1
EXHIBIT 10.70
SUPPLY AGREEMENT
This SUPPLY AGREEMENT ("Agreement") is made as of January 17, 1997, by and
among C.P. Clare Corporation, a Massachusetts corporation ("Buyer"), Tongeren
Manufacturing Company, a company organized under the laws of Belgium ("TMC"),
Gunther GmbH, a corporation organized under the laws of Switzerland ("Gunther"),
W. Gunther GmbH, a corporation organized under the laws of Germany and the
parent corporation of Gunther ("W. Gunther") and Robert P. Romano, a resident of
New Jersey.
WHEREAS, Buyer, TMC, Gunther and W. Gunther entered into a Stock Purchase
Agreement, dated as of December 19, 1996 (the "Stock Purchase Agreement"),
pursuant to which Gunther has agreed to purchase from C.P. Clare all of the
shares of TMC; and
WHEREAS, as a condition precedent to the closing of the transactions
contemplated by the Stock Purchase Agreement (the "Closing"), the parties shall
have entered into a Supply Agreement; and
WHEREAS, TMC has the capability to manufacture certain mercury switches and
mercury relays for Buyer, and Buyer desires that TMC manufacture such mercury
switches and mercury relays for use and sale by Buyer pursuant to the terms
hereof.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties agree as follows:
1. SUPPLY AND DISTRIBUTION OF MERCURY SWITCHES AND MERCURY RELAYS.
Subject to the terms and conditions set forth in this Agreement, Buyer
(including its subsidiaries and affiliates) agrees to purchase from TMC all of
its requirements for certain mercury switches and mercury relays, as described
on EXHIBIT A attached hereto (the "Switches and Relays"), and TMC hereby agrees
to supply to Buyer all of Buyer's requirements for the Switches and Relays. TMC
shall manufacture the Switches and Relays at the TMC facility in Tongeren,
Belgium in accordance with the product formulations, processes and packaging
specifications which it currently uses for the Switches and Relays. Buyer will
provide TMC with purchase orders for its requirements for the Switches and
Relays and such orders shall be filled in accordance with the procedures set
forth in such purchase orders. All orders shall specify in writing the delivery
location and means of transportation of the Switches and Relays. All shipments
of Switches and Relays will be FOB Tongeren, Belgium. In the event that the
terms and conditions set forth in such purchase orders conflict with the terms
and conditions of this Agreement, the terms and conditions of this Agreement
will govern.
2
*CONFIDENTIAL TREATMENT*
2. EXCLUSIVITY.
(a) TMC shall not sell the mercury products identified on Exhibit A,
nor any other products under configuration control (i.e., mercury switch and
mercury relay products having a drawing package) at TMC on the date of the
Closing, in any configuration to any other party during the Term of this
Agreement.
(b) Notwithstanding (a) above, TMC may manufacture and sell directly
to any party an aggregate of up to[CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION] mercury wetted reed
switches per week [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION] if such switches were previously
manufactured by W. Gunther, or an affiliate, at a Gunther facility and the
manufacture of such switches is transferred to the TMC facility in Tongeren,
Belgium. Any such mercury wetted reed switches in excess of [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION] per week sold by TMC shall bear a royalty and be subject to a
Royalty Addendum as described in Section 3(b) hereof. Nothing contained herein
shall hinder, restrict or in any other fashion prohibit TMC from manufacturing
other mercury or non mercury products not covered by paragraph (a) or (b) of
this Section, provided that such products may be covered by Section 3 herein.
(c) TMC acknowledges and agrees that for a period of three years, or
the term of this Agreement, whichever is longer, neither it, nor any of its
affiliates will compete directly or indirectly with Buyer with respect to any
the manufacture or sale of dry reed switches or molded DIP & SIP and LSR series
relays under development or manufactured by TMC prior to the date of this
Agreement. The parties hereto agree that the dry reed switches and dry reed
relays are sold by C.P. Clare on a worldwide basis and that the scope of this
non-compete agreement shall be the entire world. The parties agree that the
molded DIP and molded SIP products described in the Gunther catalog attached
hereto as Exhibit 1, all dry reed switches currently manufactured by Gunther
using a plating method and potted relays manufactured using Gunther / Comus
parts and/or described in the Gunther catalog shall not be included in the terms
of this Section 2 (c).
(d) Gunther and W. Gunther agree that for a period of one year from
the date hereof they will not use any information which becomes available to
such companys due to or following the consummation of the transactions
contemplated by the Stock Purchase Agreement, in order to allow Gunther, W.
Gunther , or any other company affiliated with TMC, including Comus
International, to make technical or process improvements to such company's
molded DIP and SIP products that compete with or are functionally compatible
with such Clare products.
(e) [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION].
