EXHIBIT 2.1
Asset Purchase Agreement dated April 20, 2002
by and among
3D Instruments, LLC, SIERRA PRECISION
and
INVIVO CORPORATION
Table of Contents
Page
ARTICLE I
DEFINITIONS............................................................... 7
1.1 "AAA" ............................................................... 7
1.2 "Accounts Payable" .................................................. 7
1.3 "Accounts Receivable" ............................................... 7
1.4 "Accrued Vacation Liability" ........................................ 7
1.5 "Affiliate" ......................................................... 8
1.6 "Assumed Contracts".................................................. 8
1.7 "Assumed Liabilities" ............................................... 8
1.8 "Authorizations" .................................................... 8
1.9 "Benefit Plans" ..................................................... 8
1.10 "Building" .......................................................... 8
1.11 "Building Lease" .................................................... 8
1.12 "Business" .......................................................... 8
1.13 "Business Day" ...................................................... 8
1.14 "Closing" ........................................................... 8
1.15 "Closing Date" ...................................................... 8
1.16 "COBRA" ............................................................. 8
1.17 "Code" .............................................................. 9
1.18 "Continuing Employee" ............................................... 9
1.19 "Contract" .......................................................... 9
1.20 "Environment" ....................................................... 9
1.21 "Environment Claim" ................................................. 9
1.22 "Environment Law" ................................................... 9
1.23 "Environmental Permit" .............................................. 9
1.24 "ERISA" ............................................................. 10
1.25 "Excluded Assets" ................................................... 10
1.26 "Excluded Liabilities" .............................................. 10
1.27 "Financial Statements" .............................................. 10
1.28 "Fixed Assets" ...................................................... 10
1.29 "GAAP"............................................................... 10
1.30 "Governmental Entity or Regulatory Authority" ....................... 10
1.31 "Hazardous Substance" ............................................... 10
1.32 "Income Tax" ........................................................ 10
1.33 "Indemnification Acknowledgment" .................................... 11
1.34 "Indemnification Limit" ............................................. 11
1.35 "Indemnitee" ........................................................ 11
1.36 "Indemnitor" ........................................................ 11
1.37 "Insurance Policies" ................................................ 11
1.38 "Intellectual Property Rights" ...................................... 11
1.39 "Key Employee" ...................................................... 11
1.40 "Knowledge", "known", "knows", ...................................... 11
1.41 "Legal Requirement" ................................................. 11
1.42 "Liability Threshold" ............................................... 12
1.43 "Liens" ............................................................. 12
1.44 "Losses" ............................................................ 12
1.45 "Material Adverse Effect" ........................................... 12
1.46 "Multi-employer Plan" ............................................... 12
1.47 "Notice of Claim" ................................................... 12
1.48 "Outside Tooling" ................................................... 12
1.49 "Permitted Liens" ................................................... 12
1.50 "Person" ............................................................ 12
1.51 "Preliminary Purchase Price" ........................................ 12
1.52 "Product Inventory" ................................................. 12
1.53 "Purchase Price" .................................................... 13
1.54 "Purchased Assets" .................................................. 13
1.55 "Purchaser" ......................................................... 13
1.56 "Purchaser Documents" ............................................... 13
1.57 "Purchaser Indemnified Person" ...................................... 13
1.58 "Required Consents" ................................................. 13
1.59 "Seller" ............................................................ 13
1.60 "Seller's Accountant" ............................................... 13
1.61 "Seller Documents" .................................................. 13
1.62 "Seller Indemnified Person" ......................................... 13
1.63 "Slow Moving Inventory" ............................................. 13
1.64 "Sublease" .......................................................... 13
1.65 "Systems" ........................................................... 13
1.66 "Tax or Taxes" ...................................................... 13
1.67 "Tax Return" ........................................................ 14
1.68 "Third Party Claim" ................................................. 14
1.69 "Transaction Taxes" ................................................. 14
ARTICLE II
SALE AND PURCHASE OF THE PURCHASED ASSETS ................................ 14
2.1 Purchase of the Purchased Assets .................................... 14
2.2 Assumption of the Assumed Liabilities................................ 17
2.3 Purchase Price; Adjustments ......................................... 18
2.4 Accounts Receivable Escrow .......................................... 19
2.5 Allocation of Purchase Price......................................... 19
2.6 Nonassignable Contracts and Authorizations........................... 20
2.7 Required Consents ................................................... 20
ARTICLE III
CLOSING................................................................... 20
3.1 The Closing ......................................................... 20
3.2 Obligations of the Seller ........................................... 20
3.3 Obligations of the Purchaser ........................................ 22
3.4 Passage of Title, etc ............................................... 23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER.............................. 23
4.1 Organization; Good Standing.......................................... 23
4.2 Authority; Enforceability ........................................... 23
4.3 No Conflict ......................................................... 23
4.4 Litigation; Compliance with Law ..................................... 24
4.5 Consents; Third Party Options ....................................... 24
4.6 No Subsidiaries; Other Equity Investments ........................... 25
4.7 Financial Statements ................................................ 25
4.8 No Material Adverse Change .......................................... 25
4.9 Taxes ............................................................... 26
4.10 Personal Property ................................................... 26
4.11 Real Property ....................................................... 27
4.12 Fixed Assets; Personal Property ..................................... 27
4.13 Intellectual Property Matters ....................................... 27
4.14 Computer Software ................................................... 28
4.15 Contracts; Customers and Suppliers .................................. 28
4.16 Product Inventory ................................................... 30
4.17 Accounts Receivable ................................................. 30
4.18 Authorizations ...................................................... 31
4.19 Employees; Labor Matters ............................................ 31
4.20 Employee Benefits ................................................... 32
4.21 Insurance ........................................................... 32
4.22 Environmental Matters ............................................... 33
4.23 Books and Records ................................................... 33
4.24 Improper Payments ................................................... 33
4.25 Additional Information Regarding Customer Matters ................... 33
4.26 No Brokers .......................................................... 33
4.27 Product Warranties .................................................. 33
4.28 Powers of Attorney .................................................. 33
4.29 Disclosure .......................................................... 34
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER .......................... 34
5.1 Organization; Good Standing ......................................... 34
5.2 Authority; Enforceability ........................................... 34
5.3 No Conflict ......................................................... 34
5.4 Litigation .......................................................... 35
5.5 Consents ............................................................ 35
5.6 No Brokers .......................................................... 35
5.7 Disclosure .......................................................... 35
ARTICLE VI
COVENANTS................................................................. 35
6.1 Conduct of Business ................................................. 35
6.2 Due Diligence ....................................................... 37
6.3 Publicity ........................................................... 38
6.4 Further Assurances .................................................. 38
6.5 Transfer and Retention of Records ................................... 38
6.6 Employee Matters .................................................... 39
6.7 Payments Received ................................................... 39
6.8 Tax Matters ......................................................... 40
6.9 UCC Matters ......................................................... 40
6.10 No Solicitation ..................................................... 40
6.11 Risk of Loss ........................................................ 40
6.12 Product Liability Insurance ......................................... 40
6.13 Sublease............................................................. 41
6.14 Software System ..................................................... 41
ARTICLE VII
CONFIDENTIALITY; NON-COMPETITION; AND NON-SOLICITATION
COVENANTS................ ................................................ 42
7.1 Confidentiality; Non-Competition; Non-Solicitation .................. 42
7.2 Remedies ............................................................ 42
7.3 Independence of Agreements .......................................... 43
7.4 Enforceability ...................................................... 43
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS OF THE PURCHASER.............. 43
8.1 Representations and Warranties Accurate ............................. 43
8.2 Performance by the Seller ........................................... 43
8.3 Legal Prohibition ................................................... 43
8.4 Closing Deliveries .................................................. 44
8.5 Absence of Material Adverse Changes ................................. 44
8.6 Consents ............................................................ 44
8.7 Sublease ............................................................ 44
8.8 System Installation ................................................. 44
ARTICLE IX
CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS OF THE SELLER AND THE
SHAREHOLDER............................................................... 44
9.1 Representations and Warranties Accurate ............................. 44
9.2 Performance by the Purchaser ........................................ 44
9.3 Legal Prohibition ................................................... 44
9.4 Closing Deliveries .................................................. 45
9.5 Sublease ............................................................ 45
ARTICLE X
TERMINATION............................................................... 45
10.1 Termination by Mutual Consent ....................................... 45
10.2 Unilateral Termination .............................................. 45
10.3 No Liability for Termination ........................................ 45
ARTICLE XI
INDEMNIFICATION........................................................... 46
11.1 Survival of Representations and Warranties .......................... 46
11.2 Indemnification by the Seller and the Shareholder ................... 46
11.3 Indemnification by the Purchaser .................................... 47
11.4 Indemnification Procedures - Third-Party Claims ..................... 47
11.5 Procedure for Indemnification - Direct Indemnification Claims ....... 49
11.6 Limitations on Amount ............................................... 49
11.7 Claims in Excess of Indemnification Limit ........................... 49
11.8 Taxes and Insurance Proceeds ........................................ 50
11.9 Sole Remedy ......................................................... 50
ARTICLE XII
MISCELLANEOUS............................................................. 50
12.1 Expenses ........................................................... 50
12.2 Amendment .......................................................... 50
12.3 Entire Agreement ................................................... 50
12.4 Waiver ............................................................. 50
12.5 Notices ............................................................ 51
12.6 Governing Law; Arbitration ......................................... 51
12.7 Severability ....................................................... 53
12.8 Binding Effect; Assignment ......................................... 53
12.9 Headings ........................................................... 53
12.10 Third Parties....................................................... 53
12.11 Counterparts; Facsimile............................................. 53
Asset Purchase Agreement
THIS
ASSET PURCHASE AGREEMENT dated as of April 20, 2002 (this "Agreement"), by
and among Sierra Precision, a
California corporation with an address at ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Seller"),
Invivo Corporation, a
Delaware corporation with an address at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ #▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Shareholder"); and 3D Instruments, LLC, an Ohio limited
liability company, with an address at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(the "Purchaser").
WHEREAS, the Seller desires to sell and transfer to the Purchaser, and the
Purchaser desires to purchase and acquire, substantially all assets, properties
and rights that are primarily related to the Business (as such term is
hereinafter defined), other than the Excluded Assets (as such term is
hereinafter defined), and the Purchaser agrees to assume the Assumed Liabilities
(as such term is hereinafter defined) only and no other liabilities, all on the
terms and provisions and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
legal adequacy of which is acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article I, whenever used in this Agreement (including,
without limitation, the exhibits and schedules attached hereto), shall have the
following meanings:
1.1 "AAA" has the meaning given such term in Section 12.6(b) of this Agreement.
1.2 "Accounts Payable" shall mean those liabilities of Seller incurred in the
ordinary course of business that would be characterized as an account payable in
accordance with GAAP (as such term is hereinafter defined) and shall include but
not be limited to commissions payable to any sales person, sales agent or broker
engaged by Seller.
1.3 "Accounts Receivable" means all trade accounts receivable and all notes,
bonds and other evidences of indebtedness of and rights to receive payment , in
each case that would be characterized as an account receivable in accordance
with GAAP (as such term is hereinafter defined).
1.4 "Accrued Vacation Liability" shall mean the obligation to be assumed by the
Purchaser to provide each Continuing Employee with credit for vacation, sick
and/or personal days that he or she accrued but did not use during his or her
employment with Seller. This obligation shall include the duty to compensate
each Continuing Employee for wages during such vacation, sick and/or personal
days that he or she uses during the scope of his or her employment with the
Purchaser, and to compensate such Continuing Employee for wages for such
vacation, sick and/or personal days that remain unused upon the termination of
such Continuing Employee's employment with the Purchaser. Wage compensation
shall be based for vacation, sick and/or personal days for the period subsequent
to the Closing Date on such Continuing Employee's base salary rate with the
Purchaser at the time of use, or for vacation, sick and/or personal days for the
period prior to the Closing Date on such Continuing Employee's base salary rate
paid by Seller at the Closing. Schedule 4.19 sets forth the aggregate accrued
but unused vacation, sick and personal days for the employees of Seller as of
the date of this Agreement.
1.5 "Affiliate" of any Person (as such term is hereinafter defined) means any
stockholder, member, Person or entity controlling, controlled by or under common
control with such Person, or any director, or executive officer of such Person.
For purposes of this definition, the term "control", when used with respect to
any Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" shall have meanings that correspond to the foregoing.
1.6 "Assumed Contracts" has the meaning given such term in Section 2.1(a)
hereof.
1.7 "Assumed Liabilities" means the liabilities and obligations set forth in
Section 2.2(a) hereof.
1.8 "Authorizations" means all licenses, permits, franchises, approvals,
authorizations, qualifications, concessions or the like, issued or granted by
any federal, state, local or foreign Governmental Entity or Regulatory Authority
(as such term is hereinafter defined) to Seller or which primarily relate to the
Business.
1.9 "Benefit Plans" has the meaning given such term in Section 4.20(a) of this
Agreement.
1.10 "Building" has the meaning given such term in Section 1.11 hereof.
1.11 "Building Lease" means that certain Single Tenant Lease dated June 7, 1999
between Seller and Capellino/▇▇▇▇▇▇▇▇ for 35,140 square feet of gross building
area and 79,500 square feet of Land Area identified as Arrow Park (the
"Building").
1.12 "Business" shall mean the business, activities and operations of Seller,
including, without limitation, the manufacture, sale and distribution of (i)
products currently being sold by or currently under development by the Seller;
(ii) Sierra Precision pressure gauges and hoses that monitor oxygen levels and
control air flow for self-contained breathing apparatus ("SCBA") air tanks and
industrial pressure gauges (items (i) and (ii) are referred to as the "Product
Line").
1.13 "Business Day" means a day other than a Saturday, Sunday or a day on which
banking institutions in the State of Ohio are authorized or obligated by law or
executive order to close.
1.14 "Closing" has the meaning given such term in Section 3.1 of this Agreement.
1.15 "Closing Date" has the meaning given such term in Section 3.1 of this
Agreement.
1.16 "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985.
1.17 "Code" means the Internal Revenue Code of 1986, as amended.
1.18 "Continuing Employee" has the meaning given such term in Section 6.6(b) of
this Agreement.
1.19 "Contract" means any contract, lease, license or other instrument,
agreement or binding commitment, whether or not in written form, to which the
Seller is a party or which primarily relates to the Business.
1.20 "Environment" means all air, surface water, groundwater or land, including,
without limitation, land surface or subsurface, including, without limitation,
all fish, wildlife, biota and all other natural resources.
1.21 "Environmental Claim" means any and all administrative or judicial actions,
suits, orders, claims, liens, notices, notices of violations, investigations,
complaints, requests for information, proceedings or other communications
(whether written or oral), whether criminal or civil, pursuant to or relating to
any applicable Environmental Law (as such term is hereinafter defined) by any
Person (including, but not limited to, any Governmental Entity or Regulatory
Authority or citizens' group) based upon, alleging, asserting, or claiming any
actual or potential (a) violation of or liability under any Environmental Law,
(b) violation of any Environmental Permit (as such term is hereinafter defined),
or (c) liability for investigatory costs, cleanup costs, removal costs, remedial
costs, response costs, natural resource damages, property damage, personal
injury, fines or penalties arising out of, based on, resulting from or related
to the presence, Release (as such term is hereinafter defined) or threatened
Release into the Environment of any Hazardous Substance (as such term is
hereinafter defined) at any location, including, but not limited to, any
off-Site (as such term is hereinafter defined) location to which any Hazardous
Substance or materials containing any Hazardous Substance were sent for
handling, storage, treatment or disposal.
1.22 "Environmental Law" means any and all current federal, state, local and
foreign, civil and criminal laws, statutes, ordinances, orders, codes, rules,
regulations, Environmental Permits, policies, guidance documents, judgments,
decrees, injunctions, or agreements with any Governmental Entity or Regulatory
Authority, relating to the protection of health and the Environment, worker
health and safety, and/or governing the handling, use, generation, treatment,
storage, transportation, disposal, manufacture, distribution, formulation,
packaging, labeling, or Release of Hazardous Substance, including, but not
limited to: the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. Section
1251 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. Section 1801
et seq.; the Federal Insecticide Fungicide and Rodenticide Act, 7 U.S.C. Section
136 et seq.; the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42
U.S.C. Section 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq.; the Occupational Safety and Health Act of 1970, 29 U.S.C. Section
651 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; and
the state analogies thereto; and any common law doctrine, including, but not
limited to, negligence, nuisance, trespass, personal injury, or property damage
related to or arising out of the presence, Release, or exposure to a Hazardous
Substance.
