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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BETWEEN
SRS LABS, INC.
AND
ROCKTRON CORPORATION
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TABLE OF CONTENTS
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I. Purpose of Agreement 1
II. Purchase and Sale of the Assets 1
A. Assets 1
1. Test and Demonstration Equipment and Documentation 1
2. Product Samples 1
3. Business Support Records and Data 1
4. Intellectual Property 1
5. Software 2
6. Contract Rights 2
B. Delivery/Risk of Loss 2
III. Consideration 2
A. Initial Payments 2
B. Royalty Payments 3
C. License 4
IV. Representations and Warranties 4
A. Representations and Warranties of Each Party 4
B. Representations and Warranties of the Seller 4
1. No Conflict 5
2. Title to the Assets 5
3. Intellectual Property 6
4. Actions and Proceedings 6
5. Consents 6
6. Contracts 6
7. Status of License with Analog Devices 6
8. Investment Representations and Warranties 6
9. Accuracy of Documents and Information 9
10. Taxes 9
C. Representations and Warranties of the Buyer 9
1. No Conflict 9
2. Actions and Proceedings 9
3. Consents 10
4. Status of the Shares 10
5. Accuracy of Documents and Information 10
V. Indemnification 10
A. Indemnification by the Seller 10
B. Indemnification by the Buyer 11
C. Notice of Claim 11
D. Defense 11
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E. Duration of Parties' Obligations 12
VI. Costs 12
A. Finder's or Broker's Fees 12
B. Expenses 12
VII. Additional Agreements and Post-Closing Matters 13
A. Additional Agreements 13
B. License Agreement to Seller 13
1. Improvements by the Seller 13
C. Post-Closing Support 14
1. Technical Support 14
2. Engineering Support 14
VIII. Miscellaneous 15
A. Notices 16
B. Bulk Sales 16
C. Headings 16
D. Entire Agreement; Modification; Waiver 16
E. Counterparts 16
F. Parties in Interest 17
G. Assignment 17
H. Governing Law 17
I. Venue 17
J. Further Assurances 17
K. Validity; Severability 18
L. Press Release 18
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Attachments
and Exhibits
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Exhibit A Prohibited Licensees
Attachment 1 Product Samples
Attachment 2 Test and Demonstration Equipment and Documentation and Business
Support Records and Data Assignment
Attachment 3 Trademark Assignment
Attachment 4 Patent Assignment
Attachment 5 Copyright Assignment
Attachment 6 Contract Assignment
Attachment 7 Royalty and Other Payments
Attachment 8 License Agreement
Attachment 9 Registration Rights Agreement
With the exception of the Registration Rights Agreement (Attachment 9)
which is filed as part of the Company's Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 1998 as Exhibit 10.1, the remaining above-referenced
Attachments and Exhibit have not been filed herewith. The Company will furnish
supplementally a copy of any omitted Exhibit or Attachment to the U.S.
Securities and Exchange Commission upon request.
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement"), dated as of May 21,
1998 (the "Closing Date"), is entered into by and among Rocktron Corporation, a
Michigan corporation (the "Seller") and SRS Labs, Inc., a Delaware corporation
(the "Buyer").
I. PURPOSE OF AGREEMENT.
The Seller wants to sell to the Buyer, and the Buyer wants to buy from
the Seller, certain assets of the Seller related to technology for the
encoding of four or five channels to two channels of sound and decoding
the two channels back to four or five channels of sound (the "Circle
Surround Technology").
II. PURCHASE AND SALE OF THE ASSETS.
The Seller hereby agrees to sell, transfer, convey and deliver to the
Buyer and the Buyer hereby agrees to purchase from the Seller, subject
to and upon the terms and conditions contained herein or attached
hereto, all of the Assets (defined below), free and clear of all
options, liabilities, obligations, liens, pledges, mortgages, security
interests or other encumbrances of any kind.
A. Assets. The "Assets" means the following property related to the
Circle Surround Technology:
1. Test and Demonstration Equipment and Documentation.
Documentation, instructions, blueprints, drawings,
schematics, marketing materials, demonstration discs
(CD's) and a list of audio and video tapes utilized in
the design, manufacture, testing and demonstration of
products utilizing the Circle Surround Technology, all
as listed in the Assignment - Test and Demonstration
Equipment and Documentation and Business Support Records
and Data (Attachment 2).
2. Product Samples. Samples of specific consumer products,
all as listed in Attachment 1.
3. Business Support Records and Data. Correspondence
identifying potential customers, customer and vendor
lists and contact logs, sales order files,
confidentially and other business agreements, logo and
trademark artwork and the file histories of the patents
and trademarks described in Articles II.A.4.b. and
II.A.4.c below, all as described in Assignment - Test
and Demonstration Equipment and Documentation and
Business Support Records and Data (Attachment 2).
4. Intellectual Property. Intellectual property shall
include:
1. All intellectual property described in the
Assignment- Test and Demonstration Equipment and
Documentation and Business Support Records and
Data (Attachment 2).
2. The trademarks and trademark applications,
including, all goodwill associated therewith,
described in the Assignment - Trademarks
(Attachment 3).
3. The patents and patent applications described in
the Assignment - Patents (Attachment 4).
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4. The copyrights described in the Assignment -
Copyright (Attachment 5).