3. NEW PRODUCTS.
(a) Mercury Switches; Mercury Wetted Relays. In the event that TMC
develops or manufactures any mercury wetted switches or mercury wetted relays
not discussed in
2
3
*CONFIDENTIAL TREATMENT*
Sections 2(a) and 2(b) hereof, any such mercury wetted switches or mercury
wetted relays shall be distributed and sold on a worldwide basis solely through
Buyer and its direct and indirect salespersons, representatives and
distributors. The mercury wetted switches and mercury wetted relays to be
governed by the terms of this Section 3(a) shall include all mercury wetted
switches and mercury wetted relays developed by TMC, whether or not such mercury
wetted switches and mercury wetted relays are produced at TMC and all mercury
wetted switches and mercury wetted relays developed within or acquired by
Gunther, W. Gunther or any of its affiliates, including, but not limited to,
Comus International and Gunther America, which are manufactured or designed in
whole or in part at TMC. Any such sales shall be made under the name of Buyer
and governed by the terms of a Buy/Resell Agreement which shall specify the
terms and conditions of such resales, including the price and delivery terms and
conditions.
(b) DRY REED SWITCHES; DRY REED RELAYS. In the event that TMC
develops or manufactures any dry reed switches or dry reed relays not currently
being sold by Gunther or Buyer, any such dry reed switches or dry reed relays
that are sold by TMC, Gunther or any affiliate thereof, including, but not
limited to, Comus International and Gunther America, shall bear a royalty
payable to Buyer. The dry reed switches and dry reed relays to be governed by
the terms of this Section 3(b) shall include all dry reed switches and relays
developed by TMC, whether or not such dry reed switches or dry reed relays are
produced at TMC and all dry reed switches and dry reed relays developed within
or acquired by Gunther, W. Gunther or any of its affiliates which are
manufactured at TMC. The royalty rate with respect to such products will be
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION]. The relationship between the parties with respect to each
product subject to this Section 3(b) shall be governed by a Royalty Addendum, a
form of which is attached hereto as Exhibit B, which shall be executed by the
parties and shall be deemed to be an addendum to this Agreement. In the event
that this Agreement is no longer in force or effect, the parties agree to
execute, prior to such termination, a Royalty Agreement that will incorporate
the terms and conditions of each Royalty Addendum executed between the parties.
(c) At the time that any mercury or dry reed switch or mercury or dry
reed relay described in Sections 3(a) or 3(b) is developed by TMC or its
affiliated parties or the manufacturing of any such product is moved into TMC,
TMC shall give prompt written notice to Buyer.
4. PRICING AND ANNUAL MINIMUM. During the Term of the Agreement, TMC
shall sell to Buyer Switches and Relays required by Buyer at such prices (in
U.S. dollars) as set forth on PRELIMINARY EXHIBIT C hereto [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION]; PROVIDED, HOWEVER, that within six weeks of the date hereof, TMC
and Buyer shall work together to produce a definitive Exhibit C . This
definitive EXHIBIT C shall reflect [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION]. Prices paid during the
first six weeks will be based on the Preliminary Exhibit C and will be reduced
to [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION] by a credit at the end of the six week period. Following
the establishment of the definitive EXHIBIT C
3
4
* Confidential Treatment Requested *
the Buyer and TMC may renegotiate individual prices with respect to certain
additional business. Both such parties agree that in the event of any price
reduction negotiations, the parties will factor in the selling costs incurred by
Buyer. Buyer shall purchase from TMC the number of Switches and Relays at such
prices which in total equal or exceed the minimum annual revenue amount (the
"Annual Minimum") as follows:
(a) In the first calendar year of this Agreement (ending January 17,
1998) the Annual Minimum shall be [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION], at the Belgian franc
conversion rate existing on the date of this Agreement.
(b) The Annual Minimum for each year subsequent to the first year
shall be negotiated by the parties hereto at a number intended to reasonably
approximate Buyer's anticipated needs for Switches and Relays for that year and
shall be agreed to by the parties on or prior to December 15 of the preceding
calendar year. No party shall have any liability for the failure of the parties
to mutually agree upon such Annual Minimum after the first year.
In satisfying the Annual Minimum, Buyer shall be permitted to include, but
shall not be limited to, purchases of Switches and Relays by Buyer or its
affiliates, purchases by Buyer or its affiliates of other products produced by
TMC, and purchases of any product manufactured or sold by TMC to any party,
related or unrelated to Buyer, which is referred to TMC by Buyer or its
affiliates. With the consent of TMC, the Annual Minimum may also be satisfied by
purchases by Buyer or its affiliates of products produced by affiliates of
Seller, including W. Gunther or Comus International. No later than the 20th day
following each calendar quarter, Buyer shall provide to TMC a written report
setting forth a summary of the Switches and Relays purchased as of the last day
of the preceding calendar quarter that shall be included in the Annual Minimum.
Upon receipt of such report, TMC shall have 30 calendar days in which to dispute
the information contained in such report and, if no notice of any such dispute
is received by Buyer by such 30th day, the information contained in Buyer's
report to TMC shall be deemed to be final and conclusive. In the event that TMC
disputes the information contained in the Buyer's report, TMC shall notify Buyer
and the parties shall work together to resolve such disputes. The Switches and
Relays shall meet all established quality and reliability standards as exist at
the date hereof and as may be subsequently modified or amended by the parties.
