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ASSET PURCHASE AGREEMENT
BY AND AMONG
AURA CERAMICS, INC.,
AURA SYSTEMS, INC. AND
ALPHA CERAMICS, INC.
February 29, 2000
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THE OBLIGATION OF THE BUYER TO PAY, AND THE RIGHTS OF THE SELLER AND THE
STOCKHOLDER TO RECEIVE, THE DEFERRED PURCHASE PRICE AND THE INSTALLMENT PAYMENTS
WITH RESPECT THERETO PURSUANT TO ARTICLE 2.4 HEREOF ARE EXPRESSLY SUBJECT TO THE
PROVISIONS OF (1) THAT CERTAIN SUBORDINATION AGREEMENT DATED AS OF
_______________, 2000, BY AND BETWEEN BUYER, SELLER, STOCKHOLDER AND EXCEL BANK,
AND (2) THAT CERTAIN SUBORDINATION AGREEMENT DATED AS OF ______________, 2000,
BY AND AMONG BUYER, SELLER, STOCKHOLDER AND LANDLORD.
i
Schedules
Schedules
2.3 Assumed Liabilities
2.5 Allocation of Purchase Price
3.1 Seller's Disclosure Schedule
3.5 Seller's Financial Statements
8
ASSET PURCHASE AGREEMENT
Asset Purchase Agreement (the "Agreement"), dated as of February 29,
2000, by and among Alpha Ceramics, Inc., a Minnesota corporation (the "Buyer"),
having its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; Aura Ceramics, Inc., a Delaware corporation (the "Seller"),
having its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and, Aura Systems, Inc., a Delaware corporation, having its
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(the "Stockholder").
This Agreement sets forth the terms and conditions upon which the Buyer
will purchase from the Seller, and the Seller will sell to the Buyer,
substantially all the assets of the Seller (other than the Retained Assets, as
hereinafter defined) and the business and goodwill constituting the
manufacturing business of the Seller as a going concern, for the consideration
provided herein.
In consideration of the foregoing, the mutual representations,
warranties and covenants set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
Definitions. For the purposes of this Agreement, all capitalized terms
used in this Agreement (including the Schedules and Exhibits annexed hereto)
shall have the meanings specified in Exhibit 1.1.
ARTICLE II
PURCHASE AND SALE OF ASSETS
Purchase of Assets. Upon the terms and subject to the conditions
contained in this Agreement, at the Closing, the Seller shall sell, assign,
transfer and convey to the Buyer, and the Buyer shall purchase, acquire and
accept from the Seller, the business of the Seller as a going concern (the
"Business"), including all of the Seller's assets of every kind and description
(the "Purchased Assets") including, without limitation, the following assets and
properties:
(a) all tangible personal property owned by the Seller including, without
limitation, all inventories wherever located, raw materials, goods
consigned to vendors or subcontractors, work in process, finished goods
and goods in transit, all machinery, equipment, fixtures and furniture;
(b) All of Seller's cash, bank accounts, prepayments and deposits as of the
Closing Date;
(c) all rights and interests of the Seller in and to any contracts,
including, without limitation, contracts for the purchase of materials,
supplies and services and the sale of products and services, equipment
leases;
(d) all of the Seller's books, records and other data;
(e) all of the Seller's goodwill, dealer and customer lists and all other
sales and marketing information, and all patents, trademarks,
copyrights and other intellectual property, know-how, technology,
drawings, engineering specifications, bills of materials, software and
other intangible assets of the Seller;
(f) all right, title and interest in and to the name "Aura Ceramics, Inc."
and all variants thereof as applicable solely to the ceramics business;
(g) all permits, licenses, orders, ratings and approvals of all federal,
state, local or foreign governmental or regulatory authorities or
industrial bodies which are held by the Seller, to the extent the same
are transferable;
(h) all notes receivable, prepaid expenses, accounts receivable and other
similar current assets;
(i) all investment securities held by Seller including, without limitation,
all proceeds thereof and all rights to cash or non-cash dividends and
voting rights associated therewith;
(j) all rights with respect to leasehold interests and subleases and rights
thereunder relating to real property;
(k) all rights of the Seller to causes of action, lawsuits, judgments, claims
and demands of any nature; and
(l) all other items of property, real or personal, tangible or intangible,
including without limitation all securities, corporate names,
restrictive and negative covenant agreements with employees and others,
and computer programs owned, used by or accruing to the benefit of the
Seller.
2.2 Retained Assets. The Seller will retain ownership only of the following
assets (collectively, the "Retained Assets"):
(a) the Seller's rights under this Agreement;
(b) all of the Seller's Plans.
2.3 Liabilities. The Buyer is not assuming or agreeing, nor shall it be deemed
to have assumed or agreed, to pay, perform or discharge any of the obligations
of the Seller other than those expressly set forth on Schedule 2.3 attached
hereto (collectively the "Assumed Liabilities"). Seller shall remain
unconditionally liable for all obligations, liabilities and commitments of
Seller, presently existing or contingent arising out of events or circumstances
occurring on or prior to the Closing Date of the Seller, other than the Assumed
Liabilities (collectively, the "Retained Liabilities").
2.4 Purchase Price. (a) The purchase price (the "Purchase Price") to be paid by
the Buyer to the Seller or its assignee (including, without limitation, the
Stockholder) for the Purchased Assets shall be $3,500,000, plus assumption by
Buyer of the Assumed Liabilities as set forth in Schedule 2.3 attached hereto.
The Purchase Price shall be payable as follows:
(i) On the Closing Date the Buyer shall pay to the Seller or its
assignee (including, without limitation, the Stockholder) an
amount equal to $800,000 (the "Closing Cash Payment"); and
(ii) The principal amount of Two Million Five Hundred Thousand and 00/100
Dollars ($2,500,000), together with interest on the unpaid balance accruing
thereon as of and from the date hereof at a rate equal to eight percent
(8%) per annum (calculated on the basis of actual days elapsed in a year of
365 days), shall be due and payable in (A) forty-seven (47) equal
consecutive monthly payments of principal and interest in the amount of
$31,000 each, commencing on the first (1st) day of the calendar month
following the Closing Date (as defined in Article 2.6 below) and continuing
----------- on the same day of each calendar month thereafter until and
including September 1, 2007; and (B) one (1) final installment due on
September 30, 2007, equal to the then outstanding principal balance of such
$2,500,000 plus accrued but unpaid interest thereon.
(iii) The principal amount of $200,000 shall be due and payable,
without interest, on September 30, 2007. (The principal
amounts due pursuant to subsections (ii) and (iii) are
referred to herein as the "Deferred Purchase Price".)
