1
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT DATED JULY 30, 1997
BETWEEN POWERSCAN, INC. AND INTRAFED, INC.
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ASSET PURCHASE AGREEMENT
DATED JULY 30, 1997
BETWEEN
POWERSCAN, INC.
AND
INTRAFED, INC.
================================================================================
2
CONTENTS
ARTICLE I SALE OF ASSETS .................................................. 2
Section 1.1 Sale of Assets ............................................ 2
Section 1.2 Liabilities Assumed ....................................... 3
Section 1.3 Excluded Assets ........................................... 4
Section 1.4 Purchase Price ............................................ 4
Section 1.5 Additional Consideration .................................. 5
Section 1.6 Closing ................................................... 7
Section 1.7 Conditions and Best Efforts ............................... 8
Section 1.8 Consents and Approvals .................................... 8
Section 1.9 Risk of Loss .............................................. 8
Section 1.10 Allocation ................................................ 9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER ........................ 9
Section 2.1 Existence ................................................. 9
Section 2.2 Authorization; Conflicts .................................. 9
Section 2.3 Title ..................................................... 10
Section 2.4 Contracts ................................................. 10
Section 2.5 Restrictive Documents ..................................... 10
Section 2.6 Litigation ................................................ 10
Section 2.7 Compliance with Laws ...................................... 11
Section 2.8 Accuracy of Representations and Warranties ................ 11
Section 2.9 Broker's or Finder's Fees ................................. 11
Section 2.10 Copies of Documents ....................................... 11
Section 2.11 Disclosure ................................................ 12
Section 2.12 Permits and Approvals ..................................... 12
Section 2.13 Intellectual Property; Licenses ........................... 12
Section 2.14 Environmental Matters ..................................... 13
Section 2.15 Inventory ................................................. 14
Section 2.16 Investment Representations ................................ 14
Section 2.17 Insurance ................................................. 17
Section 2.18 Taxes ..................................................... 17
Section 2.19 Financial Statements ...................................... 18
Section 2.20 Employee Benefit Plans .................................... 19
Section 2.21 Employment Relations ...................................... 20
ASSET PURCHASE AGREEMENT PAGE i
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER ..................... 21
Section 3.1 Existence ................................................. 21
Section 3.2 Authorization; Conflicts .................................. 21
Section 3.3 Capitalization ............................................ 21
Section 3.4 Authorization for Common Stock ............................ 22
Section 3.5 Broker's or Finder's Fees ................................. 22
Section 3.6 Litigation ................................................ 22
Section 3.7 Accuracy of Representations and Warranties ................ 22
Section 3.8 Reports and Financial Statements .......................... 23
Section 3.9 Disclosure ................................................ 23
Section 3.10 Intellectual Property ..................................... 23
ARTICLE IV CONDUCT OF BUSINESS; REVIEW ..................................... 24
Section 4.1 Conduct of Business of Seller ............................. 24
Section 4.2 Review of Seller .......................................... 24
Section 4.3 Proration ................................................. 24
Section 4.4 Employees ................................................. 25
ARTICLE V CONDITIONS TO PURCHASER'S OBLIGATIONS TO CLOSE .................. 26
Section 5.1 Opinion of Seller's Counsel ............................... 26
Section 5.2 Good Standing; Corporate Matters .......................... 26
Section 5.3 Truth of Representations and Warranties ................... 26
Section 5.4 No Injunction ............................................. 27
Section 5.5 ▇▇▇▇ of Sale; Related Agreements .......................... 27
Section 5.6 Employee Issues ........................................... 27
Section 5.7 Assignments; Consents and Approvals ....................... 28
Section 5.8 Termination and Release of Bank ........................... 28
Section 5.9 Lease ..................................................... 28
Section 5.10 Performance of Obligations ................................ 29
Section 5.11 Marketing Information ..................................... 29
Section 5.12 [Intentionally Omitted] ................................... 29
Section 5.13 Transfer of Intellectual Property ......................... 29
Section 5.14 Additional Information .................................... 29
Section 5.15 Consents .................................................. 30
Section 5.16 Physical Properties ....................................... 30
ASSET PURCHASE AGREEMENT PAGE ii
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ARTICLE VI CONDITIONS TO SELLER'S OBLIGATIONS TO CLOSE ..................... 30
Section 6.1 Opinion of Purchaser's Counsel ............................ 30
Section 6.2 Good Standing; Corporate Matters .......................... 30
Section 6.3 Truth of Representations and Warranties ................... 31
Section 6.4 No Injunction ............................................. 31
Section 6.5 Assumption of Liabilities; Related Agreements ............. 31
Section 6.6 Election to Boards of Directors ........................... 31
Section 6.7 Performance of Obligations ................................ 32
Section 6.8 Letter of Confirmation .................................... 32
ARTICLE VII COVENANTS OF SELLER ............................................. 32
Section 7.2 Consents .................................................. 32
Section 7.3 Communications ............................................ 32
Section 7.4 Inconsistent Activities ................................... 32
Section 7.5 Consultants; Employees; Contractors ....................... 33
Section 7.6 Books and Records ......................................... 33
Section 7.7 Non-Use ................................................... 33
Section 7.8 Payoff of Creditors ....................................... 34
Section 7.9 Noncompetition ............................................ 34
Section 7.10 Assignments of Intellectual Property ...................... 34
Section 7.11 Novation of Government Contracts .......................... 35
Section 7.12 Non-dissolution ........................................... 35
Section 7.13 Representative Agreement .................................. 35
Section 7.14 Financial Statements ...................................... 35
ARTICLE VIII COVENANTS OF PURCHASER .......................................... 36
Section 8.1 Communications ............................................ 36
Section 8.2 Taxes ..................................................... 36
Section 8.3 Stock Options ............................................. 36
Section 8.4 Registration Rights ....................................... 36
Section 8.5 Kok Stock ................................................. 37
ARTICLE IX SURVIVAL OF REPRESENTATIONS; INDEMNITY .......................... 38
Section 9.1 Survival of Representations ............................... 38
Section 9.2 Indemnification ........................................... 38
Section 9.3 Indemnification Conditions ................................ 39
Section 9.4 Indemnification Exclusive ................................. 40
ASSET PURCHASE AGREEMENT PAGE iii
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ARTICLE X TERMINATION OF AGREEMENT ........................................ 40
Section 10.1 Termination by Mutual Consent ............................. 40
Section 10.2 Termination for Breach or Failure of Conditions ........... 40
Section 10.3 Closing Notwithstanding Right to Terminate ................ 41
ARTICLE XI MISCELLANEOUS ................................................... 41
Section 11.1 Effective Date ............................................ 41
Section 11.2 Expenses .................................................. 41
Section 11.3 Governing Law ............................................. 41
Section 11.4 Confidentiality ........................................... 41
Section 11.5 Third-Party Beneficiaries ................................. 42
Section 11.6 Severability .............................................. 42
Section 11.7 Captions .................................................. 42
Section 11.8 Publicity ................................................. 42
Section 11.9 Notices ................................................... 42
Section 11.10 Parties in Interest ....................................... 44
Section 11.11 Counterparts .............................................. 44
Section 11.12 Waiver .................................................... 44
Section 11.13 Bulk Transfer ............................................. 44
Section 11.14 Entire Agreement .......................................... 44
Section 11.15 Amendments ................................................ 44
Section 11.16 Further Assurances ........................................ 45
Section 11.17 Knowledge of Seller Defined ............................... 45
ASSET PURCHASE AGREEMENT PAGE iv
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SCHEDULES
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A Fixed Assets (Section 1.1(a))
B Deferred Maintenance Contracts, Real Property Leases, Agreements, Consents,
Licenses and Other Contracts or Arrangements (Section 1.1(b))
C Intellectual Property (Section 1.1(c),(d))
D Consents (Section 2.4)
E Permits (Section 2.12)
F Inventory (Section 1.1(e))
G Claims, Actions, Proceedings (Section 2.6)
H Employee Benefit Plans (Section 4.4)
EXHIBITS
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1 Form of Escrow Agreement
2 Form of ▇▇▇▇ of Sale and Assignment
3 Form of Assumption of Liabilities Agreement
4 Form of Employment Agreement
5 Form of Termination and Release Agreement
6 Form of Opinion of Seller's Counsel
7 Form of Opinion of Purchaser's Counsel
8 Form of Disbursing Agency Agreement
9 Form of Assignment of Patent Application
10 Form of Assignment of Trademark
11 Form of Novation Agreement
12 Form of Assignment
ASSET PURCHASE AGREEMENT PAGE v
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DEFINITIONAL CROSS-REFERENCE
Definition Location/Section
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Act 2.16(d)
Additional Consideration 1.5
Adjusted Operating Income 1.5(c)(ii)
Agreement Introduction
Assigned Contracts 1.1(b)
Assignment of Patent Application 5.5
Assignments of Trademark 5.5
Assumption of Liabilities Agreement 6.5
Bank 5.8
Bank Settlement Payment 1.4(a)(ii)
▇▇▇▇ of Sale 5.5
Closing 1.6
Closing Cash Consideration 1.4(a)(iii)
Closing Stock Consideration 1.4(a)(iv)
Closing Date 1.6
Code 1.10
Common Stock 1.4(a)(iv)
Creditors' List 5.14
Disbursing Agency Agreement 5.5
Disbursing Agent 5.5
Disclosure Documents 2.16(b)
DOL 2.20(c)
Effective Date 11.1
Employee Benefit Plan 2.20(a)
Employment Agreement 5.6
ERISA 2.20(c)
Escrow Agent 5.5
Escrow Agreement 5.5
Excluded Assets 1.3
Financial Statements 2.19
Hazardous Substances 2.14
Intellectual Property 1.1(c)
Intellectual Property Licenses 2.13(a)
Kok Stock 8.5
Lease 5.9
Letter of Confirmation 6.3
ASSET PURCHASE AGREEMENT PAGE vi
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Liens 1.1
Loan Agreement 5.8
1996 Proxy Statement 2.16(b)
1997 Form 10-K 2.16(b)
1996 Form 10-Qs 2.16(b)
Nondisclosure Agreement 11.4
Novation Agreement 7.11
Patent 3.10
Purchase Price 1.4(a)(iv)
Purchased Assets 1.1
Purchaser Introduction
Purchaser Parent Fifth "Whereas" Clause
Registration Statement 8.4(a)
Related Agreements 5.5
Representative Agreement 7.13
Revenue 1.5(c)(i)
Rule 144 2.16(h)
SEC 2.16(b)
Seller Introduction
Seller April Balance Sheet 2.19
Shares 2.16
Software Products 1.1(c)
Stockholder Fourth 'Whereas" Clause
Tax 2.18(h)
Tax Return 2.18(i)
Termination and Release Agreement 7.8
Transferred Employees 4.4
ASSET PURCHASE AGREEMENT PAGE vii
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "AGREEMENT") dated July 30, 1997, between
POWERSCAN, INC., a Delaware corporation ("PURCHASER"), and INTRAFED, INC., a
Maryland corporation ("SELLER");
W I T N E S S E T H:
WHEREAS, Seller is the owner of certain software products and related
assets that are used in the development, production, sales, marketing,
distribution and maintenance of such software products in the document imaging
industry;
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires
to sell to Purchaser certain of the assets of Seller as described in Section 1.1
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Purchaser and Seller acknowledge that the transactions
contemplated by this Agreement are arms-length transactions and that the
consideration and undertakings set forth below represent the fair value of the
assets to be purchased;
WHEREAS, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("STOCKHOLDER") is the holder of all
outstanding shares of capital stock of Seller;
WHEREAS, Purchaser is a wholly-owned subsidiary of Star Technologies,
Inc., a Delaware corporation ("PURCHASER PARENT"); and
WHEREAS, the capitalized terms contained herein that are listed on the
definitional cross-reference sheet attached to this Agreement shall have the
definitions referred to therein for all purposes of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ASSET PURCHASE AGREEMENT PAGE 1
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ARTICLE I
SALE OF ASSETS
SECTION 1.1 SALE OF ASSETS
Upon the terms and subject to the conditions herein stated, Seller
agrees to sell, convey, transfer, assign and deliver to Purchaser on the Closing
Date and Purchaser agrees to purchase, assume, acquire and accept all of
Seller's right, title and interest in and to the assets described below (the
"PURCHASED ASSETS") on the Closing Date, free and clear of all security
interests, liens, pledges, charges, claims, rights of others or other
encumbrances of any sort ("LIENS"):
(a) the fixed assets of Seller listed individually or by category in
Schedule A hereto, subject to such changes as shall have occurred in the
ordinary course of business between the Effective Date and the Closing Date;
(b) all deferred maintenance contracts, real property leases,
agreements, consents, licenses and other contracts or arrangements listed in
Part I of Schedule B hereto (the "ASSIGNED CONTRACTS"), including all rights,
privileges, benefits, obligations and interests thereunder and any deposits or
prepayments noted in Part II of such Schedule;
(c) all copyrights, trademarks, service marks, patents, trade names
(including, without limitation, the trade name "Intrafed"), brand names,
registrations and pending applications (domestic and foreign) for copyrights,
trademarks, service marks and patents, inventions, coded or uncoded product
prototypes and/or specialized algorithms, processes, know-how, proprietary
information, formulae, designs, logos, royalty rights, trade secrets,
confidentiality rights, property rights, or without limitation, other
intellectual property rights and interests thereunder or other similar rights
(all of such rights being defined in the aggregate as "INTELLECTUAL PROPERTY")
owned by Seller and employed or proposed to be employed in the design and
manufacture of the PowerScan(R) and StageWorks(R) software products
(collectively, the "SOFTWARE PRODUCTS") including, without limitation, such
items listed in Schedule C hereto, together with any additions or modifications
to such items made between the Effective Date and the Closing Date;
(d) all licenses or agreements relating to Intellectual Property listed
in Schedule C hereto, together with any additions or modifications to such items
made between the Effective Date and the Closing Date;
ASSET PURCHASE AGREEMENT PAGE 2
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(e) the inventory items reflected on Schedule F hereto together with
any additions or modifications thereto, subject to any deletions therefrom made
by Seller in the ordinary course of Seller's business between the Effective Date
and the Closing Date;
(f) all forms, records, files, customer lists, lists of suppliers,
specifications, design documentation (including any and all existing listings of
the source code and/or object code of any program, routine, and subroutine
comprising any portion of the Software Products, together with all copies of any
of them; any and all existing descriptions of the designs, formulae, methods and
algorithms embodied in any portion of the Software Products, together with all
copies of any of them; and all existing design notes, flow charts, logic
diagrams, coding charts, manuals, specifications, instructions, annotations,
technical and engineering data, laboratory studies, and benchmark test results
used or produced in the development of any of the Software Products, together
with all copies of any of them), user documentation relating to the Software
Products, training materials, service guides, designs, drawings, business
records and plans, operating data and other data associated with, used or
employed by Seller in connection with the Purchased Assets;
(g) the sales literature, promotional literature and other selling
material used by Seller in the marketing of the Software Products including,
without limitation, all rights to any graphics contained therein; and
(h) Seller's rights under any warranties and performance guaranties
extended to Seller with respect to any of the items described above in Sections
1.1(a) and 1.1(e).