5. PURCHASE OF EQUIPMENT.
(a) Prior to the expiration of the Term (as such term may be extended
pursuant to Section 10) of this Agreement, Buyer shall purchase from TMC the dry
reed relay and TAP automation tooling, fixtures and equipment set forth in
EXHIBIT D (the "Equipment"). In consideration for the Equipment, Buyer shall pay
to TMC an aggregate purchase price in the amount of [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION]. The
parties hereto agree that Exhibit D may be modified or amended following the
date hereof following a physical review of the equipment by Buyer. Such
purchases shall be made from time to time in the discretion of the Buyer, and
payment for such equipment shall only be made upon delivery of the Equipment in
satisfactory working condition to Buyer. Prior to the time that the Equipment is
purchased
4
5
* Confidential Treatment Requested *
pursuant to the terms of this Agreement, TMC will use its best efforts to
protect and maintain such equipment in a good and workmanlike manner and shall
use its best efforts to protect such Equipment from any loss or damage of any
type or nature and shall cause the Equipment to be covered under the TMC all
risk insurance policy. Buyer will be named as loss payer and additional insured,
as their interests may appear.
(b) Pursuant to the terms of a Service Agreement to be entered into
by the parties, TMC will continue to produce certain products and continue
certain development work on behalf of Buyer. In the event that the parties
performing services pursuant to the Service Agreement need the equipment
purchased hereunder to perform their services, Buyer shall at its sole
discretion, allow certain of the Equipment to remain at the TMC location in
Tongeren Belgium to be used for such purposes. In the event that Equipment
purchased by Buyer remains at the TMC location, TMC shall be responsible for and
shall indemnify Buyer against any loss in the Equipment located at the TMC
facility, whether such loss is due to theft, vandalism, deterioration or
otherwise. TMC agrees to insure all such Equipment while it is on TMC premises
to the same extent that it would insure its own products, equipment and
machinery on the premises. In that regard, TMC will arrange for all-risk
insurance coverage sufficient to cover at all times the full value of all
Equipment located at the TMC facility. TMC shall add Buyer as a named loss payee
and additional insured with regard to such Equipment on all TMC insurance
policies, up to a value of [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION], which amount may vary annually.
Buyer may carry any such excess insurance that it deems necessary.
6. RIGHTS OF FIRST REFUSAL
(a) RIGHTS OF BUYER.
(i) Buyer shall, in accordance with the procedures set forth in
Section 6(c), have a right of first refusal to acquire a majority or controlling
interest of W. Gunther, the parent corporation of Gunther, in the event that any
shares or equity interest that would constitute a majority or controlling
interest are offered for sale or proposed to be sold by [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION].
(ii) Buyer shall, in accordance with the procedures set forth in
Section 6(c), have a right of first refusal to purchase any mercury switch or
mercury relay equipment owned by TMC in the event that TMC offers or proposes to
sell or transfer such items, whether voluntarily or in connection with the
liquidation, merger, split-up, forced sale or bankruptcy of TMC or the
contribution in kind of the assets of TMC whether in connection with the sale of
the entire business or parts thereof. This provision shall include, but not be
limited to, transfers by TMC of such equipment to W. Gunther, Gunther or any
affiliated entity.
(b) RIGHT OF TMC. TMC shall, in accordance with the procedures set
forth in Section 6(c), have a right of first refusal to acquire any equipment
owned by Buyer and related to the manufacture of mercury switches or mercury
relays in the event such items are offered for sale by Buyer.
(c) OPERATION OF RIGHTS OF FIRST REFUSAL. In the event either party
to this
5
6
Agreement proposes to take any action related to which, pursuant to this Section
6, the other party has a right of first refusal, the party proposing to take
such action shall provide 30 days' prior written notice to the other party which
sets forth the terms on which such action is proposed to be taken. The party
receiving a notice pursuant to this Section 6 shall have the right, exerciseable
upon written notice to the other party within 30 days' of receipt of such
notice, to purchase the property subject to the right of first refusal on the
same terms that have been offered to the party proposing to take any such
action. If a party determines not to exercise its right of first refusal
pursuant to this Section 6, the other party may take the proposed action upon
the terms set forth in the notice at any time within 60 days after the
expiration of the 30 day period after which time no action may be taken without
renewed compliance with this Section 6. The rights of first refusal set forth in
this Section 6 shall remain in full force and effect during the term of this
Supply Agreement, as such term may be extended from time to time.
(iii) Buyer shall have the option to purchase the assets of TMC
in the event of any of the following circumstances, A) TMC does not pay its
debts as such debts become due, B) the revocation of credit lines by any bank or
other lending institution, C) the filing of a writ against TMC to begin
bankruptcy proceedings or D) TMC becomes subject to a "depistage" pursuant to
the relevant provisions of Belgian law. In the event of any such event, TMC will
provide immediate notice to Buyer in order to allow Buyer to purchase such
assets or in some other way avoid the existence of such circumstance; provided,
however that TMC shall have up to 14 days (less if the circumstances require) to
cure any such event.
