Inventory Purchase Agreement dated as of October 28, 2020, by and among Voice Comm, LLC and TESSCO Technologies Incorporated, TESSCO Communications Incorporated and TESSCO Incorporated
THE SYMBOL “[--]” DENOTES PLACES WHERE CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH (i) NOT MATERIAL, AND (ii) WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED
INVENTORY PURCHASE AGREEMENT
DATED AS OF October 28, 2020
by and among
VOICE COMM, LLC
TESSCO TECHNOLOGIES INCORPORATED,
TESSCO COMMUNICATIONS INCORPORATED
TABLE OF CONTENTS
GLOSSARY OF DEFINED TERMS
List of Exhibits
Exhibit AForm of Bill of Sale
Exhibit BForm of Intellectual Property Coexistence Agreement
Exhibit C-1Form of Trademark Assignment Agreement
Exhibit C-2Form of Nunc Pro Tunc Trademark Assignment
Exhibit C-3Form of Partial Trademark Assignment - Canada
Exhibit C-4 Form of Patent Assignment Agreement
Exhibit DForm of Intellectual Property Registration Division Request
List of Schedules
Schedule 1.2(b)Assumed Contracts
Schedule 1.2(c)Records, Marketing Materials and Customer Lists
Schedule 1.2(d)Ventev Products Quality Control Equipment and Software
Schedule 2.2(b)Assumed Liabilities
Schedule 2.4(a)Form of Closing Schedule
Schedule 2.5(a)Valuation Model Inventory
Schedule 3.2(a)Title to Purchased Assets
Schedule 3.2(b)Purchased Assets Locations
Schedule 3.5(a)Intellectual Property
Schedule 3.6No Conflict
Schedule 3.7(a)Conduct of Retail Business
Schedule 3.10(a)Personnel Agreements
Schedule 3.10(b)Employment Claims
Schedule 3.12(a)Product Liability
Schedule 3.12(b)Ventev Products Standard Warranty
Schedule 3.13Financial Information
Schedule 6.2(c)Operational Transition
Schedule 6.3(a)Assigned Ventev Mobile Intellectual Property
Licensed Ventev Mobile Intellectual Property
Schedule 6.4(a)Warehoused Inventory
Schedule 6.4(b)Inventory Terms of Movement
Schedule 6.7Specified Vendors
Schedule 6.15Transition Services
INVENTORY PURCHASE AGREEMENT
This INVENTORY PURCHASE AGREEMENT (this “Agreement”), dated as of October 28, 2020, is by and among Voice Comm, LLC, a Delaware limited liability company (“Buyer”), TESSCO Technologies Incorporated, a Delaware corporation (“Parent”), TESSCO INCORPORATED, a Delaware corporation (“Tessco”), and TESSCO COMMUNICATIONS INCORPORATED, a Delaware corporation (“Tessco Communications” and together with Parent and Tessco, “Sellers” or individually, a “Seller”). Buyer and Sellers are referred to together as the “Parties.” Certain capitalized terms used herein shall have the meaning given to such terms in Section 9.12 below.
A.Parent and its subsidiaries, including, without limitation, Tessco and Tessco Communications (collectively, the “Seller Entities”), collectively are a value-added technology distributor, manufacturer, and solutions provider serving commercial and retail customers in the wireless infrastructure and mobile device accessories markets as described in greater detail in Parent’s filings with the United States Securities and Exchange Commission (the “SEC”) pursuant to the Securities Exchange Act of 1934, as amended, and has securities listed for trading on the Nasdaq Global Market.
B.Prior to the consummation of the transactions contemplated under this Agreement, one area of business which the Seller Entities were engaged was that of manufacturing, marketing, selling and/or distributing mobile device accessories to retail customers (the “Retail Business”).
C.Sellers wish to sell and assign to Buyer, and Buyer wishes to purchase and assume from Sellers, the Purchased Assets (as defined below) and the Assumed Liabilities (as defined below), all on the terms and conditions hereinafter set forth.
D.All of the Seller Entities’ assets and businesses, other than the Purchased Assets or Assumed Liabilities (collectively, the “Retained Businesses”), shall not be included in the transactions contemplated herein.
NOW, THEREFORE, in consideration of the mutual covenants of the Parties as hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Parties hereby agree as follows:
PURCHASE AND SALE OF PURCHASED ASSETS
CONSIDERATION AND MANNER OF PAYMENT
On or before the Closing Date, the Parties shall jointly prepare a certificate certifying the Estimated Inventory Value as of the Closing. The form of such certificate is set forth on Schedule 2.4(a) and shall be used to determine the cash payment to be delivered on the Closing Date pursuant to Section 2.1(b)(iii). In all cases, the Estimated Inventory Value will be determined using the “buckets” in the Valuation Model (as defined below). For the avoidance of doubt, the Tessco Labeled Inventory shall not be included in such certificate or included in the Estimated Inventory Value.