SECTION 1.2 LIABILITIES ASSUMED
On the Closing Date and as additional consideration for the Purchased
Assets, Purchaser shall assume, and agrees to perform and fulfill, subject to
the terms and conditions herein, all liabilities and obligations (a) to be
performed or fulfilled on and after the Closing Date by Seller under the terms
of the Assigned Contracts and of the licenses referred to in Part II of Schedule
C hereto, (b) related to any invoice of BDO ▇▇▇▇▇▇▇ with respect to its interim
1997 financial review of Seller conducted as part of Purchaser's due diligence
and (c) related to or arising from the ownership and use of the Purchased Assets
on and after the Closing Date. Except as expressly assumed in this Section 1.2,
Seller covenants and agrees that Purchaser assumes no liabilities or obligations
of Seller of any nature whatsoever whether accrued, absolute, contingent,
matured or unmatured, and that Seller shall retain and be responsible for all
liabilities and obligations not expressly assumed by Purchaser in this Section
1.2, including, but not limited to, any litigation against Seller whether now
existing or hereafter instituted.
ASSET PURCHASE AGREEMENT PAGE 3
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SECTION 1.3 EXCLUDED ASSETS
The assets described below (collectively, the "EXCLUDED ASSETS") shall
be excluded from any transfer hereunder and shall not be transferred to
Purchaser:
(a) subject to Section 1.1(b), inventory not specifically reflected on
Schedule F hereto, accounts and notes receivable, evidences of indebtedness,
cash advances or loans to employees, securities, cash, federal or state tax
credits, prepaid expenses, security or other deposits and bank accounts which
are reflected in the books of Seller and relate to Seller or its affiliate,
INTRAFED International Ltd.; and
(b) all other assets of Seller not specified in Section 1.1 or in
the schedules referred to therein.
SECTION 1.4 PURCHASE PRICE
As consideration for the purchase by Purchaser of the Purchased Assets,
Purchaser shall
(a) on the Closing Date:
(i) assume the liabilities referred to in Section 1.2 and,
except for such liabilities, Purchaser expressly is not assuming any
liabilities or obligations, whether accrued, absolute, contingent,
matured or unmatured, of Seller;
(ii) pay Seller by wire transfer of immediately available
funds on Seller's behalf to the Bank in an aggregate amount equal to
$878,687.56 (provided, that such amount shall be increased by an amount
equal to $874.31 for each day beyond July 29, 1997 that the Closing
occurs) (the "BANK SETTLEMENT PAYMENT");
(iii) pay Seller by depositing with Disbursing Agent an
aggregate amount equal to $1,000,000 (together with the Bank Settlement
Payment, the "CLOSING CASH CONSIDERATION") by wire transfer of
immediately available funds to a bank account specified by Disbursing
Agent, to be applied as set forth in the Disbursing Agency Agreement;
and
(iv) cause Purchaser Parent to issue to Seller, by depositing
with the Escrow Agent, 1,300,000 shares (the "CLOSING STOCK
CONSIDERATION"; together with the Closing Cash Consideration, the
"PURCHASE PRICE") of common stock, having a par value of $.01 per
share, of Purchaser Parent ("COMMON STOCK") to be applied as set forth
in the Escrow Agreement, all of which shares shall be unregistered; and
ASSET PURCHASE AGREEMENT PAGE 4
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(b) after the Closing Date, cause to be issued to Seller the Additional
Consideration, pursuant to Section 1.5, and the Kok Stock, in accordance with,
and subject to the proviso contained in Section 8.5.
SECTION 1.5 ADDITIONAL CONSIDERATION
As additional consideration (the "ADDITIONAL CONSIDERATION") for the
sale by Seller to Purchaser of the Purchased Assets, so long as Seller shall
otherwise be in compliance in all material respects with its obligations
hereunder, and subject to Purchaser's right of set-off to satisfy any such
obligations, Purchaser agrees to cause Purchaser Parent to issue to Seller
Common Stock on the following basis:
(a) FIRST PAYMENT. Upon completion of Purchaser Parent's financial
statements for the year ending July 31, 1998, a number of shares of Common
Stock, rounded to the nearest whole share, not to exceed 650,000, such number to
be determined according to the following charts:
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SHARES OF COMMON STOCK
REVENUE AMOUNT EARNED CALCULATION OF SHARES
AT OR BETWEEN (NOT CUMULATIVE) OF COMMON STOCK EARNED
---------------------------------------------------------------------------------------------------------------
$ 0 - 4,749,999 0 --
---------------------------------------------------------------------------------------------------------------
4,750,000 40,625 --
---------------------------------------------------------------------------------------------------------------
4,750,001 - 5,275,000 40,626 - 162,500 40,625 shares plus .2321428 shares per $1 over
$4,750,000 up to $5,275,000
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5,275,001 - 5,800,000 162,501 - 325,000 162,500 shares plus .3095238 shares per $1
over $5,275,000 up to $5,800,000
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SHARES OF COMMON STOCK
ADJUSTED OPERATING INCOME EARNED CALCULATION OF SHARES
BETWEEN (NOT CUMULATIVE) OF COMMON STOCK EARNED
---------------------------------------------------------------------------------------------------------------
$ 0 - 399,999 0 --
---------------------------------------------------------------------------------------------------------------
400,000 40,625 --
---------------------------------------------------------------------------------------------------------------
400,001 - 600,000 40,626 - 121,875 40,625 shares plus .40625 shares per $1 over
$400,000 up to $600,000
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600,001 - 800,000 121,875 - 325,000 121,875 shares plus 1.015625 shares per $1
over $600,000 up to $800,000
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(b) SECOND PAYMENT. Upon completion of Purchaser Parent's financial
statements for the year ending July 31, 1999, a number of shares of Common
Stock, rounded to the nearest whole share, not to exceed 650,000, such number to
be determined according to the following charts:
ASSET PURCHASE AGREEMENT PAGE 5
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SHARES OF COMMON STOCK
REVENUE AMOUNT EARNED CALCULATION OF SHARES
AT OR BETWEEN (NOT CUMULATIVE) OF COMMON STOCK EARNED
---------------------------------------------------------------------------------------------------------------
$ 0 - 5,999,999 0 --
---------------------------------------------------------------------------------------------------------------
6,000,000 40,625 --
---------------------------------------------------------------------------------------------------------------
6,000,001 - 6,500,000 40,626 - 162,500 40,625 shares plus .24375 shares per $1 over
$6,000,000 up to $6,500,000
---------------------------------------------------------------------------------------------------------------
6,500,001 - 7,000,000 162,501 - 325,000 162,500 shares plus .325 shares per $1 over
$6,500,000 up to $7,000,000
===============================================================================================================
SHARES OF COMMON STOCK
ADJUSTED OPERATING INCOME EARNED CALCULATION OF SHARES
BETWEEN (NOT CUMULATIVE) OF COMMON STOCK EARNED
---------------------------------------------------------------------------------------------------------------
$ 0 - 599,999 0 --
---------------------------------------------------------------------------------------------------------------
600,000 40,625 --
---------------------------------------------------------------------------------------------------------------
600,001 - 900,000 40,626 - 162,500 40,625 shares plus .40625 shares per $1 over
$600,000 up to $900,000
---------------------------------------------------------------------------------------------------------------
900,001 - 1,200,000 162,501 - 325,000 162,500 shares plus .541667 shares per $1 over
$900,000 up to $1,200,000
---------------------------------------------------------------------------------------------------------------
(c) DEFINITIONS. For purposes of this Section 1.5, the following terms
shall have the following meanings:
(i) "REVENUE" for each year shall mean Purchaser's revenue,
determined in accordance with generally accepted accounting principles
consistently applied from year to year; and
(ii) "ADJUSTED OPERATING INCOME" for each year shall mean
Purchaser's operating income, determined in accordance with generally
accepted accounting principles consistently applied from year to year,
decreased dollar for dollar by the following expenses: corporate
insurance, accounting, audit and legal fees, and compensation and
benefits associated with finance, cost accounting and purchasing
employees.
(d) PAYMENTS RESULTING FROM CERTAIN TERMINATION. Notwithstanding the
above, if, at any time prior to the expiration of two years following the
Closing Date, Stockholder, without his consent, is terminated other than for
cause as a director of either Purchaser or Purchaser Parent or as President of
Purchaser or Executive Vice President of Purchaser Parent, then Seller shall be
entitled, without regard to the amount of Purchaser's Revenue or Adjusted
Operating Income for the applicable period, to a
ASSET PURCHASE AGREEMENT PAGE 6
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minimum Additional Consideration (without affecting any higher amounts that may
be earned by Seller pursuant to the operation of Sections 1.5(a) and 1.5(b)) of
(i) 175,000 shares of Common Stock in the aggregate pursuant to Section 1.5(a)
(whether or not the date for such payment shall have occurred prior to such
termination) and (ii) 325,000 shares of Common Stock in the aggregate pursuant
to Section 1.5(b).
(e) Payments Resulting from Sale of Assets. Notwithstanding the above,
if, at any time prior to the expiration of two years following the Closing Date,
Purchaser sells or otherwise transfers (other than by merger or consolidation)
all or substantially all of its assets, then Seller shall be entitled, without
regard to the amount of Purchaser's Revenue or Adjusted Operating Income for the
applicable period, to a minimum Additional Consideration of (i) 175,000 shares
of Common Stock in the aggregate pursuant to Section 1.5(a) (whether or not the
date for such payment shall have occurred prior to such sale or transfer and
without affecting any higher amounts that may be earned by Seller pursuant to
the operation of such Section 1.5(a)) and (ii) 325,000 shares of Common Stock in
lieu of Common Stock that would otherwise have been payable pursuant to Section
1.5(b).
(f) Business of Purchaser Defined. If, at any time prior to March 31,
1999, (i) Stockholder's employment as President of Purchaser and Executive Vice
President of Purchaser Parent is terminated other than for cause by Purchaser or
(ii) Purchaser merges or consolidates with another entity, then from and after
the effective date of such termination, merger or consolidation, the term
"Purchaser" for purposes of Section 1.5(c) shall mean the business of Purchaser
as it substantially existed as of the effective date of termination. For
example, if Purchaser, following the effective date of termination of
Stockholder's employment, were to establish or acquire a substantially different
enterprise from that in which it was engaged as of the effective date of
termination, then the revenues and expenses of such new enterprise would be
excluded from the calculations of Revenue and Adjusted Operating Income for
purposes of Section 1.5(c). Similarly, if the Purchaser, prior to March 31,
1999, were to merge with Purchaser Parent or another entity, then only the
revenues and expenses of the business of Purchaser as it substantially existed
on the effective date of merger would be included in the calculation of Revenue
and Adjusted Operating Income for purposes of Section 1.5(c).