7. Program Management Review. Buyer and TMC agree to participate in
regularly scheduled Program Management Reviews in order to monitor the progress
of the products being sold pursuant to this Agreement. Each party will designate
two representatives to participate in such reviews.
8. COVENANTS OF THE PARTIES.
(a) COVENANTS OF TMC.
(i) ISO 9000 STATUS. TMC shall prior to April 30, 1997 obtain ISO
9000 status and TMC's plant located in Tongeren, Belgium or at any other plant
owned or operated by TMC or its affiliates that is supplying existing products
to Buyer.
(ii) DELIVERY OF EQUIPMENT. Upon request of Buyer, TMC shall
promptly deliver to Buyer's designated shipping agent, the Equipment that has
been purchased by Buyer pursuant to Section 5 hereof.
(b) COVENANTS OF W. GUNTHER AND GUNTHER.
(i) CONTINUATION OF BUSINESS. During the Term of this Agreement,
W. Gunther and Gunther shall not voluntarily cause the merger, consolidation,
liquidation, or dissolution of TMC and shall not sell or otherwise transfer any
majority or controlling interest in TMC.
6
7
* Confidential Treatment Requested *
(ii) MANAGING DIRECTOR. Gunther shall insure that Mr. Elson
Nowell is appointed as the Managing Director of TMC immediately following the
closing and remains so during the term of this Agreement, for so long as he
shall be employed by Gunther or any of its subsidiaries or affiliates. In the
event that TMC wishes to replace Mr. Nowell as Managing Director, the Buyer will
have the right and authority to consent prior to the appointment of such
replacement Managing Director.
(iii) LEGAL COUNSEL. Gunther covenants and agrees following the
Closing to cause TMC to continue to retain Stibbe Simont Monahan Duhot as
designated legal counsel to assist in the social restructuring begun prior to
the Closing and that Stibbe Simont Monahan Duhot shall participate in the
negotiations regarding such social restructuring. Any legal fees incurred
following the date hereof relating directly or indirectly to the social
restructuring shall be the responsibility of TMC and Gunther, provided that
Buyer will pay legal fees it incurs.
(c) [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.]
9. DEFAULT BY TMC.
(a) LIQUIDATED DAMAGES. Simultaneously with the Closing, the parties
hereto, and The First National Bank of Boston, as Escrow Agent, shall execute an
Escrow Agreement (the "Escrow Agreement) in the form attached hereto as Exhibit
E and the amount of one million two hundred fifty thousand U.S. dollars
($1,250,000) (the "Escrow Amount"), including any additions to or earnings on
the same, shall be placed in escrow. In the event that Gunther, W. Gunther, TMC
or Robert P. Romano shall default on any of its or his obligations under this
Agreement, the Escrow Amount, including any additions to or earnings on the
same, shall be paid to Buyer as liquidated damages; provided, however, that if
the Escrow Amount shall have been reduced pursuant to the terms of the Escrow
Agreement, the amount to be paid to Buyer as liquidated damages shall be the
Escrow Amount, so reduced.
(b) SWITCHES AND RELAYS. In addition to any liquidated damages to be
paid to Buyer pursuant to Section 9(a), in the event that Gunther, W. Gunther,
TMC or Robert P. Romano shall default on any of its or his obligations under
this Agreement, Buyer shall be entitled to manufacture Switches and Relays
and/or shall also be entitled to purchase Switches and Relays from a third
party.
(c) PERSONAL LIABILITY. Nothing in this Agreement shall be deemed to
impose any liability on Comus International, Elson Nowell or Robert P. Romano.
The remedies set forth in Section 9(a) and 9(b) shall be exclusive remedies for
breaches by Robert P. Romano, Gunther, W. Gunther or the Company hereunder;
provided, however, that damages relating to product liability claims arising
from product sold by TMC or its affiliates shall not be so limited.
10. TERM OF AGREEMENT. This Agreement will have an initial term of three
(3) years
7
8
(the "Initial Term"). Within 90 days' of the end of the Initial Term or within
90 days' of the end of any additional term agreed to pursuant to this Section
9(a), the parties may, by mutual agreement, extend the term of this Agreement
for an additional one (1) year period (including the Initial Term, the "Term").
Notwithstanding termination of this Agreement, the provisions of Section 11
shall continue in force and effect.
11. DEFECTIVE PRODUCTS
(a) Upon discovery of defects in the Switches and Relays and
notwithstanding the payment therefor by Buyer, Buyer shall have the right to
return such defective Switches and Relays to TMC. Buyer shall submit to TMC a
written inventory of all defective Switches and Relays manufactured by TMC and
shipped to Buyer on a timely basis following inspection of such products, which
shall include the cause for rejection of such products. If so authorized by TMC
within fourteen (14) days of TMC's receipt of such notification, Buyer shall
return, and TMC shall accept, such defective Switches and Relays for, at Buyer's
direction, replacement, credit or refund, inclusive of all related handling,
shipping, and duty charges incurred by Buyer. No replacement of defective
Switches and Relays returned to TMC shall be made unless authorized by Buyer
and, if so authorized, such replacement shall be made by TMC at its expense upon
receipt of new shipping instructions from Buyer. If TMC does not authorize the
return of defective Switches and Relays within fourteen (14) days of its receipt
of the inventory from Buyer, Buyer shall have the right, in its discretion, to
destroy or otherwise dispose of such defective Switches and Relays and demand a
credit or a refund from TMC for the same. Any such demands for a credit or a
refund shall be submitted by Buyer to TMC on a quarterly basis and shall be due
and payable by TMC within thirty (30) days after receipt. Any shipment of
defective Switches and Relays shall be credited in full against the Annual
Minimum irrespective of whether such defective goods are ultimately replaced,
credited or destroyed in accordance with this Section 11(a).
