaser
in effecting such physical transfer.
ARTICLE VI
Indemnification
---------------
SECTION 6.01. Indemnification by Seller. If the Closing occurs, Seller
shall indemnify Purchaser and its affiliates against, and hold them harmless
from, any loss, liability, claim, damage or expense (including reasonable legal
fees and expenses) ("Losses"), arising from, relating to or otherwise in respect
of:
(i) any breach of any representation or warranty of
Seller contained in this Agreement or any Ancillary
Agreement;
(ii) any breach of any covenant of Seller contained in
this Agreement or in any Ancillary Agreement;
(iii) any Excluded Liability;
(iv) the failure to comply with statutory provisions relating to bulk
sales and transfers, if applicable (other than Losses arising from,
relating to or otherwise in respect of the Assumed Liabilities); and
27
(v) any fees, expenses or other payments incurred or owed by Seller to
any brokers, financial advisors or comparable other persons retained or
employed by it in connection with the transactions contemplated by this
Agreement.
For purposes of clause (i) of Section 6.01, (I) to determine whether a
representation or warranty made with reference to a Business Material Adverse
Effect has been breached, such representation and warranty shall be read as
though there were no reference therein to a Business Material Adverse Effect and
(II) if a representation or warranty has been so breached, such breach shall
result in an obligation of the Seller to indemnify Purchaser only if such
breach, together with breaches of all other representations and warranties
(assuming for this purpose that such other representations and warranties had
been made without reference to a Business Material Adverse Effect) resulted in
Losses which in the aggregate have a Business Material Adverse Effect. The
foregoing applies only to determine whether there is an obligation to indemnify
for a breach and does not apply to determine the amount that is recoverable by
reason of such breach; such amount shall be calculated as though such
representation and warranty had been made without a reference to a Business
Material Adverse Effect, but shall be subject to the limitations of Section
6.04(d).
SECTION 6.02. Indemnification by Purchaser. If the Closing occurs,
Purchaser shall indemnify Seller and its affiliates against, and hold them
harmless from, any Losses arising from, relating to or otherwise in respect of:
(i) any breach of any representation or warranty of Purchaser
contained in this Agreement or in any Ancillary Agreement or any document
delivered pursuant thereto;
(ii) any breach of any covenant of Purchaser contained in this
Agreement or in any Ancillary Agreement;
(iii) any Assumed Liability;
(iv) any fees, expenses or other payments incurred or owed by
Purchaser to any brokers, financial advisors or comparable other persons
retained or employed by it in connection with the transactions contemplated
by this Agreement; or
(v) the conduct of the Business from and after the Closing.
SECTION 6.03. Termination of Indemnification. The
28
obligations to indemnify and hold harmless any party, (i) pursuant to
clauses (i) and (ii) of Section 6.01 or 6.02, shall terminate when the
applicable representation or warranty or covenant terminates pursuant to Section
6.05 and (ii) pursuant to the other clauses of Sections 6.01 and 6.02 shall not
terminate; provided, however, that such obligations to indemnify and hold
harmless shall not terminate with respect to any item as to which the person to
be indemnified (the "Indemnified Party") shall have, before the expiration of
the applicable period, previously made a claim by delivering a valid Claim
Notice pursuant to Section 6.04(a) to the party to be providing the
indemnification (the "Indemnifying Party").