5. Software. All software including media storage and
printed versions, together with all associated
documentation as described in the Assignment - Copyright
(Attachment 5).
6. Contract Rights. All rights of the Seller, under the
agreements described in the Assignment - Contracts
(Attachment 6) (the "Contracts"). Notwithstanding
anything to the contrary, the Seller shall retain all
rights and liabilities associated with the "velocity"
trademark/litigation settlement related to Rocktron
Corporation v. Robert Bosch Corporation (Civil Action
No. 97-73422) in the United States District Court,
Eastern District of Michigan, Southern Division.
B. Delivery/Risk of Loss.
The Seller shall deliver the Assets to the Buyer at the Buyer's
principal executive offices in Santa Ana, California. The Seller
shall bear all costs incident to shipment of the Assets to such
location. All risk of loss attributable to the Assets shall
remain with the Seller until such time as the same have been
actually delivered into the physical possession of the Buyer.
III. CONSIDERATION.
In consideration for the Assets, the Buyer shall pay to the Seller the
following amounts:
A. Initial Payments.
1. A total of $500,000 shall be paid to the Seller
consisting of $450,000 paid on the Closing Date in the
form of a cashier's check or wire transfer to an account
designated by the Seller at least three (3) business
days prior to the Closing Date and $50,000 previously
paid to the Seller by the Buyer on April 9, 1998.
2. Shares of common stock of the Buyer, $.001 par value per
share (the "Common Stock"), with a value of $300,000,
determined by the method of computation as provided
below (the "Shares").
In making the computation of the Shares, the parties
shall determine a number of full shares of Common Stock
which have a total value as nearly equal to U.S.$300,000
as is practicable, by dividing into $300,000 the daily
average of the high and low sales prices for the Common
Stock on The Nasdaq Stock Market, Inc. as reported in
The Wall Street Journal (with the exception of any
errors in such reports) for each trading day during the
period beginning on and including March 16, 1998, and
ending on and including May 18, 1998, three (3) business
days prior to the Closing Date (the share price so
computed, the "Share Price"). The parties agree that the
Share Price equals $8.50 per share and the number of
Shares computed pursuant to this section equals 35,294.
Irrevocable instructions shall be delivered by the Buyer
to the Buyer's transfer agent on the Closing Date so
that a certificate in the name of the Seller
representing the Shares may be issued on the Closing
Date in the Seller's name and delivered by the Buyer to
the Seller as soon as practicable after the Closing
Date. At the Closing Date, the Buyer also shall enter
into a Registration Rights Agreement with the Seller in
the form set forth in Attachment 9.
B. Royalty Payments.
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1. For the periods aggregating ten (10) years after the
Closing Date, the Buyer shall pay to the Seller the
royalties described on Attachment 7. Royalties shall be
computed based on the currency of the United States and
shall be paid in the currency of the United States.
Royalties shall be calculated at the end of every
calendar quarter ("Payment Period") and paid within
forty-five (45) days after the end of such Payment
Period. A written statement ("Royalty Statement") shall
accompany each royalty payment, or shall be sent alone
within such forty-five (45) day period if no royalties
are due for the respective Payment Period, providing a
complete itemized description of the calculation of the
royalties paid for the respective Payment Period.
2. The Buyer shall maintain books of account and records
concerning costs, sales and other items necessary for
the calculation of royalties for a period of three (3)
years after the respective royalty is paid. A certified
public accountant appointed by the Seller may, at the
Seller's expense, examine such books and records solely
for the purpose of verifying the accuracy of any Royalty
Statement or other accounting rendered by the Buyer
hereunder. The Seller agrees that such certified public
accountant shall be required to sign an agreement with
the Buyer protecting confidential information of the
Buyer and shall be authorized by the Buyer to report to
the Seller only the amount of royalties due and payable
in respect of the Royalty Statement examined. Such
examination shall take place at a mutually agreed upon
time and place, but in any event only during the Buyer's
normal business hours and upon reasonable advance
written request. The Buyer agrees to pay for the
reasonable fees, costs and expenses charged by any
certified public accountant engaged by the Seller for
such review if the royalties paid pursuant to the
Royalty Statement over a calendar year are understated
by more than fifteen percent (15%) of the royalties
actually due. The Seller shall have no other rights to
examine the Buyer's books and records.
3. The Buyer shall, at its option, be entitled to reduce
the amount that the Buyer would otherwise be obligated
to pay to the Seller pursuant to this Article III.B, in
satisfaction of any of the Seller's undisputed
obligations to the Buyer hereunder, including, without
limitation, any offset to which the Buyer is entitled to
under the provisions contained in Attachment 7.
C. License.
1. The Buyer is granting to the Seller a license to use the
Circle Surround Technology to the extent provided in the
license attached hereto as Attachment 8.
IV. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of Each Party.
Each Party (where applicable) represents and warrants to the
other Party as follows:
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1. It is a corporation duly organized, validly existing and
in good standing under the laws of its respective state
of incorporation, and has all necessary corporate power
and corporate authority to enter into and to perform its
obligations under this Agreement and the other documents
and agreements referenced or contemplated herein and to
consummate the transactions contemplated hereby.
2. The execution, delivery and performance of this
Agreement and the other documents and agreements
referenced or contemplated herein has been duly
authorized.