(b) At specified times or upon demand by Buyer, TMC shall prepare and
submit to Buyer a written inventory of all out of specification Switches and
Relays manufactured by TMC pursuant to a purchase order but not shipped to
Buyer. Buyer shall have the option, but not the obligation, to purchase such
Switches and Relays at a discount.
(c) TMC shall destroy or dispose of all out of specification Switches
and Relays , not purchased pursuant to Paragraph (b) hereof in the manner
requested by Buyer, in accordance with applicable law.
(d) The remedies of Buyer set forth in this Section with respect to
defective Switches and Relays shall not be exclusive, and Buyer may hold TMC
liable for any and all damages arising from such defective Switches and Relays.
8
9
12. GENERAL PROVISIONS.
(a) ASSIGNMENT. This Agreement is binding upon the parties hereto and
their respective successors in interest, provided, however, that none of the
parties to this Agreement may assign any of its rights or obligations under this
Agreement without the prior written consent of the other parties hereto.
(b) GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts, USA, without regard to its conflict of laws
provisions. Subject to the provisions of Section 12 (l) hereof, the parties
hereby consent to personal jurisdiction, service of process and venue in the
federal or state courts of Massachusetts USA or Belgium for any claim, suit or
proceeding arising under this Agreement.
(c) WAIVER. The failure of either party to enforce at any time or for
any period of time the provisions hereof or of a purchase order in accordance
with their terms will not be construed to be a waiver of such provisions or of
the right of such party thereafter to enforce each and every such provision.
(d) ENTIRE AGREEMENT. This Agreement (together with all purchase
orders submitted in accordance herewith) supersedes all prior agreements, oral
or written, among the parties hereto relating to the subject matter covered
herein, and sets forth the entire agreement and understanding among the parties
as to the subject matter of this Agreement, and none of the parties shall be
bound by any conditions, definitions, warranties, or representations with
respect to the subject matter of this Agreement, other than as expressly
provided in this Agreement or as duly set forth on or subsequent to the date
hereof in writing and signed by a proper and duly authorized representative of
the party to be bound thereby.
(e) NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given when
received, if personally delivered or sent by facsimile transmission, or fourteen
(14) days after deposited in the mails for delivery by registered or certified
mail, return receipt requested, postage prepaid, addressed as set forth below or
if sent by facsimile to the numbers set forth below:
9
10
To Buyer: with a copy to:
--------- ---------------
C.P. Clare Corporation C.P. Clare Corporation
78 Cherry Hill Drive 78 Cherry Hill Drive
Beverly, MA 01915 Beverly, MA 01915
Attn: Michael Ferrantino Attn: Jacqueline D. Arthur
Facsimile: (508) 524-4747 Facsimile: (508) 524-5769
--------------------------------------------------------------
TO TMC: with a copy to:
Tongeren Manufacturing Company W. Gunther GmbH
Overhaamlaan 40 Virnsberger Strasse 51
3700 Tongeren Belgium Nurnberg D. 90431
Attn: Elson Nowell Germany
Attn: Elson Nowell
TO GUNTHER OR W. GUNTHER: with a copy to:
------------------------- ---------------
Gunther GmbH W. Gunther GmbH
St. Jacobs - Strasse 7 Virnsberger Strasse 51
4052 Basel, Switzerland Nurnberg D. 90431
Attn: Dr. Beat Schultheiss Germany
Attn: Elson Nowell
Facsimile: 011-49-9-11-6552-239
To: Robert P. Romano: with a copy to:
Comus International Mr. Robert P. Romano
263 Hillside Avenue 260 Watching Avenue
Nutley, NJ 07110 Glen Ridge, NJ 07028
Attn: Robert P. Romano
Facsimile: 201-667-6837
(f) INDEPENDENT CONTRACTOR. TMC shall act hereunder in all respects
as an independent contractor and it shall do business at its own risk and for
its own profit and nothing contained in this Agreement shall constitute a
partnership or agency relationship between TMC, Gunther, W Gunther, Robert P.
Romano and Buyer nor authorize TMC to incur any liability on behalf of Buyer or
to make any representation on behalf of or in any way to bind Buyer to any
obligation of any kind, express or implied, to any third party.
10
11
(g) HEADINGS. The headings, titles and subtitles of the Sections of
this Agreement are for convenience only and shall not be considered as being
part of this Agreement and are of no legal effect.
