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INDEX TO EXHIBITS
DESCRIPTION OF DOCUMENTS
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2.1
EXHIBIT SEQUENTIALLY
NUMBER NUMBERED PAGE
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Asset Purchase Agreement 4
Exhibit A 33
Exhibit B 40
Exhibit C 47
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated effective as of
July 2, 2000, is among EPI TECHNOLOGIES, INC., a Texas corporation ("Seller"),
▇▇▇▇▇ ▇. ▇▇▇▇▇, its controlling shareholder ("Shareholder"), and MICRO-ASI,
INC., a Texas corporation ("Buyer").
RECITALS. Seller is primarily engaged in the business of testing
semiconductors and microcircuits, which is an integral part of the semiconductor
manufacturing process (the "Business"). Seller desires to sell to Buyer, and
▇▇▇▇▇ desires to buy from Seller, the Business and, in connection therewith,
substantially all of Seller's assets, in accordance with the terms of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing, the covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby covenant and agree as follows:
ARTICLE I: PURCHASE AND SALE
Section 1.01. Assets. At the Closing (as hereafter defined), except as
set forth in Section 1.02, and subject to the conditions set forth in this
Agreement, Seller shall sell, transfer, assign, convey, and deliver to Buyer,
and Buyer shall purchase, accept, and acquire from Seller, all of the assets,
properties, goodwill, and rights of Seller, of every kind and character,
wherever located, whether real or personal, tangible or intangible, owned,
licensed, or leased, free and clear of all liens, liabilities, claims,
encumbrances, and leases (collectively, the "Assets"), including, but not
limited to, the following:
(a) Cash in the amount of $10,000 to be paid by Seller to Buyer at
Closing;
(b) All of Seller's accounts receivable from customers and others (the
"Accounts Receivable"), all of which, as of the close of business on July 2,
2000, are listed on Schedule 1.01(b) hereto;
(c) All machinery, equipment, computer equipment, furniture, fixtures,
vehicles, tools, spare parts, supplies, materials, and other similar fixed
assets and tangible personal property owned by Seller and used or useable in the
Business, and all rights of Seller under leases of all such property (as
applicable, the "Leased Assets"), all of which are listed on Schedule 1.01(c),
hereto (the "Personal Property");
(d) Seller's leasehold interest in and to the real property currently
occupied by Seller at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the
"Leased Real Property") pursuant to that certain lease (the "Real Property
Lease") described on Schedule 1.01(d) hereto;
(e) All right, title, and interest of Seller in the inventory
(including, without limitation, raw materials, work in process, customer work in
process, samples, finished goods,
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and products) of Seller wherever located or in transit (the "Inventories"), all
of which are listed on Schedule 1.01(e) hereto;
(f) All right, title and interest of Seller under the following
agreements related to the Business: (i) agreements for the sale of goods,
materials, supplies, machinery, or capital assets, (ii) agreements to provide
services, (iii) agreements with any distributor, dealer, sales agent, or
representative, (iv) leases of Leased Assets Buyer has agreed to assume (the
"Assumed Leases"), and (v) all other agreements related to the Business (the
"Assigned Contracts"), all of which are listed in Schedule 1.01(f) hereto;
(g) Originals (or, where appropriate, copies) of all operating data,
files, and records of Seller relating to the Business, wherever located,
including books, records, blueprints, specifications, customer lists, supplier
lists, credit information, and correspondence;
(h) All computer software and related documentation relating to or
used in connection with the Business;
(i) All right, title, and interest of Seller to (i) all the
patents, patent applications, trademarks, trademark applications, service marks,
service mark applications, copyrights, copyright applications, trade names
(inclusive of the name "EPI Technologies, Inc."), corporate names, company
names, business names, fictitious business names, trade styles, logos, other
business identities, trade rights, whether or not registered, domain names,
websites, inventions, discoveries, improvements, designs, patterns, processes,
formulae, software, trade secrets, proprietary rights and data, ideas, and
know-how, whether patentable or not, and the assignable licenses and permits, in
each case used in the Business; (ii) all reissues, continuations, divisions,
renewals, extensions, modifications, substitutions, continuations-in-part of any
of the foregoing; (iii) all income, royalties, profits, damages, awards, and
payments now or hereafter relating to or payable under any of the foregoing
including damages or payments for past or future infringements of any of the
foregoing; (iv) the right to sue for past, present, or future infringements of
any of the foregoing; (v) all rights and benefits relating to any of the
foregoing throughout the world; and (vi) all goodwill associated with and/or
symbolized by any of the foregoing; in each case, whether now owned or hereafter
required by Seller (the "Intellectual Property"), including, without limitation,
those listed in Schedule 1.01(i) hereto;
(j) To the extent assignable, all permits, licenses, approvals,
registrations (including, by way of illustration and not limitation, EPA
registrations) and authorizations issued to Seller by federal, state, or local
governments or governmental authorities related to compliance by the Business
with applicable laws and regulations, all of which, are reflected on Schedule
1.01(j) hereto;
(k) All of the security and other deposits, advance rents, and any
other prepaid items and investments made prior to the Closing Date for the
benefit or to the account of Seller as tenant pursuant to the Real Property
Lease or any personal property leases, all of which are listed on Schedule
1.01(k) hereto;
(l) All securities or other interests or investments of Seller in any
other business or entity other than pursuant to the Security Agreement (as
defined below);
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(m) All goodwill associated in any manner with the Business, including
but not limited to, all trademarks, service marks, and trade names used in the
Business; and
(n) All other properties, rights, and other assets of Seller.
Section 1.02. Retained Assets. Seller shall retain the following:
(a) all cash (including ▇▇▇▇▇ cash) in excess of $10,000;
(b) the Notes (as hereafter defined); and
(c) the security interests granted pursuant to the Security Agreement.
SECTION 1.03. NO ASSUMPTION OF LIABILITIES. EXCEPT FOR (a) THE DISCLOSED
TRADE PAYABLES SET FORTH ON SCHEDULE 1.03 (THE "TRADE PAYABLES"), (b) ORDINARY
EXPENSES INCURRED IN OPERATING THE DAY TO DAY BUSINESS OF SELLER FROM AND AFTER
THE CLOSING DATE (AS HEREAFTER DEFINED), INCLUDING BUT NOT LIMITED TO, SALARIES,
RENT, INSURANCE, AND PAYROLL TAXES, ALL OF WHICH ARE SET FORTH ON SCHEDULE 1.03
HERETO (WHICH EXPENSES, NET OF COLLECTIONS BY SELLER FROM AND AFTER THE CLOSING
DATE AS REFLECTED ON SCHEDULE 1.03 HERETO, SHALL BE REIMBURSED TO SELLER BY
BUYER AT CLOSING), AND (c) SELLER'S OBLIGATIONS ATTRIBUTABLE TO PERIODS OR
OCCURRENCES FROM AND AFTER (BUT NOT PRIOR TO) THE CLOSING UNDER THE ASSIGNED
CONTRACTS, BUYER IS NOT ASSUMING ANY LIABILITIES, OBLIGATIONS, OR DUTIES OF
SELLER. THE TERM "TRADE PAYABLES" DOES NOT INCLUDE THE ACCRUED EMPLOYEE VACATION
OBLIGATIONS BEING ASSUMED BY BUYER PURSUANT TO SECTION 2.05. THE TRADE PAYABLES
WILL NOT EXCEED $42,113 AT CLOSING. BUYER ACKNOWLEDGES THAT SELLER HAS REFLECTED
ON ITS FINANCIAL STATEMENTS, LEASE PAYMENT ACCRUALS DUE TO A STRAIGHT-LINE
AMORTIZATION OF THE LEASE PAYMENTS OVER THE TERM OF THE REAL PROPERTY LEASE.
Section 1.04. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Gardere & ▇▇▇▇▇,
LLP, at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, on or before July 21,
2000, or at such other time and/or place as shall be mutually agreed to in
writing by the parties hereto, but to be effective as of July 2, 2000 (the
"Closing Date").
Section 1.05. Purchase Price.
(a) The purchase price (the "Purchase Price") for the Assets shall be
$4,863,114, payable as follows:
(i) cash in the amount of $300,000 payable at Closing;
(ii) delivery of a non-negotiable secured subordinated promissory
note (the "First Note") from Buyer to Seller in the original
principal amount of $1,613,114, accruing interest at a rate
of nine and one-half percent (9.5%) per annum, in the form
attached hereto as Exhibit A; and
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(iii) delivery of a non-negotiable secured subordinated
promissory note (the "Second Note") from Buyer to Seller in
the original principal amount of $2,950,000, accruing
interest at a rate of six percent (6%) per annum, in the
form attached hereto as Exhibit B. The First Note and the
Second Note are referred to collectively as the "Notes".
The Notes will be prepayable without premium or penalty and will accelerate
and become due and payable upon receipt of proceeds by Buyer from an initial
public offering of the shares of stock of Buyer. The Notes will be secured
pursuant to a Security Agreement to be entered into by the parties on or prior
to Closing, in substantially the form attached hereto as Exhibit C (the
"Security Agreement").
Seller shall pay and be responsible for any and all transfer, sales, use,
or other taxes imposed by reason of the transfer of the Assets contemplated
hereby.
(b) At the Closing, Buyer will assume Seller's obligations for accrued
employee vacations in the amount of $36,375 (which amount is already reflected
in the Purchase Price) other than the accrued vacation obligations for ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇.
Section 1.06. Allocation of Purchase Price. The Purchase Price will be
allocated among the Assets and the non-competition agreements described in
Section 8.05 as provided in Schedule 1.06 hereto, or as Buyer and Seller may
otherwise agree in writing. Buyer and Seller covenant and agree that they shall
each report the allocation of the Purchase Price in a manner entirely consistent
with such allocation in all tax returns and forms (including, without
limitation, Form 8594 filed with their respective federal income tax returns for
the taxable year in which the Closing Date occurs) and in the course of any tax
audit, tax review, or tax litigation relating thereto.
Section 1.07. Instruments of Transfer; Further Assurances. In order to
consummate the transactions contemplated hereby, Seller shall deliver to Buyer
(a) a Bill of Sale, in form and substance satisfactory to Buyer, conveying all
of the Assets to Buyer, free and clear of all liens, liabilities, claims,
encumbrances, and leases, (b) an Assignment Agreement, in form and substance
satisfactory to Buyer, conveying to Buyer all of Seller's rights to the Assigned
Contracts, (c) a sublease (the "Sublease") in form and substance satisfactory to
Buyer and Seller, providing for the sublease of the Leased Real Property to
Buyer on the same terms and conditions as the Real Property Lease, (d) the
consents of any person or entity necessary, in Buyer's determination, to the
transfer of the Assets (including the Assigned Contracts) to Buyer and sublease
the Leased Real Property to Buyer, (e) written consents, or minutes of the
meeting, of the shareholders and the Board of Directors of Seller, or other
evidence of all necessary approvals on the part of Seller, and (e) such other
documents as Buyer may reasonably require. At the Closing, and at all times
thereafter Seller shall, as requested by ▇▇▇▇▇, execute and deliver to Buyer
such other documents as shall be reasonably requested by Buyer to vest in Buyer
good and indefeasible title to the Assets, free and clear of all liens,
liabilities, claims, encumbrances, and leases, to transfer to Buyer Seller's
rights to the Assigned Contracts and the Leased Real
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Property (pursuant to the Sublease), and to comply with the purposes and intent
of this Agreement.
ARTICLE II: REPRESENTATIONS AND WARRANTIES OF
SELLER AND SHAREHOLDER
Seller and Shareholder, jointly and severally, represent and warrant to
Buyer that the following are true and correct as of the date hereof and will be
true and correct through the Closing Date, as if made on that date:
Section 2.01. Organization and Good Standing. Seller is a corporation duly
organized, validly existing, and in good standing under Texas law, and is duly
authorized, qualified, and licensed to do business as a foreign corporation, and
is in good standing, in all jurisdictions in which it owns or leases Assets, has
employees, or is otherwise required to be so licensed or qualified. Schedule
2.01 hereto contains a complete list of all jurisdictions in which Seller is
qualified and licensed to do business, owns or leases Assets, and/or has
employees. Seller has full power and authority to own and use its properties and
to transact the business in which it is engaged and has full power and authority
to execute, deliver, and perform this Agreement and the other agreements, and to
consummate the transactions, contemplated hereby.
Section 2.02. Capitalization. The classes of authorized capital stock of
Seller consist of (a) 50,000,000 shares of common stock, $0.01 par value per
share, of which 2,899,908 shares are issued and outstanding; (b) 3,994,108
shares of Series A Preferred Stock, no par value per share, of which 3,332,408
shares are issued and outstanding; and (c) 14,604 Shares of Series B Preferred
Stock, no par value per share, all of which are issued and outstanding. No
person, corporation, or other entity has the right to acquire any common stock
or other interest in Seller.
Section 2.03. Subsidiaries. Seller does not own, directly or indirectly,
any interest in any corporation or other entity.
Section 2.04. Authorization and Validity. The execution, delivery, and
performance of this Agreement and the other agreements contemplated hereby by
▇▇▇▇▇▇, and the consummation of the transactions contemplated hereby and
thereby, have been approved and duly authorized by the shareholders holding at
least two-thirds of the voting stock of Seller and by the Board of Directors of
Seller. This Agreement and each other agreement contemplated hereby have been or
will be prior to Closing duly executed and delivered by Seller and/or
Shareholder, as appropriate, and constitute or will constitute as of the Closing
legal, valid, and binding obligations of Seller and Shareholder, enforceable
against Seller and Shareholder in accordance with their respective terms, except
as may be limited by applicable bankruptcy, insolvency, or similar laws
affecting creditors' rights generally or the availability of equitable remedies.
Section 2.05. Financial Statements. Attached hereto as Schedule 2.05 are
true, correct and complete copies of Seller's audited balance sheet and related
audited statements of income, retained earnings, and cash flow for the 1995
fiscal year and unaudited financial statements prepared by Seller (which include
only the balance sheet and statements of income) for the 1996, 1997, 1998, and
1999 fiscal years, as well as Seller's unaudited balance sheet and related
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unaudited statement of income, retained earnings, and cash flow for the three
month period ended April 2, 2000 (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles in the United States of America as set forth in
pronouncements of the Financial Accounting Standards Board and the American
Institute of Certified Public Accountants, as such principles are currently in
effect ("GAAP"), in conformity with past practice consistently applied, present
fairly the financial condition and results of operations of Seller at the
respective dates and for the respective periods indicated, and do not omit to
state or reflect any material fact concerning Seller required to be stated or
reflected therein or necessary to make the statements therein not misleading,
except that the unaudited Financial Statements do not contain any footnotes or
other statements required by GAAP and any interim Financial Statements do not
reflect year-end adjustments.
Section 2.06. No Adverse Changes or Events. Since December 31, 1999 and
prior to Closing, the Business has been operated in the ordinary course of
business consistent with past practice, and except as set forth on Schedule 2.06
hereto, there has not been:
(a) any damage, destruction, or loss, whether or not covered by
insurance, that has had, or is reasonably likely to have, a material adverse
effect on the Business, the Assets, or Seller;
(b) any increase in the compensation or rate of compensation or
commissions or bonuses payable or to become payable by Seller to any officers,
employees, or agents of Seller, or any payment or accrual of, or commitment with
respect to, any bonus plan or any change in any insurance, pension, or other
benefit plan, payment or arrangement made to, for, or with any of such officers,
employees, or agents, other than in the ordinary course of business;
(c) any mortgaging, pledging, or subjecting to any lien, lease,
security interest, or other charge or encumbrance of any of the Assets;
(d) any action taken by Seller which would violate any of the terms of
Section 4.01 hereof had it been in effect during such period;
(e) any labor dispute, product liability claim, environmental claim,
or, to the knowledge of Seller or Shareholder, any proposed law or regulation,
or any event or condition that, individually or in the aggregate, has had, or is
reasonably likely to have, a material adverse effect on the Business, the
Assets, or Seller; or
(f) any single event, occurrence, or fact, or any series of events,
occurrences, or facts, of any character whatsoever pertaining to the Business,
the Assets, or Seller that has had, or is reasonably likely to have,
individually or in the aggregate, a material adverse effect on the Business, the
Assets, or Seller.
Section 2.07. No Violation. Neither the execution and performance of this
Agreement or the agreements contemplated hereby, nor the consummation of the
transactions contemplated hereby or thereby, will (a) conflict with, or result
in a violation or breach of, the Articles of Incorporation or Bylaws of Seller
or any agreement, indenture, or other instrument under which Seller or
Shareholder is bound or to which any of the Assets are subject, or result in the
creation
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or imposition of any lien, claim, or encumbrance upon any Asset, or (b) violate
or conflict with any applicable law or regulation applicable to Seller or any
judgment or order of any court or any public, governmental, or regulatory
agency. Seller has complied with all applicable laws, regulations, and licensing
requirements and has filed with the proper authorities all necessary statements
and reports.
