ASSET PURCHASE AGREEMENT
BY AND BETWEEN
MELLES GRIOT, INC.
AND
LASER POWER CORPORATION
December 16, 1999
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..............................................1
Section 1.1 Definitions..............................................1
ARTICLE II SALE AND PURCHASE OF THE ASSETS..........................7
Section 2.1 Sale and Purchase of the Assets..........................7
Section 2.2 Assumption of Liabilities................................7
Section 2.3 Liabilities Not Assumed..................................8
Section 2.4 Purchase Price...........................................9
Section 2.5 Instruments of Conveyance and Transfer..................10
Section 2.6 Transfer of Permits.....................................11
Section 2.7 Further Assurances......................................11
Section 2.8 Diligence in Pursuing Sales of Products.................12
ARTICLE III CLOSING.................................................12
Section 3.1 Closing.................................................12
Section 3.2 Deliveries at Closing...................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER................13
Section 4.1 Corporate Existence.....................................13
Section 4.2 Seller's Authority Relative to this Agreement...........13
Section 4.3 Title to Properties, Etc................................13
Section 4.4 Equipment...............................................14
Section 4.5 Inventory...............................................14
Section 4.6 Customers...............................................14
Section 4.7 Suppliers...............................................14
Section 4.8 Customers and Suppliers.................................14
Section 4.9 Accounts Receivable.....................................14
Section 4.10 Intellectual Property...................................14
Section 4.11 Material Contracts......................................15
Section 4.12 Absence of Certain Changes..............................16
Section 4.13 Tax Matters.............................................17
Section 4.14 No Default; Compliance with Laws........................18
Section 4.15 Litigation..............................................18
Section 4.16 Product Liability.......................................18
Section 4.17 Insurance...............................................18
Section 4.18 Licenses, Permits, Etc..................................18
Section 4.19 Interest in Competitors, Suppliers, Customers, etc......19
Section 4.20 Questionable Payments...................................19
Section 4.21 Year 2000 Compliance....................................19
Section 4.22 At-Will Employees.......................................19
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Section 4.23 No Brokers..............................................19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER.................19
Section 5.1 Corporate Existence.....................................19
Section 5.2 Buyer's Authority Relative to this Agreement............19
Section 5.3 Absence of Litigation...................................20
Section 5.4 No Further Approval.....................................20
ARTICLE VI OTHER MATTERS...........................................20
Section 6.1 Retention Bonus Payments................................20
Section 6.2 American Laser Accounts Receivable......................20
Section 6.3 Balancing Payment.......................................21
ARTICLE VII COVENANTS OF SELLER.....................................21
Section 7.1 Conduct of Business.....................................21
Section 7.2 Access to Information...................................21
Section 7.3 Preservation of Business Organization...................22
Section 7.4 Trade Secrets...........................................22
Section 7.5 Consents of Third Parties...............................22
Section 7.6 Collection of Receivables...............................22
Section 7.7 Supply Contracts........................................22
Section 7.8 Royalties...............................................22
Section 7.10 Acknowledgments by Seller...............................23
Section 7.11 Confidential Information................................23
Section 7.12 Noncompetition Agreement of Seller......................24
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF BUYER......................25
Section 8.1 Seller's Representations and Warranties True at Closing.25
Section 8.2 Approval by Counsel.....................................26
Section 8.3 Opinion of Counsel for Seller...........................26
Section 8.4 No Damage or Destruction................................26
Section 8.5 Absence of Restraint....................................26
Section 8.6 Approvals...............................................26
Section 8.7 Employment Agreements...................................26
ARTICLE IX CONDITIONS TO OBLIGATIONS OF SELLER.....................27
Section 9.1 Buyer's Representations and Warranties True at Closing..27
Section 9.2 Approval by Counsel.....................................27
Section 9.3 Opinion of Buyer's Counsel..............................27
ARTICLE X NATURE OF STATEMENTS; SURVIVAL..........................27
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ARTICLE XI INDEMNITY..............................................28
Section 11.1 Indemnity by Seller....................................28
Section 11.2 Indemnity by Buyer.....................................28
Section 11.3 Third Party Claims.....................................28
Section 11.4 Indemnity Limits.......................................29
Section 11.5 Right of Set-Off.......................................30
ARTICLE XII DISPUTE RESOLUTION.....................................30
Section 12.1 Arbitration............................................30
Section 12.2 Jurisdiction...........................................31
Section 12.3 .......................................................31
ARTICLE XIII TERMINATION............................................31
Section 13.1 Termination............................................31
ARTICLE XIV MISCELLANEOUS..........................................32
Section 14.1 Notices................................................32
Section 14.2 Governing Law..........................................33
Section 14.3 Section Headings.......................................33
Section 14.4 Entire Agreement.......................................33
Section 14.5 Severability...........................................33
Section 14.6 Assignment; Successors and Assigns.....................33
Section 14.7 Amendment..............................................34
Section 14.8 Waiver.................................................34
Section 14.9 Counterparts...........................................34
Section 14.10 Buyer's Remedies for Seller's Breach of Confidentiality
and Noncompetition.....................................34
Section 14.11 Buyer's Right to Specific Performance..................34
Section 14.12 Bulk Sales.............................................34
Section 14.13 Fees and Expenses......................................35
Section 14.14 Prorations and Transfer Taxes..........................35
Section 14.15 Sales Tax..............................................35
Section 14.16 Announcements..........................................35
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SCHEDULES AND EXHIBITS
----------------------
Schedule 1.1(a) Products
Schedule 2.1(a) Equipment
Schedule 2.1(b) Inventory
Schedule 2.1(c) Intellectual Property
Schedule 2.1(d) Accounts Receivable
Schedule 2.1(e) Acquired Contracts
Schedule 2.1(i) Permits
Schedule 4.3 Permitted Liens
Schedule 4.6 Customers of the Business
Schedule 4.7 Suppliers of the Business
Schedule 4.8 Adverse Changes in Customer and Supplier Relationships
Schedule 4.10(a) Licenses and Other Agreements in Respect of Intellectual
Property Listed at Schedule 2.1(c)
Schedule 4.10(a)(1) Intellectual Property Infringements
Schedule 4.10(b) Related Party Ownership of Patents and Inventions
Schedule 4.10(c) New Developments with Respect to Business or Products
Schedule 4.11(a) Material Contracts
Schedule 4.11(b) Non-Assignable Contracts
Schedule 4.12 Absence of Certain Changes
Schedule 4.12(b) Absence of Certain Employee Compensation Changes
Schedule 4.14 No Default; Compliance with Laws
Schedule 4.15(a) Litigation
Schedule 4.15(b) Continuing Orders
Schedule 4.16(a) Seller's Standard Warranties
Schedule 4.16(b) Product Liability Claims Not Covered by Insurance
Schedule 4.17 Insurance
Schedule 4.18 Licenses, Permits, Etc.
Schedule 4.19 Interest in Competitors, Suppliers, Customers, etc.
Schedule 5.6 No Inducement Employees
Schedule 6.1 Employees of the Business
Schedule 7.13 Release of Certain Liens
Schedule 8.7 Key Employees
Exhibit A Interim Balance Sheet
Exhibit B ▇▇▇▇ of Sale
Exhibit C Assignment (Acquired Contracts and Accounts Receivable)
Exhibit D Assignment (Intellectual Property)
Exhibit D-1 Assignment (Registered Patents)
Exhibit F Seller's Opinion of Counsel
Exhibit G Buyer's Opinion of Counsel
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") dated as of December
16, 1999, is made and entered into by and between Melles Griot, Inc., a Nevada
corporation ("Buyer"), and Laser Power Corporation, a Delaware corporation
("Seller").
RECITALS
WHEREAS, the parties hereto desire that Seller sell and Buyer purchase
certain operating assets (including fixed assets, inventory, accounts receivable
and intellectual property) of Seller used in and associated with the business of
Seller's Microcavity Laser Division, excluding the 1550 nm laser product line,
(the "BUSINESS"), all in accordance with and subject to the terms and provisions
of this Agreement; and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the execution, delivery and performance of this Agreement.
NOW, THEREFORE, expressly incorporating the foregoing Recitals as part
of the consideration hereof and in further consideration of the premises and of
the mutual representations, warranties, covenants and agreements 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. The following terms, as used herein, have the
following meanings:
"ACCOUNTS RECEIVABLE" shall mean the accounts receivable of Seller
relating to the Business and remaining unpaid at the Closing Date as set forth
on the attached Schedule 2.1(d).
"ACQUIRED CONTRACTS" shall have the meaning ascribed to it in Section
2.1(e) hereof.
"ACQUIRED RECORDS" shall mean copies of all Records relating to the
Business or the Assets.
"ADJUSTMENT FUND" shall have the meaning ascribed to it in Section
2.4(a)(i) hereof.
"ADVANCED ROYALTY PAYMENT" shall have the meaning ascribed to it in
Section 2.4(b)(i) hereof.
"AFFILIATE" shall mean, with respect to any Person, any Person directly
or indirectly controlling, controlled by, or under common control with such
other Person.
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"ASSETS" shall have the meaning ascribed to it in Section 2.1 hereof.
"ASSUMED LIABILITIES" shall have the meaning ascribed to it in Section
2.2 hereof.
"BENEFIT PLAN" means any plan, program, trust, contract, policy or
arrangement which is sponsored by Seller or to which Seller contributes, and
that provides any pension, retirement, profit sharing, bonus, deferred or
incentive compensation, life, health, post-retirement, medical, disability,
accident, stock option, stock purchase, stock appreciation, severance payments,
fringe benefits, vacation pay, holiday pay, sick pay or similar benefit to
employees of the Business, whether or not such plan, program, trust, contract,
policy or arrangement is an "employee benefit plan" within the meaning of
Section 3(3) of ERISA.
"BUSINESS" shall have the meaning ascribed to it in the first Recital
to this Agreement.
"BUYER" shall have the meaning ascribed to it in the first paragraph of
this Agreement.
"CASH PAYMENT" shall have the meaning ascribed to it is Section 2.4
hereof.
"CLOSING" shall have the meaning ascribed to it in Section 3.1 hereof.
"CLOSING BALANCE SHEET" shall have the meaning ascribed to it in
Section 2.4(a)(ii).
"CLOSING DATE" shall have the meaning ascribed to it in Section 3.1
hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" shall have the meaning ascribed to it in
Section 7.11 hereof.