3. Each of this Agreement and the other documents and
agreements referenced or contemplated herein constitutes
a legal, valid and binding obligation of such Party,
enforceable against such party in accordance with its
respective terms, except as such enforceability may be
subject to or limited by (a) bankruptcy, insolvency,
moratorium, fraudulent conveyance or other similar laws
relating to the rights of creditors generally, (b)
limitations imposed by law or equitable principles upon
the availability of specific performance, injunctive
relief or equitable remedies, and (c) concepts of
materiality.
B. Representations and Warranties of the Seller.
The Seller represents and warrants to the Buyer as follows:
1. No Conflict. The execution and the delivery of this
Agreement and the other documents and agreements
referenced or contemplated herein and the consummation
of the transactions contemplated hereby and thereby will
not:
a. violate any term or provision of the Seller's
Articles of Incorporation or Bylaws;
b. result in the creation of any lien or
encumbrance upon any of the Assets;
c. result, to the Seller's present knowledge, in a
breach or violation of, or be in conflict with,
or constitute a default under, any judgment,
order, decree, statute, law, rule, regulation or
other restriction of any court, government or
governmental agency applicable to the Seller or
the Assets; or
d. result in a breach or violation of, or be in
conflict with, or constitute a default under the
terms, conditions of any lease, license,
promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust,
partnership agreement or other agreement,
contract, instrument or arrangement to which the
Seller is a party or any of the Assets is bound.
2. Title to the Assets. The Seller has and, upon the
consummation of the transactions contemplated by the
Agreement (the "Closing"), the Buyer shall have, sole,
good and marketable title to the Assets, free and clear
of all liens, encumbrances or claims of any kind
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or nature whatsoever, including, without limitation,
those portions of the Assets which may have been
developed by the Seller's consultants or independent
contractors.
3. Intellectual Property.
a. Included in the Assets listed in Attachments 2,
3, 4 and 5 are all of the proprietary assets
(collectively, the "Intellectual Property")
owned by the Seller, or currently under
development by the Seller, or in which the
Seller owns rights, which are related to the
Circle Surround Technology as of the date
hereof. The use of the products incorporating
Circle Surround Technology by the Seller's
customers for the purpose for which sold, and
the use or publication by the Seller or the
Buyer of the technology disclosed in the
patents, trademarks and copyrights included in
the Assets do not, to the best of the Seller's
knowledge, involve infringement or claimed
infringement of any patent, trademark or
copyright. The Seller warrants that the patents
and trademarks included in the Assets are, to
the best of the Seller's knowledge, valid,
enforceable and free from defects.
b. Except as set forth in this Agreement, the
Attachments and/or the Appendices hereto, the
Seller has not sold, transferred, licensed,
abandoned, released, pledged or subjected to
lien, charge or encumbrance of any kind any of
the Intellectual Property to be acquired by the
Buyer from the Seller. The Seller has paid all
maintenance fees or other governmental fees, and
made all necessary filings, required to keep the
Intellectual Property listed in Attachments 2,
3, 4 and 5 in full force and effect. There are
no immediate necessary formal actions which must
be taken to maintain the Intellectual Property
listed in Attachments 2, 3, 4 and 5 except as
specifically noted in the respective attachment.
4. Actions and Proceedings. There are no actions, suits, or
proceedings pending or, to the knowledge of the Seller,
threatened which, individually or in the aggregate,
would have a material adverse effect on the Seller or
the Assets or which would seek to question, delay or
prevent the consummation of, or materially impair the
ability of the Seller to consummate the transactions
contemplated hereby.
5. Consents. Except as specifically provided in this
Agreement and to the best of the Seller's knowledge,
there are no authorizations, approvals, consents, orders
or waivers required to be obtained from, or notices or
filings required to be given to, or made with, any
government, governmental agency or any person (whether
or not governmental in character) in connection with (a)
the execution and delivery of this Agreement and the
other documents and agreements referenced or
contemplated herein; (b) the consummation of the
transactions contemplated hereby; and (c) the
fulfillment of or the compliance with the terms,
conditions and provisions hereof.
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6. Contracts. True and complete copies of all Contracts
included in the Assets have been made available to the
Buyer prior to the execution hereof. As of the date
hereof, except as otherwise provided in this Agreement:
a. there exist no circumstance, to Seller's
knowledge, which would affect the validity or
enforceability of any of the Contracts in
accordance with their respective terms;
b. the Seller has performed and complied in all
material respects with all obligations required
to be performed by it to date under, and is not
in default (without giving effect to any
required notice or grace period) under, or in
breach of the terms, conditions or provisions of
any of the Contracts; and
c. the legal validity and enforceability of any of
the Contracts has not been, and shall not in any
manner be, impaired by the consummation of the
transactions contemplated hereby. There is no
warranty with respect to the performance of any
of the Contracts.
7. Status of License with Analog Devices. The Seller never
received production silicon by year end 1997 as
specified under that certain Restricted Exclusive Analog
Technology and Nonexclusive Know-How and Trademark
License dated October 28, 1997 (the "ADI License
Agreement") by and between the Seller and Analog
Devices, Inc. ("ADI"). The Seller has provided to the
Buyer documentation evidencing the status of ADI's
performance with respect to the ADI License Agreement.