(b) The payment of the Deferred Purchase Price shall be and hereby is expressly
subordinated to the payment of (A) the $1,000,000 term loan and the
$200,000 revolving line of credit obtained on or prior to the date hereof
by the Buyer from Excel Bank to acquire the assets from Seller pursuant to
this agreement and provide Buyer with working capital; (B) any and all
other indebtedness of the Buyer for money borrowed from any banks,
financial institutions or other institutional lenders to (i) purchase
equipment in the future, and (ii) provide for any additional capital needs
of the Buyer; (C) any and all loans and lines of credit obtained by the
Buyer to refinance all or any part of the indebtedness referred to in (A),
(B) above; and (D) the amounts due and payable to the Landlord by the Buyer
under and pursuant to the Lease (as those terms are defined in Section 4.4
hereof); provided, however, that the Seller shall only be required to
subordinate payment of the Deferred Purchase Price to the payment of
indebtedness under (A), (B) and (C) above up to an aggregate principal
amount outstanding at any one time of $2,000,000. The Seller shall execute
and deliver subordination agreements in favor of such lenders and the
Landlord at the request of the Buyer.
(c) If an Event of Default, as defined below, has occurred and is
continuing, the outstanding principal balance of the Deferred Purchase
Price and interest accrued thereon shall become immediately due and
payable, upon ten (10) days written notice and demand given by the
Seller to the Buyer. An Event of Default shall mean the occurrence of
any one or more of the following:
(i) Buyer shall fail to pay, when due, any installment of the
Deferred Purchase Price and such failure shall continue for
sixty (60) days after written notice given by the Seller to
the Buyer; or
(ii) Buyer shall file or have filed against it a petition in
bankruptcy or for an arrangement pursuant to any present or
future state or federal bankruptcy act or under a similar
federal or state law, or shall be adjudicated a bankrupt or
insolvent, or shall make a general assignment for the benefit
of creditors, or shall be unable to pay its debts generally as
they become due, or any property of the Buyer shall be levied
upon or attached in any proceeding; or
(iii) Buyer shall be or become insolvent (whether in the equity or bankruptcy
sense); or
(iv) the dissolution of the Buyer;
(d) Payment of the Deferred Purchase Price and the installment payments
with respect thereto are specifically subject to the terms and
conditions of Buyer's "Right of Set Off" as set forth in Article 8.5
herein. Such right of set off shall continue to be effective and
available to Buyer notwithstanding the assignment by Seller to
Stockholder of Seller's right and entitlements pursuant to Article
2.4(e) hereof or the liquidation of the Seller.
(e) Seller hereby sells, transfers, conveys and assigns to Stockholder any
and all rights and entitlements of Seller under, pursuant to and by
virtue and arising out of this Agreement the payment of any and all
monies to be paid to Seller. Buyer is hereby directed therefore to pay
to Stockholder the portion of the Purchase Price payable pursuant to
subsection (a) above. Buyer hereby agrees that Stockholder shall have
the same rights hereunder as the Seller by virtue of such assignment
notwithstanding the subsequent liquidation of Seller.
2.5 Allocation of Purchase Price. The Purchase Price shall be allocated among
the Purchased Assets for purposes of Section 1060 of the Internal Revenue Code
of 1986, as amended (the "Code"), as set forth in Schedule 2.5 attached hereto.
The Seller and the Buyer agree to be bound by such allocations and to complete
and attach Internal Revenue Form 8594 to their respective federal income tax
returns to reflect such allocations.
2.6 Time and Place of Closing. The closing of the transactions described herein
(the "Closing") shall take place simultaneously with the execution of this
Agreement. The date and time at which the Closing actually occurs is hereinafter
referred to as the "Closing Date."
2.7 Execution and Delivery of Documents of Title by the Seller. At the Closing,
the Seller shall execute and deliver to the Buyer a ▇▇▇▇ of sale in form and
substance acceptable to Buyer, (the "▇▇▇▇ of Sale") and such deeds, conveyances,
certificates of title, assignments, assurances and other instruments and
documents as the Buyer may reasonably request in order to effect the sale,
conveyance, and transfer of the Purchased Assets from the Seller to the Buyer.
Such instruments and documents shall be sufficient to convey to the Buyer good
and marketable title in all of the Purchased Assets. The Seller will, from time
to time after the Closing Date, take such additional actions and execute and
deliver such further documents as the Buyer may reasonably request in order to
more effectively sell, transfer and convey the Purchased Assets to the Buyer and
to place the Buyer in position to operate and control all of the Purchased
Assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND THE STOCKHOLDER
The Seller and the Stockholder hereby jointly and severally represent
and warrant to the Buyer that the following statements are true and correct,
except as disclosed on Schedule 3.1 attached hereto.
(a) Organization and Qualification. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
state of its incorporation. The Seller has full corporate power and
authority to own, use and lease its properties and to conduct its
business as such properties are currently owned, used or leased and as
such business is currently conducted. The Seller is qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction in which the conduct of its business would require such
qualification.
(b) Authority; No Violation. The Seller has all requisite corporate power and
authority to enter into this Agreement and each of the Purchase Documents
to which it is a party and to carry out the transactions contemplated
hereby or thereby. The execution, delivery and performance by the Seller of
this Agreement and each of the Purchase Documents to which it is a party
have been duly and validly authorized and approved by all necessary
corporate action. This Agreement and each of the Purchase Documents to
which it is a party constitute the legal and binding obligation of the
Seller and the Stockholder, enforceable against each in accordance with its
terms. Assuming the accuracy of the representations and warranties of the
Buyer hereunder, the entering into of this Agreement by the Seller and the
Stockholder does not, and the consummation by the Seller and the
Stockholder of the transactions contemplated hereby, including specifically
the transfer of the Purchased Assets to the Buyer by the Seller, will not
violate the provisions of (i) any applicable laws of the United States or
any other state or jurisdiction in which the Seller does business, or (ii)
the Seller's or the Stockholder's Charter or bylaws. 3.2 The Seller and the
Stockholder hereby jointly and severally represent and warrant that neither
of them has any actual knowledge that any of the following statements are
not true or correct in all material respects, except as set forth on
Schedule 3.1 attached hereto. For purposes of this Section 3.2, the term
"actual knowledge" shall not include the actual knowledge possessed by any
of the Aura Ceramics Employees. Furthermore, if one or more Aura Ceramics
Employees possesses actual knowledge of any facts or circumstance which
would cause any such statement to be untrue or incorrect, then the Seller
and the Shareholder shall not be deemed to have made any misrepresentation
or breach of warranty with respect to such specific statement.
(a) No Violation. The execution, delivery and performance of this Agreement
and each of the Purchase Documents, and the consummation of the
transactions contemplated thereby, will not conflict with any provision
of, or result in a default or acceleration of any obligation under,
result in any change in the rights or obligations of the Seller under
or require any consent under, any Lien, contract agreement, license,
lease, instrument, indenture, order, arbitration award, judgment, or
decree to which the Seller is a party or by which it is bound, or to
which any property of the Seller is subject and which now has a
Material Adverse Effect on the Seller.