"CONTRACT" shall mean any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES" shall have the meaning ascribed to it in Section 11.1 hereof.
"EMPLOYEES" shall mean employees of the Business as of the date of this
Agreement.
"EQUIPMENT" shall mean the machinery, equipment, computers, hardware,
computer software, furniture, fixtures, vehicles, tools, dies, supplies, and
other tangible personal property set forth on the attached Schedule 2.1(a).
"GAAP" shall mean generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Seller's
Audited Consolidated Financial Statements for the years ending August 31, 1997
and September 30, 1998 were prepared.
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"GOVERNMENTAL AUTHORIZATION" shall mean any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" shall mean any (i) nation, state, county, city,
district, or other jurisdiction of any nature; (ii) federal, state, local,
municipal, foreign or other government; (iii) governmental or quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal); or (iv) multi-national
organization or body; exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"INTELLECTUAL PROPERTY" shall mean any patents, patent applications,
licenses, and Trademarks set forth on Schedule 2.1(c), as well as all patents,
patent applications, licenses, industrial design registrations, utility models,
mask works, mask work registrations, copyrights, copyright registrations,
applications for copyright registration, Trademarks, trade names, trade secrets,
processes, designs, formulas, rights to technology, inventions, licenses,
computer software, all product know-how, including engineering drawings,
engineering notebooks, specifications, designs, manufacturing procedures and
documentation, schematics, blueprints, files, records, notes or computer disks,
tapes or other storage media associated therewith, owned by Seller, licensed to
Seller, used or held for use in connection with the design, manufacture,
fabrication or production of any of the Products, owned by Seller, licensed to
Seller, used or held for use in connection with the Business, and approvals
owned, applied for, held or licensed to or by Seller, related to or in
connection with the Business or the Products.
"INTERIM BALANCE SHEET" shall mean the unaudited balance sheet of the
Assets, dated as of October 31, 1999, attached hereto as Exhibit A.
"INTERIM NET VALUE OF PURCHASED ASSETS" shall mean the net value of
purchased assets set forth on the Interim Balance Sheet.
"INVENTORY" shall mean the inventories of raw materials,
work-in-process and finished Products held for sale, and general stores, spare
parts and other items relating to the Products set forth on the attached
Schedule 2.1(b), including, without limitation, Seller's rights in and to raw
materials previously ordered and currently in transit to the Business, but
excluding any finished products shipped to customers on or before the Closing
Date.
"IRS" shall mean the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KEY EMPLOYEES" shall have the meaning ascribed to it in Section 8.8.
"KNOWLEDGE" Seller will be deemed to have "Knowledge" of a particular
fact or other matter if ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, or ▇▇▇▇▇
▇▇▇▇▇▇:
(a) is actually aware of such fact or other matter; or
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(b) could be expected to discover or otherwise become aware of
such fact or other matter in the course of conducting a reasonably comprehensive
investigation concerning the existence of such fact or other matter.
"LEGAL ACTION" shall have the meaning ascribed to it in Section 11.3(b)
hereof.
"LEGAL REQUIREMENT" shall mean any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"LIENS" shall mean any liabilities, security interests, claims,
charges, conditions, equitable interests, liens, options, mortgages, pledges,
title defects, conditional sales or other title retention agreements,
obligations, commitments or other encumbrances of any nature whatsoever.
"MONTHLY ROYALTY AMOUNTS" shall have the meaning ascribed to it in
Section 2.4(b)(ii).
"NET VALUE OF PURCHASED ASSETS" shall mean that portion of the Purchase
Price which is set forth on the Closing Balance Sheet, as adjusted by the
parties in accordance with Section 2.4(a) of this Agreement.
"OCCUPATIONAL SAFETY AND HEALTH LAW" shall mean any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
"ORDER" shall mean any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" shall mean an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
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"ORGANIZATIONAL DOCUMENTS" shall mean (a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERMITS" shall mean the licenses, permits, approvals and
authorizations of any Governmental Body which are necessary to the conduct of
the Business and which are transferable, set forth on the attached Schedule
2.1(i).
"PERMITTED LIENS" shall mean, (i) liens for taxes not yet due and
payable or being contested in good faith by appropriate proceedings and for
which an adequate reserve has been set aside; (ii) inchoate liens of materialmen
and suppliers and other like liens which have not yet been asserted and which
are incurred in the ordinary course of business securing obligations that are
not overdue; and (iii) those Liens set forth on Schedule 4.3 hereto.
"PERSON" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
other legal or commercial entity or Governmental Body.
"PROCEEDING" shall mean any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"PRODUCTS" shall mean the products listed or described on the attached
Schedule 1.1(a).
"PURCHASE PRICE" shall have the meaning ascribed to it in Section 2.4
hereof.
"REASONABLE BEST EFFORTS" shall mean the reasonable efforts that a
prudent Person desirous of achieving a result would use in similar circumstances
to achieve such result as expeditiously as possible.
"RECORDS" shall mean books, files, and records including any accounting
reports, data processing or computer reports and information used therewith, and
vendor lists, customer lists, mailing lists, personnel records, copies of
business records, computer disks, computer tapes or other storage media,
operating data, property records, production data, royalty statements,
manufacturing and quality control records and other data and databases.
"RETAINED LIABILITIES" shall have the meaning ascribed to it in Section
2.3 hereof.
"ROYALTY PERIOD" shall have the meaning ascribed to it in Section
2.4(b)(ii).
"SELLER" shall have the meaning ascribed to it in the first paragraph
of this Agreement.
"SYSTEMS" shall have the meaning ascribed to it in Section 4.21 hereof.
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"TAX" shall mean any tax (including any income tax, capital gains tax,
value added tax, sales tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other fee,
and any related charge or amount (including any fine, penalty, interest, or
addition to tax), imposed, assessed, or collected by or under the authority of
any Governmental Body or payable pursuant to any tax-sharing agreement or any
other Contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
"TAX RETURN" shall mean any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREATENED" shall mean a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally if made to ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, or ▇▇▇▇▇
▇▇▇▇▇▇, or in writing) or any notice has been given (orally if made to ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, or ▇▇▇▇▇ ▇▇▇▇▇▇, or in writing), or if
Seller has Knowledge of any other event or circumstances that would lead a
prudent Person to conclude that such a claim, Proceeding, dispute, action, or
other matter is likely to be asserted, commenced, taken, or otherwise pursued in
the future.
"TERRITORY" shall have the meaning ascribed to it in Section 7.10(c)
hereof.
"TRADEMARKS" shall mean trademarks and service marks, including the
goodwill associated therewith, trademark and service ▇▇▇▇ registrations, and
applications for trademark and service ▇▇▇▇ registrations.
"YEAR 2000 COMPLIANT" shall have the meaning ascribed to it in Section
4.21 hereof.
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ARTICLE II
SALE AND PURCHASE OF THE ASSETS
Section 2.1 SALE AND PURCHASE OF THE ASSETS. Seller, at the Closing,
will sell, convey, transfer or assign and deliver to Buyer, free and clear of
all Liens, except Permitted Liens and Buyer will purchase from Seller, all
Seller's right, title and interest in and to the Assets (as hereinafter
defined). As used herein, "ASSETS" shall mean the following assets:
(a) the Equipment;
(b) the Inventory;
(c) the Intellectual Property;
(d) the Accounts Receivable;
(e) all rights under any contracts listed in Schedule 2.1(e)
("ACQUIRED CONTRACTS"), except to the extent related to Retained Liabilities;
(f) all rights, claims, commitments and warranties relating to
the Business, and all other rights relating to the Assets;
(g) all prepaid expenses and deposits of the Business having
an ongoing value to Buyer for use in the Business;
(h) the Acquired Records;
(i) the Permits; and
(j) all sales literature, catalogues, art work, promotional
literature and other selling material associated with, used or employed by
Seller in connection with the Business (the "SALES LITERATURE").
Section 2.2 ASSUMPTION OF LIABILITIES.
(a) Subject to the terms and conditions of this Agreement, and
in further consideration for the transfer and delivery of the Assets to the
Buyer, and in reliance on the representations and warranties of Seller herein
contained, Buyer, from and after the Closing Date, shall:
(i) assume and agree to observe, perform and fulfill the
terms and conditions of the Acquired Contracts transferred pursuant to Section
2.1 hereof; provided, however, that there shall exist no default or condition
that, with notice or the passage of time, or both, might constitute a default
with respect to such agreements, and no default will exist upon assignment of
any such agreement to Buyer; and
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(ii) assume and agree to pay and discharge all debts,
liabilities and obligations arising out of the Buyer's conduct of the Business
and the ownership of the Assets (except as provided in Section 2.2(a)(i) above)
of any kind, character or description, whether accrued, absolute, contingent or
otherwise including any and all Product warranty obligations for repairs to
Products (the "Product Repair Claims") that arise before or after the Closing
Date, or any obligations under any of the Permits that arise after the Closing
Date.
(b) The obligations and liabilities which are required to be
assumed by the Buyer under this Section 2.2 are herein referred to as the
"ASSUMED LIABILITIES." The undertakings of the Buyer referred to in this Section
2.2 shall not in any way limit the Buyer's right of recourse for any breach of
the covenants, representations or warranties of the Seller contained in this
Agreement. Nothing contained in this Agreement shall be deemed or construed to
foreclose the Buyer from contesting in good faith the duties and liabilities to
third parties which are assumed by the Buyer pursuant to this Agreement.