8. Investment Representations and Warranties. The Seller
understands and represents and warrants for itself to,
and agrees with, the Buyer that:
a. The Seller understands that no U.S. federal or
state agency has passed on, or made any
recommendation or endorsement of the Shares.
b. The Seller acknowledges that, in making the
decision to accept (i) the Shares as part of the
purchase price for the Assets, it has relied
solely upon independent investigations made by
it and not upon any representations made by the
Buyer with respect to the Buyer or the Shares,
except for the representations and warranties in
this Agreement, except that the Seller has
received, reviewed and relied upon (i) the
Buyer's Annual Report to Stockholders for the
year ended December 31, 1997 and (ii) copies of
the Buyer's report on Form 10-KSB for the year
ended December 31, 1997, the Buyer's Current
Report on Form 8-K dated March 12, 1998 (and the
amendment to such Report filed on Form 8-K/A
dated May 18, 1998), and the Buyer's definitive
Proxy Statement dated April 30, 1998, each filed
by the Buyer pursuant to the Exchange Act,
which, together with any filings by
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the Buyer under the Exchange Act after the date
hereof and prior to the Closing, are defined as
"Exchange Act Reports."
c. The Seller understands that the Shares are being
offered and sold to it in reliance on specific
exemptions from or non-application of the
registration requirements of U.S. federal and
state securities laws and that the Buyer is
relying upon the truth and accuracy of the
representations, warranties, agreements,
acknowledgments and understandings of the Seller
set forth herein in order to determine the
applicability of such exemptions and the
suitability of the Seller to acquire the Shares.
d. The Seller is acquiring the Shares for
investment for such Seller's own account, not as
a nominee or agent, and not with a view to the
resale or distribution of any part thereof,
within the meaning of the Securities Act, and
the Seller has no present intention of selling,
granting any participation in, or otherwise
distributing the same within the meaning of the
Securities Act. By executing this Agreement, the
Seller further represents that it does not have
any contract, undertaking, agreement or
arrangement with any person to sell, transfer or
grant participation to such person or to any
third person with respect to any of the Shares.
e. The Seller represents that it has had an
opportunity to ask questions and receive answers
from the Buyer regarding the terms and
conditions of the offering of the Shares and
that it has received the information it
requested regarding the business and affairs of
the Buyer.
f. The Seller acknowledges that it is able to fend
for itself and bear the economic risk of its
investment and has such knowledge and experience
in financial or business matters that it is
capable of evaluating the merits and risks of
the investment in the Shares.
g. The Seller understands that the Shares it is
acquiring are characterized as "restricted
securities" under the U.S. federal securities
laws inasmuch as they are being acquired from
the Buyer in a transaction not involving a
public offering and that under such laws and
applicable regulations such securities may be
resold without registration under the Securities
Act only in certain limited circumstances. In
this connection, the Seller represents that it
is familiar with Rule 144 promulgated under the
Securities Act, as presently in effect, and
understands the resale limitations imposed
thereby and by the Securities Act.
h. Without in any way limiting the representations
set forth above or restricting the Seller's
ability to utilize Rule 144, the Seller further
agrees not to make any disposition of all or any
portion of the Shares unless and until:
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(i) There is then in effect a registration
statement under the Securities Act
covering such proposed disposition and
such disposition is made in accordance
with such registration statement; or
(ii) (x) The Seller shall have notified the
Buyer of the proposed disposition and
shall have furnished the Buyer with a
detailed statement of the circumstances
surrounding the proposed disposition,
and (y) if requested by the Buyer, the
Seller shall have furnished the Buyer
with an opinion of counsel, reasonably
satisfactory to the Buyer, that such
disposition will not require
registration of such shares under the
Securities Act.
i. The Seller has the financial ability to bear the
economic risk of its investment in the Shares,
has adequate means of providing for its current
needs and foreseeable future contingencies and
has no need for liquidity with respect to its
investment in the Shares. The Seller is an
"accredited investor," as that term is defined
in Regulation D promulgated under the Securities
Act.
j. The Seller knows of no public solicitation or
advertisement in connection with the offer or
sale of the Shares.
k. The Seller acknowledges that the certificates
representing the Shares shall contain the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED, OR
REGISTERED OR QUALIFIED UNDER ANY OTHER
SECURITIES LAW; THEY HAVE BEEN ACQUIRED BY THE
HOLDER FOR INVESTMENT AND MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER SUCH ACT AND
ANY APPLICABLE SECURITIES LAWS, OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE
AND SRS LABS, INC. ("SRS") SHALL HAVE RECEIVED,
AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF
THE EXEMPTION REASONABLY SATISFACTORY TO SRS
(WHICH MAY INCLUDE, AMONG OTHER THINGS, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO
SRS)."
9. Accuracy of Documents and Information. The copies of all
instruments, agreements, other documents and written
information delivered to the Buyer or any of its
representatives pursuant to this Agreement are complete
and correct in all material respects as of the date
hereof. The representations and warranties made by the
Seller
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in this Agreement, or in other written materials
furnished to the Buyer hereunder or in connection with
the transactions contemplated hereby, taken as a whole,
do not contain any untrue statement of material fact and
do not omit any material fact necessary to make the
statements or facts contained herein or therein not
misleading.