(b) Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency
or commission or other federal, state, county, local or other foreign
governmental authority, instrumentality, agency or commission
("Governmental Entity") or any third party, including a party to any
agreement with the Seller, is required by or with respect to the Seller or
the Stockholder in connection with the execution and delivery of this
Agreement and any Related Agreements to which the Seller or the Stockholder
is a party or the consummation of the transactions contemplated hereby and
thereby, except for such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable securities laws.
(c) Subsidiaries. The Seller has never had and, as of the date hereof, has no
Subsidiaries.
(d) Financial Statements. The financial statements of Seller heretofore
delivered by Seller or Stockholder to Buyer hereto attached as Schedule
3.5 (the "Financial Statements"), have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered
thereby, present fairly in all material respects the financial
condition of the Seller as of such dates and the results of operations
of the Seller for such periods, are correct and complete, and are
consistent with the books and records of the Seller.
(e) Title to the Purchased Assets. Seller has good and marketable title to, or
a valid leasehold or license interest in, all of the Purchased Assets, free
and clear of all Liens, and free of any material infractions or
non-compliance with zoning and building laws (collectively, the "Defects");
and (ii) the sale and delivery of the Purchased Assets to the Buyer
pursuant hereto shall vest in the Buyer good and valid title thereto or a
valid leasehold or license interest therein, free and clear of any and all
Liens or Defects; and (iii) the Seller owns, leases or licenses all real,
personal, tangible and intangible property and assets necessary for the
conduct of its business as such business is presently conducted, and all
such property and assets are included in the Purchased Assets. The
Stockholder does not own, lease or license any real, personal, tangible or
intangible property which is used by Seller in the conduct of its business.
(f) Leases. Each lease and sublease to which Seller is a party is legal,
valid, binding, enforceable, and in full force and effect and will
continue to be so on identical terms following the consummation of the
transactions contemplated hereby, and Seller is not in material breach
or default thereunder.
(g) Intellectual Property.
(i) The Buyer shall have no obligations in respect of any
royalties, fees or other obligations in connection with the
Intellectual Property Rights used by the Seller prior to the
Closing.
(ii) Each item of Seller Intellectual Property is free and clear of
any Liens or other encumbrances and the Seller is the
exclusive owner of all Seller Intellectual Property (other
than Seller Intellectual Property which is Intellectual
Property exclusively licensed to the Seller).
(iii) To the extent that any Intellectual Property has been
developed or created independently or jointly by any person
other than the Seller for which the Seller has, directly or
indirectly, paid, the Seller has a written agreement with such
person with respect thereto, and the Seller thereby has
obtained ownership of, and is the exclusive owner of, all such
Intellectual Property and associated Intellectual Property
Rights by operation of law or by valid assignment.
(iv) The Seller has not transferred ownership of or granted any
license of or right to use or authorized the retention of any
rights to use any Intellectual Property or Intellectual
Property Rights that is or was Seller Intellectual Property,
to any other person.
(v) The Seller Intellectual Property constitutes all the
Intellectual Property and Intellectual Property Rights used in
and/or necessary to the conduct of the business of the Seller
as it currently is conducted, planned or is reasonably
contemplated to be conducted, including, without limitation,
the design, development, manufacture, use, import and sale of
products, technology and services (including products,
technology or services currently under development).
(vi) There are no contracts, licenses or other agreements, other
than those executed by an Aura Ceramics Employee, to which the
Seller is a party with respect to any Intellectual Property
and Intellectual Property Rights and no person who has
licensed Intellectual Property or Intellectual Property Rights
to the Seller has ownership rights or license rights to
improvements made by the Seller in such Intellectual Property
which has been licensed to the Seller.
(vii) There are no contracts, licenses or agreements, other than
those executed by an Aura Ceramics Employee, between the
Seller and any other person wherein or hereby the Seller has
agreed to, or assumed, any obligation or duty to warrant,
indemnify, reimburse, hold harmless, guaranty or otherwise
assume or incur any obligation or liability or provide a right
of rescission with respect to the infringement or
misappropriation by the Seller or such other person of the
Intellectual Property Rights of any person other than the
Seller.
(viii) The operation of the business of the Seller as it currently is conducted
or is reasonably contemplated to be conducted, including but not limited to
the design, development, use, import, manufacture and sale of the products,
technology or services (including products, technology or services
currently under development) of the Seller does not infringe or
misappropriate the Intellectual Property Rights of any person, violate the
rights of any person (including rights to privacy or publicity), or
constitute unfair competition or trade practices under the laws of any
jurisdiction, and the Seller has not received notice from any person
claiming that such operation or any act, product, technology or service
(including products, technology or services currently under development) of
the Seller infringes or misappropriates the Intellectual Property Rights of
any person or constitutes unfair competition or trade practices under the
laws of any jurisdiction (nor is the Seller or the Stockholder aware of any
basis therefor).
(ix) Each item of Seller Registered Intellectual Property is valid and
subsisting, and all necessary registration, maintenance and renewal fees in
connection with such Seller Registered Intellectual Property have been paid
and all necessary documents and certificates in connection with such Seller
Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. There are no actions that must be taken
by the Seller within sixty (60) days of the Closing date, including the
payment of any registration, maintenance or renewal fees or the filing of
any documents, applications or certificates for the purposes of
maintaining, perfecting or preserving or renewing any Registered
Intellectual Property. For each product, technology or service of the
Seller that constitutes or includes a copyrightable work, the Seller has
registered the copyright in the latest version of such work with the U.S.
Copyright Office. In each case in which the Seller has acquired any
Intellectual Property rights from any person, the Seller has obtained a
valid and enforceable assignment sufficient to irrevocably transfer all
rights in such Intellectual Property and the associated Intellectual
Property Rights (including the right to seek past and future damages with
respect thereto) to the Seller and, to the maximum extent provided for by,
and in accordance with, applicable laws and regulations, the Seller has
recorded each such assignment with the relevant governmental authorities,
including the PTO, the U.S. Copyright Office, or their respective
equivalents in any relevant foreign jurisdiction, as the case may be.
(x) There are no contracts, licenses or agreements between the
Seller and any other person with respect to Seller
Intellectual property under which there is any dispute known
to the Seller or the Stockholder regarding the scope of such
agreement, or performance under such agreement including with
respect to any payments to be made or received by the Seller
thereunder.
(xi) To the knowledge of the Seller and the Stockholder no person
is infringing or misappropriating any Seller Intellectual
Property.
(xii) The Seller has taken all reasonable steps that are required to
protect the Seller's rights in confidential information and
trade secrets of the Seller or provided by any other person to
the Seller. Without limiting the foregoing, the Seller has,
and enforces, a policy requiring each employee, consultant and
contractor to execute proprietary information, confidentiality
and assignment agreements substantially in the Seller's
standard forms, and all current and former employees,
consultants and contractors of the Seller have executed such
an agreement.