SECTION 1.6 CLOSING
Provided that each of the conditions contained in Articles V and VI
hereof has been satisfied or expressly waived, the consummation of the sale of
assets referred to in Section 1.1 (the "CLOSING") shall take place at 10:00 a.m.
on July 30, 1997 at the offices of ▇▇▇▇▇▇▇ Coie, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.,
▇▇▇▇▇▇▇▇▇▇, D.C., or at such other time,
ASSET PURCHASE AGREEMENT PAGE 7
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date or place as the parties hereto shall mutually agree in writing. The date on
which the Closing occurs is referred to herein as the "CLOSING DATE".
SECTION 1.7 CONDITIONS AND BEST EFFORTS
Purchaser and Seller will each use its best efforts to effectuate the
transactions contemplated by this Agreement and to fulfill in all material
respects all of the conditions of its or his obligations under this Agreement
and will use their respective best efforts to do all acts and things as may be
required to carry out its obligations hereunder and to consummate and complete
the transactions contemplated by this Agreement.
SECTION 1.8 CONSENTS AND APPROVALS
Notwithstanding any other provision of this Agreement, to the extent
that the assignment of any contract, agreement, lease, commitment or right
contemplated to be assigned hereunder shall require the consent or approval of
another party thereto, this Agreement shall not constitute an agreement to
assign the same if an attempted assignment would constitute a breach thereof. If
such consent or approval is not obtained, Seller will use its best efforts and
cooperate with Purchaser in any reasonable arrangements (which may include a
sublease, license thereof or operating agreement with respect thereto) approved
by Purchaser designed to provide for Purchaser all of the benefits under any
such contract, agreement, lease, commitment or right. If Seller shall have made
or shall be making such arrangements as so approved, Purchaser agrees to assume
the obligations of Seller to be performed on and after the Closing Date with
respect to any such contract, agreement, lease, commitment or right and agrees
to perform and fulfill such obligations as though any such contract, agreement,
lease, commitment or right had been assigned.
SECTION 1.9 RISK OF LOSS
The risk of loss, damage or destruction to the Purchased Assets shall
be borne by Seller to the time of Closing. In the event of such loss, damage or
destruction which materially adversely affects the Purchased Assets taken as a
whole, Purchaser may, at its sole option and notwithstanding any other provision
of this Agreement, upon notice to Seller, rescind this Agreement and declare it
to be of no further force and effect, in which event there shall be no Closing
and all of the terms and provisions hereof shall be deemed null and void except
that the last sentence of Section 4.2, and Section 11.4 shall remain in effect,
with the understanding that the terms and conditions of the Nondisclosure
Agreement shall remain in effect for 12 months following any such rescission. In
the event any of the Purchased Assets are unavailable for delivery to Purchaser
on the Closing Date as a result of loss, damage or destruction and such
Purchased Assets were
ASSET PURCHASE AGREEMENT PAGE 8
17
insured by Seller, Purchaser may at its sole option require Seller to deliver to
Purchaser assignments of Seller's rights under its insurance policies, if any,
applicable to such Purchased Assets and to close on that basis. Seller hereby
agrees to make such assignment of rights if Purchaser so elects.
SECTION 1.10 ALLOCATION
Purchaser, Seller and Stockholder agree to treat the purchase and sale
of the Purchased Assets as a fully taxable transaction for income tax purposes
and to allocate the Purchase Price (and all other capitalizable costs) among the
Purchased Assets for all purposes (including financial accounting and tax
purposes) in accordance with an allocation schedule to be agreed upon within 30
days following the Closing in accordance with Section 1060 of the Internal
Revenue Code of 1986, as amended (the "CODE").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
SECTION 2.1 EXISTENCE
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland, and has corporate power and
authority to own, lease and operate the Purchased Assets and to engage in and
perform the transactions contemplated hereby and by the Related Agreements.
Seller is duly qualified to transact business in, and is in good standing under
the laws of, each jurisdiction in which it owns or leases property or where the
nature of its business requires such qualification.
SECTION 2.2 AUTHORIZATION; CONFLICTS
The execution, delivery and performance of this Agreement and the
Related Agreements and the consummation by Seller of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of Seller. This Agreement, and, when executed and delivered
by Seller in accordance with the provisions hereof, the Related Agreements,
constitutes or will constitute legal, valid and binding agreements of Seller,
enforceable against Seller in accordance with their respective terms, except as
such enforcement may be limited by general principles of equity or by
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally, and each document and instrument of Seller contemplated hereby or
thereby, when executed and delivered by Seller, in accordance with the
provisions hereof, shall be legal, valid and
ASSET PURCHASE AGREEMENT PAGE 9
18
binding upon Seller, and enforceable in accordance with its terms, subject to
the exception set forth above. The execution and delivery of this Agreement, the
Related Agreements and such documents and instruments do not, and the
consummation of the transactions contemplated hereby or thereby will not,
violate, contravene or constitute any default under, conflict with or result in
the breach of or in the creation of any Lien upon any property of Seller under
(i) any provision of Seller's Amended and Restated Articles of Incorporation or
By-Laws, (ii) any judgment, order, award, injunction, decree, ruling or, to the
knowledge of Seller, regulation, of any court, arbitrator or governmental or
regulatory authority binding upon the Purchased Assets or (iii) by the
conclusion of Closing, any mortgage, credit facility, lease or other material
agreement, contract or instrument to which Seller is a party or that is binding
upon the Purchased Assets.
SECTION 2.3 TITLE
Seller has or will have, on the Closing Date, good and marketable title
to all the tangible personal property reflected in Schedule A hereto, except as
indicated therein, and all Intellectual Property listed in Part I of Schedule C
in each case free and clear of Liens.
SECTION 2.4 CONTRACTS
Schedule B hereto and Part II of Schedule C hereto contain,
respectively, an accurate and complete list of (a) all material deferred
maintenance contracts, real property leases, agreements, consents, licenses and
other contracts or arrangements, and (b) licenses or agreements for Intellectual
Property, in each case related to the Purchased Assets. Except as indicated
therein, each such contract is valid and in full force and effect with respect
to Seller, and, to the knowledge of Seller, there exists no event of default or
event (including the purchase and sale of the Purchased Assets hereunder,
subject to obtaining the consents referred to in Schedule D hereto) that, with
the giving of notice or the lapse of time, would become a material default
thereunder.
SECTION 2.5 RESTRICTIVE DOCUMENTS
Seller is not subject to, or a party to, any mortgage, loan, lease,
license, or other agreement that, subject to obtaining the consents set forth in
Schedule D hereto, would prevent consummation of the transactions contemplated
by this Agreement or compliance by Seller with the terms, conditions and
provisions hereof.
SECTION 2.6 LITIGATION
Except as set forth in Schedule G hereto, there are no pending, or to
the knowledge of Seller, threatened, claims, actions, proceedings,
investigations, examinations or suits
ASSET PURCHASE AGREEMENT PAGE 10
19
against Seller that, if determined adversely to Seller, would adversely affect
Seller's ability to perform its obligations under this Agreement or any Related
Agreement or that would adversely affect the Purchased Assets in any material
respect. As provided in Section 1.2, Purchaser assumes no liabilities or
obligations with respect to any litigation involving Seller, whether or not
existing on the Effective Date or the Closing Date.
SECTION 2.7 COMPLIANCE WITH LAWS
Seller is in compliance in all respects with all judgments, decrees
and, to the knowledge of Seller, applicable laws, regulations and orders
relating to the Purchased Assets, violation of which would adversely affect the
Purchased Assets. No consent of, or, except as may be required in connection
with the filing of Articles of Sale and Transfer pursuant to Sections 3-107 of
the Maryland General Corporation Law and routine filings under laws relating to
the transfer of certain intellectual property rights, filing with, any
governmental or regulatory authority is required to be made in connection with
the execution, delivery and performance of this Agreement by Seller.
SECTION 2.8 ACCURACY OF REPRESENTATIONS AND WARRANTIES
None of the representations, warranties or statements of Seller herein,
in any schedule hereto or in any Related Agreement contain any untrue statement
of a material fact or omit or misstate a material fact necessary in order to
make the statements contained herein or therein not misleading.
SECTION 2.9 BROKER'S OR FINDER'S FEES
Except as set forth in Schedule G hereto, no agent, broker, person or
firm acting on behalf of Seller is, or will be, entitled to any commission or
broker's or finder's fee from either party hereto, or from any person
controlling, controlled by or under common control with any party hereto, in
connection with any of the transactions contemplated herein.
SECTION 2.10 COPIES OF DOCUMENTS
Seller has caused to be made available for inspection and copying by
Purchaser all documents in its possession referred to in this Article II or in
any schedule furnished by Seller to Purchaser. All such copies of leases,
contracts or license agreements are true, complete and correct.
ASSET PURCHASE AGREEMENT PAGE 11
20
SECTION 2.11 DISCLOSURE
To the knowledge of Seller, there is no fact that materially and
adversely affects the Purchased Assets, including without limitation, any
liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type, whether accrued, absolute, contingent, matured or
unmatured (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles) that has not been
disclosed in this Agreement, the schedules hereto, the Related Agreements or in
the certificates or other documents furnished pursuant hereto or thereto except
for facts that have otherwise been disclosed in writing to Purchaser and for
matters pertaining to the general economic environment or to the document
imaging processing industry generally.
SECTION 2.12 PERMITS AND APPROVALS
To the knowledge of Seller, Schedule E hereto contains an accurate and
complete listing of all material permits and approvals currently used by Seller
in connection with the design, manufacture or sale of the Purchased Assets.
Purchaser will acquire from Seller those permits and approvals, set forth in
Schedule E hereto, to the extent transferable pursuant to the terms hereof.
SECTION 2.13 INTELLECTUAL PROPERTY; LICENSES
(a) To the knowledge of Seller, Schedule C hereto sets forth a true and
complete list of all Intellectual Property of any kind now used in the design,
manufacture or marketing of the Software Products. Part II of Schedule C also
contains a true and complete list of all licenses or agreements that in any way
affect the rights of Seller to any of the Intellectual Property (the
"INTELLECTUAL PROPERTY LICENSES"); such list indicates the specific Intellectual
Property affected by each Intellectual Property License. Subject to the
qualification with respect to the Patent set forth in Sections 2.13(d) and 3.10,
neither Seller's operations nor any Intellectual Property or Intellectual
Property License infringes (nor is there any basis to believe that any
Intellectual Property or Intellectual Property License would infringe) upon any
issued or pending patent, trademark, trade name, service ▇▇▇▇, copyright or
other right of any other person nor, to the knowledge of Seller, is there any
infringement by any other person of any of the Intellectual Property.
(b) To the knowledge of Seller, all the Intellectual Property Licenses
are valid and enforceable, Seller has performed all obligations imposed on it
thereunder and neither Seller nor, to the knowledge of Seller, any other party
thereto is in default thereunder in any respect, nor is there any event that
with the giving of notice or lapse of time, or both, would constitute a default
thereunder. Seller has not received notice that
ASSET PURCHASE AGREEMENT PAGE 12
21
any party to any such agreement intends to cancel, terminate or refuse to renew
the same or to exercise or decline to exercise any option or other right
thereunder. No licenses, sublicenses, covenants or agreements have been granted
or entered into by Seller in respect of any of the Intellectual Property, except
the Intellectual Property Licenses. No director, officer, stockholder or
employee of Seller owns, directly or indirectly, in whole or in part, any of the
Intellectual Property.
(c) Except as set forth in Schedule G hereto, Seller has received no
notice of the assertion of any claim of infringement or other interference with
third-party rights with respect to the Intellectual Property and Seller has at
all times maintained reasonable procedures to protect, and has enforced, all of
its trade secrets.
