Exhibit 2(a)
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of the 18th day of January,
2002 by and between TRANSMATION, INC., an Ohio corporation (hereinafter
"Seller") and ▇▇▇▇▇▇ CORPORATION, an Ohio corporation, or its nominee
(hereinafter "Buyer").
WHEREAS, Seller is engaged, in part, in the business of sales and
distribution of meter and measurement controls, as well as assembly and meter
modification (the "Business"); and
WHEREAS, Seller desires to sell and Buyer desires to purchase the
assets and inventory used by Seller in conducting the Business and the Business
as a going concern, upon terms and conditions set forth below;
NOW, THEREFORE, in consideration of the respective representations,
warranties, and covenants contained herein, and intending to be legally bound
hereby, the parties agree as follows:
I. SALE OF ASSETS
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A. ASSETS PURCHASED. Effective as of the Closing Date, as hereinafter
specified, Seller shall grant, convey, transfer, assign and deliver to Buyer, by
good and marketable title free and clear of all liens, claims security interests
and encumbrances and causes of action of any nature whatsoever, and Buyer shall
purchase and receive from Seller, the following assets of the Seller that are
used exclusively in the Seller's Business (collectively, the "Assets"):
1. INVENTORY. All raw material, work in process and all finished
goods inventory, all meters, parts, measurement devices, and assemblies listed
on Schedule I.A.1 to this Agreement (the "Inventory").
2. PROPERTY AND EQUIPMENT. All machinery and equipment used in the
Business, associated spare parts inventories, supplies on hand, furniture,
office equipment, computer hardware
and software, material handling equipment, racking, shelving, leasehold
improvements, listed on Schedule I. A.2 to this Agreement ("Property and
Equipment").
3. CONTRACTS, LEASES, ORDERS, ETC. The rights and obligations of
Seller under the agreements and contracts, the open purchase orders with
customers, leases, and open purchase orders with vendors, all as listed on
Schedule I.A.3; provided, however, that the Buyer shall not assume any defaults
under any of the same.
4. RECORDS. All of the books and records of Seller relating to the
Business, including but not limited to, receivable records, credit histories,
sales invoices, vendor invoices, purchase orders, invoices, contracts, customer
lists, supplier records, business backlog and all other documents, catalogs and
marketing materials used by Seller in the Business, and specifically all records
related to the measurement and control business acquired from each EIL
Corporation and Metermaster, Inc.
5. TRADEMARKS AND INTELLECTUAL PROPERTY. The trademarks and trade
names and domain names listed on Schedule I.A.5 (collectively, the
"Trademarks"). All patents, copyrights, engineering drawings and specifications,
customer lists, pricing, marketing material, vendor information, licenses,
permits, design material, customer correspondence, templates, designs, customer
drawings, and all intangible property of any nature used solely in connection
with the Business. Buyer and Seller agree that, except as set forth below, after
the Closing, Seller shall have no further right to or claim to use the
Trademarks and the Seller shall not use the same after the Closing Date.
6. SOFTWARE LICENSES. All right, title and interest in the current
software
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licenses used by the Business listed on Schedule I.A.6.
7. EDI AGREEMENTS. Intentionally Omitted.
8. ACCOUNTS RECEIVABLES. All accounts receivable of the Business
listed on Schedule I.A.8 (the "Accounts Receivable").
9. DEPOSITS. All prepaids and deposits listed on Schedule I.A.9.
10. GOODWILL. All goodwill related to the Business and the Business
as a going concern.
12. DOMAIN NAME AND WEBSITE. The Internet domain name
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, the web site for ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ all related intangible and
tangible property rights related to said domain name and web site.
13. NON-DISCLOSURE RIGHTS. Seller shall partially assign to Buyer
the non-disclosure rights as the non-disclosure rights pertain to the Business
pursuant to the Agreements between each ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, and ▇▇▇▇▇▇ Equity L.P. on the one part and Transmation, Inc. on the other
part dated April 4, 1997 and Confidentiality Agreements, dated February 4, 1999,
between each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. on the one part and
Metermaster, Inc. on the other part only and the Non-Compete Agreements between
E.I.L Instruments and Transmation Inc. dated April 4, 1997, as they relate to
the Non-Compete and Non-Disclosure portion of each of the Non-Compete Consulting
and Non-Disclosure Agreement by and between ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and E.I.L.
Instruments, Inc. dated June 1, 1993, and Non-Compete and Non-Disclosure
Agreement by and between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and E.I.L.