Section 2.08. Accounts Receivable and Trade Payables. Schedule 1.01(b) sets
forth all of the Accounts Receivable from sales made as of July 2, 2000, which
Schedule is complete and accurate. All such Accounts Receivable will be
collected in the usual and ordinary course of business within seventy-five (75)
days of the respective invoice date. Schedule 1.03 sets forth all of the Trade
Payables of Seller as of July 2, 2000. On the Closing Date, the Trade Payables
will not exceed $42,113.
Section 2.09. Inventories. The Inventories are of a quality and quantity
usable or saleable in the ordinary course of business and are not, other than
ordinary wear and tear in the ordinary course of business, obsolete, defective,
or damaged. Except as set forth on Schedule 2.09 hereto, Seller does not hold
any materials or supplies on consignment nor does Seller have title to any
materials in the possession of others.
Section 2.10. Assigned Contracts. The Assigned Contracts constitute all of
the agreements, contracts, commitments, and documents to which Seller is a party
or by which Seller or any Asset is bound. The Assigned Contracts to be assigned
to Buyer pursuant to the provisions of this Agreement are all valid and in full
force and effect and neither Seller nor, to the knowledge of the Seller or
Shareholder, any other party to any such Assigned Contract is in default with
respect to any term or condition thereof, nor has any event occurred which,
through the passage of time or the giving of notice, or both, would constitute a
default thereunder or would cause the acceleration of any obligation of Seller
or, to the knowledge of the Seller or Shareholder, any other party thereto. The
Assigned Contracts are and, on the Closing Date will be, valid and in full force
and effect and have not been previously, nor will they be, assigned or otherwise
transferred by Seller or, to the knowledge of the Seller or Shareholder, by any
other party thereto, other than pursuant to this Agreement. Each of the Assigned
Contracts will be duly and validly assigned to Buyer on the Closing Date and,
upon such assignment, ▇▇▇▇▇ will acquire all of Seller's right, title, and
interest in and to such Assigned Contract and will be substituted for Seller
under the terms of such Assigned Contract for periods from and after the Closing
Date. Except as set forth on Schedule 2.10, no consent is required for such
assignment. Seller has delivered to Buyer true, correct, and complete copies of
each Assigned Contract.
Section 2.11. Owned Property. Seller does not own any real property. Seller
has good and marketable title to all personal property included in the Assets
(including without limitation all intangible assets and all personal property
reflected on the Financial Statements or acquired after the date thereof, except
any subsequently sold in the ordinary course of business consistent with prior
periods), free and clear of all mortgages, options, liens, charges, security
interests, leases, covenants, conditions, agreements, claims, restrictions, and
other encumbrances of every kind except as shown in Schedule 2.11.
Notwithstanding any other provision in this Agreement, Seller makes no
representation or warranty with respect to the ownership of certain shrink-wrap
software on the personal computers of employees of Seller.
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Section 2.12. Leased Property. Seller is not the lessor of any real or
personal property. The only real property leased by ▇▇▇▇▇▇ is the Leased Real
Property. Set forth on Schedule 2.12(a) hereto is a description of each lease
under which Seller is the lessee of any personal property (all of such leases
being referred to herein as the "Personal Property Leases") and each Assumed
Lease is set forth on Schedule 2.12(b) hereto (the Real Property Lease and the
Personal Property Leases are sometimes collectively referred to herein as the
"Leases"). Seller has delivered to Buyer a true, correct, and complete copy of
each of the Leases. The property described in the Leases is presently used by
Seller as lessee under the terms of the Leases. All rentals due by Seller under
the Leases have been paid and there exist no defaults by Seller under the terms
of the Leases and no event has occurred which, upon the passage of time or the
giving of notice, or both, would result in any event of default by Seller or
prevent Buyer from exercising and obtaining the benefits of any rights or
options contained therein. Neither the Real Property Lease nor any of the
Assumed Leases has been modified or amended either in writing, orally, or by
course of practice. To the knowledge of Seller and Shareholder, Seller has all
right, title, and interest of the lessee under the terms of the Leases, free of
all liens, claims, and encumbrances, except as provided in such Leases, and all
the Leases are valid, binding and in full force and effect. Except as expressly
set forth on Schedule 2.12(c), to the knowledge of Seller and Shareholder, all
of the property, real or personal, covered by the Leases (including, but not
limited to, the roof, foundation, HVAC, plumbing, gas and electrical associated
with the Leased Real Property) is in good condition and state of repair and, all
maintenance of such property required by the Leases has been performed timely
and in a good and workmanlike manner. Except as set forth on Schedule 2.12(c),
no consent is necessary for the assignment by Seller to Buyer of the Assumed
Leases or the sublease of the Leased Real Property pursuant to the Sublease.
Except as set forth on Schedule 2.12(c), upon the Closing, Buyer will have all
right, title, and interest of the lessee under the terms of the Assumed Leases
and the Leased Real Property under the Sublease, free of all liens, claims, or
encumbrances.
Section 2.13. Taxes. Seller has duly and timely filed all income, excise,
corporate, franchise, property, sales, payroll, withholding, and other tax
returns and reports required to be filed by it as of the date hereof and has
paid all taxes (including penalties and interest) which have or may become due
for the tax periods covered by such returns and any assessments which have been
received by it or otherwise. All such tax returns or reports accurately reflect
the tax liabilities of Seller for the periods covered thereby. Seller is not
delinquent in the payment of any tax, assessment, or governmental charge, there
is no tax deficiency or delinquency asserted against Seller and there is no
unpaid assessment, proposal for additional taxes, deficiency, or delinquency in
the payment of any of the taxes of Seller that could be asserted by any taxing
authority. No Internal Revenue Service or other tax audit of Seller is pending
or, to the knowledge of Seller or Shareholder, threatened. To the knowledge of
Seller and Shareholder, Seller has not violated any federal, state, local, or
foreign tax laws. All monies required to be withheld by Seller from employees or
other payees or collected from customers or other payees for income taxes,
social security, Medicare, and unemployment insurance taxes and sales, use, and
excise taxes, have been collected or withheld and either paid to the respective
governmental agencies or set aside in accounts for such purpose in the manner
required by applicable law and are properly reflected in the Financial
Statements.
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Section 2.14. Trade Rights, Patents, Copyrights, etc.
(a) Except as set forth on Schedule 2.14, Seller has the right to use
the Intellectual Property without infringing or violating the rights of any
third parties. Upon consummation of the transactions contemplated by this
Agreement, all Intellectual Property will be transferred to Buyer and Buyer will
be entitled to the same use as Seller (to the exclusion of Seller) of all
Intellectual Property without the necessity of consent of any third party or
payment of any fee or charge to any third party and without material
modification of any Intellectual Property. No claim or demand has been asserted
or overtly threatened by any person to the ownership of or right to use any
Intellectual Property or asserting that Seller is infringing or misappropriating
any Intellectual Property or challenging or questioning the validity or
effectiveness of any such license, right, or agreement, and there is no valid
basis for any such claim. Each of the Intellectual Property is valid, binding,
and subsisting, has not been canceled, abandoned, or otherwise terminated and,
if applicable, has been duly issued or filed. None of the Intellectual Property
is subject to any outstanding order, ruling, decree, judgment, or stipulation by
or with any governmental entity or regulatory agency, or has been the subject of
litigation within the last five (5) years, whether or not resolved in favor of
Seller.
(b) To the knowledge of Seller and Shareholder, no other person,
corporation, or other entity, or any product, activity, or operation of any
other person, corporation, or other entity, infringes upon or involves, or has
resulted in the infringement of, any Intellectual Property.
(c) With respect to the Assets and the Intellectual Property, neither
Seller nor Shareholder has received any notice that any, and to the knowledge of
Seller and Shareholder no, (i) product (or component thereof or process for
making or using such product or component) used, sold, or manufactured, (ii)
activity, or (iii) operation of Seller infringes upon or involves, or has
resulted in the infringement of, any intellectual property of any other person,
corporation, or other entity; and no proceedings have been instituted, are
pending or, to the knowledge of Seller and Shareholder are, threatened which
challenge the rights of Seller with respect thereto, and there is no basis for
any such proceedings.
(d) All the patents underlying the Intellectual Property are valid and
enforceable. Seller has disclosed to Buyer all written material known to Seller
that relates to the validity of the patents and the allowability of the patent
applications underlying the Intellectual Property.
(e) Seller has taken all commercially reasonable measures necessary to
protect the Trade Secrets which have been used in the operation of the Business.
None of the Trade Secrets (as hereinafter defined) have been disclosed to any
third parties.
Section 2.15. Absence of Undisclosed Liabilities. As of the date hereof,
and as of the Closing Date, except as reflected on Schedule 2.15, Seller does
not have and will not have any indebtedness, liability, or loss of any nature,
whether accrued, absolute, contingent, or otherwise, whether due or to become
due, which is material to the Business, which will have a material adverse
effect on the Assets or the Business following the Closing Date, and not (a)
reflected on the Financial Statements or (b) otherwise expressly reflected in
this Agreement.
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Section 2.16. Necessary Property and Transfer of Assets. The Assets
(including the Leased Assets) are owned, or at the Closing will be owned, by
Seller free and clear of all liens, liabilities, claims, encumbrances, and
leases (except for the Assumed Leases). Except as set forth on Schedule 2.16,
the Assets constitute all of the property and property rights now used, and
traditionally used by Seller, consistent with prior practice, for the conduct of
the Business in the manner and to the extent presently conducted by Seller.
Except as expressly set forth on Schedule 2.16, no consent is necessary to, and
there exists no restriction on, the transfer of any of the Assets or the
assignment of the Assigned Contracts to Buyer. There exists no condition,
restriction, or reservation affecting the title to or utility of the Assets,
including the Assigned Contracts and the Leased Real Property, which would
prevent Buyer from occupying or utilizing the Assets or enforcing the rights
under the Assigned Contracts or the Sublease, or any part thereof, to the same
full extent that Seller might continue to do so if the sale and transfer
contemplated hereby did not take place. Upon the Closing, good, valid, and
marketable title to the Assets and the rights under the Assigned Contracts shall
be vested in Buyer free and clear of all taxes, liens, charges, claims, and
encumbrances.
Section 2.17. Use and Condition of Property. Except as expressly set forth
on Schedule 2.17, all of the Assets are in good operating condition and repair
as required for their use in the Business as presently conducted. All the Assets
have been used, maintained, and serviced by Seller in accordance with
commercially reasonable business practices, and no notice of any violation of
any law, statute, ordinance, or regulation relating to any of the Assets has
been received by Seller or Shareholder. To the knowledge of Seller and
Shareholder, all improvements located on and the use presently being made by
Seller of the Leased Real Property comply with all applicable zoning and
building code ordinances and all applicable fire, environmental, occupational
safety, and health standards and similar laws or regulations. There is no
proposed, pending, or, to the knowledge of Seller and Shareholder, threatened
change in any such code, ordinance, or standard which would, or could reasonably
be expected to, adversely affect the Business or the use of the Assets. Seller
is in compliance with the Americans with Disabilities Act ("ADA") and Seller has
not received notice from any individual, entity or federal, state, or local
governmental agency or official notifying Seller that Seller or any property or
asset of Seller is in violation of, or in noncompliance with, the ADA.
Section 2.18. Consents. Except as set forth on Schedule 2.18 hereto, no
authorization, consent, approval, permit, or license of, or filing with, any
governmental or public body or authority, any lender or lessor or any other
person or entity is required (a) to authorize, or is required in connection
with, the execution, delivery, and performance of this Agreement or the
agreements contemplated hereby on the part of Seller and/or Shareholder or (b)
in connection with the transfer of any Asset from Seller to Buyer.
Section 2.19. Licenses, Registrations and Permits. Set forth on Schedule
2.19 hereto is a description of each license, registration, or permit now used,
and traditionally used consistent with prior practice, for the conduct of the
Business together with the name of the government agency or entity issuing such
license or permit. Such licenses and permits are valid and in full force and
effect. Except as noted on Schedule 2.19 and state sales tax permits, such
licenses, registrations, and permits are freely transferable without consent of
any third party (including any governmental agency or entity) by Seller and upon
Closing Buyer will have all right, title, and interest of the holder thereof.
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Section 2.20. Finder's Fee. Seller has not incurred any obligation for any
finder's, broker's or agent's fee in connection with the transactions
contemplated hereby for which Buyer may be liable or for which a claim could be
asserted against the Assets.
Section 2.21. Claims and Proceedings. There are no claims, actions, suits,
proceedings, or investigations currently pending, initiated within the last five
(5) years, or, to the knowledge of Seller and Shareholder, threatened against or
affecting Seller, Shareholder, the Business, or any Asset, nor to the knowledge
of Seller and Shareholder, is there any basis for any claim, action, suit,
proceeding, or investigation resulting from actions related to, or performance
under, the Assigned Contracts, the Assumed Leases, or the conduct of the
Business.
Section 2.22. Environmental Matters.
(a) Seller is, and has been at all times, in compliance with all
applicable environmental laws ("Environmental Laws").
(b) Seller has all permits, licenses, approvals, and/or registrations
required to be issued to Seller under Environmental Laws on account of any or
all of Seller's activities and is in full compliance with the terms and
conditions of each permit, license, approval, and registration.
(c) Seller has not received any notice or other communication
concerning any alleged violation of any Environmental Law, whether or not
corrected to the satisfaction of the appropriate authority, or notice or other
communication concerning alleged liability for any response costs or remedial
action in connection with the Leased Real Property or any other property
occupied by Seller, or any activities of Seller, or for which Seller is alleged
to be liable under any Environmental Law, and there exists no writ, injunction,
decree, order, judgment, or lien outstanding, nor any lawsuit, claim,
proceeding, citation, directive, summons, or investigation, pending or, to the
knowledge of Seller and Shareholder, threatened, relating to the occupancy, use,
maintenance, or operation of the Leased Real Property or other property occupied
by Seller, or conduct of the Business or other operations by Seller, or any
alleged violation of Environmental Law by Seller or the presence of hazardous
materials on the Leased Real Property or other property occupied by Seller or
any offsite location for which Seller is alleged to be liable.
(d) Except as disclosed in Schedule 2.22(d), neither Seller nor
Shareholder know of, or have any reason to believe there has been, any violation
of any Environmental Law by Seller or the presence of any hazardous materials on
the Leased Real Property or other property occupied by Seller or any offsite
location for which Seller is alleged to be liable.
(e) Seller has never been refused insurance coverage, nor has
insurance coverage ever been cancelled, as a result of the presence of hazardous
materials on the Leased Real Property or other property occupied by Seller, or
violations of Environmental Laws, or due to other concerns relating to matters
affecting human health or the environment.
Section 2.23. Corporate Name. There are no actions, suits or proceedings
pending or, to the knowledge of Seller and Shareholder, threatened against or
affecting Seller which may result
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in any impairment of the right of Buyer to use the name "EPI Technologies"
following the Closing. To the knowledge of Seller and Shareholder, the use of
the name "EPI Technologies" by ▇▇▇▇▇ will not infringe on the rights of any
third party. Seller shall change its name promptly following the Closing so as
to delete the name "EPI Technologies".
Section 2.24. Alien Employment Eligibility. With respect to each person
employed by Seller, (a) Seller hired such person in compliance with the
Immigration Reform and Control Act of 1986 and the rules and regulations
thereunder (the "IRCA") and (b) Seller has complied with all record keeping and
other regulatory requirements under the IRCA.
Section 2.25. List of Officers and Employees; Compensation. Schedule 2.25
hereto sets forth (a) the annual salary and all other compensation paid or
payable by Seller to Shareholder for the fiscal year of Seller ended December
31, 1999 and for the interim period ended as of the date of this Agreement, and
(b) a complete and accurate list of all employees of the Business as of the date
of this Agreement, together with their positions and their annual salaries and
other compensation, including accruals for vacations through the July 2, 2000.
Schedule 2.25 specifies which employees of Seller are employed pursuant to
written employment or consulting agreements. Accurate copies of all such
employment and consulting agreements have been or will be promptly delivered to
Buyer. Except as set forth on Schedule 2.25, there are no covenants, agreements
or restrictions to which Seller is a party, including but not limited to
employee non-compete agreements, prohibiting, limiting or in any way restricting
Seller or any employee of Seller from engaging in any type of business activity
within the United States.
Section 2.26. Employee Benefit Matters.
(a) Schedule 2.26(a) hereto sets forth a true, complete and correct
list of all "employee benefit plans" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and all other
employee profit-sharing, incentive, deferred compensation, welfare, pension,
retirement severance, group insurance and other employee benefit plans,
arrangements, agreements and practices which relate to employee benefits under
which Seller, or any other corporation or trade or business under common control
with Seller or treated as a single employer with Seller (an "ERISA Affiliate")
as determined under Sections 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended (the "Code"), has any current or future obligation or
liability or under which any present or former employee of Seller or an ERISA
Affiliate, or such present or former employee's dependent or beneficiaries, has
any current or future right to benefits (collectively, "Employee Plans").
(b) Neither Seller nor an ERISA Affiliate is, or could be, liable for
an excise tax under Section 4980B of the Code in connection with an Employee
Plan which would reasonably be expected to become payable by Buyer.
