EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
DATED March 3, 2003
by and among
COMPUTER SYSTEM PRODUCTS, INC.,
APA ACQUISITION, INC.
and
▇▇▇▇▇ ▇▇▇ AND ▇▇▇▇▇▇ ▇▇▇
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TABLE OF CONTENTS
1. DEFINITIONS 1
2. SALE AND TRANSFER OF ASSETS; CLOSING 8
2.1 ASSETS 8
2.2 PURCHASE PRICE 9
2.3 ALLOCATION OF PURCHASE PRICE 9
2.4 ASSUMPTION OF LIABILITIES 9
2.5 CLOSING 10
2.6 CLOSING OBLIGATIONS 10
2.7 PRORATION OF EXPENSES 12
2.8 TITLE AND RISK OF LOSS 12
3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS 13
3.1 ORGANIZATION AND GOOD STANDING 13
3.2 AUTHORITY; NO CONFLICT 13
3.3 CAPITALIZATION 14
3.4 FINANCIAL STATEMENTS 15
3.5 BOOKS AND RECORDS 15
3.6 TITLE TO PROPERTIES; ENCUMBRANCES 16
3.7 CONDITION AND SUFFICIENCY OF ASSETS 16
3.8 CLEAR TITLE 16
3.9 PRODUCT LIABILITY CLAIMS 16
3.10 ACCOUNTS RECEIVABLE 17
3.11 INVENTORY 17
3.12 NO UNDISCLOSED LIABILITIES 17
3.13 TAXES 17
3.14 NO MATERIAL ADVERSE CHANGE 18
3.15 EMPLOYEE BENEFITS 19
3.16 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS 20
3.17 LEGAL PROCEEDINGS; ORDERS 21
3.18 CONTRACTS; NO DEFAULTS 22
3.19 INSURANCE 24
3.20 ENVIRONMENTAL MATTERS 24
3.21 EMPLOYEES 25
3.22 INTELLECTUAL PROPERTY 25
3.23 CERTAIN PAYMENTS 25
3.24 DISCLOSURE 25
3.25 RELATIONSHIPS WITH RELATED PERSONS 26
3.26 BROKERS OR FINDERS 26
3.27 INVESTMENT INTENT 26
3.28 PROJECTIONS 27
3.29 INDEBTEDNESS 27
4. REPRESENTATIONS AND WARRANTIES OF BUYER AND APA 27
4.1 ORGANIZATION AND GOOD STANDING 27
4.2 AUTHORITY; NO CONFLICT 27
4.3 CERTAIN PROCEEDINGS 28
4.4 BROKERS OR FINDERS 28
5. COVENANTS OF COMPANY AND SHAREHOLDERS PRIOR TO CLOSING DATE 28
5.1 ACCESS AND INVESTIGATION 28
5.2 OPERATION OF THE BUSINESS OF THE COMPANY 29
5.3 NEGATIVE COVENANT 29
5.4 REQUIRED APPROVALS 29
5.5 NOTIFICATION 29
5.6 RESTRUCTURING OF INDEBTEDNESS [Intentionally Deleted] 30
5.7 NO NEGOTIATION 30
5.8 BEST EFFORTS 30
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE 30
6.1 APPROVALS OF GOVERNMENTAL BODIES 30
6.2 BEST EFFORTS 31
6.3 LOAN 31
7. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER TO CLOSE 31
7.1 ACCURACY OF REPRESENTATIONS 31
7.2 PERFORMANCE BY COMPANY AND SHAREHOLDERS 31
7.3 CONSENTS 31
7.4 ADDITIONAL DOCUMENTS 32
7.5 NO PROCEEDINGS 32
7.6 NO CLAIM REGARDING SHARE OWNERSHIP OR SALE PROCEEDS 32
7.7 NO PROHIBITION 32
7.8 DUE DILIGENCE REVIEW 32
8. CONDITIONS PRECEDENT TO OBLIGATION OF COMPANY TO CLOSE 32
8.1 ACCURACY OF REPRESENTATIONS 33
8.2 BUYER'S PERFORMANCE 33
8.3 CONSENTS 33
8.4 ADDITIONAL DOCUMENTS 33
8.5 NO INJUNCTION 33
9. TERMINATION 33
9.1 TERMINATION EVENTS 33
9.2 EFFECT OF TERMINATION 34
10. INDEMNIFICATION; REMEDIES 34
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE 34
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10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY COMPANY AND SHAREHOLDERS 35
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER 35
10.4 TIME LIMITATIONS 36
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS 36
10.6 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS 37
10.7 LIMITATION ON INDEMNIFICATION 37
11. GENERAL PROVISIONS 37
11.1 EXPENSES 37
11.2 PUBLIC ANNOUNCEMENTS 38
11.3 CONFIDENTIALITY 38
11.4 NOTICES 38
11.5 JURISDICTION; SERVICE OF PROCESS 39
11.6 FURTHER ASSURANCES 39
11.7 WAIVER 40
11.8 ENTIRE AGREEMENT AND MODIFICATION 40
11.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS 40
11.10 SEVERABILITY 40
11.11 SECTION HEADINGS, CONSTRUCTION 41
11.12 TIME OF ESSENCE 41
11.13 GOVERNING LAW 41
11.14 COUNTERPARTS 41
12. PERFORMANCE FOLLOWING THE DATE OF CLOSING 41
12.1 COLLECTION OF RECEIVABLES 41
12.2 FURTHER ACTS AND ASSURANCES 41
12.3 CHANGE OF NAME 42
12.4 TEMPORARY FACILITIES 42
12.5 EMPLOYMENT 42
12.6 JOINDER AGREEMENT 43
SCHEDULE 1 EXCLUDED ASSETS
SCHEDULE 2.4 LIABILITIES
SCHEDULE 2.7 PRORATION OF EXPENSES
EXHIBIT A-1 ▇▇▇▇▇▇ ▇▇▇ AGREEMENT NOT TO COMPETE
EXHIBIT A-2 ▇▇▇▇ ▇▇▇ AGREEMENT NOT TO COMPETE
EXHIBIT B ASSUMPTION AGREEMENT
EXHIBIT C ▇▇▇▇▇▇ ▇▇▇ EMPLOYMENT AGREEMENT
EXHIBIT D IT SERVICES AGREEMENT
EXHIBIT E SUBLEASE AGREEMENT
EXHIBIT F PROMISSORY NOTE
EXHIBIT G GUARANTY
EXHIBIT H WARRANT
EXHIBIT I ▇▇▇▇ OF SALE
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of March 3, 2003, by
and among APA Acquisition, Inc., a Minnesota corporation ("Buyer"), APA Optics,
Inc., a Minnesota corporation ("APA"), ▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇▇ ▇▇▇ (collectively,
"Shareholders" and individually, a "Shareholder"), and Computer System Products,
Inc., a Minnesota corporation (the "Company").
RECITALS
Shareholders own substantially all of the issued and outstanding capital stock
of the Company and are directors and officers of the Company.
Buyer is a wholly-owned Subsidiary of APA.
Buyer desires to purchase certain assets of the Company for the consideration
and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings specified
or referred to in this Section 1:
"APA"--as defined in the Recitals to this Agreement.
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"Agreements Not to Compete"--the agreements in the form of Exhibits A-1 and A-2
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attached hereto of ▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇ ▇▇▇ to refrain from competition with
Buyer for three (3) years after the Closing Date, and to observe certain other
restrictions on solicitation of employees and use of confidential information.
"Ancillary Agreements" - the Agreements not to Compete, Assumption Agreement,
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Employment Agreement, IT Services Agreement, Sublease Agreement, Note, Guaranty
and Warrants.
"Applicable Contract"--any Contract included in the Assets which would be deemed
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"material" to a prudent business person and (a) under which the Company has or
may acquire any rights, (b) under which the Company has or may become subject to
any obligation or liability, or (c) by which the Company or any of the assets
owned or used by it is or may become bound. By way of example and not
limitation, a Contract is material if it provides or may provide substantial
revenues or may subject the Company to substantial liability. A contract for
acquisition by the Company of services or goods which cannot be obtained
elsewhere is also material.
"Assets"--the assets, tangible and intangible, of the Company used or useful in
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the Company's business, wherever located, consisting of all of the Company's
assets as of the date of this Agreement, plus additions and accretions between
the date of this Agreement and the Closing Date. By way of example, and not in
limitation of the foregoing, the Assets include all equipment, inventory,
finished product, intellectual property, trade secrets, accounts receivable
(including the Crescent earn-out payments), cash and securities, contracts,
commitments, customer lists, recoveries in insurance, litigation or warranty
with respect to any assets, work-in process, the corporate name and assumed
names, and all goodwill. Provided, however, that the Assets do not include the
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Excluded Assets.
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"Assumption Agreement"--as defined in Section 2.4 of this Agreement.
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"Best Efforts"--the efforts that a prudent Person desirous of achieving a result
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would use in similar circumstances to ensure that such result is achieved as
expeditiously as possible; provided, however, that an obligation to use Best
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Efforts under this Agreement does not require the Person subject to that
obligation to take actions that would result in a materially adverse change in
the benefits to or rights of such Person under this Agreement or the
Contemplated Transactions.