SELLERS’ REPRESENTATIONS AND WARRANTIES
Except as set forth in the applicable section or subsection of the Disclosure Schedules (or any other referenced section of subsection of the Disclosure Schedules if it is readily apparent on the face of such disclosure that the disclosure applies to such other referenced section or subsection), Sellers hereby jointly and severally represent and warrant to Buyer as follows:
proceeding, hearing or investigation against or involving the Ventev Products under any Environmental and Safety Requirement based on any such fact, event or circumstance, including liability for cleanup costs, personal injury or property damage.
Authorities relating to COVID-19 that are applicable to the Retail Business and the Purchased Assets.
BUYER’S REPRESENTATIONS AND WARRANTIES
Buyer hereby represents and warrants to Sellers as follows:
the Purchase Price (based on projected volume of Inventory at Closing) and consummate the transactions contemplated by this Agreement and the Transaction Documents.
All documents delivered to Buyer shall be in form and substance reasonably satisfactory to Buyer.
All documents delivered to Sellers shall be in form and substance reasonably satisfactory to Sellers.
Ventev Products (collectively, or as applicable to a specific manufacturer where the context suggests, the “Prepayment Amount”). Buyer agrees that it will use its reasonable efforts to continue manufacturing Ventev Products following the Closing with each of the manufacturers with whom Sellers have made prepayments so long as the applicable manufacturer is competitive with other manufacturers in terms of price, quality and timing; provided that Buyer is not obligated to continue so manufacturing if Buyer determines that such requirements have not been met. If Buyer selects any such manufacturer with whom Sellers have made prepayments, Buyer and Sellers shall instruct the applicable manufacturer to apply any then remaining portion of the Prepayment Amount to each of Buyer’s orders, as and when purchase orders are placed with the manufacturer (or will otherwise cooperate in order placement and interface with the manufacturer including, if requested by Sellers, Sellers making purchases as directed and on behalf of Buyer in order to allow for the application of the applicable Prepayment Amount). In either such event, Buyer will reimburse Sellers for the applicable portion of the Prepayment Amount for each such prepaid Apple connector so used, which reimbursement shall be paid within thirty (30) days of Buyer receiving such Ventev Products. For the avoidance of doubt, the Prepayment Amount shall continue to be held in Sellers’ name and for Sellers’ account(s) with each such manufacturer and shall be considered an Excluded Asset, unless and until other arrangements acceptable to Buyer and Sellers are made, subject only to Buyer’s first right for a period of [--] after the Closing to apply the applicable Prepayment Amount against Buyer purchases from the applicable manufacturer and reimburse Sellers therefor. Notwithstanding the foregoing, Sellers will be permitted to sell or otherwise dispose of any of the Apple connectors, or to otherwise monetize the remaining Prepayment Amount, in any case for its sole benefit; provided that before so doing Sellers shall notify Buyer of the price and other relevant terms of the proposed transaction whereupon Buyer will have a right of first refusal for [--] to purchase such Apple connectors (or the rights thereto) on the same price and terms. If Buyer does not elect to exercise such right of first refusal, Sellers may sell such connectors to the third party purchaser or to dispose or monetize the connectors or Prepayment Amount on terms no less favorable to Sellers’ counterparty as those described in the notice.
immediately be tendered by written notice to Sellers for payment or defense as the case may be.
or otherwise enter into, any Acquisition Proposal. Sellers hereby confirm that they have discontinued, and have previously directed their respective Affiliates and representatives to discontinue, any solicitation efforts or negotiations with respect to or in furtherance of any Acquisition Proposal. Sellers shall promptly (and in any event within twenty-four (24) hours after receipt thereof by Sellers, any of their respective Affiliates or representatives) advise Buyer of the receipt of any Acquisition Proposal.
in the event the Indemnifying Party and the Indemnified Party cannot agree upon such counsel within ten (10) days after the Defense Notice is provided, then the Indemnifying Party shall propose an alternate Defense Counsel, which shall be subject again to the Indemnified Party’s approval, which approval again shall not be unreasonably withheld, conditioned or delayed. If the Parties still fail to agree on Defense Counsel, then, at such time, they shall mutually agree in good faith on a procedure to determine the Defense Counsel. Notwithstanding the foregoing, however, the Parties agree that Ballard Spahr LLP (with respect to Sellers) and Katten Muchin Rosenman LLP (with respect to Buyer) shall be deemed to be pre-approved as Defense Counsel upon request by either Party.