(d) Subject to Section 9.3, and in addition to the indemnification
contained in Section 9.2(a), Seller shall indemnify and hold Purchaser harmless
from and against all losses, claims, damages or expenses to which Seller may
become subject as a result of any claim that any Intellectual Property infringes
upon the rights of any third party. Subject to Section 9.3, in the event that
Seller or Purchaser is sued for any such infringement, and settles such suit by
agreeing to replace such Intellectual Property or modify such Intellectual
Property to be non-infringing, then in the event of such replacement or
modification Seller covenants that such replacement or modification will meet or
exceed, in all material respects, the functionality, quality, and operational
ease of use of such Intellectual Property as it existed prior to such
replacement or modification. In the event a modification or replacement cannot
be accomplished in accordance with the standards of the preceding sentence,
Purchaser shall be entitled to make appropriate claims under the Escrow
Agreement and shall have the right of set-off to satisfy any shortfall
thereunder. In addition, in the event that Seller is sued for such infringement
and fails to prevail, Purchaser shall also be entitled to make appropriate
claims under the Escrow Agreement and shall also have the right of set-off to
satisfy any shortfall thereunder. The remedies set forth in this Section 2.13(d)
are not exclusive and Purchaser may exercise any and all remedies available to
it, at law or in equity, in addition to the remedies contained herein.
Notwithstanding the foregoing, Seller shall not be liable hereunder for any
loss, claim, damage or expense to the extent it results solely from Purchaser's
modification of any Intellectual Property after the Closing Date.
Notwithstanding this Section 2.13(d) or Article IX, the indemnification provided
herein and therein shall not apply to any infringement or other claims of third
parties with respect to the Patent, of which Seller did not have knowledge as of
the Closing Date.
SECTION 2.14 ENVIRONMENTAL MATTERS
Seller does not currently nor has it in the past produced, used,
handled or disposed of, any "Hazardous Substances," "Pollutants" or
"Contaminants" as such terms are
ASSET PURCHASE AGREEMENT PAGE 13
22
defined in the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended (collectively, "HAZARDOUS SUBSTANCES"), other than in
compliance with applicable laws and regulations, nor have any Hazardous
Substances been released, emitted, dumped, buried or otherwise disposed of or
stored, whether in underground or above-ground storage tanks or otherwise, by
Seller, other than in compliance with applicable laws and regulations. Seller
has received no notice from any governmental agency advising Seller and has no
reason to believe that it is potentially responsible for (a) response costs with
respect to a release or threatened release of Hazardous Substances or (b) any
violation of any environmental law or regulation. Seller further has received no
notice of and has no reason to believe that it is the target of an environmental
investigation, or an administrative, civil or criminal action. No environmental
approvals, permits, licenses, clearances or consents are necessary in connection
with the use of the Purchased Assets.
SECTION 2.15 INVENTORY
All inventory items reflected on Schedule F hereto are of a quality and
quantity usable and salable in the ordinary course of business. Such inventory
constitutes less than fifty percent of Seller's inventory and consists of
equipment, materials and components used or sold in connection with such
business.
SECTION 2.16 INVESTMENT REPRESENTATIONS
In connection with the acquisition of the shares included in the
Closing Stock Consideration (the "SHARES"):
(a) ABILITY TO BEAR RISK. Seller is in a financial position to hold the
Shares for an indefinite period of time and is able to bear the economic risk
and withstand a complete loss of Seller's investment in the Shares.
(b) DISCLOSURE DOCUMENTS. Seller acknowledges that it has received a
copy of Purchaser Parent's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997 (the "1997 FORM 10-K"), Purchaser Parent's Quarterly Report on
Form 10-Q for the fiscal quarters ended June 30, September 30 and December 31,
1996 (the "1996 FORM 10-QS"), and Purchaser Parent's Notice of 1996 Annual
Meeting and Proxy Statement for its 1996 Annual Meeting of Stockholders (the
"1996 PROXY STATEMENT"), in each case, as filed with the Securities and Exchange
Commission ("SEC") (collectively, the "DISCLOSURE DOCUMENTS"), and has had the
opportunity to review, to Seller's satisfaction, the Disclosure Documents.
ASSET PURCHASE AGREEMENT PAGE 14
23
(c) PROFESSIONAL ADVICE. Seller has obtained, to the extent that it
deems necessary, its own professional advice with respect to the risks inherent
in acquiring the Shares, the condition of Purchaser Parent and the suitability
of Seller's investment in the Shares in light of Seller's financial condition
and investment needs.
(d) ACCREDITED INVESTOR. Seller is an "accredited investor" as that
term is defined in Regulation D under the Securities Act of 1933, as amended
(the "ACT").
(e) ACCESS TO INFORMATION. Seller has been given access to full and
complete information regarding Purchaser Parent, including, in particular, the
current financial condition of Purchaser Parent and the risks associated
therewith, and has utilized such access to its satisfaction for the purpose of
obtaining information about Purchaser Parent and verifying the information
contained in the Disclosure Documents. Seller has met with or been given
reasonable opportunity to meet with representatives of Purchaser and Purchaser
Parent to ask questions of, and receive answers from, such representatives
concerning the terms and conditions of this Agreement and to obtain any
additional information, to the extent reasonably available, necessary to verify
the information provided by Purchaser Parent in the Disclosure Documents, or
otherwise.
(f) ACQUISITION ENTIRELY FOR OWN ACCOUNT. The Shares are being acquired
by Seller for investment for its account, not as a nominee or agent, and not
with a view to the distribution of any part thereof; Seller does not have any
present intention of selling, granting any participation in or otherwise
distributing any of the Shares in a manner contrary to the Act or any applicable
state securities or Blue Sky law, nor does Seller have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
a participation to such person or to any third person with respect to any of the
Shares.
(g) DUE DILIGENCE. Seller has been solely responsible for its own due
diligence investigation of Purchaser Parent and its business, and Seller's
analysis of the merits and risks of the Shares, and is not relying on anyone
else's analysis or investigation of Purchaser Parent, its business or the merits
and risks of the Shares other than professionals employed specifically by Seller
to assist it.
(h) RESTRICTED SECURITIES. Seller realizes that the Shares have not
been and will not be registered under the Act at the Closing, and that they are
characterized under the Act as "restricted securities" and, therefore, cannot be
sold or transferred unless subsequently registered under the Act or an exemption
from such registration is available. In this connection, Seller represents that
it is familiar with Rule 144 of the SEC issued
ASSET PURCHASE AGREEMENT PAGE 15
24
under the Act ("RULE 144") as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
(i) EXEMPTION RELIANCE. Seller has been advised that the Shares have
not been and will not be registered at the Closing under the Act or any
applicable state securities laws, but are being issued under this Agreement
pursuant to exemptions from such laws, and that Purchaser Parent's reliance upon
such exemptions is predicated in part upon the representations of Seller
contained herein.
(j) FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, Seller further agrees not to make any
disposition of all or any portion of the Shares unless and until:
(i) There is in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement;
(ii) Seller (A) shall have notified Purchaser Parent of the
proposed disposition and shall have furnished Purchaser Parent with a statement
in reasonable detail of the circumstances surrounding the proposed disposition
and (B) if requested by Purchaser Parent, shall have furnished Purchaser Parent
with an opinion of counsel, reasonably satisfactory to Purchaser Parent, that
such disposition will not require registration under the Act; or
(iii) Purchaser Parent shall be satisfied that such proposed
disposition complies in all respects with Rule 144 or any successor rule
providing a safe harbor for such disposition without registration.
(k) LEGEND. It is understood that the certificates evidencing the
Shares may bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND NO INTEREST
HEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS (I) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING SUCH
SECURITIES, (II) THIS COMPANY RECEIVES AN OPINION OF LEGAL COUNSEL
FOR THE HOLDER OF THE SECURITIES
ASSET PURCHASE AGREEMENT PAGE 16
25
REASONABLY SATISFACTORY TO THIS COMPANY STATING THAT SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION, OR (III) THIS COMPANY
OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT
FROM REGISTRATION.
(l) RESIDENCY. For purposes of the application of state securities
laws, Seller is domiciled in the State of Maryland.
SECTION 2.17 INSURANCE
Except as set forth in Schedule G hereto, there is no claim by Seller
pending under any insurance policy covering any Purchased Asset as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies.
SECTION 2.18 TAXES
(a) Seller has filed all Tax Returns (as defined below) that it was
required to file. All such Tax Returns were correct and complete in all material
respects. All Taxes (as defined below) owed by Seller (whether or not shown on
any Tax Return) have been paid. Seller is not currently the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by an authority in a jurisdiction where Seller does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There are no
liens on any of the assets of Seller that arose in connection with any failure
(or alleged failure) to pay any Tax.
(b) Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(c) No director or officer (or employee responsible for Tax matters) of
Seller expects any authority to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or claim concerning any
Tax liability of Seller either (A) claimed or raised by any authority in writing
or (B) as to which any of the directors and officers (and employees responsible
for Tax matters) of Seller has knowledge based upon personal contact with any
agent of such authority. Seller has furnished or made available to Purchaser
complete and current copies of all Tax Returns filed for taxable periods ended
on or after December 31, 1990.
(d) Seller has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
ASSET PURCHASE AGREEMENT PAGE 17
26
(e) The unpaid Taxes of Seller (A) did not, as of April 30, 1997,
exceed the reserve for Tax liability set forth on the face of the April 30, 1997
balance sheet (rather than in any notes thereto) and (B) will not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Seller in filing its Tax
Returns.
(f) Seller is not a party to any Tax allocation or sharing agreement.
Seller (A) has not been a member of an affiliated group filing a consolidated
federal income Tax Return (other than a group the common parent of which was
Seller) and (B) has no liability for the Taxes of any person (other than any of
Seller and its subsidiaries) under Section 1.1502-6 of the United States
Treasury Regulations (or any similar provision of state, local, or foreign law),
as a transferee or successor, by contract, or otherwise.
(g) Seller is an "S corporation" within the meaning of Section 1361(a)
of the Code for federal and state income tax purposes since its incorporation,
and has never had any subsidiaries.
(h) For purposes of this Agreement, "TAX" means any federal, state,
local, or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
(i) For purposes of this Agreement, "TAX RETURN" means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
SECTION 2.19 FINANCIAL STATEMENTS
Seller has delivered to Purchaser an audited balance sheet and
statements of income, shareholders' equity and cash flows of Seller as of and
for each of the fiscal years ended December 31, 1995 and December 31, 1996.
Seller has also delivered to Purchaser a review of the statements of income,
shareholders' equity and cash flows of Seller as of and for the four months
ended April 30, 1997 (the "SELLER APRIL BALANCE SHEET"). All the foregoing
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied from year to year and are herein
referred to as the "FINANCIAL STATEMENTS." The Financial Statements have been
prepared on a basis consistent with prior accounting periods and present fairly
the financial position, results of operations and changes in financial position
of Seller as of the dates
ASSET PURCHASE AGREEMENT PAGE 18
27
and for the periods indicated. Seller has no liability or obligation of any
nature (absolute, contingent or otherwise) that is not fully reflected or
reserved against in the Seller April Balance Sheet, except for liability
reserved against or obligations incurred since the date of the Seller April
Balance Sheet in the ordinary course of business and consistent with past
practice.
SECTION 2.20 EMPLOYEE BENEFIT PLANS
(a) With respect to any employee benefit plan ("EMPLOYEE BENEFIT PLAN")
within the meaning of Section 3(3)g of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"): (i) Seller is, and at all times has been, in
compliance with, and such Employee Benefit Plan is, and at all times has been,
maintained, administered and operated in compliance with, the terms of such
Employee Benefit Plan and all applicable laws, rules and regulations, including,
but not limited to, ERISA and the Code; (ii) all Tax Returns, information
returns, reports and information relating to such Employee Benefit Plan required
to be filed with any governmental entity or agency have been accurately, timely
and properly filed; (iii) all notices, statements, reports and other disclosure
required to be given or made to participants in such Employee Benefit Plan or
their beneficiaries have been accurately, timely and properly disclosed or
provided; (iv) neither Seller nor any other fiduciary of such Employee Benefit
Plan has engaged in any transaction or acted or failed to act in a manner that
violates the fiduciary requirements of Section 404 of ERISA with respect to such
Employee Benefit Plan; and (v) no event has occurred or is threatened or about
to occur that would constitute a prohibited transaction under Section 406 or 407
of ERISA or under Section 4975 of the Code. Each Employee Benefit Plan that is
intended to be qualified under Section 401(a) of the Code is and, at all times
since inception, has been so qualified and its related trust is, and at all
times since inception has been, exempt from taxation under Section 501(a) of the
Code. Each Employee Benefit Plan that constitutes a "group health plan" within
the meaning of Section 4980B(g)(2) of the Code or Section 607(1) of ERISA has
been administered and operated at all times in compliance with the requirements
of Section 4980B(f) of the Code and Title I, Subtitle B, Part 6 of ERISA.
(b) All contributions and other payments required to have been made by
Seller (including any pretax or post-tax contributions or payments by employees
or their dependents) to any Employee Benefit Plan (or to any person pursuant to
the terms thereof) have been so made and the amount of any such payment or
contribution obligation that has accrued, but is not yet due, as of the date
hereof, has been properly reflected in the Seller April Balance Sheet.