Section 2.3 LIABILITIES NOT ASSUMED. Except as specifically provided in
this Agreement (including, without limitation, the terms of Section 2.2 hereof),
regardless of when asserted or claimed, Buyer shall not assume or be bound by
and Seller shall retain and shall be solely responsible for all obligations and
liabilities of Seller and the Business (all such liabilities and obligations
being herein referred to as the "RETAINED LIABILITIES") including, but not
limited to:
(a) any and all liabilities and obligations, whether civil or
criminal in nature, arising out of, relating to or involving the Business and
existing before the Closing or any violation by Seller of any term or provision
of any Legal Requirements, except for warranty obligations provided for in
Section 2.2(a)(ii) hereof;
(b) any and all obligations or liabilities relating to the
Business, the existence of which constitutes a breach of Seller's
representations or warranties under this Agreement;
(c) any and all product liability of Seller (whether or not
asserted on or before or after the Closing Date, but excluding the Product
Repair Claims) in connection with the Business or the Products manufactured,
sold or serviced prior to the Closing Date by Seller or Seller's agents or
produced by any third party and sold or serviced by Seller or Seller's agents
prior to the Closing Date;
(d) any and all Proceeding(s) arising from the conduct of the
Business before the Closing, including any liability arising from any
environmental condition either existing before the Closing or arising from the
conduct of the Business before the Closing;
(e) any income tax liability of Seller and any penalties and
interest related thereto;
(f) any debt or liability for borrowed funds;
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(g) any liability arising out of or related to the sponsorship
of, the responsibility for, contributions to, or any liability in connection
with any Benefit Plan maintained or contributed to by Seller; without limiting
the foregoing, Seller shall be liable for any continuation coverage (including
any penalties, excise taxes or interest resulting from the failure to provide
continuation coverage) required by law due to qualifying events which occur on
or before the Closing Date;
(h) any obligation or liability of Seller or arising from the
Seller's conduct of the Business before the Closing which is not specifically
assumed by the Buyer pursuant to Section 2.2 hereof;
(i) any obligation or liability for increased Worker's
Compensation premiums relating to the period prior to Closing.
Section 2.4 PURCHASE PRICE. Subject to the terms and conditions of this
Agreement, in reliance upon the representations and warranties of Seller
contained herein, and in consideration of the transfer of the Assets described
in Section 2.1 as herein provided, on the Closing Date, Buyer agrees to purchase
the Assets for an aggregate purchase price (the "PURCHASE PRICE") equal to: (i)
the Net Value of Purchased Assets (the "CASH PAYMENT"), plus (ii) royalty
payments as required by Section 2.4(b) hereof.
(a) CASH PAYMENT.
(i) An amount equal to ninety percent (90%) of the Interim
Net Value of Purchased Assets shall be paid to Seller by wire transfer at
Closing. An amount equal to ten percent (10%) of the Interim Net Value of
Purchased Assets shall be held by Buyer pending agreement of the parties on the
Closing Balance Sheet (the "ADJUSTMENT FUND").
(ii) Within ten (10) days following the Closing, Seller
shall provide Buyer with a balance sheet reflecting the Net Value of Purchased
Assets as of the Closing Date ("CLOSING BALANCE SHEET"). Buyer shall have
fifteen (15) days to review the Closing Balance Sheet and to provide Seller with
any proposed adjustments to the Closing Balance Sheet. Seller shall then have
five (5) days thereafter to accept or reject such proposed adjustments.
(iii) Upon agreement of the parties on the Closing Balance
Sheet, and any adjustments thereto pursuant to Section 2.4(a)(ii) above, the
Adjustment Fund shall be distributed as follows:
(1) If the Net Value of Purchased Assets is equal to
the Interim Net Value of Purchased Assets, then the Adjustment Fund shall be
paid to Seller immediately by wire transfer;
(2) If the Net Value of Purchased Assets is greater
than the Interim Net Value of Purchased Assets, then the Adjustment Fund, plus
the difference between the Net Value of Purchased Assets and the Interim Net
Value of Purchased Assets, shall be paid to Seller immediately by wire transfer;
or
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(3) If the Net Value of Purchased Assets is less
than the Interim Net Value of Purchased Assets, then the difference between the
Net Value of Purchased Assets and the Interim Net Value of Purchased Assets
shall be subtracted from the Adjustment Fund and the balance of the Adjustment
Fund, if any, paid to Seller immediately by wire transfer. In the event that the
Adjustment Fund is reduced below $0, then the Seller shall immediately repay to
Buyer any negative balance by wire transfer.
(iv) In the event the parties cannot agree within fifteen
(15) days of Seller's receipt of Buyer's proposed adjustments to the Closing
Balance Sheet, then the parties agree to submit the matter to arbitration
pursuant to Section 12 of this Agreement.
(b) ROYALTY PAYMENT
(i) ADVANCED ROYALTY PAYMENT. Buyer shall pay a portion of
the royalty payment ("ADVANCED ROYALTY PAYMENT") on November 1, 2000, in the
amount of US $920,000.
(ii) ADDITIONAL ROYALTY PAYMENTS. During the period
October 1, 2000 through September 30, 2003 (the "ROYALTY PERIOD"), royalties of
nine and two tenths percent (9.2 %) of the Net Sales Proceeds of the sales of
microcavity laser products invoiced by Buyer in a given month shall accrue,
PROVIDED, HOWEVER, that the sales price of microcavity laser products invoiced
to Affiliates of Buyer during the Royalty Period shall be increased by twelve
percent (12%) for purposes of this royalty calculation ("ROYALTY AMOUNTS") and
shall be paid to Seller, in arrears, in monthly installments by wire transfer to
an account designated by Seller ("MONTHLY ROYALTY AMOUNTS"). Notwithstanding
anything contained herein to the contrary, no Monthly Royalty Amounts shall be
made until the full amount of the Advanced Royalty Payment has been fully offset
by the Royalty Amounts, and PROVIDED FURTHER, that in no event shall the sum of
the Advanced Royalty Payment, and the Monthly Royalty Amounts exceed
US$2,668,000. For purposes of this Agreement, "Net Sales Proceeds" shall mean,
with respect to any microcavity laser products sold by Buyer, the gross amount
billed or invoiced by Buyer to a third party for sales of such products, less
the following items, as allocable to such sales: (i) trade discounts, credits or
allowances, (ii) credits or allowances additionally granted upon returns,
rejections or recalls (except where any such recall arises out of Buyer's or its
Affiliate's gross negligence, willful misconduct or fraud), (iii) freight,
shipping and insurance charges, (iv) taxes, duties or other governmental tariffs
(other than income taxes), and (v) government mandated rebates, if any.
Section 2.5 INSTRUMENTS OF CONVEYANCE AND TRANSFER.
(a) At the Closing, as contemplated hereby, Seller will
execute, acknowledge and deliver to Buyer:
(i) duly executed bills of sale substantially in the forms
attached hereto as Exhibit B transferring the Equipment, Inventory and certain
of the other Assets;
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(ii) a duly executed assignment in the form attached
hereto as Exhibit C transferring the Acquired Contracts and Accounts Receivable,
together with such Uniform Commercial Code financing statements as may be
required in connection with the transfer of the Accounts Receivable;
(iii) duly executed instruments of assignment, transfer or
license in the forms attached hereto as Exhibit D, transferring the Intellectual
Property;
(iv) all Sales Literature and true and complete copies of
all Records; and
(v) such other documents, instruments, certificates and
writings, in form and substance satisfactory to Buyer's counsel, for the
conveyance, sale, transfer and assignment of the Assets as shall be required to
effectively vest in Buyer good and marketable title to the Assets free and clear
of all Liens except Permitted Liens and Seller shall take all such steps as may
be required to put the Buyer in actual possession and operating control of the
Assets as contemplated hereby.
(b) To the extent that the assignment of any lease, license,
Contract, commitment or right shall require the consent of any other party
thereto, this Agreement shall not constitute an agreement to assign the same if
an attempted assignment would constitute a breach thereof; and to the extent
that the transfer of any Permit shall require the consent of the Governmental
Body which issued such Permit, this Agreement shall not constitute an agreement
to transfer any such Permit if an attempted transfer would invalidate such
Permit. Other than with respect to the Intellectual Property, if any lease,
license, Contract, commitment, right, Permit or other asset or property which is
part of the Assets cannot, in the opinion of the Buyer's counsel, be transferred
effectively to the Buyer without the consent of a third party, the Seller shall
thereafter be obligated to use its Reasonable Best Efforts to assure the Buyer
of the benefits of such lease, license, Contract, commitment, right, Permit, or
other asset or property.
Section 2.6 TRANSFER OF PERMITS. The Seller and the Buyer shall, before
and after the Closing, take all reasonable action as may be necessary or
appropriate, in the opinion of the Buyer, to transfer to the Buyer all of the
Permits set forth on Schedule 2.1(i), to the end that the Buyer shall be
substituted for the Seller as the approved party under such Permits.
Section 2.7 FURTHER ASSURANCES. The Seller shall, at the Closing and at
any time and from time to time at the Buyer's request and without further
consideration, execute, acknowledge and deliver such further instruments of
conveyance, sale, transfer, assignment and confirmation in addition to those
delivered pursuant to Section 3.2, and shall take such other action as Buyer may
reasonably request to more effectively (i) convey, sell, transfer and assign to
and vest in Buyer any of the Assets, (ii) confirm the title of Buyer thereto,
(iii) deliver the Assets to Buyer, (iv) assist Buyer in exercising rights with
respect thereto, and (v) put Buyer in actual possession and operating control of
any of the Assets.
Section 2.8 DILIGENCE IN PURSUING SALES OF PRODUCTS. Buyer shall use
Reasonable Best Efforts to market and sell the microcavity laser products during
the Royalty Period at prices competitive in the microcavity laser market.
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ARTICLE III
CLOSING
Section 3.1 CLOSING. The closing of the transactions contemplated by
this Agreement (referred to herein as the "CLOSING") shall take place at the
offices of ▇▇▇▇▇▇ Godward LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ at [______] [__].m. on December ___, 1999, or such other
place, time and date to which the parties may agree. The date of the Closing is
referred to herein as the "CLOSING DATE." Failure to consummate the transactions
contemplated hereby on the Closing Date shall not result in a termination of
this Agreement or relieve any party hereto of any obligation hereunder.
Section 3.2 DELIVERIES AT CLOSING.
(a) At the Closing, Buyer shall deliver the following to
Seller:
(i) ninety percent (90%) of the Interim Net Value of
Purchased Assets as provided for in Section 2.4(a)(i);
(ii) the opinion of counsel, agreements, documents, and
certificates required in Article 9 of the Agreement;
(iii) certified copies of the resolutions duly adopted by
the Board of Directors of Buyer constituting all necessary corporate
authorization for the consummation by Buyer of the transactions contemplated
hereby; and
(iv) certificates of incumbency for all relevant officers
and directors of Buyer executing this Agreement and any other documents pursuant
to this Agreement.