1.23 "Environmental Permit" means any federal, state, local, provincial, or
foreign permits, licenses, consents or Authorizations required by any
Governmental Entity or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental Entity or Regulatory
Authority under any applicable Environmental Law.
1.24 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the regulations thereunder.
1.25 "Excluded Assets" has the meaning given such term in Section 2.1(b) of this
Agreement.
1.26 "Excluded Liabilities" means all liabilities, obligations and
responsibilities of the Seller of any nature whatsoever, whether relating to or
arising out of the Business or otherwise, other than the Assumed Liabilities.
1.27 "Financial Statements" has the meaning given such term in Section 4.7 of
this Agreement.
1.28 "Fixed Assets" has the meaning given such term in Section 2.1(a)(iii) of
this Agreement.
1.29 "GAAP" means generally accepted accounting principles in effect in the
United States of America at the time of any determination, and which are applied
on a consistent basis. All accounting terms used in this Agreement which are not
expressly defined in this Agreement shall have the meanings given to those terms
by GAAP, unless the context of this Agreement otherwise requires.
1.30 "Governmental Entity or Regulatory Authority" means any court, tribunal,
arbitrator, executive or regulatory authority, tax authority, agency,
commission, official or other instrumentality of the United States of America,
any foreign country or any domestic or foreign state, county, city, municipality
or other political subdivision.
1.31 "Hazardous Substance" means petroleum, petroleum hydrocarbons or petroleum
products, petroleum by-products, radioactive materials, asbestos or
asbestos containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls, and
any other chemicals, materials, substances or wastes, in any amount or
concentration, which are now or hereafter become defined or regulated as
"hazardous substances", "hazardous materials", "hazardous wastes", "extremely
hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic
pollutants", "pollutants", "regulated substances", "solid wastes" or
"contaminants" or words of similar import under any Environmental Law.
1.32 "Income Tax" means any federal, state, local or foreign Tax (as such term
is hereinafter defined) that is (a) based upon, measured by or calculated with
respect to income, profits, capital stock, net worth or receipts, in each case
whether gross, net or adjusted (including, without limitation, capital gains
Taxes and minimum Taxes), or (b) based upon, measured by or calculated with
respect to multiple bases (including, without limitation, corporate franchise
Taxes) if one or more of the bases on which such Tax may be based, measured or
calculated with respect to, is described in clause (a), in each case together
with any interest, penalties or additions to any Tax in respect of any of the
foregoing, whether disputed or not, and any obligation to indemnify, assume or
succeed to the liability of any other Person in respect of the foregoing
(including, without limitation, as a transferee pursuant to Section 6901 of the
Code or otherwise) as a result of Treasury Regulation Section 1.1502-6 or any
similar provision of applicable law, or as a result of a tax sharing or similar
agreement, arrangement or understanding.
1.33 "Indemnification Acknowledgment" has the meaning given such term in Section
11.4(a)(ii) of this Agreement.
1.34 "Indemnification Limit" has the meaning given such term in Section 11.6(a)
of this Agreement.
1.35 "Indemnitee" has the meaning given such term in Section 11.4(a) of this
Agreement.
1.36 "Indemnitor" has the meaning given such term in Section 11.4(a) of this
Agreement.
1.37 "Insurance Policies" has the meaning given such term in Section 4.21 of
this Agreement.
1.38 "Intellectual Property Rights" means the United States of America and
foreign patents, copyrights, trademarks, trade names, service marks, brand
names, business and product names, uniform resource locators ("URL's") or
internet domain names, internet websites and the electronic files, content and
layout related thereto, email addresses, listings for the Seller and/or Business
in telephone books and directories and internet directories, browser and search
engines, logos, symbols, trade dress, design or representation or expressions of
any of the foregoing, all registrations or applications for registration of any
of the foregoing, and all databases, source codes, object codes, computer
programs and computer software in any form or medium (including, without
limitation, the Systems (as such term is hereinafter defined)), in each case
that are owned by the Seller and relate primarily to the Business, and all trade
secrets, industrial or manufacturing models, processes, designs and
methodologies, research and development, inventions, know-how, customer lists,
manufacturing, engineering and other drawings and blueprints, technology,
technical information, engineering data, design and engineering specifications,
inventions and other proprietary processes and information of any kind owned by
the Seller that relate primarily to the Business or any of the Purchased Assets.
1.39 "Key Employee" shall mean those employees of the Seller whose names and
positions are listed on Schedule 1.38 attached hereto and any person who may
succeed any such employee in that position.
1.40 "Knowledge", "known", "knows", "" and language of similar import shall mean
those matters of which the applicable Person is aware or should be aware in the
prudent exercise of such person's duties, and in the case of Seller shall refer
solely to the Chief Executive Officer of the Shareholder and the directors,
executive officers and Key Employee of the Seller, and assuming, solely with
respect to the Key Employee, the exercise of due diligence.
1.41 "Legal Requirement" of a Person means any statute, rule, regulation or
other provision of law, or any order, judgment or other direction of a court,
arbitration panel or other tribunal resolution or any Governmental Entity or
Regulatory Authority, or, permit, registration, license or Authorization
applicable to such Person, or to any of its properties, assets or business.
1.42 "Liability Threshold" has the meaning given such term in Section 11.6(a) of
this Agreement.
1.43 "Liens" means any liens, charges, encumbrances, options, rights of first
refusal, security interests, claims, mortgages, pledges, charges, easements,
obligations or any other encumbrances (including, without limitation, any
conditional sale or other title retention agreement or any lease in the nature
thereof and any agreement to grant or to permit or suffer to exist any of the
foregoing) or third party rights or equitable interests of any nature
whatsoever, provided, however, that "Liens" shall exclude Permitted Liens.
1.44 "Losses" has the meaning given such term in Section 11.2 of this Agreement.
1.45 "Material Adverse Effect" shall mean a material adverse effect on the
assets, properties, operations, or condition (financial or otherwise) of the
Business or the Purchased Assets; except to the extent that such effect results
from (i) changes in general economic conditions, (ii) changes affecting the
industry generally in which the entity operates which do not affect such entity
disproportionately, or (iii) any attack on, outbreak or escalation of
hostilities or act of terrorism or war involving the United States.
1.46 "Multi-employer Plan" has the meaning given such term in Section 4.20(b) of
this Agreement.
1.47 "Notice of Claim" has the meaning given such term in Section 11.4(a)(i) of
this Agreement.
1.48 "Outside Tooling" shall mean tooling that is located at the facilities of a
supplier or outside vendor of Seller.
1.49 "Permitted Liens" means: (a) any Liens arising by operation of law in the
ordinary course of business for example, mechanic's liens, landlord's liens and
liens to secure importation/custom duties in connection with the importation of
goods; (b) any liens for Taxes (defined below), assessments, judgments and
similar charges not yet due and payable or which are being contested in good
faith and for which any required reserves have been established; (c) purchase
money liens and liens securing rental payments under capital lease arrangements
of the Seller so long as same are reflected in an Assumed Contract and (d)
Assumed Liabilities, including without limitation Liens consisting of licenses
of Intellectual Property Rights that are being assumed and conditions, covenants
and restrictions under Assumed Contracts.
1.50 "Person" means any natural individual, corporation, partnership, joint
venture, trust, limited liability company, association, organization, firm or
other entity.
1.51 "Preliminary Purchase Price" has the meaning given such term in Section 2.3
of this Agreement.
1.52 "Product Inventory" means all of the inventories of products and goods
(whether raw materials, work-in-process or finished goods) of the Business that:
(a) are in good and merchantable condition;
(b) are not obsolete, damaged or soiled;
(c) do not contain any items that are part of any discontinued line of products
or goods, unless the Purchaser presently carries such line; and
(d) any merchandising, promotional and packaging supplies and materials which
are held at, or are in transit from or to, any of the locations at which any
aspect of the operations of the Business is conducted, or which are used or held
for use by the Seller primarily for use with the Business and any other item of
the Business which in accordance with GAAP would be characterized as inventory.
1.53 "Purchased Assets" has the meaning given such term in Section 2.1(a) of
this Agreement.
1.54 "Purchaser" has the meaning given such term in the first paragraph of this
Agreement.
1.55 "Purchaser Documents" has the meaning given such term in Section 5.2 of
this Agreement.
1.56 "Purchaser Indemnified Person" has the meaning given such term in Section
11.2 of this Agreement.
1.57 "Required Consents" has the meaning given to that term in Section 2.7
hereof.
1.58 "Seller" has the meaning given such term in the first paragraph of this
Agreement.
1.59 "Seller's Accountant" means KPMG.
1.60 "Seller Documents" has the meaning given such term in Section 4.2 of this
Agreement.
1.61 "Seller Indemnified Person" has the meaning given such term in Section 11.3
of this Agreement.
1.62 "Slow Moving Inventory" has the meaning given such term in Section 4.16(b)
of this Agreement.
1.63 "Sublease" shall have the meaning given such term in Section 6.13 of this
Agreement.
1.64 "Systems" means all computer hardware and software, including, without
limitation, application software data and databases, applications and all
related documentation, that are primarily related to the Business.
1.65 "Tax" or "Taxes" means any and all taxes, charges, fees, levies,
deficiencies or other assessments of any nature whatsoever, including, without
limitation, any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (pursuant to Section 59A of the Code or
otherwise), custom
duties, capital stock, net worth, franchise, recording, employee's income
withholding, foreign withholding, social security (or its equivalent),
unemployment, disability, real property, personal property, intangible property,
sales, use, transfer, value added, occupancy, registration, customs, recording,
gains, alternative or add-on minimum, estimated or other tax, charge, fee, levy,
deficiency or other assessment of whatever kind or nature, including any
interest, penalties or additions to tax in respect of the foregoing, whether
disputed or not, and any obligation to indemnify, assume or succeed to the
liability of any other Person in respect of the foregoing (including, without
limitation, as a transferee (pursuant to Section 6901 of the Code or otherwise),
as a result of Treasury Regulation Section 1.1502-6 or similar provision of
applicable law, or as a result of a tax sharing or similar agreement,
arrangement or understanding).
1.66 "Tax Return" means any federal, state, local or foreign return,
declaration, report, claim for refund or credit, document, or other information
or filing (including any schedule or exhibit thereto) that is filed or required
to be supplied to any Governmental Entity or Regulatory Authority in respect of
or relating to any Tax, and any amendment thereof, whether on a consolidated,
combined, unitary or separate basis.
1.67 "Third Party Claim" means a claim or demand made by any Person who is not a
party to this Agreement including, without limitation, any corporation,
Governmental Entity or Regulatory Authority or other third party against an
Indemnitee.
1.68 "Transaction Taxes" shall have the meaning given to such term in Section
6.8(a) hereof.
ARTICLE II
SALE AND PURCHASE OF THE PURCHASED ASSETS
2.1 Purchase of the Purchased Assets.
(a) Upon the terms and provisions and subject to the conditions hereof, and
based upon the representations, warranties, covenants and agreements of the
Seller and Shareholder contained in this Agreement and the other Seller
Documents and the exhibits and schedules attached hereto and thereto, at the
Closing, the Seller shall sell, transfer, assign, convey and deliver to the
Purchaser, and the Purchaser shall purchase and acquire from the Seller, free
and clear of all Liens, all of the right, title and interest of the Seller in
and to all of the assets, properties and rights of every nature, kind and
description relating primarily to the Business, whether real or personal,
tangible or intangible, whether owned, leased, licensed or otherwise held by the
Seller or used by the Seller or by any other Person primarily in connection with
the Business, wherever located and howsoever situated (all of the foregoing,
collectively, the "Purchased Assets"), excluding therefrom the Excluded Assets.
Without limiting the foregoing, the Purchased Assets shall include, in each case
with respect to the Business, the following:
(i) all of the Seller's Product Inventory and all merchandising, operating,
production, shipping and packaging supplies and materials (whether or not
considered Product Inventory);
(ii) all of the Seller's Accounts Receivable, notes and other amounts receivable
and the proceeds of the foregoing (including, without limitation, all rebates or
vendor reimbursements due from any supplier or vendor or buying association with
respect to the period prior to the Closing), including but not limited to those
matters listed on Schedule 4.17 hereof;
(iii) all of Seller's machinery, equipment (including vehicles, computer
equipment and software, tooling and leasehold improvements), furniture and
fixtures (including trade fixtures), vehicles and other tangible personal
property of every kind, nature and description, including but not limited to
those listed on Schedule 4.12(a) hereof, but excluding asset numbers 200, 264,
265, 266, 282, 345, 357, 363 and 371 as listed on Schedule 4.12(a) hereof (the
"Fixed Assets");
(iv) all of the Seller's Intellectual Property Rights primarily related to or
primarily used in the Business including, without limitation; any and all trade
names or trademarks used primarily in connection with the Business, whether
registered as such or not, including but not limited to those listed on Schedule
4.13 hereof;
(v) all of the right, title and interest of Seller in and to the use of the name
"Sierra Precision", and any derivatives or combinations thereof (except as
provided in Section 2.1(b)(iii) below);
(vi) all of the rights to insurance and condemnation proceeds;
(vii) all of the Contracts (except for those Contracts as to which a required
consent to assignment has not been received prior to the Closing) and all right,
title and interest of the Seller in and to the Contracts, as listed on Schedule
2.1(a)(vii) hereof (such contracts, together with such leases and other
Contracts referred to under (x) below, the "Assumed Contracts");
(viii) all of the Authorizations, to the extent the Authorizations
are assignable to Purchaser pursuant to their terms or the applicable law
governing same;
(ix) all of the Seller's books and records relating to the Business and the
Purchased Assets including, without limitation, all: quality control records;
records relating to the Authorizations; records relating to the adoption and use
of any of the Intellectual Property Rights; product literature (including
installation and service instructions) designs, descriptions and concepts,
engineering schematics, artwork and drawings, manufacturing drawings,
instructions and records; specifications; sales, purchasing (including purchase
orders), rebate, customer (including customer lists which shall include records
of sales by customer and part number), vendor, supplier (including supplier
lists), financial accounting and personnel records; product registrations;
marketing plans; market research data; promotional and marketing materials;
print, radio and television commercials; label and shipping carton dies;
designs; films; artwork; photography; mechanical art; color separations; prints,
plates and graphic material; and all files and correspondence related to any of
the foregoing, subject to Seller's right to access thereto under the provisions
of Section 6.5(b) hereof;
(x) all right, title and interest of the Seller under all leases and other
Contracts with respect to any real property or any machinery, equipment,
vehicles and other personal property which can be assigned by the Seller and
which are included in the definition of Assumed Liabilities; provided, however,
that, any such leases and Contracts which cannot be assigned by the Seller shall
be excluded from the Assumed Liabilities;
(xi) all customer sales orders and customer sales leads, customer lists
(including sales records detailing customer name and quantities and dollar
values for each product sold to such customer) and supplier lists, customer
shipping labels and shipping forms, customer sales histories, vendor purchase
histories, catalogs, handbooks, brochures, mailing lists, advertising materials,
files, telephone numbers and other information relating to the Business, the
Seller, the Purchased Assets or the customers and suppliers thereto;
(xii) all manufacturer warranties provided to the Seller with respect to any of
the Product Inventory or the Fixed Assets which can be assigned to the
Purchaser;
(xiii) all claims against any third party, whether matured or unmatured,
liquidated or unliquidated, direct or contingent, arising out of or resulting
from or relating to any occurrence prior to the Closing, including, without
limitation, all rights under express or implied warranties and guarantees and
other similar contractual rights made by third parties arising out of, resulting
from or relating to the Business or any of the Purchased Assets, except for any
of same that do not affect the operation of the Business or the Purchased Assets
after the Closing Date; and
(xiv) pre-paid expenses and goodwill, and all other assets which are used
primarily in conjunction with the operations of the Business of every kind and
description, wherever located.