SECTION 6.04. Procedures. (a) In order for the Indemnified Party to be
entitled to any indemnification provided for under this Agreement in respect of,
arising out of or involving a claim made by any person against the Indemnified
Party (a "Third Party Claim"), such Indemnified Party must notify the
Indemnifying Party in writing of the Third Party Claim (a "Claim Notice")
promptly following receipt by such Indemnified Party of written notice of the
Third Party Claim, which notification, to be a valid Claim Notice, must be
accompanied by a copy of the written notice of the Third Party Claimant
asserting the Third Party Claim; provided, however, that failure to give such
notification promptly (so long as a valid Claim Notice is given before the
expiration of the applicable period) shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
prejudiced as a result of such failure. Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party copies of all other notices and documents
(including court papers) received by the Indemnified Party relating to the Third
Party Claim.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided, however, that such counsel is not reasonably
objected to by the Indemnified Party. Should the Indemnifying Party so elect to
assume the defense of a Third Party Claim, the Indemnifying Party shall not be
liable to the Indemnified Party for any legal expenses incurred by the
Indemnified Party in connection with the defense thereof, except as provided
below. If the Indemnifying Party assumes such defense, the Indemnified Party
shall have the right to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by the
Indemnifying Party, it being understood that the Indemnifying Party shall
control such defense. The Indemnifying Party shall be liable for the reasonable
fees and expenses of counsel employed by the Indemnified Party (provided that
the incurrence of such fees and expenses of counsel was reasonably
29
necessary to respond timely to legal process) for any period after the Claim
Notice is given during which the Indemnifying Party has not assumed the defense
thereof if and to the extent that the Indemnifying Party is responsible to
indemnify for such Third Party Claim. If the Indemnifying Party does not assume
the defense of a Third Party Claim within 30 days after the giving by the
Indemnified Party to the Indemnifying Party of a valid Claim Notice with respect
to the Third Party Claim, the Indemnifying Party shall be liable to the
Indemnified Party for all fees and expenses of counsel employed by the
Indemnified Party if and to the extent that the Indemnifying Party is
responsible to indemnify for such Third Party Claim; provided, however, such
counsel is not reasonably objected to by the Indemnifying Party. If the
Indemnifying Party chooses to defend a Third Party Claim, all the Indemnified
Parties shall cooperate in the defense thereof. Such cooperation shall include
the retention and (upon the Indemnifying Party's request) the provision to the
Indemnifying Party of records and information which are relevant to such Third
Party Claim, and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder and to act as a witness or respond to legal process. Whether or not
the Indemnifying Party assumes the defense of a Third Party Claim, the
Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the Indemnifying Party's
prior written consent (which consent shall not be unreasonably withheld). If the
Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified
Party shall agree to any settlement, compromise or discharge of a Third Party
Claim that the Indemnifying Party may recommend and that by its terms obligates
the Indemnifying Party to pay the full amount of the liability in connection
with such Third Party Claim, which releases the Indemnified Party completely in
connection with such Third Party Claim.
(c) Other Claims. In the event any Indemnified Party should have a
claim against any Indemnifying Party under Section 6.01 or 6.02 that does not
involve a Third Party Claim being asserted against or sought to be collected
from such Indemnified Party, the Indemnified Party shall deliver prompt written
notice of such claim to the Indemnifying Party (the "Other Claim Notice") which
notice to be a valid Other Claim Notice must certify that the Indemnified Party
has in good faith already sustained Losses with respect to such claim. The
failure by any Indemnified Party to notify the Indemnifying Party promptly (so
long as a valid Other Claim Notice is given before the expiration of the
applicable period) shall not relieve the Indemnifying Party from any liability
that it may have to such Indemnified Party under Section 6.01 or 6.02, except to
the extent that the Indemnifying Party has been prejudiced by such failure. If
the Indemnifying Party does not notify the Indemnified Party within
30
10 business days following its receipt of such notice that the Indemnifying
Party disputes its liability to the Indemnified Party under Section 6.01 or
6.02, such claim specified by the Indemnified Party in such notice shall be
conclusively deemed a liability of the Indemnifying Party under Section 6.01 or
6.02 and the Indemnifying Party shall pay the amount of such liability to the
Indemnified Party on demand or, in the case of any Other Claim Notice in which
the amount of the claim (or any portion thereof) is estimated, on such later
date when the amount of such claim (or such portion thereof) becomes finally
determined, in each case subject to the provisions of Section 6.04(d). If the
Indemnifying Party has timely disputed its liability with respect to such claim,
as provided above, the Indemnifying Party and the Indemnified Party shall
proceed in good faith to negotiate a resolution of such dispute and, if not
resolved through negotiations, such dispute shall be resolved by litigation in
an appropriate court of competent jurisdiction.
(d) Purchaser and its affiliates shall not be entitled to recover any
amount for indemnification claims under clause (i) of Section 6.01 unless and
until the amount which Purchaser and its affiliates are entitled to recover in
respect of such claims exceeds, in the aggregate, $250,000 (the "Deductible"),
in which event (subject to clause (ii) below) the entire amount which Purchaser
and its affiliates are entitled to recover in respect of such claims less the
Deductible shall be payable; and (ii) the maximum amount recoverable by
Purchaser and its affiliates for indemnification claims under clause (i) of
Section 6.01 shall in the aggregate be equal to $1,600,000.
(e) The indemnification provided in Article VI shall be the sole and
exclusive remedy for any inaccuracy or breach of any representation or warranty
made by Seller in this Agreement or in any Ancillary Agreement. All amounts
payable by one party in indemnification of the other shall be considered an
adjustment to the Purchase Price.