(c) Except as set forth on Schedule 2.26(c) hereto, neither Seller nor
an ERISA Affiliate has within the past six years had an obligation to contribute
to a "defined benefit plan" as defined in Section 3(35) of ERISA, a pension plan
subject to the minimum funding standards of Section 302 of ERISA or Section 412
of the Code, or a "multi-employer plan" as defined in Section 3(37) of ERISA or
Section 414(f) of the Code or a "multiple employer plan" within the meaning of
Section 210(a) of ERISA or Section 413(c) of the Code. None of the
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Employee Plans are funded through a "welfare benefit fund" as defined in Section
419(e) of the Code. Except as set forth on Schedule 2.26(c), no other trade or
business is, or, at any time within the past six years has been, treated,
together with an ERISA Affiliate, as a single employer under Section 414 of the
Code or Section 4001 of ERISA.
(d) No Employee Plan is intended to be qualified under Section 401(a)
of the Code.
(e) There have been no prohibited transactions or breaches of any of
the duties imposed on "fiduciaries" (within the meaning of Section 3(21) of
ERISA), with respect to the Employee Plans that could result in Seller or an
ERISA Affiliate becoming liable directly or indirectly (by indemnification or
otherwise) for any excise tax, penalty or other liability under ERISA or the
Code which would reasonably be expected to result in a liability to Buyer.
(f) To the knowledge of Seller and Shareholder, except as set forth on
Schedule 2.26(f) hereto, there are no actions, claims, or other proceedings
pending or threatened, asserted, or instituted with respect to or arising in
connection with any Employee Plan (other than routine claims for benefits), and
there are no investigations or audits of any Employee Plan by any governmental
authority currently pending and there have been no such investigations or audits
that have been concluded that resulted in any liability of Seller or any ERISA
Affiliate that has not been fully discharged.
(g) No lien, claim, or encumbrance has been filed by any person or
entity and no lien, claim, or encumbrance exists by operation of law or
otherwise on the Assets relating to, or as a result of, the operation or
maintenance of any Employee Plan, and there are no facts or circumstances that
would reasonably be expected to result in the imposition of a lien, claim, or
encumbrance.
(h) Buyer will incur no liability, cost or expense arising from, or
with respect to, any Employee Plan or any other similar plan or arrangement
maintained, or contributed to, by Seller or any ERISA Affiliate.
(i) If Seller maintains an Employee Plan that is a "group health plan"
as described in Section 5000(b)(1) of the Code, Seller will offer "continuation
coverage," as described in Section 4980B of the Code and Sections 601 through
608 of ERISA, and any amendments thereto and successor provisions thereof,
including any regulations promulgated under the applicable provisions of the
Code and ERISA ("COBRA Coverage"), to each employee of Seller who ceases to be
employed by Seller as a result of the transactions contemplated by this
Agreement (and such employee's dependents, if applicable). Buyer will have no
obligation to provide COBRA Coverage to any employee or former employee of
Seller, or to any dependent of any such employee or former employee, as a result
of the transactions contemplated by this Agreement, except to the extent
required by applicable law. Schedule 2.26(i) hereto identifies all individuals
receiving COBRA Coverage under any Employee Plan as of the Closing Date.
Section 2.27. Labor Relations. Seller has not experienced and is not
currently experiencing, nor does Seller or Shareholder know of any fact or facts
giving Seller or
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Shareholder reason to expect, nor, to the knowledge of Seller and Shareholder,
is there any basis for, any labor disputes or strikes, work stoppages,
slow-downs, or other material interference with or impairment of Seller or the
Business by labor, nor has ▇▇▇▇▇▇ committed any unfair labor practice. Seller is
not a party to any collective bargaining agreements with any union and is not
currently experiencing, nor does Seller or Shareholder know of, any current or
contemplated union organization efforts or negotiations, or requests for
negotiations, for any representations or any labor contract relating to any
employee of Seller.
Section 2.28. Arms-Length Transactions. Except as set forth on Schedule
2.28 hereto, all of the material transactions with any person, corporation, or
other entity by Seller have been conducted on an arms-length basis. Except as
set forth on Schedule 2.28, (a) none of the officers, directors, or, to the
knowledge of Seller and Shareholder, shareholders of Seller or Seller's or
Shareholder's respective affiliates or relatives has any direct or indirect
interest, profit participation, or ownership (other than through non-controlling
investments in securities of publicly-held corporations) in businesses which are
competitors of Seller, (b) Seller does not have any outstanding loans or other
advances to any shareholder, officer, director, or employee of Seller or
Seller's or Shareholder's respective affiliates or relatives, and (c) none of
the officers, directors, or, to the knowledge of Seller and Shareholder,
shareholders of Seller or Seller's or Shareholder's respective affiliates or
relatives is an affiliate of any person, corporation, or other entity that has a
material business relationship with Seller.
Section 2.29. Customers and Suppliers. Schedule 2.29(a) hereto lists, with
respect to the fiscal years ended December 31, 1998 and 1999 and with respect to
the current fiscal year through May 31, 2000, the twenty (20) largest customers
(by dollar volume) of Seller during such period (showing the dollar volume for
each). Schedule 2.29(b) hereto lists, with respect to the fiscal years ended
December 31, 1998 and 1999 and with respect to the current fiscal year through
May 31, 2000, the twenty (20) largest suppliers (by dollar volume) of Seller
during each such period (showing the dollar volume for each). No material
adverse change has occurred in the business relationship of Seller with its
customers and suppliers reflected on Schedules 2.29(a) or 2.29(b). Neither
Seller nor Shareholder has any knowledge that any customer or supplier listed on
such Schedules or otherwise material to the Business intends to cease or
substantially reduce purchasing or supplying goods or services from or to
Seller, or is currently involved in any bankruptcy, liquidation, or similar
proceeding or has any right to assert any claim against Seller.
Section 2.30. Insurance. Schedule 2.30 hereto sets forth a complete and
accurate list of all policies of insurance and bonds of any type carried by
Seller with respect to its operations. Such insurance policies and bonds are
with reputable insurers and provide coverage of a character and in such amounts,
and against such losses and risks, as are generally and usually maintained by
comparable businesses similarly situated that exercise prudent business
practices in respect of their properties, assets, and business. Seller is not in
default with respect to any provision contained in such insurance policies and
bonds nor has it failed to give any notice or present any material claim
thereunder in a timely fashion. Such insurance policies and bonds are in full
force and effect, and there exist no premiums that are due and unpaid.
Section 2.31. Other Information. All information relating to Seller has
been disclosed to Buyer which would be material to a reasonably prudent
prospective third party purchaser of
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Seller, the Assets, or the Business and accurately and completely represents
such information in all material respects. In furtherance of the foregoing, and
not in limitation thereof, all information furnished by Seller to Buyer or its
representatives in connection with the transactions contemplated by this
Agreement and specifically referred to in this Agreement (including, without
limitation, information contained in the Schedules and Exhibits hereto, the
instruments referred to in such Schedules and the certificates and other
documents to be executed or delivered pursuant hereto by Seller or Shareholder
at or before Closing) is not, nor at the Closing will be, false or misleading in
any material respect, or contains, or at the Closing will contain, any
misstatement of material fact, or omits, or at the Closing will omit, to state
any material fact necessary to make the statements contained therein, in light
of the circumstances in which they were made, not misleading when taken as a
whole with the other disclosures made hereunder.
Section 2.32. Knowledge. As used in this Agreement, the terms "to the
Seller's knowledge," "to the knowledge of Seller," and other similar terms shall
mean the knowledge of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, and/or ▇▇▇▇▇▇▇▇ ▇▇▇▇ after
making due inquiry of employees and/or agents of Seller and anything which, in
the exercise of reasonable business judgment, Messrs. ▇▇▇▇▇, ▇▇▇▇▇▇, and/or ▇▇▇▇
should have known.
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants that the following are true and correct as of
this date and will be true and correct through the Closing Date as if made on
that date:
Section 3.01. Organization and Good Standing. Buyer is a corporation duly
organized, validly existing, and in good standing under Texas law, with all
requisite power and authority to carry on the business in which it is engaged,
to own the properties it owns, and to execute and deliver this Agreement and to
consummate the transactions contemplated hereby.
Section 3.02. Authorization and Validity. The execution, delivery, and
performance of this Agreement and the other agreements contemplated hereby by
▇▇▇▇▇, and the consummation of the transactions contemplated hereby and thereby,
have been duly authorized by ▇▇▇▇▇. This Agreement and each other agreement
contemplated hereby have been or will be prior to Closing duly executed and
delivered by ▇▇▇▇▇ and constitute or will constitute as of the Closing legal,
valid, and binding obligations of Buyer, enforceable against Buyer in accordance
with their respective terms, except as may be limited by applicable bankruptcy,
insolvency, or similar laws affecting creditors' rights generally or the
availability of equitable remedies.
Section 3.03. No Violation. Neither the execution and performance of this
Agreement or the other agreements contemplated hereby, nor the consummation of
the transactions contemplated hereby or thereby, will (a) conflict with, or
result in a breach of, the Articles of Incorporation or Bylaws of Buyer or any
agreement, indenture, or other instrument under which Buyer is bound or (b)
violate or conflict with any law or regulation or any judgment or order of any
court or any public, governmental, or regulatory agency.
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Section 3.04. Finder's Fee. Buyer has not incurred any obligation for any
finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
Section 3.05. Access to Information. ▇▇▇▇▇ has received and examined all
the information and materials it considers necessary or appropriate to decide
whether to purchase the Assets and has had an opportunity to ask questions of,
and receive answers from, Seller regarding the Assets and the Business.
ARTICLE IV: SELLER'S AND SHAREHOLDER'S COVENANTS
Seller and Shareholder, jointly and severally, covenant and agree with
Buyer that, from and after the date of this Agreement and until the Closing
Date, Seller will conduct the Business in the ordinary course consistent with
prior practice and subject to the following provisions and limitations:
Section 4.01. Operation of the Business. Without the prior written consent
of Buyer, Seller will not:
(a) Grant any increase in the rate of pay or salary of any of its
employees or agents or in any other way increase in any amount the benefits or
compensation of any such employee or agent, including Shareholder.
(b) Enter into any new employment contract or collective bargaining
agreement or extend or negotiate any existing employment contract or collective
bargaining agreement.
(c) Enter into any contract or commitment or engage in any transaction
which is not in the usual and ordinary course of business or which is
inconsistent with past practices.
(d) Sell or dispose of or encumber any material amount of Assets,
other than the sale of inventory in the ordinary course of business consistent
with prior periods or pursuant to this Agreement.
(e) Make, or enter into any contract for, any material capital
expenditure or, except as required by this Agreement, enter into, modify, amend,
or cancel any material lease of capital equipment or real property.
(f) Enter into any contract, whether for the purchase or sale of
inventory, supplies, other products or services or otherwise, and whether in the
ordinary course of business or otherwise, involving more than $5,000 or enter
into any series of such contracts with one party or affiliated group of parties
involving more than $10,000 in the aggregate.
(g) Create, assume, incur, or guarantee any indebtedness other than
trade indebtedness in the usual and ordinary course of business consistent with
prior periods and with a maturity date of less than one year.
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(h) Pay any distribution in respect of its capital stock or directly
or indirectly redeem, purchase, or otherwise acquire any of its capital stock.
(i) Make or institute any unusual or novel method of transacting
business or change any accounting procedures or practices or its financial
structure.
(j) Make any amendments to or changes in its Articles of Incorporation
or Bylaws.
(k) Perform any act, or attempt to do any act, or permit any act or
omission to act, which will cause a breach of any material contract, commitment,
or obligation to which Seller is a party or cause any representation or warranty
made by Seller and Shareholder herein to be untrue or incorrect as of the
Closing.
(l) Take any action or incur any liability or obligation which, if
taken or incurred prior to the date of this Agreement, would be required to be
disclosed on any Schedule hereto.
Section 4.02. Preservation of Business. Seller shall use its commercially
reasonable efforts to (a) carry on the Business diligently and substantially in
the same manner as heretofore conducted, (b) keep its business organization
intact, including preserving its present relationships with suppliers and
customers and others having business relations with it, and (c) perform all
obligations required to be performed by it prior to the Closing Date under any
contract or lease. On the Closing Date, Seller will have in inventory quantities
of supplies and materials consistent with past practice and Trade Payables will
not exceed $42,113.
Section 4.03. Insurance and Maintenance of Property. Seller will use its
commercially reasonable efforts to cause the Assets and its operations to be
insured consistent with past practice and will maintain the Assets and the
Leased Real Property in good condition and repair.
Section 4.04. Full Access. Buyer and its representatives (including,
without limitation, its officers, employees, legal counsel, environmental
consultants, financial advisors, and accountants) shall have full access at all
reasonable times determined by Seller to all premises, properties, books,
records, contracts, tax records, and documents of Seller relating to the
Business (collectively, "Properties"). Seller and Shareholder will furnish to
Buyer any information in respect of the Business and the Properties as Buyer and
its representatives may from time to time reasonably request, and Seller will
permit Buyer and its representatives to make a full general, as well as a legal
and accounting, review and investigation of the Business, its affairs and
Properties including, but not limited to, communication with key employees,
customers, and suppliers of Seller on a basis reasonably satisfactory to Buyer.
Section 4.05. Books, Records and Financial Statements. Seller shall
maintain its books and financial records consistent with the past practices of
Seller. Said books and financial records shall fairly and accurately reflect the
operations of the Business.
Section 4.06. Employees. Seller and Shareholder shall use their
commercially reasonable efforts to retain the present employees of Seller so
that they will be available to
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Buyer after the Closing, and will cooperate with all reasonable requests made by
Buyer for the purpose of allowing Buyer to hire those employees of Seller
designated by Buyer, such employment to be effective as of the Closing Date.
Section 4.07. Consents of Third Parties. Seller will use its commercially
reasonable efforts to obtain all consents of third parties required for the
assignment and transfer to Buyer of the Assigned Contracts and the other Assets,
the sublease to Buyer of the Leased Real Property pursuant to the Sublease, and
the consummation of the transactions contemplated hereby.
Section 4.08. Payment of Taxes. Seller will pay all state sales and use
(including those incurred as a result of this transaction) payroll, state, and
federal unemployment and state and federal social security and income taxes
arising from or related to (a) the conduct of the Business or other operations
of Seller and attributable to periods or the conduct of business prior to the
Closing Date and (b) the purchase and sale of the Assets in accordance with this
Agreement.
Section 4.09. No Negotiation. Seller and Shareholder will not solicit or
respond favorably to any solicitation from, or otherwise enter into or continue
negotiations or discussions or reach any agreement with, any person or entity
regarding the merger or consolidation of Seller or the sale of any of the assets
of Seller (other than in the ordinary course of business of Seller) or the sale
of any capital stock of Seller or any similar transaction.
Section 4.10. Notice of Any Material Change. Seller and Shareholder shall,
promptly after the first notice or occurrence thereof but not later than the
Closing Date, notify Buyer of the occurrence of any event or the existence of
any state of facts that would make untrue in any material respect any of the
representations and warranties of Seller and Shareholder in this Agreement.
Section 4.11. Update of Schedules. At Closing, Seller shall deliver to
Buyer revised and amended Schedules to bring down to Closing all information
required to be stated thereon.
Section 4.12. Release of Certain Liens. Seller shall obtain the release of
any and all liens and security interests held by any party on any of the Assets.
Section 4.13. Termination of Leases. On or before the Closing, Seller will
cause all of the Leases (other than the Real Property Lease and the Assumed
Leases) to be terminated and Seller will acquire title to the property covered
thereby so that Seller will convey all of the Leased Assets to Buyer free and
clear of such Leases.
Section 4.14. Name Change. Seller and Shareholder (a) acknowledge that
Buyer, at the Closing, will acquire all right, title, and interest of Seller in
and to the name "EPI Technologies, Inc." and any variation thereof and (b)
covenant and agree to change, at the request of Buyer, by appropriate corporate
proceedings or otherwise, the name of Seller to a name other than "EPI
Technologies, Inc." or similar name.
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Section 4.15. Employee Plans.
(a) Buyer shall not assume or continue any Employee Plan or any
responsibility or liability whatsoever with respect to any Employee Plan. Seller
and ▇▇▇▇▇ agree that Buyer is not intended to be and is not a successor employer
to Seller for any purpose, including with respect to COBRA Coverage, and that no
benefit plan sponsored or maintained by Buyer is intended to be and no such plan
shall be a successor plan to any Employee Plan.
(b) Seller agrees that it will comply with COBRA Coverage after the
Closing with respect to all qualified beneficiaries who had a qualifying event
as of or prior to the Closing, including any former employees of Seller who are
hired by ▇▇▇▇▇, but who are entitled to elect COBRA Coverage under an Employee
Plan due to a significant gap in coverage, a preexisting condition, or as
otherwise may be required by applicable law. Except as described in the
preceding sentence and as set forth on Schedule 4.15 hereto, prior to the
Closing Date, all of the Employee Plans shall be terminated by Seller and Seller
shall take all actions necessary and appropriate to wind-up the affairs of each
Employee Plan, including making any and all filings with regulatory authorities
reasonably necessary or appropriate, payment of all contributions required to be
made with respect to such Employee Plans through the Closing Date, and
termination of insurance policies or other funding vehicles for all Employee
Plans.