(h) AUTHORITY. Each party represents and warrants to the other that
it has full power and authority to enter into this Agreement and to perform its
obligations hereunder.
(i) NOTIFICATION. The parties agree to cooperate in order to file any
requests for authorization or notification to the appropriate governmental
authorities as any party may deem advisable.
(j) COOPERATION. The parties agree to cooperate with each other to
the fullest possible extent with respect to all aspects of their rights and
obligations under this Agreement.
(k) SEVERABILITY. Should any provision of this Agreement now or later
conflict with any applicable law or administrative regulation with the force of
law, whether national or supranational, said provision(s) shall be considered as
not written and of no effect and all other provisions of this Agreement shall
remain in full force and effect.
(1) ARBITRATION. Except with respect to an action seeking specific
performance, any dispute arising relating to this Agreement, or a breach of this
Agreement, arising among the parties shall be settled by arbitration in
accordance with the commercial arbitration rules of the American Arbitration
Association ("AAA"). The arbitration proceeding, including the rendering of an
award, shall take place in Boston, Massachusetts and be administered by the AAA.
The decision of the arbitrators shall be final and binding on the parties hereto
and any judgment rendered by such arbitrators may be enforced by any court of
competent jurisdiction. Each party shall bear its own expenses in connection
with such arbitration unless otherwise ordered by such arbitrator.
11
12
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date and year first written above.
C.P. CLARE CORPORATION
By:___________________________________________________
Name:
Title:
TONGEREN MANUFACTURING COMPANY
By:___________________________________________________
Name:
Title:
GUNTHER GmbH
By:___________________________________________________
Name:
Title:
W. GUNTHER GmbH
with respect to Sections 2(c), 2(d), 2(e), 6(a), 6(c),
8(b), 9(a), 9(c), 10 and 12
By:___________________________________________________
Name:
Title:
______________________________________________________
Robert P. Romano
with respect to Sections, 2(e), 8(c), 9(a), 9(c), 10 and 12.
12
13
* Confidential Treatment Requested *
EXHIBIT A
List of Restricted Products
---------------------------
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION].
13
14
* Confidential Treatment Requested *
EXHIBIT B
Form of Royalty Addendum
------------------------
Name of Product:
Product Description:
Term of Royalty: 10 years from first commercial sale
- -----------------------------------------------------
ROYALTY RATE: [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION].
TERMS AND CONDITIONS: TMC shall pay to Buyer a quarterly royalty fee determined
by multiplying [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION] by (ii) the amount of the Net Product Sales
of products covered by this Royalty Addendum during such quarter. The amount of
Net Product Sales shall equal the amount of gross sales of such products sold by
TMC for such period to be determined in accordance with the books and records of
TMC, which shall be maintained in accordance with generally accepted accounting
principles in Belgium. Each quarterly royalty fee shall be accompanied by a
statement setting forth the basis for such fee and detailing the number of
orders shipped by TMC, volume and customer on each order and the Net Product
Sales calculation. On reasonable notice, Buyer, at its own expense, shall have
the right to have an accountant inspect the books and records of TMC for the
sole purpose of determining the correctness of payments due under this Royalty
Addendum. Each quarterly royalty payment shall be payable in US dollars by wire
transfer to an account established by Buyer, within 30 days of each calendar
quarter.
14
15
* Confidential Treatment Requested *
EXHIBIT C
Pricing and Annual Minimums
---------------------------
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION].
15
16
* Confidential Treatment Requested *
EXHIBIT D
Equipment
---------
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION].
16
17
EXHIBIT E
ESCROW AGREEMENT
----------------
AGREEMENT made as of January ___, 1997 by and among C.P. Clare Corporation, a
Massachusetts corporation ("Seller"), Gunther GmbH, a corporation organized
under the laws of Switzerland ("Buyer") and The First National Bank of Boston a
national bank as escrow agent (the "Escrow Agent").
WHEREAS, pursuant to a Stock Purchase Agreement (the "Stock Purchase
Agreement") dated as of December 19, 1996 by and among Buyer, the Company and
the Seller which is the holder of all of the capital stock of Tongeren
Manufacturing Company, (the "Company"), Buyer is acquiring all of the
outstanding Company shares from the Seller; and
WHEREAS, pursuant to the terms of the Stock Purchase Agreement, Seller and
Buyer have entered into that certain Supply Agreement that contains certain
undertakings on the part of each party; and
WHEREAS, in order to assure performance by the Company under the Supply
Agreement, Buyer has agreed that ONE MILLION TWO HUNDRED AND FIFTY THOUSAND
DOLLARS ($1,250,000) is being deposited, pursuant to Section 9(a) of the Supply
Agreement, in escrow to be held as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
of the parties herein contained, and other good and valuable consideration,
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. ESTABLISHMENT OF ESCROW; INVESTMENT. Tongeren Manufacturing Company has
herewith deposited with the Escrow Agent and the Escrow Agent acknowledges
receipt of ONE MILLION TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($1,250,000 U.S.).