(b) Excluded Assets. Notwithstanding anything contained in Section 2.1(a), all
Seller's right, title and interest in all of the following assets, properties
and rights of every nature, kind and description (the "Excluded Assets") shall
be excluded from the Purchased Assets, and shall remain vested in the Seller:
(i) all cash, cash equivalents, deposits, bank accounts and other similar assets
in the name of the Seller and the Shareholder (on behalf of the Seller) as of
the Closing Date and listed in Schedule 2.1(b);
(ii) any interest in and to any refund of Taxes of the Seller for any period and
any interest in and to any refund of Taxes relating to the Business or the
Purchased Assets for, or applicable to, all times prior to the Closing Date;
(iii) the corporate charter, qualifications to conduct business as a foreign
corporation, taxpayer and other identification numbers, seals, minute books,
stock transfer books and other documents relating to the organization and
existence of the Seller as a corporation;
(iv) any other asset, property, right, contract or claim set forth in
Schedule 2.1(b); and
(v) asset numbers 200, 264, 265, 266, 282, 345, 357, 363 and 371 as listed on
Schedule 4.12(a) hereof.
For the avoidance of doubt, any item listed on Schedule 2.1(b) shall be an
Excluded Asset regardless of whether it would otherwise be a Purchased Asset
pursuant to any other provision or schedule hereto.
2.2 Assumption of the Assumed Liabilities.
(a) Assumed Liabilities. At the Closing, the Seller shall assign, and the
Purchaser shall assume and agree to perform, pay or discharge, only the Assumed
Liabilities. For purposes hereof, the term "Assumed Liabilities" shall mean (i)
warranty work to be performed on products manufactured and sold by the Business
prior to the Closing Date, except that the warranty work for which Purchaser is
responsible hereunder shall not exceed Fifty Thousand Dollars ($50,000.00) in
the aggregate of the direct costs to Purchaser of materials and labor to perform
such warranty work (the "Assumed Warranty Liabilities"); (ii) liability of the
Seller under Assumed Contracts; (iii) all Transaction Taxes; and (iv) the
Accrued Vacation Liability. Except for the Assumed Liabilities, the Purchaser
shall not assume any liability, responsibility or obligation for any liability,
responsibility or obligation of the Seller or which in any way relate to or
arise from the Business, the Purchased Assets or otherwise (whether known or
unknown, fixed or contingent, matured or unmatured), all of which liabilities,
responsibilities and obligations shall at and after the Closing remain the sole
and exclusive responsibility of the Seller.
(b) Excluded Liabilities. Without limiting the generality of Section
2.2(a) hereof, the Purchaser shall not assume any of the following
liabilities of the Seller (collectively, the "Excluded Liabilities"):
(i) all liabilities and obligations of the Seller for any and all Taxes relating
to the Business or the Purchased Assets that relate in any manner to, or first
arose during, all times prior to the Closing Date, except as provided under
Section 2.2(a)(iii) above and Section 6.8 below;
(ii) except to the extent assumed by Purchaser under Section 2.2(a)(i) above,
all claims, demands, liabilities or obligations of any nature whatsoever with
respect to the Business or any of the Purchased Assets, which are based upon or
relate to events or conditions existing on or before the Closing Date, or which
are based upon any products sold or services performed prior to the Closing,
notwithstanding that the date on which the claim, demand, liability or
obligation arose or became manifest was on a date which was on or after the
Closing Date;
(iii) all liabilities of the Seller pursuant to Section 11.2 of this
Agreement;
(iv) all liabilities, claims or other obligations of the Seller for any of the
following: workers' compensation; payments on behalf of employees of Seller
under any Benefit Plans; insurance; holiday, regular and severance pay with
respect to all employees of the Seller, whether or not such employees become
employees of the Purchaser after the Closing (provided, however, that Purchaser
shall be responsible for all such liabilities, claims and obligations for
Continuing Employees with respect to employment after the Closing);
(v) any obligation to provide vacation, sick or personal days to any employee of
Seller other than a Continuing Employee with respect to employment prior to the
Closing;
(vi) any debt liability or other obligation of the Seller incurred after
the Closing Date;
(vii) the Accounts Payable of Seller;
(viii) Liabilities of whatsoever nature under the Personal Property
Leases.
2.3 Purchase Price; Adjustments.
(a) Purchase Price. In consideration for the sale, transfer, assignment,
conveyance and delivery to the Purchaser of the Purchased Assets (free and clear
of any and all Liens) being purchased by the Purchaser hereunder and the
representations and warranties and covenants and agreements of the Seller set
forth herein and in the other Seller Documents, and upon the terms and subject
to the conditions contained herein, at the Closing , the Purchaser shall pay to
the Seller an aggregate amount equal to Four Million Four Hundred Nineteen
Thousand Five Hundred One Dollars ($4,419,501.00) (the "Preliminary Purchase
Price"), subject to adjustment at the Closing for increases or decreases in (i)
Accounts Receivable and (ii) the cost of Product Inventory as provided in
Section 2.3(b) and subject to escrow withholding as provided in Section 2.4. The
Preliminary Purchase Price is based on (A) the
Accounts Receivable for Seller as of April 18, 2002 of Seven Hundred Fifty-Eight
Thousand Nine Hundred Eighty-Four Dollars ($758,984.00) (the "Preliminary AR"),
(B) the net Product Inventory of Seller of Two Million Two Hundred Sixty-One
Thousand Forty-Four Dollars ($2,261,044.00) which amount reflects the cost of
Product Inventory as of March 31, 2002, plus estimated labor and overhead, but
minus adjustments for Slow-Moving Inventory calculated as of November 30, 2001
(the "Preliminary Net Product Inventory") and (C) the depreciated value of the
Fixed Assets of Seller as of March 31, 2002, of One Million One Hundred
Sixty-Two Thousand Four Hundred Seventy-Three Dollars ($1,162,473.00) (the "Net
Physical Assets"). The calculation of the Preliminary Purchase Price is attached
hereto as Schedule A. Upon the occurrence of the Closing, the Purchase Price, as
it may be adjusted pursuant to the terms of Section 2.3(b) hereof (the "Final
Purchase Price") and subject to escrow withholding pursuant to Section 2.4
hereof, shall be paid by wire transfer to such bank accounts as shall be
specified in writing by Seller. Seller shall specify such bank accounts to
Purchaser no later than two (2) Business Days prior to the Closing Date.
(b) Adjustments. At the Closing, the Preliminary Purchase Price will be adjusted
up or down, as applicable, by the amount of (i) any increase or decrease in the
Preliminary AR between April 18, 2002 and the Closing Date; and (ii) any
increase or decrease in the Preliminary Net Product Inventory between March 31,
2002 and the Closing Date. The cost of the Product Inventory as of the Closing
Date shall be determined using actual receipts and shipments in addition to
products and goods in transit, shall include an estimate of labor and overhead
consistent with the methodology used for determining the Preliminary Purchase
Price, and shall reflect the results of the physical Product Inventory count
performed by Seller and Purchaser between April 9, 2002 and April 15, 2002. The
adjustment to the cost of the Product Inventory shall be updated through the
Closing Date for purposes of calculating the final net Product Inventory. In the
event of a dispute between the parties with respect to the results of the
determination of the cost of Product Inventory as of the Closing Date, the
dispute shall be resolved pursuant to the provisions of Section 12.6(b). The Net
Physical Assets shall not be adjusted at the Closing.
Section 2.4. Accounts Receivable Escrow. Purchaser shall deposit a portion of
the Final Purchase Price equal to fifteen percent (15%) of the Accounts
Receivable as of the Closing Date (the "AR Escrow Amount") with ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Ltd. (the "Escrow Agent"), to be held in escrow for a period
of one hundred twenty (120) days after Closing (the "AR Escrow Period"). The AR
Escrow Amount will be available as an escrow fund solely to compensate Purchaser
for the amount owed on any Accounts Receivable of the Seller purchased by
Purchaser and not paid by the party indebted thereunder within the AR Escrow
Period (the "Unpaid Accounts Receivable"). Within ten (10) Business Days of the
expiration of the AR Escrow Period, Purchaser shall submit a claim to the Escrow
Agent (an "Escrow Claim") (with a copy to the Seller, together with related
invoices) for any Unpaid Accounts Receivable. Unless Escrow Agent receives
written notice from Seller that Seller disputes the Escrow Claim of Purchaser
within five (5) days of Seller's receipt of the Escrow Claim, Escrow Agent,
within fifteen (15) Business Days of the expiration of the AR Escrow Period, (i)
shall wire transfer to Purchaser the amount provided for in the Escrow Claim
delivered by Purchaser; (ii) the Escrow Agent shall wire transfer to Seller in
the manner and to the bank accounts set forth above, any remaining portion of
the AR Escrow Amount (such amount being hereinafter referred to as the "Final
Payment"); and (ii) Purchaser shall assign to Seller any Unpaid Accounts
Receivable for which Purchaser was compensated from the escrow fund, and Seller
shall be entitled to pursue collection of and enforce such Unpaid Accounts
Receivable. Should Purchaser receive payment on any Unpaid Accounts Receivable
for which Purchaser was compensated from the AR Escrow Amount following the
expiration of the AR Escrow Period, the Purchaser will pay over to Seller the
amount of any such payment. If there are any disputes between the parties with
respect to claims on the escrow fund or related matters, the parties hereby
agree to submit such dispute to binding arbitration pursuant to Section 12.6 of
this Agreement. Both Purchaser and Seller agree that the Escrow Agent, with
respect to performance of its duties under this section, shall not be liable to
any parties for damages, losses or expenses, except in the event of gross
negligence or willful misconduct on its part and that should a dispute arise,
Escrow Agent shall not disburse the AR Escrow Amount or any portion thereof,
until Escrow Agent receives instructions for disbursal signed by Purchaser and
Seller or an order from the arbitration panel contemplated by Section
12.6(b)(ii) hereof. Notwithstanding the foregoing, should Purchaser be unable to
receive payment for any Unpaid Accounts Receivable because of the AR Escrow
Amount being insufficient to pay all Unpaid Accounts Receivable, Seller shall
indemnify Purchaser for any such unpaid amount under the provisions of Article
XI hereof, except that Purchaser acknowledges that notwithstanding the
provisions of Section 11.1 hereof, Purchaser shall provide Seller with notice of
a claim hereunder within forty-five (45) days of the expiration of the Holding
Period. Seller shall pay the amount, (subject to the existence of a dispute
regarding same) within thirty (30) days of receipt of such claim.
Purchaser agrees to pursue collection of the Accounts Receivable in accordance
with Purchaser's past practices for collection of accounts receivable.
2.5 Allocation of Purchase Price. The Final Purchase Price for the Purchased
Assets and the amount of the Assumed Liabilities shall be allocated among the
Purchased Assets sold, transferred, assigned and conveyed pursuant to this
Agreement, as
mutually agreed to by Purchaser and Seller (with Purchaser to make the initial
proposal for such allocation), not later than one hundred fifty (150) days after
the Closing Date in accordance with Section 1060 of the Code. Purchaser and
Seller agree that the Final Purchase Price shall be allocated among the
Purchased Assets as follows: first, to non-obsolete Product Inventory at
Seller's cost; second, to Accounts Receivable by the amount thereof collected
during the Accounts Receivable Escrow Period and the amount retained by
Purchaser from the Accounts Receivable Escrow; third, to Fixed Assets at the
appraised value thereof; fourth, to leasehold improvements included in the Fixed
Assets at their net book depreciated value; and the balance shall be allocated
to the covenants not to compete. Each party shall treat the purchase and sale
pursuant to this Agreement consistently with such allocations for all purposes,
including, without limitation, determining any Taxes and filing its Form 8594,
and shall not take any position inconsistent therewith, whether on a Tax Return,
before a Governmental Entity or Regulatory Authority or any judicial or other
proceeding. In the event the allocation is disputed by any Governmental Entity
or Regulatory Authority, the party receiving notice of such dispute shall
promptly notify and consult with the other parties concerning the resolution of
such dispute, and shall keep the other parties apprised of the status of such
dispute and the resolution thereof. For purposes of the preparation of Form
8594, each party's name, address and taxpayer identification number is set forth
on Schedule 2.5 attached hereto.
2.6 Nonassignable Contracts and Authorizations. To the extent that the
assignment of any Contract issue or the Authorization which is to be assigned to
the Purchaser shall require the consent of any other Person, this Agreement
shall not constitute a contract to assign the same if an assignment of such
Contract or Authorization would constitute a breach thereof. The Seller shall
use commercially reasonable efforts, for a period of ninety (90) days following
the Closing, and the Purchaser shall cooperate where appropriate, to obtain any
consent necessary for any such assignment requested by Purchaser. After such
ninety (90) day period, Seller shall have no further obligation to Purchaser
(but Seller will be obligated to the other party to the Contract) with respect
to any such Contracts or Authorizations that were not assigned.
2.7 Required Consents. Notwithstanding anything set forth in Section 2.7 hereof,
the Seller shall obtain the consent of the other party, or the authorizing
party, as the case may be, to the assignment by the Seller to the Purchaser of
those Contracts and Authorizations set forth on Schedule 2.7 attached hereto
(such consents, the "Required Consents").
ARTICLE III
CLOSING
3.1 The Closing. The closing of the purchase and sale of the Purchased Assets
hereunder and the other transactions contemplated hereby (the "Closing") shall
take place at: 5:00 p.m. on such date and time as may be agreed to in writing by
the Purchaser and the Seller (the "Closing Date"), at such a location as may be
agreed to in writing by the Purchaser and Seller. All transactions contemplated
hereunder to occur on the Closing Date shall be deemed to have occurred
simultaneously at 5:00 p.m. (local time) on the Closing Date.
3.2 Obligations of the Seller. At the Closing and subject to the terms,
provisions and conditions contained herein, the Seller shall take all actions
and do all things necessary to sell, transfer, assign, convey and deliver the
Purchased Assets to the Purchaser free and clear of any and all Liens and to
consummate the transactions contemplated hereby, including, without limitation,
delivery or causing to be delivered to the Purchaser the following:
(a) a ▇▇▇▇ of Sale duly executed by the Seller in the form of Exhibit A attached
hereto and other customary and appropriate documents of conveyance, containing
covenants of warranty, which are in accordance with the representations and
warranties of Seller contained herein, necessary to sell, transfer and assign
all of the Seller's right, title and interest in and to the Purchased Assets,
free and clear of any and all Liens;
(b) such instruments of sale, assignment, transfer and conveyance as the
Purchaser may reasonably request in order to record the sale, assignment,
transfer and conveyance of any of the Intellectual Property Rights with the
United States Patent and Trademark Office, the United States Copyright Office
and any other Governmental Entity or Regulatory Authority, domestic or foreign;
(c) such other general or specific instruments of sale, assignment, transfer and
conveyance (including, without limitation, assignments of leases whether real or
personal, all in recordable form (where necessary) and with all applicable
revenue stamps attached) executed by the Seller, with full covenants of warranty
as to the good and marketable title of the Seller in the Purchased Assets
covered thereby, of the Seller in and to the Purchased Assets, as may be
necessary or appropriate, in the reasonable judgment of
the Purchaser, to fully and effectively sell, assign, transfer and convey the
Purchased Assets and all right, title and interest therein to the Purchaser;
(d) an opinion of Fenwick & West LLP, legal counsel to the Seller, in a
form reasonably acceptable to legal counsel for Purchaser;
(e) a certificate dated as of the Closing Date, executed by the
Secretary of the Seller certifying:
(i) that attached thereto are true, correct and complete copies of the (1)
Certificate of Incorporation of Seller; (2) the By-Laws of the Seller; (3) a
true, correct and complete copy of the resolutions adopted by the board of
directors of the Seller authorizing the execution, delivery and performance of
this Agreement and the other Seller Documents and the consummation of the
transactions contemplated hereby and thereby; and (4) a true, correct and
complete copy of the resolutions adopted by the board of directors of the
Shareholder authorizing the execution, delivery and performance of this
Agreement and the other Seller Documents and the consummation of the
transactions contemplated hereby and thereby; and
(ii) the incumbency of the officers of the Seller executing this
Agreement and the other Seller Documents;
(f) all Required Consents and all Authorizations necessary or required
to be obtained in order to consummate the transactions contemplated
hereby;
(g) evidence reasonably satisfactory to the Purchaser of the payment by the
Seller of all Taxes, if applicable, based upon or relating to the sale,
assignment, conveyance and transfer of the Purchased Assets to the Purchaser and
the consummation of the transactions contemplated hereby that are due and
payable on or before the Closing Date;
(h) an Estoppel Certificate dated not more than ten (10) days prior to the
Closing Date from the lessor of the Building Lease, in the form of Exhibit B
attached hereto;
(i) all of the Seller's books, records and other data and materials
contemplated by Section 2.1(a) of this Agreement;
(j) evidence reasonably satisfactory to the Purchaser of the payment in
full of all indebtedness of the Seller which is in any way secured by the
Purchased Assets;
(k) an Assignment and Assumption Agreement (the "Assignment and Assumption
Agreement") executed by Seller in the form of Exhibit C attached hereto and made
a part hereof;
(l) a check payable to the Purchaser in an amount equal to the aggregate Accrued
Vacation Liability for all of the Continuing Employees, based on each such
Continuing Employee's base salary rate at the Closing;
(m) the Sublease, executed by the Seller;
(n) the System Licenses; and
(o) such other certificates, documents, receipts and instruments as the
Purchaser or its legal counsel may reasonably request.