ARTICLE V: CONDITIONS TO OBLIGATIONS OF BUYER
The obligation of Buyer to consummate the purchase of the Assets and the
other transactions contemplated hereby is subject to the fulfillment on or prior
to the Closing Date of each of the following conditions, which may be waived in
whole or in part by Buyer to the extent permitted by applicable law:
Section 5.01. No Material Adverse Change. Since the close of business on
April 2, 2000, no material adverse change in the business, operations,
prospects, earnings, assets, or condition (financial or otherwise) of the
Business and no event which could materially and adversely affect the business,
operations, prospects, earnings, assets, or condition (financial or otherwise)
of the Business shall have occurred.
Section 5.02. Representations and Warranties. The representations and
warranties of Seller and Shareholder contained in this Agreement shall be true
and correct in all material respects at and as of the Closing Date, with the
same force and effect as if made at and as of the Closing Date; and Seller and
Shareholder shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed by them at
or prior to the Closing.
Section 5.03. Certificate. Seller and Shareholder shall have delivered to
Buyer a signed certificate dated the Closing Date, to the effect that the
conditions specified in Sections 5.01, 5.02, and 5.04 which have not been
otherwise waived, have been satisfied.
Section 5.04. Consents and Waivers. At the Closing, except as set forth in
the Schedules, all consents, authorizations, orders, or approvals of (a) the
shareholders of Seller,
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(b) the Board of Directors of Seller, (c) governmental agencies, and (d) third
parties necessary for the transfer or assignment of the Business or any of the
Assets (inclusive of the Assigned Contracts) shall have been obtained.
Section 5.05. Litigation. At the Closing, there shall be no effective order
of any nature issued by a court or governmental agency restraining or
prohibiting the consummation of any of the transactions provided for herein or
limiting in any manner Buyer's right to control the Business.
Section 5.06. Due Diligence. Buyer and its representatives shall have
conducted such due diligence with respect to Seller, and the Business and
related matters as Buyer and its representatives deem necessary or desirable in
connection with the transactions contemplated by this Agreement and Buyer, in
its sole discretion and judgment, shall have determined that such diligence and
the results thereof are satisfactory to Buyer.
Section 5.07. Board Approval. The Board of Directors of Buyer shall have
approved the transactions contemplated by this Agreement.
Section 5.08. Compliance. Seller and the Shareholder shall have, or shall
have caused to be, satisfied or complied with and performed in all material
respects all terms, covenants, and conditions of this Agreement to be complied
with or performed by them on or before the Closing Date.
Section 5.09. Release of Liens on Assets. Seller shall have obtained the
release of any and all liens and security interests held by any party on any of
the Assets.
Section 5.10. Employment Agreements. Concurrent with the Closing, ▇▇▇▇
▇▇▇▇▇▇ shall have entered into an employment agreement with Buyer, which
includes non-compete provisions, and ▇▇▇▇▇▇▇▇ ▇▇▇▇ shall have entered into
ninety (90) day consulting agreement with Buyer, each on terms and conditions
acceptable to Buyer. Such employment agreement, including the non-competition
provisions contained therein, is a material inducement to Buyer to enter into
this Agreement and to close the transactions contemplated hereby.
Section 5.11. Updated Schedules. There shall have been no material change
to the Schedules when updated pursuant to Section 4.11.
Section 5.12. Opinion. Counsel to Seller shall have delivered to Buyer its
opinion, dated as of the Closing Date, in form and substance reasonably
satisfactory to Buyer.
Section 5.13. Sublease. Buyer and Seller shall have entered into the
Sublease, subject to the consent of the lessor, and Seller and the landlord of
the Leased Real Property shall have executed an amendment to the Real Property
Lease, in a form and substance acceptable to Buyer, amending the Real Property
Lease to require the waiver and/or subordination of the landlord's lien, among
other things.
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ARTICLE VI: CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions contemplated by
this Agreement are subject to the fulfillment of each of the following
conditions, which may be waived in whole or in part by Seller to the extent
permitted by applicable law:
Section 6.01. Representations. The representations and warranties of Buyer
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing Date, with the same force and effect as if made at and
as of the Closing Date; and Buyer shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed by it at or prior to the Closing Date.
Section 6.02. Certificate. Buyer shall have delivered to Seller a
certificate, dated the Closing Date, and signed on behalf of it by the President
of Buyer to the effect that the conditions specified in Section 6.01 have been
satisfied.
Section 6.03. Litigation. At the Closing, there shall be no effective order
of any nature issued by a court or governmental agency restraining or
prohibiting the consummation of the transactions provided for herein.
Section 6.04. Board Approval. The Board of Directors of Buyer shall have
approved the transactions contemplated by this Agreement.
Section 6.05. Buyer shall have executed and delivered to Seller the Notes
and the Security Agreement.
Section 6.06. Buyer shall have entered into the agreements referred to in
Section 5.10.
Section 6.07. Sublease. Buyer and Seller shall have entered into the
Sublease.
ARTICLE VII: INDEMNIFICATION
Section 7.01. Seller and Shareholder, jointly and severally, agree to
indemnify, defend and hold Buyer and its officers, directors, employees,
attorneys, and affiliates (defined as any person or entity controlling,
controlled by, or under common control with, Buyer) harmless from and against
all losses, claims, obligations, demands, assessments, penalties, liabilities,
costs, damages, reasonable attorneys' fees, and expenses (collectively,
"Damages"), actually incurred against the Assets or by Buyer, its officers,
directors, employees, attorneys, or affiliates, by reason of, resulting from,
relating to, or based upon:
(a) The inaccuracy of any representation or warranty of Seller or
Shareholder in this Agreement, including but not limited to the Exhibits and
Schedules to this Agreement, or in any certificate, document, or other
instrument (collectively, the "Related Agreements")
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delivered at Closing in connection with this Agreement or in connection with the
transfer or other transactions contemplated by this Agreement;
(b) The breach by Seller and/or Shareholder of, or the failure by
Seller and/or Shareholder to perform, any of its or their covenants,
commitments, agreements, or obligations under or contained in this Agreement or
any ancillary documents hereto;
(c) Any claimed violation of any federal, state, or local statute,
rule, or regulation as a result of any action or omission to act of Seller,
and/or any director, officer, employee, consultant, independent contractor,
representative, or agent of Seller, prior to Closing;
(d) Any sales, use, or similar taxes in connection with the purchase
and sale transaction contemplated by this Agreement and any federal, state, or
local income, or other tax payable by Seller, including, but not limited to, all
such taxes resulting from the purchase and sale transaction contemplated by this
Agreement or the operations of Seller prior to the Closing Date;
(e) Any claim by reason of, resulting from, relating to, or based upon
occurrences of any nature with respect to the Business or other operations of
Seller, or the conduct thereof, prior to the Closing (except for the Trade
Payables), whether any such claims are asserted prior to or after the Closing;
(f) Any claim by reason of, resulting from, relating to, or based upon
occurrences of any nature with respect to Seller from and after the Closing;
(g) Seller's failure to properly perform its testing services;
(h) Any proved claim by reason of, resulting from, relating to, or
based upon the storage, use, or maintenance of the equipment, parts, or products
of any customer on the premises of EPI related to any purchase order or other
agreement entered into prior to the Closing Date; and
(i) The establishment, administration, maintenance, operation, or
implementation of any Employee Plan prior to July 24, 2000.
Section 7.02. Limitations on Amount of Liability.
(a) Neither Seller nor Shareholder will have any liability (whether
liquidated, contingent, or otherwise) to the Buyer, under, or in connection
with, this Agreement or any of the Related Agreements pursuant to indemnity
claims made pursuant to Section 7.01(a), (c) and (e) until the total of all
Damages with respect to such claims exceeds Fifty Thousand ($50,000.00) (the
"Indemnification Threshold"), however, at such time as the total of all Damages
exceeds the Indemnification Threshold, Seller and Shareholder will be liable,
jointly and severally, on a dollar-for-dollar basis, for the full amount of all
Damages.
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(b) The maximum amount of Damages that Seller and/or Shareholder
shall, in the aggregate, be required to pay to Buyer pursuant to Section
7.01(a), (c), and (e) shall be the Purchase Price.
Section 7.03. Survival of Representations; Warranties. No disclosure by
Seller or Shareholder, nor any investigation by or on behalf of Buyer with
respect to Seller, the Assets, or Shareholder shall be deemed to affect Buyer's
reliance on the representations, warranties, covenants, or agreements contained
herein or to waive Buyer's rights to indemnity as provided herein for the breach
or inaccuracy or failure to perform or comply with any representation, warranty,
covenant, or agreement of Seller or Shareholder; provided, however, that if,
prior to the Closing Date, in the course of any investigation by or on behalf of
Buyer, of Seller, the Assets, or Shareholder, or with respect to any information
which Buyer may have or obtain with respect thereto, the results of such
investigation or such information could reasonably give Buyer an action for
breach of a representation made by Seller hereunder, Buyer shall promptly
disclose such results of its investigation or such information to Seller. If,
prior to the Closing Date, Buyer does not disclose such results of its
investigation or such information to Seller, Buyer may not make a claim for
breach of a representation to the extent that facts revealed by such
investigation are inconsistent with such representation or make a claim that
Seller has failed to perform or comply with any representation, warranty,
covenant or agreement of Seller or Shareholder and Buyer will not be entitled to
indemnity as provided herein for any breach alleged by Buyer that is based on
such results of its investigation or such information. The indemnity obligations
of Seller and Shareholder under this Article VII (and the representations,
warranties, covenants, and agreements of Seller and Shareholder) shall survive
the Closing for a period of twenty-four (24) months.
Section 7.04. Offset. Notwithstanding anything to the contrary contained
herein, Seller and Shareholder agree that Buyer shall be entitled, at Buyer's
option, to credit and offset against any payments due by Buyer under the Notes
an aggregate amount equal to all amounts due Buyer by Seller, Shareholder, or
their heirs, personal representatives, distributees, successors, assigns, or
other affiliates either resulting from a breach hereof or under this Article
VII. Such offset shall (a) first be against the next succeeding payment of
accrued but unpaid interest due under the Notes (as may be allocated by Buyer in
its sole discretion), if any; (b) next, against the next succeeding payment of
principal due under the Notes (as may be allocated by Buyer in its sole
discretion); and (c) lastly, shall be payable by Seller and Shareholder pursuant
to Section 7.01 only after said offset is made against (a) and (b) above. Buyer
shall notify Shareholder and Seller of its intent to exercise its right to
offset and its basis for claiming such right. Shareholder and Seller shall have
thirty (30) days from the date of such notice to cure, to ▇▇▇▇▇'s full
reasonable satisfaction, any breach of Section 7.01 alleged by Buyer in such
notice prior to Buyer's exercise of its rights to offset as set forth in this
Section 7.04. If any payment due under any Note becomes due prior to the end of
such thirty (30) day period, then Buyer may postpone the payment of such Note,
without penalty and without such Note being in default or any time frame running
which with the giving of notice or the passage of time, or both, would result in
a default under such Note, until the earlier to occur of (y) the cure of such
breach to the full reasonable satisfaction of Buyer or (z) the end of such
thirty (30) day period, at which point Buyer may exercise its right of offset.
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Section 7.05. Payment of Uncollected Accounts Receivable. Seller and
Shareholder have represented and warranted that each of the Accounts Receivable
will be collected in full by Buyer within seventy-five (75) days of the invoice
date of such receivable. If any such Account Receivable is not collected within
such seventy-five (75) day period, Shareholder and Seller, jointly and
severally, shall pay to Buyer the amount of such Account Receivable within seven
(7) days of receipt of notice from Buyer that such Account Receivable was not
timely collected and the reason(s) for such failure to collect. Buyer shall
refund to Shareholder or Seller, as applicable, any funds (less any collection
costs reasonably incurred by Buyer in collecting such receivable) pertaining to
such Account Receivable that are subsequently collected. The parties hereto
agree that any funds received from any customer of Buyer after the Closing Date
shall be applied according to the purchase order number. If the customer fails
to designate a purchase order number to which a payment should be applied, such
payment shall be applied first to amounts owed by such customer relating to
sales made by Buyer after the Closing Date, if any, and then to any Account
Receivable of such customer. Buyer shall use commercially reasonable efforts to
collect the Accounts Receivable, but shall not be obligated to incur any costs
or institute litigation with respect to any Account Receivable. Notwithstanding
any other provision in this Agreement to the contrary, the payment obligations
of Seller and/or Shareholder under this Section 7.05 shall not be subject to, or
limited by, the Indemnification Threshold or the cap on the Damages set forth in
Section 7.02.
Section 7.06. Consent to Sublease. ▇▇▇▇▇, Seller, and Shareholder agree to
use their best efforts to obtain the consent to the Sublease from the lessor of
the Leased Real Property. Notwithstanding any other provision contained in this
Agreement, Buyer, Seller, and Shareholder acknowledge that consent to the
Sublease from lessor has not been obtained and if consent is not obtained, the
Sublease will not be effective and neither party will have any liability to the
other with respect to the Sublease or the failure to obtain such consent.
ARTICLE VIII: MISCELLANEOUS
Section 8.01. Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time on or before the Closing Date, in which
event all further obligations of all parties shall terminate and this Agreement
shall have no further force or effect:
(a) By the mutual consent of ▇▇▇▇▇ and ▇▇▇▇▇▇;
(b) By Buyer, if (i) there has been a material misrepresentation by
Seller and/or Shareholder set forth herein, (ii) there has been any material
failure or refusal on the part of Seller and/or Shareholder to comply with its
obligations hereunder, (iii) Buyer is for any reason dissatisfied with the
results of its investigation of the business and affairs of Seller pursuant to
Section 5.06 hereof, or (iv) any of the other conditions to its obligations to
close set forth in Article V shall not have been satisfied;
(c) By Seller, if (i) there has been a material misrepresentation by
Buyer set forth herein, (ii) there has been any material failure or refusal on
the part of Buyer to comply with its obligations hereunder, or (iii) any of the
other conditions to its obligations to close set forth in Article VI shall not
have been satisfied; or
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(d) By ▇▇▇▇▇, on the one hand, or Seller, on the other hand, upon two
(2) days' written notice at any time after July 31, 2000 if the Closing has not
previously taken place. This Section 8.01(d) shall not apply in the event of the
failure of the transactions contemplated by this Agreement to be consummated as
a result of a breach by Seller, Shareholder, or Buyer of this Agreement or a
representation, warranty, or covenant contained in this Agreement, subject to
Section 7.03; in such event, the provisions of Section 8.03 hereof shall apply.
Section 8.02. Risk of Loss. If prior to the Closing Date, the Leased Real
Property and/or any Assets to be purchased by Buyer hereunder are destroyed or
damaged by fire or other casualty or is condemned or taken by any governmental
authority or otherwise acquired pursuant to eminent domain authority, Seller (a)
shall notify Buyer as soon as practicable in writing of the occurrence of such
event and (b) shall, if Buyer agrees not to terminate this Agreement as a result
of such casualty or condemnation, cause any available insurance proceeds or
condemnation awards to be used to repair or restore such property to its
condition prior to damage or destruction, unless directed otherwise in writing
by ▇▇▇▇▇. Except as provided in (b) above, nothing contained in this Section
8.02 shall be construed to limit or otherwise restrain Buyer's option not to
close if any condition contained in Article V is not satisfied.
Section 8.03. Default; Remedies. This Section shall apply in the event that
a party refuses to consummate the transactions contemplated by this Agreement or
if any default under, or breach of any representation or covenant of, this
Agreement on the part of a party (the "Defaulting Party") shall have occurred
that results in the failure to consummate the transactions contemplated hereby.
In such event, the non-Defaulting Party may either (a) seek and obtain specific
performance against the Defaulting Party from a court of competent jurisdiction,
provided that it file such a request with such court within one hundred eighty
(180) days after it becomes aware of such failure, refusal, default, or breach,
or (b) seek and obtain money damages from the Defaulting Party plus, in either
case, its court costs and reasonable attorneys' fees in connection with the
pursuit of its remedies hereunder.
Section 8.04. Notices. Any notice or communication pursuant hereto must be
in writing and delivered personally or sent by certified mail, postage prepaid
and with return receipt requested, Federal Express (or other overnight delivery
service), or via facsimile, to the address specified on the signature page of
this Agreement. Notices delivered personally shall be deemed communicated as of
actual receipt; mailed notices shall be deemed communicated as of 10:00 a.m. on
the second business day after mailing; notices sent by overnight delivery shall
be deemed received on the next business day; and notices sent by facsimile shall
be deemed received upon receipt of a confirmation of transmittal. Any party may
change its address for notice by written notice given to the other parties.
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Section 8.05. Confidentiality and Noncompetition Provisions.
(a) Nondisclosure. Seller and Shareholder have had access to and
become familiar with various trade secrets consisting of, but not limited to,
financial statements, processes, computer programs, compilations of information,
records, sales procedures, customer requirements, pricing techniques, customer
lists, methods of doing business, and other confidential information
(collectively referred to as the "Trade Secrets"), which have been used in the
operation of Seller's business. After the Closing Date, Seller and Shareholder
shall not use in any way or disclose any of the Trade Secrets, directly or
indirectly. All files, records, documents, information, data, and similar items
relating to the business of Seller shall remain the exclusive property of Buyer.