(b) At the Closing, Seller shall deliver the following to
Buyer:
(i) such documents, instruments, certificates and writings
required to be delivered by Seller pursuant to Section 2.5;
(ii) the opinion of counsel, agreements, documents and
certificates required by Article 8 of this Agreement;
(iii) certified copies of the resolutions duly adopted by
the Board of Directors of Seller constituting all necessary corporate
authorization for the consummation by Seller of the transactions contemplated
hereby;
(iv) certificates of incumbency for all relevant officers
and directors of Seller executing this Agreement and any other documents
pursuant to this Agreement; and
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(v) such consents or other documents executed by Seller
and such third parties as may, in Buyer's opinion, be required to effectively
vest in Buyer good and marketable title to the Intellectual Property; and
(vi) such additional documents, instruments, certificates
and writings as Buyer may reasonably request to effect the transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
Section 4.1 CORPORATE EXISTENCE Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly authorized, qualified and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now being conducted, except where
the failure to be so qualified or licensed would not reasonably be expected to
have a material adverse effect on the Seller or the Business.
Section 4.2 SELLER'S AUTHORITY RELATIVE TO THIS AGREEMENT. Seller has
full corporate power and authority to execute, deliver and perform this
Agreement, and the transactions contemplated hereby. The execution, delivery and
performance by Seller of this Agreement and the consummation and performance of
the transactions contemplated hereby have been duly authorized and approved and
no further corporate action is necessary on the part of Seller to make this
Agreement, and the transactions contemplated hereby, valid and binding upon
Seller in accordance with their terms. Neither the execution, delivery nor
performance of this Agreement nor the consummation and performance of the
transactions contemplated hereby by Seller will conflict with any provision of
the Organizational Documents of Seller, or result in a violation or breach of
any term or provision or constitute a default or accelerate the performance
required under any Lien or other Material Contract to which Seller is a party or
by which it or any of the Assets is bound, or violate any Order applicable to
Seller.
Section 4.3 TITLE TO PROPERTIES, ETC. Seller has good and marketable
title to, and is in possession of, all the Assets, free and clear of all Liens
except for liens to be removed prior to Closing and Permitted Liens as set forth
on Schedule 4.3 attached hereto. Seller has the right to transfer, sell, convey
and assign the Assets without the consent of any other party; and the
instruments of transfer, sale, conveyance and assignment to be executed and
delivered by Seller to Buyer at the Closing will be valid and binding
obligations of Seller and sufficient to transfer, sell, convey and assign to
Buyer all right, title and interest of Seller, in and to the Assets.
Section 4.4 EQUIPMENT. Schedule 2.1(a) attached hereto sets forth an
accurate description of all items of Equipment, including the book value of the
items listed thereon. The Equipment being transferred as a portion of the Assets
is in good operating condition, is in a state of reasonable maintenance and
repair, ordinary wear and tear excepted, and is fit for the ordinary purposes
for which such Equipment is used. All of the Equipment conforms in all material
respects to all applicable laws.
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Section 4.5 INVENTORY. Schedule 2.1(b) attached hereto sets forth an
accurate description of all Inventory of Seller as of October 31, 1999,
including the book value of the items listed thereon. The Inventory consists of
items of raw materials and work in process as indicated, and are of good and
standard quality, fit for their intended purpose and, in the case of goods
covered by a customer or distributor purchase order, of specifications and in
quantities corresponding to the customer orders to which they relate. Any of the
Inventory that is obsolete, excessive, slow-moving or unsaleable is valued in
accordance with GAAP in the books and records of Seller. The values at which the
Inventory is carried on Seller's books and records reflect Seller's normal
valuation policy as consistently applied.
Section 4.6 CUSTOMERS. Schedule 4.6 sets forth a complete and accurate
list of all of the customers of the Business during the period beginning
December 1, 1998 and ending on the date of this Agreement.
Section 4.7 SUPPLIERS. Schedule 4.7 sets forth a complete and accurate
list of all of the suppliers of the Business during the period beginning
December 1, 1998 and ending on the date of this Agreement.
Section 4.8 CUSTOMERS AND SUPPLIERS. There have been no material
adverse changes in the relationships between Seller and Seller's customers and
suppliers of the Business since December 1, 1998 through the date of this
Agreement. Except as and to the extent set forth on Schedule 4.8, Seller has not
been provided with any notice that any significant supplier or customer of the
Business intends to cease doing business with Seller.
Section 4.9 ACCOUNTS RECEIVABLE. The accounts receivable related to the
Business owed to Seller as of October 31, 1999 are listed on the attached
Schedule 2.1(d). To Seller's Knowledge, all such accounts receivable are
collectible in the amounts shown on Schedule 2.1(d).
Section 4.10 INTELLECTUAL PROPERTY. The attached Schedule 2.1(c) sets
forth a list of all Intellectual Property, together with a summary description
and full information in respect of the filing, registration, issuance or status
thereof. No Intellectual Property will be adversely affected by the transactions
contemplated hereby. Except as set forth on attached Schedule 4.10(a), no
licenses, sublicenses, covenants, Contracts, agreements or legally enforceable
commitments have been granted or entered into by Seller in respect of such
Intellectual Property. Except as set forth on attached Schedule 4.10(a)(1),
Seller has no Knowledge of: (i) any infringement or claimed infringement by
Seller or its customers of any patent rights, copyrights, trademarks, service
marks, trade names, trade secrets, mask work rights or other intellectual
property rights of others, (ii) any infringement of rights in and to the
Intellectual Property, or of any pending, existing or Threatened Proceedings
relating to the Intellectual Property, or (iii) any Threatened or contemplated
cancellation or revocation of any Contract granting to the Seller any copyright,
or patent or trademark, license or other Intellectual Property right. Except as
set forth on attached Schedule 4.10(b), to Seller's Knowledge, no present or
past parent or Affiliate, director, officer, employee, stockholder, or
consultant of Seller: (i) owns, directly or indirectly, in whole or in part, any
14
interest in and to any Intellectual Property or inventions or patents, or
copyrights or applications therefor which Seller is presently using in
connection with the Business or related to the Business or Products, or (ii) has
made any invention not assigned to Seller which is necessary or desirable for
the operation of the Business. Except as set forth on Schedule 4.10(c), as of
the date hereof, the Seller has no Knowledge of any new developments with
respect to the Business or the Products which are commercially available or any
new or improved materials, products, processes, methods or services useful in
connection with the Business or the Products which are commercially available
and which may adversely affect the sales, properties, Assets, liabilities or
condition (financial or otherwise) of the Business.
Section 4.11 MATERIAL CONTRACTS.
(a) Schedule 4.11(a) is a list of certain material contracts,
agreements and other documents to which the Seller is a party or by which it, or
the Assets, is bound in connection with the Business and which may involve
payments or receipts in excess of $25,000 (the "Material Contracts"). Except for
contracts, agreements and other documents listed on Schedule 4.11(a), the Seller
is not a party in connection with the Business, nor are any of the Assets in any
way bound or obligated by any written or oral:
(i) Contracts, agreements or commitments in respect of the
sale of products or services, including any existing written warranties given by
Seller in connection with the sale of products of the Business that are in force
at Closing Date, or for the future purchase of raw materials, supplies,
equipment, or other products or utilities;
(ii) sales agency or distributorship agreements or
franchise agreements, or any legally enforceable commitments or obligations with
respect thereto;
(iii) collective bargaining agreements, union agreements,
employment contracts, consulting agreements or any agreements providing for the
services of an independent contractor;
(iv) profit-sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health insurance or
other employee benefit plans, agreements, arrangements or commitments, whether
or not legally binding, applicable to any employee employed by Seller in
connection with the Business;
(v) loan or credit agreements, indentures, guarantees
(other than an endorsement made for collection), mortgages, pledges, conditional
sales or other title retention agreements, or any equipment financing
obligations, leases or lease-purchase agreements; or
(vi) Contracts, agreements or legally enforceable
commitments, other than those of the types covered by paragraphs (a) through (e)
above and as otherwise listed on Schedule 4.11(a), which might materially affect
the sales, properties, Assets, liabilities or condition (financial or otherwise)
of the Business.
15
(b) A true and complete copy of each Contract, agreement or
other document (or, in the case of oral commitments, a description of the
material terms thereof) which is listed on Schedule 4.11(a), including all
amendments, supplements and modifications thereto, has heretofore been furnished
to Buyer. Each such Contract, agreement or other document is in full force and
effect and is the binding obligation of the parties thereto. No event or
condition has occurred or exists, or, is alleged by any of the other parties to
such Contracts, agreements or other documents to have occurred or existed which
constitutes, or as a result of the consummation of the transactions contemplated
hereby or with the lapse of time or giving of notice or both might constitute a
material default or a basis for acceleration of any obligation, force majeure,
or other claim of excusable delay or non-performance thereunder or in respect
thereof, whether on the part of Seller or any other party. Except as noted on
Schedule 4.11(b), each such Contract, agreement or other document may be
assigned or otherwise transferred pursuant to this Agreement without consent of
any third party.
Section 4.12 ABSENCE OF CERTAIN CHANGES. Except as disclosed on
Schedule 4.12, since June 30, 1999, the Seller has not:
(a) experienced any material adverse change in the Business,
or in the prospects or conditions (financial or otherwise) of the Business;
(b) (i) except for customary raises granted its Employees in
accordance with its past practices, increased or agreed to increase the rate of
compensation payable or to become payable by it to any of its Employees, or (ii)
made, directly or indirectly, any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any severance or termination pay
to any present or former Employees other than as described on Schedule 4.12(b)
hereto, or (iii) adopted any new, or made any increase in any existing, profit
sharing, bonus, deferred compensation, savings, insurance, group life, health
insurance, pension, retirement or other employee benefit plan, payment or
arrangement made to, for or with any of such Employees;
(c) changed accounting methods or practices followed by Seller
as it relates to the Business or changed depreciation or amortization policies
or rates heretofore adopted in connection with the Assets;
(d) borrowed or agreed to borrow any funds or incurred, or
become subject to, any obligations or liability (absolute or contingent, whether
or not outstanding at present) which materially and adversely affects the
Business or any of the Assets except: (i) current liabilities (other than for
borrowed money or the deferred purchase price of any assets) incurred in the
Ordinary Course of Business and obligations under agreements entered into in the
Ordinary Course of Business; and (ii) obligations or liabilities entered into or
incurred in connection with the execution of this Agreement;
(e) experienced any actual or Threatened employment dispute,
demand for recognition, strike, walkout, lockout, slowdown, labor grievance or
arbitration, unfair labor practice charge or complaint, labor organizational
activity or requests by Employees for union representation, charge of
discrimination or unfair employment practice, or any other occurrence, event or
condition of any similar character affecting the Employees, directly or
indirectly, which may have a material adverse effect on the condition, continued
operation or prospects of the Business or on the Assets;
16
(f) granted any powers of attorney or comparable delegations
of authority outstanding in connection with the Business which may be binding on
Seller;
(g) suffered any damage, destruction, loss, waiver of rights
or other decreases in the value of any of the Assets of whatever form, whether
or not covered by insurance, which individually or in the aggregate is material;
(h) canceled or agreed to cancel any debt or claims or entered
or agreed to enter into any Contract, agreement or arrangement granting any
preferential rights to purchase any of the Assets or requiring the consent of
any party to the transfer or assignment of any of the Assets of the Business;
(i) learned of any planned or proposed Legal Requirement which
has or would have a material and adverse effect on the continued operation,
Assets, business condition (financial or otherwise) or prospects of the
Business;
(j) amended or terminated, or agreed to amend, terminate or
permit any termination of, any Contract, agreement or license to which Seller is
a party and which affects the Business, if such amendment or termination is or
would have a material and adverse effect on the Buyer or the Business, is not at
arm's length or is other than in Ordinary Course of Business; or
(k) amended, terminated, allowed to lapse or failed to renew
any Permit, if such amendment, termination, lapse or failure to renew is or
would be material or has or would have an adverse effect on Buyer or the
Business.