ASSET PURCHASE AGREEMENT PAGE 19
28
(c) There are no actions, suits or claims (other than routine claims
for benefits) pending and, to Seller's knowledge, there are no actions, suits or
claims threatened with respect to any Employee Benefit Plan or against the
assets of any Employee Benefit Plan, nor, to the knowledge of Seller, is there a
reasonable basis for any such action, suit or claim. None of the Employee
Benefit Plans is currently under investigation, audit or review, directly or
indirectly, by the IRS, the Department of Labor (the "DOL") or any other
governmental entity or agency, and, to the knowledge of Seller, no such action
is contemplated or under consideration by the IRS, DOL or any other governmental
entity or agency.
(d) Seller does not maintain or contribute to, and has never maintained
or contributed to (or been obligated to contribute to), any multi-employer plan
within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA, or any plan
that is subject to Section 302 or Title IV of ERISA or Section 412 of the Code.
(e) Seller is not, and has never been, a member of (i) a controlled
group of corporations, within the meaning of Section 414(b) of the Code, (ii) a
group of trades or businesses under common control, within the meaning of
Section 414(c) of the Code, (iii) an affiliated service group, within the
meaning of Section 414(m) of the Code, or (iv) any other group of persons,
organizations and/or entities that is treated as a single employer under Section
414(o) of the Code.
(f) The consummation of any transaction contemplated by this Agreement
will not result in any (i) payment (whether of severance pay or otherwise)
becoming due from Seller to any officer, employee, former employee or director
thereof or to the trustee under any "rabbi trust" or similar arrangement, (ii)
benefit under any Employee Benefit Plan being established or becoming
accelerated, vested or payable, or (iii) payment or series of payments by
Seller, directly or indirectly, to any person that would constitute a "parachute
payment" within the meaning of Section 280G of the Code.
SECTION 2.21 EMPLOYMENT RELATIONS
There are no outstanding charges pending against Seller under any
Federal, State or other applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours respecting
employees of Seller.
ASSET PURCHASE AGREEMENT PAGE 20
29
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
SECTION 3.1 EXISTENCE
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has corporate power and
authority to engage in and perform the transactions contemplated hereby and by
the Related Agreements.
SECTION 3.2 AUTHORIZATION; CONFLICTS
The execution, delivery and performance of this Agreement, and the
Related Agreements and the consummation by Purchaser of the transactions
contemplated hereby or thereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement and, when executed and
delivered by Purchaser in accordance with the provisions hereof, the Related
Agreements, constitutes or will constitute legal, valid and binding agreements
of Purchaser enforceable in accordance with their respective terms, except as
such enforcement may be limited by general principles of equity or by
bankruptcy, insolvency or similar laws affecting creditors' rights generally,
and each document and instrument of Purchaser contemplated hereby or thereby,
when executed and delivered by Purchaser in accordance with the provisions
hereof, shall be legal, valid and binding upon Purchaser and enforceable in
accordance with its terms, subject to the exception set forth above. The
execution and delivery of this Agreement, the Related Agreements and such
documents and instruments do not, and the consummation of the transactions
contemplated hereby or thereby will not, violate, contravene or constitute any
default under, conflict with or result in the breach of or in the creation of
any Lien upon any property of Purchaser under (i) any provision of Purchaser's
Certificate of Incorporation or By-Laws, (ii) any judgment, order, award,
injunction, decree, ruling or, to the best knowledge of Purchaser, regulation of
any court, arbitrator or governmental or regulatory authority binding upon
Purchaser or any of its properties or (iii) at the Closing Date, any mortgage,
credit facility, lease or other material agreement, contract or instrument to
which Purchaser is a party or that is binding upon Purchaser or any of its
properties.
SECTION 3.3 CAPITALIZATION
Purchaser Parent's authorized capital as of March 31, 1997 consisted
of:
ASSET PURCHASE AGREEMENT PAGE 21
30
(a) PREFERRED STOCK. 1,000,000 shares of preferred stock, having a par
value of $.01 per share, of which (i) 500,000 shares have been designated Series
A Preferred Stock and 17,500 of such shares were issued and outstanding; (ii)
120,117 shares have been designated Series B Senior Preferred Stock and 11,917
of such shares were issued and outstanding; and (iii) 80,079 shares have been
designated Series C Senior Preferred Stock and 7,945 of such shares were issued
and outstanding; and
(b) COMMON STOCK. 60,000,000 shares of common stock, having a par value
of $.01 per share, of which 49,000,000 shares have been designated Common Stock
and 19,937,115 of such shares were issued and outstanding, and 95,191 of such
shares were held in Purchaser Parent's treasury. All issued and outstanding
shares of Common Stock are validly issued, fully paid and nonassessable. As of
such date there were options and warrants outstanding to purchase not more than
1,322,000 shares of Common Stock.
SECTION 3.4 AUTHORIZATION FOR COMMON STOCK
Prior to the Closing, Purchaser Parent shall have taken all necessary
action to permit it to issue the Shares, which Shares, when issued, will be duly
authorized, validly issued, fully paid and nonassessable, and no stockholder of
Purchaser Parent will have any preemptive right in respect thereof.
SECTION 3.5 BROKER'S OR FINDER'S FEES
No agent, broker, person or firm acting on behalf of Purchaser is, or
will be, entitled to any commission or broker's or finder's fees from either
party hereto, or from any person controlling, controlled by or under common
control with either party hereto, in connection with any of the transactions
contemplated herein.
SECTION 3.6 LITIGATION
There are no pending, or to the knowledge of Purchaser, threatened,
claims, actions, proceedings, investigations, examinations or suits against
Purchaser that, if determined adversely to Purchaser, would adversely affect
Purchaser's ability to perform its obligations under this Agreement or any
Related Agreement or that would enjoin or prevent the consummation of the
transactions contemplated by this Agreement.
SECTION 3.7 ACCURACY OF REPRESENTATIONS AND WARRANTIES
None of the representations, warranties or statements of Purchaser
herein or in any Related Agreement contain any untrue statement of a material
fact or omit or misstate a
ASSET PURCHASE AGREEMENT PAGE 22
31
material fact necessary in order to make the statements contained herein or
therein not misleading.
SECTION 3.8 REPORTS AND FINANCIAL STATEMENTS
Purchaser has previously delivered to Seller true and complete copies
of the 1997 Form 10-K, the 1996 Form 10-Qs, and the 1996 Proxy Statement. As of
their respective dates, such reports and statements did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements contained therein were prepared in accordance with generally accepted
accounting principles consistently applied, and reflect all adjustments which,
in Purchaser Parent's opinion, are necessary for the fair presentation of the
results of operations and financial condition for such periods. The financial
results for the interim periods are not necessarily indicative of the results
for the entire year.
SECTION 3.9 DISCLOSURE
To the knowledge of Purchaser, there is no fact relating to Purchaser
or Purchaser Parent that materially and adversely affects Purchaser's ability to
carry out its obligations under this Agreement, including without limitation,
material facts relating to any liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, whether accrued,
absolute, contingent, matured or unmatured (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles) that has not been disclosed in this Agreement, the
Disclosure Documents, the Related Agreements or in the certificates or other
documents furnished pursuant hereto or thereto except for facts that have
otherwise been disclosed in writing to Seller and for matters pertaining to the
general economic environment.
SECTION 3.10 INTELLECTUAL PROPERTY
Purchaser acknowledges that Seller has made no representations or
warranties as to whether or not following the Closing Date there will be patent
infringement or other claims against Purchaser by third parties with respect to
Patent Application No. SN 08/365,605 or any subsequently issued patent or
patents with respect to such patent application (together, the "PATENT").
Purchaser further acknowledges that Seller's obligation to indemnify Purchaser
under this Agreement for any such infringement or other claims only extends to
such infringement claims that were to Seller's knowledge prior to the Closing
Date.
ASSET PURCHASE AGREEMENT PAGE 23
32
ARTICLE IV
CONDUCT OF BUSINESS; REVIEW
SECTION 4.1 CONDUCT OF BUSINESS OF SELLER
During the period from the Effective Date to the Closing Date, Seller
covenants and agrees, to the extent related to the Purchased Assets, to (a)
continue to operate its business in a reasonable and prudent manner as the same
is currently being conducted, (b) use commercially reasonable efforts to
preserve its existing operations, business organization and relations with its
customers and suppliers, (c) refrain from entering into any contract or
commitment except in the ordinary course of business and except for agreements
resulting in the settlement and release of existing debts and claims, (d) not
assign, sell, lease or otherwise transfer or dispose of any of the Purchased
Assets other than in the ordinary course of business, except with Purchaser's
prior written consent, (e) maintain the Purchased Assets in their present
condition, reasonable wear and tear excepted, and (f) maintain insurance on the
Purchased Assets in comparable amounts and scope to that in effect on the
Effective Date.
SECTION 4.2 REVIEW OF SELLER
Purchaser may, prior to the Closing Date, through its designated
representatives, review the properties, books and records of Seller, as they
relate to the Purchased Assets; such review shall not, however, affect the
representations, warranties or indemnifications made by Seller in this Agreement
or in any Related Agreement. Purchaser's rights pursuant to this Section 4.2 are
subject to the condition that Purchaser shall conduct its investigation in a
manner that will not unreasonably interfere with the operations of Seller. In
the event of termination of this Agreement, Purchaser shall keep confidential
any material information obtained from Seller concerning the properties,
operations and business of Seller in accordance with Section 11.4.
SECTION 4.3 PRORATION
Except as otherwise specifically provided in this Agreement, it is the
intention of the parties hereto that Seller shall operate for its own account
the Purchased Assets until the close of business on the day prior to the Closing
Date and that Purchaser shall operate for its own account the Purchased Assets
from and after the Closing Date. Thus, with respect to any leases of real
property or equipment or to any service agreements relating to Seller and
assumed by Purchaser hereunder and to telephone, propane, natural gas,
electricity, water, sewage and other utilities relating to the real property
leased by Seller that is leased to Purchaser pursuant to the transactions
contemplated hereby, Seller shall
ASSET PURCHASE AGREEMENT PAGE 24
33
pay for any amounts applicable to the period up to but excluding the Closing
Date and Purchaser shall pay for any amounts applicable to any period from and
after the Closing Date. With regard to state and local personal property and
other taxes payable with respect to the Purchased Assets, Seller shall pay such
taxes that apply to the period up to but excluding the Closing Date while
Purchaser shall pay such taxes which apply to items payable by Purchaser in
accordance with Section 8.2, and the period from and after the Closing Date.
SECTION 4.4 EMPLOYEES
(a) Purchaser, as a successor employer, has offered or will offer
employment, effective on the Closing Date, to substantially all of the employees
of Seller. Such offers of employment included or will include compensation rates
which were no less than the compensation rates, by individual, provided by
Seller as of April 30, 1997 and benefit plans that were at least equal to those
described in Schedule H hereto. Those employees of Seller who accept such offers
of employment with Purchaser pursuant to this Agreement shall hereinafter be
referred to as "TRANSFERRED EMPLOYEES".
(b) Except as expressly provided in Section 4.4(c), Purchaser assumes
no liability or obligation with respect to any Seller benefit plan (including,
without limitation, Seller's layoff or severance pay plan) as any such plan may
apply to any employee or former employee of Seller. Purchaser further agrees
that Transferred Employees' service with Seller shall be counted as service with
Purchaser for the purposes of determining such Transferred Employees'
eligibility for and entitlement to succeeding benefits under all benefit plans
provided by Purchaser to Transferred Employees, including, without limitation,
participation and vesting under Purchaser Parent's 401(k) plan.
(c) As of the Closing Date, Purchaser shall adopt vacation and holiday
plans for Transferred Employees to succeed Seller's vacation and holiday plans.
Such vacation and holiday plans shall be at Purchaser's expense. For the
remainder of the calendar year in which the Closing takes place, such plans
shall be equal to and in place of what Seller would have provided to the
Transferred Employees. Prior to the Closing Date, Seller will have provided
Purchaser with a list of the Transferred Employees and their vacations for the
remainder of the calendar year.
(d) Seller covenants and agrees that (i) upon being furnished a list of
Seller's employees to whom Purchaser has made offers of employment pursuant to
Section 4.1(a), Seller shall use its commercially reasonable best efforts to
encourage such employees to accept such offers and (ii) for a period of 18
months from and after the Closing Date,
ASSET PURCHASE AGREEMENT PAGE 25
34
neither Seller nor any affiliate of Seller will solicit or recruit for
employment from Purchaser any Transferred Employee.
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS TO CLOSE
Consistent with Purchaser's rights under Section 10.2(b), the purchase
of the Purchased Assets by Purchaser on the Closing Date is conditioned upon
receipt by Purchaser of the legal opinions, consents and other documents listed
below.