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Instruments, Inc. dated June 1, 1993 to the extent and as they pertain to the
Business.
B. CASH AND ASSETS EXCLUDED. The Assets being purchased and sold
hereunder do not include the Seller's cash and any deferred tax assets, if any,
the leased copier at the Business's ▇▇▇▇ Valley, Maryland location and any
assets not described in Section I.A.
C. LIABILITIES EXCLUDED. The parties agree, understand and acknowledge
that this is an asset purchase and Buyer is not assuming any liabilities of any
nature whatsoever of Seller, except as specifically set forth herein. Except for
those liabilities being assumed by Buyer as set forth herein, Seller shall
remain solely responsible and liable for any and all liabilities of the Business
up to and including the Closing Date. All the assets conveyed hereunder and the
Business as of the Closing Date as well as the liabilities assumed by Buyer as
set forth herein, and all receivables and payables, and liabilities of any
nature whatsoever created or arising from the ownership and operation of the
Business by Buyer subsequent to the Closing Date shall be the sole property,
liability and responsibility of Buyer. Buyer is not assuming any liability of
Seller related to Seller's sale of products prior to the Closing Date, including
but not limited to warranty work or claims or product liability of any nature
said liabilities being the sole responsibility of the Seller hereunder. Buyer is
not a successor in interest of Seller.
At the Closing, Buyer shall assume and become responsible to pay,
perform and discharge to the extent the same have not been paid, performed or
discharged by Seller prior to the Closing only the following debts, obligations
and liabilities of Seller and no others:
1. The amount of customer deposits for goods to be shipped
subsequent to the Closing Date which customer deposits are listed on Schedule
I.C.1 and for which Buyer
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receives a purchase price reduction as provided herein;
2. The duties and obligations arising subsequent to the Closing Date
pursuant to the contracts, leases and other items listed on Schedule I.A.3;
3. The amount of customer credits to the accounts receivable
balances as reflected on Seller's aged accounts receivable as of the Closing
Date and which are netted to arrive at the total Accounts Receivable balance
hereunder.
II. PURCHASE PRICE AND PAYMENT
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A. PURCHASE PRICE AND ALLOCATION.
1. ASSETS AND BUSINESS. For the Assets and Business conveyed
hereunder, Buyer shall pay to Seller a total purchase price (the "Purchase
Price") equal to the sum of Two Million Eight Hundred Eighty Five Thousand
Twenty Six and 05/100 Dollars ($2,885,026.05) subject to the adjustments
contained herein, plus an amount equal to the Contingency Payment (as defined in
Section II.A.4 hereof), if applicable.
2. PURCHASE PRICE ADJUSTMENTS.
a. The Purchase Price will be adjusted based upon the book value
of the current assets of the Business and the value of the Property and
Equipment transferred hereunder as at the Closing Date. On the Closing Date, the
Seller shall deliver to the Buyer, in writing, an unaudited estimate of the book
value of the current assets of the Business (the "Current Asset Value") and, as
of October 31, 2001, the value of the Property and Equipment (the "Property and
Equipment Value"), which values shall be attached hereto as Schedule
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II.A.2.a. The Current Asset Value shall be based on the sum of the value of the
Inventory (, the net Accounts Receivable and any other Assets that, under
Generally Accepted Accounting Principles, would be classified as current or
short-term assets and which are conveyed to Buyer hereunder. The net value of
the Inventory is estimated to be $638,968 as at June 16, 2002. The parties agree
that, as of January 14, 2002, the extended cost of the gross Inventory is
$1,271,066.81, the Inventory reserve is $445,178.00 and the excluded Inventory
Adjustment is $176,037.00, for a net Inventory value, as of January 14, 2002, of
$649,851.81. The parties agree that the January 14, 2002 values shall be rolled
forward to January 18, 2002 to determine the value of the Inventory on the
Closing date for purpose of the adjustment contemplated by this Section. The
aggregate value of the Accounts Receivable to be included in the Current Asset
Value shall be the total dollar amount of all Accounts Receivable less any
reserved amount for doubtful accounts. The Property and Equipment Value shall be
based on the book value of the Property and Equipment, less accumulated
depreciation, as of October 31, 2001.