Section 4.13 TAX MATTERS. All foreign, federal, state, county, local
and any other Tax, including, without limitation, income taxes, corporate
franchise taxes, payroll taxes, sales taxes and ad valorem taxes, due and
payable by Seller with respect to the Business on or before the date of this
Agreement have been paid and the Seller has filed all Tax Returns and reports
required to be filed by it.
Section 4.14 NO DEFAULT; COMPLIANCE WITH LAWS. Except as listed on
Schedule 4.14:
(a) there has been no default in any respect in any material
obligation to be performed by Seller under any Material Contract, nor has Seller
waived any material right under any such Material Contract; and
(b) the Seller has complied in all material respects with all
applicable Legal Requirements, including, without limitation, those imposing
taxes, in every applicable jurisdiction, in respect of the ownership of the
Assets used in connection with the Business and the conduct of the Business.
17
Section 4.15 LITIGATION. Except as set forth on Schedule 4.15(a), there
are no Proceedings pending, Threatened or affecting the Seller in connection
with the Business or the Assets, including, but not limited to, any such action
(a) involving or concerning product liability of any Products designed,
produced, manufactured, sold or serviced by the Seller prior to the Closing Date
or (b) which question the validity or legality of the transactions contemplated
hereby. Seller is not, in connection with the Business, subject to any
continuing Order, applicable to it or to the Business or the Assets, and is not,
in violation of or in default with respect to any Order, except as set forth on
Schedule 4.15(b).
Section 4.16 PRODUCT LIABILITY. Seller has not given or made any
warranties to third parties with respect to any Products, except for Seller's
standard warranties and OEM warranties, true copies of which are attached as
Schedule 4.16(a), warranties imposed by the provisions of the applicable
commercial codes or for which it is indemnified by third parties. Except as set
forth on Schedule 4.16(b), to Seller's Knowledge there is no state of Seller's
affairs, nor has any event occurred which may form the basis of any present
claim against the Seller in connection with the Business not fully covered by
insurance for product liability.
Section 4.17 INSURANCE. Schedule 4.17 is a schedule setting forth a
list and brief description of all policies of insurance held by the Seller in
connection with the Business, copies of which policies have been heretofore
furnished to the Buyer. Such policies are (i) in full force and effect, (ii)
underwritten by financially sound and reputable insurers, (iii) sufficient for
all applicable requirements of law and (iv) in amount, and against such risks,
as are generally maintained for comparable businesses and properties in the
locality where such business and properties are located.
Section 4.18 LICENSES, PERMITS, ETC. Schedule 4.18 is a schedule
describing all licenses, product and establishment registrations, franchises,
Permits, easements, certificates, consents, rights and privileges necessary to
the conduct of the Business, all of which have been obtained by Seller and are
valid and in full force. Copies of all such items have heretofore been furnished
to the Buyer.
Section 4.19 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. To
Seller's Knowledge, no officer or director of Seller or any spouse or child of
any such officer or director, as applicable, has any ownership interest in any
competitor, supplier or customer of Seller in connection with the Business, or
any property (tangible or intangible) used in the operation of the Business,
except as disclosed on Schedule 4.19.
Section 4.20 QUESTIONABLE PAYMENTS. To Seller's Knowledge, neither the
Seller nor any Employee, agent, or representative as applicable, of Seller has
made, directly or indirectly, in connection with the Business, any bribes,
kickbacks, illegal payments, political contributions with corporate funds,
payments from corporate funds not recorded on the books and records of Seller,
payments from corporate funds which were falsely recorded on the books and
records of the Seller, payments from corporate funds to governmental officials
for improper purposes or illegal payments from corporate funds to obtain or
retain business either within the United States or abroad.
18
Section 4.21 YEAR 2000 COMPLIANCE. All computers, hardware, computer
software, databases and embedded control systems used by the Seller, to the
extent that they constitute part of the Assets (collectively, the "SYSTEMS") are
Year 2000 Compliant. As used herein, the term "YEAR 2000 COMPLIANT" means that
the Systems (i) accurately process date and time data (including calculating,
comparing, and sequencing) from, into and between the twentieth and twenty-first
centuries, the years 1999 and 2000, and leap year calculations and (ii) operate
accurately with other software and hardware that use standard date format (4
digits) for representation of the year.
Section 4.22 AT-WILL EMPLOYEES. It is Seller's published policy that
all Employees of the Business are employed "at will".
Section 4.23 NO BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement arising out of any action
taken by Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
Section 5.1 CORPORATE EXISTENCE. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada.
Buyer is duly qualified to do business and in good standing as a foreign
corporation in California.
Section 5.2 BUYER'S AUTHORITY RELATIVE TO THIS AGREEMENT. Buyer has
full corporate power and authority to execute, deliver and perform this
Agreement and the transactions contemplated hereby. The execution, delivery and
performance by Buyer of this Agreement and the consummation and performance of
the transactions contemplated hereby have been duly authorized and approved and
no further corporate action is necessary on the part of Buyer to make this
Agreement, and the transactions contemplated hereby, valid and binding upon
Buyer in accordance with their terms. Neither the execution, delivery nor
performance of this Agreement and consummation and performance of the
transactions contemplated hereby by Buyer will conflict with any provision of
the Organizational Documents of Buyer, or result in a violation or breach of any
term or provision or constitute a default or accelerate the performance required
under any Lien or other Contract or agreement to which Buyer is a party or by
which it or any of its assets and properties is bound, or violate any Order
applicable to Buyer.
Section 5.3 ABSENCE OF LITIGATION. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of any director or
officer of Buyer, threatened against or affecting the ability or right of Buyer
to execute and deliver this Agreement or to consummate and perform the
transactions contemplated hereby.
Section 5.4 NO FURTHER APPROVAL. No approval, authorization, order,
license, permit, franchise or consent of, or registration, declaration or filing
with, any governmental authority or other person is required in connection with
the execution, delivery and performance by Buyer of this Agreement and the
consummation of the transactions contemplated hereby.
19
Section 5.5 NO BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement arising out of any action
taken by Buyer.
Section 5.6 NO INDUCEMENT. For a period of three (3) years after the
Closing, Buyer will not, directly or indirectly, either for itself, its
subsidiary, an Affiliate, or any other Person, induce or attempt to induce any
employee of the Seller identified on Schedule 5.6 to leave the employ of the
Seller.
ARTICLE VI
OTHER MATTERS
Section 6.1 RETENTION BONUS PAYMENTS. Buyer shall reserve for certain
employees set forth on Schedule 6.1: (i) US $80,000, plus (ii) in the event that
the Royalty Amounts exceed $920,000, then eight tenths of one percent (.8%) of
the Net Sales Proceeds during the Royalty Period shall be distributed to such
employees (to the extent that such employee is an employee of Buyer at the time
such funds are to be distributed) in the form of a bonus. In no event shall such
bonus amounts exceed US $232,000.
Section 6.2 AMERICAN LASER ACCOUNTS RECEIVABLE. For each microcavity
laser that Buyer ships to American Laser Corporation, Buyer shall remit to
Seller the value of one microcavity laser. In the event American Laser pays to
Buyer any amounts unrelated to or independent from the shipment of microcavity
lasers, Buyer shall remit to Seller all of such payment. Notwithstanding the
foregoing, Buyer's obligation to remit such payments to Seller shall cease at
such time as all such remittances shall equal $98,910.00 (the "Remittance Cap").
Section 6.3 BALANCING PAYMENT. From the Closing Date until December 24,
1999, Buyer shall pay to the Seller the value of the gross margin on sales of
the Products shipped during such period, less any commissions or other payments
to a third party relative to theses shipments. Seller shall pay Buyer $4,000 per
day for each business day between the Closing Date and December 24, 1999. This
provision shall apply only to sales of the Products which are included on the
unshipped order backlog of the Seller as of the Closing Date.
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ARTICLE VII
COVENANTS OF SELLER
Seller covenants with the Buyer that:
Section 7.1 CONDUCT OF BUSINESS. From the date of this Agreement to the
Closing Date, Seller will operate the Business only in the Ordinary Course, and,
in particular, without the prior written consent of Buyer, Seller, in connection
with the Business, will not:
(a) commit any act or permit the occurrence of any event or
the existence of any condition of the type described in Section 4.12 in
connection with the Business or the Assets;
(b) enter into any Contract, agreement, commitment or
undertaking in connection with the Business or the Assets involving payments or
receipts of more than US $25,000, other than Contracts or commitments made
pursuant to this Agreement;
(c) cancel or permit any insurance maintained in connection
with the Business or the Assets to lapse or terminate, unless reviewed or
replaced by like coverage;
(d) be in material default under any Contract, agreement,
commitment or undertaking of any kind relating to the Business or the Assets;
(e) violate or fail to comply with all laws applicable to the
Assets or the Business;
(f) fail to maintain and repair the Assets in accordance with
good standards of maintenance and as required in any leases or other agreements
pertaining thereto; or
Section 7.2 ACCESS TO INFORMATION. From and after the date of this
Agreement, the Seller will give to Buyer and its representatives, full and free
access to all the properties, Records, contracts, and commitments of the
Business so that Buyer may have full opportunity to make such investigation as
it shall desire to make of the affairs of the Business. Without limiting the
foregoing, Seller shall cooperate with and give Buyer full access to such
information and Records as Buyer may deem necessary to facilitate the review of
the Closing Balance Sheet by Buyer. Any such investigation shall not affect the
representations and warranties of the Seller contained in this Agreement.