(xiii) No Seller Intellectual Property, Intellectual Property Rights
or service of the Seller is subject to any proceeding or
outstanding decree, order, judgment, agreement or stipulation
that restricts in any manner the use, transfer or licensing
thereof by the Seller or may affect the validity, use or
enforceability of such Seller Intellectual Property.
(xiv) No (A) product, technology, service or publication of the
Seller, (B) material published or distributed by the Seller,
or (C) conduct or statement of Seller, constitutes obscene
material, a defamatory statement or material, false
advertising or otherwise violates any law or regulation.
(h) Contracts. The Seller is not a party to or subject to any contract or
agreement other than those executed by an Aura Ceramics Employee.
(i) Compliance with Laws. Seller is not now charged with or under
investigation with respect to any possible material violation of any
applicable law, statute, ordinance, regulation, rule, order or
requirement.
(j) Taxes. Seller has filed all Tax Returns that it was required to file. All
such Tax Returns were correct and complete in all respects. All Taxes shown
to be due and payable on such Tax Returns by the Seller have been paid. The
Seller has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or
deficiency. The Seller is not the beneficiary of any extension of time
within which to file any Tax Return. No Claim has ever been made by an
authority in a jurisdiction where the Seller does not file Tax Returns
alleging that it is or may be subject to the imposition of any Tax by that
jurisdiction. The Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, consultant, independent contractor, creditor, stockholder, or
other third party. Neither the Seller nor the Stockholder is aware of any
dispute or Claim concerning any liability for Taxes of the Seller. The
Seller has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or
deficiency. The unpaid Taxes of the Seller (i) did not, as of the Last
Balance Sheet Date, exceed the reserve for Tax liabilities set forth on the
face of the Last Balance Sheet (rather than in any notes thereto) and (ii)
do not exceed that reserve as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Seller
in filing its Tax Returns.
(k) Plan. The Aura Ceramics Employees are not covered by any Plan other than
the 401(k) Plan of Seller.
(l) Environmental Matters. The Seller has not received written notice from any
Person, (i) that it has been identified by the EPA or similar state
authority as a potentially responsible party under CERCLA with respect to a
site listed on the "National Priorities List," as in effect as of the
Closing Date, of hazardous waste sites or any similar state list; (ii) that
any Hazardous Materials which the Seller has generated, transported, or
disposed of has been found at any site at which a person has conducted or
has ordered that the Seller conduct a remedial investigation, removal, or
other response action pursuant to any Environmental Law; or (iii) that the
Seller is or shall be a named party to any Environmental Action arising out
of any person's incurrence of costs, expenses, losses, or damages of any
kind whatsoever in connection with the release of Hazardous Materials.
There are no underground fuel or other storage tanks located at any of the
facilities of the Seller. There have been no unpermitted Releases of
Hazardous Materials by the Seller on, upon, into, or from the real estate
or other assets of the Seller or any other property; there have been no
unpermitted Releases of Hazardous Materials on, upon, into or from the real
estate or other assets of the Seller by any other persons; there have been
no Releases on, upon, from, or into any neighboring real property which,
through the soil, groundwater, or surface water, can reasonably be expected
to come to be located on, upon, or under the real estate or other assets of
the Seller.
(m) Employees. Seller is in compliance in all material respects with applicable
federal, state and local laws affecting labor, employment and employment
practices, including terms and conditions of employment and wages and
hours, and, there are, and have been during the past five (5) years, no
complaints against the Seller pending or, to the knowledge of the Seller
and the Stockholder, threatened before the National Labor Relations Board
or any similar state or local agency. Upon termination of the employment of
any employee of the Seller, to the knowledge of the Seller and the
Stockholder, neither the Buyer nor the Purchased Assets will be subject to
any claim by any such employee for "severance payment" or any other payment
by reason of anything done by the Seller prior to or after the Closing.
(n) Litigation. There are no claims pending or threatened (or any facts
which could lead to such a Claim) by, or against the Seller or to which
the Seller or the Stockholder or their respective businesses,
properties or assets, at law or in equity, before any federal, state,
local or foreign court or any other governmental or administrative
agency or tribunal or any arbitrator or arbitration panel, and (b)
there are no judgments, orders, rulings, charges, decrees, injunctions,
notices of violation or other mandates against the Seller to which the
Seller or the Stockholder is a party with respect to the businesses,
properties or assets of the Seller.
(o) Brokers. Neither the Seller nor the Stockholder nor anyone acting on
their behalf has engaged, retained, nor incurred any liability to any
broker, investment banker, finder or agent or has agreed to pay any
brokerage fees, commissions, finder's fees or other fees with respect
to this Agreement or the transactions contemplated hereby.
(p) Disclosure of Material Information. There is no fact or circumstance
known to the Seller or the Stockholder which now or hereafter has a
Material Adverse Effect on the Seller and which has not been set forth
in this Agreement or in any other document delivered in connection
herewith. Without limiting the generality of the foregoing, the
Stockholder has not heretofore taken any actions, nor is there any
existing fact or circumstance relating to Stockholder, which now or
hereafter has a Material Adverse Effect on Buyer after the consummation
of the purchase and sale of the Purchased Assets contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
4.1 Organization and Qualification. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the state of Minnesota,
with full corporate power and authority to own, use or lease its properties and
to conduct its business as such properties are owned, used or leased and as such
business is conducted.
4.2 Authority. The Buyer has the requisite corporate power and authority to
enter into this Agreement and each of the Purchase Documents and to carry out
the transactions contemplated hereby or thereby. The execution, delivery and
performance of this Agreement and each of the Purchase Documents by the Buyer
has been duly and validly authorized and approved by all necessary corporate
action. This Agreement and each of the Purchase Documents constitute the legal
and binding obligation of the Buyer, enforceable against the Buyer in accordance
with its terms, except that the enforceability hereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding may be brought.
4.3 Brokers. The Buyer has not engaged, retained, or incurred any liability to
any broker, investment banker, finder or agent or has agreed to pay any
brokerage fees, commissions, finder's fees or other fees with respect to this
Agreement or the transactions contemplated hereby.
4.4 Lease. The Buyer shall assume at the closing any and all obligations of
Seller and Stockholder under and pursuant to that certain amended and restated
lease agreement dated as of October 1, 1997, by and between Winnetka Properties,
L.L.C. (the "Landlord") and the Seller (the "Lease") relating to that portion of
the building located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ known as
Winnetka Properties which is currently being leased by Seller (the "Leased
Premises"), including but not limited to any and all environmental cleanup
obligations with respect to the Leased Premises and the $200,000 collateral
requirements which are set forth and contained in the Lease; provided, however,
that the Seller or Stockholder shall pay to the Landlord the $100,000 fee
required to be paid to the Landlord for its consent to the assignment of the
Lease by Seller to Buyer, the release of Seller from any further obligations
under the Lease, and the release of Stockholder from its guaranty of the Lease;
provided further, however, that the Buyer shall have no obligation to the
Seller, the Stockholder or the Landlord, to pay or reimburse Seller or
Stockholder for such fee.