The Buyer shall conduct a physical inventory/audit of the current
assets of the Business and the Property and Equipment within 60 days after the
Closing Date and will deliver to the Seller, in writing, the Buyer's
determination of the Current Asset Value and the Property and Equipment value,
each as at the Closing Date. After receiving the Buyer's determination, the
Seller will have 15 days to review such determination, together with any work
papers used in preparation thereof. The Current Asset Value and/or the Property
and Equipment Value determined by Buyer shall be binding on the Seller if it
does not deliver a written objection (a "Dispute Notice") to the Buyer within
such 15 day period. If the Buyer fails to deliver its written
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determination of either the Current Asset Value or the Property and Equipment
Value within the aforementioned 30 day period, the Buyer shall, for the purposes
of this Section II.A.2, be bound by the Current Asset Value and/or the Property
and Equipment Value set forth on Schedule II.A.2.a, for which a value was not
delivered.
In the event of a dispute, Buyer and Seller will use their reasonable
efforts to resolve any such objections and any resolution by them shall be final
and binding on them. If Buyer and Seller do not resolve any such dispute within
the thirty (30) days after Buyer's receipt of the Dispute Notice, then Buyer and
Seller shall, within five business days, submit the determination of Current
Asset Value and/or Property and Equipment Value, or the resolution of only such
item(s) thereof as are in dispute, to a firm of independent public accountants
agreed upon by Seller and Buyer (the "NEUTRAL ACCOUNTANT"), for computation,
verification or resolution in accordance with the provisions of this Agreement.
Buyer and Seller will make readily available to such firm all relevant books and
records (including work papers of a party's independent public accountants) as
such firm reasonably requests and each party will be afforded the opportunity to
present to the Neutral Accountant any material relating to the determination and
to discuss the determination with the Neutral Accountant; provided, however,
that any materials so provided will be provided to all other parties hereto and
no such discussions may take place without all other parties hereto being
present, in person or otherwise, for the same. Such firm's computation or
verification of the Current Asset Value and Property and Equipment Value or
resolution of such disputed item(s) thereof (as the case may be), which Buyer
and Seller will instruct such firm to deliver to them within thirty (30) days
after submission to such firm, will be final and binding upon the parties for
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all purposes, and such firm's fees and expenses therefor will be borne equally
by Buyer and Seller.
If the Current Asset Value as so finally determined exceeds
$1,274,524.00 ("Baseline Current Asset Value"), then the Buyer will pay the
amount of such excess amount within ten (10) days after such final
determination. If the Current Asset Value is less than the Baseline Current
Asset Value, then the Seller will pay the amount of such deficiency to Buyer
within ten (10) days after such final determination.
If the Property and Equipment Value is less than $58,502.00, the
Property and Equipment Value, then the Seller will pay the amount of such
deficiency to Buyer within ten (10) days after such final determination.
All payments pursuant to this Section shall be made by wire transfer of
immediately available funds to an account or accounts specified by the recipient
of such payments, and such payments shall accrue no interest prior to payment on
the date specified herein.
b. If the Buyer does not collect, in full, all Accounts
Receivable in existence on the Closing Date within 60 days after the Closing,
then Buyer shall permit the Seller to attempt collection of any receivables not
so collected by that date. The Seller shall promptly remit any amounts that it
collects on such receivables to Buyer. If, by the date that is 90 days after the
Closing, the Buyer and/or Seller, as the case may be, have not collected the
entire amount of each Account Receivable, the Seller will promptly pay to Buyer
an amount equal to the receivables not so collected (net of reserves
specifically applicable thereto) and the Buyer will irrevocably assign and
transfer all of such uncollected Accounts Receivable to the Seller.
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3. PAYMENT OF PURCHASE PRICE. At the Closing, the Buyer shall pay
the Purchase Price to Seller as follows:
a. ($2,660,026.05) shall be paid in cash or immediately available
funds.
b. The amount of Seventy Five Thousand Dollars ($75,000.00) (the
"Escrow Amount Amount") shall be delivered to US Title Agency, Inc., in escrow,
for a period not to exceed ninety (90) days at Closing pursuant to the terms of
an Escrow Agreement (the "Escrow Agreement").
c. The amount of One Hundred Fifty Thousand Dollars ($150,000)
(the "Holdback Amount") shall be paid to the Seller on October 18, 2002.