TESSCO Technologies Incorporated
11126 McCormick Road
Hunt Valley, MD
Attention: Aric Spitulnik
with a copy (which shall not constitute notice) to:
Ballard Spahr LLP
300 E Lombard Street
Baltimore, MD 21202
Attention: Douglas Fox and Michael Kuhn
Email: ***@*** and ***@***
Voice Comm LLC
80 Twinbridge Drive
Pennsauken, NJ 08110
Attention: Derek Weiss and Glen Roland
Email: ***@*** and ***@***
with a copy (which shall not constitute notice) to:
126 East 56th Street
New York, NY 10022
Attention: Daniel Goldberg
Katten Muchin Rosenman LLP
575 Madison Avenue
New York, NY 10022
Attention: Evan Borenstein
Date of service of such notice shall be (i) the date such notice is personally delivered, (ii) the next succeeding Business Day after date of delivery to the overnight courier if sent by overnight courier for next Business Day service or (iii) on the date of transmission if sent by electronic mail and upon confirmation of transmission or receipt generated by the sender’s computer showing that such communication was sent to the appropriate electronic mail address on a specified date. Any Party may change the address for notice by notifying the other Party of such change in accordance with this Section 9.1.
issuance, and shall consider any comments received by the non-disclosing Party in good faith in advance of making any such disclosure or public statement.
“Acquisition Proposal” means a bona fide offer or proposal to acquire, directly or indirectly, the Retail Business or all or any substantial portion of the Purchased Assets, in each case, in a single transaction or series of related transactions (whether such acquisition is structured as a sale of stock, sale of assets, merger, recapitalization or otherwise, other than the transactions provided for in this Agreement).
“Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person. For purposes of the immediately preceding sentence, the term “controls” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means (a) the current ownership of, or contractual right to vote, at least a majority of the outstanding voting securities of a Person or (b) the possession, directly or indirectly, of any other power to direct or cause the direction of the management and policies of such a Person, by contract or otherwise.
“Affiliated Group” means an affiliated group as defined in Section 1504 of the Code (or analogous combined, consolidated or unitary group defined under state, local or foreign income Tax Law).
“Board Change” means the occurrence of a change in the current Board of Directors of Parent such that the current members of the Board of Directors other than Robert B. Barnhill, Jr. no longer comprise a majority of the members of the Board.
“Business Day” means any day that is not a Saturday, a Sunday or a day on which the banks in New York, New York are closed.
“Calendar Quarter” means March 31, June 30, September 30, or December 31, as applicable.
“Cash Consideration” means the sum of (a) $5,000,000, (b) the Transition Ventev Inventory Amount and the amounts paid by Buyer to Sellers for Transition Ventev Inventory delivered to Buyer after the Closing Date, and (c) the Final Inventory Value.
“Code” means the Internal Revenue Code of 1986, as amended.
“Contract Year” means the calendar year, except as otherwise set forth in Section 6.3(b).
“COVID-19” means the infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) and commonly known as “COVID-19.”
“COVID-19 Measure” means any action taken by Sellers, or that Sellers refrain from taking, on the basis of any requirement of any quarantine, “shelter in place”, “stay at home”, workforce reduction, social distancing, shut down, closure, sequester, or any other Law, Governmental Order, directive, guidelines, or written recommendations (which shall include recommendations included on websites, social media or other electronic means) by any Governmental Authority in connection with or in response to the COVID-19 Pandemic.
“COVID-19 Pandemic” means the pandemic caused by COVID-19 which, as of the date hereof, has spread throughout the world and has resulted in Governmental Authorities implementing numerous measures to try to contain COVID-19, including travel bans and restrictions, quarantines, shelter-in-place orders, stay-at-home orders and shutdowns.
“Estimated Inventory Value” means an amount equal to the [--] of the Inventory (other than the Transition Ventev Inventory) set forth on the Valuation Model, to be calculated in accordance with the Valuation Model.
“Excluded Inventory” means (a) all inventory of the Retail Business supplied by a Specified Vendor that has not established a commercial relationship with Buyer prior to the Closing Date (including any additions to such inventory due to customer returns after the Closing or acquired by Sellers subsequent to the Closing in the ordinary course pursuant to purchase orders submitted prior to Closing) and (b) all Excluded European Inventory.
“GAAP” means United States generally accepted accounting principles, consistently applied.
“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.