4.5 Sole Representations and Warranties. The representations and warranties
contained in this Article IV are the only representations and warranties made by
the Buyer in connection with the transactions contemplated by this Agreement and
supersede any and all previous written or oral statements made by the Buyer to
the Seller or the Stockholder.
ARTICLE V
COVENANTS
Covenants of the Seller. The Seller and the Stockholders each shall
keep, perform and fully discharge the following covenants and agreements:
(a) Transfer of Necessary Permits. From and after the Closing Date, the
Seller will use its best efforts to assist the Buyer in obtaining all
of the Necessary Permits and all other permits, licenses, and leases
which are associated with the Business as presently conducted on or
after the Closing Date, to the extent the same are by their terms and
by law transferable.
(b) Retained Liabilities. From and after the Closing Date , the Seller
agrees to pay, perform and fully discharge all of the Retained
Liabilities as they come due.
(c) Non-Disclosure of Proprietary Information. The Seller agrees to hold
Proprietary Information in confidence and not disclose it, except to its
employees or representative to whom disclosure is necessary to effect the
purposes of this Agreement and who are similarly bound to hold such
information in confidence. In addition, the Seller shall use its best
efforts to prevent inadvertent or unauthorized disclosure, publication, or
other dissemination of any Proprietary Information. For the purposes of
this Agreement, "Proprietary Information" means information or material
included in the Purchased Assets and proprietary to the Buyer or is
designated as Proprietary Information by the Buyer or is not generally
known by personnel outside of the employment of the Buyer including,
without limitation, financial information, applications, technical and
business data, know-how, formulae, processes, models, designs, plans,
drawings, specifications, schematics, samples, reports, data charts,
customer lists, vendor lists, studies, price lists, findings, inventions,
trade secrets, circuitry, software, programs, source code listings or other
documentation or designs of such party.
(d) Tax Matters. The Seller and Stockholder shall be responsible for and
shall cause to be prepared and duly filed all Tax Returns relating to
Taxes of the Seller.
(e) Waiver of Compliance with the Bulk Sales Act. In connection with the
transactions contemplated hereby, the parties shall waive compliance
with the provisions of Article 6 of the Uniform Commercial Code Bulk
Transfers and the Bulk Sales Act, to the extent applicable, and any
other applicable United States, state or provincial bulk sales act or
statute ("Bulk Sales Acts").
(f) WARN; COBRA. The Seller shall terminate the employment of all of its
employees simultaneously with the Closing and shall be responsible for
any notice required under or liability associated with the Worker
Adjustment and Retraining Notification Act (29 U.S.C. ss.ss.2101 to
2109), COBRA group health plan continuation coverage (29 U.S.C. ▇▇.▇▇.
601608 and 26 U.S.C. ss.4980B) and any applicable State or local plant
closing, mass layoff, relocation, or severance, or continuation
coverage laws associated with the employees which takes place or arises
on or before the Closing Date.
(g) The Seller shall remove all Liens and Defects other than the Assumed
Liabilities.
5.2 Covenants of Buyer. The Buyer shall keep, perform and fully discharge the
following covenants and agreements:
(a) The Buyer shall abide by and assume, perform, pay or discharge, any and
all obligations under and pursuant to the Lease relating to the Leased
Premises, including but not limited to any and all environmental
cleanup obligations with respect to the Leased Premises which are set
forth and contained in the Lease; provided, however, that the Seller or
the Stockholder shall satisfy the collateral requirement set forth in
the Lease and any agreements and documents related thereto, to the
satisfaction of the Landlord; provided further, however, that the Buyer
shall have no obligation to the Seller, the Stockholder or the
Landlord, to satisfy such collateral requirement.
(b) On and after the closing, Buyer shall comply with all environmental
laws relating to the Leased Premises, obtain any required environmental
permits with respect to Buyer's operations, and be responsible for any
required cleanup of the Leased Premises resulting from any
environmental action taken with respect to the Leased Premises if such
action arises.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Conditions Precedent to Obligations of Buyer. The obligations of the
Buyer to proceed on the Closing Date shall be subject (as its discretion) to the
satisfaction, on or prior to the Closing, of all of the following conditions:
(a) The representations and warranties of the Seller and Stockholder herein
are true in all material respects on the date hereof and as of the
Closing Date, with the same effect as though made at such time.
(b) Seller and Stockholder have complied with each and all of the covenants
and agreements required to be performed or complied with by either of
them on or prior to the Closing Date.
(c) Title to the Purchased Assets shall have been sold, transferred,
assigned, and conveyed to Buyer free and clear of any and all
mortgages, security interests, liens, and encumbrances whatsoever.
(d) Buyer shall have closed on the following financing transaction with
Excel Bank: (i) a One Million and 00/100 Dollars ($1,000,000) five (5)
year term loan, and (ii) a Two Hundred Thousand and 00/100 Dollars
($200,000) working capital line of credit.
(e) The Landlord shall have consented in writing to the Assignment of the
Lease by Seller to Buyer; such consent shall contain the
acknowledgement and agreement of the Landlord that Buyer shall not be
responsible for satisfying the collateral obligation described in
Section 4.4 hereof; and which consent shall otherwise be acceptable in
form and substance to the Buyer and Excel Bank.
(f) The Landlord shall have executed and delivered to Buyer an estoppel
certificate in customary form, which is acceptable, in form and
substance, to the Buyer and Excel Bank.
The foregoing condition are for the sole benefit of the Buyer and, therefore,
any or all of such conditions may be waived by the Buyer in its sole discretion.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
7.1 Conditions Precedent to Obligations of Seller. The obligations of the Seller
to proceed on the Closing Date shall be subject (in its discretion) to the
satisfaction, on or prior to the Closing, of all of the following conditions:
(a) The representations and warranties of the Buyer herein are true in all
material respects on the date hereof and as of the Closing date with
the same effect as though made at such time.
(b) Buyer has complied with each and all of the covenants and agreements
required to be performed or complied with on or prior to the Closing
Date.
The foregoing conditions are for the sole benefit of the Seller and, therefore,
any or all of such conditions may be waived by the Seller in its sole
discretion.
Seller and Stockholder acknowledge and agree that Buyer shall have no obligation
to obtain from the Landlord a release of Seller and Stockholder of their
respective obligations under the Lease and the agreements and documents related
thereto.
ARTICLE VIII
INDEMNIFICATION
Survival of Representations and Warranties. Each and every
representation and warranty set forth in this Agreement shall survive the
Closing without limitation.