"▇▇▇▇ of Sale" - as defined in Section 2.6 of this Agreement.
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"Breach"--a "Breach" of a representation, warranty, covenant, obligation, or
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other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation or other provision, or (b) any
valid claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation or other
provision.
"Buyer"--as defined in the first paragraph of this Agreement.
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"Closing"--as defined in Section 2.5.
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"Closing Date"--the date and time as of which the Closing actually takes place.
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"Company"--as defined in the first paragraph of this Agreement.
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"Consent"--any approval, consent, ratification, waiver, or other authorization
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(including any Governmental Authorization).
"Contemplated Transactions"--all of the transactions contemplated by this
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Agreement, including:
(a) the sale of the Assets by Company to Buyer;
(b) the performance by Buyer, APA, Company and Shareholders of their
respective covenants and obligations under this Agreement, including without
limitation the Ancillary Agreements; and
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(d) Buyer's acquisition and ownership of the Assets and exercise of
control over them.
"Contract"--any agreement, contract, obligation, promise or undertaking (whether
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written or oral and whether express or implied) that is legally binding.
"Damages"--as defined in Section 10.2.
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"Disclosure Letter"--the disclosure letter delivered by the Company and
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Shareholders to Buyer concurrently with the execution and delivery of this
Agreement.
"Employment Agreement" - as defined in Section 12.5.
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"Encumbrance"--any charge, claim, community property interest, condition,
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equitable interest, lien, option, pledge, security interest, right of first
refusal or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income or exercise of any other attribute of ownership.
"Environmental, Health, and Safety Liabilities"--any cost, damages, expense,
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liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses;
(c) financial responsibility for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") (whether or not such Cleanup has been required
or requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Sec. 9601 et seq., as amended
("CERCLA").
"Environmental Law"--any Legal Requirement that requires or relates to:
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(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or Hazardous Materials, violations of
discharge limits, or other prohibitions and of the commencements of activities,
such as resource extraction or construction, that could have a significant
impact on the environment;
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(b) preventing or reducing to acceptable levels the release of
pollutants or Hazardous Materials into the environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used
so that they do not present unreasonable risks to human health or the
environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of Hazardous Materials;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any successor
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law, and regulations and rules issued pursuant to that Act or any successor law.
"Excluded Assets"-amounts owed to the Company by Enlighten Technologies, lease
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for facilities in Plymouth, MN, and all assets listed as Schedule 1 to this
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Agreement.
"Facilities"--any real property, leaseholds, or other interests currently or
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formerly owned or operated by the Company and any buildings, plants, structures,
or equipment (including motor vehicles, tank cars, and rolling stock) currently
or formerly owned or operated by the Company.
"GAAP"--generally accepted United States accounting principles, applied on a
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consistent basis.
"Governmental Authorization"--any approval, consent, license, permit, waiver, or
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other authorization issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"Governmental Body"--any:
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(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
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(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"Hazardous Materials"--any waste or other substance that is listed, defined,
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designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"Indebtedness"--means the Company's revolving credit line, overline, and other
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indebtedness described in Part 3.29 of the Disclosure Letter.
"Indemnified Persons"--as defined in Section 10.2.
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"Intellectual Property"--any and all (i) inventions (whether patentable or
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unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications and patent disclosures, together with all
reissuances, continuations, continuations in part, revisions, extensions and
reexaminations thereof, (ii) trademarks, service marks, trade dress, logos,
trade names, assumed names and corporate names, together with all translations,
adaptations, derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith, (iii) copyrightable works, all copyrights and all
applications, registrations and renewals in connection therewith, (iv) mask
works and all applications, registrations and renewals in connection therewith,
(v) trade secrets and confidential business information (including ideas,
research and development, know-how, technology, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals), (vi) computer
software (including data and related software program documentation in computer
readable and hard-copy forms), (vii) other intellectual property and proprietary
rights of any kind, nature or description, and (viii) copies of tangible and
embodiments thereof (in whatever form or medium).
"IRC"--the Internal Revenue Code of 1986 or any successor law, and regulations
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issued by the IRS pursuant to the Internal Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or any successor agency, and,
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to the extent relevant, the United States Department of the Treasury.
"IT Services Agreement"--the agreement in the form of Exhibit D attached hereto
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pursuant to which Buyer will provide technology support and services to
Engineered Products Co. and ▇▇▇ Communications, Inc.
"Knowledge"--an individual will be deemed to have "Knowledge" of a particular
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fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
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(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonable investigation concerning the existence of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving as a director,
officer, manager, partner, executor, or trustee of such Person (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter.
"Legal Requirement"--any Order or any constitution, law, ordinance, principle of
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common law, regulation, statute or treaty of a Governmental Body.
"Liability" or "Liabilities" any and all debts, liabilities and/or obligations
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of any type, nature or description (whether known or unknown, asserted or
unasserted, secured or unsecured, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due).
"Occupational Safety and Health Law"--any Legal Requirement designed to provide
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safe and healthful working conditions and to reduce occupational safety and
health hazards.
"Order"--any award, decision, injunction, judgment, order, ruling, subpoena, or
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verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be deemed to
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have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
parent company (if any) of such Person.
"Organizational Documents"--(a) the articles or certificate of incorporation and
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the bylaws of a corporation or cooperative; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"Person"--any individual, corporation (including any non-profit corporation),
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cooperative, general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Plan"--as defined in Section 3.15.
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"Proceeding"--any action, arbitration, audit, hearing, investigation,
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litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Purchase Price"--as defined in Section 2.2.
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"Related Person"--with respect to a particular individual:
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(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse and former spouses, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934,
interpreted regardless of whether such Person is subject thereto) of voting
securities or other voting interests representing at least 15% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 15% of the outstanding equity securities or
equity interests in a Person.
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"Representative"--with respect to a particular Person, any director, governor,
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officer, manager, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"Securities Act"--the Securities Act of 1933 or any successor law, and
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regulations and rules issued pursuant to that Act or any successor law.
"Shareholders"--as defined in the first paragraph of this Agreement.
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"Subsidiary"--with respect to any Person (the "Owner"), any corporation or other
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Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries.
"Tax"--any tax (including any income tax, capital gains tax, value-added tax,
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sales tax, property tax, gift tax, or estate tax), levy, assessment, tariff,
duty (including any customs duty), deficiency, or other fee, and any related
charge or amount (including any fine, penalty, interest or addition to tax),
imposed, assessed or collected by or under the authority of any Governmental
Body or payable pursuant to any tax-sharing agreement or any other Contract
relating to the sharing or payment of any such tax, levy, assessment, tariff,
duty, deficiency or fee.
"Tax Return"--any return (including any information return), report, statement,
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schedule, notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection, or payment of any Tax
or in connection with the administration, implementation, or enforcement of or
compliance with any Legal Requirement relating to any Tax.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will be
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deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"Warrants"--warrants in the form of Exhibit H attached hereto issued as
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consideration for the Agreements Not to Compete and exercisable by the
Shareholders for purchase of an aggregate of 350,000 shares of Common Stock of
APA at $3.00 per share for a period beginning on April 1, 2003 and ending at
5:00 p.m. Minneapolis time, on March 31, 2008.
2. SALE AND TRANSFER OF ASSETS; CLOSING
2.1 ASSETS
Subject to the terms and conditions of this Agreement, at the Closing, the
Company will sell and transfer the Assets to Buyer, and Buyer will purchase the
Assets from the Company.
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2.2 PURCHASE PRICE
The purchase price (the "Purchase Price") for the Assets will be:
- $3.578 million, delivered to Diversified Business Credit, Inc.
- Other consideration herein recited
2.3 ALLOCATION OF PURCHASE PRICE
Buyer shall, in a reasonable manner, determine the fair market value of the
Assets and Buyer shall allocate the Purchase Price among the Assets and the
Agreements Not to Compete in accordance with said determination and Section 1060
of the IRC. Said allocation shall be communicated by Buyer to Company as soon
as practical after it is available. The Buyer and the Company shall each file,
in accordance with Section 1060 of the IRC, an Asset Allocation Statement on
Form 8594 (which conforms with such allocation) with its federal income tax
return for the tax year in which the Closing Date occurs and shall
contemporaneously provide the other party with a copy of the Form 8594 being
filed. Each party agrees not to assert, in connection with any tax return,
audit or other similar proceeding, any allocation of the Purchase Price which
differs from the allocation determined by Buyer hereunder.
2.4 ASSUMPTION OF LIABILITIES
(a) LIMITATION ON ASSUMPTION OF LIABILITIES. Except as
specifically set forth in Section 2.4(b) hereof, Company shall transfer
the Assets to Buyer on the Closing Date free and clear of all
Encumbrances, and Buyer shall not, by virtue of its purchase of the
Assets, assume or become responsible for any Liabilities of Company or any
Shareholder.