SECTION 5.1 OPINION OF SELLER'S COUNSEL
Seller shall have furnished Purchaser with a favorable opinion, dated
the Closing Date, of ▇▇▇▇▇, Rothman, Goldstein, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Chartered,
its corporate counsel, substantially in the form set forth in Exhibit 6 hereto.
SECTION 5.2 GOOD STANDING; CORPORATE MATTERS
Seller shall have delivered to Purchaser (a) copies of Seller's Amended
and Restated Articles of Incorporation, including all amendments thereto,
certified by the Secretary of State of the State of Maryland, (b) a certificate
from the Secretary of State of the State of Maryland to the effect that Seller
is in good standing in such state and listing all charter documents on file, (c)
certificates from any jurisdiction in which Seller is qualified to transact
business as to Seller's qualification to transact business therein, (d) a
certificate of the Secretary or an Assistant Secretary of Seller certifying (i)
attached By-Laws of Seller, (ii) appropriate corporate authorizations relating
to this Agreement, the Related Agreements and the transactions contemplated
hereby and thereby and (iii) incumbency and specimen signatures of those
officers of Seller executing this Agreement, the Related Agreements or any
document contemplated hereby or thereby, and (e) copies of Termination
Statements on Form UCC-3 related to the Purchased Assets.
SECTION 5.3 TRUTH OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Seller contained in this
Agreement, the Related Agreements or in any schedule, certificate or document
delivered pursuant hereto or thereto shall be true and correct in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, subject to
such changes permitted hereunder that may have occurred between the Effective
Date and the Closing Date, none of which shall be materially
ASSET PURCHASE AGREEMENT PAGE 26
35
adverse and Seller shall have delivered to Purchaser on the Closing Date an
officer's certificate, dated the Closing Date, to such effect.
SECTION 5.4 NO INJUNCTION
No action or proceeding shall have been instituted, nor shall any
action be threatened, before any court or other governmental body or public
authority, nor shall any order, judgment or decree have been issued or be
proposed to be issued by any such body or authority to restrain, prohibit,
prevent or delay the completion and consummation of any of the transactions
contemplated hereby or by any Related Agreement, or challenge the validity of
any such transactions, and Seller shall have delivered to Purchaser an officer's
certificate, dated the Closing Date, to such effect.
SECTION 5.5 ▇▇▇▇ OF SALE; RELATED AGREEMENTS
Seller shall have duly authorized, executed and delivered to Purchaser
a ▇▇▇▇ of Sale and Assignment to be dated the Closing Date substantially in the
form of Exhibit 2 hereto (the "▇▇▇▇ OF SALE"), an Assignment of Patent
Application to be dated the Closing Date substantially in the form of Exhibit 9
hereto (the "ASSIGNMENT OF PATENT APPLICATION"), an Assignment of Trademark to
be dated the Closing Date substantially in the form of Exhibit 10 hereto (the
"ASSIGNMENT OF TRADEMARK"), the Assumption of Liabilities Agreement, an Escrow
Agreement to be dated the Closing Date among Purchaser Parent, Purchaser, Seller
and First Security Bank, National Association, as escrow agent thereunder
("ESCROW AGENT") substantially in the form of Exhibit 1 hereto (the "ESCROW
AGREEMENT"), and the Disbursing Agency Agreement to be dated the Closing Date
among Purchaser, Seller and First Security Bank, National Association, as
disbursing agent thereunder ("DISBURSING AGENT") substantially in the form of
Exhibit 8 hereto (the "DISBURSING AGENCY AGREEMENT"; together with the ▇▇▇▇ of
Sale, the Assignment of Patent Application, the Assignment of Trademark, the
Assumption of Liabilities Agreement and the Escrow Agreement, the "RELATED
AGREEMENTS").
SECTION 5.6 EMPLOYEE ISSUES
(a) Purchaser and Purchaser Parent shall have entered into an
Employment Agreement with Stockholder substantially in the form of Exhibit 4
hereto (the "EMPLOYMENT AGREEMENT").
(b) Seller shall have provided Purchaser information, including job
descriptions, salaries and benefits (including accrued vacations) with respect
to each of Seller's employees and shall have afforded Purchaser reasonable
opportunities to
ASSET PURCHASE AGREEMENT PAGE 27
36
interview such employees and offer the employees referred to in Section 4.4(a)
employment by Purchaser.
SECTION 5.7 ASSIGNMENTS; CONSENTS AND APPROVALS
Seller shall have, except as otherwise noted on each such Schedule, (a)
effectively assigned to Purchaser the contracts noted on Part I of Schedule B
hereto and the licenses noted on Part III of Schedule C hereto, (b) obtained the
consents noted on Schedule D hereto related to such contracts and/or licenses
and (c) obtained all consents, authorizations and approvals under all statutes,
laws, ordinances, regulations, rules, judgments, decrees and orders of any court
or governmental agency, board, bureau, body, department or authority or of any
other person required to be obtained, in connection with the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby.
SECTION 5.8 TERMINATION AND RELEASE OF BANK
Seller and Creditanstalt-Bankverein (the "BANK") shall have entered
into a mutual release in form and substance reasonably satisfactory to Purchaser
with respect to the transactions contemplated by the Loan and Security Agreement
dated as of June 22, 1994 (the "LOAN AGREEMENT") by and between Seller and the
Bank, and Purchaser shall be satisfied that the Bank has effectively released
Seller and any related liens upon Seller's assets from any claims of the Bank,
including, without limitation, by having provided to Purchaser Termination
Statements on Form UCC-3 for filing in appropriate jurisdictions and copies of
canceled Revolving Notes and Term Notes (as defined in the Loan Agreement) as
well as evidence of the termination of the Stock Pledge Agreement (as defined in
the Loan Agreement), the Conditional Assignment and Patent Security Agreement
(as referred to in the Loan Agreement), the Conditional Assignment and Trademark
Security Agreement (as referred to in the Loan Agreement), and the Source Code
Escrow Agreement (as referred to in the Loan Agreement); and the Source Code (as
defined in the Loan Agreement), as released from escrow, shall be provided to
Purchaser at Closing.
SECTION 5.9 LEASE
Purchaser and Seller shall have entered into a sublease agreement or
other arrangement upon terms acceptable to Purchaser (which may be the terms of
the existing lease) by which Purchaser shall acquire Seller's leasehold rights
to the premises occupied by Seller at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (the "LEASE"), and Purchaser shall be satisfied that all
necessary consents related to the Lease shall have been obtained by Seller and
provided to Purchaser.
ASSET PURCHASE AGREEMENT PAGE 28
37
SECTION 5.10 PERFORMANCE OF OBLIGATIONS
Each of the obligations of Seller to be performed on or before the
Closing Date pursuant to the terms hereof and each Related Agreement shall have
been duly performed, and Seller shall have delivered to Purchaser an officer's
certificate, dated the Closing Date, to such effect.
SECTION 5.11 MARKETING INFORMATION
Seller shall have provided Purchaser with copies of (a) any generally
applicable sales, marketing or promotional literature currently used in the
marketing of Software Products, (b) any marketing surveys prepared for Seller
relating to Software Products and (c) outstanding proposals for the distribution
of Software Products.
SECTION 5.12 [INTENTIONALLY OMITTED]
SECTION 5.13 TRANSFER OF INTELLECTUAL PROPERTY
Except as otherwise noted on Schedule C and Exhibit 12 hereto, Seller
will deliver at Closing an assignment, or other memorialization of transfer or
sale for each of the Intellectual Property and Intellectual Property Licenses in
a form reasonably satisfactory to Purchaser. Seller further agrees to deliver to
Purchaser at Closing an absolute discharge of all Seller's right in any
Intellectual Property owned by Seller and registered with the Registrar of
Copyrights or the Patent and Trademark Office or their non-United States
counterparts, as well as an absolute assignment of such right sufficient to
irrevocably transfer the registration of same to Purchaser in the United States
and in any other country.
SECTION 5.14 ADDITIONAL INFORMATION
Seller shall have provided Purchaser with (a) true and complete copies
of each agreement referred to in Section 7.7(b), (b) a true and complete list,
signed and sworn to or affirmed by Seller or Seller's duly authorized agent,
containing the names and business addresses of all known creditors of Seller,
with the amounts Seller will owe to each such creditor immediately prior to the
Closing, together with the names of all persons known to Seller to assert claims
against Seller even though such claims are disputed (the "CREDITORS' LIST") and
(c) certificates of insurance for Seller's existing casualty and liability
insurance policies, naming Purchaser as loss payee thereon as the parties'
interests may appear, and containing endorsements providing that such insurance
shall not be cancelable except upon 30 days' prior written notice to Purchaser.
ASSET PURCHASE AGREEMENT PAGE 29
38
SECTION 5.15 CONSENTS
Except as set forth on Schedule D hereto, no notice to or filing with,
and no authorization, consent or approval of, any person is necessary to the
consummation of the transactions contemplated hereby or to the conduct of the
business of Seller to be conducted after the Closing, including, without
limitation, consents from parties to loans, contracts, leases, licenses, notes
or other agreements and consents from governmental agencies, whether federal,
state or local. Except as otherwise noted on Schedule D hereto, copies of each
of the consents included in such Schedule have been heretofore delivered by the
Seller to Purchaser and such copies are (or to the extent not then delivered,
will be) true and complete and include all amendments, supplements and
modifications thereto.
SECTION 5.16 PHYSICAL PROPERTIES
There shall have occurred no material damage to or destruction or loss
of (whether or not covered by insurance) any of Seller's facilities, equipment
or other assets.
ARTICLE VI
CONDITIONS TO SELLER'S OBLIGATIONS TO CLOSE
Consistent with Seller's rights under Section 10.2(b), the sale of the
Purchased Assets by Seller on the Closing Date is conditioned upon receipt by
Seller of the legal opinions and other documents listed below.
SECTION 6.1 OPINION OF PURCHASER'S COUNSEL
Purchaser shall have furnished Seller with an opinion, dated the
Closing Date, of ▇▇▇▇▇▇▇ Coie, corporate counsel of Purchaser and Purchaser
Parent, substantially in the form of Exhibit 7 hereto.
SECTION 6.2 GOOD STANDING; CORPORATE MATTERS
Purchaser shall have delivered or caused to be delivered to Seller (a)
copies of Purchaser's Certificate of Incorporation and Purchaser Parent's
Restated Certificate of Incorporation, including all amendments thereto,
certified, in each case, by the Secretary of State of the State of Delaware, (b)
certificates from the Secretary of State of the State of Delaware to the effect
that Purchaser and Purchaser Parent are in good standing in such State and
listing all charter documents of Purchaser and Purchaser Parent on file and (c)
a certificate of the Secretary or an Assistant Secretary of each of Purchaser
and
ASSET PURCHASE AGREEMENT PAGE 30
39
Purchaser Parent, as the case may be, certifying (i) attached By-Laws, (ii)
appropriate corporate authorizations relating to (A) with respect to Purchaser,
this Agreement, each of the Related Agreements to which it is a party and the
transactions contemplated hereby and thereby and (B) with respect to Purchaser
Parent, the issuance of the Closing Stock Consideration and the Letter of
Confirmation, and (iii) incumbency and specimen signatures of those officers
executing the documents described above or any document to which Purchaser or
Purchaser Parent, as the case may be, is a party contemplated hereby or thereby.
SECTION 6.3 TRUTH OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Purchaser contained in this
Agreement, of Purchaser Parent contained in the Letter of Confirmation and
Representation of Purchaser Parent dated the date of this Agreement (the "LETTER
OF CONFIRMATION") to Seller, in form and substance reasonably satisfactory to
Seller, and of Purchaser contained in any Related Agreement to which it is a
party or in any certificate or document delivered pursuant hereto or thereto
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date, and Purchaser shall have delivered to Seller on the
Closing Date an officer's certificate, dated the Closing Date, to such effect.
SECTION 6.4 NO INJUNCTION
No action or proceeding shall have been instituted, nor shall any
action be threatened, before any court or other governmental body or public
authority, nor shall any order, judgment or decree have been issued or be
proposed to be issued by any such body or authority to restrain, prohibit,
prevent or delay the completion and consummation of any of the transactions
contemplated hereby or by any Related Agreement, or challenge the validity of
any such transactions, and Purchaser shall have delivered to Seller an officer's
certificate, dated the Closing Date, to such effect.
SECTION 6.5 ASSUMPTION OF LIABILITIES; RELATED AGREEMENTS
Purchaser shall have duly authorized, executed and delivered to Seller
an Assumption of Liabilities Agreement to be dated the Closing Date
substantially in the form of Exhibit 3 hereto (the "ASSUMPTION OF LIABILITIES
AGREEMENT") and each other Related Agreement to which it is a party.
SECTION 6.6 ELECTION TO BOARDS OF DIRECTORS
Stockholder shall have been elected a director of Purchaser and
Purchaser Parent.