10. Taxes. The Assets shall be free and clear of any liens
or encumbrances created by Seller's failure to (a) file
applicable federal, state, county and local tax returns
required to have been filed, and (b) pay or caused to be
paid all taxes required to be paid, with respect to the
Assets in those jurisdictions where the nature or use of
the Assets requires such filing and where the failure to
do so would have a material adverse affect on the
Assets.
C. Representations and Warranties of the Buyer.
The Buyer represents and warrants to the Seller as follows:
1. No Conflict. The execution and the delivery of this
Agreement and the other documents and agreements
referenced or contemplated herein and the consummation
of the transactions contemplated hereby and thereby will
not:
a. violate any term or provision of the Buyer's
Certificate of Incorporation or Bylaws; or
b. result in a breach or violation of, or be in
conflict with, or constitute a default under,
any judgment, order, decree, statute, law, rule,
regulation or other restriction of any court,
government or governmental agency applicable to
the Buyer.
2. Actions and Proceedings. There are no actions, suits, or
proceedings pending or, to the knowledge of the Buyer,
threatened which, individually or in the aggregate,
would have a material adverse effect on or which would
seek to question, delay or prevent the consummation of,
or materially impair the ability of the Buyer to
consummate, the transactions contemplated hereby.
3. Consents. There are no authorizations, approvals,
consents or waivers required to be obtained from, or
notices or filings required to be given to or made with,
any government, governmental agency or third party for
the consummation by the Buyer of the transactions
contemplated hereby, except that in connection with the
issuance of the Shares to the Seller, the Buyer must
file a Nasdaq National Market Notification Form for
Listing of Additional Shares with The Nasdaq Stock
Market, Inc.
4. Status of the Shares. Upon consummation of the
transactions contemplated hereby, the Shares will have
been, validly issued, fully paid, and nonassessable.
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5. Accuracy of Documents and Information. The copies of all
instruments, agreements, other documents and written
information delivered to the Seller or on behalf of the
Buyer or any of its representatives pursuant to this
Agreement are complete and correct in all material
respects as of the date hereof. The representations and
warranties made by the Buyer in this Agreement, or in
other written materials furnished to the Seller
hereunder or in connection with the transactions
contemplated hereby, taken as a whole, do not contain
any untrue statement of material fact and do not omit
any material fact necessary to make the statements or
facts contained herein or therein not misleading.
V INDEMNIFICATION.
A0 Indemnification by the Seller. The Seller shall defend and hold
harmless the Buyer and its officers, directors, employees,
attorneys, and agents and its successors and assigns against and
in respect of any and all losses, damages, claims, obligations,
demands, actions (pending or threatened), suits, proceedings,
assessments, liabilities, judgments, recoveries and
deficiencies, costs and expenses (including, without limitation,
reasonable attorneys' fees and costs and expenses incurred in
investigating, preparing, defending against or prosecuting any
pending or threatened litigation, claim, proceeding or demand),
all on an after-tax basis, less any amounts actually paid as
insurance reimbursement, of any kind or character (collectively,
a "Loss"), which arises out of, results from, or relate to:
1. the Seller's possession, ownership, use or transfer of
Assets prior to the date hereof;
2. the products made and sold by the Seller other than the
products provided to Buyer pursuant to Article II.A.2
hereof;
3. any breach of, or failure by the Seller fully to
perform, or any inaccuracy in, any of the
representations, warranties, covenants or agreements of
the Seller in this Agreement, or in any attachment,
schedule, exhibit, certificate, list, or other document
furnished or to be furnished by the Seller under this
Agreement; and/or
4. the "Velocity" trademark litigation/settlement related
to Rocktron Corporation v. Robert Bosch Corporation
(Civil Action No. 97-73422) in the United States
District Court, Eastern District of Michigan, Southern
Division.
B0 Indemnification by the Buyer. The Buyer shall defend and hold
harmless the Seller and its officers, directors, employees,
attorneys, and agents and its successors and assigns against and
in respect of any and all Losses, which arise out of, result
from, or relate to any breach of, or failure by the Buyer fully
to perform, or any inaccuracy in, any of the representations and
warranties, covenants or agreements of the Buyer in this
Agreement or in any attachment, schedule, exhibit, certificate,
list or other document furnished or to be furnished by the Buyer
under this Agreement.
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C0 Notice of Claim. Whenever the Buyer or the Seller learns of or
discovers any matter which may give rise to a claim for
indemnification (the "Claim") against any other party under this
Article V (the "Indemnity Obligor"), the Buyer or the Seller, as
the indemnified party (the "Indemnified Party"), shall give
notice to the Indemnity Obligor of the Claim. With respect to
Claims which are the subject of actions, suits, or proceedings
threatened or asserted in writing by any third party (a " Third
Party Claim"), the Indemnified Party shall, within 15 days
following receipt of such Third Party Claim, promptly notify the
Indemnity Obligor in writing of any Claim for recovery,
specifying in reasonable detail the nature of the Loss and the
amount of the liability estimated to arise therefrom. If the
Indemnified Party does not so notify the Indemnity Obligor
within 15 days of its discovery of a Third Party Claim, such
Claim shall be barred only to the extent that the Indemnity
Obligor is prejudiced by such failure to notify. The Indemnified
Party shall provide to the Indemnity Obligor as promptly as
practicable thereafter all information and documentation
reasonably requested by the Indemnity Obligor to verify the
Claim asserted.