(b) ASSUMPTION OF CERTAIN LIABILITIES. Notwithstanding the provisions
of Section 2.4(a) Buyer covenants and agrees that on the Closing Date, it
shall execute and deliver to Company an assumption agreement in the form of
Exhibit B attached hereto (the "Assumption Agreement") pursuant to which it
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will assume and agree to perform and discharge only the following
Liabilities of Company, subject to Section 2.7 hereof and Schedule 2.7
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attached:
(i) All Liabilities of Company arising under all Company
Contracts which accrue and become performable, in full or in part, on
and after the Closing Date, except that Buyer does not assume any
Liabilities for products sold or services rendered under such
Contracts prior to the Closing Date or under any Contracts which are
Excluded Assets;
(ii) All of Company's trade accounts payable arising out of
the operation of the Company's business in the Ordinary Course of
Business or which have been restructured pursuant to the Company's
vendor discounted repayment plan instituted in 2002 and which remain
unpaid on the Closing Date, except those listed on Schedule 2.4; and
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(iii) All Liabilities of Company identified on Schedule 2.4
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hereto.
2.5 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement will
take place at the offices of ▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Association, 4800
▇▇▇▇▇ Fargo Center, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at
10:00 a.m. (local time) on the date that is one business day following the
satisfaction or waiver of the conditions precedent to the parties obligations
set forth in Sections 7 and 8 hereof, or at such other time and place as the
parties may agree, but in no event later than March 14, 2003. Notwithstanding
any provision of this Agreement to the contrary, the Closing shall be effective
for all purposes, including Tax and accounting purposes, as of the close of
business on the Closing Date (the "Effective Time").
2.6 CLOSING OBLIGATIONS
At the Closing:
(a) The Company and the Shareholders will deliver to Buyer:
(i) a certificate executed by the Company and the Shareholders
representing and warranting to Buyer that each of the representations and
warranties of the Company and the Shareholders in this Agreement was
accurate in all respects as of the date of this Agreement and is accurate
in all respects as of the Closing Date as if made on the Closing Date;
(ii) a copy certified by the Secretary of the Company of the duly
adopted resolutions of the Company's Board of Directors and shareholders
approving this Agreement and authorizing the execution and delivery of this
Agreement, including the documents, instruments and agreements to be
executed and/or delivered by the Company and/or shareholders pursuant to
this Agreement, and the consummation of the Contemplated Transactions;
(iii) a ▇▇▇▇ of Sale in the form of Exhibit I attached hereto to all
of the Assets duly executed by the Company (the "▇▇▇▇ of Sale");
(iv) duly executed assignments by the Company and the Shareholders
to Buyer with respect to all Intellectual Property in a form acceptable for
filing with the U.S. Patent and Trademark Office;
(v) releases, satisfactions, or terminations of all financing
statements or other evidences of Encumbrances filed with the Minnesota
Secretary of State, any county recorder and/or any other similar office in
the State of Minnesota evidencing an Encumbrance on any of the Assets;
10
(vi) all consents, releases, assignments and permissions of any
kind or nature, whether from a Governmental Body or otherwise, which
reasonably may be required to effectively sell, assign and transfer the
Assets to Buyer, all in a form reasonably satisfactory to counsel for
Buyer;
(vii) certificates of title and assignments thereof for vehicles
included in the Assets, if any;
(viii) the Agreements Not to Compete duly executed by the
Shareholders;
(ix) Sublease Agreement and rent then payable thereunder;
(x) such other documents and items as are reasonably necessary or
appropriate to effect the consummation of the Contemplated Transactions;
(xi) the Company's financial statements for the fiscal year ended
December 31, 2002, audited by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, with the auditor's report
of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
(xii) Articles of Amendment to the Articles of Incorporation of the
Company changing its name (See Section 12.3 of this Agreement).
(b) Buyer will deliver to the Company and Shareholders, duly executed as
applicable:
(i) the cash portion of the Purchase Price by bank cashier's or
certified check payable to the order of, or by wire transfer to an account
designated by, the Company;
(ii) the Warrants;
(iii) a certificate executed by Buyer to the effect that each of
Buyer's representations and warranties in this Agreement was accurate in
all respects as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the Closing Date;
(iv) a copy certified by the Secretary of Buyer of the duly adopted
resolutions of the Board of Directors of Buyer and APA approving this
Agreement and authorizing the execution and delivery of this Agreement,
including the documents, instruments and agreements to be executed and/or
delivered by the Buyer pursuant hereto, and the consummation of the
Contemplated Transactions;
(vii) the Assumption Agreement;
(viii) IT Services Agreement;
11
(ix) Reimbursement of the Company's actual costs incurred in
connection with this Agreement and the Contemplated Transactions during the
period from February 19, 2003 through the Closing Date (including broker's
fees described in Section 3.26), up to $100,000;
(x) Evidence of assumption by Buyer or APA of and release of
Company from the $1.378 million line of credit with Diversified Business
Credit, Inc.;
(xi) Sublease Agreement;
(xii) Forgiveness of the Note; and
(xiii) Employment Agreement.
2.7 PRORATION OF EXPENSES
Buyer shall be entitled to all amounts due or to become due and payable to
the Company under any Contract included in the Assets, whether the right to
payment relates to a period before or after the Closing Date. All amounts due
or to become due and payable by the Company under the Contracts and under the
Liabilities assumed by Buyer under Section 2.4 shall be adjusted and prorated as
of the opening of business on the Closing Date as set forth in Schedule 2.7
(such that the Company shall be responsible for amounts allocable with respect
to periods prior to the Closing Date, and Buyer shall be responsible for amounts
allocable with respect to periods on and after the Closing Date).
2.8 TITLE AND RISK OF LOSS
(a) The Company shall bear all costs and expenses and assume and bear
all risk of loss, damage or destruction of or to the Assets due to theft,
expropriation, seizure, destruction, damage, fire, earthquake, flood or
other cause or casualty until title is passed to Buyer at the Closing.
(b) If prior to the Closing Date, any material Assets suffer, sustain
or incur any material loss, damage or destruction, including, without
limitation, any environmental contamination or pollution, and the Company
has not, at its option and expense, wholly repaired such Assets or replaced
such Assets with assets which are as nearly identical as practicable in
value, form and function, Buyer shall have the right, at its sole
discretion and election, to either (i) terminate this Agreement or (ii)
subject to the other terms of this Agreement, complete the purchase
contemplated by this Agreement in which event:
(i) The Company shall assign and transfer to Buyer and Buyer
shall be entitled to receive all insurance proceeds and other
compensation collected by reason of such loss, damage or destruction,
together with any rights to receive any uncollected insurance proceeds
12
or other compensation relating to such loss, damage or destruction and
an amount equal to the sum of the aggregate amount of any applicable
deductibles under any insurance policies covering the lost, damaged or
destroyed Assets plus any self-insured retentions; or
(ii) Buyer shall be entitled to reduce the Purchase Price of
the Assets by an amount equal to the cost of repair, or if destroyed
or damaged beyond repair, or if expropriated, seized, lost or stolen,
by an amount equal to the replacement cost; or
(iii) Buyer shall be entitled to utilize alternatives 1 and 2
concurrently, but not both with respect to any single Asset.
If Buyer elects to complete the purchase contemplated hereby
notwithstanding any such loss, damage or destruction, and if the Company assigns
such insurance proceeds and other compensation and any other rights thereto to
Buyer, then, at the Buyer's reasonable request, the Company shall cooperate
with Buyer, at no cost or expense to Buyer, in collecting all insurance proceeds
and other compensation with respect thereto.
The Purchase Price shall be reduced by the amount of any deductible amounts
under such insurance policies and self-insured retentions which are not paid by
the Company to Buyer.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
The Company and the Shareholders represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Minnesota, with full power
and authority, corporate and otherwise, to conduct its business as it is now
being conducted, to own or use the properties and assets that it purports to own
or use, and to perform all its obligations under Applicable Contracts. The
Company is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) Except as set forth in the Disclosure Letter or as may be subject
to any lease, the Assets, when delivered to Buyer, will be free of all
Encumbrances.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation
of the Company and each Shareholder, enforceable against the Company and each
Shareholder in accordance with its terms. The Company and the Shareholders have
the absolute and unrestricted right, power, authority, and capacity to execute
and deliver this Agreement and the Ancillary Agreements and to perform their
respective obligations under this Agreement and the Ancillary Agreements.
13
(b) Except as set forth in the Disclosure Letter, neither the execution
and delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Company, or (B) any
resolution adopted by the board of directors or the shareholders of the
Company;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of
the Contemplated Transactions or to exercise any remedy or obtain any
relief under, any Legal Requirement or any Order to which the Company or
Shareholders, or any of the assets owned or used by the Company, may be
subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company;
(iv) cause the Company to become subject to, or to become liable
for the payment of, any Tax;
(v) cause any of the assets owned by the Company to be reassessed
or revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance upon
or with respect to any of the Assets.
Except as set forth in the Disclosure Letter, neither the Shareholders nor the
Company is or will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions.