Section 7.3 PRESERVATION OF BUSINESS ORGANIZATION. Seller will use its
Reasonable Best Efforts to preserve the business organization of the Business
from the date of this Agreement to and including the Closing Date, and to
preserve for Buyer Seller's good relations with all licensors, suppliers,
customers and others having business relations with Seller in connection with
the Business.
Section 7.4 TRADE SECRETS. From and after the Closing Date, Seller will
not use or divulge to any competitor or unauthorized person, any Confidential
Information, and will use its Reasonable Best Efforts to insure that its
employees and agents do not use or divulge, any Confidential Information, trade
secrets, processes, formulae or know-how relating to the Business.
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Section 7.5 CONSENTS OF THIRD PARTIES. Seller will use all reasonable
and proper efforts to obtain, where required, the consents of all third parties,
including assisting Buyer in obtaining all Governmental Authorizations related
to the Business or Assets which require such consents.
Section 7.6 COLLECTION OF RECEIVABLES. Subject to Section 6.2, hereof,
after the Closing Date, Seller hereby authorizes Buyer to collect all
receivables and other items transferred to Buyer hereunder, and to endorse with
the name of Seller any checks or other instruments received on account of any
such receivable or other item. The Seller agrees that it will transfer or cause
to be transferred to Buyer any cash or other property that it may receive after
the Closing Date in respect of such receivables or other items. The Seller will
on and after the Closing Date, cooperate with Buyer in endeavoring to effect the
collection of all receivables and the pursuit of all other Proceedings involving
the Business based on Contracts, arrangements or acts of the Seller which were
in effect or occurred on or prior to the Closing Date and related to the
Business.
Section 7.7 SUPPLY CONTRACTS. As may be requested by Buyer, Seller
hereby agrees that it shall maintain any and all Contracts or agreements with
suppliers or vendors listed on Schedule 2.1(e) or other such Contracts or
arrangements which Seller is unable, for whatever reason, to transfer or assign
to Buyer. Seller shall for the duration of any such Contract, agreement or
arrangement, pass through the benefits of same to Buyer at Seller's cost of the
goods or services provided thereunder. Buyer shall pay Seller for such goods or
services in accordance with the terms of Seller's invoice for same.
Section 7.8 ROYALTIES. With respect to the license agreements set forth
on Schedule 4.18 Seller has paid or shall pay prior to the Closing Date any
royalties or other similar obligations associated with the Business due and
payable on or before the Closing Date.
Section 7.9 INSURANCE. Seller shall maintain valid policies of
insurance as set forth in Section 4.17 hereof which will be outstanding and duly
in force on the Closing Date.
Section 7.10 ACKNOWLEDGMENTS BY SELLER. Seller acknowledges that:
(a) Seller has occupied a position of trust and confidence in
connection to the Business prior to the date hereof and has become familiar with
the following, any and all of which constitute confidential information of the
Business, (collectively the "CONFIDENTIAL INFORMATION"): (i) any and all trade
secrets concerning the business and affairs of the Business, the Products,
product specifications, data, know-how, formulae, compositions, processes,
designs, sketches, photographs, graphs, drawings, samples, inventions and ideas,
past, current and planned research and development, current and planned
manufacturing and distribution methods and processes, customer lists, current
and anticipated customer requirements, price lists, market studies, business
plans, computer software and programs (including object code and source code),
computer software and database technologies, systems, structures and
architectures (and related processes, formulae, compositions, improvements,
devices, know-how, inventions, discoveries, concepts, ideas, designs, methods
and information of the Business and any other information, however documented,
of the Business that is a trade secret within the meaning of California Uniform
Trade Secrets Act, Section 3426, et seq. of the California Civil Code; (ii) any
and all information concerning the business and affairs of the Business (which
22
includes historical financial statements, financial projections and budgets,
historical and projected sales, capital spending budgets and plans, the names
and backgrounds of key personnel, personnel training and techniques and
materials) however documented; and (iii) any and all notes, analysis,
compilations, studies, summaries, and other material prepared by or for the
Business containing or based, in whole or in part, on any information included
in the foregoing;
(b) the business of the Business is international in scope;
(c) its products and services are marketed worldwide (the
"TERRITORY");
(d) Buyer has required that Seller make the covenants set
forth in Section 7 of this Agreement as a condition to the Buyer's purchase of
the Assets owned by Seller;
(e) the provisions of Section 7 of this Agreement are
reasonable and necessary to protect and preserve the Business; and
(f) the Business would be irreparably damaged if Seller were
to breach the covenants set forth in Section 7 of this Agreement.
Section 7.11 CONFIDENTIAL INFORMATION.
(a) Seller acknowledges and agrees that all Confidential
Information known or obtained by Seller, whether before or after the date
hereof, is the property of the Business. Therefore, Seller agrees that Seller
will not, at any time, disclose and will use its Reasonable Best Efforts to
prevent any of its employees from disclosing to any unauthorized Person or use
for its own account (other than with respect to internal research or development
of products unrelated to the Business or to the Products) or for the benefit of
any third party any Confidential Information, which Seller has in its
possession, whether in memory, in writing or other physical form, without
Buyer's written consent, unless and to the extent that the Confidential
Information is or becomes generally known to and available for use by the public
other than as a result of Seller's fault or the fault of any other Person bound
by a duty of confidentiality to Buyer or the Business. Seller agrees to deliver
to Buyer at the time of execution of this Agreement, and at any other time Buyer
may request, all documents, memoranda, notes, plans, records, reports, and other
documentation, models, components, devices, or computer software, whether
embodied in a disk or in other form (and all copies of all of the foregoing),
relating to the businesses, operations, or affairs of the Business and any other
Confidential Information that Seller may then possess or have under its control.
(b) If, for any reason, the Closing of the transactions
contemplated by this Agreement fails to occur, each party shall maintain as
confidential all non-public information of the other received or learned by it
in the course of negotiations, due diligence and other actions undertaken in the
course of entering into and performing this Agreement, and Buyer shall return
all such information delivered by Seller to Seller.
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Section 7.12 NONCOMPETITION AGREEMENT OF SELLER. As an inducement for
Buyer to enter into this Agreement and as additional consideration for the
consideration to be paid to Seller hereunder,
(a) Seller agrees that:
(i) for a period of three (3) years after the Closing,
Seller will not, directly or indirectly, or individually or in partnership or
jointly in conjunction with any Person, as a principal, agent or shareholder, or
in any manner whatsoever engage or invest in, own, manage, operate, finance,
control, or participate in the ownership, management, operation, financing, or
control of, be associated with, or in any manner connected with, lend Seller's
name or any similar name to, lend Seller's credit to, or render services or
advice to, any business whose products or activities compete in whole or in part
with the products or activities of the Business anywhere within the Territory,
other than with respect to laser optics coating products; provided, however,
that Seller may purchase or otherwise acquire up to (but not more than) five
percent of any class of securities of any enterprise (but without otherwise
participating in the activities of such enterprise) if such securities are
listed on any national or regional securities exchange or have been registered
under Section 12(g) of the Securities Exchange Act of 1934. Seller agrees that
this covenant is reasonable with respect to its duration, geographical area, and
scope;
(ii) for a period of three (3) years after the Closing,
Seller will not, directly or indirectly, either for itself, its subsidiary, an
Affiliate, or any other Person, (i) induce or attempt to induce any employee of
the Buyer in connection with the Business to leave the employ of the Buyer; (ii)
in any way interfere with the relationship between the Buyer and any employee of
the Buyer in connection with the Business; (iii) employ, or otherwise engage as
an employee, independent contractor, or otherwise, any employee of the Buyer in
connection with the Business; or (iv) induce or attempt to induce any customer,
supplier, licensee, or business relation of the Buyer in connection with the
Business to cease doing business with the Buyer, or in any way interfere with
the relationship between any customer, supplier, licensee, or business relation
of the Buyer in connection with the Business; and
(iii) for a period of three (3) years after the Closing,
Seller will not, directly or indirectly, either for itself, its subsidiary, an
Affiliate, or any other Person, solicit the business of any Person known to
Seller to be a customer of the Business, whether or not Seller, or any of
Seller's shareholders, directors, officers, employees or agents, had personal
contact with such Person, with respect to products or activities which compete
in whole or in part with the products or activities of the Business, other than
for the 1550 nm microlaser product line which is not part of the Business.
(b) In the event of a breach by Seller of any covenant set
forth in Subsection 7.12(a) hereof, the term of such covenant will be extended
by the period of the duration of such breach. Seller will not, at any time
during or after the three (3) year period, disparage Buyer or the Business, or
any of their shareholders, directors, officers, employees, or agents.
(c) It is the understanding and agreement of the parties that
the covenants not to compete contained in this Section 7.12, as to duration,
scope and geographical area are necessary to protect the rights of Buyer in and
to the Assets. In the event that the provisions of this Section 7.12 should ever
be deemed to exceed the duration, scope or geographic limitations permitted by
applicable laws, then such provisions shall be reformed to the maximum duration,
scope or geographic limitations permitted by applicable law.
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(d) In the event that Seller is acquired by, merged with or
into or sells all or substantially all of its assets to a competitor or an
affiliate of a competitor of Buyer, then the term of the covenants set forth in
Section 7.12 hereof, shall expire as of the date of the closing of such
acquisition, merger, or sale.
Section 7.13 RELEASE OF CERTAIN LIENS. The parties agree that the liens
set forth on the attached Schedule 7.13 will not be released prior to Closing.
Seller hereby agrees to effect a release of the Assets from the liens set forth
on Schedule 7.13 on or before sixty (60) days after Closing.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer hereunder shall be, at the option of Buyer, subject to
the satisfaction of the following conditions:
Section 8.1 SELLER'S REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING.