3.3 Obligations of the Purchaser. At the Closing and subject to the terms,
provisions and conditions contained herein, the Purchaser shall deliver to the
Seller the following:
(a) the Final Purchase Price minus the AR Escrow Amount, by wire
transfer as specified above;
(b) an opinion of ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Ltd., legal counsel to
the Purchaser, reasonably acceptable to legal counsel to Seller;
(c) a certificate dated as of the Closing Date, executed by the sole member of
the Purchaser certifying that attached thereto is a true, correct and complete
copy of the (1) Articles of Organization and Operating Agreement of the
Purchaser; (2) a true, correct and
complete copy of the resolutions adopted by the members of the Purchaser
authorizing the execution, delivery and performance of this Agreement and the
other Purchaser Documents and the consummation of the transactions contemplated
hereby and thereby; and
(d) the Assignment and Assumption Agreement, executed by Purchaser;
(e) the Sublease, executed by the Purchaser; and
(f) such other certificates, documents and instruments as the Seller or its
legal counsel may reasonably request.
3.4 Passage of Title, etc. At the Closing, title to the Purchased Assets shall
pass to the Purchaser, and the Seller shall put the Purchaser in full, complete
and quiet possession and enjoyment of the Purchased Assets and the Purchaser
shall be entitled to all of the benefits of the Business and the goodwill
associated therewith.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDER
The Seller and shareholder hereby represent and warrant to the Purchaser that
the following are true and correct as of the Closing Date, except as set forth
in the disclosure letter, consisting of Schedules numbered to correspond to
sections of this Agreement, provided by the Seller to the Purchaser on the date
hereof and hereby made a part of this Agreement:
4.1 Organization; Good Standing. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California,
and has the power and authority to own and lease its assets and properties and
to conduct the Business as it is now being conducted. The Seller is duly
qualified or licensed to do business and is in good standing as a foreign
corporation under the laws of each jurisdiction in which the conduct of the
Business or the ownership or leasing of the Purchased Assets requires such
qualification, other than in such jurisdictions where the failure to be so
qualified or licensed (individually or in the aggregate) could not reasonably be
expected to have a Material Adverse Effect.
4.2 Authority; Enforceability. The Seller has the corporate power and authority
to execute, deliver and perform this Agreement and all other agreements,
certificates and documents executed or delivered, or to be executed or
delivered, by the Seller in connection herewith (collectively, the "Seller
Documents"), and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the other Seller
Documents by the Seller has been duly authorized by all necessary corporate
action on the part of the Seller. This Agreement and each of the other Seller
Documents have been duly executed and delivered by the Seller. This Agreement
and the Seller Documents constitute (or, in the case of certain Seller
Documents, when executed and delivered will constitute) the legal, valid and
binding obligations of the Seller, enforceable against the Seller in accordance
with their respective terms, subject to: (i) applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, or other laws affecting any rights,
powers, privileges, remedies and interest of creditors, generally; and (ii)
rules or principles of equity affecting the enforcement of obligations
generally, whether at law, in equity or otherwise, including without limitation
rules governing specific performance, injunctive relief and other equitable
remedies.
4.3 No Conflict.
Except as set forth on Schedule 4.3(a) attached hereto, the execution, delivery
and performance of this Agreement and the other Seller Documents by the Seller
and the consummation of the transactions contemplated hereby and thereby do not
and will not:
(a) violate or conflict with any provision of the Certificate of
Incorporation or By-Laws of the Seller;
(b) violate, conflict with, result in a breach of or constitute (with or without
notice or lapse of time or both) a default under, give rise to a right of
termination, amendment or cancellation of, accelerate the performance required
by, or result in any payment under, any Assumed Contract, except as would not
have a Material Adverse Effect; or
(c) violate, conflict with or result in a breach of any Legal
Requirement or;
(d) result in the creation of any Lien on any of the Purchased Assets.
4.4 Litigation; Compliance with Law.
(a) There are currently no actions, suits, claims for damages, proceedings
(including, without limitation, all arbitrations and alternative dispute
resolution proceedings), or governmental investigations of which the Seller has
received notice, or has been served, and to the knowledge of the Seller, pending
or threatened against the Seller arising out of or relating to the Business or
any of the Purchased Assets which could reasonably be expected to have a
Material Adverse Effect. There is no claim, action, suit, proceeding (including,
without limitation, all arbitrations and alternative dispute resolution
proceedings) or governmental investigation before any Governmental Entity or
Regulatory Authority pending or, to the knowledge of the Seller, threatened
against the Seller which relates to or arises out of the Business or any of the
Purchased Assets or the transactions contemplated by this Agreement, nor does
the Seller have any knowledge of any reasonably likely basis or set of
circumstances for any such action, suit, proceeding, claim or investigation, in
each case which could reasonably be expected to have a Material Adverse Effect.
(b) Seller has complied in all material respects with, and is not in material
violation of, any judgment, order, decree, restraint or other directive of or
stipulation with any Governmental or Regulatory Authority, or in violation of
any other Legal Requirement, and the Seller does not have knowledge of any
reasonable basis for a claim that such a violation exists. The Seller has no
knowledge of any proposed Legal Requirement that might reasonably be expected to
have a Material Adverse Effect.
(c) The Seller has heretofore furnished to the Purchaser true, correct and
complete copies of all material pleadings in, and material correspondence with
respect to, the actions, suits, proceedings, claims or governmental
investigations.
4.5 Consents; Third Party Options.
(a) Governmental and Regulatory. Except as set forth in Schedule 4.5(a) attached
hereto, no material filing or registration with, notice to or authorization,
consent or approval or other action (including, without limitation, the grant of
any waiver) of any Governmental Entity or Regulatory Authority is required to be
obtained by the Seller in connection with the transactions contemplated herein.
(b) Consents to Assign. Schedule 4.5(b) sets forth a true and complete list of
each Assumed Contract with respect to which the consent or approval of any third
party is required in order for Seller or the Shareholder to assign or transfer
to Purchaser any rights or obligations under such Assumed Contracts.
(c) There are no existing Contracts, options, commitments with or rights granted
to any Person to acquire (whether directly by merger, or otherwise) the Business
or any of the Purchased Assets or any interest therein, except for those
Contracts entered into in the normal course of business consistent with past
practice for the sale of Product Inventory by the Seller.
4.6 No Subsidiaries; Other Equity Investments. The Seller does not own, directly
or indirectly, any shares of capital stock of any corporation or any equity
investment in any partnership, association or other business organization the
assets of which are necessary to conduct the Business.
4.7 Financial Statements. Attached hereto as Schedule 4.7 are true and complete
copies of: (i) annual balance sheets and the related statements of income, and
cash flows (together with the related notes) of the Business as of and for the
years ended June 30, 2001, June 30, 2000 and June 30, 1999; and (ii) the
internal balance sheets and the related statements of income of the Business as
of and for the period ended March 31, 2002 (all of the foregoing, collectively,
the "Financial Statements"). The Financial Statements (x) fairly present the
financial position of the Business as of the dates thereof and the results of
its operations, cash flows and stockholders' equity for each of the periods then
ended; (y) have been prepared in accordance with GAAP (except, with respect to
the unaudited Financial Statements, for the absence of footnotes required by
GAAP and subject to customary year-end adjustments). Since June 30, 2001, there
has been no change in any accounting (including Tax accounting) policies,
practices or procedures of the Seller, except for the adoption of accounting
principles publicly disclosed in quarterly reports on the Shareholder's Form
10-Qs filed subsequent to such date which are reflected on Schedule 4.7 hereof.
No uncollectible accounts receivable are reflected on any of said balance sheets
in excess of the reserves set forth thereon for uncollectible items.
4.8 No Material Adverse Change. Since March 31, 2002, the Seller has operated
the Business diligently and only in the ordinary course of business, and there
has been no material adverse change in the business, operations, properties,
assets, liabilities, commitments, earnings or financial condition of the
Business. Without limiting the foregoing, since March 31, 2002, the Business has
not:
(i) suffered any damage, destruction or loss of physical property
(whether or not covered by insurance) in excess of $50,000;
(ii) waived any substantial right;
(iii) increased, or agreed to increase, the compensation or bonuses or special
compensation of any kind of any employee of the Seller or agent of the Seller,
or adopted or increased any benefit under any insurance, pension or other
employee benefit plan, payment or arrangement made to, for or with any employee;
(iv) lost any major customer of the Business or knows of any threatened
cancellation of a customer relationship with the Business or had any material
order cancelled or knows of any threatened cancellation of any material order of
the Business; or
(v) entered into any transaction not in the ordinary course of the
Business.
4.9 Taxes.
(a) Except as set forth on Schedule 4.9(a) attached hereto:
(i) The Seller has duly and timely filed with the appropriate Governmental
Entity and Regulatory Authority: (1) all material Tax Returns required to be
filed by, relating to the Purchased Assets, with respect to all periods ending
on or prior to the date hereof, which Tax Returns are true, correct and complete
in all material respects; and (2) all material Tax Returns required to be filed
by the Seller for Taxes with respect to the Building Lease and paid the amount
of Tax showing as payable on such Tax Returns or made payment to the landlord of
the Building in respect of any Taxes payable by the Seller under the Building
Lease for all periods ending on or prior to the date of the Closing.
(ii) The Seller has duly and timely paid all material Taxes attributable to the
Purchased Assets due and payable on or before the date hereof (other than
Transaction Taxes).
(iii) The Seller in connection with the Business has complied in all material
respects with all applicable Legal Requirements relating to the collection,
withholding and payment of Taxes. To Seller's knowledge, no Governmental Entity
or Regulatory Authority has proposed, asserted or assessed (tentatively or
otherwise) any adjustment that could reasonably be expected to result in an
additional Tax for which the Seller is or may be liable or which could
reasonably be expected to result in a Lien on any of the Purchased Assets that
has not been finally settled and fully paid. There is no pending, proposed or,
to the knowledge of the Seller, threatened audit, examination, investigation,
dispute, deficiency assessment, claim, or other administrative or judicial
proceeding relating to any Tax which could reasonably be expected to result in a
Lien on any of the Purchased Assets.
4.10 Personal Property. Except as set forth on Schedule 4.10 attached hereto,
the Seller has good, valid and marketable title to or, in the case of leases and
licenses, valid and subsisting leasehold interests or licenses in, all of the
Purchased Assets (whether real, personal, mixed, tangible or intangible), in
each case free and clear of any and all Liens. All assets, properties and rights
relating to the Business are owned by the Seller, and none of the Seller's other
Affiliates has any ownership interest therein. The Purchased Assets are suitable
for, and include all rights and property necessary for, the conduct of the
Business by the Purchaser in the manner it is presently conducted by the Seller
and no Excluded Asset constitutes property or rights material or necessary to
the operation of the Business. At the Closing, the Purchaser will obtain from
the Seller good and marketable title to all of the Purchased Assets, free and
clear of all Liens.
4.11 Real Property.
(a) Except for the Building Lease, Seller is not a party to any agreement under
which it is a landlord, tenant or subtenant of real property that relates
primarily to the Business. The Seller has a valid leasehold interest in the
Building, free and clear of all Liens, and the Building Lease is in full force
and effect and enforceable in accordance with its terms. There are no eminent
domain proceedings pending or, to the knowledge of the Seller, threatened
against the Building. The Seller, in connection with the operation of the
Business does not own or have any beneficial interest in any real property,
other than the Building.
(b) True, correct and complete copies of the Building Lease have been delivered
to the Purchaser by the Seller. Except as set forth in Schedule 4.11(b) attached
hereto, the Building Lease has not been amended or modified. The Seller: (i) has
not assigned,
pledged or otherwise transferred, and has not sublet the premises demised by the
Building Lease or granted to any Person the right to possession, use, occupancy
or engagement of the Building Lease; and (ii) is in exclusive possession of the
premises demised by the Building Lease. To the knowledge of the Seller, no event
has occurred or failed to occur which (with the giving of notice or the passage
of time, or both) would constitute a default under the Building Lease. All
brokerage commissions with respect to the Building Lease have been fully paid.
4.12 Fixed Assets; Personal Property.
(a) Schedule 4.12(a) attached hereto contains a true, complete and correct list
of the Fixed Assets as of the date of this Agreement, including equipment,
machinery, computers, computer software, furniture, leasehold improvements,
vehicles, trade fixtures, tooling (including Outside Tooling), and other items
of personal property owned, used or leased by the Seller and all interests
therein which are necessary for the operation of the Business and which are part
of the Purchased Assets. The Seller has good, valid and marketable title to the
Fixed Assets, in each case free and clear of any and all Liens, except for those
Liens set forth on Schedule 4.12(a) attached hereto. All of the Fixed Assets are
in good operating condition, state of maintenance and repair and working order,
subject to normal wear and tear.
(b) Schedule 4.12(b) attached hereto sets forth a list (including, without
limitation, all amendments) of all leases relating to personal property of
Seller (the "Personal Property Leases"), including, without limitation, the
dates of the Personal Property Leases, the personal property leased thereunder,
the name of the lessees and lessors, the commencement date and expiration date
of such Personal Property Leases, the annual rent payable by the lessees under
such Personal Property Leases, the security deposited with the lessor or
sublessor under any such Personal Property Lease and the amount of the purchase
option under any such Personal Property Lease.
4.13 Intellectual Property Matters. Set forth on Schedule 4.13 attached hereto
is a list of the registered Intellectual Property Rights (including pending
registrations or applications), specifying as to each, as applicable: (i) the
nature of the Intellectual Property Right; (ii) the user of the Intellectual
Property Right; (iii) all licenses, sublicenses and other agreements relating in
any manner to any such Intellectual Property Right; and (iv) the filing and
registration information with respect to each such Intellectual Property Right.
Except as set forth on Schedule 4.13 attached hereto, there are no royalties,
fees or other amounts payable by or to the Seller with respect to any of the
Intellectual Property Rights. To the Seller's knowledge, the Seller's prior use
of the Intellectual Property Rights has not, and the Seller's present use of the
Intellectual Property Rights does not, infringe or otherwise violate any rights
(including, without limitation, rights of privacy) of any Person, and the Seller
has not received a notice of a claim of infringement or knows of any reasonable
basis for a claim that such an infringement or violation exists. Except as set
forth on Schedule 4.13 attached hereto, to the Seller's knowledge, the Seller
has ownership of (free and clear of any and all Liens) or rights by license,
lease or other agreement to use (free and clear of any and all Liens) without
the payment of any fees or the incurrence of any costs the Intellectual Property
Rights that are necessary to permit the use of the Purchased Assets as currently
used with the Business and to conduct the Business as currently conducted. To
the Seller's knowledge, the Seller is not a party in any pending action, suit or
proceeding that involves a claim of infringement or any other claim related to
any Intellectual Property Right. Upon the execution and recording, where
applicable, of such instruments of assignment or conveyance as may be requested
by the Purchaser, all Intellectual Property Rights will be fully vested in the
Purchaser, free and clear of any and all Liens.
4.14 Computer Software. The Seller has the right to use, by license, lease or
other agreement, the Systems free and clear of any and all Liens. The Seller is
generally satisfied that the Systems perform in accordance with the
documentation and written material used in connection therewith, and, to the
knowledge of Seller, the Systems are free from any material defects. The Seller
has heretofore delivered to the Purchaser full, correct and complete copies of
all licenses, leases or other agreements providing for the use by Seller of such
Systems, and user and technical documentation relevant to the Systems received
by Seller. The Seller has taken all appropriate measures to protect the
confidential nature of the Systems in accordance with the applicable license,
lease or other agreement governing the use of such Systems.