14
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of 10,000,000
shares of common stock, par value $.0001 per share, of which 3,680,000 shares
are issued and outstanding. The Shareholders own 3,600,000 shares of common
stock of record (approximately 98%) and have the power to vote all of said
shares. The Shareholders are the sole officers and directors of the Company.
There are no outstanding rights to acquire any equity or other securities of the
Company (including, without limitation, options, warrants, or subscription
rights). There are no Contracts relating to the issuance, sale, or transfer of
any unissued equity securities or other securities of the Company. None of the
outstanding equity securities or other securities of the Company was issued in
violation of the Securities Act or any other Legal Requirement. The Company
does not own, or have any Contract to acquire, any equity securities or other
securities of any Person or any direct or indirect equity or ownership interest
in any other business.
3.4 FINANCIAL STATEMENTS
The Company has furnished to Buyer true and correct copies of the financial
statements identified in Part 3.4 of the Disclosure Letter hereto. Except as
described in the Disclosure Letter, all of said financial statements, including
any notes thereto, are true and correct in all material respects and present an
accurate and complete disclosure of the financial position and condition of the
Company as of their respective dates and the results of its operations for the
periods covered in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby and on a basis consistent with that of prior years
and periods; provided, however, that the interim financial statements are
subject to year-end adjustments (which will not be material individually or in
the aggregate) and lack footnotes and other presentation items. Except as
described in the Disclosure Letter, subsequent to the respective dates of said
financial statements, there have been no material adverse changes in the
properties, assets, liabilities, revenues, income, expenses, operations,
financial condition or prospects of the Company from that reflected in said
financial statements. Except for liabilities (i) reflected or reserved against
in the balance sheet of the Company as of January 31, 2003 (the "Balance Sheet
-------------
Date") or in the notes thereto, (ii) incurred in the Ordinary Course of Business
----
since the Balance Sheet Date (none of which resulted from, arose out of, is
related to, or was caused by any breach of Contract, breach of warranty, tort,
infringement or violation of applicable legal requirements), and/or (iii)
described in the Disclosure Letter hereto, the Company does not have any
Liabilities (and there is no basis for any present or future proceeding against
the Company which could give rise to any Liabilities) which, individually or in
the aggregate, could reasonably be expected to have a material adverse effect on
the Company. The Liabilities of the Company incurred after the Balance Sheet
Date have been incurred in the Ordinary Course of Business and are usual and
ordinary in amount both individually and in the aggregate. Except as described
in the Disclosure Letter, the Company has not changed its accounting policies
and practices in the past three (3) years. Except as described in the
Disclosure Letter, no prior period adjustment is reflected in the statements of
income, changes in shareholders' equity and cash flow contained in the Company's
financial statements for the period ending on the Balance Sheet Date.
15
3.5 BOOKS AND RECORDS
Except as described in the Disclosure Letter, the books of account, minute
books, stock record books, and other records of the Company, all of which have
been made available to Buyer, are complete and correct and have been maintained
in accordance with sound business practices. The minute book of the Company
contains accurate and complete records of all meetings held of, and corporate
action taken by, the stockholders, the Boards of Directors, and committees of
the Boards of Directors of the Company, and no meeting of any such stockholders,
Board of Directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute book.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
The Company does not own any real property, leasehold interest in real
property, or other interests therein, except as set forth in the Disclosure
Letter. The Company owns or has enforceable assignable leases for all the
Assets whether real, personal, or mixed and whether tangible or intangible. Any
Encumbrances affecting any Assets are described in all material respects in the
Disclosure Letter and all such Encumbrances will be terminated on or before the
Closing Date (except for leases transferred by valid assignment).
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The Assets, including without limitation buildings, plants, structures, and
equipment of the Company are structurally sound, are in good operating condition
and repair, ordinary wear and tear excepted, and are adequate for the uses to
which they are being put, and none of such buildings, plants, structures, or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost. The Company
shall use its best efforts and shall cooperate with Buyer with respect to the
transfer to Buyer of all existing manufacturers', vendors', installers' and
other warranties for the Assets which are in effect as of the Closing Date.
Except as described in the Disclosure Letter, the Assets are sufficient for the
continued conduct of the Company's business after the Closing in substantially
the same manner as conducted prior to the Closing.
3.8 CLEAR TITLE
On the Closing Date, the Company will convey to Buyer free and clear of any
and all Encumbrances of any kind, nature or description whatsoever, good, valid
and marketable title to, or a valid leaseholder interest in, all of the Assets
(whether real, personal or mixed, and whether tangible or intangible),
including, without limitation, all of the properties and assets listed on
Company's balance sheet as of the Balance Sheet Date, except for personal
property sold or otherwise transferred since the Balance Sheet Date in the
Ordinary Course of Business.
3.9 PRODUCT LIABILITY CLAIMS
16
All products which the Company has sold have been merchantable and free
from material defects in material or workmanship for the term and under the
conditions set forth in the Company's standard written product warranties.
Except as set forth in the Disclosure Letter, during the three (3) years
immediately preceding the date hereof, the Company has not received a claim
based upon an alleged breach of product warranty, or arising from manufacture or
sale of its products ("Product Liability Claims"). The Company has no
reasonable grounds to believe that future Product Liability Claims with respect
to products sold prior to the Closing Date will be different from its past
experience with respect thereto.
3.10 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the accounting
records of the Company as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
To Shareholders' Knowledge, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of the respective reserves shown on the
accounting records of the Company as of the Closing Date (which reserves are
adequate and calculated consistent with past practice and, in the case of the
reserve as of the Closing Date, will not represent a material adverse change in
the composition of such Accounts Receivable in terms of aging). Subject to such
reserves and except as described in the Disclosure Letter,, each of the Accounts
Receivable either has been or, to Shareholders' Knowledge, will be collected in
full, without any set-off, within ninety days after the day on which it first
becomes due and payable. The Company has not received written notice of any
contest, claim, or right of set-off under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. The Disclosure Letter contains a complete and accurate list of all
Accounts Receivable as of the Closing Date, which list sets forth the aging of
such Accounts Receivable.
3.11 INVENTORY
Except for write-offs and other adjustments set forth in the Disclosure
Letter, all of the Company's parts, components, materials, and inventory
(collectively, "Inventory") consists of items which are in all material respects
of a quality merchantable and saleable at customary prices in the Ordinary
Course of Business and are of good quality and in good condition and sufficient
for the purpose for which they were purchased and/or manufactured. Except as
described in the Disclosure Letter, the Inventory has been purchased and/or
manufactured in the Ordinary Course of Business and is consistent with the
anticipated requirements of the Company's business, and the volume of purchases
and/or production thereof and of orders therefor have not been reduced or
increased in anticipation of the consummation of the transactions contemplated
hereby.
3.12 NO UNDISCLOSED LIABILITIES
Except as set forth in the Disclosure Letter, the Company does not have any
Liabilities.
3.13 TAXES
17
(a) The Company has filed or caused to be filed on a timely basis all
Tax Returns that are or were required to be filed by or with respect to it,
pursuant to applicable Legal Requirements. The Company has delivered or made
available to Buyer copies of all such Tax Returns filed since its inception.
Shareholders have paid all Taxes due pursuant to those Tax Returns or otherwise,
or pursuant to any assessment received by Shareholders or the Company, except
such Taxes, if any, as are listed in the Disclosure Letter and are being
contested in good faith and as to which the Shareholders and/or the Company, as
applicable, agree to pay in full consistent with any resolution of any contested
Taxes.
(b) Except as described in the Disclosure Letter, none of the United
States federal and state income Tax Returns applicable to the Company or the
Shareholders with respect to any period of time commencing with the Company's
inception have been audited by the IRS or relevant state tax authorities. All
deficiencies proposed as a result of any such audits have been paid, reserved
against, settled, or, as described in the Disclosure Letter, are being contested
in good faith by appropriate proceedings. The Disclosure Letter describes all
adjustments to the United States federal income Tax Returns filed by the Company
for all taxable years since its inception, and the resulting adjustments
proposed by the IRS. Except as described in the Disclosure Letter, neither
Shareholders nor the Company has given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the Tax Returns of the
Company.
(c) The charges, accruals, and reserves with respect to Taxes on the
books of the Company are adequate (determined in accordance with GAAP) and are
at least equal to the Company's projected liability for Taxes. There exists no
proposed tax assessment against the Company except as disclosed in the
Disclosure Letter. All Taxes that the Company is or was required by Legal
Requirements to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper Governmental Body or other
Person.
(d) All Tax Returns filed by the Company are true, correct, and
complete. There is no Tax sharing agreement that will require any payment by the
Company after the date of this Agreement. During the five-year period preceding
the Closing Date the Company has been an "S" corporation.