D0 Defense. If the facts relating to a Loss arise out a Third Party
Claim, or if there is any claim against a third party available
by virtue of the circumstances of the Loss, the Indemnity
Obligor may, by giving written notice to the Indemnified Party
within 15 days following its receipt of the notice of such
claim, elect to assume the defense or the prosecution thereof,
including the employment of counsel or accountants, reasonably
satisfactory to the Indemnified Party, at its cost and expense;
provided, however, that during the interim the Indemnified Party
shall use its best efforts to take all action (not including
settlement) reasonably necessary to protect against further
damage or loss with respect to the Loss. The Indemnified Party
shall have the right to employ counsel separate from counsel
employed by the Indemnity Obligor in any such action and to
participate therein, but the fees and expenses of such counsel
shall be at the Indemnified Party's own expense, unless (a) the
employment thereof has been specifically authorized by the
Indemnity Obligor, (b) such Indemnified Party has been advised
by counsel reasonably satisfactory to the Indemnity Obligor that
there may be one or more legal defenses available to it which
are different from or additional to those available to the
Indemnity Obligor and in the reasonable judgment of such counsel
it is advisable for such Indemnified Party to employ separate
counsel, or (c) the Indemnity Obligor has failed to assume the
defense of such action and employ counsel reasonably
satisfactory to the Indemnified Party. Whether or not the
Indemnity Obligor chooses to defend or prosecute such claim, all
the parties hereto shall cooperate in the defense or prosecution
thereof and shall furnish such records, information and
testimony and shall attend such conferences, discovery
proceedings and trial as may be reasonably requested in
connection therewith. The Indemnity Obligor shall not be liable
for any settlement of any such claim effected without its prior
written consent. In the event of payment by the Indemnity
Obligor to the Indemnified Party in connection with any Loss
arising out of a Third Party Claim, the Indemnity Obligor shall
be subrogated to and shall stand in the place of the Indemnified
Party as to any events or circumstances in respect of which the
Indemnified Party may have any right or claim against such third
party relating to such indemnified matter. The Indemnified Party
shall cooperate with the Indemnity Obligor in prosecuting any
subrogated claim. The Indemnity Obligor will take no action in
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connection with any claim that would adversely affect the
Indemnified Party without the consent of the Indemnified Party.
E0 Duration of Parties' Obligations. The Indemnity Obligor's
indemnification obligations under this Agreement shall survive
the Closing and shall terminate as follows: (a) with respect to
claims for indemnifying arising under Articles V.A.1, V.A.2 and
V.A.4, they shall continue and not terminate and (b) with
respect to all other claims for indemnity, after ten (10) years
from the date hereof.
VI COSTS.
A0 Finder's or Broker's Fees. The Seller represents to the Buyer
that it has not made any arrangement or had any dealings whereby
the Seller or the Buyer could become subject, absolutely or
contingently, to a claim for any brokerage commission or
finder's fee. The Buyer represents to the Seller that the Buyer
has not and will not pay any brokerage commission or finder's
fee in respect of the consideration to be paid under this
Agreement or any other agreement made in contemplation of this
Agreement, and the Buyer has not made any arrangement or had any
dealings whereby the Seller could become subject, absolutely or
contingently, to a claim for any brokerage commission or
finder's fee. The Seller on the one hand, and the Buyer, on the
other hand, each agree to indemnify and hold harmless the other
against any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries, and deficiencies,
including interest, penalties, and reasonable attorneys fees,
incurred or suffered by reason of any brokerage commission or
finder's fee alleged to be payable because of any act, omission
or statement of the indemnifying party.
B0 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, each party shall pay its own fees and
expenses incident to the negotiation, preparation, execution,
delivery, and performance hereof, including, without limitation,
the fees and expenses of its respective counsel, accountants and
other experts.
VII ADDITIONAL AGREEMENTS AND POST-CLOSING MATTERS.
A0 Additional Agreements. Concurrently with the execution of this
Agreement, each party shall execute and deliver to the other the
following (to the extent a party thereto):
1 Assignment Agreement - Test and Demonstration Equipment
and Documentation and Business Support Records and Data,
in the form attached hereto as Attachment 2.
2 Assignment Agreement - Trademarks, in the form attached
hereto as Attachment 3.
3 Assignment Agreement - Patent, in the form attached
hereto as Attachment 4.
4 Assignment Agreement - Copyright, in the form attached
hereto as Attachment 5.
5 Assignment Agreement - Contracts, in the form attached
hereto as Attachment 6.
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6 License Agreement, in the form attached hereto as
Attachment 8.
7 Registration Rights Agreement, in the form attached
hereto as Attachment 9.
B0 License Agreement to Seller. In connection with the Closing, the
Buyer shall grant to the Seller a limited license, in the form
attached hereto as Attachment 8, to use the Circle Surround
Technology. Such license agreement shall prohibit the Seller
from granting any sublicense thereunder (the "Circle Surround
License").