4.15 Contracts; Customers and Suppliers.
(a) Attached to Schedule 4.15(a) is a complete list of all Contracts (whether
written or oral) to which the Seller is a party, and which is primarily related
to the Business, and in either case which provides for or falls within any of
the following categories (collectively, the "Contracts"):
(i) Contracts with any distributor, manufacturer, vendor, supplier, broker,
sales agent, other agent or manufacturer's representative providing for the
payment of an amount annually: (i) individually for any such Contract of Ten
Thousand Dollars ($10,000) or (ii) in the aggregate of Fifty Thousand Dollars
($50,000).
(ii) Contracts granting, or consenting to the existence of, any Lien on
or in any of the Purchased Assets in favor of any Person;
(iii) Collective bargaining arrangements or other Contracts with any
labor union;
(iv) Contracts for capital expenditures or the acquisition or construction of
any Fixed Assets in excess of $25,000 that is an executory contract as of the
date hereof;
(v) Contracts for the purchase or sale of the Product Inventory, materials,
supplies, merchandise, machinery, equipment, parts or other property or services
each of which involve, in the aggregate, the payment or receipt of more than
$50,000 in any twelve (12) month period (other than standard Product Inventory
purchases or sales executed in the ordinary course of business);
(vi) Contracts relating to the borrowing of money or the incurrence of any
indebtedness for borrowed money, or the issuance of any letter of credit, or the
guaranty of another Person's indebtedness or Contracts of suretyship or relating
to the repurchase of any goods or assets of any other Person;
(vii) Contracts granting to any Person a right of first refusal, first offer,
option or similar preferential right to purchase or acquire any of the Purchased
Assets;
(viii) Contracts limiting, restricting or prohibiting the Seller
from conducting any business anywhere in the United States of America or
elsewhere in the world;
(ix) Joint venture or partnership agreements or other similar Contracts;
(x) Contracts of employment or for the retention of consultants or
advisors;
(xi) Contracts which indemnify any other Person or which provide for charitable
contributions or which are in the nature of a severance agreement or which would
otherwise entitle any Person not a party to this Agreement to receive a payment
based upon the consummation of the transactions contemplated hereby; or
(xii) any other Contract which is material to the operations of the
Business or any of the Purchased Assets.
Except as set forth on Schedule 4.15(a) attached hereto, each Contract (assuming
due authorization and execution by the counterparty to the Contract):
(i) is in full force and effect;
(ii) is a valid and binding obligation of the Seller enforceable in accordance
with its terms, subject to: (1) applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, or other laws affecting any rights, powers,
privileges, remedies and interest of creditors, generally; and (2) rules or
principles of equity affecting the enforcement of obligations generally, whether
at law, in equity or otherwise, including without limitation rules governing
specific performance, injunctive relief and other equitable remedies; and
(iii) does not give rise to a Lien on any of the Purchased Assets.
Except as set forth on Schedule 4.15(a) attached hereto, there is no default
under or breach by the Seller (which, with or without the giving of notice or
lapse of time or both) would constitute a default under any Contract and, to the
knowledge of the Seller there is no default under or breach by any counterparty
to a Contract (which with or without the giving of notice or lapse of time or
both) would constitute a default under any Contract, in each case except as
would not have a Material Adverse Effect. Seller has delivered true, correct and
complete copies of all Contracts and summaries of oral Contracts, if any.
(b) Schedule 4.15(b) attached hereto contains a list of each of the ten (10)
largest customers and suppliers (measured by dollar volume of purchases and
sales, as applicable) of the Seller for calendar years 2000 and 2001. Except as
set forth on Schedule 4.15(b)
attached hereto, the Seller is not engaged in any material dispute with any
material customer, supplier or manufacturer with respect to the Purchased Assets
or the Business. No current material customer of, or supplier or manufacturer to
the Business has notified the Seller that of any intended termination,
non-renewal or any modification of its arrangements with the Seller prior to the
Closing.
4.16 Product Inventory.
(a) At the Closing, Seller will provide Buyer a list of all Product Inventory.
All Product Inventory as of the date of this Agreement:
(i) is in good and merchantable condition;
(ii) is not obsolete, damaged or soiled;
(iii) is good and salable in the ordinary course of business at the price for
such item contained on Seller's current price list; and
(iv) does not contain any items that are part of any discontinued line
of products.
(b) Schedule 4.16 sets forth among other things those items of Product Inventory
that (while part of or currently used in the Business) are maintained in
Seller's Product Inventory for the Business in an amount that exceeds an
eighteen (18) month supply of such items, based on the usage by Seller of such
items during the most recent twelve (12) months ("Slow Moving Inventory"). The
value of Slow Moving Inventory for purposes of determining the Final Purchase
Price will be discounted by thirty-five percent (35%). However, certain items of
Product Inventory that are defined as Slow Moving Inventory shall be exempt from
this discount (i.e. valued at one hundred percent (100%) of cost) despite the
fact that they would otherwise fall within the above definition. The methodology
and judgment used in preparing Schedule 4.16 will be utilized to determine which
items of Product Inventory shall be exempt from the thirty-five percent (35%)
discount (i.e. valued at one hundred percent (100%) cost, despite otherwise
falling within the definition of Slow Moving Inventory) at Closing.
None of the Product Inventory is subject to any write-down or write-off. Seller
is not under any obligation to return any material portion of the Product
Inventory in its possession to any other Person.
4.17 Accounts Receivable. Attached hereto as Schedule 4.17 is a list
of Accounts Receivable as of April 18, 2002. All such Accounts
Receivable:
(a) arose in bona fide, arm's length completed transactions and in the ordinary
course of business consistent with past practices; and
(b) constitute only valid, undisputed claims, subject to: (i) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, or other laws
affecting any rights, powers, privileges, remedies and interest of creditors,
generally; and (ii) rules or principles of equity affecting the enforcement of
obligations generally, whether at law, in equity or otherwise.
4.18 Authorizations. Seller has delivered to Purchaser true, correct and
complete copies of all Authorizations that are material to the Business and the
Purchased Assets. To the knowledge of Seller, the Seller owns, holds, possesses
or lawfully uses all Authorizations which are in any manner necessary for the
conduct of the Business as currently conducted and for the ownership and use of
the Purchased Assets, free and clear of any and all Liens or other restrictions,
except where the failure to own, hold or possess such Authorization would not
have a Material Adverse Effect. The Seller has not received any notice of any
claim of default with respect to any Authorization and, to the knowledge of the
Seller, the Seller is not in default with respect to any Authorization and to
the knowledge of Seller no event has occurred which, with the giving of notice
or passage of time or both, would cause or give rise to any default with respect
to any Authorization, except as would not have a Material Adverse Effect. All
such Authorizations are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees, and will not be adversely
affected or terminated by consummation of the transactions contemplated hereby.
None of the Authorizations have been amended, assigned, pledged or otherwise
transferred. There are no Authorizations required to conduct the Business which
have not been obtained by Seller.
4.19 Employees; Labor Matters. Schedule 4.19 attached hereto contains a list of
the Seller's employees employed in the Business, including a description of each
employee's position, compensation and benefits. The Seller currently employs
eighty (80) employees in
the Business. Seller knows of no efforts within the last four (4) years to
attempt to organize the Seller's employees employed in the Business or any other
union activities in connection with the Business including organizational,
protected and concerted activities. No strike, slowdown, picketing, work
stoppage or other labor dispute involving the Business has occurred during the
last four (4) years and, to the knowledge of the Seller, none is threatened or
presently contemplated. No Key Employee of the Seller employed in the Business
has indicated that he or she is considering terminating his or her employment,
nor, to the knowledge of Seller, has any Key Employee of Seller indicated to
Seller that he or she is not willing to be hired by Purchaser. To the knowledge
of the Seller, the Seller has complied with all Legal Requirements regarding its
employees and the Building is in compliance with the Americans with Disabilities
Act of 1990.
The Seller in connection with the employees of the Business is not a party to
any collective bargaining agreement, no collective bargaining agent has been
certified as a representative of any such employees and no representation
campaign or election is now in progress with respect to any such employees and
to the knowledge of the Seller no such campaign is threatened. There are no
pending, or to the knowledge of the Seller, threatened, charges or complaints of
unfair labor practice, employment discrimination or any similar matters against
or relating to the Seller, in connection with the operation of the Business.
Seller has not, within the ninety (90) days preceding the date of this
Agreement, terminated or laid off any employee whose termination or layoff when
combined with any action taken by Purchaser after the Closing in connection with
employees could require notice under the Worker Adjustment and Retaining
Notification Act (the "WARN Act").
4.20 Employee Benefits.
(a) Attached as Schedule 4.20(a) hereof is a true, correct and complete list of
each pension, profit-sharing, bonus, incentive, deferred compensation, severance
pay, retirement (including all 401K plans maintained by Seller) or other
material employee benefit plan, agreement or arrangement within the meaning of
Section 3(3) of ERISA and any other material pay practices, currently maintained
or contributed to by Seller for the benefit of any of the employees of the
Business (collectively, the "Benefit Plans"). Seller hereby acknowledges that
Seller has made or will make all contributions to such Benefit Plans on or
before the due dates for such contribution: (i) for any periods through and
including December 31, 2001; and/or (ii) for the period between January 1, 2002
and Closing, and that copies of all such Benefit Plans have been delivered to
Purchaser.
(b) Seller (i) has no actual or potential withdrawal liability with respect to
any multi-employer plan (within the meaning of Section 3(37) of ERISA) (a
"Multi-employer Plan"); (ii) has not failed to make contributions or pay any
premiums required by the terms of any Multi-employer Plan or applicable law, or
would incur any actual or potential withdrawal liability as a result of this
Agreement and the transactions contemplated hereby; or (iii) has no obligation
to provide any welfare benefits under a multi-employer welfare plan to retired
or former employees other than continuation of coverage required by applicable
law. Seller has no actual or potential liability under any employee benefit
plans (within the meaning of Section 3(3) of ERISA) that were previously
maintained by the Seller. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
create a liability for payments, distributions or reimbursements to participants
or beneficiaries under any Benefit Plans or Multi-employer Plan.
(c) Seller has never contributed to a Multi-employer Plan on behalf of
any current employees of the Business.
4.21 Insurance. Schedule 4.21 attached hereto sets forth a true, complete and
correct list of all policies of insurance of any kind or nature covering any of
the Purchased Assets or which primarily relate to the Business (collectively,
the "Insurance Policies") including, without limitation, policies of life, fire,
theft, casualty, product liability, workmen's compensation, business
interruption, employee fidelity and other casualty and liability insurance,
indicating the type of coverage, the name of insured, the insurer, the premium,
the expiration date of each policy and the amount of coverage. All such
Insurance Policies: (a) are with insurance companies reasonably believed by the
Seller to be financially sound and reputable; (b) are sufficient for compliance
with all Legal Requirements and all applicable Contracts; (c) are in full force
and effect, valid and enforceable in accordance with their respective terms, and
no notice of cancellation has been received and there is no existing default or
event which, with the giving of notice or lapse of time or both, would
constitute a default under any such Insurance Policies except as would not have
a Material Adverse Effect, and to the knowledge of the Seller, no such default
or event is threatened; and (d) provide insurance coverage for the Purchased
Assets, and the conduct of the Business for all risks, in each case as normally
insured against by Persons carrying on businesses similar to the Business. All
liability insurance of the Seller except products liability insurance (which has
been carried on a claims made basis) maintained by the Seller has been on an
"occurrence" basis.
4.22 Environmental Matters. Seller in the operation of the Business:
(a) Is in compliance with all Environmental Laws and Environmental
Permits.
(b) Has obtained and holds all Environmental Permits necessary for the conduct
of its operations as presently conducted and the operation of the Business as
presently conducted.
(c) Has not transported or arranged for the treatment, storage, handling,
disposal or transportation of any Hazardous Substance to any off-Site location
which could reasonably be expected to result in an Environmental Claim against
the Seller.
(d) Has not utilized and does not now utilize any form of asbestos in connection
with or relating to its operation of the Business.
4.23 Books and Records. The books and records of the Seller to be transferred to
the Purchaser pursuant to Section 2.1(a) hereof are complete and correct in all
material respects and properly and accurately reflect all transactions engaged
in by the Seller with respect to the Business.
4.24 Improper Payments. To the knowledge of Seller, neither the Seller nor any
of its officers, Affiliates or any Person associated with or acting on behalf of
the Seller, has made any illegal payment to, or provided any illegal benefit or
inducement for, any governmental official, union official, supplier, customer,
union or other Person, in an attempt to influence any such Person to take or to
refrain from taking any action relating to the Business, or any of the Purchased
Assets.
4.25 Additional Information Regarding Customer Matters. There are no (i) open
letters of credit and/or pre-arranged wire transfers between the Seller and the
customers of the Business; (ii) personal or other guaranties given to the Seller
by or on behalf of the customers of the Business; or (iii) lock boxes maintained
by the Seller.
4.26 No Brokers. Except for ▇▇▇▇▇ ▇▇▇▇▇▇▇ US Bancorp., to which Seller will owe
a commission upon the Closing of the transactions contemplated herein, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on by the Seller directly with the Purchaser and without the
intervention of any other Person acting on behalf of the Seller which would give
rise to any claim against the Purchaser or for any finder's fee, brokerage
commission or like payment, and if any such fee, commission or payment is
payable, it shall be the sole responsibility of the Seller.
4.27 Product Warranties. Except as set forth in Schedule 4.27 attached hereto,
with respect to the Product Line: (a) the Seller is not liable for any unexpired
product warranty with respect to any product included in the Product Line that
it distributes or that it has heretofore distributed, sold or manufactured; (b)
the Seller has not received any notice of any claim based upon any product
warranty with respect to any such Product Line or any item thereof; and (c) the
Seller knows of no nor has any reasonable ground to know of any such claim
(actual or threatened) based upon any product warranty with respect to any item
of such Product Line. Seller has provided to Purchaser all warranties, express
or implied, that the Seller has made or is responsible for in connection with
the Product Line.
4.28 Powers of Attorney. Seller has not granted any powers of attorney to any
third party which primarily relates to the Purchased Assets, the Assumed
Liabilities or the Business, except in the ordinary course of business.
4.29 Disclosure. No representation, warranty or other statement by the Seller
set forth herein or in any of the other Seller Documents, or contained in any
other document or schedule required to be delivered to Purchaser hereunder,
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller as follows:
5.1 Organization; Good Standing. The Purchaser is a limited liability company
duly organized, validly existing and is in good standing under the laws of the
State of Ohio and is authorized as a foreign corporation to do business in the
State of
California, and has all material licenses, permits, authorizations and
the power and authority to own and lease its assets and properties and to
conduct its
business as it is now being conducted. The Purchaser is duly qualified or
licensed to do business and is in good standing as a foreign corporation under
the laws of the jurisdictions in which the conduct of its business or the
ownership or leasing of its assets and properties requires such qualification,
other than in jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse effect on
this Agreement and the transactions contemplated hereby.
5.2 Authority; Enforceability. The Purchaser has the power and authority to
execute, deliver and perform this Agreement and all other agreements,
certificates and documents executed or delivered, or to be executed or
delivered, by the Purchaser in connection herewith (collectively the "Purchaser
Documents") and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the other
Purchaser Documents by the Purchaser have been duly authorized by all necessary
action on the part of the Purchaser. This Agreement and each of the other
Purchaser Documents has been duly executed and delivered by the Purchaser and
this Agreement and each of the other Purchaser Documents constitutes (or when
executed and delivered will constitute) legal, valid and binding obligations of
the Purchaser, enforceable against the Purchaser in accordance with their
respective terms, except as limited by (i) applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, or other laws affecting any rights,
powers, privileges, remedies and interests of creditors, generally; and (ii)
rules or principles of equity affecting the enforcement of obligations
generally, whether at law, in equity or otherwise, including without limitation
rules governing specific performance, injunctive relief and other equitable
remedies.
5.3 No Conflict. The authorization, execution, delivery and performance by the
Purchaser of this Agreement and the other Purchaser Documents and the
consummation of the transactions contemplated hereby and thereby do not and will
not (a) violate or conflict with any provision of the Purchaser's Articles of
Organization or Operating Agreement; (b) violate, conflict with, result in a
breach of or constitute (with or without notice or lapse of time or both) a
default under, give rise to a right of termination, amendment or cancellation
of, accelerate the performance required by, or result in any payment under, any
Contract, instrument or other writing of any nature whatsoever to or by which
the Purchaser is a party or is bound, or by which any of its properties or
assets is subject, except as would not have a material adverse effect on this
Agreement or the transactions contemplated hereby; or (c) violate, conflict with
or result in a breach of any Legal Requirement applicable to the Purchaser.