3.14 NO MATERIAL ADVERSE CHANGE
Since the Balance Sheet Date, except as set forth in the Disclosure Letter,
the Company has not (i) sold, transferred or otherwise disposed of any of its
properties or assets outside the Ordinary Course of Business or to any of its
Related Persons; (ii) mortgaged, pledged or subjected to any Encumbrance any of
its properties or assets; (iii) acquired any properties or assets outside the
Ordinary Course of Business or from any of its Related Persons; (iv) declared or
paid any dividend or made any other distribution to its shareholders or
repurchased any of its outstanding capital stock; (v) entered into any
transaction or otherwise conducted any business other than transactions in the
Ordinary Course of Business or transactions which involve more than $100,000 in
the aggregate; (vi) modified, amended, canceled or terminated any Contracts
under circumstances that could reasonably be anticipated to have a material
adverse effect on the Company; (vii) made any loan or advance to any Related
Persons; (viii) suffered any material adverse change in its assets, properties,
financial condition, results of operations, business or prospects; (ix)
sustained any damage, loss or destruction of or to any of its assets or
properties taken as a whole (whether or not covered by insurance) except for
such damages, loss or destruction that will not have a material adverse effect;
(x) experienced any material labor trouble or any change in its executive
personnel except for such troubles or changes that will not have a material
adverse effect on the Company; or (xi) agreed to or obligated itself to take any
of the actions identified in clauses (i) through (vii) above.
18
3.15 EMPLOYEE BENEFITS
(a) As used in this Section 3.15, the following terms have the meanings
set forth below.
"Company Other Benefit Obligation" means an Other Benefit Obligation owed,
----------------------------------
adopted, or followed by the Company.
"Company Plan" means all Plans of which the Company is or was a Plan Sponsor, or
--------------
to which the Company otherwise contributes or has contributed, or in which the
Company otherwise participates or has participated. All references to Plans are
to Company Plans unless the context requires otherwise.
"Company VEBA" means a VEBA whose members include employees of the Company.
--------------
"ERISA Affiliate" means, with respect to the Company, any other person that,
-----------------
together with the Company, would be treated as a single employer under IRC Sec.
414.
"Other Benefit Obligations" means all obligations, arrangements, or customary
---------------------------
practices, whether or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to present or former directors,
employees, or agents, other than obligations, arrangements, and practices that
are Plans. Other Benefit Obligations include consulting agreements under which
the compensation paid does not depend upon the amount of service rendered,
sabbatical policies, severance payment policies, and fringe benefits within the
meaning of IRC Sec. 132.
"Plan" has the meaning given in ERISA Sec. 3(3).
------
"Plan Sponsor" has the meaning given in ERISA Sec. 3(16)(B).
--------------
"VEBA" means a voluntary employees' beneficiary association under IRC Sec.
------
501(c)(9).
(b) Except as set forth in the Disclosure Letter
(i) , at no time since January 1, 1998 have there been any Company
Plans, Company Other Benefit Obligations or Company VEBAs,
(ii) as of the date of this Agreement and as of the Closing Date,
the Company will not have any Liabilities under any Other Benefit
Obligation owed, adopted or followed by any ERISA Affiliate of the Company.
19
(iii) as of the date of this Agreement and as of the Closing Date,
the Company will not have any Liabilities under any Plans of which any
ERISA Affiliate of the Company is or was a Plan Sponsor, or to which any
ERISA Affiliate of the Company otherwise contributes or has contributed, or
in which any ERISA Affiliate of the Company otherwise participates or has
participated.
(iv) as of the date of this Agreement and as of the Closing Date,
the Company does not have any Liabilities under any VEBA whose members
include the employees of any ERISA Affiliate of the Company.
3.16 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in the Disclosure Letter and except as limited
by any applicable statute of limitations period:
(i) The Company is, and at all times since its inception has been,
in full compliance with each Legal Requirement that is or was applicable to
it or to the conduct or operation of its business or the ownership or use
of any of its assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a
violation by the Company of, or a failure on the part of the Company to
comply with, any Legal Requirement, or (B) may give rise to any obligation
on the part of the Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature; and
(iii) The Company has not received, at any time since its inception,
any written notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of, or failure to comply with,
any Legal Requirement, or (B) any actual, alleged, possible, or potential
obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
(b) The Disclosure Letter contains a complete and accurate list of each
Governmental Authorization that is held by the Company or that otherwise relates
to the business of, or to any of the assets owned or used by, the Company. Each
Governmental Authorization listed or required to be listed in the Disclosure
Letter is valid and in full force and effect. Except as set forth in the
Disclosure Letter:
(i) the Company is in full compliance with all of the terms and
requirements of each Governmental Authorization identified or required to
be identified in the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be
listed in the Disclosure Letter, or (B) result directly or indirectly in
the revocation, withdrawal, suspension, cancellation, or termination of, or
any modification to, any Governmental Authorization listed or required to
be listed in Part 3.16 of the Disclosure Letter;
20
(iii) the Company has not received, at any time since its inception,
any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications currently required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed
in the Disclosure Letter have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations have been duly
made on a timely basis with the appropriate Governmental Bodies. To the
Knowledge of the Company and Shareholders, the Governmental Authorizations
listed in the Disclosure Letter collectively constitute all of the
Governmental Authorizations necessary to permit the Company to lawfully
conduct and operate its business in the manner it currently conducts and
operates such business and to permit the Company to own and use its assets
in the manner in which it currently owns and uses such assets.
3.17 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in the Disclosure Letter, to the Knowledge of
the Company and Shareholders there is no pending Proceeding:
(i) that has been commenced by or against the Company,
Shareholders or, to the Knowledge of the Company and Shareholders, any
other Person that otherwise relates to or may affect the business of the
Company or any of the A; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Shareholders and the Company, no such Proceeding has been
Threatened. The Company and Shareholders, as applicable, have delivered to
Buyer copies of all pleadings, correspondence, and other documents relating to
each Proceeding listed in the Disclosure Letter. The Proceedings listed in the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of the Company.
(b) Except as set forth in the Disclosure Letter:
(i) there is no Order to which the Company or any of the Assets is
subject;
(ii) neither of the Shareholders is subject to any Order that
relates to the business of the Company or the Assets.
21
(c) except as set forth in the Disclosure Letter:
(i) the Company is, and at all times since its inception has been,
in full compliance with all of the terms and requirements of each Order to
which it or any of the Assets is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any Order
to which the Company or any of the Assets is subject; and
(iii) the Company has not received, at any time since its inception,
any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged,
possible, or potential violation of, or failure to comply with, any term or
requirement of any Order to which the Company, or any of the assets owned
or used by the Company, is or has been subject.
3.18 CONTRACTS; NO DEFAULTS
(a) The Disclosure Letter contains a complete and accurate list, and
the Company has delivered to Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of services
or delivery of goods or materials by the Company;
(ii) each Applicable Contract that involves performance of services
or delivery of goods or materials to the Company;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of
money by the Company;
(iv) each Applicable Contract affecting the ownership of, leasing
of, title to, use of, or any leasehold or other interest in, any real or
personal property;
(v) each licensing agreement or other Applicable Contract with
respect to any Intellectual Property;
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a
group of employees;
(vii) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of the Company or any affiliate
of the Company or limit the freedom of the Company or any affiliate of the
Company to engage in any line of business or to compete with any Person;
22
(ix) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct payments
for goods;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for capital expenditures;
(xiii)each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the Company
other than in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
(b) Except as set forth in the Disclosure Letter:
(i) Shareholders and Related Person of Shareholders do not have
and may not acquire any rights under, and do not have and may not become
subject to any obligation or liability under, any Contract that relates to
the business of, or any of the assets owned or used by, the Company; and
(ii) to the Knowledge of the Company and Shareholders, no officer,
director, agent, employee, consultant, or contractor of the Company is
bound by any Contract that purports to limit the ability of such officer,
director, agent, employee, consultant, or contractor to assign to the
Company or to any other Person any rights to any invention, improvement, or
discovery.
(c) Except as set forth in the Disclosure Letter, each Contract
identified or required to be identified in the Disclosure Letter is in full
force and effect and is valid and enforceable in accordance with its terms.
(d) Except as set forth in the Disclosure Letter:
(i) the Company is, and at all times since its inception has been,
in material compliance with all applicable terms and requirements of each
Applicable Contract;
(ii) each other Person that has any Liability to the Company under
any Applicable Contract is to the Knowledge of the Company and Shareholders
in full compliance with the material terms and requirements of such
Applicable Contract;
23
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result
in a violation or breach of, or give the Company or other Person the right
to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any
Applicable Contract; and
(iv) the Company has not given to or received from any other Person
any notice or other communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or breach of, or default
under, any Applicable Contract.
(e) Except as described in the Disclosure Letter, there are no
renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate
any material amounts paid to or payable by the Company under current or
completed Contracts with any Person and no such Person has made written demand
for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
(g) Attached as an Appendix to the Disclosure Letter is a true, correct
and complete list of any and all Contracts between the Company and any
Shareholder, the Company and any Related Person, and the Company and any Related
Person of any Shareholder.
(h) Except as described in the Disclosure Letter, no Person who is or
has been a customer of the Company (whether or not such Person is party to a
Contract with the Company) has indicated in writing that it intends to reduce or
cease its business with the Company.