(b) Noncompetition. As a material inducement to Buyer's entry into
this Agreement, from and after the Closing Date, and for a period of two (2)
years thereafter, Seller and Shareholder, individually and collectively, shall
not, directly or indirectly, in any capacity, within the United States or its
territories, (i) invest (other than investments in publicly-owned companies
which constitute not more than one percent (1%) of the voting securities of any
such company) or engage in any business that is directly or indirectly
competitive with the Business, (ii) accept employment with or render services to
a competitor of the Business as a director, officer, agent, employee, or
consultant, or (iii) contact, solicit, or attempt to solicit or accept business
competitive with, or similar to, the Business (A) from any of the customers of
Seller as of the Closing Date or (B) from any person or entity whose business
Seller was soliciting as of such time.
(c) Nonemployment. For a period of two (2) years after the Closing
Date, Seller and Shareholder, individually and collectively, shall not, on their
own behalf or on behalf of any other person, partnership, association,
corporation, or other entity, hire or solicit or in any manner attempt to
influence or induce any employee employed by Seller or Buyer prior to the
Closing Date to leave the employment of Buyer, nor use or disclose to any
person, partnership, association, corporation, or other entity any information
concerning the names and addresses of such employees.
(d) Severability. Seller and Shareholder agree that the agreements set
forth in this Section 8.05 each constitutes separate agreements independently
supported by good and adequate consideration and shall be severable from the
other provisions of, and shall survive, this Agreement. The existence of any
claim or cause of action of Seller or Shareholder against Buyer, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by Buyer of the covenants and agreements of Seller or Shareholder
contained in this Section 8.05.
(e) Acknowledgements. Seller and Shareholder acknowledge and recognize
that the enforcement of the provisions of this Section 8.05 is necessary to
ensure the preservation and continuity of the Business and goodwill of the
Business. Seller and Shareholder further agree that due to the nature of such
Business, the noncompetition restrictions set forth in this Section 8.05 are
reasonable as to time, scope, and geographic area.
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Section 8.06. Costs, Expenses, and Legal Fees. Except as expressly provided
herein, each party hereto shall bear its own costs and expenses (including
attorneys' fees) in connection with the preparation, execution, and performance
of this Agreement and the transactions contemplated hereby. In the event of any
litigation or dispute between the parties to this Agreement arising out of or
related to this Agreement or the transactions contemplated hereby, the
prevailing party (whether plaintiff or defendant) shall be entitled to recover,
in addition to any other recovery to which it may prove itself entitled, the
reasonable attorneys' fees incurred by it in enforcing or defending its rights.
Section 8.07. Waiver. The waiver by any party of any breach or provision of
this Agreement must be in writing and shall not constitute a continuing waiver
or a waiver of any subsequent breach of the same or a different provision
hereof.
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Section 8.08. Severability. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision never comprised a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid, or enforceable provision or by
its severance herefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision, there shall be added automatically as part of this
Agreement a provision as similar in its terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
Section 8.09. Entire Agreement. This Agreement and the exhibits hereto
supercede all prior agreements and understandings relating to the subject matter
hereof, except that the obligations of any party under any agreement executed
pursuant to this Agreement shall not be affected by this Section.
Section 8.10. Miscellaneous. This Agreement may be amended only by an
instrument in writing executed by both parties hereto. There are no oral
agreements among the parties to this Agreement. Seller may not assign any of its
rights or delegate any of its duties under this Agreement, the Notes, the
Security Agreement, or any other agreement referred to herein. Buyer may assign
its rights hereunder to a wholly owned subsidiary of Buyer. THIS AGREEMENT AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY,
CONSTRUED, AND ENFORCED IN ACCORDANCE WITH INTERNAL LAWS (AND NOT THE CONFLICTS
LAWS) OF TEXAS. THIS AGREEMENT IS PERFORMABLE IN DALLAS COUNTY, TEXAS. The
captions in this Agreement are for convenience of reference only. Whenever the
context requires, references in this Agreement to the singular number shall
include the plural, the plural number shall include the singular and words
denoting gender shall include the masculine, feminine, and neuter. This
Agreement shall be binding on the parties hereto and their heirs, estates,
personal representatives, successors, and permitted assigns. This Agreement
shall not be construed against the party responsible for, or primarily
responsible for, preparing this Agreement. Time is of the essence with respect
to all of Seller's and Shareholder's obligations in this Agreement.
(SIGNATURES BEGIN ON NEXT PAGE)
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement as of the date first above written.
SELLER
Address: EPI TECHNOLOGIES, INC., a Texas corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇:
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ -----------------------------------------
Name:
---------------------------------------
Telecopy: Title:
---------------- --------------------------------------
Attn:
--------------------
SHAREHOLDER
Address:
-------------------------
------------------------- --------------------------------------------
Telecopy: ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------
BUYER
Address: MICRO-ASI, INC., a Texas corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ By:
Attn: Chief Executive Officer -----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Executive
Officer
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EXHIBIT A
SECURED PROMISSORY NOTE
$1,613,114 July 2, 2000
Dallas, Texas
FOR VALUE RECEIVED, this Secured Promissory Note (this "Note") is
made by Micro-ASI, Inc., a Texas corporation ("Maker") to EPI Technologies,
Inc., a Texas corporation ("Payee").
1. Payments. Maker hereby promises to pay to the order of Payee the
principal sum of One Million Six Hundred Thirteen Thousand One Hundred Fourteen
and no/100 Dollars ($1,613,114) at its office at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇, or such other place as the holder hereof may
designate from time to time in writing, in lawful money of the United States of
America and in immediately available funds, together with interest on the unpaid
principal balance hereof at the rate provided herein from the date of this Note
until payment in full of the indebtedness evidenced by this Note. This Note
shall be payable as follows: (a) on October 15, 2000 Maker shall pay the
interest accrued and unpaid from the date hereof through October 15, 2000 and
(b) the entire amount of the principal and interest accrued and unpaid from
October 16, 2000 shall be due and payable in full on January 31, 2001. All past
due and delinquent sums hereunder, both principal and interest, shall bear
interest at the rate determined below until such sums have been paid.
Notwithstanding any provisions contained herein, all unpaid principal and all
accrued and unpaid interest under this Note shall be due and payable upon
receipt of proceeds by Maker from an initial public offering of shares of stock
of Maker. If any required payment falls due on a Saturday, Sunday or a national
or state bank holiday in Texas, then such date shall be extended to the next
succeeding day that is not a Saturday, Sunday or national or state bank holiday.
2. Interest Rate. The principal amount outstanding from time to time
hereunder shall bear interest calculated on the basis of a 365-day year, at a
rate equal to nine and one-half percent (9.5%) per annum, compounded quarterly.
Any statements or invoices sent by ▇▇▇▇▇ to Maker and setting forth the amount
of interest payable hereunder, unless contested in writing to Payee by Maker
within thirty (30) days from the date of such statement or invoice, shall be
deemed conclusive as to the interest actually payable hereunder.
3. Maximum Rate. It is the intention of the parties hereto to conform
strictly to any usury laws in force that apply to this transaction. Accordingly,
all agreements among the parties hereto (including, without limitation, the
Transaction Documents, as defined herein), whether previously existing, now
existing or hereafter arising and whether written or oral, are hereby limited so
that in no contingency, whether by reason of acceleration of the maturity of the
amounts owing under this Note or otherwise, shall the interest (and all other
sums that are deemed to be interest) contracted for, charged or received by
Payee with respect to this Note, exceed the Highest Lawful Rate. The "Highest
Lawful Rate" means the maximum non-usurious interest rate, if any, that at any
time or from time to time may be contracted for, taken, reserved, charged or
received under the laws of the United States and the laws of such states as may
be
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applicable thereto which are presently in effect or, to the extent allowed under
such applicable laws of the United States and the laws of such states, which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow. If, from any circumstance whatsoever,
interest under any agreement to which Maker and Payee are parties (including,
without limitation, under the Transaction Documents) would otherwise be payable
in excess of the Highest Lawful Rate, and if from any circumstance Payee shall
ever receive anything of value deemed interest by applicable law in excess of
the Highest Lawful Rate, then ▇▇▇▇▇'s receipt of such excess interest shall be
deemed a mistake and the same shall, so long as no Event of Default under this
Note shall be continuing, at the option of Maker, either be repaid to Maker or
credited to the unpaid principal; provided, however, that if an Event of Default
shall have occurred and be continuing, and Payee shall receive excess interest
during such period, then Payee shall have the option of either crediting such
excess amount to principal or refunding such excess amount to Maker. All
interest paid or agreed to be paid to Payee shall, to the extent allowed by
applicable law, be amortized, prorated, allocated, and spread throughout the
full period of Maker's credit relationship with Payee until payment in full of
the principal (including the period of any renewal or extension) so that the
interest for such full period shall not exceed the Highest Lawful Rate.
4. Prepayment. This Note may be prepaid, in whole or in part, without
premium or penalty. All prepayments shall be applied first to accrued interest
and then to principal.
5. Default Rate. Upon the failure of Maker to make any payment of
principal or interest on, or any amount owing in respect of, the indebtedness
evidenced by this Note, or any other amounts payable by Maker to Payee pursuant
to the terms hereof, when due and payable or declared due and payable, the
interest rate applicable to this Note shall be increased by two percent (2%) per
annum above the rate otherwise applicable until all such past due amounts have
been paid in full, at which time the interest rate applicable to this Note shall
revert back to the rate set forth in Section 2 hereof.
6. Transaction Documents. This Note, including the principal, interest
and fees and costs payable pursuant hereto, is secured by that certain Security
Agreement, dated the date hereof (the "Security Agreement"), between Maker and
Payee. This Note, that certain Promissory Note, of even date herewith, in the
amount of $2,950,000, executed by Maker in favor of Payee (the "Second Note"),
the Security Agreement and that certain Asset Purchase Agreement, dated the date
hereof, among Maker, ▇▇▇▇▇ ▇. ▇▇▇▇▇ and Payee (the "Purchase Agreement", and all
documents, instruments and certificates executed and delivered in connection
herewith and therewith, are sometimes hereinafter collectively referred to as
the "Transaction Documents."
7. Event of Default. The occurrence of any one or more of the following
shall constitute an "Event of Default" hereunder.
(a) Maker shall fail to pay any principal, interest or other amounts
when due and payable or declared due and payable (whether at maturity,
by acceleration or otherwise) under this Note, the Second Note, or that
certain Sublease, dated as of the date hereof, between Maker and Payee
within ten (10)
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days of receipt of written notice of such failure to pay such amount on
the due date thereof, except as provided in Section 7.04 of the
Purchase Agreement;
(b) Maker shall fail or neglect to perform, keep or observe any
material provision, condition, covenant or warranty contained in this
Note or the Second Note or the Security Agreement to which it is a
party (other than as set forth in Section 7(a) of this Note) or an
event of default shall occur under the Security Agreement, which
failure or default continues for thirty (30) days after written notice
of such failure or default from Payee to Maker;
(c) The Collateral is attached, seized, levied upon or subjected to
a writ or distress warrant, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors
and the same is not cured within sixty (60) days thereafter;
(d) An application is made by Maker for the appointment of a
receiver trustee or custodian for any of Maker's assets; a petition
under any section or chapter of the Bankruptcy Code of 1976, as amended
(the "Bankruptcy Code") or any similar law or regulation shall be filed
by Maker; or Maker makes an assignment for the benefit of its creditors
or any case or proceeding is filed by Maker for its dissolution,
liquidation, or termination;
(e) Maker ceases to conduct business or is enjoined, restrained or
in any way prevented by court order from conducting all or any material
part of its business affairs; or a petition under any section or
chapter of the Bankruptcy Code or any similar law or regulation is
filed against Maker or any case or proceeding is filed against Maker
for its dissolution or liquidation, and such injunction, restraint or
petition is not dismissed within sixty (60) days after the entry or
filing thereof;
(f) A notice of lien, levy or assessment is filed of record with
respect to the Collateral by the United States, or any department,
agency or instrumentality thereof, or by any state, county, municipal
or other governmental agency, including, without limitation, the
Pension Benefit Guaranty Corporation, or if any taxes or debts owing at
any time or times hereafter to any one of these becomes a lien or
encumbrance upon any of Maker's assets and the same is not released
within sixty (60) days after the same becomes a lien or encumbrance;
provided, however, that Maker shall have the right to contest in good
faith and by appropriate proceedings any such lien, levy or assessment
if Maker provides Payee with a bond or indemnity satisfactory to Payee
assuring the payment of such lien, levy or assessment; or
(g) Maker becomes insolvent or admits in writing its inability to
pay its debts as they mature or communicates its intention to petition
for protection under the Bankruptcy Code or apply for the appointment
of a receiver, trustee or custodian.
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8. Remedies. Upon and after the occurrence and continuance of an Event
of Default, Payee shall have the option, without demand or notice or legal
process of any kind, to declare the unpaid principal of this Note and the Second
Note, together with accrued but unpaid interest thereon and any other sums owing
hereunder, at once due and payable, and to exercise any and all other rights and
remedies available hereunder or under the Security Agreement, or otherwise
available at law or in equity; provided, however, that with respect to Maker's
first failure to pay any amounts owed pursuant to Section 7(a), Maker shall have
thirty (30) days in which to cure such Event of Default after written notice
from ▇▇▇▇▇.
9. Remedies Cumulative. The remedies of Payee, as provided herein,
shall be cumulative and concurrent, and may be pursued singularly, successively
or together, at the sole discretion of Payee, and may be exercised as often as
occasion therefor shall arise. No act of omission or commission of Payee,
including specifically any failure to exercise any right, remedy or recourse,
shall be deemed to be a waiver or release of the same, such waiver or release to
be effected only through a written document executed by ▇▇▇▇▇ and then only to
the extent specifically recited therein. A waiver or release with reference to
any one event shall not be construed as continuing, as a bar to, or as a waiver
or release of, any subsequent right, remedy or recourse as to a subsequent
event.
10. Costs of Collection. Maker promises to pay all of ▇▇▇▇▇'s costs of
collection of every kind, including, but not limited to, all reasonable
attorneys' fees, court costs, and expenses of every kind, incurred by ▇▇▇▇▇ in
connection with the collection (including, but not limited to, collection
through a bankruptcy or other court) or enforcement of this Note or any other
Transaction Document.
11. Waivers. Maker and each surety, endorser, guarantor and other party
now or hereafter liable for the payment of any sums of money payable on this
Note, hereby severally (a) waive demand, presentment for payment, notice of
dishonor, notice of nonpayment (except as provided herein), protest, notice of
protest, notice of intent to accelerate, notice of acceleration and all other
notices, filing of suit and diligence in collecting this Note or enforcing any
other security with respect to same; (b) agree to any substitution,
subordination, exchange or release of any such security or the release of any
parties primarily or secondarily liable hereon; (c) agree that Payee shall not
be required first to institute suit or exhaust its remedies hereunder against
Maker, or others liable or to become liable hereon or to enforce its rights
against them or any security with respect to same; (d) consent to any and all
renewals, extensions, indulgences, releases or changes regardless of the number
of such renewals, extensions, indulgences, releases or changes, without notice
thereof; and (e) agree to the application of any deposit balance, if any, with
Payee as payment or part payment hereon or as an offset hereto. No such conduct
shall affect, impair, release or change the liability of Maker, surety,
endorser, guarantor and any other party. No waiver by Payee of any of its rights
or remedies hereunder or under any other document evidencing or securing this
Note or otherwise shall be considered a waiver of any other subsequent right or
remedy of Payee; no delay or omission in the exercise or endorsement by Payee of
any rights or remedies shall ever be construed as a waiver of the same or any
other right or remedy of Payee; and no exercise or enforcement of any such right
or remedy shall ever be held to exhaust any right or remedy of Payee.
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12. Notices. Except as otherwise provided herein, any notice or demand
which, by the provisions hereof, is required or which may be given to or served
upon Maker or Payee shall be in writing and, if by telecopy, shall be deemed to
have been validly served, given or delivered when transmitted with a copy
immediately mailed by registered or certified mail, if by personal delivery,
shall be deemed to have been validly served, given or delivered upon actual
delivery and, if mailed, shall be deemed to have been validly served, given or
delivered three (3) business days after deposit in the United States mails, as
registered or certified mail, with proper postage prepaid and addressed to the
party to be notified, at the following addresses (or such other address(es) as a
party may designate for itself by like notice):
If to Maker: Micro-ASI, Inc.
Dallas, Texas 75243
Attention: Chief Executive Officer
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Payee: EPI Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: _______________________
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
13. Successors and Assigns. This Note shall be binding upon Maker and
its successors and assigns (including, without limitation, a receiver, trustee
or debtor-in-possession of or for Maker) and shall inure to the benefit of Payee
and its successors and assigns. Maker may not assign its rights hereunder
without the prior written consent of ▇▇▇▇▇, in its sole discretion, other than
by operation of law. Payee may assign all or a part of its interest in this Note
or its rights hereunder to any party without the prior written consent of Maker;
provided, however, that such assignee must agree in writing to be bound by all
the terms and conditions of this Note as the "Payee," including Section 18
hereof.