The consideration deposited hereunder, including any additions to or earnings on
the same, shall be referred to as the "Escrow Fund." The Escrow Fund shall be
held in escrow in the name of the Escrow Agent or its nominee, subject to the
terms and conditions set forth herein. Jacqueline Arthur or any other designated
Seller representative shall serve as the exclusive representative of the Seller
with respect to the Escrow Fund and this Agreement (the "Escrow
Representative"). Unless otherwise directed by the Escrow Representative and
Company, the Escrow Agent shall invest the cash held in the Escrow Fund in any
"sweep" fund of the Escrow Agent, U.S. Government obligations, time deposits
rated A or above, commercial paper rated A- or above, bank certificates of
deposit (up to the maximum insured amount of any such deposit) or repurchase
agreements secured by U.S. Government obligations, (individually, an
"Investment" and collectively, the "Investments"), and the Escrow Agent shall
not be responsible for any loss incurred upon any such investment made in
17
18
good faith. Unless otherwise directed in writing by the Escrow Representative
and the Company, the Escrow Agent shall not invest all or any portion of the
Escrow Fund in any Investment if the maturity date of such Investment is later
than 30 days from the date of the Investment.
2. AMOUNTS EARNED ON ESCROW FUND. All amounts earned, paid or distributed
with respect to the Escrow Fund (whether interest, dividends or otherwise) shall
become a part of the Escrow Fund and shall be held hereunder upon the same terms
as the original Escrow Fund.
3. CLAIMS AGAINST ESCROW FUND; RELEASE. At any time or times prior to the
expiration of this Agreement, Seller may make claims against the Escrow Fund for
payment of the amount of the Escrow Fund due to defaults by the Buyer, Gunther,
the Company or Robert Romano under the terms of the Supply Agreement. Seller
shall notify the Buyer, Company, Escrow Representative and the Escrow Agent in
writing prior to the expiration of this Agreement of each such claim, including
a summary of the amount of and bases for such claim. If the Company shall
dispute such claim, the Company shall give written notice thereof to Seller and
to the Escrow Agent within (30) days after receipt of notice of Seller's claim,
in which case the Escrow Agent shall continue to hold the Escrow Fund in
accordance with the terms of this Agreement; otherwise, such claim shall be
deemed to have been acknowledged to be payable out of the Escrow Fund in the
full amount thereof and the Escrow Agent shall use its best efforts to pay such
claim in immediately available funds to Seller within three (3) business days
after expiration of said thirty day period or as soon thereafter as possible. If
the amount of the claim exceeds the value of the Escrow Fund, the Escrow Agent
shall have no liability or responsibility for any deficiency. The Escrow Fund
shall be released to the Company on the following dates, as long as no claim by
Seller against the Escrow Fund is pending: a) one-third on January 17, 1998, b)
one-third on January 17, 1999 and one third on January 17, 2000. In the event a
claim against the Escrow Fund is pending on any such date, such release shall
not be effective until such claim has been resolved. In the event of the
termination, cessation or liquidation of the business of the Company or, in the
event that the Company becomes insolvent or commits an act of bankruptcy or
applies for, consent to or acquiesces in the appointment of a liquidator or any
trustee or receiver for it or any of its property or such liquidator, trustee or
receiver is so appointed for the Company, then in such event the Escrow Fund
will be immediately released to the Seller.
4. Disputed Claims.
---------------
(a) If the Company shall dispute a claim of Seller as above provided,
the Escrow Agent shall set aside a portion of the Escrow Fund sufficient to pay
said claim in full (the "Set Aside Amount").
(b) If the disputed claim has not been resolved or compromised within
sixty (60) days after the Escrow Representative sends notice of dispute of the
same, or in the event of a third-party claim or suit, within fifteen (15) days
after its resolution or compromise, said indenmification claim shall be
referred to the American Arbitration Association, to be settled
18
19
by arbitration in Boston, Massachusetts in accordance with the commercial
arbitration rules of the Association. The fees and expenses of the arbitrator
shall, as between the Seller and the Company, be borne by them in such
proportions as shall be determined by the arbitrator, or if there is no such
determination, then such fees and expenses shall be borne equally by the Seller
and the Company. In no event shall the Escrow Agent be responsible for any fee
or expense of any party to any arbitration proceeding. The determination of the
arbitrator as to the amount, if any, of the claim which is properly allowable
shall be conclusive and binding upon the parties hereto and judgment may be
entered thereon in any court having jurisdiction thereof, including, without
limitation, any Superior Court in the Commonwealth of Massachusetts. The Escrow
Agent shall use its best efforts to make payment of such claim, as and to the
extent allowed, to the Seller out of the Set Aside Amount (or if insufficient,
out of the Escrow Fund) within three (3) business days following said
determination or as soon thereafter as possible.