3.19 INSURANCE
Part 3.19 of the Disclosure Letter lists all insurance policies and
fidelity bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company. There is no material claim by
the Company pending under any such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. Except as described in the Disclosure Letter, all premiums due and
payable under all such policies and bonds have been paid, and the Company is
otherwise in full compliance with the terms of such policies and bonds. Neither
the Company nor the Shareholders has Knowledge of any Threatened termination of,
or premium increase with respect to, any of such policies or bonds.
3.20 ENVIRONMENTAL MATTERS
To Shareholders' and Company's Knowledge, the Company is, and at all times
has been, in full compliance with, and has not been and is not in violation of
or liable under, any Environmental Law. Neither Shareholders nor the Company has
any basis to expect, nor has any of them or any other Person for whose conduct
they are or may be held to be responsible received, any actual or Threatened
order, notice, or other communication from (i) any Governmental Body or private
citizen acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential violation or failure to
comply with any Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which the Company has had an interest, or with
respect to any property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or processed by
the Company or any other Person for whose conduct the Company is or may be held
responsible.
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3.21 EMPLOYEES
The Disclosure Letter contains a list of all employees of the Company
(full-time and part-time) as of February 14, 2003, which includes name,
position, annual salary, tenure and severance obligations (if any).
3.22 INTELLECTUAL PROPERTY
The Disclosure Letter contains a list and description of all Intellectual
Property of any kind which relates to, arises from or which is used or useful in
the operation of the business of the Company. Neither Shareholders nor the
Company have any Knowledge of any asserted claim have no reason to believe that
the operation of the business or the possession or use in the business of the
Company of any such Intellectual Property infringes the intellectual property
rights of any other Person. Except as described in the Disclosure Letter, the
Company has the sole and exclusive right to use all of the Intellectual Property
listed in the Disclosure Letter. Except as described in the Disclosure Letter,
the Company has not entered into any Contracts that would impair its rights in
and to the Intellectual Property listed in the Disclosure Letter and neither
Shareholders nor the Company has any Knowledge that any of such rights to such
Intellectual Property is, or is claimed to be, invalid. Except as provided in
the Disclosure Letter, the Company is not obligated under any Contract or
otherwise to pay royalties, fees or other payments with respect to any of the
Intellectual Property listed in the Disclosure Letter.
3.23 CERTAIN PAYMENTS
Since its inception, neither the Company nor any director, officer, agent,
or employee of the Company, or to Shareholders' Knowledge any other Person
associated with or acting for or on behalf of the Company, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any affiliate of the Company, or
(iv) in violation of any Legal Requirement, or (b) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
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3.24 DISCLOSURE
(a) No representation or warranty of the Company or the Shareholders in
this Agreement and no statement in the Disclosure Letter omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
(c) To Shareholders' Knowledge, there are no facts that have specific
application to Shareholders or the Company (other than general economic or
industry conditions) that materially adversely affect or, as far as Shareholders
can reasonably foresee, materially threaten, the assets, business, prospects,
financial condition, or results of operations of the Company that have not been
set forth in this Agreement or the Disclosure Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as disclosed in the Disclosure Letter, neither Shareholders nor any
Related Person of Shareholders or of the Company has, or since January 1, 1998,
has had, any interest in any property (whether real, personal, or mixed and
whether tangible or intangible), used in or pertaining to the Company's
businesses. Except as disclosed in the Disclosure Letter, neither Shareholders
nor any Related Person of Shareholders or of the Company is an owner (of record
or as a beneficial owner) of an equity interest or any other financial or profit
interest in a Person that has (i) had business dealings or a material financial
interest in any transaction with the Company other than business dealings or
transactions conducted in the Ordinary Course of Business with the Company at
substantially prevailing market prices and on substantially prevailing market
terms, or (ii) engaged in competition with the Company with respect to any line
of the products or services of the Company (a "Competing Business") in any
market presently served by the Company; provided, however, that ownership of
less than one percent of the outstanding capital stock of any Competing Business
that is publicly traded on any recognized exchange or in the Nasdaq market is
acceptable and is deemed not contrary of the foregoing representation. Except
as set forth in the Disclosure Letter, neither Shareholders nor any Related
Person of Shareholders or of the Company is a party to any Contract with, or has
any claim or right against, the Company.
3.26 BROKERS OR FINDERS
Except as described in the Disclosure Letter, Shareholders and their agents
have incurred no obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment in connection
with this Agreement and will indemnify and hold Buyer harmless from any and all
payment alleged to be due by or through the Company or Shareholders. The
Company has agreed to pay a cash fee not in excess of $60,000 to Pelstring
Capital Corporation, a business broker.
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3.27 INVESTMENT INTENT
Shareholders are acquiring the Warrants for their own respective accounts
and not with a view to distribution within the meaning of Section 2(11) of the
Securities Act. The Company and each Shareholder is an "accredited investor" as
defined in Rule 501 of Regulation D under the Securities Act, except as set
forth in the Disclosure Letter. Each Shareholder acknowledges that said
Shareholder's Warrant, and the common stock issuable upon exercise of said
Warrant is not transferable unless registered under the Securities Act, and that
APA has no obligation to effect such registration. Each Shareholder
acknowledges that he has had the opportunity to review information about APA and
to speak to management of APA to his satisfaction in connection with the
acceptance of his Warrant.
3.28 PROJECTIONS
Except as described in the Disclosure Letter, the projections and the
projected operating results of the Company for the period from January 1, 2003
through December 31, 2003 were prepared in good faith by the Company based on
assumptions its management believes to be reasonable and, in the opinion of
management of the Company, the underlying assumptions provided a reasonable
basis for such projections.
3.29 INDEBTEDNESS
Part 3.29 of the Disclosure Letter describes all Indebtedness in existence
as of the date of this Agreement. Except as set forth in the Disclosure Letter,
the Company is in full compliance with all terms, conditions and covenants of,
and has performed in all respects all of its obligations required to be
performed by it through the date of this Agreement under the terms of all such
Indebtedness. The Company is not in breach of or in default in any respect
under any Indebtedness nor has any event or circumstance occurred which, with
notice or lapse of time or both, would constitute any such breach or default.
4. REPRESENTATIONS AND WARRANTIES OF BUYER AND APA
Buyer and APA represent and warrant to the Company and the Shareholders as
follows:
4.1 ORGANIZATION AND GOOD STANDING
(a) Each of APA and the Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Minnesota, with
full power and authority, corporate and otherwise, to conduct its business as it
is now being conducted, to own or use the properties and assets that it purports
to own or use. Each of APA and the Buyer is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted by it, requires such
qualification.
(b) Issuance of the Warrants has been duly authorized and the common
stock of APA, when issued upon exercise of the Warrants and payment of the
exercise price, will be validly issued and non-assessable.
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4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation
of Buyer and APA, enforceable against Buyer and APA in accordance with its
terms. Each of Buyer and APA has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and to perform its respective
obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement by Buyer or
APA nor the consummation or performance of any of the Contemplated Transactions
by Buyer or APA will give any Person the right to prevent, delay, or otherwise
interfere with any of the Contemplated Transactions.
(c) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of
the Contemplated Transactions or to exercise any remedy or obtain any
relief under, any Legal Requirement or any Order to which the Buyer or APA,
or any of the assets owned or used by the Buyer or APA, may be subject;
(ii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Buyer or APA or that otherwise relates to
the business of, or any of the assets owned or used by, the Buyer or APA;
(iii) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any material contract of Buyer or APA ;
or
(iv) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by the Buyer or APA.
Buyer and APA are not and will not be required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
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4.3 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer or APA
that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To Buyer's
and APA's Knowledge, no such Proceeding has been Threatened.
4.4 BROKERS OR FINDERS
Buyer and its managers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement, except as otherwise
herein provided.
5. COVENANTS OF COMPANY AND SHAREHOLDERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, the Company will,
and the Shareholders will cause the Company and its Representatives to, (a)
afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, "Buyer's Advisors") full and free access to the
Company's personnel (during normal Company business hours), properties,
contracts, books and records, and other documents and data, (b) furnish Buyer
and Buyer's Advisors with copies of all such contracts, books and records, and
other existing documents and data as Buyer may reasonably request, and (c)
furnish Buyer and Buyer's Advisors with such additional financial, operating,
and other data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing Date, the Company will,
and the Shareholders will cause the Company to:
(a) conduct the business of the Company only in the Ordinary Course of
Business;
(b) use their Best Efforts to preserve intact the current business
organization of the Company, keep available through the Closing Date the
services of the current officers, employees, and agents of the Company, and
maintain the relations and good will with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships with the
Company;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the status of the
business, operations, and finances of the Company.