5.4 Litigation. There is no action, suit, proceeding (including, without
limitation, all arbitrations and alternative dispute resolution proceedings) or
governmental investigation pending or, to the knowledge of the Purchaser,
threatened against the Purchaser which relates to the transactions contemplated
by this Agreement, nor does the Purchaser have any knowledge of any reasonably
likely basis or set of circumstances for any such action, suit, proceeding,
claim or investigation, the result of which could materially and adversely
affect the Purchaser or the transactions contemplated hereby or could impair the
ability of the Purchaser to consummate the transactions contemplated hereby.
5.5 Consents. Except as set forth in Schedule 5.5 attached hereto, no filing or
registration with, notice to, or authorization, consent or approval of, or other
action (including, without limitation, the grant of any waiver) of any
Governmental Entity or Regulatory Authority or any other Person is required to
be obtained by the Purchaser (I) in connection with the purchase from the Seller
of the Purchased Assets; and (ii) the execution, delivery and performance of
this Agreement and the other Purchaser Documents and the consummation of the
transactions contemplated hereby and thereby.
5.6 No Brokers. Except for ▇▇▇▇▇ ▇▇▇▇▇▇▇ US Bancorp., to which Seller will owe a
commission upon the Closing of the transactions contemplated herein, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried out by the Purchaser directly with the Seller and without the
intervention of any other Person on behalf of the Purchaser, in such a manner as
to give rise to any claim against the Seller for any finder's fee, brokerage
commission or like payment, and if any such fee, commission or payment is
payable, it shall be the sole responsibility of the Purchaser.
5.7 Disclosure. No representation, warranty or other statement by the Purchaser
set forth herein or in any of the other Purchaser Documents or contained in any
other document or certificate furnished to the Seller or any of the Seller's
officers, legal counsel, accountants, representatives or other agents in
connection with the transactions contemplated hereby, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements contained herein or therein not misleading.
ARTICLE VI
COVENANTS AND OTHER AGREEMENTS
6.1 Conduct of the Business.
(a) During the period from the date of this Agreement through the Closing Date,
the Seller shall:
(i) conduct the Business and own, operate and use the Purchased Assets
in the ordinary course consistent with past practice;
(ii) use reasonable efforts to preserve the present business organizations and
relationships of the Business (including, without limitation, with distributors,
customers, vendors, suppliers, manufacturers, employees and others) with respect
to the Purchased Assets and all of the goodwill associated therewith;
(iii) use reasonable efforts to keep available the services of the
present employees of the Seller who are actively involved in the Business;
(iv) use reasonable efforts to preserve the material rights and
franchises of the Seller which are part of the Purchased Assets;
(v) not take any action that could reasonably be expected to or would have a
Material Adverse Effect on the Business or any of the Purchased Assets or would
materially impair, hinder or adversely affect the ability of the Seller to
consummate the transactions contemplated hereby or by any other Seller Document;
(vi) deliver to the Purchaser a copy of each written notice sent or
received under the Building Lease;
(vii) deliver to the Purchaser a copy of each written notice or communication
from any Governmental Entity or Regulatory Authority relating to the Business or
any of the Purchased Assets;
(viii) perform all material obligations under the Building Lease and
any Contract; and
(ix) deliver to the Purchaser all material notices and communications with
respect to the Business from customers, suppliers, vendors and third parties.
(b) Without limiting the generality of the foregoing, from the date of this
Agreement through the Closing Date, Seller shall not:
(i) sell, pledge, transfer, dispose of, or encumber or suffer or permit
to exist any Lien on, any of the Purchased Assets;
(ii) increase any compensation or benefit payable or provided to any employee
who is employed in the Business, except pursuant to a Legal Requirement, an
existing Benefit Plan or Contract and which increase, if any, shall not be
greater than in accordance with the Seller's past practices;
(iii) except as set forth in Schedule 6.1(b), enter into, amend or terminate any
Contract without the prior written consent of the Purchaser, which consent will
not be unreasonably withheld or delayed, or take or fail to take any action
within the reasonable control of such Seller that would constitute a breach of
or default under (without regard to any notice or passage of time or both) any
Contract, other than in the ordinary course of business;
(iv) waive any claims or rights of value with respect to any of the Purchased
Assets or the Business, other than in the ordinary course of business consistent
with past practices;
(v) amend, waive, surrender or terminate or agree to the amendment, waiver,
surrender or termination of (A) the Building Lease; or (B) any Contract or
Authorization, without the prior written consent from the Purchaser (which
consent will not be unreasonably withheld or delayed);
(vi) exercise any right or option under (A) the Building Lease, or any Contract
or (B) extend or renew the Building Lease, any Personal Property Lease, or any
Contract;
(vii) incur any indebtedness for borrowed money in connection with the Business
other than borrowings for working capital purposes under existing credit
facilities in the ordinary course of business and consistent with past
practices; and
(viii) enter into, adopt or amend any Benefit Plan including, without
limitation, any bonus, profit-sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
pension, retirement, deferred compensation, employment, severance or other
employee benefit agreements, trusts, plans, funds or other arrangements of or
for the benefit or welfare of any employee of Seller; except as may otherwise be
required pursuant to any applicable Legal Requirement.
6.2. Due Diligence.
(a) The Seller shall give the Purchaser and the Purchaser's officers, employees,
legal counsel, accountants and other representatives free and full access to and
the right to inspect, during normal business hours, all of the premises,
properties, assets, records, contracts and other documents of the Seller
relating to the Business or the Purchased Assets, and shall permit them to
consult with the officers, employees, accountants, legal counsel of Seller or
agents of the Seller, customers of and suppliers to the Business for the purpose
of making such investigation as the Purchaser shall consider appropriate;
provided, that (i) such investigation shall not unreasonably interfere with the
business operations of the Business; (ii) Purchaser shall, at Seller's request,
direct all requests for information through a designated representative of
Seller or the Shareholder; and (iii) Purchaser shall hold in confidence all such
documents and information and shall return or destroy, at Seller's request, all
such documents in the event that this Agreement is terminated. Prior to the
Closing, the Seller shall furnish to the Purchaser all such documents and copies
of documents and records and information which relate to the Business or the
Purchased Assets and copies of any working papers relating thereto as the
Purchaser shall from time to time reasonably request.
(b) Prior to and after the Closing, the Seller shall promptly advise the
Purchaser in writing of the commencement or threat (of which any of them has
knowledge) against the Seller of any claim, action, suit or other proceeding
that relates to or might reasonably be expected to materially affect the
Business or the Purchased Assets.
(c) Prior to the Closing, Seller and Purchaser shall each use commercially
reasonable efforts to take any action where the failure or omission to take such
action would cause (x) any representation or warranty made by it in this
Agreement or in any other Seller Document or Purchaser Document, as applicable,
to be untrue or incorrect as of the Closing or (y) any of the conditions to the
Closing set forth herein not to be satisfied.
6.3 Publicity. Seller and Purchaser shall issue a joint press release mutually
approved by both parties announcing this Agreement and the transactions
contemplated hereby. Seller and Purchaser may make such other public disclosures
as required by any Legal Requirement or the rules of The Nasdaq Stock Market or
the order or decree of any court of competent jurisdiction or governmental
authority, which disclosure shall be substantially similar in content to the
press release (unless agreed to otherwise by the other party). Seller and
Purchaser will consult with each other before issuing, and provide each other
the opportunity to review and comment upon, any other press release or other
public statements with respect to the transactions contemplated by this
Agreement, and shall not issue any such press release or make any such public
statement prior to such consultation, in each case except as may be required by
any Legal Requirement or the rules of The Nasdaq Stock Market. Seller and
Purchaser shall cause their employees, officers and directors to comply with
this Section 6.3.
6.4 Further Assurances. After the Closing, each of the parties hereto shall
execute such documents and other instruments and perform such further acts as
may be required or reasonably requested by any other party hereto to carry out
the provisions hereof and the transactions contemplated hereby including,
without limitation, vesting in the Purchaser good and marketable title to the
Purchased Assets free and clear of any and all Liens.
6.5 Transfer and Retention of Records.
(a) After the Closing, neither the Seller nor any of its respect agents or
representatives will retain any document, databases or other media embodying any
confidential or proprietary information relating to the Purchased Assets or the
Business, except that Seller may retain copies of any document, database or
other media as Seller deems reasonably necessary for the preparation of Tax and
financial reporting matters (including filings required to be made with the
Securities and Exchange Commission), audits, legal proceedings, governmental
investigations and other similar business purposes. Seller's possession of any
such document or other media shall be bound by the provisions of Section 7.1 of
this Agreement.
(b) Notwithstanding the provisions of Section 6.5(a) hereof, for a period of
seven years after the Closing, the Purchaser, upon reasonable prior written
notice from the Seller, shall give the Seller and its representatives,
employees, counsel and accountants,
access, during normal business hours, to the books and records relating to the
Business but solely with respect to periods prior to the Closing Date, and shall
permit such persons to examine and copy such records to the extent reasonably
requested in connection with the preparation of Tax and financial reporting
matters (including filings required to be made with the Securities and Exchange
Commission), audits, legal proceedings, governmental investigations and other
business purposes; provided, however, that nothing herein shall obligate the
Purchaser to:
(i) take actions that would unreasonably disrupt the normal course of
its business;
(ii) grant access to any of its proprietary, confidential or classified
information (other than information acquired pursuant to this Agreement and the
transactions contemplated hereby); or
(iii) waive any right to assert the attorney-client privilege or any other
privilege with respect to any document.
6.6 Employee Matters.
(a) The Purchaser shall offer employment to no less than sixty percent (60%) of
the employees of the Business; provided, however, that the Purchaser retains the
right to alter any terms and conditions of employment (including, without
limitation, the levels of compensation and benefits) in the future or to
discontinue to employ any such employee after the Closing Date. At least five
(5) Business Days prior to the Closing Date, the Purchaser will advise the
Seller of those employees of the Seller who will be hired by the Purchaser.
Purchaser (so long as Seller has not laid off or terminated more than ten (10)
employees during the 90-day period preceding the Closing Date) hereby agrees to
indemnify and hold harmless Seller and the Shareholder from any claim under the
WARN Act arising from Purchaser's refusal to hire employees of Seller effective
as of the Closing or the Purchaser's layoff or termination of any Continuing
Employee after the Closing.
(b) The Purchaser shall not be deemed to be a successor employer with respect to
the employment of any Continuing Employees or with respect to any Benefit Plans.
In the event any employee of the Business shall be deemed to have been
terminated by reason of the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, all
liability for any severance and other similar benefits to any such employee with
respect to employment prior to the Closing shall be the sole responsibility of
the Seller. An individual who was previously employed by the Seller who is hired
by the Purchaser shall be deemed a new employee of the Purchaser (a "Continuing
Employee"). The Purchaser shall not have any liability, obligation or
responsibility to any employee of the Seller (including any Continuing
Employee(s)) which liability, obligation or responsibility arose or accrued on
or prior to the Closing Date (except for the Accrued Vacation Liability). The
Seller shall not have any liability, obligation or responsibility to any
Continuing Employee which arises or accrues on or after the Closing Date. In
addition, the Seller shall be responsible solely for any obligations with
respect to COBRA health care continuation and disability insurance for all
former employees of the Seller and employees of the Seller who are not
Continuing Employees.
6.7 Payments Received. The Seller agrees that after the Closing the Seller will
hold for the benefit of the Purchaser and will promptly transfer and deliver to
the Purchaser, from time to time as and when received by any of them, any cash,
checks with appropriate endorsements (using their best efforts not to convert
such checks into cash) or other property that they may receive on or after the
Closing which relates to any of the Purchased Assets or the Business prior to
the Closing including, without limitation, any proceeds arising from Accounts
Receivable and insurance proceeds reimbursing Purchaser and/or Seller, as
applicable, for damage to or destruction of the Purchased Assets (other than
cash, checks or other property received that related to Excluded Assets or
Liabilities other than Assumed Liabilities, including without limitation
Contracts that are not assumed by Purchaser, or proceeds from Accounts
Receivable assigned back to Seller pursuant to Section 2.5). From and after the
Closing, the Purchaser shall have the right and authority to endorse without
recourse the name of the Seller on any check or any other evidence of
indebtedness received by the Purchaser (except for checks for payment which
Seller has a right to receive, as specified above) on account of the Purchased
Assets or the Business prior to the Closing.
6.8 Tax Matters.
(a) Transaction Taxes. Purchaser shall reimburse Seller for any payment made by
Seller in respect of transfer, sales, or use taxes incurred, or that are payable
to any taxing authority, in connection with the sale, transfer, and delivery of
the Purchased Assets contemplated by this Agreement (collectively, the
"Transaction Taxes"). Notwithstanding the foregoing, each party shall be
responsible for its own income, capital gain or other similar taxes due in
connection with the transactions (including the sale, transfer, and delivery of
the Purchased Assets) contemplated by this Agreement.
(b) Purchaser shall be solely responsible for all tax matters arising from or
relating to the Purchased Assets and related businesses after the Closing.
Purchaser shall indemnify and hold harmless Seller from any liability for, or
arising out of or based upon, or relating to any Tax matter arising from the
Purchased Assets and related businesses after the Closing. Seller and Purchaser
shall cooperate concerning all tax matters relating to this division of
responsibility, including the filing of Tax returns and other governmental
filings associated therewith.
6.9 UCC Matters. Seller shall obtain and file (or cause to be filed) such
financing statements as are required in order to sell, transfer, assign, convey
and deliver to the Purchaser all right, title and interest of the Seller in and
to the Purchased Assets, free and clear of any and all Liens (except for
Permitted Liens), and shall furnish the Purchaser with such documents as the
Purchaser may reasonably request to confirm the foregoing.
6.10 No Solicitation. The Seller agrees that neither the Seller nor its
Affiliates, investment bankers, advisors, attorneys or other agents will,
directly or indirectly, solicit, initiate, facilitate or encourage (including,
without limitation, by way of furnishing or disclosing non-public information)
any inquiries or the making of any proposal with respect to any merger,
consolidation, recapitalization or other business combination involving the
sale, transfer or assignment of all or any of the Purchased Assets (each an
"Acquisition Transaction"), or explore or otherwise engage in discussions with
any Person (other than the Purchaser and its representatives) with respect to
any Acquisition Transaction or enter into any agreement, arrangement or
understanding, formal or informal, written or oral, with respect to any such
Acquisition Transaction.
6.11 Risk of Loss. If prior to the Closing any portion of the Purchased Assets
(including, without limitation, any portion of the Leased Real Property) shall
be taken (or any public announcement shall be made of an intent to take) by
condemnation, eminent domain or similar means or shall be damaged or destroyed
by fire or other casualty, and the result thereof has or could reasonably be
expected to have a Material Adverse Effect on the Business, the Purchaser shall
have the option to either: (i) terminate this Agreement by giving notice to the
Seller within ten (10) Business Days following receipt by the Purchaser of the
notice required by the immediately following sentence; or (ii) not terminate
this Agreement. The Seller shall give to the Purchaser prompt written notice of
any taking, public announcement, damage or destruction. Should Purchaser not
terminate the Agreement and subject to the provisions of Section 2.1(a)(vi), the
Seller shall pay over to the Purchaser and irrevocably assign to the Purchaser
all amounts received or receivable (whether from insurance proceeds,
governmental payments or otherwise) by the Seller as a result of or relating to
any such taking, damage or destruction.
6.12 Product Liability Insurance. At or prior to the Closing, Seller will obtain
a "tail" product liability coverage extending for a period of one year after
Closing, and shall supply a certificate to Purchaser evidencing such insurance.
At or prior to the Closing, the Purchaser will obtain and maintain products
liability insurance coverage for liability arising from the sale of the Product
Line or other Product Inventory, with such coverage levels equivalent or in
excess to levels carried by Seller, and for a period of at least one year.
Except as set forth above, from and after the Closing, Purchaser shall be solely
responsible for maintaining insurance coverage for the Purchased Assets, and
Seller shall have no obligation to keep the Insurance Policies listed on
Schedule 4.21 in effect following the Closing.