1 Improvements by the Seller. If at any time during this
Agreement any invention, new development, enhancement or
improvement, whether patentable or unpatentable,
relating to the Circle Surround Technology
(collectively, referred to herein as "Improvement") is
made by the Seller, including any such new development,
enhancement or improvement brought about by the Seller's
vendors or subcontractors, and as often as the same
shall occur:
a. During the First Two Years. During the first two
years of the Agreement, Seller shall not assign
or license any right, title and interest in and
to such invention, new development, enhancement
or improvement, to anyone other than Buyer.
However, for any Improvements which are assigned
to the Buyer during the first two years of this
Agreement, the Seller shall be granted a
non-exclusive royalty-free license back with
respect to such Improvements.
b. While Performing Technical Engineering Support.
Improvements made by the Seller while performing
technical or engineering support (see Article
VII.C, herein) as often as the same shall occur,
shall become the sole property of the Buyer.
Seller shall furnish to the Buyer all relevant
information pertaining thereto and shall assign
to the Buyer or one of the Buyer's affiliates,
in the Buyer's sole and absolute discretion, all
right, title and interest in and to such
invention, new development, enhancement or
improvement, without the requirement of any
payment or royalty from the Seller. However, for
any Improvements which are assigned to the Buyer
pursuant to this Article VII.B.1.b., the Seller
shall be granted, a non-exclusive royalty-free
license back with respect to such Improvements
and the terms of this Agreement shall be
extended with respect to any such assigned
Improvement to Buyer so as to require payment of
royalties received by Buyer for such Improvement
pursuant to Attachment 7 hereto for ten (10)
years from the date of such assignment or
license to the Buyer.
c. While Not Performing Technical or Engineering
Support. Improvements made by the Seller
relating to the Circle Surround Technology
during a time while not performing technical or
engineering support for the Buyer, shall be the
sole property of the Seller; provided however,
that Buyer has a right of first refusal to
license and/or purchase the Improvements made
after the first
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two years while not performing technical or
engineering support under such terms as may be
agreed upon by the Seller and the Buyer.
2. Prohibited Licenses. The Buyer agrees that it will not
grant license agreements for any of the Assets acquired
by the Buyer herein relating to the Circle Surround
Technology to those companies within the musical
instrument or professional audio industries which are
listed on Exhibit "A", without obtaining the Seller's
prior approval.
C0 Post-Closing Support.
1 Technical Support. The Seller shall, following all
reasonable requests, provide technical support and
training at no charge to the Buyer (except for
reasonable travel expenses, including, but not limited
to, transportation, lodging and meals and limited to a
maximum of one (1) round trip by a representative of the
Seller to a location other than the Seller's place of
business for a period not to exceed three (3) days) for
six (6) months following the date hereof. For purposes
of this Agreement, "technical support" shall mean
assistance to the Buyer in understanding and using the
Circle Surround Technology.
2 Engineering Support. Following the Closing and for so
long as royalty payments or per-unit fees, if any, are
paid to the Seller, the Seller shall provide engineering
support to the Buyer. Unless otherwise requested by the
Buyer, the Seller agrees to designate James K. Waller,
Jr. to provide such services and by his acknowledgment
of this obligation in this Agreement James K. Waller,
Jr. agrees to provide such services. The Seller and Mr.
Waller shall provide the Buyer with an aggregate minimum
of 20 hours per month and an aggregate maximum of 32
hours per month, as requested by the Buyer. If Buyer
requires and requests more than 32 hours of engineering
support, the Seller may provide such support at its
discretion. For purposes of this Agreement, "engineering
support" shall mean assistance to the Buyer in the
application of the Circle Surround Technology as
contained in any related products and/or processes. For
engineering support, the Seller shall be paid $170 per
hour and shall be reimbursed for all reasonable travel
expenses including, but not limited to, transportation,
lodging and meals, with reimbursement to be made within
thirty (30) days of receipt by the Buyer of statements
therefor.
VIII MISCELLANEOUS.
A0 Notices. All notices, payments (other than at Closing),
requests, demands and other communications under this Agreement
shall be in writing and shall be deemed to have been given if
personally delivered or if sent by telecopy or facsimile or
mailed by overnight, commercial air courier service or by first
class, registered or certified mail, postage prepaid, and
properly addressed as follows:
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If to the Seller:
Rocktron Corporation
2870 Technology Drive
Rochester Hills, MI 48309
Attention: Mr. James K. Waller, Jr., President
Facsimile: (248) 853-4163
with a copy to:
Catalano, Zingerman & Associates, P.C.
810 S. Cincinnati, Suite 200
Tulsa, Oklahoma 74119
Attention: Frank J. Catalano, Esq.
Facsimile: (918) 599-9889
If to the Buyer:
SRS Labs, Inc.
2909 Daimler Street
Santa Ana, CA 92705
Attention: Janet M. Biski,
Vice President and Chief Financial Officer
Facsimile No. (714) 852-1099
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, 17th floor
Costa Mesa, California 92647
Attention: John F. Della Grotta, Esq.
Facsimile No. (714) 979-1921
Any party may change its address for purposes of this Article by
giving the other parties written notice of the new address in
the manner set forth above. Notice will conclusively be deemed
to have been given when personally delivered, or if given by
mail, on the second day after being sent by an overnight,
commercial air courier service or on the third day after being
sent by first class, registered or certified mail, or if given
by telecopy or facsimile machine, when confirmation of
transmission is indicated by the sender's telecopy or facsimile
machine.