8.2 Indemnification.
(a) The Seller and the Stockholder shall, jointly and severally, indemnify,
defend and hold the Buyer, and their respective officers, directors,
consultants, employees, owners, agents and Affiliates, harmless from and
against any and all damages, losses, obligations, deficiencies,
liabilities, claims, encumbrances, penalties, costs, and expenses,
including reasonable attorneys' fees and costs ("Losses"), in connection
with any Loss which the Buyer may suffer or incur, resulting from, related
to or arising out of any of the following: (i) any breach of a
representation or warranty (which survives pursuant to Section 5.1 above
and only for so long as such survival), (ii) non-fulfillment of any of the
covenants of the Seller or the Stockholder in this Agreement; (iii) any of
the Retained Liabilities or the Retained Assets; (iv) fraud, intentional
misrepresentation (which survives pursuant to Section 5.1 above and only
for so long as such survival) on the part of each of the Seller or
Stockholder; (v) any Taxes required to be paid by the Seller or the
Stockholder or with respect to the Purchased Assets or the Business for any
period ending on or before the Closing Date; (vi) any and all actions,
suits, investigations, proceedings and claims relating to the conduct of
the Business by the Seller on or prior to the Closing Date and any and all
actions, suits, investigations, proceedings, demands, assessments, audits,
judgments and claims arising out of any of the foregoing.
(b) The Buyer shall indemnify, defend and hold the Seller and its officers,
directors, consultants, employees, owners, agents and Affiliates, harmless
from and against any and all Losses, in connection with any Loss which such
indemnitee may suffer or incur, resulting from, related to or arising out
of any of the following: (i) any breach of a representation or warranty
(which survives pursuant to Section 5.1 above and only for so long as such
survival), (ii) nonfulfillment of any of the covenants of the Buyer in this
Agreement; (iii) fraud, intentional misrepresentation (which survives
pursuant to Section 5.1 above and only for so long as such survival) on the
part of the Buyer; (iv) any and all actions, suits, investigations,
proceedings, and claims relating to the conduct of the Business by the
Buyer after the Closing Date, (v) the Assumed Liabilities, or (vi) any and
all liabilities, actions, suits, investigations, proceedings, demands,
assessments, audits, Liens, judgments and claims arising out of any of the
foregoing or out of the conduct of the Business by the Buyer after the
Closing.
(c) For purposes of this Article V, Losses for breach of any
representation, warranty or covenant contained in this Agreement shall
be determined without giving effect to "material," "materiality" or
"Material Adverse Effect."
(d) Buyer hereby acknowledges and agrees that the indemnification set forth
in subsection (b) above shall inure to the benefit of the Stockholder,
as the assignee of Seller pursuant to Article 2.4(e) hereof,
notwithstanding the subsequent liquidation of Seller.
8.3 Notice and Opportunity to Defend. If there occurs an event for which an
indemnitee asserts an indemnifiable event pursuant to Section 5.2, the
indemnitee shall promptly notify the indemnitors. If such event involves (a) any
Claim or (b) the commencement of any action, suit or proceeding by a third
person, the indemnitee will give the indemnitors prompt written notice of such
Claim or the commencement of such action, suit or proceeding, provided, however,
that the failure to provide prompt notice as provided herein will relieve the
indemnitors of their obligations hereunder only to the extent that such failure
prejudices the indemnitors hereunder. In case any such action, suit or
proceeding shall be brought against an indemnitee and it shall notify the
indemnitors of the commencement thereof, the indemnitors shall be entitled to
participate therein and, to the extent that they desire to do so, to assume the
defense thereof, with counsel reasonably satisfactory to the indemnitees and,
after notice from the indemnitors to the indemnitees of such election so to
assume the defense thereof, the indemnitors shall not be liable to the
indemnitees hereunder for any attorneys' fees or any other expenses, in each
case subsequently incurred by the indemnitees, in connection with the defense of
such action, suit or proceeding. The indemnitees each agree to cooperate fully
with the indemnitors and their counsel in the defense against any such action,
suit or proceeding. In any event, the each indemnitee shall have the right to
participate at its own expense in the defense of such action, suit or
proceeding. In no event shall the indemnitors be liable for any settlement or
compromise effected without their prior consent. If, however, an indemnitee
refuses to consent to a bona fide offer of settlement which the indemnitors wish
to accept, such indemnitee may continue to pursue such matter, free of any
participation by the indemnitors, at the sole expense of such indemnitee. In
such event, the obligation of the indemnitors to such indemnitee shall be equal
to the lesser of (i) the amount of the offer or settlement which the indemnitors
wish to accept (which must include the unconditional release of such indemnitee
from all liability with respect to the Claim at issue), which such indemnitee
refused to accept plus the costs and expenses of such indemnitee prior to the
date the indemnitors notified the indemnitees of the offer of settlement and
(ii) the actual out-of-pocket amount such indemnitee is obligated to pay as a
result of its continuing to pursue such matter.
8.4 Adjustment for Insurance and Taxes. The amount which an indemnitor is
required to pay to, for or on behalf of an indemnitee pursuant to this Article V
shall be adjusted (including, without limitation, retroactively) (i) by any
insurance proceeds actually recovered by or on behalf of such indemnitee in
reduction of the related indemnifiable loss (the "Indemnifiable Loss") and (ii)
to take account of any Tax benefit realized as a result of any Indemnifiable
Loss. Amounts required to be paid, as so reduced, are hereafter sometimes called
an "Indemnity Payment." If an indemnitee shall have received or shall have had
paid on its behalf an Indemnity Payment in respect of an Indemnifiable Loss and
shall subsequently receive insurance proceeds in respect of such Indemnifiable
Loss, or realize any Tax benefit as a result of such Indemnifiable Loss, then
the indemnitee shall pay to the indemnitor the amount of such insurance proceeds
or Tax benefit or, if lesser, the amount of the Indemnity Payment.
8.5 Right of Set Off. Buyer may set off and deduct any and all amounts now or
hereafter due and payable by Buyer to Seller or Stockholder (including, without
limitation the Deferred Purchase Price and the installments with respect
thereto) against any and all payment obligations now or hereafter due or to
become due by either the Seller or the Stockholder to the Buyer under this
Agreement and any and all other amounts now or hereafter due or to become due by
either Seller or Stockholder to Buyer. Such right of set off shall continue to
be effective and available to Buyer notwithstanding the assignment by Seller to
Stockholder of Seller's rights and entitlements pursuant to Article 2.4(e)
hereof or the liquidation of Seller.
8.6 Limited Recourse. Notwithstanding anything to the contrary contained herein,
after the Closing Date the provisions of this Article shall be the sole recourse
of the parties hereto, other than any claims made by any party for specific
performance, and such recourse is explicitly limited to the dollar amounts and
time limits set forth in this Agreement.