“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
“Hazardous Wastes” means: (a) hazardous materials, hazardous substances, extremely hazardous substances or hazardous wastes, as those terms are defined by the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq., and any other Environmental and Safety Requirements; (b) petroleum, including crude oil or any fraction thereof which is liquid at standard conditions of temperature and pressure (60 degrees Fahrenheit and 14.7 pounds per square inch absolute); (c) any radioactive material, including any source, special nuclear, or by-product material as defined in 42 U.S.C. §2011 et seq.; (d) asbestos in any form or condition; and (e) any other material, substance or waste to which liability or standards of conduct may be imposed under any Environmental and Safety Requirements.
“Inventory” means all inventory of the Retail Business, wherever located (including all Transition Ventev Inventory), other than Excluded Inventory and Excluded Ventev Inventory, in each case as listed on Schedule 1.2(a), as updated as of the Closing.
“Inventory Holdback Amount” means an amount equal to [--] of the Estimated Inventory Value, calculated in accordance with the Valuation Model as of the Closing.
“Law” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.
“Liabilities” means any indebtedness, liabilities or obligations of any nature whatsoever, whether accrued or unaccrued, absolute or contingent, direct or indirect, asserted or unasserted, fixed or unfixed, known or unknown, choate or inchoate, perfected or unperfected, liquidated or unliquidated, secured or unsecured, or otherwise, and whether due or to become due.
“Liens” means any claims, liens, charges, restrictions, options, preemptive rights, mortgages, hypothecations, assessments, pledges, encumbrances or security interests of any kind or nature whatsoever.
“Losses” means any and all losses, actual damages, Liabilities, Taxes, deficiencies, demands, claims, suits, actions, causes of action, assessments, interest, fines, penalties, costs or expenses, including reasonable attorneys’ fees and expenses (but excluding, in each case, punitive damages unless such damages are paid to a third party).
“Material Adverse Effect” means (a) any state of facts, events, changes, effects, results, occurrences, circumstances or developments that, individually or in the aggregate with all other facts, events, changes, effects, results, occurrences, circumstances or developments, would, or would reasonably be expected to, prevent or materially impair or delay Sellers’ ability to consummate the transactions contemplated by this Agreement in a timely manner, and (b) any state of facts, events, changes, effects, results, occurrences, circumstances or developments that, individually or in the aggregate with all other facts, events, changes, effects, results, occurrences, circumstances or developments, has had or would reasonably be expected to have, a material adverse effect on the financial condition, assets, liabilities, business or operating results of the
Retail Business taken as a whole; provided that none of the following either alone or taken together with other facts, events, changes, effects, results, occurrences, circumstances or developments, will constitute, or be taken into account in determining whether there has been a Material Adverse Effect: (i) changes, events, occurrences or developments in, or effects or results arising from or relating to, general business or economic conditions affecting the industry in which the Retail Business operates, including cyclical fluctuations and trends; (ii) changes, events, occurrences or developments in, or effects or results arising from or relating to, national or international political or social conditions, including the engagement by the United States in hostilities or the escalation thereof, whether or not pursuant to the declaration of a national emergency or war, or the occurrence or the escalation of any military, cyber or terrorist attack upon the United States, or any of its territories, possessions, or diplomatic or consular offices or upon any military installation, asset, equipment or personnel of the United States; (iii) changes, events, occurrences or developments in, or effects or results arising from or relating to, financial banking, or securities markets; (iv) changes in, or effects arising from or relating to, any earthquake, hurricane, tsunami, tornado, flood, mudslide or other natural disaster, pandemic (including the COVID-19 Pandemic), weather condition, explosion or fire or other force majeure event or act of God; (v) changes, events, developments, occurrences, results or effects arising from or relating to the announcement, pendency or performance of this Agreement or the transactions contemplated hereby; or (vi) any failure, in and of itself, to achieve any budgets, projections, forecasts, estimates, plans, predictions, performance metrics or operating statistics or the inputs into such items (but, for the avoidance of doubt, not the underlying causes of any such failure to the extent such underlying cause is not otherwise excluded from the definition of Material Adverse Effect), except in the case of the foregoing clauses (i), (ii) and (iii), to the extent such facts, events, changes, effects, results, occurrences, circumstances or developments have a disproportionate impact on the Retail Business, as compared to other participants engaged in the industries in which the Retail Business operates.