ASSET PURCHASE AGREEMENT PAGE 31
40
SECTION 6.7 PERFORMANCE OF OBLIGATIONS
Each and all of the obligations of Purchaser to be performed on or
before the Closing Date pursuant to the terms hereof and of each Related
Agreement to which it is a party shall have been duly performed, and Purchaser
shall have delivered to Seller an officer's certificate, dated the Closing Date,
to such effect.
SECTION 6.8 LETTER OF CONFIRMATION
Purchaser Parent shall have duly authorized, executed and delivered the
Letter of Confirmation to Seller.
ARTICLE VII
COVENANTS OF SELLER
Seller covenants and agrees with Purchaser as follows:
SECTION 7.1 [INTENTIONALLY OMITTED]
SECTION 7.2 CONSENTS
Seller shall to the extent not delivered at Closing, obtain all
consents from third parties necessary to assign to Purchaser, to the extent
assignable, (i) any Assigned Contract, (ii) licenses for Intellectual Property
listed in Part II of Schedule C, and (iii) all government and regulatory
licenses, permits and approvals referred to on Schedule E hereto.
SECTION 7.3 COMMUNICATIONS
Seller shall promptly deliver to Purchaser the original of any mail or
other communication received by it after the Closing Date pertaining to the
Purchased Assets or the liabilities assumed by Purchaser hereunder, and any
moneys, checks or other instruments of payment to which Purchaser is entitled
under the terms of this Agreement.
SECTION 7.4 INCONSISTENT ACTIVITIES
Unless and until this Agreement has been terminated by its terms,
Seller will not (a) solicit, directly or indirectly, or cause any other person
to solicit any offer to acquire any Purchased Asset (except inventory in the
ordinary course of business) or (b) enter into any negotiations for, or enter
into any agreement or understanding which provides
ASSET PURCHASE AGREEMENT PAGE 32
41
for, the acquisition of any Purchased Asset to a person other than in connection
with the transactions contemplated herein.
SECTION 7.5 CONSULTANTS; EMPLOYEES; CONTRACTORS
Seller shall, at Purchaser's request, execute waivers, in form and
substance reasonably satisfactory to Seller, of any rights Seller may have under
existing confidentiality, consulting or other agreements to restrict any
consultants, former employees and contractors from providing services to
Purchaser or restricting information any such consultant, former employee or
contractor can provide to Purchaser, in either case specifically relating to
Software Products.
SECTION 7.6 BOOKS AND RECORDS
Until the third anniversary of the Closing Date, Seller, upon
reasonable notice from Purchaser, and to the extent reasonably possible, shall
make available to Purchaser such records that Seller may have retained (other
than those that Seller could reasonably assert are covered by attorney-client
privilege) relating to the Purchased Assets as may be reasonably requested by
Purchaser in connection with (a) Purchaser's defense of any claim, proceeding or
lawsuit arising out of the operation of Purchaser's document imaging processing
business on and after the Closing Date or (b) Purchaser's need to review
historical employment and accounts payable records.
SECTION 7.7 NON-USE
(a) Seller, on and after the Closing Date, shall not to make, retain or
use any copies of items identified on Schedule C hereto except as may be covered
by separate licenses from Purchaser. Purchaser acknowledges that one copy of
each of the most current version of PowerScan and all the most current versions
of StageWorks Office are deemed licensed to Seller effective from and after the
Closing Date, under the terms of the shrinkwrap license applicable to each such
product.
(b) Seller hereby assigns to Purchaser all of its trade secret and
other rights to confidential treatment of information relating to the Purchased
Assets and/or the Software Products, whether contained in confidentiality,
consulting or other agreements.
(c) Seller, from and after the Closing Date, shall keep any information
or materials relating to the Purchased Assets as confidential and not to
disclose such information or materials to anyone other than persons employed or
retained by Purchaser or Purchaser Parent except (i) to the extent any such
information or materials is or becomes publicly available without a breach of
the provisions of this Agreement or (ii) in
ASSET PURCHASE AGREEMENT PAGE 33
42
response to directives of governmental or judicial authority in the United
States; provided, that with respect to any disclosure contemplated by clause
(ii) above, only if immediate notification is given to Purchaser to permit it to
seek a protective order before such disclosure, to require that the information
be restricted as to further use or disclosure by the requesting authority, or,
if it is impossible to so notify Purchaser, then only after Seller have made a
reasonable effort to seek such a protective order.
SECTION 7.8 PAYOFF OF CREDITORS
(a) Seller shall (i) diligently seek resolution of outstanding claims
of creditors of Seller identified on the Creditors' List in accordance with the
provisions of the Disbursing Agency Agreement and enter into an Agreement of
Accord and Satisfaction and General Release substantially in the form of Exhibit
5 hereto (the "TERMINATION AND RELEASE AGREEMENT") with those creditors with
which it is required to do so pursuant to Section 2.2(a) of the Disbursing
Agency Agreement, or with respect to creditors holding promissory notes of
Seller, obtain the return of the original of any such notes marked "cancelled",
(ii) use its best efforts to realize upon receivables and other Excluded Assets
and (iii) apply all amounts so realized directly to pay such amounts owed to
creditors and provide notice to Disbursing Agent and Purchaser of each such
payment in reasonable detail.
(b) Seller shall, in any negotiations with a creditor of Seller that
results in such creditor receiving less than the full amount due such creditor,
neither make any untrue statement of a material fact nor omit to state any
material fact necessary to make the statements made by or on behalf of Seller
regarding the transactions contemplated by this Agreement or any Related
Agreement, in light of the circumstances under which they were made, not
misleading.
SECTION 7.9 NONCOMPETITION
Seller will not compete with Purchaser in the development, production,
sales, marketing, distribution and maintenance of software products used in the
document imaging industry, for customers located in states east of the
Mississippi River, for a period of two years commencing on the Closing Date.
SECTION 7.10 ASSIGNMENTS OF INTELLECTUAL PROPERTY
The parties agree that, to expedite the Closing, Purchaser may not have
completed its normal and customary due diligence relating to Intellectual
Property that constitutes Purchased Assets prior to the Closing. Accordingly,
Seller, from and after the Closing Date, shall cooperate with Purchaser in order
to permit Purchaser to complete
ASSET PURCHASE AGREEMENT PAGE 34
43
satisfactorily any remaining due diligence with respect to such Intellectual
Property, including without limitation, matters relating to right, title,
infringement, authority to transfer or assign, and registration. In any event,
Seller shall have presented to Purchaser, in commercially reasonable form, valid
executed assignments of all Intellectual Property not later than [60] days
following the Closing.
SECTION 7.11 NOVATION OF GOVERNMENT CONTRACTS
Purchaser and Seller shall execute the Novation Agreement attached as
Exhibit 11 hereto (the "NOVATION AGREEMENT"). Purchaser and Seller shall
promptly execute any additional novation agreements that may be required to
effect the assignment of each government contract that is an Assigned Contract.
Seller shall use its best efforts to obtain the cognizant government contracting
officer's (or officers') prompt consent to the required novation agreements. For
each government contract that is an Assigned Contract, Seller shall be entitled
to all receivables due for services performed or goods delivered prior the
Closing Date, and Purchaser shall be entitled to all receivables due for
services performed or goods delivered on or after the Closing Date. Purchaser
shall use its best efforts to collect all receivables due to the Seller and upon
receipt shall remit to the Seller all receivables due to the Seller that are
collected or received by the Purchaser after the Closing Date. Seller shall use
its best efforts to collect all receivables due to the Purchaser and upon
receipt shall remit to the Purchaser all receivables due to the Purchaser that
are collected or received by the Seller after the Closing Date.
SECTION 7.12 NON-DISSOLUTION
Seller shall take no action that would result in the dissolution of
Seller, and shall not dissolve, prior to the expiration of two years following
the Closing Date.
SECTION 7.13 REPRESENTATIVE AGREEMENT
Seller shall promptly after the Closing and in any event within 30 days
thereof, cause INTRAFED International Ltd. to enter into a representative
agreement (the "REPRESENTATIVE AGREEMENT") with Purchaser in form and substance
reasonably satisfactory to Purchaser.
SECTION 7.14 FINANCIAL STATEMENTS
Seller shall within seven days after the Closing provide any Financial
Statements not heretofore provided.
ASSET PURCHASE AGREEMENT PAGE 35
44
ARTICLE VIII
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller as follows:
SECTION 8.1 COMMUNICATIONS
Purchaser shall promptly deliver to Seller the original of any mail or
other communication received by it after the Closing Date that does not pertain
to the Purchased Assets or the liabilities assumed by Purchaser hereunder, and
any moneys checks or other instruments to which Purchaser is not entitled under
the terms of this Agreement.
SECTION 8.2 TAXES
Purchaser shall pay all sales tax, use tax, transfer tax, documentary
stamp tax or other similar tax, in any case, arising out of the transfer of the
Purchased Assets. Seller shall prepare and timely file all Tax Returns,
information returns and reports for sales tax, transfer tax, gains tax,
documentary stamp tax or other similar Tax required of Seller, which Tax Returns
shall be consistent with the allocation set forth in Section 1.10. Seller shall
provide Purchaser with copies of any such Returns at least ten days prior to
their filing.
SECTION 8.3 STOCK OPTIONS
Purchaser agrees to cause Purchaser Parent, pursuant to Purchaser
Parent's existing employee benefit plans, to grant options to purchase an
aggregate amount not to exceed 300,000 shares of Common Stock to certain of
those persons who have accepted Purchaser's offers of employment pursuant to
Section 5.6(b).
SECTION 8.4 REGISTRATION RIGHTS
(a) If Purchaser shall receive, at any time after the Closing Date and
prior to the date which is two months following receipt of any Additional
Consideration pursuant to Section 1.5(b), a written request from Seller that
Purchaser Parent file a registration statement under the Act on Form S-3 (a
"REGISTRATION STATEMENT") covering at least 400,000 shares of Common Stock owned
by Seller, then Purchaser shall cause Purchaser Parent to use its best efforts
to (i) cause such registration statement to become effective within 90 days of
the receipt of such request, (ii) keep such registration effective for up to 90
days and (iii) register and qualify such Common Stock under such other
securities or
ASSET PURCHASE AGREEMENT PAGE 36
45
blue sky laws of such states or jurisdictions as shall be reasonably requested
by Seller; provided, that Purchaser shall not be required to cause Purchaser
Parent to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(b) It shall be a condition precedent to the obligations of Purchaser
under Section 8.4(a) that Seller shall furnish to Purchaser Parent such
information regarding it and the intended method of disposition of such Common
Stock as shall be required to effect the registration of such Common Stock, and
to execute such documents in connection with such registration as Purchaser
Parent may reasonably request.
(c) All expenses (other than any underwriting discounts or commissions,
if any) relating to the registration, filings or qualifications pursuant to this
Section 8.4 shall be borne by Purchaser or Purchaser Parent; provided, that
Purchaser or Purchaser Parent shall not be required to pay for separate counsel
for Seller, if any, retained by Seller.
(d) Purchaser shall have no obligations under Section 8.4(a) if
Purchaser Parent does not qualify to register Seller's Common Stock on Form S-3,
or if Purchaser Parent shall have previously caused a Registration Statement to
become effective pursuant to the terms hereof. With respect to Purchaser's
obligation under this Section 8.4, Purchaser shall cause Purchaser Parent to use
commercially reasonable best efforts, to the extent within Purchaser Parent's
control, to comply with the eligibility requirements of Form S-3.
(e) Notwithstanding Section 8.4(a), (i) if Purchaser Parent shall
furnish to Seller a certificate signed by the Chairman of the Board of Directors
of Purchaser Parent stating that in the good faith judgment of the Board of
Directors of Purchaser Parent, it would be seriously detrimental to Purchaser
Parent and its stockholders for such Registration Statement to be filed and it
would therefore be essential to defer the filing of such Registration Statement,
Purchaser Parent shall have the right to defer taking action with respect to
such filing for a period of not more than 60 days and (ii) Purchaser Parent
shall have no obligation to file a Registration Statement with respect to any
shares of Common Stock that would, during the anticipated period of
effectiveness, be salable under Rule 144.