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5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the date
of this Agreement and the Closing Date, the Company will not, and the
Shareholders will cause the Company not to, without the prior consent of Buyer,
take any affirmative action, or fail to take any reasonable action within its
control, as a result of which any of the changes or events listed in Section
3.14 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, the Company
will, and the Shareholders will cause the Company to, make all filings required
by Legal Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, the
Company will, and the Shareholders will cause the Company to, cooperate with
Buyer with respect to all filings that Buyer elects to make or is required by
Legal Requirements to make in connection with the Contemplated Transactions.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, the Company and
the Shareholders will promptly notify Buyer in writing if Shareholders or the
Company becomes aware of any fact or condition that causes or constitutes a
Breach of any of the representations and warranties of the Company or the
Shareholders as of the date of this Agreement, or if Shareholders or the Company
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Disclosure Letter if the Disclosure Letter were dated the date of the
occurrence or discovery of any such fact or condition, the Company and the
Shareholders will promptly deliver to Buyer a supplement to the Disclosure
Letter specifying such change. During the same period, the Company and the
Shareholders will promptly notify Buyer of the occurrence of any Breach of any
covenant of the Company or the Shareholders in this Section 5 or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 7 impossible or unlikely.
5.6 RESTRUCTURING OF INDEBTEDNESS [INTENTIONALLY DELETED]
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Shareholders will not, and will cause the Company and each of their
Representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business) of the Company, or any of the capital stock of the Company, or any
merger, consolidation, business combination, or similar transaction involving
the Company.
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5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, the Company and
the Shareholders will use their Best Efforts to cause the conditions in Sections
7 and 8 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will,
and will cause each of its Related Persons to, make all filings required by
Legal Requirements to be made by them to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Buyer
will, and will cause each Related Person to, cooperate with the Company and
Shareholders with respect to all filings that the Company and Shareholders are
required by Legal Requirements to make in connection with the Contemplated
Transactions, and (ii) cooperate with the Company and the Shareholders in
obtaining all Consents identified in Part 3.2 of the Disclosure Letter; provided
that this Agreement will not require Buyer to dispose of or make any change in
any portion of its business or to incur any other burden to obtain a
Governmental Authorization.
6.2 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Buyer will use its
Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
6.3 LOAN
Upon execution of this Agreement and delivery to Buyer of written
agreements by holders of all Encumbrances on the Assets that they shall
terminate all such Encumbrances at Closing, APA shall loan $150,000 to the
Company, to be evidenced by a promissory note in the form of Exhibit F attached
hereto (the "Note"). The Note shall be due and payable with interest at prime
rate (as announced by US Bank in Minneapolis Minnesota from time to time) plus
2.0%, on March 14, 2003. Engineered Products Co. shall unconditionally guaranty
repayment of the loan pursuant to a corporate guaranty in the form of Exhibit G
attached hereto (the "Guaranty"). Such loan shall be forgiven if Closing has
occurred as of March 14, 2003 (or such later date agreed to by APA and the
Company), and the loan proceeds have been used for payroll and purchase of
---
inventory or as otherwise permitted in writing by APA.
7. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER TO CLOSE
Buyer's obligation to purchase the Assets and to take the other actions required
to be taken by Buyer at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Buyer, in whole or in part):
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7.1 ACCURACY OF REPRESENTATIONS
All of Shareholders' representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
7.2 PERFORMANCE BY COMPANY AND SHAREHOLDERS
(a) All of the covenants and obligations that the Company and the
Shareholders are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered individually), must have been duly
performed and complied with in all material respects.
(b) Each document required to be delivered pursuant to Section 2.6 must
have been delivered, and each of the other covenants and obligations in Article
5 must have been performed and complied with in all respects.
7.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter must
have been obtained and must be in full force and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered by the Company and
Shareholders to Buyer: such documents as Buyer may reasonably request for the
purpose of (i) evidencing the accuracy of any representations and warranties of
the Company and the Shareholders, (ii) evidencing the performance by the Company
and the Shareholders of, or the compliance by the Company and the Shareholders
with, any covenant or obligation required to be performed or complied with by
the Company and the Shareholders, (iii) evidencing the satisfaction of any
condition referred to in this Section 7, or (iv) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING SHARE OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened any claim asserting that a
Person other than Shareholders is entitled to all or any portion of the Purchase
Price.
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7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
7.8 DUE DILIGENCE REVIEW
Buyer shall be satisfied that no material change in either the general
business conditions and outlook for the Company or its financial condition,
operating results, business or prospects has occurred since the date of
execution of this Agreement.
8. CONDITIONS PRECEDENT TO OBLIGATION OF COMPANY TO CLOSE
The Company's obligation to sell the Assets and to take the other actions
required to be taken at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by the Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and APA's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer and APA are
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.6 and must have made the cash payment
required to be made by Buyer pursuant to Section 2.6(b)(i).
8.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter must
have been obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
33
Buyer and/or APA must have caused the following documents to be delivered
to the Company:
(a) such documents as the Company or Shareholders may reasonably
request for the purpose of (i) evidencing the accuracy of any representation or
warranty of Buyer and APA, (ii) evidencing the performance by Buyer and APA of,
or the compliance by Buyer and APA with, any covenant or obligation required to
be performed or complied with by Buyer or APA, (iii) evidencing the satisfaction
of any condition referred to in this Section 8, or (iv) otherwise facilitating
the consummation of any of the Contemplated Transactions.
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the Assets to Buyer, and (b) has been
adopted or issued, or has otherwise become effective, since the date of this
Agreement.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice in writing given prior to or at the Closing,
be terminated:
(a) by either Buyer or the Company if a material Breach of any
provision of this Agreement has been committed by the other party and such
Breach has not been waived;
(b) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date;
(c) by the Company, if any of the conditions in Section 8 has not been
satisfied of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of the Company or the
Shareholders to comply with any obligations under this Agreement) and the
Company has not waived such condition on or before the Closing Date;
(d) by mutual consent of Buyer and the Company;
(e) by either Buyer or the Company if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before March
14, 2003, or such later date as the parties may agree upon; or
(f) by Buyer pursuant to Section 2.8(b).
9.2 EFFECT OF TERMINATION
34
Each party's right of termination under Section 9.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11.1 and
11.3 will survive; provided, however, that if this Agreement is terminated by a
party because of the Breach of the Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the
certificate delivered pursuant to Section 2.6(a)(iii), and any other certificate
or document delivered pursuant to this Agreement will survive the Closing. The
right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY COMPANY AND SHAREHOLDERS
The Company and the Shareholders, jointly and severally, will indemnify and
hold harmless Buyer and its Representatives, shareholders, members, controlling
persons, and affiliates (collectively, the "Indemnified Persons") for, and will
pay to the Indemnified Persons the amount of, any loss, liability, claim,
damage, expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by the Company or
any Shareholder in this Agreement, the Disclosure Letter, or any other
certificate or document delivered by the Company or any Shareholder pursuant to
this Agreement;
(b) any Breach by the Company or any Shareholder of any covenant or
obligation in this Agreement;
35
(c) any product sold by, or any services provided by, the Company prior
to the Closing Date;
(d) any claim by any Person for brokerage or finders' fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Shareholders or the Company
(or any Person acting on their behalf) except for the fee described in Section
3.26; or
(e) any breach of any Contract by the Company prior to and including
the Closing Date.
The remedies provided in this Section 10.2 will not be exclusive of or limit any
other remedies that may be available to Buyer or the other Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer and APA, jointly and severally, will indemnify and hold harmless the
Company and each Shareholder, and will pay to the Company or Shareholders, as
applicable, the amount of any Damages arising, directly or indirectly, from or
in connection with (a) any Breach of any representation or warranty made by
Buyer or APA in this Agreement or in any certificate delivered by Buyer or APA
pursuant to this Agreement, (b) any Breach by Buyer or APA of any covenant or
obligation of Buyer or APA in this Agreement, or (c) any claim by any Person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such Person with Buyer
or APA (or any Person acting on its behalf) in connection with any of the
Contemplated Transactions.
10.4 TIME LIMITATIONS
(a) Except as provided in subsection (b), below, the Company and the
Shareholders will have no liability (for indemnification or otherwise) with
respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing Date, unless Buyer notifies
Shareholders of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Buyer on or before the first anniversary of
the Closing Date;
(b) A claim by Buyer with respect to any representation or warranty of
Company or the Shareholders concerning Liabilities, Encumbrances, Taxes,
Environmental Health and Safety, Proceedings (actual or threatened), or a claim
for indemnification or reimbursement not based upon any representation or
warranty or any covenant or obligation to be performed and complied with prior
to the Closing Date, may be made at any time.
(c) If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, unless the Company or the Shareholders notify Buyer on or before the first
anniversary of the Closing Date specifying the factual basis of the claim in
reasonable detail to the extent then known by the Company and the Shareholders.
36
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Section 10.2,
10.4, or (to the extent provided in the last sentence of Section 10.3) Section
10.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice.