Buyer shall not have discovered any material error, misstatement or omission in
the representations and warranties made by Seller in Article 4 hereof; the
representations and warranties made by Seller herein shall be deemed to have
been made again at and as of the time of Closing and shall then be true in all
material respects, except to the extent that such representations and warranties
shall have been made as of a specified date; Seller shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing; and Buyer shall
have received a certificate of the President of Seller to the effect set forth
in this Section 8.1.
Section 8.2 APPROVAL BY COUNSEL. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated by this
Agreement or incidental thereto and all other related legal matters shall have
been approved by Fulbright & ▇▇▇▇▇▇▇▇ L.L.P., counsel for Buyer, and such
counsel shall have been furnished with such certified copies of actions and
proceedings and other such instruments and documents as it shall have reasonably
requested.
Section 8.3 OPINION OF COUNSEL FOR SELLER. Buyer shall have received
the legal opinion of ▇▇▇▇▇▇ Godward LLP, Counsel for Seller, within five (5)
business days of the Closing Date and dated the Closing Date, in the form of
Exhibit F attached hereto.
Section 8.4 NO DAMAGE OR DESTRUCTION. Prior to the Closing there shall
not have occurred any casualty to any Equipment or Inventory owned or used by
the Seller as a result of which the monetary amount of damage or destruction
aggregates more than $250,000 and such loss shall not be substantially covered
by valid, existing insurance underwritten by responsible insurers. Additionally,
there shall not have been any changes in the business, properties or operations
of the Business or of the Assets since the date hereof and continuing as of the
Closing Date which would have a material adverse effect on the value of the
Business or the Assets.
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Section 8.5 ABSENCE OF RESTRAINT. No Order to restrain, enjoin or
otherwise prevent the consummation of this Agreement or any transactions in
connection herewith shall have been entered and, on the Closing Date, there
shall not be any pending or Threatened Proceeding with a view to seeking to
restrain or prohibit consummation of the transactions contemplated hereby or in
which divestiture, rescission or significant damages are sought in connection
with the transactions contemplated hereby, and no investigation by any foreign
or domestic Governmental Body shall be pending or Threatened which might result
in any such Proceeding.
Section 8.6 APPROVALS. All consents and authorizations by third parties
and all Governmental Authorizations in form and substance reasonably
satisfactory to Buyer, the granting or making of which are necessary for the
consummation of the transactions contemplated hereby or for the prevention of
the termination of any right, privilege, lease, license, Contract, Permit or
agreement of Seller relating to the Business or any material loss or
disadvantage to Buyer upon the consummation of the transactions contemplated
hereby shall have been obtained or made.
Section 8.7 EMPLOYMENT AGREEMENTS. Buyer shall have received executed
employment agreements in the form of Exhibit E from the individuals listed on
Schedule 8.8 (the "Key Employees").
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder shall be, at the option of Seller, subject
to the satisfaction of the following conditions:
Section 9.1 BUYER'S REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING.
There shall have been no material error, misstatement or omission in the
representations and warranties made by Buyer in Article 5 hereof; the
representations and warranties made by Buyer herein shall be deemed to have been
made again at and as of the time of Closing and shall then be true in all
material respects, except to the extent that such representations and warranties
shall have been made at and as of a specific date; Buyer shall have performed
and complied with all agreements and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing; and Seller shall
have received a certificate, dated the Closing Date, of a senior officer of
Buyer to the effect set forth in this Section 9.1.
Section 9.2 APPROVAL BY COUNSEL. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated by this
Agreement or incidental thereto and all other related legal matters shall have
been approved by counsel for Seller and such counsel shall have been furnished
with such certified copies of actions and proceedings of Buyer and other such
instruments and documents as they shall have reasonably requested.
26
Section 9.3 OPINION OF BUYER'S COUNSEL. The Seller shall have received
an opinion of Fulbright & ▇▇▇▇▇▇▇▇, L.L.P., counsel for the Buyer, dated the
Closing Date, substantially in the form of Exhibit G attached hereto.
ARTICLE X
NATURE OF STATEMENTS; SURVIVAL
Except as otherwise set forth in Article 7 of this Agreement, all covenants,
representations and warranties made by Seller hereunder or pursuant hereto or in
connection with the transactions contemplated hereby (except such covenants,
agreements, representations and warranties relating to the Intellectual Property
which shall survive until December 16, 2002) shall survive until December 16,
2000, regardless of any investigation at any time made by or on behalf of Buyer,
or of any information Buyer may have in respect thereto. Except as otherwise set
forth in this Agreement, all covenants, agreements, representations and
warranties made by Buyer hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive until December 16, 2000,
regardless of any investigation at any time made by or on behalf of Seller, or
of any information Seller may have in respect thereto.
ARTICLE XI
INDEMNITY
Section 11.1 INDEMNITY BY SELLER. Subject to the limitations set out in
Section 11.4 hereof, Seller covenants and agrees to indemnify and save and hold
Buyer and its representatives, affiliates, shareholders, officers and directors,
harmless, at all times after the Closing Date, from and against any loss,
liability, claim, damage (including incidental and consequential damages),
expense (including costs of investigation and defense and reasonable attorneys'
fees), or diminution of value, whether on or involving a third party claim
(collectively, "DAMAGES") arising out of or resulting from:
(a) any Retained Liabilities;
(b) any breach of any representation, warranty, or covenant
made by Seller in connection with the transactions contemplated hereby.
Section 11.2 INDEMNITY BY BUYER. In addition to Buyer's indemnity
obligations under Section 2.3 hereof, Buyer covenants and agrees to indemnify
and hold Seller, its directors, officers, employees and agents, harmless, at all
times after the Closing Date, from and against any damages arising or resulting
from:
(a) any breach of any representation, warranty, covenant or
agreement made by Buyer in connection with the transactions contemplated hereby,
including any inaccuracy in any written representation, list, schedule,
certificate or other agreement, instrument or document furnished or to be
furnished to Seller pursuant to the terms of this Agreement, or delivered in
contemplation of, or in connection with the transactions contemplated hereby;
27
(b) product safety or liability claims (including, without
limitation, any based on a failure to warn), or claims in respect of any
personal injury or damage to the property of others, or any Occupational Safety,
Health or Welfare Law arising from or relating to acts, omissions, events or
conditions of or relating to the Business occurring after the Closing Date or
any claim otherwise arising out of the Business after the Closing Date;
(c) the Assumed Liabilities.
Section 11.3 THIRD PARTY CLAIMS. The obligations and liabilities of the
parties under this Article 11 with respect to claims resulting from the
assertion of liability by third parties (including governmental penalties, fines
and assessments) shall be subject to the following terms and conditions:
(a) NOTICE. The indemnified party shall give prompt written
notice to the indemnifying party of any assertion of liability by a third party
which might give rise to a claim by the indemnified party against the
indemnifying party based on the indemnity agreements contained in Section 11.
Such notice shall comply with the provisions of Section 14.
(b) DEFENSE. In the event any action, suit or proceeding (a
"LEGAL ACTION") is brought against an indemnified party, with respect to which
the indemnifying party may have liability under an indemnity agreement contained
herein, the Legal Action shall, upon the written agreement of the indemnifying
party that it is obligated to indemnify under such indemnity agreement, be
defended by the indemnifying party and such defense shall include all
proceedings on appeal or for review which counsel for the defendant shall deem
appropriate. The indemnified party shall have the right to be represented by
counsel and accountants, at its own expense, and shall be kept fully informed as
to such Legal Action at all stages thereof whether or not it is represented by
its own counsel. Until the indemnifying party shall have so assumed the defense
of any Legal Action, or if the indemnified party shall have reasonably concluded
that there are likely to be defenses available to the indemnified party that are
different from or in addition to those available to the indemnifying party (in
which case the indemnifying party shall not be entitled to assume the defense of
such Legal Action but shall have the right to be represented by counsel and
accountants, at its own expense, and shall be kept fully informed as to such
Legal Action at all stages thereof whether or not represented by its own
counsel), all legal or other expenses reasonably incurred by the indemnified
party shall be borne by the indemnifying party. The indemnifying party shall
make available to the indemnified party and its attorneys and accountants all
books and records of the indemnifying party relating to such Legal Action and
the parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to facilitate the proper and adequate
defense of any such Legal Action.
(c) SETTLEMENT OF CLAIMS. The indemnifying party shall not
make any settlement of any claim without the written consent of the indemnified
party, which consent shall not be unreasonably withheld. Without limiting the
generality of the foregoing, it shall not be deemed unreasonable to withhold
consent to a settlement involving injunctive or other equitable relief against
the indemnified party or its assets, employees or business.
28
(d) Buyer and Seller agree that it, as applicable, shall
promptly pay to any indemnified party it is obligated to indemnify hereunder in
cash the amount of any damages to which such indemnified party may become
entitled by reason of the provisions of this Agreement.
Section 11.4 INDEMNITY LIMITS. The parties agree that no claims may be
made by Buyer under the indemnification provisions set forth in this Agreement
to the extent that the aggregate of all indemnity claims made by Buyer (as
indemnified party) as of the date of such claim exceeds the sum of the Cash
Payment and the Advanced Royalty Payment or to the extent that the aggregate of
all such indemnity claims does not exceed US $100,000. In addition, Seller shall
not be liable for the first $100,000 in Damages that would otherwise be included
in claims made under the indemnification provisions in this Agreement. Seller
shall not be liable for Damages that would otherwise be included in claims made
under the indemnification provisions of this Agreement in any amount exceeding
the sum of the Cash Payment and the Advanced Royalty Payment.
Section 11.5 RIGHT OF SET-OFF. Upon notice to the Seller specifying the
basis for such set-off, Buyer may set-off any amount to which it may be entitled
pursuant to this Agreement against any payments due Seller under this Agreement
and/or may give notice of a claim in such amount under the indemnification
provisions hereof. The exercise of such right of set-off by the Buyer in good
faith, whether or not ultimately determined to be justified, will not constitute
an event of default under this Agreement. Neither the exercise of nor the
failure to exercise such right of set-off or to give notice of a claim under the
indemnification provisions hereof will constitute an election of remedies or
limit the Buyer in any manner in the enforcement of any other remedies which may
be available to it.