6.13 Sublease. At or prior to the Closing, Seller, the Purchaser and
Capellino/▇▇▇▇▇▇▇▇ shall enter into a sublease acceptable to Capellino/▇▇▇▇▇▇▇▇
(the "Sublease"). The Sublease shall provide (i) a 1-year term commencing on the
Closing Date, which term may be extended at the option of Purchaser for
additional monthly periods not to exceed twelve months (the "Option Months"),
and upon one hundred twenty (120) days written notice prior to the expiration of
the original term of the sublease; (ii) rental payable by the Purchaser during
the term of the Sublease (including the Option Months) shall be Eighteen
Thousand and Ten Dollars ($18,010.00) per month, subject to base rent increase
for the Option Months as provided in the Building Lease; (iii) that upon
vacation of the Building by Purchaser, Purchaser shall reimburse Seller on a
monthly basis for fifty percent (50%) of any shortfall incurred by Seller
between the rent payable under the Building Lease and any sublease entered into
by Seller for the Building after Purchaser's vacation of the Building (A "Rent
Shortfall"); (iv) that Purchaser shall reimburse Seller for fifty percent (50%)
of any brokerage commissions payable by Seller incurred for the purpose of
retaining a sublessee of the Building ("Commissions"); (v) that in no event
shall Purchaser's liability for a Rent Shortfall and/or Commissions exceed One
Hundred Fifty Thousand Dollars ($150,000) in the aggregate; and (vi) Purchaser
shall be responsible for all repairs, restorations, replacements, renewals and
other maintenance obligations of the Seller pursuant to the Building Lease
during the term of the Sublease; provided, however, that with respect to all
major repairs, restorations, replacements to or other maintenance of HVAC,
plumbing, electrical, roofing, the parking lot or any structural item (including
any series of related items that become major in the aggregate, the "Major
Expenses"), Purchaser shall bear the first Ten Thousand Dollars ($10,000.00) of
all Major Expenses in the aggregate during the term of the Sublease, and
Purchaser and
Seller (or Shareholder in lieu of Seller) shall each bear fifty percent (50%) of
the Major Expenses exceeding Ten Thousand Dollars ($10,000.00).
6.14 Software System.
(a) Installation of System; Costs. Seller's personnel shall use commercially
reasonable efforts to install a separate standalone version of Fourth Shift
operating software and Seller shall download thereon the complete current
database of Seller, operating on a separate hardware server located at the
Building (the "System Installation"). Purchaser shall submit the purchase order
and pay the costs of the Fourth Shift operating software and any related
expenses (the "System Costs") as they come due; provided, however, that (i) in
the event this Agreement is terminated pursuant to Section 10.2(c) as a result
of a material breach of Seller, then Seller shall reimburse Purchaser for the
System Costs, and (ii) in the event that this Agreement is terminated by either
party pursuant to Sections 10.1 or 10.2(a) or by Purchaser pursuant to Section
10.2(b), then Seller shall reimburse Purchaser for fifty percent (50%) of the
System Cost.
(b) Licenses. At the Closing, Seller shall transfer to Purchaser twelve (12)
licenses for the Fourth Shift software (the "System Licenses"), without cost to
Purchaser other than the cost of ongoing maintenance fees and expenses for such
licenses.
ARTICLE VII
CONFIDENTIALITY; NON-COMPETITION; AND NON-SOLICITATION COVENANTS
7.1 Confidentiality; Non-Competition; Non-Solicitation.
(a) Confidentiality. From and after the Closing, the Seller shall hold in
confidence, and shall use its best efforts to have each of its Affiliates hold
in confidence, all knowledge, information and documents of a confidential nature
or not generally known to the public with respect to the Business and the
Purchased Assets (including without limitation the financial information,
technical information or data relating to the products and names of customers of
the Business) and shall not disclose or make use of the same without the written
consent of the Purchaser, except to the extent that such knowledge, information
or documents shall have become public knowledge other than through a breach of
this Agreement by Seller.
(b) Non-Competition. The Seller nor any of its Affiliates shall not (i) at any
time during the three (3) years following the Closing Date directly or
indirectly, engage (whether as owner, partner, member, lender, shareholder,
consultant, employee, agent, supplier, distributor or otherwise) in any
business, activity or enterprise which competes with any aspect of the Business
(a "Competing Business"); or (ii) at any time during the three (3) year period
following the Closing Date, directly or indirectly, induce or influence any
customer, supplier, distributor, broker, consultant or any other Person that had
a business relationship with the Seller prior to the Closing, to terminate such
relationship or to discontinue or reduce the extent of its relationship with the
Purchaser to the extent such relationship relates to the Business. For purposes
of this Agreement: neither the Seller, nor its Affiliates shall be deemed to be
directly or indirectly interested in a business if their interest, individually
or in the aggregate with each other, is limited solely to the ownership of not
more than two percent (2%) on an individual basis or five percent (5%) in the
aggregate (taking into account the Seller, its Affiliates) of the securities of
any class of corporation whose shares are listed or admitted to trade on a
national securities exchange or are quoted on NASDAQ or a similar means if
NASDAQ is no longer providing such information.
(c) Non-Solicitation. The Seller, nor any of its Affiliates shall not at any
time during the two (2) year period following the Closing Date, (i) directly or
indirectly, encourage, induce, attempt to induce or solicit to employ any
Continuing Employee; or (ii) solicit any Continuing Employee to leave his or her
employment with Purchaser or join the employ of another; provided, however, that
Seller shall not be prohibited from (i) placing advertisements for employment
that are aimed at the public at large in any newspaper, trade magazine, or other
periodical in general circulation or advertising for employment aimed at the
public at large through any other mass medium such as radio, television or the
Internet, or (ii) responding to any unsolicited inquiry by a Continuing Employee
concerning employment with Seller.
(d) No Limitation on Common Law. The parties agree that nothing in this
Agreement shall be construed to limit or negate the common law of torts or trade
secrets where it provides the Purchaser with any broader, further or other
remedy or protection than those provided in this Article VII.
7.2 Remedies. The Seller acknowledges that because the breach or attempted or
threatened breach of any of the provisions of Section 7.1 hereof will result in
immediate and irreparable injury to the Purchaser for which the Purchaser will
not have an adequate
remedy at law and for which monetary damages are not readily calculable.
Therefore, the Purchaser shall be entitled to obtain injunctive and other
equitable relief restraining and prohibiting such breach or threatened breach,
including, without limitation, obtaining a temporary and permanent injunction,
enjoining any such breach or attempted or threatened breach (without being
required to post a bond or other security or to show any actual damages). The
right to an injunction and other equitable relief shall be in addition to, and
cumulative with, all other rights and remedies available to the Purchaser at
law, in equity or otherwise.
7.3 Independence of Agreements. The provisions of this Article VII are in
addition to and independent of any agreements or covenants contained in any
employment, consulting or other agreement between the Purchaser or any of its
Affiliates, on the one hand, and the Seller and its Affiliates, on the other
hand.
7.4 Enforceability. The Seller acknowledges that, without the provisions of this
Article VII hereof, the Purchaser would not enter into this Agreement or
consummate the transactions contemplated hereby. Accordingly, the Seller shall
be bound by the provisions hereof to the maximum extent permitted by law, it
being the intent and spirit of the parties that such provisions shall be
enforced to the fullest extent permitted by law. Without limiting the generality
of the foregoing, if any provision of this Article VII hereof shall be held by
any court of competent jurisdiction or another competent authority to be
illegal, invalid or unenforceable, such provision shall be reformed so that it
will be construed and enforced as if it had been more narrowly drawn so as not
to be illegal, invalid or unenforceable, and such illegality, invalidity or
unenforceability shall have no effect upon and shall not impair the
enforceability of any other provision of this Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS OF THE PURCHASER
All obligations of the Purchaser pursuant to this Agreement to consummate the
transactions contemplated hereby at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
any one or more of which may be waived in writing by the Purchaser (in its sole
discretion):
8.1 Representations and Warranties Accurate. All representations and warranties
of the Seller contained in this Agreement and the other Seller Documents shall
be true and accurate in all material respects on and as of the Closing Date as
if made again at and as of such date.
8.2 Performance by the Seller. The Seller and Shareholder shall have performed
and complied in all material respects with all terms, provisions, agreements,
covenants and conditions required by this Agreement to be performed and complied
with by them at or prior to the Closing.
8.3 Legal Prohibition.
No action, suit, investigation, inquiry or other proceeding by any Governmental
Entity or Regulatory Authority or other Person shall have been instituted or
threatened in writing which:
(a) could reasonably be expected to have a Material Adverse Effect on
the Business, the Purchased Assets or the Assumed Liabilities or the
Purchaser;
(b) questions the validity hereof or any of the transactions contemplated
hereby, or seeks to enjoin the consummation of the transactions contemplated
hereby or seeks to obtain substantial damages in respect thereof.
On the Closing Date, there shall be no effective permanent or preliminary
injunction, writ, temporary restraining order or any order of any nature issued
by a court of competent jurisdiction directing that the transactions provided
for herein not be consummated as so provided.
8.4 Closing Deliveries. The Purchaser shall have received all
deliveries to be made to it and Seller shall have performed all of its
obligations pursuant to Section 3.2 of this Agreement.
8.5 Absence of Material Adverse Changes. There shall not have occurred since the
date hereof any event, loss, damage, condition or state of facts of any nature
whatsoever which had or can reasonably be expected to have a Material Adverse
Effect on the Business, the Purchased Assets or the Assumed Liabilities.
8.6 Consents. The Seller shall have obtained all Required Consents.
8.7 Sublease. Seller and Capellino/▇▇▇▇▇▇▇▇ shall have executed and
delivered the Sublease.
8.8 System Installation. The System Installation shall be complete in
all material respects.
ARTICLE IX
CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS
OF SELLER AND THE SHAREHOLDER
All obligations of the Seller pursuant to this Agreement to consummate the
transactions contemplated hereby at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
any one or more of which may be waived in writing by the Seller (in its sole
discretion):
9.1 Representations and Warranties Accurate. All representations and warranties
of the Purchaser contained in this Agreement and the other Purchaser Documents
shall be true and accurate in all material respects on and as of the Closing
Date as if made again at and as of such date.
9.2 Performance by the Purchaser. The Purchaser shall have performed and
complied in all material respects with all terms, provisions, agreements,
covenants and conditions required by this Agreement to be performed and complied
with by the Purchaser at or prior to the Closing.
9.3 Legal Prohibition. No action, suit, investigation, inquiry or other
proceeding by any Governmental Entity or Regulatory Authority or other Person
shall have been instituted or threatened in writing which:
(a) could reasonably be expected to have a Material Adverse Effect on
the Business, the Purchased Assets or the Assumed Liabilities or the
Purchaser; or
(b) questions the validity hereof or any of the transactions contemplated
hereby, or seeks to enjoin the consummation of the transactions contemplated
hereby or seeks to obtain substantial damages in respect thereof.
On the Closing Date, there shall be no effective permanent or preliminary
injunction, writ, temporary restraining order or any order of any nature issued
by a court of competent jurisdiction directing that the transactions provided
for herein not be consummated as so provided.
9.4 Closing Deliveries. The Seller shall have received all deliveries
to be made to it and the Purchaser shall have performed all of its
obligations pursuant to Section 3.3 of this Agreement.
9.5 Sublease. The Purchaser and Capellino/▇▇▇▇▇▇▇▇ shall have executed
and delivered the Sublease.
ARTICLE X
TERMINATION
10.1 Termination by Mutual Consent. This Agreement may be terminated at
any time before the Closing by the mutual written consent of the
Purchaser and Seller.
10.2 Unilateral Termination.
(a) Either the Purchaser or Seller, by giving written notice to the other, may
terminate this Agreement if a Governmental Entity or Regulatory Authority shall
have issued a nonappealable final order, decree or ruling or taken any other
action, in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby.
(b) Either the Purchaser or Seller, by giving written notice to the other, may
terminate this Agreement if the Closing shall not have occurred by midnight
Pacific Time on June 15, 2002; provided, however, that the right to terminate
this Agreement pursuant to this Section 10.2(b) shall not be available to any
party whose failure to perform in any material respect any of its obligations or
covenants under this Agreement results in the failure of any condition set forth
in Article VIII or Article IX or if the failure of such condition results from
facts or circumstances that constitute a material breach of a representation or
warranty or covenant made under this Agreement by such party.
(c) Either Buyer or Seller may terminate this Agreement at any time before the
Closing if the other has committed a material breach of (i) any of its
representations and warranties under Article IV or Article V, as applicable or
(ii) any of its covenants under Article VI, and, in the case of either clause
(i) or (ii) above has not cured such material breach within ten days after the
party seeking to terminate this Agreement has given the other party written
notice of the material breach and its intention to terminate this Agreement
pursuant to this Section 10.2(c).
10.3 No Liability for Termination. Termination of this Agreement by a party
hereto (the "Terminating Party") in accordance with the provisions of this
Article X will not give rise to any Liability on the part of the Terminating
Party on account of such termination (other than pursuant to Section 6.14);
provided, however, that nothing herein shall relieve a party from liability for
a willful breach of this Agreement. The provisions of Section 6.14, this Article
X and Article XII shall survive any termination of this Agreement.
ARTICLE XI
INDEMNIFICATION
11.1 Survival of Representations and Warranties. Unless this Agreement is
terminated in accordance with Article X, and except for the covenants and
agreements contained in Article VII (which shall survive for the periods set
forth in Article VII) and Section 6.13 (which shall survive for ninety (90) days
after the term of the Sublease, as it may be extended as provided therein,
expires), all representations, warranties, covenants and agreements of the
parties contained in this Agreement or in any other document or instrument
executed or delivered in connection herewith shall survive for a period of
eighteen (18) months following the Closing Date (the "Indemnification Period"),
whereupon all such representations, warranties, covenants and agreements will
expire and no claims for indemnification may be made by either party against the
other. Notwithstanding the above, if, prior to the expiration of the
Indemnification Period, a Purchaser Indemnified Person or Seller Indemnified
Person makes a claim for indemnification under this Agreement, then such
person's rights to indemnification under this Article XI solely with respect to
such claim shall survive the expiration of the Indemnification Period until such
claim is settled pursuant to the terms of this Article XI.
11.2 Indemnification by the Seller and the Shareholder. The Seller and
Shareholder, shall indemnify and hold harmless the Purchaser and each of its
directors, officers, employees, and Affiliates (each a "Purchaser Indemnified
Person") from and defend each of them from and against and will pay each
Purchaser Indemnified Person for any and all demands, claims, actions,
liabilities, losses, damages, costs, penalties and expenses (including, without
limitation, interest and the reasonable fees and expenses of attorneys), whether
or not involving a Third Party Claim, suffered or incurred by Purchaser during
the Indemnification Period (collectively, "Losses") asserted against, imposed
upon or incurred by any such Purchaser Indemnified Person, directly or
indirectly, resulting from or arising out of any of the following:
(a) any inaccuracy or breach of any representation or warranty of the
Seller, or in any other Seller Document;
(b) any breach of any agreement, covenant or obligation of the Seller
contained herein or in any Seller Document;
(c) any liability, obligation or responsibility of the Seller or which in any
way relates to the Business or the Purchased Assets that is not an Assumed
Liability (including, without limitation, any liability for Taxes or
withholdings (other than Transaction Taxes)) arising out of the operation of the
Business by the Seller prior to the Closing Date;
(d) any Excluded Liability;
(e) any claim, action, suit or proceeding relating to any product warranty made
against the Seller with respect to any product manufactured by the Seller, other
than the Assumed Warranty Liabilities;
(f) any liability arising from any noncompliance with any bulk sales, bulk
transfer or similar laws applicable to the transactions contemplated hereby; and
(g) the amount of unpaid Accounts Receivable not recovered by Purchaser from the
AR Escrow Amount due to the insufficiency of the AR Escrow Amount, except that
the Indemnification Period for claims under this Section 11.2(g) shall be
forty-five (45) days as set forth in Section 2.3(b) hereof.
11.3 Indemnification by the Purchaser. The Purchaser shall indemnify and hold
harmless the Seller and each of the respective directors, officers, employees,
and Affiliates (each a "Seller Indemnified Person"), from and defend each of
them from and against and will pay each Seller Indemnified Person for any and
all Losses asserted against, imposed upon or incurred by any such Seller
Indemnified Person, directly or indirectly, resulting from or arising out of any
of the following:
(a) any inaccuracy or breach of any representation or warranty of the
Purchaser contained herein or in any other Purchaser Document;
(b) any breach of any agreement, covenant or obligation of the
Purchaser contained herein or in any other Purchaser Document;
(c) except as described in Section 11.2(c) hereof, the Purchaser's ownership of
the Purchased Assets and the operation of the Business from and after the
Closing Date; and
(d) any Assumed Liability.