B0 Bulk Sales. The parties agree to waive compliance with the
provisions of Article 6 of the Uniform Commercial Code (Bulk
Transfers) as in effect in any jurisdiction and the bulk
transfer and bulk sales laws of any applicable state or
jurisdiction (the "Bulk Sales Laws") in connection with the
purchase and sale of the Assets hereunder. The Seller shall
indemnify
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and hold harmless the Buyer, and shall reimburse the Buyer for,
any losses that the Buyer may suffer as a result of or due to
noncompliance with the provisions of the Bulk Sales Law.
C0 Headings. The subject headings of the Articles and Sections of
this Agreement are included for purposes of convenience only,
and shall not affect the construction or interpretation of any
of its provisions.
D0 Entire Agreement; Modification; Waiver. This Agreement
constitutes the entire agreement between the parties pertaining
to the subject matter contained in it and supersedes all prior
and contemporaneous agreements, representations, and
understandings of the parties (except for the Confidentiality
Agreement dated September 22, 1997 between the parties
concerning the subject matter hereof). No supplement,
modification or amendment of this Agreement shall be binding
unless executed in writing by all the parties. No waiver of any
of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No
waiver shall be binding unless executed in writing by the party
making the waiver.
E0 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
F0 Parties in Interest. Nothing in this Agreement, whether express
or implied, is intended to:
1 confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it
and their respective successors and assigns;
2 relieve or discharge any obligation or liability of any
third persons to any party to this Agreement; or
3 confer upon any third person any right of subrogation or
action over or against any party to this Agreement.
G0 Assignment. This Agreement shall be binding upon and inure to
the benefit of successors and assigns of the Seller and the
Buyer. The Buyer may freely assign its rights and obligations
under this Agreement. The Seller may assign its rights and
obligations under this Agreement with the following exceptions:
1 The License Agreement attached hereto as Attachment 8 is
assignable but such assignment shall only be royalty
free with respect to the sale or manufacture of units up
to and including twice the number of units sold or
manufactured under the License Agreement in the
preceding 12 months. Any additional units sold or
manufactured under the License Agreement will incur a
royalty at prevailing market rates.
2 The obligations of the Seller and James K. Waller, Jr.
described at Article VII.C may not be assigned.
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H0 Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of California without
regard to the conflicts of law principles thereof.
I0 Venue. The parties hereby irrevocably and unconditionally
consent to submit to the exclusive jurisdiction of the courts of
the State of California, County of Orange, and/or the United
States District Court for the Central District of California
(Southern Division) for any actions, suits, controversies or
proceedings arising out of or relating to this Agreement and the
transactions contemplated hereby (and the parties agree not to
commence any action, suit or proceeding relating thereto except
in such courts), and further agree that service of any process,
summons, notice or document by U.S. registered mail to the
respective addresses set forth above shall be effective service
of process for any action, suit or proceeding brought against
the parties in any such court. The parties hereby irrevocably
and unconditionally waive any objection to the laying of venue
of any action, suit, controversies or proceeding arising out of
this Agreement or the transactions contemplated hereby, in the
courts of the State of California, County of Orange and/or the
United States District Court for the Central District of
California (Southern Division), and hereby further irrevocably
and unconditionally waive and agree not to plead or claim in any
such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient or improper
forum.
J0 Further Assurances. The Seller will from time to time subsequent
to the Closing, at the Buyer's request and without further
consideration, execute and deliver such other instruments of
conveyance, assignment, and transfer, and take such other
actions, as the Buyer may reasonably request in order to more
effectively convey, assign, transfer the Assets to the Buyer.
K0 Validity; Severability. Each Article, section, subsection and
lesser section of this Agreement constitutes a separate and
distinct undertaking, covenant and/or provision hereof. Whenever
possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable
law. In the event that any provision of this Agreement shall be
determined to be unlawful, invalid or unenforceable, such
provision shall be deemed severed from this Agreement, but every
other provision of this Agreement shall remain in full force and
effect. In substitution for any provision of this Agreement held
unlawful, invalid or unenforceable, there shall be substituted a
provision of similar import reflecting the original intent of
the parties hereto to the fullest extent permissible under law.
L0 Press Release. The Seller and its affiliates shall not release a
press release relating to this Agreement or any of the
transactions or documents contemplated hereby without first
submitting a copy of such press release to the Buyer and
obtaining the prior approval of the Buyer to any such press
release, which approval shall not be unreasonably withheld. The
Buyer shall provide the Seller an advance copy of the press
release relating to the Closing of this Agreement.
(Signature page follows)
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IN WITNESS WHEREOF, the Seller and the Buyer have caused this Agreement
to be duly executed as of the date first above written.
SRS Labs, Inc., a Delaware corporation Rocktron Corporation, a Michigan corporation
By: /s/ STEPHEN V. SEDMAK By: /s/ JAMES K. WALLER, JR.
----------------------------------------- ----------------------------------------
Stephen V. Sedmak James K. Waller, Jr.
President and Chief Operating Officer President
Acknowledged, agreed and accepted with
respect to Article VII, Section C.2
/s/ JAMES K. WALLER, JR.
-------------------------------------------
James K. Waller, Jr., as an individual and
an employee of Rocktron Corporation
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