5. TERMINATION. This Agreement shall terminate on January 17, 2000 (the
"Termination Date") if there are no outstanding indemnification claims on the
Termination Date; otherwise this Agreement shall continue in effect until all
indemnification claims Seller has made pursuant to Section 3 hereof on or prior
to the Termination Date shall have been disposed of. As of the Termination Date,
an amount of the Escrow Fund adequate to cover all disputed and undisputed
claims made by Seller pursuant to Section 3 hereof will be held by the Escrow
Agent, and the Escrow Agent shall distribute on the Termination Date the
balance, if any, of the Escrow Fund to the Company. At such time as all
remaining claims hereunder have been resolved and the Escrow Agent has received
a written notice executed by the Company and the Escrow Representative to that
effect and any amounts to be distributed to Seller in connection therewith have
been so distributed, the Escrow Agent shall distribute the remaining Escrow
Fund, if any, to the Company.
6. THE ESCROW AGENT. Notwithstanding anything herein to the contrary, the
Escrow Agent shall promptly dispose of all or any part of the Escrow Fund as
directed by a writing signed by the Escrow Representative and the Company. The
reasonable fees and expenses of the Escrow Agent, including the fees and
disbursements of its counsel, if any, in connection with its performance of this
Agreement shall be paid from the income on the Escrow Fund and, if and to the
extent not so paid, shall be borne by the Company. The Escrow Agent may decline
to act and shall not be liable for failure to act if in doubt as to its duties
under this Agreement. The Escrow Agent may act upon any instrument or signature
believed by it to be genuine and may assume that any person purporting to give
any notice or instruction hereunder, reasonably believed by it to be authorized,
has been duly authorized to do so. The Escrow Agent's duties shall be determined
only with reference to this Escrow Agreement and applicable laws, and the Escrow
Agent is not charged with knowledge of or any duties or responsibilities in
connection with any other document or agreement.
The Escrow Agent shall have the right at any time to resign hereunder by
giving written notice of its resignation to the parties hereto, at the addresses
set forth herein or at such other address as the parties shall provide, at least
thirty (30) business days prior to the date specified for such resignation to
take effect. If the parties hereto do not designate a successor
19
20
escrow agent within said thirty (30) business days, the Escrow Agent may appoint
a successor escrow agent. Upon the effective date of such resignation, all cash
and other payments and all other property then held by the Escrow Agent
hereunder shall be delivered by it to such successor escrow agent or as
otherwise shall be designated in writing by the parties hereto.
In the event that the Escrow Agent should at any time be confronted with
inconsistent or conflicting claims or demands by the parties hereto, the Escrow
Agent shall have the right to interplead said parties in any court of competent
jurisdiction and request that such court determine such respective rights of the
parties with respect to this Escrow Agreement, and upon doing so, the Escrow
Agent shall be released from any obligations or liability to either party as a
consequence of any such claims or demands.
The Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any rights hereunder, either directly or by or through
its agents or attorneys. The Escrow Agent shall not be responsible for and shall
not be under a duty to examine into or pass upon the validity, binding effect,
execution or sufficiency of this Escrow Agreement or of any agreement amendatory
or supplemental hereto.
7. MISCELLANEOUS. This Agreement shall be construed under and governed by
the laws of the Commonwealth of Massachusetts and shall inure to the benefit of
and be binding upon the successors, assigns, heirs and personal representatives
of the parties hereto.
8. COUNTERPARTS. This Escrow Agreement may be executed in one or more
counterparts, all of which documents shall be considered one and the same
document.
20
21
9. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given when
received, if personally delivered or sent by facsimile transmission, or three
(3) days after deposited in the U.S. mails for delivery by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
TO SELLER: C.P. Clare Corporation
--------- 78 Cherry Hill Drive
Beverly, MA 01915
Attn: Jacquie Arthur, VP & Chief
Financial Officer
With a copy to: C.P. Clare Corporation
78 Cherry Hill Drive
Beverly, MA 01915
Attn: Lori M. Henderson, Corporate
Counsel
TO THE COMPANY: Tongeren Manufacturing Company
-------------- Overhaamlaan 40
3700 Tongeren, Belgium
Attn: Elson Nowell, Managing Director
TO THE BUYER: Gunther GmbH
------------ St. Jacobs - Strasse 7
4052 Basel, Switzerland
Attn: Dr. Beat Sehultheiss
With a copy to: W. Gunther GmbH
Virnsberger Strable 51
Nurnberg D. 90431
Germany
Attn: Elson Nowell, Managing Director
TO ESCROW AGENT: The First National Bank of Boston
--------------- 100 Federal Street, 4th Floor
Boston, MA 02110
Attn: James Bosland, Sr. Portfolio Mgr.
Addresses may be changed by written notice given pursuant to this Section.
Any notice given hereunder may be given on behalf of any party by its counsel or
other authorized representatives.
21
22
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be
executed by their duly authorized representatives, as of the date first written
above.
BUYER:
-----
GUNTHER GmbH
By:
-----------------------------------
Title:
--------------------------------
THE COMPANY:
-----------
TONGEREN MANUFACTURING
COMPANY
By:
-----------------------------------
Title:
--------------------------------
SELLER:
------
C.P. CLARE CORPORATION
By:
-----------------------------------
Title:
--------------------------------
ESCROW AGENT:
------------
The First National Bank of Boston
By:
-----------------------------------
Title:
--------------------------------
22