“Net Sales Proceeds” means (a) the gross sales price of Inventory; and (b) the value of any non-cash consideration provided by a vendor in connection with opportunistic, non-ordinary course or one-off arrangements with such vendor (excluding standard return right or stock balancing) pursuant to which Buyer swaps or exchanges Inventory purchased from Sellers for newer inventory of such vendor (with the value of the corresponding newer inventory constituting the proceeds subject to the post-Closing purchase price adjustment set forth in this Agreement), in each case less out-of-pocket expenses associated with the sale or other transaction (e.g., freight costs, credit cards fees, packaging, and similar expenses) excluding selling, general and administrative expenses. For purposes of clause (a) above, Buyer shall not discount certain items of Inventory or allocate the value received upon the sale of multiple items of Inventory in each case in bad faith for the purpose of avoiding payment on the post-Closing purchase price adjustment set forth in this Agreement. Notwithstanding the foregoing, for purposes of Section 2.5, any Royalty paid pursuant to Section 6.3(b) shall constitute an out-of-pocket expense associated with the sale and be deducted from the calculation of Net Sales Proceeds.
“Organizational Documents” means (a) in the case of any Person organized as a corporation, the certificate or articles of incorporation of such corporation and the bylaws of such corporation, (b) in the case of any Person organized as a limited liability company, the certificate of formation or organization and the limited liability company agreement or operating agreement, (c) in the case of any Person organized as a limited partnership, the certificate of limited
partnership and partnership agreement of such limited partnership, (d) in the case of any other Person, all constitutive or organizational documents of such Person which address matters relating to the business and affairs of such Person similar to the matters addressed by the documents referred to in clauses (a) through (c) above in the case of Persons organized as corporations, limited liability companies or limited partnerships and (e) any amendment to any of the foregoing.
“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated association, limited liability company, corporation, entity or Governmental Authority.
“Seller Taxes” means, without duplication, (a) any and all Taxes imposed on Sellers for any taxable period, (b) any and all Taxes imposed on or with respect to the Purchased Assets for any taxable period (or portion of any taxable period) ending on or before the Closing Date, (c) any and all Taxes imposed in connection with the transactions contemplated by this Agreement (including any Transfer Taxes), or (d) any and all amounts payable (including Taxes) by Buyer with respect to the Purchased Assets as a result of transferee, successor or similar liability (including bulk transfer or similar Laws) by operation of Law (including pursuant to Treasury Regulations Section 1.1502-6 (or any predecessor or successor thereof or any analogous or similar Law)) or otherwise, which relate to an event or transaction occurring on or before the Closing Date.
“SKU” means the manufacturer part number applicable to a particular product or good.
“Tax” means any federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax, of any kind whatsoever, including any interest, penalties or additions to tax or additional amounts in respect of the foregoing; the foregoing shall include any transferee or secondary liability for a tax and any liability assumed by agreement or arising as a result of being (or ceasing to be) a member of any Affiliated Group (or being included (or required to be included) in any Tax Return relating thereto).
“Tax Return” means any return, declaration, report, claim for refund, information return, notice, form or other documents filed or required to be filed, or maintained or required to be maintained, in connection with the determination, assessment or collection of any Tax of any Person or the administration of any Laws relating to any Tax, including any schedule, statements or attachment thereto or amendment thereof.
“Transaction Documents” means all agreements and instruments contemplated by and being delivered pursuant to or in connection with this Agreement.
“Transition Ventev Inventory” means Ventev-branded, mobile device accessory inventory and any Apple connectors which Buyer directed Sellers to purchase or consented to Sellers ordering on or after [--], through the Closing Date; provided, however that any such
inventory which has been ordered but is in production or in transit as of the Closing shall only constitute Transition Ventev Inventory when it is received by Buyer.
“Transition Ventev Inventory Amount” means an amount equal to [--] of Sellers’ all-in cost with respect to Transition Ventev Inventory held by Sellers as of the Closing (which, for the avoidance of doubt, shall not include any Transition Ventev Inventory [--]), other than Excluded Ventev Inventory.
“Treasury Regulations” means the United States Treasury regulations issued pursuant to the Code.
disclosure that the disclosure applies to such other referenced section or subsection. Inclusion of any matter in the Disclosure Schedule shall expressly not be deemed to constitute an admission by a Party or otherwise imply that any such matter is material, has a Material Adverse Effect or creates a measure for, or further defines the meaning of, materiality or Material Adverse Effect and their correlative terms for the purposes of this Agreement. Any capitalized terms used but not defined in any section of the Disclosure Schedule shall have the same meaning assigned to such term herein.
[Signature page follows.]
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.
TESSCO TECHNOLOGIES INCORPORATED
By:/s/ Aric Spitulnik
By:/s/ Aric Spitulnik
TESSCO COMMUNICATIONS INCORPORATED
By:/s/ Aric Spitulnik
VOICE COMM, LLC
Its:Chief Executive Officer