4. CONTINGENCY PAYMENT. Buyer shall pay Seller an additional One
Hundred Fifty Thousand Dollars ($150,000.00) (the "Contingency Payment") within
thirty (30) days following the one (1) year anniversary of the Closing Date
hereunder if Buyer's net sales of products from the MAC Group for the one (1)
year period following the Closing Date equal or exceed Eight Million Five
Hundred Thousand Dollars ($8,500,000.00). Net Sales shall mean the invoiced
amount of the MAC Group products sold less sales returns, allowances, and less
credit adjustments. If Buyer's net sales for the MAC Group products are less
than Eight Million Five Hundred Thousand Dollars ($8,500,000.00) as defined
above, then Seller shall not be entitled to the contingency payment hereunder.
5. PURCHASE PRICE ALLOCATION. The Purchase Price shall be allocated
as follows:
Accounts Receivable Book Value at Closing
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Inventory At Value set forth on Schedule II.A.2.a
Fixed Assets, Leaseholds, Leases, $750,000.00
and Templates
Transmation Printed Catalogues $140,000.00
in Stock and at Customers
Transmation CD Catalogue $160,000.00
in Blank Banner
Information Technology Agreement $40,000
Telephone and Usage Referral Agreement $175,000
Transmation Products Rights $269,174.05
Trademarks $20,000.00
Internet Domain Name $15,000.00
Assigned Non-Disclosure & Non-Competes $50,000.00
and Goodwill
Buyer's attorney shall complete the Asset Acquisition Statement,
IRS Form 8594, reflecting said allocations which both parties agree to file with
their respective Federal income tax returns within 90 days after the Closing.
III. CLOSING
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A. CLOSING. The closing of the transactions contemplated by this
Agreement, the transfer of title and the payment of the consideration shall take
place in the offices of ▇▇▇▇▇▇▇ & Co., LPA located in Cleveland, Ohio on the
Closing Date. The Closing Date shall be the date the date hereof.
B. CLOSING DOCUMENTS/DELIVERIES.
1. At Closing, Buyer shall deliver to Seller:
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a. Two Million Six Hundred Sixty Thousand and Twenty Six and
05/100 Dollars ($2,660,026.05) of the Purchase Price to Seller by electronic
wire transfer.
b. Seventy Five Thousand Dollars ($75,000) by electronic wire
transfer to US Title Agency, Inc. as escrow agent pursuant to the Escrow
Agreement.
c. A duly executed Sub-Lease for the premises located at ▇▇▇▇
Valley, Maryland (the "Sublease").
d. A duly executed Telephone Usage Agreement (the "Telephone
Usage Agreement").
e. A duly executed IT Agreement (the "IT Agreement").
f. A duly executed Escrow Agreement.
g. A duly executed assumption agreement for each contract or item
listed on Schedule I.A.3.
2. At Closing, Seller shall deliver to Buyer:
a. A ▇▇▇▇ of Sale transferring good and marketable title to the
Assets purchased hereunder free and clear of any liens, claims, security
interests, liabilities or encumbrances of any nature whatsoever.
b. A duly executed counterpart of each of the Sub-Lease,
Telephone Usage Agreement and IT Agreement.
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c. Assignments for each contract listed on Schedule I.A.3 with
appropriate consents of other parties.
d. The results of lien searches from each county and state where
any of the assets being conveyed hereunder are located, and termination
statements and appropriate release of liens for any liens on the Assets shown by
such search results.
e. Opinion of Seller's Legal Counsel in a form reasonably
acceptable to Buyer.
f. A certificate signed by an officer of Seller confirming that
there has been no material adverse condition affecting the Business since March
31, 2001 that was not otherwise disclosed in this Agreement, and including such
other representations as set forth in Schedule III.B.2.f.
g. A certificate signed by an officer of Seller, that all
representations and warranties contained herein are true and correct as of the
Closing Date.
h. A duly executed Escrow Agreement.
i. Seller will deliver to Buyer an assignment in recordable form,
assigning to Buyer at Closing any rights, tangible or intangible, it has
pursuant to any agreement pursuant to the terms of which it acquired any
interest in any asset, or customers or suppliers, or employees from any third
party within five (5) years of the Closing Date, including all documents
pursuant to the terms of which Seller acquired any such assets or rights,
including but not limited
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to any rights related to the measurement and controls product lines acquired
from Meter Master, Inc. and EIL Corporation.
j. As soon as reasonably feasible following Closing, as agreed by
the parties, or if they are unable to agree, then within 14 days of Closing,
Seller shall deliver to Buyer, as agreed by the parties, or if they are unable
to agree, at the sublease location nearest where said items are currently
located, the following:
i.) Up to six (6) years of MAC mailing lists, if available
ii.) The MAC catalogs
iii.) All tradesmark, trade name, web site and domain name
records and files
iv.) The artwork for the catalog(s)
v.) Up to six (6) years of customer order history, if
available
vi.) Any other assets to be delivered hereunder.
k. Consent and Release of KeyBank.