ARTICLE IX
MISCELLANEOUS
Fees and Expenses. Each of the parties hereto will pay and discharge
its own expenses and fees in connection with the negotiation of and entry into
this Agreement and the consummation of the transactions contemplated hereby.
9.2 Notices. All notices, requests, demands, consents and communications
necessary or required under this Agreement or any other Purchase Document to
which the Seller is a party shall be made in the manner specified, or, if not
specified, shall be delivered by hand or sent by registered or certified mail,
return receipt requested, or by telecopy (receipt confirmed) to:
if to the Buyer:
Alpha Ceramics, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile Transmission Number: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Winthrop & Weinstine, P.A.
3000 ▇▇▇▇ ▇▇▇▇▇▇▇▇ Plaza
▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile Transmission Number: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Seller or Stockholder:
Aura Systems, Inc.
Aura Ceramics, Inc.
▇▇▇▇▇▇▇ ▇. Froch
Office of the General Counsel
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile Transmission Number: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, requests, demands, consents and other communications shall be
deemed to have been duly given or sent two (2) days following the date on which
mailed, or on the date on which delivered by hand or by facsimile transmission
(receipt confirmed), as the case may be, and addressed as aforesaid.
9.3 Successors and Assigns. All covenants and agreements set forth in this
Agreement and made by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the successors and assigns of such party, whether or not
so expressed, except that neither party may assign or transfer any of their
respective rights or obligations under this Agreement without the consent in
writing of the other, except in connection with a merger of such party with a
third party or a sale of all or substantially all the assets or stock of such
party to a third party.
9.4 Counterparts; Descriptive Headings; Variations in Pronouns. This Agreement
may be executed in any number of counterparts and by the different parties
hereto on separate counterparts, each of which when so executed and delivered
shall be an original, but all of which together shall constitute one and the
same instrument, and it shall not be necessary in making proof of this Agreement
to produce or account for more than one such counterpart. The headings of the
sections and paragraphs of this Agreement have been inserted for convenience of
reference only and shall not be deemed to be part of this Agreement. All
pronouns and any variations thereof refer to the masculine, feminine or neuter,
singular or plural, as the identity of the Person or Persons may require.
9.5 Severability; Entire Agreement. If any provision contained herein is held
unenforceable, the enforceability of any such provision in every other respect
and of the remaining provisions hereof shall not be in any way impaired or
affected. This Agreement, including the Schedules and Exhibits referred to
herein, is complete, and all promises, representations, understandings,
warranties and agreements with reference to the subject matter hereof, and all
inducements to the making of this Agreement relied upon by any of the parties
hereto, have been expressed herein or in said Schedules or Exhibits. This
Agreement may not be amended except by an instrument in writing signed on behalf
of the Seller and the Buyer.
9.6 Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement or the other Purchase Documents to which the Buyer,
on the one hand, and Seller and/or Stockholder, on the other hand, is a party,
or where any provision hereof or thereof is validly asserted as a defense, the
successful party shall be entitled to recover reasonable attorneys' fees in
addition to any other available remedy.
9.7 Course of Dealing. No course of dealing and no delay on the part of any
party hereto in exercising any right, power, or remedy conferred by this
Agreement shall operate as a waiver thereof or otherwise prejudice such party's
rights, powers and remedies. The failure of any of the parties to this Agreement
to require the performance of a term or obligation under this Agreement or the
waiver by any of the parties to this Agreement of any breach hereunder shall not
prevent subsequent enforcement of such term or obligation or be deemed a waiver
of any subsequent breach hereunder. No single or partial exercise of any rights,
powers or remedies conferred by this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
9.8 GOVERNING LAW. THIS AGREEMENT, INCLUDING THE VALIDITY HEREOF AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
9.9 WAIVER OF JURY TRIAL. EACH OF THE BUYER, THE SELLER AND THE STOCKHOLDER
HEREBY EXPRESSLY WAIVES ITS OR HIS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OTHER
PURCHASE DOCUMENT TO WHICH THE SELLER IS A PARTY OR THE PURCHASED ASSETS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
[Remainder of Page Intentionally Left Blank]
THE OBLIGATION OF THE BUYER TO PAY, AND THE RIGHTS OF THE SELLER AND THE
STOCKHOLDER TO RECEIVE, THE DEFERRED PURCHASE PRICE AND THE INSTALLMENT PAYMENTS
WITH RESPECT THERETO PURSUANT TO ARTICLE 2.4 HEREOF ARE EXPRESSLY SUBJECT TO THE
PROVISIONS OF (1) THAT CERTAIN SUBORDINATION AGREEMENT DATED AS OF
_______________, 2000, BY AND BETWEEN BUYER, SELLER, STOCKHOLDER AND EXCEL BANK,
AND (2) THAT CERTAIN SUBORDINATION AGREEMENT DATED AS OF ______________, 2000,
BY AND AMONG BUYER, SELLER, STOCKHOLDER AND LANDLORD.
IN WITNESS WHEREOF the parties hereto have executed this Agreement
under seal as of the date first set forth above.
ATTEST: ALPHA CERAMICS, INC.
______________________________ By:
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
ATTEST: AURA CERAMICS, INC.
______________________________ By:
-------------------------------------
Name: ______________________________
Title: ______________________________
ATTEST: AURA SYSTEMS, INC.
______________________________ By:
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief
Operating Officer
MPL1: 328666-9
Schedule 1.1
Definitions
"Affiliate" means when used with respect to any Person, (a) if such
Person is a corporation, any officer or director thereof and any Person which
is, directly or indirectly, the beneficial owner (by itself or as part of any
group) of more than five percent (5%) of any class of any equity security
thereof, and, if such beneficial owner is a partnership, any general or limited
partner thereof, or if such beneficial owner is a corporation, any Person
controlling, controlled by or under common control with such beneficial owner,
or any officer or director of such beneficial owner or of any corporation
occupying any such control relationship, (b) if such Person is a partnership,
any general or limited partner thereof and (c) any other Person which, directly
or indirectly, controls or is controlled by or is under common control with such
Person. For purposes of this definition, (i) "control" (including the
correlative terms "controlling," "controlled by" and "under common control
with"), with respect to any Person, shall mean possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise; and (ii) all employees, stockholders, consultants and
agents of a party and any stockholder of such party shall be considered an
Affiliate of such party.
"Assignment of Lease" means the Assignment of Lease by and between the
Seller, the Buyer and Winnetka Properties, L.L.C. with respect to the real
property located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇, in form and substance acceptable to both Buyer and Seller.
"Aura Ceramics Employees" means, individually or collectively, as the
context requires, (i) ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Oberant, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
and (ii) any previous employee of Seller who was not been an officer, director
or employee of Stockholder.
"▇▇▇▇ of Sale" means the ▇▇▇▇ of Sale of even date herewith given by
the Seller to the Buyer in form and substance acceptable to Buyer.