14. GOVERNING LAW. THIS NOTE SHALL BE DEEMED A CONTRACT AND INSTRUMENT
MADE UNDER THE LAWS OF THE STATE OF TEXAS AND ACCEPTED BY PAYEE IN SAID STATE,
AND ANY AND ALL CLAIMS, DEMANDS OR ACTIONS IN ANY WAY RELATING THERETO OR
INVOLVING ANY DISPUTE BETWEEN ANY OF THE PARTIES TO THIS NOTE, WHETHER ARISING
IN CONTRACT OR TORT, AT LAW, IN EQUITY OR STATUTORILY, SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND/OR GOVERNED BY THE LAWS OF THE STATE OF TEXAS
(EXCEPTING ITS CHOICE OF LAW RULES) AND THE LAWS OF THE UNITED STATES OF
AMERICA. MAKER HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NON-EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF TEXAS AND AGREES
AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING
RELATING TO THE TRANSACTION DOCUMENTS, THE RELATIONSHIPS CREATED THEREBY OR THE
DEBT BY ANY MEANS ALLOWED UNDER TEXAS OR FEDERAL
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LAW. VENUE FOR ANY LEGAL PROCEEDING MAY BE DALLAS, COUNTY, TEXAS; PROVIDED, THAT
PAYEE MAY CHOOSE ANY VENUE IN ANY STATE WHICH IT DEEMS APPROPRIATE IN THE
EXERCISE OF ITS SOLE DISCRETION.
15. Severability. If any provisions of this Note or any payments
pursuant to the terms hereof shall be invalid or unenforceable to any extent,
the remainder of this Note and any other payments hereunder shall not be
affected thereby and shall be enforceable to the greatest extent permitted by
law. Furthermore, in lieu of such invalid or unenforceable provisions, there
shall be added automatically as part of this Note, a provision or provisions as
similar in its or their terms to such invalid or unenforceable provisions as may
be possible and be legal, valid and enforceable.
16. Time of the Essence. Time is of the essence with respect to all of
Maker's obligations and agreements under this Note and the other Transaction
Documents.
17. No Oral Agreements. This Note and the other Transaction Documents
as written represent the final agreement between the Maker and Payee with
respect to the matters contained therein and may not be contradicted by evidence
of prior, contemporaneous or subsequent oral agreements between Maker and ▇▇▇▇▇.
There are no unwritten agreements between Maker and Payee.
18. Offset and Subordination. Maker shall be entitled, at Maker's
option, to credit and offset against any payments due under this Note, an
aggregate amount equal to all amounts owing to Maker by Payee and/or ▇▇▇▇▇ ▇.
▇▇▇▇▇ or their assigns, pursuant to the Purchase Agreement; provided, however
that any sums offset hereunder may not also be offset under the Second Note.
▇▇▇▇▇ agrees to subordinate its rights under this Note in accordance with the
Security Agreement.
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
Note at Dallas, Texas as of the date and year first above written.
MICRO-ASI, INC.
By:
--------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
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EXHIBIT B
SECURED PROMISSORY NOTE
$2,950,000.00 July 2, 2000
Dallas, Texas
FOR VALUE RECEIVED, this Secured Promissory Note (this "Note") is made
by Micro-ASI, Inc., a Texas corporation ("Maker") to EPI Technologies, Inc., a
Texas corporation ("Payee").
1. Payments. Maker hereby promises to pay to the order of Payee the
principal sum of Two Million Nine Hundred Fifty Thousand and no/100 Dollars
($2,950,000) at its office at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇, or such other place as the holder hereof may designate
from time to time in writing, in lawful money of the United States of America
and in immediately available funds, together with interest on the unpaid
principal balance hereof at the rate provided herein from the date of this Note
until payment in full of the indebtedness evidenced by this Note. This Note
shall be payable as follows: (a) on October 5, 2000, Maker shall pay the
interest accrued and unpaid from the date hereof through October 5, 2000; (b) on
January 5, 2001, Maker shall pay the interest accrued and unpaid from October 6,
2000 through January 5, 2001; and (c) the balance shall be paid in fourteen (14)
quarterly installments of principal of $210,714.28 plus accrued and unpaid
interest on the fifth day of each January, April, July and October of each year
commencing on April 5, 2001, with a final payment of all remaining unpaid
principal and accrued and unpaid interest due in one lump sum on July 5, 2004.
Each payment made under clause (c) of this Section 1 shall be applied first to
interest accrued and unpaid on the outstanding principal balance as of such date
of payment and then to the outstanding principal balance due hereunder.
Notwithstanding any provisions contained herein, all unpaid principal and all
accrued and unpaid interest under this Note shall be due and payable upon
receipt of proceeds by Maker from an initial public offering of shares of stock
of Maker. All past due and delinquent sums hereunder, both principal and
interest, shall bear interest at the rate determined below until such sums have
been paid. If any required payment falls due on a Saturday, Sunday or a national
or state bank holiday in Texas, then such date shall be extended to the next
succeeding day that is not a Saturday, Sunday or national or state bank holiday.
2. Interest Rate. The principal amount outstanding from time to time
hereunder shall bear interest calculated on the basis of a 365-day year, at a
rate equal to six percent (6%) per annum, compounded quarterly. Any statements
or invoices sent by ▇▇▇▇▇ to Maker and setting forth the amount of interest
payable hereunder, unless contested in writing to Payee by Maker within thirty
(30) days from the date of such statement or invoice, shall be deemed conclusive
as to the interest actually payable hereunder.
3. Maximum Rate. It is the intention of the parties hereto to conform
strictly to any usury laws in force that apply to this transaction. Accordingly,
all agreements among the parties hereto (including, without limitation, the
Transaction Documents, as defined herein), whether previously existing, now
existing or hereafter arising and whether written or oral, are
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hereby limited so that in no contingency, whether by reason of acceleration of
the maturity of the amounts owing under this Note or otherwise, shall the
interest (and all other sums that are deemed to be interest) contracted for,
charged or received by Payee with respect to this Note, exceed the Highest
Lawful Rate. The "Highest Lawful Rate" means the maximum non-usurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received under the laws of the United States and the
laws of such states as may be applicable thereto which are presently in effect
or, to the extent allowed under such applicable laws of the United States and
the laws of such states, which may hereafter be in effect and which allow a
higher maximum nonusurious interest rate than applicable laws now allow. If,
from any circumstance whatsoever, interest under any agreement to which Maker
and Payee are parties (including, without limitation, under the Transaction
Documents) would otherwise be payable in excess of the Highest Lawful Rate, and
if from any circumstance Payee shall ever receive anything of value deemed
interest by applicable law in excess of the Highest Lawful Rate, then ▇▇▇▇▇'s
receipt of such excess interest shall be deemed a mistake and the same shall, so
long as no Event of Default under this Note shall be continuing, at the option
of Maker, either be repaid to Maker or credited to the unpaid principal;
provided, however, that if an Event of Default shall have occurred and be
continuing, and Payee shall receive excess interest during such period, then
Payee shall have the option of either crediting such excess amount to principal
or refunding such excess amount to Maker. All interest paid or agreed to be paid
to Payee shall, to the extent allowed by applicable law, be amortized, prorated,
allocated, and spread throughout the full period of Maker's credit relationship
with Payee until payment in full of the principal (including the period of any
renewal or extension) so that the interest for such full period shall not exceed
the Highest Lawful Rate.
4. Prepayment. This Note may be prepaid, in whole or in part, without
premium or penalty. All prepayments shall be applied first to accrued interest
and then to principal.
5. Default Rate. Upon the failure of Maker to make any payment of
principal or interest on, or any amount owing in respect of, the indebtedness
evidenced by this Note, or any other amounts payable by Maker to Payee pursuant
to the terms hereof, when due and payable or declared due and payable, the
interest rate applicable to this Note shall be increased by two percent (2%) per
annum above the rate otherwise applicable until all such past due amounts have
been paid in full, at which time the interest rate applicable to this Note shall
revert back to the rate set forth in Section 2 hereof.
6. Transaction Documents. This Note, including the principal, interest
and fees and costs payable pursuant hereto, is secured by that certain Security
Agreement, dated the date hereof (the "Security Agreement"), between Maker and
Payee. This Note, that certain Promissory Note, of even date herewith, in the
amount of $1,613,114, executed by Maker in favor of Payee (the "First Note"),
the Security Agreement and that certain Asset Purchase Agreement, dated the date
hereof, among Maker, ▇▇▇▇▇ ▇. ▇▇▇▇▇, and Payee (the "Purchase Agreements"), and
all documents, instruments and certificates executed and delivered in connection
herewith and therewith, are sometimes hereinafter collectively referred to as
the "Transaction Documents."
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7. Event of Default. The occurrence of any one or more of the following
shall constitute an "Event of Default" hereunder.
(a) Maker shall fail to pay any principal, interest or other amounts
when due and payable or declared due and payable (whether at maturity,
by acceleration or otherwise) under this Note, the First Note, or that
certain Sublease, dated as of the date hereof, between Maker and Payee
within ten (10) days of receipt of written notice of such failure to
pay such amount on the due date thereof, except as provided in Section
7.04 of the Purchase Agreement;
(b) Maker shall fail or neglect to perform, keep or observe any
material provision, condition, covenant or warranty contained in this
Note or the First Note or the Security Agreement to which it is a party
(other than as set forth in Section 7(a) of this Note) or an event of
default shall occur under the Security Agreement, which failure or
default continues for thirty (30) days after notice of such failure or
default from Payee to Maker;
(c) The Collateral is attached, seized, levied upon or subjected to
a writ or distress warrant, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors
and the same is not cured within sixty (60) days thereafter;
(d) An application is made by Maker for the appointment of a
receiver trustee or custodian for any of Maker's assets; a petition
under any section or chapter of the Bankruptcy Code of 1976, as amended
(the "Bankruptcy Code") or any similar law or regulation shall be filed
by Maker; or Maker makes an assignment for the benefit of its creditors
or any case or proceeding is filed by Maker for its dissolution,
liquidation, or termination;
(e) Maker ceases to conduct business or is enjoined, restrained or
in any way prevented by court order from conducting all or any material
part of its business affairs; or a petition under any section or
chapter of the Bankruptcy Code or any similar law or regulation is
filed against Maker or any case or proceeding is filed against Maker
for its dissolution or liquidation, and such injunction, restraint or
petition is not dismissed within sixty (60) days after the entry or
filing thereof;
(f) A notice of lien, levy or assessment is filed of record with
respect to the Collateral by the United States, or any department,
agency or instrumentality thereof, or by any state, county, municipal
or other governmental agency, including, without limitation, the
Pension Benefit Guaranty Corporation, or if any taxes or debts owing at
any time or times hereafter to any one of these becomes a lien or
encumbrance upon any of Maker's assets and the same is not released
within sixty (60) days after the same becomes a lien or encumbrance;
provided, however, that Maker shall have the right to contest in good
faith and by appropriate proceedings any such lien, levy or assessment
if Maker provides
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Payee with a bond or indemnity satisfactory to Payee assuring the
payment of such lien, levy or assessment; or
(g) Maker becomes insolvent or admits in writing its inability to
pay its debts as they mature or communicates its intention to petition
for protection under the Bankruptcy Code or apply for the appointment
of a receiver, trustee or custodian.
8. Remedies. Upon and after the occurrence and continuance of an Event
of Default, Payee shall have the option, without demand or notice or legal
process of any kind, to declare the unpaid principal of this Note and the First
Note, together with accrued but unpaid interest thereon and any other sums owing
hereunder, at once due and payable, and to exercise any and all other rights and
remedies available hereunder or under the Security Agreement, or otherwise
available at law or in equity; provided, however, that with respect to Maker's
first failure to pay any amounts owed pursuant to Section 7(a), Maker shall have
thirty (30) days in which to cure such Event of Default after written notice
from ▇▇▇▇▇.
9. Remedies Cumulative. The remedies of Payee, as provided herein,
shall be cumulative and concurrent, and may be pursued singularly, successively
or together, at the sole discretion of Payee, and may be exercised as often as
occasion therefor shall arise. No act of omission or commission of Payee,
including specifically any failure to exercise any right, remedy or recourse,
shall be deemed to be a waiver or release of the same, such waiver or release to
be effected only through a written document executed by ▇▇▇▇▇ and then only to
the extent specifically recited therein. A waiver or release with reference to
any one event shall not be construed as continuing, as a bar to, or as a waiver
or release of, any subsequent right, remedy or recourse as to a subsequent
event.
10. Costs of Collection. Maker promises to pay all of ▇▇▇▇▇'s costs of
collection of every kind, including, but not limited to, all reasonable
attorneys' fees, court costs, and expenses of every kind, incurred by ▇▇▇▇▇ in
connection with the collection (including, but not limited to, collection
through a bankruptcy or other court) or enforcement of this Note or any other
Transaction Document.
11. Waivers. Maker and each surety, endorser, guarantor and other party
now or hereafter liable for the payment of any sums of money payable on this
Note, hereby severally (a) waive demand, presentment for payment, notice of
dishonor, notice of nonpayment (except as provided herein), protest, notice of
protest, notice of intent to accelerate, notice of acceleration and all other
notices, filing of suit and diligence in collecting this Note or enforcing any
other security with respect to same; (b) agree to any substitution,
subordination, exchange or release of any such security or the release of any
parties primarily or secondarily liable hereon; (c) agree that Payee shall not
be required first to institute suit or exhaust its remedies hereunder against
Maker, or others liable or to become liable hereon or to enforce its rights
against them or any security with respect to same; (d) consent to any and all
renewals, extensions, indulgences, releases or changes regardless of the number
of such renewals, extensions, indulgences, releases or changes, without notice
thereof; and (e) agree to the application of any deposit balance, if any, with
Payee as payment or part payment hereon or as an offset hereto. No such conduct
shall affect, impair, release or change the liability of Maker, surety,
endorser, guarantor and any other party. No waiver by ▇▇▇▇▇ of any of its rights
or remedies hereunder or under any other
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document evidencing or securing this Note or otherwise shall be considered a
waiver of any other subsequent right or remedy of Payee; no delay or omission in
the exercise or endorsement by Payee of any rights or remedies shall ever be
construed as a waiver of the same or any other right or remedy of Payee; and no
exercise or enforcement of any such right or remedy shall ever be held to
exhaust any right or remedy of Payee.
12. Notices. Except as otherwise provided herein, any notice or demand
which, by the provisions hereof, is required or which may be given to or served
upon Maker or Payee shall be in writing and, if by telecopy, shall be deemed to
have been validly served, given or delivered when transmitted with a copy
immediately mailed by registered or certified mail, if by personal delivery,
shall be deemed to have been validly served, given or delivered upon actual
delivery and, if mailed, shall be deemed to have been validly served, given or
delivered three (3) business days after deposit in the United States mails, as
registered or certified mail, with proper postage prepaid and addressed to the
party to be notified, at the following addresses (or such other address(es) as a
party may designate for itself by like notice):
If to Maker: Micro-ASI, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Payee: EPI Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: _______________________
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
13. Successors and Assigns. This Note shall be binding upon Maker and
its successors and assigns (including, without limitation, a receiver, trustee
or debtor-in-possession of or for Maker) and shall inure to the benefit of Payee
and its successors and assigns. Maker may not assign its rights hereunder
without the prior written consent of ▇▇▇▇▇, in its sole discretion, other than
by operation of law. Payee may assign all or a part of its interest in this Note
or its rights hereunder to any party without the prior written consent of Maker;
provided, however, that such assignee must agree in writing to be bound by all
the terms and conditions of this Note as the "Payee," including Section 18
hereof.
14. GOVERNING LAW. THIS NOTE SHALL BE DEEMED A CONTRACT AND INSTRUMENT
MADE UNDER THE LAWS OF THE STATE OF TEXAS AND ACCEPTED BY PAYEE IN SAID STATE,
AND ANY AND ALL CLAIMS, DEMANDS OR ACTIONS IN ANY WAY RELATING THERETO OR
INVOLVING ANY DISPUTE BETWEEN ANY OF THE PARTIES TO THIS NOTE, WHETHER ARISING
IN CONTRACT OR TORT, AT LAW, IN EQUITY OR STATUTORILY, SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND/OR GOVERNED BY THE LAWS OF THE STATE OF TEXAS
(EXCEPTING ITS CHOICE OF LAW RULES) AND
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THE LAWS OF THE UNITED STATES OF AMERICA. MAKER HEREBY IRREVOCABLY SUBMITS
ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE
STATE OF TEXAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON
IT IN ANY LEGAL PROCEEDING RELATING TO THE TRANSACTION DOCUMENTS, THE
RELATIONSHIPS CREATED THEREBY OR THE DEBT BY ANY MEANS ALLOWED UNDER TEXAS OR
FEDERAL LAW. VENUE FOR ANY LEGAL PROCEEDING MAY BE DALLAS, COUNTY, TEXAS;
PROVIDED, THAT PAYEE MAY CHOOSE ANY VENUE IN ANY STATE WHICH IT DEEMS
APPROPRIATE IN THE EXERCISE OF ITS SOLE DISCRETION.