ARTICLE XII
DISPUTE RESOLUTION
Section 12.1 ARBITRATION. (a) All disputes under this Agreement shall
be settled by binding arbitration at San Diego County, California, before a
single arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association (the "RULES"). Any party may commence arbitration at any
time by giving written notice to the other party that such dispute has been
referred to arbitration under this Agreement. The arbitrator shall be selected
by the joint agreement of the parties, but, if they do not so agree, within
twenty (20) days following the notice referred to above, then the selection
shall be made pursuant to the Rules from the panel of arbitrators maintained by
such Association. The parties shall be entitled to conduct discovery in
connection with the dispute in accordance with the Federal Rules of Civil
Procedure.
(b) Within ten (10) days following the appointment of the
arbitrator each party shall furnish the arbitrator with a statement of the
matters in dispute. The arbitrator shall commence hearing the matter within
twenty (20) days of receiving such statement and shall complete the arbitration
and file his written decision within sixty (60) days following his appointment.
The costs of arbitration, including the arbitrator's fees and the fees and costs
of counsel shall be allocated by the arbitrator in his decision. If the
arbitrator determines that the dispute and arbitration, or either is not the
result of good faith on the part of any party, then the arbitrator may make an
additional award to the party aggrieved for such sum as the arbitrator may in
his or her discretion determine is a reasonable damage figure.
29
(c) The award of the arbitrator shall be binding and
conclusive upon the parties and may be entered in any state or federal court
within San Diego County, California. There shall be no right of appeal from the
award of the arbitrator. The arbitrator may award attorneys fees and costs in
accordance with Section 12.3 below.
(d) To the extent that arbitration may not be legally
permitted hereunder, then any party to any dispute under this Agreement may
commence a civil action in accordance with Section 12.2, below.
(e) Nothing in this Agreement shall prevent the parties from
settling any dispute by mutual agreement or mutually agreed mediation.
Section 12.2 JURISDICTION. (a) The parties hereby irremovably submit to
the exclusive jurisdiction of the state and federal courts located in San Diego
County, California for the purpose of any action or proceeding arising out of or
relating to this Agreement. The parties irrevocably agree that all claims in
such action or proceeding may be heard and determined only in such courts. To
the extent permitted by law each of the parties hereby waives and hereby agrees
not to assert by way of motion as a defense or otherwise in any such action or
proceeding that it is not personally subject to the jurisdiction of such courts,
that the action or proceeding is brought in an inconvenient forum or that the
venue of the action or proceeding is improper; PROVIDED, HOWEVER, that nothing
herein shall prevent any party hereto from removing any case hereunder brought
in a state court to the United States District Court in San Diego County,
California. The parties further agree that a final judgment in any action or
proceeding hereunder shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment or in any other manner provided by law.
(b) Each of the parties irrevocably consents to the service of
the summons and complaint and any other process in such action or proceeding
relating to this Agreement on behalf of itself or its property by any means
permitted by California law and addressed to such party at the address set forth
in Section 14.1 hereof.
Section 12.3 If any legal action or arbitration or other proceeding is
brought by any party with respect to this Agreement or because of an alleged
dispute, breach, default or misrepresentation in connection with any other
provisions of this Agreement, then the court or arbitrator shall award the
successful or prevailing party, in addition to any other relief to which it may
be entitled, reasonable attorneys' fees and other costs incurred in that action
or proceeding, including fees and costs incurred on appeal and in collecting any
judgment or award, as equitably determined by the court or the arbitrator, and
the court or arbitrator shall so provide in its judgment or award.
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ARTICLE XIII
TERMINATION
Section 13.1 TERMINATION. This Agreement may be terminated by:
(a) the mutual written consent of the parties hereto;
(b) Buyer, if a material default shall be made by Seller in
the observance or in the due and timely performance by Seller of any of the
covenants of Seller herein contained, or if there shall have been a material
breach by Seller of any of the warranties and representations of Seller herein
contained, or if the conditions of this Agreement to be complied with or
performed by Seller at or before the Closing Date shall not have been complied
with or performed at the time required for such compliance or performance and
such noncompliance or nonperformance shall not have been waived by Buyer;
(c) Seller, if a material default shall be made by Buyer in
the observance or in the due and timely performance by Buyer of any covenants of
Buyer herein contained, or if there shall have been a material breach by Buyer
of any of the warranties and representations of Buyer herein contained, or if
the conditions of this Agreement to be complied with or performed by Buyer at or
before the Closing Date shall not have been complied with or performed at the
time required for such compliance or performance and such noncompliance and
nonperformance shall not have been waived by Seller; or
(d) either Buyer or Seller if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before January
10, 2000, or such later date to which the parties may agree.
ARTICLE XIV
MISCELLANEOUS
Section 14.1 NOTICES. Except as otherwise provided herein, all notices,
requests, demands and other communications required or permitted to be given
hereunder shall be in writing and shall be transmitted by telegram, telecopy or
personal delivery and shall be confirmed by first-class, postage prepaid,
registered or certified mail. All such communications shall be deemed received
when sent. All such communications shall be addressed, as applicable, to a party
at his or its address as shown below:
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(a) If to Buyer to:
Melles Griot, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With a copy to:
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(b) If to Seller to:
Laser Power Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
With a copy to:
▇▇▇▇▇▇ Godward LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: D. ▇▇▇▇▇▇▇ ▇▇▇▇
or to such other address as it may by written notice, received by the other
party, have designated as its address for such purpose.
Section 14.2 GOVERNING LAW. This Agreement shall be governed by the
laws of California and of the United States of America, as applicable, in all
respects, including matters of construction, enforcement and performance,
without giving effect to the principles of conflicts of law thereof.
Section 14.3 SECTION HEADINGS. The section headings and underlining
contained herein are for purposes of convenience only and shall not be deemed to
constitute a part of this Agreement or to affect the meaning or interpretation
of this Agreement in any way.
Section 14.4 ENTIRE AGREEMENT. This Agreement, including the Exhibits,
and Schedules hereto, set forth the entire agreement and understanding of the
parties with respect to the transactions contemplated hereby, and supersede all
prior agreements, arrangements and understandings related to the subject matter
hereof. The Schedules to this Agreement, which have been provided by Seller are
an integral part of this Agreement and are incorporated herein by reference.
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Section 14.5 SEVERABILITY. If any provision of this Agreement is or
becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, such
provision shall be deemed amended to conform to applicable laws so as to be
valid and enforceable or, if it cannot be amended without materially altering
the intention of the parties, it shall be stricken and the remainder of this
Agreement shall remain in full force and effect.
Section 14.6 ASSIGNMENT; SUCCESSORS AND ASSIGNS. None of the parties
hereto may assign this Agreement or its rights hereunder, whether in whole or in
part, without the prior written consent of the other parties hereto; provided,
however, that either party may assign this Agreement and its rights and
obligations hereunder to any person by which it is acquired, with which or into
which it is merged, or to which it sells all or substantially all of its assets.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns, heirs and
representatives, as applicable.
Section 14.7 AMENDMENT. This Agreement may not be released, discharged,
amended or modified in any manner except by an instrument in writing signed by
the parties or their duly authorized officers or agents.
Section 14.8 WAIVER. No waiver of any right under this Agreement shall
be deemed effective unless contained in writing signed by the party charged with
such waiver, and no waiver of any right arising from any breach or failure to
perform shall be deemed to be a waiver of any future such right or any other
right arising under this Agreement.
Section 14.9 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
Section 14.10 BUYER'S REMEDIES FOR SELLER'S BREACH OF CONFIDENTIALITY
AND NONCOMPETITION. If Seller breaches the covenants set forth in Section 7 of
this Agreement, Buyer will be entitled, in addition to any right to damages and
any other rights it may have, to obtain injunctive or other equitable relief to
restrain any breach or threatened breach or otherwise to specifically enforce
the provisions of Section 7 of this Agreement, it being agreed that money
damages alone would be inadequate to compensate the Buyer and would be an
inadequate remedy for such breach. Nothing herein shall be construed as
prohibiting Buyer from pursuing any other remedies available to it at law or in
equity including recovery of damages.
Section 14.11 BUYER'S RIGHT TO SPECIFIC PERFORMANCE. The parties hereto
recognize that the Business is uniquely suited to Buyer's business requirements
and that it may be impossible to determine the amount of damages which would
result to Buyer from Seller's refusal to complete the sale of the Business as
required under the provisions of this Agreement. Seller therefore agrees that in
the event of the failure of Seller to complete the sale of the Business in
accordance with the provisions of this Agreement after the conditions precedent
to Seller's obligations to close have been fulfilled or waived, that Buyer will
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be entitled to enforce specific performance of this Agreement against Seller.
Seller and Buyer hereby consent to the right of Buyer to obtain a Decree of
Specific Performance against Seller in any court having jurisdiction over this
matter. Nothing herein shall be construed, however, as prohibiting Buyer from
pursuing any other available remedy at law or in equity for such breach
including recovery of damages.
Section 14.12 BULK SALES. Seller agrees to indemnify Buyer from and
against any loss, cost or expense (including expenses for investigations,
reasonable costs of employee time used in investigation and defense, and
attorneys' fees and expenses) arising out of the failure to comply with the laws
of the State of California as set forth in Division 6 of the California
Commercial Code and any similar law of any other jurisdiction which may be
applicable to the transactions set forth in this Agreement.
Section 14.13 FEES AND EXPENSES.
(a) Buyer agrees to pay all costs associated with or arising
out of moving the Assets.
(b) Each of Buyer and Seller shall pay its own expenses
incurred in connection with the preparation, negotiation, execution, delivery
and consummation of this Agreement and the transactions contemplated hereby.
Section 14.14 PRORATIONS AND TRANSFER TAXES. Personal property taxes,
utilities and other terms not included in the Assumed Liabilities shall be
adjusted ratably as of the Closing Date. All applicable state, federal and local
transfer taxes payable in connection with the transactions contemplated hereby
shall be paid by Seller.
Section 14.15 SALES TAX. Buyer shall pay, when due, all state and local
sales taxes due upon the sale of the Assets and shall hold Seller harmless from
and indemnify Seller against any liability thereon.
Section 14.16 ANNOUNCEMENTS. Except for announcements or filings
required by law, or securities regulation, each party shall promptly advise and
cooperate with the other prior to issuing any press release or other information
to the press or any third party with respect to this Agreement or the
transactions contemplated by this Agreement. In this regard, each party shall
provide to the other, prior to release, copies of all proposed public releases
with respect to the transactions and shall use its Reasonable Best Efforts to
accommodate the reasonable comments of the other party with respect to the text
of any such release.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MELLES GRIOT, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: COO
LASER POWER CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CFO
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