C. CONDUCT OF BUSINESS.
1. EMPLOYEE RELATED MATTERS.
a. Attached hereto as Schedule III.C.1 is a current list of all
employees (the "Employees") listing the name of each employee of the Business,
the date of hire, current compensation and date and amount of last pay increase.
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b. Buyer and Seller agree:
1. Seller shall be solely liable and responsible for any
payroll including sick pay, accrued and/or unused vacation pay, termination pay,
and benefits, and payroll taxes of any nature, causes of action, arising or
related to Seller's employment of the Employees up to and including the Closing
Date. The Seller agrees to pay all such liabilities on or before the Closing
Date.
2. Buyer shall be solely liable and responsible for any
payroll and payroll taxes and benefits arising or related to Buyer's employment
of any Employees, who accept Buyer's offer of employment, commencing upon the
day after the Closing Date. Buyer is not assuming any employment-related
obligations of Seller.
2. SUBLEASE AND SPACE USAGE MATTERS.
a. SUBLEASE. As of the Closing Date, the rent for the ▇▇▇▇
Valley, Maryland facility shall be prorated, with Seller being responsible for
the rent up to and including the Closing Date and Buyer shall be responsible for
rent subsequent to the Closing Date pursuant to the terms of the Sublease. The
utilities for the ▇▇▇▇ Valley, Maryland facility shall also be prorated as of
the Closing Date. The parties acknowledge the ▇▇▇▇ Valley, Maryland property
shall be occupied by both Buyer and Seller subsequent to the Closing Date. For
purposes of the prorations and ongoing allocation of expenses hereunder as the
close of business on the Closing Date and thereafter, the Seller shall be
responsible for forty percent (40%) of the ▇▇▇▇ Valley, Maryland rent and
utilities and Buyer shall be responsible for sixty percent (60%) of the ▇▇▇▇
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Valley, Maryland rent and utilities, subject to the terms of the Sub-lease.
b. OTHER BUSINESS SPACE. In addition to the space located in ▇▇▇▇
Valley, Maryland, the Seller leases or occupies additional space in connection
with the Business located in Rochester, New York (the "Rochester Space"),
Houston, Texas (the "Houston Space") and Meriden, Connecticut (the "Connecticut
Space"). The Buyer acknowledges and agrees that it will use and occupy each of
the Rochester Space, Houston Space and Connecticut Space for a period of up to
one year after the Closing Date. In connection with its use and occupancy of
such space, the Buyer agrees as follows:
(1) The Buyer will occupy the Rochester space on a month-to month
basis for no more than one year after the Closing Date and will
pay the Seller Two Hundred and Fifty Dollars ($250), in advance
and on the first day of each month following the Closing Date,
for each month or portion thereof that the Buyer occupies such
space after Closing. On the Closing Date, the Buyer will pay the
Seller a pro rated amount of the above rent for the Rochester
Space for the period between the Closing Date and January 31,
2002.
(2) The Buyer will occupy the Houston Space on a month-to month basis
for no more than one year after the Closing Date and will pay the
Seller Sixty Five Dollars ($65), in advance and on the first day
of each month following the Closing Date, for each month or
portion thereof that the Buyer occupies such space after Closing.
On the Closing Date, the Buyer will pay the Seller a pro rated
amount of the above rent for the Houston Space for the period
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between the Closing Date and January 31, 2002.
(3) The Buyer will occupy the Connecticut Space on a month-to-month
basis but, in no event, later than May 31, 2002, at which time
the Seller's lease of such space expires. The Buyer will occupy
the Connecticut Space at no cost for the period between the
Closing Date and March 18, 2002. After March 18, 2002, the Buyer
will pay the Seller Eight Hundred Dollars ($800), in advance and
on the first day of each month following March 18, 2002, for each
month or portion thereof that the Buyer occupies such space after
March 18, 2002. On March 18, 2002, if the Buyer still occupies
the Connecticut Space, the Buyer will pay the Seller a pro rated
amount of the above rent for the Connecticut Space for the period
between the March 18, 2002 and March 30, 2002.