15. Severability. If any provisions of this Note or any payments
pursuant to the terms hereof shall be invalid or unenforceable to any extent,
the remainder of this Note and any other payments hereunder shall not be
affected thereby and shall be enforceable to the greatest extent permitted by
law. Furthermore, in lieu of such invalid or unenforceable provisions, there
shall be added automatically as part of this Note, a provision or provisions as
similar in its or their terms to such invalid or unenforceable provisions as may
be possible and be legal, valid and enforceable.
16. Time of the Essence. Time is of the essence with respect to all of
Maker's obligations and agreements under this Note and the other Transaction
Documents.
17. No Oral Agreements. This Note and the other Transaction Documents
as written represent the final agreement between the Maker and Payee with
respect to the matters contained therein and may not be contradicted by evidence
of prior, contemporaneous or subsequent oral agreements between Maker and ▇▇▇▇▇.
There are no unwritten agreements between Maker and Payee.
18. Offset and Subordination. Maker shall be entitled, at Maker's
option, to credit and offset against any payments due under this Note, an
aggregate amount equal to all amounts owing to Maker by Payee and/or ▇▇▇▇▇ ▇.
▇▇▇▇▇ or their assigns, pursuant to the Purchase Agreement; provided, however,
that any sums offset hereunder may not also be offset under the First Note.
▇▇▇▇▇ agrees to subordinate its rights under this Note in accordance with the
Security Agreement.
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
Note at Dallas, Texas as of the date and year first above written.
MICRO-ASI, INC.
By:
--------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
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Exhibit C
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), dated as of July 2, 2000, is
by and between MICRO-ASI, INC., a Texas corporation (the "Debtor"), whose
address is ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and
EPI TECHNOLOGIES, INC., a Texas corporation (the "Secured Party"), whose address
is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
RECITALS:
A. The Debtor has made and delivered to the Secured Party those certain
promissory notes, of even date herewith, (i) in the principal amount of
$1,613,114 (the "First Note") and (ii) in the principal amount of $2,950,000
(the "Second Note") (as the same may be amended, renewed, extended, restated,
replaced, substituted, supplemented or otherwise modified from time to time,
being hereinafter collectively referred to as the "Notes");
B. The Secured Party has conditioned its obligations to advance the
funds under the Note upon the execution and delivery of this Agreement by the
Debtor.
NOW THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the following
terms have the following meanings:
"Assets" means those assets transferred to the Debtor by the
Secured Party pursuant to that certain Asset Purchase Agreement, of
even date herewith (the "Purchase Agreement") between the Debtor and
the Secured Party which are listed on Schedule 1.01(c) of the Purchase
Agreement and from which are specifically excluded inventory and
accounts receivable, together with all attachments, components, parts,
equipment, and accessories installed thereon or affixed thereto as of
the date hereof.
"Collateral" has the meaning specified in Section 2.1 of this
Agreement.
"Event of Default" has the meaning specified in the Note.
"Intellectual Property" means the Patents, Patent Assignments,
Trademarks, and Trademark Assignments.
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"Lien" means any lien, mortgage, security interest, tax lien,
pledge, encumbrance, or conditional sale or title retention agreement
or any other interest in property designed to secure the repayment of
the Note or any other obligation, whether arising by agreement,
operation of law, or otherwise.
"Material Adverse Effect" means (a) a material adverse effect
upon the business, operations, properties, assets, or condition
(financial or otherwise) of the Debtor and its subsidiaries take as a
whole or (b) the impairment of the ability of Debtor to perform its
obligations under the Agreement or any of the other Transaction
Documents to which it is a party or of the Secured Party to enforce or
collect any of the Obligations under the Note. In determining whether
any individual event would result in a Material Adverse Effect,
notwithstanding that such event does not of itself have such effect, a
Material Adverse Effect shall be deemed to have occurred if the
cumulative effective of such event and all other then existing events
would result in a Material Adverse Effect.
"Obligations" means the following obligations, indebtedness
and liabilities of the Debtor:
(1) the obligations and indebtedness of the Debtor to the
Secured Party under this Agreement, the Note and the other Transaction
Documents;
(2) all costs and expenses, including, without limitation, all
reasonable attorneys' fees and legal expenses, incurred by the Secured
Party to preserve and maintain the Collateral, collect the obligations
herein described, and enforce this Agreement;
(3) all extensions, renewals, and modifications of any of the
foregoing.
"Patent Assignments" means any written agreement now or
hereafter in existence assigning to the Debtor the Patents, including,
without limitation, the agreements described on Schedule 3 hereto, if
any.
"Patents" means all of the following: (a) all patents, patent
applications, and patentable inventions transferred to the Debtor by
the Secured Party pursuant to the Purchase Agreement, including without
limitation, those set forth on Schedule 3 hereto, if any, and all of
the inventions and improvements described and claimed therein; (b) all
continuations, divisions, renewals, extensions, modifications,
continuations-in-part, or reissues of any of the foregoing; (c) all
income, royalties, profits, damages, awards, and payments relating to
or payable under any of the foregoing; (d) the right to sue for past,
present, and future infringements of any of the foregoing; (e) all
other rights and benefits relating to any of the foregoing throughout
the world; and (f) all goodwill associated with any of the foregoing.
"Patent Security Agreement" means the patent security
agreement to be executed and delivered by the Debtor to the Secured
Party, substantially in the form of Exhibit A hereto, as such agreement
may hereafter be amended, supplemented, or otherwise modified from time
to time.
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"Proceeds" means any "proceeds," as such term is defined in
Article 9 of the UCC and, in any event, shall include, but not be
limited to; (a) any and all proceeds of any insurance, indemnity,
warranty, or guaranty payable to the Debtor from time to time with
respect to any of the Collateral; (b) any and all payments (in any form
whatsoever) made or due and payable to the Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure,
or forfeiture of all or any part of the Collateral by any governmental
authority (or any person acting under color of governmental authority);
and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Trademark Assignment" means any written agreement now or
hereafter in existence assigning to the Debtor the Trademark including,
without limitation, the agreements identified on Schedule 3 hereto, if
any.
"Trademarks" means all of the following: (a) all trademarks,
trade names, corporate names, company names, business names, fictitious
business names, trade styles, service marks, logos, other business
identifiers, prints and labels on which any of the foregoing have
appeared or appear, all registrations and recordings thereof, and all
applications in connection therewith including registrations,
recordings, and applications in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any
state thereof, or any other country or any political subdivision
thereof, transferred to the Debtor by the Secured Party pursuant to the
Purchase Agreement including, without limitation, those described in
Schedule 3 hereof; (b) all reissues, extensions, and renewals thereof;
(c) all income, royalties, damages and payments now or hereafter
relating to or payable under any of the foregoing including damages or
payments for past or future infringements of any of the foregoing; (e)
the right to sue for past, present, and future infringements of any of
the foregoing; (f) all rights corresponding to any of the foregoing
throughout the world; and (g) all goodwill associated with and
symbolized by any of the foregoing.
"UCC" means the Uniform Commercial Code as in effect in the
State of Texas; provided, however, that if by mandatory provisions of
law, the perfection or effect of perfection or non-perfection of the
security interest created hereunder in any Collateral is governed by
the Uniform Commercial Code as in effect on or after the date hereof in
any other jurisdiction, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof
relating to such perfection or the effect of perfection or
non-perfection.
Section 1.2. Other Definitional Provisions. References to "Sections",
"subsections", "Exhibits", and "Schedules" shall be to Sections, subsections,
Exhibits, and Schedules, respectively, of this Agreement unless otherwise
specifically provided. All definitions contained in this Agreement are equally
applicable to the singular and plural forms of the terms defined. All references
to statutes and regulations shall include any amendments of the same and any
successor statutes and regulations. References to particular sections of the UCC
should be read to refer also to parallel sections of the Uniform Commercial Code
as enacted in each state where any portion of the Collateral is or may be
located.
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ARTICLE II
SECURITY INTEREST
Section 2.1 Security Interest. As collateral security for the prompt
payment and performance in full when due of the Obligations (whether at stated
maturity, by acceleration, or otherwise), the Debtor hereby pledges and assigns
(as collateral) to the Secured Party, and grants to the Secured Party a
continuing lien on, and first and senior security interest in, all of the
Debtor's right, title, and interest in and to the following, wherever located
(collectively, the "Collateral"):
(a) all of the Assets; and
(b) all Intellectual Property;
Section 2.2 The Debtor Remains Liable. Notwithstanding anything to the
contrary contained herein, (a) the Debtor shall remain liable under the
contracts, agreements, documents and instruments included in the Collateral to
the extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by the Secured Party of any of its rights hereunder shall not
release the Debtor from any of its duties or obligations under the contracts,
agreements, documents and instruments included in the Collateral, and (c) the
Secured Party shall not have any indebtedness, liability or obligation under any
of the contracts, agreements, documents and instruments included in the
Collateral by reason of this Agreement, nor shall the Secured Party be obligated
to perform any of the obligations or duties of the Debtor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Secured Party to enter into this Agreement and to extend
credit under the Note, the Debtor represents and warrants to the Secured Party
that:
Section 3.1 Title. The Debtor is the legal and beneficial owner of the
Collateral free and clear of any Lien or other encumbrance of any nature
whatsoever other than (a) the Liens and security interests created by this
Agreement and the other Transaction Documents; (b) Liens in favor of a senior
lender to Debtor; and (c) any claim to the Assets by any party arising from
anything other than any action by Debtor after the date hereof (the "Permitted
Liens").
Section 3.2 Financing Statements. No financing statement, security
agreement, or other Lien instrument covering all or any part of the Collateral
is on file in any public office, except as may have been filed in connection
with any Permitted Lien.
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Section 3.3 Principal Place of Business. The principal place of
business and chief executive office of the Debtor, and the office where the
Debtor keeps its books and records, is located at the address of the Debtor
shown at the beginning of this Agreement.
Section 3.4 Location of Collateral. All Collateral is or will be
located at the places specified on Schedule 1 hereto. If any such location is
leased by the Debtor, the name and address of the landlord leasing such location
is identified on Schedule 1 hereto. Upon completion of the transactions
contemplated by the Purchase Agreement, the Debtor will have exclusive
possession and control of the Collateral, except for the Permitted Liens.
Section 3.5 Perfection. Upon the filing of Uniform Commercial Code
financing statements in the jurisdictions listed on Schedule 2 attached hereto,
the filing of the Patent Security Agreement with the United States Patent and
Trademark Office, the security interest in favor of the Secured Party created
herein will constitute a valid and perfected Lien upon and security interest in
the Collateral (including Patents and Trademarks), subject to no equal or prior
Liens, other than Permitted Liens.
ARTICLE IV
COVENANTS
The Debtor covenants and agrees with the Secured Party that, until the
Obligations are paid and performed in full and all commitments of the Secured
Party to the Debtor have been terminated:
Section 4.1 Encumbrances. The Debtor shall not create, permit, or
suffer to exist, and shall defend the Collateral against, any Lien or other
encumbrance on the Collateral (other than Permitted Liens), and shall defend the
Debtor's rights in the Collateral and the Secured Party's pledge and collateral
assignment of and security interest in the Collateral against the claims and
demands of all persons, other than holders of Permitted Liens. The Debtor shall
do nothing to impair the rights of the Secured Party in the Collateral.
Section 4.2 Disposition of Collateral. Except as expressly permitted by
the terms of the Transaction Documents and except as in the ordinary course of
business to non-affiliate third parties, the Debtor shall not sell, lease,
assign (by operation of law or otherwise), or otherwise dispose of, or grant any
option with respect to, the Collateral or any part thereof without the prior
written consent of the Secured Party. Notwithstanding the foregoing, to the
extent that the Debtor collects or receives cash or other cash collateral, the
Debtor shall be entitled to make payments to its parent company or affiliates or
non-affiliated third party creditors of its parent company or its affiliates in
connection with the ordinary business operations of the Debtor, its parent
corporation or affiliates.
Section 4.3 Further Assurances. At any time and from time to time, upon
the request of the Secured Party, and at the sole expense of the Debtor, the
Debtor shall promptly execute and deliver all such further agreements, documents
and instruments and take such further action as the Secured Party may reasonably
deem necessary or appropriate to preserve and perfect its
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security interest in and pledge and collateral assignment of the Collateral and
carry out the provisions and purposes of this Agreement or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder with respect to
any of the Collateral. Without limiting the generality of the foregoing, the
Debtor shall (a) execute and deliver to the Secured Party such financing
statements as the Secured Party may from time to time require; and (b) execute
and deliver to the Secured Party such other agreements, documents and
instruments as the Secured Party may reasonably require to perfect and maintain
the validity, effectiveness, and priority of the Liens intended to be created by
this Agreement. At any time during the existence of an Event of Default, the
Debtor authorizes the Secured Party to file one or more financing or
continuation statements, and amendments thereto, relating to all or any part of
the Collateral without the signature of the Debtor where permitted by law. A
carbon, photographic, or other reproduction of this Agreement or of any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement and may be filed as a financing statement.
Section 4.4 Insurance. The Debtor will maintain, with financially sound
and reputable companies, insurance policies insuring the Collateral against loss
and business interruption by fire, explosion, theft and such other casualties as
are usually insured against by companies engaged in the same or similar
businesses, and insuring the Debtor against liability for personal injury and
property damage relating to the Collateral, such policies to be in such amounts
and against at least such risks as are usually insured against, in the same
general area by companies engaged in the same or a similar business. The Debtor
shall deliver to the Secured Party the original (or a certified copy thereof) of
each policy of insurance and evidence of payment of all premiums therefor.
Section 4.5 Bailees. If any of the Collateral is at any time in the
possession or control of any warehouseman, bailee, or any of the Debtor's agents
or processors, the Debtor shall, at the request of the Secured Party, notify
such warehouseman, bailee, agent or processor of the security interest created
hereunder and shall instruct such person to hold such Collateral for the Secured
Party's account, subject to the Secured Party's instructions and the right of
holders of Permitted Liens.
Section 4.6 Inspection Rights. After reasonable notice and during
regular business hours, unless an Event of Default has occurred and is
continuing, in which case at all times and without any requirement of notice the
Debtor shall permit the Secured Party and its representatives to examine,
inspect, and audit the Collateral.
Section 4.7 Mortgagee and Landlord Waivers. As to each location where
Collateral is located, the Debtor shall use commercially reasonable efforts to
cause each mortgagee of real property owned by the Debtor and each landlord of
real property leased by the Debtor to execute and deliver instruments reasonably
satisfactory in form and substance to the Secured Party by which such mortgagee
or landlord waives its rights, if any, in the Collateral.
Section 4.8 Corporate Changes. The Debtor shall not change its name,
identity, or corporate structure in any manner that might make any financing
statement filed in connection with this Agreement seriously misleading unless
the Debtor shall have given the Secured Party ten (10) days prior written notice
thereof and shall have taken all action reasonably deemed necessary or
appropriate by the Secured Party to protect its Liens and the perfection and
priority
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thereof. The Debtor shall not change its principal place of business, chief
executive office, or the place where it keeps its books and records unless it
shall have given the Secured Party ten (10) days prior written notice thereof
and shall have taken all action reasonably deemed necessary or appropriate by
the Secured Party to cause its security interest in the Collateral to be
perfected with the priority required by this Agreement.
Section 4.9 Books and Records; Information. The Debtor shall keep
accurate and complete books and records of the Collateral and the Debtor's
business and financial condition. The Debtor shall from time to time at the
request of the Secured Party deliver to the Secured Party such information
regarding the Collateral as the Secured Party may reasonably request, including,
without limitation, lists and descriptions of the Collateral and evidence of the
identity and existence of the Collateral.
Section 4.10 Warehouse Receipts Non-Negotiable. The Debtor agrees that
if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued in respect of any of the Collateral, such warehouse receipt or receipt in
the nature thereof shall not be "negotiable" (as such term is used in Section
7.104 of the UCC) unless such warehouse receipt or receipt in the nature thereof
is delivered to the Secured Party.
Section 4.11 Notification. The Debtor shall promptly notify the Secured
Party of (a) any Lien, encumbrance, or claim that has attached to or been made
or asserted against any of the Collateral, other than Permitted Liens; (b) any
material change in the nature of the Collateral; (c) any material damage to or
loss of Collateral; and (d) the occurrence of any other event or condition that
could reasonably be expected to have a Material Adverse Effect.
Section 4.12 Intellectual Property. To the extent that the failure to
do so could reasonably be expected to result in a Material Adverse Effect:
(a) The Debtor shall prosecute diligently all applications in
respect of Intellectual Property, now or hereafter pending.
(b) The Debtor shall preserve and maintain all of its rights
in the Intellectual Property and shall protect the Intellectual
Property from infringement, unfair competition, cancellation, or
dilution by all appropriate action including the commencement and
prosecution of legal proceedings to recover damages for infringement
and to defend and preserve its rights in the Intellectual Property.