11.4 Indemnification Procedures - Third-Party Claims.
(a) The rights and obligations of a party claiming a right to indemnification
under this agreement (each an "Indemnitee") from another party hereto (each an
"Indemnitor") in any way relating to a Third Party Claim shall be governed by
the following procedures of this Section 11.4:
(i) The Indemnitee shall give prompt written notice to the Indemnitor of the
commencement of any action, suit or proceeding, or any written threat thereof,
which notice shall set forth the alleged nature and basis of the claim and the
amount thereof (or a reasonable estimate of such amount), to the extent known
and any other reasonably relevant information in the possession of the
Indemnitee (a "Notice of Claim"). No failure to give a Notice of Claim shall
affect the indemnification obligations of an Indemnitor hereunder, except to the
extent such failure materially prejudices such Indemnitor's ability to
successfully defend the matter giving rise to the indemnification claim.
(ii) In the event that an Indemnitee furnishes an Indemnitor with a Notice of
Claim, then upon the written acknowledgment by the Indemnitor given to the
Indemnitee within thirty (30) days after the Indemnitor's receipt of the Notice
of Claim, that the Indemnitor is undertaking and will prosecute the defense of
the claim under the indemnity agreements contained in this Article XI and
confirming that as between the Indemnitor and the Indemnitee, the claim covered
by the Notice of Claim is the obligation of the Indemnitor, with respect to
which the Indemnitor is obligated to indemnify and hold harmless the Indemnitee
hereunder and that the Indemnitor will be able to pay the full amount of
potential liability in connection with such claim (including, without
limitation, any action, suit or proceeding and all proceedings on appeal which
legal counsel for the Indemnitee shall deem appropriate) (an "Indemnification
Acknowledgment"), then the claim covered by the Notice of Claim may be defended
by the Indemnitor; provided, however, that the Indemnitee is authorized to file
any motion, answer or other pleading that may be reasonably necessary or
appropriate to protect its interests during such thirty (30) day period. In the
event the Indemnitor does not furnish an Indemnification Acknowledgment to the
Indemnitee within such time period, or does not offer reasonable assurances to
the Indemnitee as to Indemnitor's financial capacity to satisfy any final
judgment or settlement, the Indemnitee may, upon written notice to the
Indemnitor, assume control of the defense (with legal counsel chosen by the
Indemnitee) and defend, settle or dispose of the claim, at the sole cost and
expense of the Indemnitor. The party that does not assume control of the defense
shall have the right to employ its own legal counsel or otherwise participate in
respect of any such claim, action, suit or proceeding, but the fees and expenses
of such legal counsel shall be at such party's own cost and expense.
(iii) The Indemnitee or the Indemnitor, as the case may be, depending upon who
is controlling the defense of the action, suit or proceeding, shall keep the
other fully informed of such claim, action, suit or proceeding at all stages
thereof, whether or not the other is represented by legal counsel. Subject to
the Indemnitor furnishing the Indemnitee with an Indemnification Acknowledgment
in accordance with Section 11.4(a)(ii) hereof, the Indemnitee shall cooperate
with the Indemnitor and provide such assistance, at the sole cost and expense of
the Indemnitor, as the Indemnitor may reasonably request in connection with the
defense of any such claim, action, suit or proceeding, including, but not
limited to, providing the Indemnitor with access to and use of all relevant
corporate records and making available its officers and employees for
depositions, pre-trial discovery and as witnesses at trial, if required. In
requesting any such cooperation, the Indemnitor shall have due regard for, and
attempt to not be disruptive of, the business and day-to-day operations of the
Indemnitee and shall follow the requests of the Indemnitee regarding any
documents or instruments which the Indemnitee reasonably believes should be
given confidential treatment or is subject to a privilege.
(b) The Indemnitor shall not settle any claim, action, suit or proceeding which
Indemnitor has undertaken to defend, in accordance with the procedures set forth
in this Article XI, without the Indemnitee's prior written consent (which
consent shall not be unreasonably withheld or delayed), unless there is no
obligation on the part of the Indemnitee to contribute to any payment made to
settlement of the claim, action, suit or proceeding, the Indemnitee receives a
general and unconditional release with respect to the claim (which shall be in
form, substance and scope reasonably acceptable to the Indemnitee), there is no
finding or admission of violation of any Legal Requirement by, or effect on any
other claims that may be made against the Indemnitee and the relief granted in
connection therewith requires no action on the part of and has no effect on the
Indemnitee or its business or reputation. If the Indemnitee is controlling the
defense of the claim, action, suit or proceeding, the Indemnitee shall not
settle the claim, action, suit, or proceeding without the Indemnitor's prior
written consent (which consent shall not be unreasonably withheld or delayed).
(c) Any claim made by a Purchaser Indemnified Person or a Seller Indemnified
Person that may be made under more than one subsection under Section 11.2 or
11.3, as applicable, may be made under the subsection that the claiming party
may elect in its sole discretion, notwithstanding that such claim may be made
under more than one subsection.
11.5 Procedure for Indemnification - Direct Indemnification Claims. A claim for
indemnification for any matter not relating to a Third Party Claim may be
asserted by notice directly by the Indemnitee to the Indemnitor specifying the
factual basis of that claim in reasonable detail to the extent then known by the
Indemnitee.
11.6 Limitations on Amount.
(a) The Seller and Shareholder shall have no liability for indemnification with
respect to any Loss based upon Section 11.2 hereof until the aggregate of all
defense costs, expenses and Losses with respect to the matters covered by
Section 11.2 hereof exceeds Fifty Thousand Dollars ($50,000.00) (the "Liability
Threshold"), and then after the Liability Threshold has been exceeded the Seller
and Shareholder shall be responsible for all Losses based thereon from the first
dollar of Loss, without regard to the Liability Threshold. In addition, as to
the provisions of Section 11.2(g), there shall be no Liability Threshold and
Seller and Shareholder shall be liable for and from the first dollar of Loss.
Anything to the contrary notwithstanding, the Seller and Shareholder shall have
no liability for indemnification to the extent that the aggregate amount of all
Losses with respect to such matters exceeds one-third (1/3) of the Purchase
Price (the "Indemnification Limit").
(b) Notwithstanding anything to the contrary set forth in Section 11.6(a)
hereof, the limitations set forth in said Section 11.6(a) shall not apply to any
claim by the Purchaser or other Purchaser Indemnified Person with respect to a
claim for indemnification based upon actual fraud with respect to a breach of a
representation or warranty or any of the covenants, agreements or obligations of
the Seller set forth herein.
(c) The Purchaser shall have no liability for indemnification pursuant to
Section 11.3 hereof for any Losses until the Liability Threshold has been
exceeded, and after the Liability Threshold has been exceeded the Purchaser
shall be responsible for all Losses from the first dollar of Loss without regard
to the Liability Threshold; provided that the Purchaser shall have no liability
for indemnification under Sections 11.3(a) and 11.3(b) hereof to the extent the
aggregate amount of Losses indemnifiable under those sections exceeds the
Indemnification Limit (for purposes of clarity, the Indemnification Limit shall
not apply to Purchaser's obligations under Section 11.3(c) and 11.3(d)hereof).
Notwithstanding the above, with respect to the provisions of Section 11.3(d),
there shall be no Liability Threshold and the Purchaser shall be liable for and
from the first dollar of Loss.
11.7 Claims in Excess of Indemnification Limit. Notwithstanding anything to the
contrary set forth herein, from and after the time when the aggregate amount of
Losses paid or potentially payable by an indemnifying party under this Agreement
which are subject to
the Indemnification Limit exceeds or is reasonably expected to exceed the
Indemnification Limit based upon Losses previously paid and pending
indemnification claims made in accordance with this Agreement, the Purchaser
Indemnified Person or the Seller Indemnified Person, as applicable, shall have
the right, at its own cost and expense, to jointly control the defense and
settlement of any pending indemnification claims the liability for which could
potentially result in the aggregate Losses exceeding the Indemnification Limit.
At such time as the aggregate amount of Losses which are subject to the
Indemnification Limit exceed the Indemnification Limit and have been paid or
settled (subject to being paid), the indemnifying party shall no longer have the
right to control or defend any indemnification claims.
11.8 Taxes and Insurance Proceeds. The amount of any Loss for which
indemnification is obtained under this Agreement shall be reduced by the amount
of any insurance proceeds or Tax benefit obtained as a result of such Loss.
11.9 Sole Remedy. Notwithstanding anything else contained in this Agreement to
the contrary, the rights to indemnification and defense under this Article XI
shall be exclusive of all other rights of indemnification, recovery, defense or
other remedy (whether legal or equitable, or whether based in contract or tort,
but expressly excluding claims based on actual fraud) that any Person would
otherwise have in connection with the transactions contemplated by this
Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 Expenses. Except as otherwise expressly provided in this Agreement, each
party hereto shall pay its own costs and expenses incurred in connection with or
incidental to the preparation and negotiations of this Agreement, the carrying
out of the provisions of this Agreement and the consummation of the transactions
contemplated hereby (including, without limitation, attorneys' fees and
expenses).
12.2 Amendment. This Agreement may not be modified, amended, altered or
supplemented, except by a written agreement executed by each of the parties
hereto.
12.3 Entire Agreement. This Agreement, including the schedules and exhibits
hereto, and the instruments and other documents delivered pursuant to this
Agreement, the Seller Documents, the Purchaser Documents contain the entire
understanding and agreement of the parties relating to the subject matter hereof
and supersedes all prior and/or contemporaneous understandings and agreements of
any kind and nature (whether written or oral) among the parties with respect to
such subject matter, all of which are merged herein.
12.4 Waiver. Any waiver by the Purchaser, on the one hand, and the Seller, on
the other hand, of any breach of or failure to comply with any provision or
condition of this Agreement by the other party shall not be construed as, or
constitute, a continuing waiver of such provision or condition, or a waiver of
any other breach of, or failure to comply with, any other provision or condition
of this Agreement, any such waiver to be limited to the specific matter and
instance for which it is given. No waiver of any such breach or failure or of
any provision or condition of this Agreement shall be effective unless in a
written instrument signed by the party granting the waiver and delivered to the
other party hereto in the manner provided for hereunder in Section 12.5. No
failure or delay by either party to enforce or exercise its rights hereunder
shall be deemed a waiver hereof, nor shall any single or partial exercise of any
such right or any abandonment or discontinuance of steps to enforce such rights,
preclude any other or further exercise thereof or the exercise of any other
right.
12.5 Notices. All notices, demands, consents, requests, instructions and other
communications to be given or delivered or permitted under or by reason of the
provisions of this Agreement or in connection with the transactions contemplated
hereby shall be in writing and shall be deemed to be delivered and received by
the intended recipient as follows: (a) if personally delivered, on the Business
Day of such delivery (as evidenced by the receipt of the personal delivery
service), (b) if mailed certified or registered mail return receipt requested,
three (3) Business Days after being mailed, (c) if delivered by overnight
courier (with all charges having been prepaid), on the Business Day of such
delivery (as evidenced by the receipt of the overnight courier service of
recognized standing), or (d) if delivered by facsimile transmission, on the
Business Day of such delivery if sent by 6:00 p.m. in the time zone of the
recipient, or if sent after that time, on the next succeeding Business Day (as
evidenced by the printed confirmation of delivery generated by the sending
party's telecopier machine). If any notice, demand, consent, request,
instruction or other communication cannot be delivered because of a changed
address of which no notice was given (in accordance with this Section 12.5), or
the refusal to accept same, the notice, demand, consent, request, instruction or
other communication shall be deemed received on the second Business Day the
notice
is sent (as evidenced by a sworn affidavit of the sender). All such notices,
demands, consents, requests, instructions and other communications will be sent
to the following addresses or facsimile numbers as applicable:
IF TO THE PURCHASER: IF TO SELLER:
3D Instruments, LLC
Invivo Corporation, attn: ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO: WITH A COPY TO:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Ltd. Fenwick & West LLP
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ Two ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party may specify by notice given to the other
party in accordance with this Section 12.5.
12.6 Governing Law; Arbitration.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED IN THAT STATE, WITHOUT REGARD TO ANY OF ITS PRINCIPLES OF CONFLICTS OF
LAWS OR OTHER LAWS WHICH WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION; EXCEPT, HOWEVER, THAT THE APPLICABILITY OF BULK SALES SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF
CALIFORNIA. THIS AGREEMENT SHALL BE
CONSTRUED AND INTERPRETED WITHOUT REGARD TO ANY PRESUMPTION AGAINST THE PARTY
CAUSING THIS AGREEMENT TO BE DRAFTED.
(b) Any dispute between the parties arising out of or relating to this Agreement
shall be settled by mandatory, final, binding arbitration in Santa ▇▇▇▇▇ County,
California and conducted by the American Arbitrators Association (the "AAA")
pursuant to its rules and procedures. Except as specifically otherwise provided
in this Agreement, arbitration will be the sole and exclusive remedy of the
parties for any dispute arising out of this Agreement, the Seller Documents or
the Purchaser Documents.
(i) If any such dispute exists, a party will notify the other party of the
dispute, and if the dispute is not resolved within ten (10) days after such
notice is furnished, the notifying party may institute arbitration proceedings
pursuant to this Section 12.6(b).
(ii) Any arbitration conducted pursuant to this Section 12.6 shall be before a
panel of three (3) arbitrators chosen from lists of qualified arbitrators
submitted by the AAA; provided, however, that such lawyers cannot work for a
firm then performing services for either party, that each party will have the
opportunity to make such reasonable objection to any of the arbitrators listed
as such party may wish and that the AAA will select the arbitrator from the list
of arbitrators as to whom neither party makes any such objection.
(iii) For any dispute submitted to arbitration, the burden of proof will be as
it would be if the claim were litigated in a judicial proceeding. The arbitrator
shall have the authority to grant any equitable and legal remedies that would be
available in any judicial proceeding instituted to resolve a dispute. The
determination of a majority of the arbitrators in the arbitration shall be
conclusive and binding on the parties hereto and shall not be subject to appeal
or judicial review. The award of the arbitrators may be enforced in any court of
competent jurisdiction and each of the parties hereby unconditionally and
irrevocably consents to the jurisdiction of the Federal District Court for the
Central District of
California and the Courts of the State of
California solely
with respect to (and for no reason or other purpose) any action instituted to
enforce any such award.
(iv) Each of the parties unconditionally and irrevocably waives any right to a
trial by jury in respect of any such action.
(v) The arbitrators shall be entitled to award and apportion the costs and
expenses of the parties in connection with any arbitration (including, without
limitation, attorneys' fees and expenses) as well as the costs and expenses of
the arbitrators and the AAA, as the arbitrators, in their discretion, may
determine.
12.7 Severability. Without limiting anything set forth in Section 7.4 hereof,
the parties agree that should any provision of this Agreement be held to be
invalid, illegal or unenforceable in any jurisdiction, that holding shall be
effective only to the extent of such invalidity, illegally or unenforceability
without invalidating or rendering illegal or unenforceable the remaining
provisions hereof, and any such invalidity, illegally or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. It is the intent of the parties that this Agreement be fully
enforced to the fullest extent permitted by applicable law.
12.8 Binding Effect; Assignment. This Agreement and the rights and obligations
hereunder may not be assigned by any party hereto without the prior written
consent of the other party. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
12.9 Headings. The section headings contained in this Agreement (including,
without limitation, section headings and headings in the exhibits and schedules)
are inserted for reference purposes only and shall not affect in any way the
meaning, construction or interpretation of this Agreement. Any reference to the
masculine, feminine, or neuter gender shall be a reference to such other gender
as is appropriate. References to the singular shall include the plural and vice
versa.
12.10 Third Parties. Except as expressly permitted by Section 12.8 hereof,
nothing herein is intended or shall be construed to confer upon or give to any
Person, other than the parties hereto and the Indemnified Persons, any rights,
privileges or remedies under or by reason of this Agreement.
12.11 Counterparts; Facsimile. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original, and all of which, when
taken together, shall constitute one and the same document. This Agreement shall
become effective when one or more counterparts, taken together, shall have been
executed and delivered by all of the parties. Facsimile signatures shall have
the full legal effect of original signatures.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written.
SIERRA PRECISION
By:
▇▇▇▇▇▇ ▇▇▇▇, President
INVIVO CORPORATION
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Chief Executive Officer and
President
PURCHASER:3D INSTRUMENTS, LLC
By: STANCORP, INC., its Sole Member
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President