SECTION 8.5 KOK STOCK
Purchaser agrees, at the option of Seller upon notice, to cause
Purchaser Parent to issue to ▇▇▇▇▇ ▇. ▇▇▇, on behalf of Seller, and as further
consideration for the sale by Seller to Purchaser of the Purchased Assets,
200,000 shares of Common Stock (the "KOK STOCK"); provided, that Purchaser shall
have first received a release, in form and
ASSET PURCHASE AGREEMENT PAGE 37
46
substance reasonably satisfactory to Purchaser, of any claims ▇▇. ▇▇▇ may
otherwise attempt to assert against Purchaser or Purchaser Parent arising from
the transaction contemplated hereby. Should Seller and ▇▇. ▇▇▇ determine to
substitute cash or other consideration to obtain such release, then upon receipt
of such release, Purchaser shall cause Purchaser Parent to issue the Kok Stock
to Seller, to the extent of such substitution.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNITY
SECTION 9.1 SURVIVAL OF REPRESENTATIONS
The respective representations, warranties, statements and covenants of
Purchaser, Seller contained in this Agreement, the ▇▇▇▇ of Sale, the Assumption
of Liabilities Agreement, other Related Agreements or in any schedule,
certificate or document delivered pursuant hereto or thereto shall survive the
purchase and sale of the Purchased Assets contemplated hereby regardless of any
investigation made by the parties hereto.
SECTION 9.2 INDEMNIFICATION
(a) Subject to Section 9.3, and in addition to the indemnification
contained in Section 2.13(d), Seller will indemnify and hold Purchaser harmless
from and against any and all losses, claims, damages or expenses (including
reasonable attorneys fees) to which Purchaser may become subject to the extent
such losses, claims, damages or expenses (i) result from any breach of any
representation or warranty of Seller hereunder or under any Related Agreement,
(ii) result from any breach of any covenant or obligation of Seller hereunder or
under any Related Agreement, other than a representation or warranty, (iii)
arise due to the parties' determination that any bulk transfer laws do not apply
to the transactions contemplated hereby, as further contained in Section 11.13,
(iv) which are based upon any liability or obligation of Seller under the
Assigned Contracts or the licenses for Intellectual Property listed in Part II
of Schedule C hereto existing on or before the day prior to the Closing Date,
(except for liabilities or obligations specifically assumed by Purchaser
hereunder) and (v) result from errors or omissions contained in written
information provided by Seller pursuant to Section 8.4(b). Claims under items
(iii), (iv) or (v) of the foregoing indemnity may only be asserted by Purchaser
as a result of and with respect to claims, suits, proceedings, demands or other
actions by third parties.
(b) Subject to Section 9.3, Purchaser will indemnify and hold Seller
harmless from and against any and all losses, claims, damages or expenses
(including its reasonable attorneys fees) to which Seller may become subject to
the extent such losses,
ASSET PURCHASE AGREEMENT PAGE 38
47
claims, damages or expenses (i) result from any breach of any representation or
warranty of Purchaser hereunder or under any Related Agreement, (ii) result from
any breach of any covenant or obligation of Purchaser hereunder or under any
Related Agreement, other than a representation or warranty, (iii) arise on or
after the Closing Date and relate to any Purchased Asset (except as provided in
Section 2.13(d) and except for any other liabilities or obligations specifically
assumed by Seller hereunder) or are based upon any liability or obligation
assumed by Purchaser hereunder. Claims under item (iii) of the foregoing
indemnity may only be asserted by Seller as a result of and with respect to
claims, suits, proceedings, demands or other actions by third parties.
SECTION 9.3 INDEMNIFICATION CONDITIONS
(a) The rights to indemnification set forth in Sections 2.13(d), 9.1
and 9.2 shall be subject to the following conditions:
(i) the indemnified party giving the indemnifying party prompt
written notice of the claim, suit, proceeding, demand or other action
asserted; provided, that failure to give such notice shall not abrogate
or diminish the indemnifying party's obligation if such failure does
not (in the reasonable judgment of the indemnifying party) prejudice
the indemnifying party's ability to defend such claim, and
(ii) with respect to third party claims, the indemnified party
giving the indemnifying party requisite authority to control the
defense and full cooperation in the defense.
(b) So long as such participation does not, in the reasonable opinion
of the indemnifying party, interfere with the defense thereof, the indemnified
party shall have the right to participate in the investigation and defense of
third party claims, with separate counsel chosen by such indemnified party that
is reasonably acceptable to the indemnifying party. In any such event the fees
and expenses of such counsel shall be paid by the indemnified party unless (i)
the indemnifying party shall have failed to assume the defense of any such claim
or (ii) in the reasonable judgment of the indemnified party, a conflict of
interest would exist between the indemnified party and the indemnifying party
(in which case, if such indemnified party notifies the indemnifying party that
such indemnified party elects to employ separate counsel at the indemnifying
party's expense, the indemnifying party shall not have the right to assume the
defense on behalf of such indemnified party). The indemnifying party shall not,
without the prior written consent of the indemnified party, settle or compromise
any action or consent to the entering of any judgment which does not include as
an unconditional term thereof the delivery by the claimant or plaintiff of a
duly executed
ASSET PURCHASE AGREEMENT PAGE 39
48
written release of such indemnified party from all liability in respect of any
such claim, which release shall be satisfactory in form and substance to such
indemnified party, or settle or compromise any action in any matter that, in the
reasonable judgment of such indemnified party, may materially and adversely
affect such indemnified party.
(c) Purchaser shall first exercise any rights it may have to proceed
under the Escrow Agreement prior to exercising any right of set off it may have
against the Additional Consideration, to satisfy claims hereunder.
SECTION 9.4 INDEMNIFICATION EXCLUSIVE
Purchaser and Seller agree that the rights to indemnification and to be
held harmless set forth in this Article IX shall, except as provided in Section
2.13(d), in the proviso below and as otherwise required by law, be exclusive of
all rights to indemnification and to be held harmless in connection with the
matters described in this Article that the parties would otherwise have;
provided, that any separate indemnification provisions contained in any Related
Agreement shall operate irrespective of and independent from the provisions of
Section 2.13(d) and this Article IX.
ARTICLE X
TERMINATION OF AGREEMENT
SECTION 10.1 TERMINATION BY MUTUAL CONSENT
This Agreement may be terminated by mutual written consent of Purchaser
and Seller.
SECTION 10.2 TERMINATION FOR BREACH OR FAILURE OF CONDITIONS
Seller may elect by notice to Purchaser, and Purchaser may elect by
notice to Seller, to terminate this Agreement if:
(a) The terminating party shall have discovered a material breach of
the covenants contained in Sections 4.1 or 4.2 or a material error,
misstatement, or omission in the representations and warranties made in this
Agreement by the other party which shall not have been cured by such other party
within 15 days after written notice to such other party specifying in detail
such asserted error, misstatement or omission, or by the Closing Date, whichever
first occurs; or
(b) All of the conditions precedent to the terminating party's
obligations to close under this Agreement, as set forth in either Article V or
Article VI, and the Related
ASSET PURCHASE AGREEMENT PAGE 40
49
Agreements, as the case may be, have not been met and have not been waived by
the terminating party on or prior to the Closing Date.
SECTION 10.3 CLOSING NOTWITHSTANDING RIGHT TO TERMINATE
The party with a right to terminate this Agreement pursuant to Section
10.1 or Section 10.2 shall not be bound to exercise such right, but its failure
to exercise such right shall not constitute a waiver of any other right it may
have under this Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 EFFECTIVE DATE
This Agreement shall be effective on the date first above written (the
"EFFECTIVE DATE").
SECTION 11.2 EXPENSES
The parties hereto shall pay all of their own expenses relating to the
transactions contemplated by this Agreement; provided, that Purchaser shall pay
up to $37,500 of the invoiced costs of ▇▇▇▇▇, Rothman, Goldstein, ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, Chartered, any fees of Escrow Agent and shall advance fees of Disbursing
Agent, to be repaid pursuant to the terms of the Disbursing Agency Agreement.
SECTION 11.3 GOVERNING LAW
The interpretation and construction of this Agreement, and all matters
relating hereto, shall be governed by the laws of the State of Maryland,
excluding its conflict of law rules.
SECTION 11.4 CONFIDENTIALITY
Purchaser and Seller hereby incorporate by reference the provisions of
the Nondisclosure Agreement dated February 24, 1997 (the "NONDISCLOSURE
AGREEMENT") by and between Seller and Purchaser; provided, that, in accordance
with Section 7 of the Nondisclosure Agreement, Seller and Purchaser hereby
modify the terms and conditions thereof to provide that the Nondisclosure
Agreement shall, without any further action of the parties, terminate on the
Closing Date and no longer have any force or effect thereafter.
ASSET PURCHASE AGREEMENT PAGE 41
50
SECTION 11.5 THIRD-PARTY BENEFICIARIES
Each party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any person other than the
parties hereto and Purchaser Parent.
SECTION 11.6 SEVERABILITY
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.7 CAPTIONS
The Article and Section captions used herein are for reference purposes
only, and shall not in any way affect the meaning or interpretation of this
Agreement.
SECTION 11.8 PUBLICITY
Beginning as of the Effective Date and expiring six months after the
Closing Date and except as may be required by law or securities regulation,
neither of the parties hereto shall issue any press release or make any other
public statement, in each case relating to or connected with or arising out of
this Agreement or the matters contained herein, without consulting with the
other with respect to the contents and the manner of presentation and
publication thereof.
SECTION 11.9 NOTICES
Any notice or other communications required or permitted hereunder
shall be in writing and be sufficiently given if delivered in person or sent by
facsimile (which provides written confirmation to the sender of its delivery) or
by registered or certified mail, postage prepaid, or by overnight courier
service, addressed as follows:
ASSET PURCHASE AGREEMENT PAGE 42
51
If to Purchaser, to:
PowerScan, Inc.
c/o Star Technologies, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ Coie
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: Corporate Group
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and if to Seller, to:
Intrafed, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, Rothman, Goldstein, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Chartered
One Bethesda Center
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as shall be furnished in writing by either party to the
other, and such notice or communication shall be deemed to have been given as of
the date so delivered, sent by facsimile or mailed.
ASSET PURCHASE AGREEMENT PAGE 43
52
SECTION 11.10 PARTIES IN INTEREST
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and assigns; provided, that neither party may assign its rights or
delegate its obligations hereunder without the prior written consent of the
other party, and any attempt to so assign or delegate without such consent shall
be void.
SECTION 11.11 COUNTERPARTS
This Agreement may be executed in one or more counterparts (or upon
separate signature pages bound together into one or more counterparts), all of
which taken together shall constitute one instrument.
SECTION 11.12 WAIVER
Waiver by any party of any breach or failure to comply with any
provision of this Agreement by the other party shall not be construed as, or
constitute, a continuing waiver of such provision, or a waiver of any other
breach of or failure to comply with any other provisions of this Agreement.
SECTION 11.13 BULK TRANSFER
Purchaser and Seller hereby agree that no bulk transfer laws are
applicable to the transactions contemplated herein.
SECTION 11.14 ENTIRE AGREEMENT
This Agreement, including the Related Agreements and the other
documents referred to herein which form a part hereof, contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein and therein. This Agreement, together with the Related Agreements and
such other documents, supersedes all prior agreements and understandings between
the parties with respect to such subject matter.
SECTION 11.15 AMENDMENTS
This Agreement may not be amended, modified or supplemented orally, but
only by an instrument in writing signed by the parties hereto.
ASSET PURCHASE AGREEMENT PAGE 44
53
SECTION 11.16 FURTHER ASSURANCES
Subject to the terms hereof, Purchaser and Seller shall, at any time
and from time to time, on and after the Closing Date, and without further
consideration, execute, acknowledge and deliver or cause to be executed,
acknowledged and delivered, all such further agreements, instruments,
certificates or documents, and shall do and cause to be done such further acts
and things (including, with respect to any government contracts, all
certifications and other obligations prescribed by 48 C.F.R. Part 42 of the
Federal Acquisition Regulations), in any case, as the other party hereto may
reasonably request to carry out more effectually the purposes of, or to better
assure and confirm into such other party the rights and benefits to be provided
under this Agreement and the Related Agreements. Purchaser and Seller agree to
cooperate fully to make available to each other upon reasonable request such
non-confidential information, records and documents related to the Purchased
Assets (excluding, in any case, tax returns and work papers) as may be necessary
for either party to evaluate potential tax liabilities and/or prepare applicable
tax returns.
SECTION 11.17 KNOWLEDGE OF SELLER DEFINED
Where any representation or warranty contained in this Agreement is
expressly qualified by reference to the "knowledge of Seller," such term shall
mean the actual knowledge, after inquiry that would be considered reasonable and
prudent by a reasonable business person, of any of the following officers of
Seller Stockholder (President and Chief Executive Officer), ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(Vice President of Sales/Marketing), ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (Product Development
Manager) or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq. (General Counsel).
ASSET PURCHASE AGREEMENT PAGE 45
54
IN WITNESS WHEREOF, each of Purchaser and Seller has caused this Asset
Purchase Agreement to be duly executed by its duly authorized representative, on
the date first set forth above.
POWERSCAN, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman of the Board
INTRAFED, INC.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer, President
ASSET PURCHASE AGREEMENT SIGNATURE PAGE