"Business Day" means any day, excluding Saturday, Sunday and any other
day on which federally chartered national banks are required by law to close.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended, and the regulations thereunder, and court
decisions in respect thereof, all as the same shall be in effect at the time.
"Charter" means the Certificate of Incorporation, Articles of
Incorporation or Organization or other organizational document of a corporation,
as amended and restated through the date hereof.
"Claim" means an action, suit, proceeding, hearing, investigation,
litigation, charge, complaint, claim or demand.
"Closing" and "Closing Date" shall have the meanings ascribed to such
terms in Section 2.5.
"Code" means the Internal Revenue Code of 1986, and the regulations
thereunder, published Internal Revenue Service rulings, and court decisions in
respect thereof, all as the same shall be in effect at the time.
"Defects" shall have the meaning ascribed to such term in Section 3.8.
"Environmental Action" means any administrative, regulatory or judicial
action, suit, demand, demand letter, claim, notice of noncompliance or
violation, investigation, request for information, proceeding, consent order or
consent agreement relating in any way to any Environmental Law or any
Environmental Permit, including, without limitation, (a) any claim by any
governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any Environmental Law
and (b) any claim by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials, damage to the environment or alleged injury or threat of
injury to human health or safety from pollution or other environmental
degradation.
"Environmental Law" means any applicable federal, state or local law,
statute, rule, regulation, or ordinance relating to the environment, human
health or safety from pollution or other environmental degradation or Hazardous
Materials, including, without limitation, CERCLA, the Resource Conservation and
Recovery Act, the Hazardous Materials Transportation Act, the Clean Water Act,
the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide and Rodenticide
Act and the Occupational Safety and Health Act, and any similar state and local
laws or bylaws, the rules, regulations and interpretations thereunder, all as
the same shall be in effect from time to time.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
any similar or successor federal statute, and the rules, regulations and
interpretations thereunder, all as the same shall be in effect at the time.
"ERISA Affiliate" means, for purposes of Title IV of ERISA, any trade
or business, whether or not incorporated, that together with the Seller or any
Subsidiary of the Seller, would be deemed to be a "single employer" within the
meaning of Section 4001 of ERISA, and, for purposes of the Code, any member of
any group that, together with the Seller, is treated as a "single employer" for
purposes of Section 414 of the Code.
"Hazardous Materials" means (a) petroleum or petroleum products,
natural or synthetic gas, asbestos, urea formaldehyde foam insulation and radon
gas, (b) any substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar import, under any
Environmental Law and (c) any other substance exposure to which is regulated
under any Environmental Law.
"Intellectual Property" means any or all of the following (i) works of
authorship including, without limitation, computer programs, source code and
executable code, whether embodied in software, firmware or otherwise,
documentation, designs, files, records, data and mask works, (ii) inventions
(whether or not patentable), improvements, and technology, (iii) proprietary and
confidential information, trade secrets and know how, (iv) databases, data
compilations and collections and technical data, (v) logos, trade names, trade
dress, trademarks and service marks, (vi) domain names, web addresses and sites,
(vii) tools, methods and processes, and (viii) all embodiments of the foregoing
in any form and instantiated in any media.
"Intellectual Property Rights" means worldwide common law and statutory
rights associated with (i) patents and patent applications, (ii) copyrights,
copyright registrations and copyright applications and "moral" rights, (iii) the
protection of trade and industrial secrets and confidential information, (iv)
other proprietary rights relating to intangible intellectual property, (v)
trademarks, trade names and service marks, (vi) analogous rights to those set
forth above, and (vii) divisions, continuations, renewals, reissuances and
extensions of the foregoing (as applicable) now existing or hereafter filed,
issued or acquired.
"Last Balance Sheet Date" means February 28, 2000.
"Lien" means, with respect to any asset, any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien, charge, restriction,
adverse claim by a third party or title defect or encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any assignment or other conveyance of any right to receive
income and any assignment of receivables with recourse against assignor), any
filing of any financing statement as debtor under the Uniform Commercial Code or
comparable law of any jurisdiction and any agreement to give or make any of the
foregoing.
"Material Adverse Effect" means, with respect to any Person, an actual
material adverse impact (other than arising in connection with any impact on the
applicable industry or market generally) on the business, operations, assets,
liabilities, or condition (financial or otherwise) of such Person.
"Person" means any individual, firm, partnership, association, trust,
corporation, limited liability company, governmental body or other entity.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor
thereto.
"Plans" means any:
(i) "Employee Pension Benefit Plan" (as such term is defined
in Section 3(2) of ERISA) which is not a Multiemployer Plan;
(ii) "Employee Welfare Benefit Plan" (as such term is defined
in Section 3(3) of ERISA); and
(iii) Stock purchase, option, or bonus plan, deferred
compensation, severance pay, incentive, merit or performance bonus, vacation,
sick pay or leave, fringe benefit plan, policy, or arrangement, or payroll
practice, which is maintained or contributed to by the Seller or any ERISA
Affiliate, or under which the Seller or any ERISA Affiliate has any liability or
contingent liability.
"Proprietary Information" shall have the meaning ascribed to it in Section
4.1(d) herein.
"Purchase Documents" means this Agreement, the ▇▇▇▇ of Sale, the
Assignment of Lease, and any other certificate, document, instrument, stock
power, or agreement executed in connection therewith.
"Release" means any release, issuance, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment or into or out of
any property, including the movement of Hazardous Materials through or in the
air, soil, surface water, ground water, or property other than in compliance
with all Environmental Laws and Permits.
"Seller Intellectual Property" means any Intellectual Property and
Intellectual Property Rights that are owned by or exclusively licensed to the
Seller.
"Seller Registered Intellectual Property" shall have the meaning
ascribed to it in Section 3.11 herein.
"Subsidiary" means, with respect to any Person (a) any corporation,
association or other entity of which at least a majority in interest of the
outstanding capital stock or other Equity Securities having by the terms thereof
voting power under ordinary circumstances to elect a majority of the directors,
managers or trustees thereof, irrespective of whether or not at the time capital
stock or other Equity Securities of any other class or classes of such
corporation, association or other entity shall have or might have voting power
by reason of the happening of any contingency, is at the time, directly or
indirectly, owned or controlled by such Person, or (b) any entity (other than a
corporation) in which such Person, one or more Subsidiaries of such Person, or
such Person and one or more Subsidiaries of such Person, directly or indirectly
at the date of determination thereof, has at least majority ownership interest.
"Tax" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Schedule 2.3
Trade Accounts Payable of the Seller as of the date of closing
as derived from the books and records of Seller
Schedule 2.5
Purchase Price Allocation for purposes of
IRS Section 1060
Schedule 3.1
(Seller's disclosure schedule)
Schedule 3.5
Seller's Financial Statements