3. ACCOUNTS RECEIVABLE; COLLECTION. Seller acknowledges that
payments for Accounts Receivable may still be sent to Seller subsequent to the
Closing Date. Seller acknowledges that payments on Accounts Receivable received
subsequent to Closing shall constitute property of the Buyer hereunder unless
such Accounts Receivable are subsequently assigned and transferred to the Seller
as contemplated by the last sentence of Section II.A.2.b hereof. Seller agrees
to wire to Buyer, on a weekly basis, the aggregate amount of all checks received
subsequent to the Closing Date on Accounts Receivable; provided, however, that
once the Seller cumulatively receives a total of One Hundred Thousand Dollars
($100,000) or more with respect to Accounts Receivable, the Seller will wire
such amount to Buyer on the next business day. The Buyer shall pay the cost of
any
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such wires. Seller shall obtain the consent and release of KeyBank, N.A. of any
claims, rights and secured interests in the Accounts Receivable.
4. CORRESPONDENCE. All communication received in writing pertaining
to the Business by Seller subsequent to the Closing Date shall be forwarded to
Buyer, at no cost to the Seller.
IV. CONDITIONS PRECEDENT
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A. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER. The Closing
pursuant to this Agreement and the delivery and payment of the Purchase Price at
the Closing and all other obligations of the Buyer to be performed under this
Agreement on or after the Closing Date shall, at the option of Buyer, be subject
to the fulfillment at Closing Date of the following conditions:
1. COMPLIANCE. All the representation, warranties, and covenants
contained herein or referred to herein, and the exhibits attached hereto and all
of which are hereby incorporated herein, shall be true and correct in all
material aspects on the Closing Date, and not omit a material fact which would
make the representations contained herein misleading.
2. DOCUMENTATION. Seller shall deliver at or prior to the Closing
Date, bills of sale, documents of title, instruments, affidavits, assignments of
contracts with proper approval of parties (as may be required), certificates, as
described herein and such other closing documents which Buyer or its counsel
shall reasonably request of Seller, which Buyer or its counsel deem necessary to
evidence full and complete transfer to Buyer, free and clear of all liens,
security interests and encumbrances, of the Assets the business, and interests
sold hereunder, and to
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consummate the transactions contemplated hereunder. Such documents include, but
are not limited to, the documents listed in Section III.B.2 hereof.
3. MISCELLANEOUS. All matters, proceedings, instruments and
documents required to carry out this Agreement or incidental thereto and all
other relevant legal matters shall have been approved at or before Closing by
legal counsel for Buyer and Seller.
B. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The Closing
pursuant to this Agreement and the delivery of the Assets and Business and all
of the obligations of Seller to be performed under this Agreement on or after
the Closing Date at the option of the Seller shall be subject to the fulfillment
at Closing Date of the following:
1. COMPLIANCE. There shall have been no breach by Buyer in the
performance of any of its covenants herein and in any Exhibit or Schedule
hereto, and each of the representations and warranties of Buyer contained or
referred to in this Agreement and in any Exhibit or Schedule hereto shall be
true and correct in all material respects on the Closing Date and not omit a
material fact which would make the representation contained herein misleading.
2. PURCHASE PRICE. The Buyer shall deliver at the Closing Date the
Purchase Price as provided for herein.
3. DOCUMENTS. The Buyer shall have delivered such other closing
documents which Buyer or its counsel shall reasonably request of Seller, which
Buyer or its counsel deem necessary to effect the transactions contemplated
hereby.
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4. MISCELLANEOUS. All matters, proceedings, instruments and
documents required to carry out this Agreement or incidental thereto and all
other relevant legal matters shall have been approved at or before closing by
legal counsel for Seller.
V. REPRESENTATIONS AND WARRANTIES
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A. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer and agrees as follows:
1. ORGANIZATION. Seller is a corporation duly formed and organized
and validly existing and is in good standing under the laws of the State of Ohio
and has the power and authority to own its properties and carry on its business
as now conducted.
2. BINDING AGREEMENT. This Agreement and the transactions
contemplated hereunder is a valid and binding Agreement of the Seller in
accordance with its terms and Seller has taken all necessary corporate actions
to effect this transaction including, but not limited to, having obtained
appropriate approval of its Board of Directors.