(b) If any Proceeding referred to in Section 10.5(a) is brought against
an indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel reasonably
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 10 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding. If the indemnifying party
assumes the defense of a Proceeding, (i) it will be conclusively established for
purposes of this Agreement that the claims made in that Proceeding are within
the scope of and subject to indemnification; (ii) no compromise or settlement of
such claims may be effected by the indemnifying party without the indemnified
party's consent unless (A) there is no finding or admission of any violation of
Legal Requirements or any violation of the rights of any Person and no effect on
any other claims that may be made against the indemnified party, and (B) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the indemnified party will have no liability with
respect to any compromise or settlement of such claims effected without its
consent. If notice is given to an indemnifying party of the commencement of any
Proceeding and the indemnifying party does not, within twenty (20) days after
the indemnified party's notice is given, give notice to the indemnified party of
its election to assume the defense of such Proceeding, the indemnifying party
will be bound by any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
37
10.6 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by written notice to the party from whom indemnification
is sought.
10.7 LIMITATION ON INDEMNIFICATION
Neither Buyer, the Company, nor the Shareholders shall be required to
provide indemnification for the breach or falsity of any representation or
warranty unless and until the indemnified party has sustained cumulative losses
as a result of one or more such breaches or falsities of at least Fifty Thousand
Dollars ($50,000). Once such cumulative losses equal or exceed the sum of Fifty
Thousand Dollars ($50,000), the indemnifying party shall provide indemnification
for all losses sustained as a result of such breach(es) or falsity(ies) in
excess of such sum.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, including without
limitation the Buyer's obligations pursuant to Section 2.6(b)(ix), each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. The Company will not incur, and the Shareholders will
cause the Company not to incur, any out-of-pocket expenses in connection with
this Agreement. In the event of termination of this Agreement, the obligation
of each party to pay its own expenses will be subject to any rights of such
party arising from a Breach of this Agreement by another party.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this Agreement
or the Contemplated Transactions will be issued, if at all, at such time, in
such manner and with such information content as Buyer and jointly determine;
provided, however, that Buyer may make any announcement it reasonably deems
necessary to comply with Legal Requirements without prior consultation with the
Company or Shareholders. Unless consented to by Buyer in advance or required by
Legal Requirements, prior to the Closing, the Company shall, and the
Shareholders shall cause the Company to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
The Company, Shareholders, and Buyer will consult with each other concerning the
means by which the Company's customers, and suppliers and others having dealings
with the Company will be informed of the Contemplated Transactions, and Buyer
will have the right to be present for any such communication.
11.3 CONFIDENTIALITY
38
Between the date of this Agreement and the Closing Date, Buyer, APA, the
Company, and Shareholders will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, and not use to the detriment of another party or the
Company any written, oral, or other information obtained in confidence from
another party or the Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with Proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
11.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Shareholders and the Company:
c/o Engineered Products Co.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President, ▇▇▇▇▇▇ ▇▇▇, or ▇▇▇▇▇ ▇▇▇, as appropriate
With a copy to:
▇.▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, PLLP
4200 IDS Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Buyer:
APA Optics, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President/CEO
With a copy to:
39
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇, P.A.
4800 ▇▇▇▇▇ Fargo Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Any notice purported to be given by Shareholders must be signed by all
Shareholders. Any notice purported to be given by the Company, APA, or Buyer,
must be signed by the chief executive officer of such entity.
11.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement shall be brought against any of the
parties in the courts of the State of Minnesota, County of Hennepin, and each of
the parties consents to the jurisdiction of such court (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
11.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
40
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
11.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
No party may assign any of its rights under this Agreement without the
prior consent of the other parties, except that Buyer may assign any of its
rights under this Agreement to any Subsidiary of Buyer, provided that APA shall
remain obligated to perform its obligations under this Agreement. Subject to
the preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed
to give any Person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
11.10 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.12 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
11.13 GOVERNING LAW
This Agreement will be governed by the laws of the State of Minnesota
without regard to conflicts of laws principles.
11.14 COUNTERPARTS
41
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
12. PERFORMANCE FOLLOWING THE DATE OF CLOSING
The following covenants and agreements are to be performed after the
Closing by the parties and shall continue in effect for the periods respectively
indicated or, where no indication is made, until performed:
12.1 COLLECTION OF RECEIVABLES
After the Closing, Buyer shall be empowered to collect all Receivables and
other items transferred to Buyer hereunder and to endorse with the name of the
Company any checks or other instrument received on account of any such
Receivables or other items. The Company and the Shareholders agree to promptly
transfer to Buyer any cash, checks or other property that the Company and the
Shareholders may receive in respect of the Receivables or other items. At the
written request of Buyer, the Company and the Shareholders will cooperate, and
will use their best efforts to have the officers, directors, and other employees
of the Company cooperate, with Buyer on and after the Closing Date in
endeavoring to effect the collection of all Receivables and with respect to
other actions, proceedings, arrangements or disputes involving the Company and
the Shareholders or Buyer based upon Contracts, arrangements or acts of the
Company and the Shareholders which were in effect or occurred on or prior to the
Closing Date.
12.2 FURTHER ACTS AND ASSURANCES
The Company and Shareholders agree that, at any time and from time to time,
on and after the Closing Date, upon the reasonable request of Buyer, they will
do or cause to be done all such further acts and things and execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered to Buyer any
and all papers, documents, instruments, agreements, deeds, assignments,
transfers, assurances and conveyances as may be necessary or desirable to vest,
perfect and confirm of record in Buyer, its successors and assigns, the title to
any of the Assets or otherwise to carry out and give effect to the provisions
and intent of this Agreement. In addition, from and after the Closing Date, the
Company and Shareholders will afford to Buyer and its attorneys, accountants and
other representatives access, during normal business hours, to such personnel,
books and records relating to the Assets as may reasonably be required in
connection with the preparation of financial information or the filing of tax
returns and will cooperate in all reasonable respects with Buyer in connection
with claims and litigation asserted by or against third parties, relating to the
transactions contemplated hereby.
12.3 CHANGE OF NAME
The Company will provide Buyer with such consents and shall perform such
other acts (including changing Company's name and assumed name) as may be
necessary to enable Buyer to use the names "Computer System Products," "CSP," or
any derivations thereof in the jurisdictions in which the Company heretofore has
done business to the extent such use is currently permitted. From and after the
Closing Date the Company agrees that it will not use such name for any purpose
whatsoever.
42
12.4 TEMPORARY FACILITIES
The Company will permit Buyer to occupy the facilities located at ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ until September 30, 2003, for a monthly
rent of $16,666 gross or $7.50 per square foot (whichever is less) pursuant to a
sublease agreement in the form of Exhibit E attached hereto. Rent shall be
payable in advance on the first day of each calendar month. Rent for any partial
month shall be pro-rated on a daily basis and any overpayment by Buyer shall be
refunded within ten business days after demand.
12.5 EMPLOYMENT
(a) Buyer will employ ▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇▇ ▇▇▇ agrees to work for
Buyer, full time, at an annualized salary of $150,000, for a period from
the Closing Date through September 30, 2003 pursuant to an employment
agreement in the form of Exhibit C attached hereto (the "Employment
Agreement"). "Full-time" means not less than 40 hours per week. ▇▇▇▇▇▇ ▇▇▇
shall assist in the integration of the Assets in Buyer's business and shall
perform other duties requested by Buyer. ▇▇▇▇▇▇ ▇▇▇ shall be entitled to
participate in whatever employee benefits are generally available to other
employees of Buyer on the standard terms and conditions applicable to such
benefits.
(b) Buyer, at its option, may offer employment to other employees
of the Company. The Company and the Shareholders hereby consent to such
employment and hereby waive any contract provision which would prevent any
such employee from accepting employment with Buyer.
12.6 JOINDER AGREEMENT. APA joins in and agrees to perform and/or cause
Buyer to perform all obligations of Buyer under the foregoing Asset Purchase
Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
COMPANY: BUYER:
COMPUTER SYSTEM PRODUCTS, APA ACQUISITION, INC.
INC.
By___________________________________ By___________________________________
Its________________________________ Its________________________________
___________________________________ ___________________________________
Print Name and Title Print Name and Title
43
SHAREHOLDERS: APA:
_____________________________________ APA OPTICS, INC.
▇▇▇▇▇ ▇▇▇
_____________________________________ By___________________________________
▇▇▇▇▇▇ ▇▇▇ Its_________________________________
____________________________________
Print Name and Title
44
EXHIBIT A-1
-----------
▇▇▇▇▇▇ ▇▇▇ Agreement Not to Compete
-----------------------------------
[See attached]
------
EXHIBIT A-2
-----------
▇▇▇▇ ▇▇▇ Agreement Not to Compete
---------------------------------
[See attached]
EXHIBIT B
---------
Assumption Agreement
--------------------
[See attached]
EXHIBIT C
---------
▇▇▇▇▇▇ ▇▇▇ Employment Agreement
-------------------------------
[See attached]
EXHIBIT D
---------
IT Services Agreement
---------------------
[See attached]
EXHIBIT E
---------
Sublease Agreement
------------------
[See attached]
EXHIBIT F
---------
Promissory Note
---------------
[See attached]
EXHIBIT G
---------
Guaranty
--------
[See attached]
EXHIBIT H
---------
Warrant
-------
[See attached]
EXHIBIT I
---------
▇▇▇▇ of Sale
------------
[See attached]