(c) The Debtor shall not abandon any of the Intellectual
Property.
(d) Except as permitted pursuant to the Transaction Documents,
the Debtor shall not sell or assign any of its interest in, or grant
any license under (except as permitted by Section 5.5 hereof), any of
the Intellectual Property without the prior written consent of the
Secured Party, which consent shall not be unreasonably withheld, and
shall maintain the quality of any and all products and services with
respect to which the Intellectual Property is used. The Debtor shall
not enter into any material agreement, including, but not limited to
any licensing agreement, that is inconsistent with the Debtor's
obligations under this Agreement or any of the Transaction Documents.
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(e) Upon the occurrence of any event that would require any
addition to or modification of Schedule 3 hereto or upon the request of
the Secured Party, the Debtor shall furnish to the Secured Party
statements and schedules further identifying the Intellectual Property
and such other rights in connection with the Intellectual Property as
the Secured Party may reasonably request. Promptly upon the request of
the Secured Party, the Debtor shall modify this Agreement by amending
Schedule 3 hereto to include any Intellectual Property that becomes
part of the Collateral.
(f) If an Event of Default shall have occurred and be
continuing, the Debtor shall use its best efforts to obtain any
consents, waivers, or agreements necessary to enable the Secured Party
to exercise its rights and remedies with respect to the Intellectual
Property.
(g) The Debtor will concurrently herewith execute and deliver
to the Secured Party the Patent Security Agreement, and all other
documents, instruments and other items as may be necessary for the
Secured Party to file the Patent Security Agreement with the United
States Patent and Trademark Office and any similar domestic or foreign
office, department or agency.
ARTICLE V
RIGHTS OF THE SECURED PARTY
Section 5.1 Power of Attorney. Subject to the rights of holders of
Permitted Liens, the Debtor hereby irrevocably constitutes and appoints the
Secured Party and any officer or agent thereof, with full power of substitution,
as its true and lawful attorney-in-fact with full irrevocable power and
authority in the name of the Debtor or in its own name, to take after the
occurrence and during the continuance of an Event of Default, any and all action
and to execute any and all documents and instruments which the Secured Party at
any time and from time to time deems necessary or reasonably desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, the Debtor hereby gives the Secured Party the power and right
on behalf of the Debtor and in its own name to do any of the following after the
occurrence and during the continuance of an Event of Default, after notice to or
the consent of the Debtor:
(a) to demand, sue for, collect, or receive in the name of the
Debtor or in its own name, any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral and,
in connection therewith, endorse checks, notes, drafts, acceptances,
money orders, documents of title, or any other instruments for the
payment of money under the Collateral or any policy of insurance;
(b) to pay or discharge taxes, Liens, or other encumbrances
levied or placed on or threatened against the Collateral;
(c) (i) to receive payment of and receipt for any and all
monies, claims, and other amounts due and to become due at any time in
respect of or arising out of any
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Collateral; (ii) to sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, proxies, stock powers, verifications, and notices
in connection with accounts and other documents relating to the
Collateral; (iii) to commence and prosecute any suit, action, or
proceeding at law or in equity in any court of competent jurisdiction
to collect the Collateral or any part thereof and to enforce any other
right in respect of any Collateral; (iv) to defend any suit, action, or
proceeding brought against the Debtor with respect to any Collateral;
(v) to settle, compromise, or adjust any suit, action, or proceeding
described above and, in connection therewith, to give such discharges
or releases as the Secured Party may deem appropriate; (vi) to exchange
any of the Collateral for other property upon any merger,
consolidation, reorganization, recapitalization, or other readjustment
of the issuer thereof and, in connection therewith, deposit any of the
Collateral with any committee, depositary, transfer agent, registrar,
or other designated agency upon such terms as the Secured Party may
determine; (vii) to add or release any guarantor, indorser, surety, or
other party to any of the Collateral; (viii) to renew, extend, or
otherwise change the terms and conditions of any of the Collateral;
(ix) to grant or issue any exclusive or nonexclusive license under or
with respect to any of the Intellectual Property; (x) to endorse the
Debtor's name on all applications, documents, papers, and instruments
necessary or desirable in order for the Secured Party to use any of the
Intellectual Property; (xi) to make, settle, compromise, or adjust any
claims under or pertaining to any of the Collateral (including claims
under any policy of insurance); and (xii) to sell, transfer, pledge,
convey, make any agreement with respect to or otherwise deal with any
of the Collateral as fully and completely as though the Secured Party
were the absolute owner thereof for all purposes, and to do, at the
Secured Party's option and the Debtor's expense, at any time, or from
time to time, all acts and things which the Secured Party deems
necessary to protect, preserve, maintain, or realize upon the
Collateral and the Secured Party's security interest therein.
This power of attorney is a power coupled with an interest and shall be
irrevocable. The Secured Party shall be under no duty to exercise or withhold
the exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to the Secured Party in this Agreement, and shall not be
liable for any failure to do so or any delay in doing so. This power of attorney
is conferred on the Secured Party solely to protect, preserve, maintain, and
realize upon its security interest in the Collateral. The Secured Party shall
not be responsible for any decline in the value of the Collateral and shall not
be required to take any steps to preserve rights against prior parties or to
protect, preserve, or maintain any Lien given to secure the Collateral.
Section 5.2 Setoff. To the extent permitted in the other Transaction
Documents, after the occurrence and during the continuation of an Event of
Default, the Secured Party shall have the right to set off and apply against the
Obligations, at any time and without notice to the Debtor, any and all deposits
(general or special, time or demand, provisional or final) or other sums at any
time credited by or owing from the Secured Party to the Debtor whether or not
the Obligations are then due. The rights and remedies of the Secured Party
hereunder are in addition to other rights and remedies (including, without
limitation, other rights of setoff) that the Secured Party may have.
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Section 5.3 Assignment by the Secured Party. The Secured Party may at
any time assign or otherwise transfer all or any portion of its rights and
obligations under this Agreement and the other Transaction Documents (including,
without limitation, the Obligations) to any other person, to the extent
permitted by the Transaction Documents, and such person shall thereupon become
vested with all the benefits thereof granted to the Secured Party herein or
otherwise.
Section 5.4 Performance by the Secured Party. If the Debtor shall fail
to perform any covenant or agreement contained in this Agreement, the Secured
Party may perform or attempt to perform such covenant or agreement on behalf of
the Debtor. In such event, the Debtor shall, at the request of the Secured
Party, promptly pay any amount expended by the Secured Party in connection with
such performance or attempted performance to the Secured Party, together with
interest thereon at the maximum rate permitted under the Note from and including
the date of such expenditure to but excluding the date such expenditure is paid
in full. Notwithstanding the foregoing, it is expressly agreed that the Secured
Party shall not have any liability or responsibility for the performance of any
obligation of the Debtor under this Agreement.
Section 5.5 License. If no Event of Default shall have occurred and be
continuing, the Debtor shall have the exclusive, non-transferrable right and
license to use the Intellectual Property in the ordinary course of business and
the exclusive right to grant to other persons licenses and sublicenses with
respect to the Intellectual Property for full and fair consideration. The Debtor
agrees not to sell or assign its interest in, or grant any sublicense under, the
license granted under this Section 5.5 without the prior written consent of the
Secured Party, which consent shall not be unreasonably withheld.
Section 5.6. Subordination. Simultaneously with, and conditioned upon,
the payment in full of the First Note, all rights of Secured Party under this
Agreement and the Notes shall be subordinated to any senior lender to Debtor, as
designated by Debtor from time to time (the "Senior Lenders"), and Secured Party
agrees to execute such documents as Debtor may request to subordinate Secured
Party's Liens, payment rights, and remedies to the Liens, rights, and remedies
of the Senior Lenders; provided, however, Secured Party will retain a first Lien
on the Intellectual Property.
ARTICLE VI
DEFAULT
Section 6.1 Rights and Remedies. If an Event of Default under this
Agreement or the Note shall have occurred and be continuing, the Secured Party
shall have the following rights and remedies, subject to the rights of the
holders of the Permitted Liens:
(a) In addition to all other rights and remedies granted to
the Secured Party in this Agreement, the Note or by applicable law, the
Secured Party shall have all of the rights and remedies of the Secured
Party under the UCC (whether or not the UCC applies to the affected
Collateral). Without limiting the generality of the foregoing, the
Secured Party may (i) without demand or notice to the Debtor, collect,
receive, or take possession of the Collateral or any part thereof and
for that purpose the Secured Party may enter
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upon any premises on which the Collateral is located and remove the
Collateral therefrom or render it inoperable, and/or (ii) sell, lease,
or otherwise dispose of the Collateral, or any part thereof, in one or
more parcels at public or private sale or sales, at the Secured Party's
offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as may be commercially reasonable or as otherwise
may be permitted by law. The Secured Party shall have the right at any
public sale or sales, and, to the extent permitted by applicable law,
at any private sale or sales, to bid (which bid may be, in whole or in
part, in the form of cancellation of indebtedness) and become a
purchaser of the Collateral or any part thereof free of any right or
equity of redemption on the part of the Debtor, which right or equity
of redemption is hereby expressly waived and released by the Debtor.
Upon the request of the Secured Party, the Debtor shall assemble the
Collateral and make it available to the Secured Party at any place
designated by the Secured Party that is reasonably convenient to the
Secured Party. The Debtor agrees that the Secured Party shall not be
obligated to give more than ten (10) days prior written notice of the
time and place of any public sale or of the time after which any
private sale may take place and that such notice shall constitute
reasonable notice of such matters. The Secured Party shall not be
obligated to make any sale of Collateral if it shall determine not to
do so, regardless of the fact that notice of sale of Collateral may
have been given. The Secured Party may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned
from time to time by announcement at the time and place fixed for sale,
and such sale may, without further notice, be made at the time and
place to which the same was so adjourned. The Debtor shall be liable
for all expenses of retaking, holding, preparing for sale, or the like,
including, without limitation, reasonable attorney fees, legal
expenses, and other costs and expenses incurred by the Secured Party in
connection with the collection of the Obligations and the enforcement
of the Secured Party's rights under this Agreement. The Debtor shall
remain liable for any deficiency if the Proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations
in full. The Secured Party may apply the Collateral against the
Obligations in such order and manner as the Secured Party may elect in
its sole discretion. To the maximum extent permitted by law, the Debtor
waives all rights of marshalling, valuation, and appraisal in respect
of the Collateral. Any cash held by the Secured Party as Collateral and
all cash proceeds received by the Secured Party in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral shall then be applied by the Secured Party against the
Obligations in such order as the Secured Party shall select. Any
surplus of such cash or cash proceeds and interest accrued thereon, if
any, held by the Secured Party and remaining after payment in full of
all the Obligations shall be paid over to the Debtor or to whomsoever
may be lawfully entitled to receive such surplus; provided, however,
that the Secured Party shall have no obligation to invest or otherwise
pay interest on any amounts held by it in connection with or pursuant
to this Agreement.
(b) The Secured Party may cause any or all of the Collateral
held by it to be transferred into the name of the Secured Party or the
name or names of the Secured Party's nominee or nominees.
(c) The Secured Party may exercise any and all rights and
remedies of the Debtor under or in respect of the Collateral,
including, without limitation, any and all
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rights of the Debtor to demand or otherwise require payment of any
amount under, or performance of any provision of, any of the Collateral
and any and all voting rights and corporate powers in respect of the
Collateral.
(d) The Secured Party may collect or receive all money or
property at any time payable or receivable on account of or in exchange
for any of the Collateral, but shall be under no obligation to do so.
(e) On any sale of the Collateral, the Secured Party is hereby
authorized to comply with any limitation or restriction with which
compliance is necessary, in the view of the Secured Party's counsel, in
order to avoid any violation of applicable law or in order to obtain
any required approval of the purchaser or purchasers by any applicable
governmental authority.
(f) For purposes of enabling the Secured Party to exercise its
rights and remedies under this Section 6.1 and enabling the Secured
Party and its successors and assigns to enjoy the full benefits of the
Collateral, the Debtor hereby grants to the Secured Party upon the
occurrence of and during the continuance of an Event of Default an
irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to the Debtor) to use, assign, license,
or sublicense any of the Intellectual Property, including in such
license reasonable access to all media in which any of the licensed
items may be recorded or stored and all computer programs used for the
completion or printout thereof. This license shall also inure to the
benefit of all successors, assigns, and transferees of the Secured
Party.
(g) The Secured Party may require that the Debtor assign all
of its right, title, and interest in and to the Intellectual Property
or any part thereof to the Secured Party or such other person as the
Secured Party may designate pursuant to documents satisfactory to the
Secured Party.
ARTICLE VII
MISCELLANEOUS
Section 7.1 No Waiver; Cumulative Remedies. No failure on the part of
the Secured Party to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power, or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in this Agreement are cumulative
and not exclusive of any rights and remedies provided by law.
Section 7.2 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Debtor and the Secured Party and their
respective successors, and permitted assigns, except that neither party hereto
shall assign any of its rights or obligations under this Agreement except as
permitted by the Transaction Documents.
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Section 7.3 Amendment. The provisions of this Agreement may be amended
or waived only by an instrument in writing signed by the parties hereto.
Section 7.4 Notices. All notices and other communications provided for
in this Agreement shall be given or made in the manner and to the addresses
specified in the Purchase Agreement.
Section 7.5 Governing Law; Venue; Service of Process. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas (other than the conflicts of laws rules thereof) and the applicable laws
of the United States of America. Any action or proceeding against the Debtor
under or in connection with this Agreement or the other Transaction Documents
may be brought in any state or federal court in Dallas County, Texas. The Debtor
hereby irrevocably (a) submits to the nonexclusive jurisdiction of such courts,
and (b) waives any objection it may now or hereafter have as to the venue of any
such action or proceeding brought in such court or that such court is an
inconvenient forum. The Debtor agrees that service of process upon it may be
made by certified or registered mail, return receipt requested, at its address
specified or determined in accordance with the provisions of Section 7.4 of this
Agreement. Nothing in this Agreement or any other Transaction Document shall
affect the right of the Secured Party to serve process in any other manner
permitted by law or shall limit the right of the Secured Party to bring any
action or proceeding against the Debtor or with respect to any of its property
in courts in other jurisdictions. Any action or proceeding by the Debtor against
the Secured Party shall be brought only in a court located in Dallas County,
Texas.
Section 7.6 Headings. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 7.7 Survival of Representations and Warranties. All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, and no investigation by the Secured Party shall affect the
representations and warranties or the right of the Secured Party to rely upon
them.
Section 7.8 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7.9 Waiver of Bond. In the event the Secured Party seeks to
take possession of any or all of the Collateral by judicial process, the Debtor
hereby irrevocably waives any bonds and any surety or security relating thereto
that may be required by applicable law as an incident to such possession, and
waives any demand for possession prior to the commencement of any such suit or
action.
Section 7.10 Severability. Any provision of this Agreement which is
determined by a court of competent jurisdiction to be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement, and any such prohibition or
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unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 7.11 Construction. The Debtor and the Secured Party acknowledge
that each of them has had the benefit of legal counsel of its own choice and has
been afforded an opportunity to review this Agreement with its legal counsel and
that this Agreement shall be construed as if jointly drafted by the Debtor and
the Secured Party.
Section 7.12 Termination. If all of the Obligations shall have been
paid and performed in full, the Secured Party shall, upon the written request of
the Debtor, execute and deliver to the Debtor a proper instrument or instruments
acknowledging the release and termination of the Liens created by this
Agreement, and shall duly assign and deliver to the Debtor (without recourse and
without any representation or warranty) such of the Collateral as may be in the
possession of the Secured Party and has not previously been sold or otherwise
applied pursuant to this Agreement.
Section 7.13 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE DEBTOR HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO
A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE SECURED PARTY IN THE
NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
DEBTOR:
MICRO-ASI, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
SECURED PARTY:
EPI TECHNOLOGIES, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
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Schedule 1
Locations of Assets
EQUIPMENT AND INVENTORY
Name and Address of Landlord of Premises
Location (if any)
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ProLogis Trust
Suite 400 2310 ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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Schedule 2
Jurisdictions for Filing
UCC-1 Financing Statements
Dallas County, Texas
Texas Secretary of State
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Schedule 3
Intellectual Property
PATENTS
Owner of Country of Application Registration Expiration
Record Registration or Registration No. or Filing Date Date
----------------------------- --------------------- ---------------------- ----------------- -----------------------
Micro-ASI U.S. 5475317 12/12/95 12/23/13
Micro-ASI U.S. 6064217 5/16/2000 12/23/13
PATENT APPLICATIONS
Name of Agreement Patent/Company Date of Agreement
---------------------------------------- ------------------------------------ ------------------------------------
Fine Pitch Contact Device 99124831.7/ P.R. of China 11/17/99
Fine Pitch Contact Device 09/193,830 / U.S. 11/17/98
TRADEMARKS
Owner of Country of Application Filing Expiration
Record Registration Trademark or Registration No. Date Date
------------------- -------------------- -------------------- --------------------- ------------- --------------------
Micro-ASI U.S. EPIK 2039318 2/18/97 2/18/07
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