3. NO VIOLATION. The execution, delivery and performance of this
Agreement by Seller and the consummation of the transactions contemplated
hereunder will not, at the Closing Date, violate, with or without the giving of
notice or the lapse of time, or both, and will not conflict with, or result in
the breach or termination of any provision of, or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any of the Assets
by reason of any provision of any material indenture, mortgage, deed of trust,
pension or retirement plan, or other instrument or agreement, or any order,
judgment or decree, law, statute, ordinance
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or regulation, or any other restriction of any kind or character, which would
prevent Seller from entering into this Agreement or, at the Closing, from
consummating the transactions contemplated hereby according to the terms herein.
4. GOOD TITLE. Seller has, and at the Closing, Buyer will acquire,
good and marketable title to all Assets and the Business to be sold to Buyer
hereunder, free and clear of all liens, security interests, encumbrances and
claims, and causes of action. The Assets are in good operating condition and
repair (ordinary wear and tear excepted) and immediately capable for use in the
Business.
5. COMPLIANCE WITH LAWS.
a. Except for any violations or noncompliance that do not have a
material adverse effect on the Assets or the Business, Seller is in compliance
with all laws, regulations, ordinances and orders of and federal, state or local
governmental authority relating to the Assets and Business sold (including,
without limitation orders of any environmental protection agency), and Seller
has no notice or knowledge of any violation or claim of violation by it of any
such law, regulation, ordinance or order. There is no judgment or judicial or
administrative decree or order with respect to the Assets sold and no action,
suit, proceeding or investigation is pending or, to the Seller's knowledge,
threatened against Seller which might result in a material adverse change in the
Assets sold or the value thereof, or which questions the legality or validity of
this Agreement or any action taken or to be taken by the parties hereto in
connection with this Agreement.
20
b. Seller in the operation of the Business, and use and operation
of the Assets, is in compliance with all laws, rules and regulations and
ordinances pertaining to the environment, and hazardous waste and there is no
violation under any such law, rule, ordinance, or regulation, except for any
violations or noncompliance that do not have a material adverse effect on the
Assets or the Business.
c. Seller and Seller's places of Business, and especially the
▇▇▇▇ Valley, Maryland facility, meet all the requirements and standards under
the laws and regulations of the Occupational Safety and Hazard Act (OSHA) and
are not in violation of the same, except for any violations or non-compliance
that do not have a material adverse effect on the Assets on the Business. The
Seller has not received any citation or written notice suggesting that it is
violating or has violated the laws and regulations of OSHA in connection with
the Business.
d. Seller's methods and procedures used in the Business are in
compliance with all laws including those pertaining to the EPA, hazardous waste
and OSHA, except for any violations or noncompliance that do not have a material
adverse effect on the Assets on the Business. The Seller has not received any
citation or written notice suggesting that it is violating or has violated the
laws and regulations of the EPA in connection with the Business.
e. Seller has all necessary permits and licenses, including but
not limited to governmental permits and licenses necessary to conduct the
Business in its places of business, except for any licenses or permits the
failure of which to obtain or maintain do not have a material adverse affect on
the Assets or the Business.
21
6. BROKER. Seller shall be solely responsible and liable for any
Broker or commission fees due Capital Formation Group. At Closing, Seller shall
provide Buyer evidence satisfactory to Buyer that Seller has paid or has made
arrangements for payment of said fees acceptable to Capital Formation Group, or
the same shall be paid from the funds at Closing. Seller represents it has
retained no other broker, agent, or finder in relation to this transaction and
no fee is owed to any other party as a broker or agency fee as a result of
Seller's actions in relation to this transaction.
7. CONTRACTS, ETC. Schedule I.A.3 lists all contracts and amendments
and modifications to the same related to, used in, or involved in the Business
that are being transferred to the Buyer. Seller is not in breach of any of the
terms of the same except for any breach which would not have a material adverse
effect on the Business or the Assets. There are no other contracts, other than
those listed on Schedule I.A.3, which pertain to and are material to the
Business as a going concern. The Seller does not currently have any Electronic
Data Interface agreements in place in connection with the Business
8. CONDITION OF ASSETS. All tangible assets and properties which are
part of the Assets being purchased are in good operating condition and repair
(ordinary wear and tear excepted) and are usable in the ordinary course of the
Business, and said assets are fit for the purposes which the assets are being
used in the Business. The Assets constitute all of the assets necessary for the
Buyer to operate the Business after the Closing Date.
9. ABSENCE OF LITIGATION. Seller is not a party to any action, suit,
proceeding or to its knowledge, in any investigation presently pending, nor to
its knowledge, are any claims
22
threatened which are related to or might adversely affect the Assets or the
Business or the transactions contemplated by this Agreement.