(f) In no event shall Seller be liable for loss of profits or
consequential damages by reason of a breach of any representation or warranty
made by Seller or any of its affiliates in this Agreement or any Ancillary
Agreement.
(g) Upon making any payment to an Indemnified Party for any
indemnification claim pursuant to this Article VI, the Indemnifying Party shall
be subrogated, to the extent of such payment, to any rights which the
Indemnified Party may have against any other parties with respect to the subject
matter underlying such indemnification claim.
SECTION 6.05. Survival. The representations and warranties in Article
III and Article IV shall survive the
31
Closing until January 20, 1998 and shall thereupon terminate together with any
right to indemnification except as set forth in the proviso contained in Section
6.03. The covenants and agreements contained herein (other than the covenant and
agreement to indemnify against breaches of representations and warranties, which
shall terminate January 20, 1998) shall survive the Closing without limitation.
ARTICLE VII
General Provisions
------------------
SECTION 7.01. Assignment. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by Purchaser or
Seller without the prior written consent of the other party hereto.
Notwithstanding the foregoing, (a) Purchaser may assign its right to purchase
the Acquired Assets or any portion thereof hereunder to a wholly-owned
subsidiary of Purchaser without the prior written consent of Seller so long as
(i) the representations and warranties of Purchaser contained herein are equally
true of such assignee, (ii) such assignment does not have any adverse
consequences to Seller or any of its affiliates (including, without limitation,
any adverse effect on the ability of Purchaser to consummate (or timely
consummate) the transactions contemplated hereby), and (iii) such assignee
executes a counterpart of this Agreement agreeing to be bound by the provisions
hereof as "Purchaser," and agreeing to be jointly and severally liable with the
assignor and any other assignee for all of the obligations of the assignor
hereunder; (b) Purchaser may assign its rights hereunder by way of security and
such secured party may assign such rights by way of exercise of remedies and (c)
Seller may assign its rights hereunder to any purchaser of the Rolodex business
(it being understood that such purchaser will not thereby have assumed any of
the obligations of Seller hereunder). No assignment shall limit or affect the
assignor's obligations hereunder. Any attempted assignment in violation of this
Section 7.01 shall be void.
SECTION 7.02. No Third-Party Beneficiaries. Except as provided in
Article VI, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any person, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.
SECTION 7.03. Notices. All notices or other communications required
or permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by facsimile or
32
sent, postage prepaid, by registered, certified or express mail or reputable
overnight courier service and shall be deemed given when so delivered by hand or
facsimile, or if mailed, three days after mailing (one business day in the case
of overnight express mail or overnight courier service), as follows:
(i) if to Purchaser,
Franklin Electronic Publishers, Incorporated
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Senior Vice President
and General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Rosenman & Colin LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇; and
(ii) if to Seller,
Insilco Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 7.04. Interpretation; Exhibits and Schedules; Certain
Definitions. (a) The headings contained in this Agreement, in any Exhibit or
Schedule hereto and in the table of contents to this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All Exhibits and Schedules annexed hereto or referred to herein
are hereby incorporated in and made a part of this
33
Agreement as if set forth in full herein. Any capitalized terms used in any
Schedule or Exhibit but not otherwise defined therein, shall have the meaning
as defined in this Agreement. When a reference is made in this Agreement to a
Section , Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated.
(b) For all purposes hereof:
"affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person provided, however, that neither
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. nor any of its affiliates shall be deemed an affiliate of
Seller except for purposes of Article VI.
"including" means including, without limitation.
"person" means any individual, firm, corporation, partnership, limited
liability company, trust, joint venture, Governmental Entity or other entity.
"subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
(c) The following terms are defined in this Agreement
in the Sections set forth below:
Term Section
Acquired Assets 1.02(a)
Acquisition 1.01
Ancillary Agreements 1.02(b)(vii)
Applicable Law 3.03
Acquired Business 5.08(a)(ii)
Assigned Contracts 1.02(a)(vii)
Assigned Intellectual Property 1.02(a)(iv)
Assigned Permits 1.02(a)(vi)
Assumed Liabilities 1.03(a)
Books and Records 5.06(e)(i)
Business Material Adverse Effect 3.06(b)
Business Recital
Claim Notice 6.04(a)
Closing 2.01
Closing Date 2.01
Code 3.10(a)
34
Competitive Activities 5.08(a)(i)
Confidentiality Agreement 5.01(a)
Consent 3.03
Contracts 1.02(a)(vii)
Covered Books 5.11
Deductible 6.04(d)
Electronic Products Recital
Employee 5.05
Exchange Act 3.03
Excluded Assets 1.02(b)
Excluded Liabilities 1.03(b)
FR & Co. 5.06(d)
Governmental Entity 3.03
HSR Act 3.03
Indemnified Party 6.03
Indemnifying Party 6.03
Intellectual Property 1.02(a)(iv)
Inventory 1.02(a)(i)
Inventory Difference 1.05(b)
Judgment 3.03
KPMG 5.06(d)
License Agreement 2.02(c)
Licensed Marks 5.11
Liens 3.05
Losses 6.01
Other Claim Notice 6.04(c)
Permits 3.09
Permitted Liens 3.05
Personal Property 1.02(a)(ii)
Proceeding 1.03(b)(iii)
Programs 5.14
Purchase Price 1.01(a)
Purchaser Preamble
Receivables 1.02(a)(iii)
Receivable Difference 1.05(a)
Records 1.02(a)(ix)
Seller Preamble
Tax 3.10(a)
Taxing Authority 3.10(a)
Technology 1.02(a)(v)
Tele-Art 1.02(a)(vii)
Tele-Art Contracts 1.02(a)(vii)
Tele-Art License 1.02(a)(vii)
Tele-Art Repair Agreement 1.02(a)(vii)
Territory 3.06(a)(iv)
Third Party Claim 6.04(a)
Trademark 5.15
Transfer Taxes 5.02(c)
SECTION 7.05. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be
35
considered one and the same agreement, and shall become effective when one or
more such counterparts have been signed by each of the parties and delivered to
the other party.
SECTION 7.06. Entire Agreement. This Agreement, the Ancillary
Agreements and the Confidentiality Agreement contain the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings relating to such
subject matter. Neither party shall be liable or bound to any other party in any
manner by any representations, warranties or covenants relating to such subject
matter except as specifically set forth herein or in the Ancillary Agreements or
the Confidentiality Agreement.
SECTION 7.07. Severability. If any provision of this Agreement (or any
portion thereof) or the application of any such provision (or any portion
thereof) to any person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof (or the remaining portion thereof) or the application of such provision
to any other persons or circumstances.
SECTION 7.08. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
SECTION 7.09. Amendments and Waivers. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. By an instrument in writing Purchaser, on the one hand, or
Seller, on the other hand, may waive compliance by the other party with any term
or provision of this Agreement that such other party was or is obligated to
comply with or perform.
IN WITNESS WHEREOF, Purchaser and Seller have duly executed this Agreement
as of the date first written above.
INSILCO CORPORATION
by
---------------------------
Name:
Title:
FRANKLIN ELECTRONIC PUBLISHERS,
INCORPORATED
36
by
---------------------------
Name:
Title:
37
*LIST OF OMITTED SCHEDULES
TO
ASSET PURCHASE AGREEMENT
BETWEEN
INSILCO CORPORATION
AND
FRANKLIN ELECTRONIC PUBLISHERS, INCORPORATED
DATED AS OF OCTOBER 4, 1996
Schedules
---------
o Cover Sheet
o Schedule 1.02(a)(i) - Inventory
o Schedule 1.02(a)(ii) - Machinery, Tooling, Equipment, Furniture
and Vehicles
o Schedule 1.02(a)(iii) - Accounts Receivable
o Schedule 1.02(a)(iii)(b) - Excluded Accounts Receivable
o Schedule 1.02(b)(i) - Excluded Assets
o Schedule 3.03 - No Conflicts; Consents
o Schedule 3.04 - Liabilities
o Schedule 3.06 - Intellectual Property
o Schedule 3.07 - Contracts
o Schedule 3.09 - Permits
o Schedule 3.11 - Proceedings
Exhibits
--------
o Exhibit A - Form of Assignment and ▇▇▇▇ of Sale
o Exhibit B - Form of Assumption Agreement
o Exhibit C - Form of License Agreement
o Exhibit D-1 - Form of Letter to U.S. Customs Service regarding
Importation of Electronic Products
o Exhibit D-2 - Form of Letter to U.S. Customs Service regarding
Importation of Covered Books
o Exhibit E - Form of Temporary License Agreement
o Exhibit F - Accounting Principles
o Exhibit G - Letters of Credit
o Exhibit H - KPMG Letter
o Exhibit I - Inventory Count Procedures
* Registrant agrees to furnish supplementally a copy of any of the foregoing
schedules to the Commission upon request.