10. BOOKS AND RECORDS. The books and records of the Business are, in
all material respects, complete and correct and have been maintained in
accordance with good business practices. Seller's customer and receivable
records for the Business accurately reflect the sales and payment practices of
the customers of the Business.
11. FINANCIAL INFORMATION. Seller has furnished to Buyer, Seller's
financial information related to Sales, Order Backlog and operating costs, and
hereby represents and warrants that the information provided is true and
correct. Attached hereto as Schedule V.A.11 is Seller's Order Backlog report,
dated as of January 16, 2002, which is true and correct in all material
respects. Attached hereto Schedule V.A.11 are unaudited, internally prepared
income statements for the Business for the years ended March 31, 2001, 2000,
1999, and 1998 and for the 8 months ended November 30, 2001 ("Financial
Statements"). The Financial Statements are true and correct in all material
respects, have been prepared in accordance with generally accepted accounting
principles consistent with past practice and fairly represent the results of
operations, selling, general, and administrative costs and gross margins of the
Business. There has been no material adverse change in the Business since March
31, 2001, and the gross margins as reflected therein are still representative of
the Business.
12. TAXES. Seller has paid all payroll taxes, income taxes,
franchise taxes, real estate taxes, personal property, sales taxes, excise
taxes, and fuel taxes, and other taxes applicable to the Business in the
ordinary course as the same become due, and Seller shall remain
23
liable for all of Seller's taxes of any nature subsequent to the Closing Date.
Seller represents that Buyer will incur no transferee liability as a result of
Closing arising from Seller's unpaid taxes for periods prior to the Closing
Date.
13. COMPLIANCE WITH CONTRACTS. Seller is in compliance with all
terms and conditions of the leases, purchase orders, and the contracts listed on
Schedule I.A.3 as of the Closing Date, except for any non-compliance that does
not have a material adverse effect.
14. DEPOSITS. Seller represents that all of its customer deposits as
of the Closing Date are listed on Schedule V.A.14. There are no other customer
deposits related to the Business as of the Closing Date other than those listed
on Schedule V.A.14.
15. QUALIFICATIONS. The Business is qualified to do business in the
states of New York, Baltimore, Florida, Pennsylvania, Connecticut, Texas and any
other states or jurisdictions in which the Business is conducted, except where
the failure to be so qualified does not have a material adverse effect on the
Assets or the Business.
16. SERVICE PROVIDERS. Seller represents there are no material third
party service providers to the Business.
17. PRESS RELEASES. Seller represents there have been no press
releases or other information released to the public pertaining to the sale of
the Business, except as listed on set forth on Schedule V.A.17.
18. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. Seller represents the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act
does not apply to the transaction contemplated by this Agreement.
24
19. CUSTOMERS AND EMPLOYEES. Seller knows of no vendor or customer
who has stated any intention, or likelihood of terminating the customer's or
vendor's relationship with the Business currently, as a result of any sale of
the Business, or as a result of the transaction contemplated by this Agreement.
Seller knows of no employee currently employed in the Business who would refuse
to accept employment with the Buyer.
20. EMPLOYMENT RELATED CLAIMS. Seller has no pending workers'
compensation case, or insurance claims related to the Business, nor does Seller,
after due inquiry, have knowledge of any circumstances which could give rise to
a claim, except for those claims or situations described on Schedule V.A.20.
21. SOFTWARE LICENSES. All software licenses related to the software
used in the Business have been fully paid and Seller has the right to assign the
software licenses to Buyer at Closing.
22. COMMISSIONS. Seller shall fully pay all commissions and costs
and expenses due pursuant to its sales representative agreements for all periods
prior to and including the Closing Date.
23. MARYLAND PREMISES. The ▇▇▇▇ Valley, Maryland real property at
which the Business is operated does not, to the Seller's knowledge, contain a
septic tank, and is served by city water and sewers.
24. INVENTORY. The Inventory is in good and saleable condition;
provided, however, and notwithstanding the foregoing, the Seller makes no
representation or warranty with
25
respect to whether any portion of the Inventory is excessive or obsolete or any
representation or warranty that any Inventory is slow-moving or has been in
inventory for any period of time.
25. EMPLOYMENT MATTERS.
(a) (i) Seller has not entered into any collective bargaining
agreement or other contract with any employee of the Business, union, labor
organization or other employee representative or group of employees and, to
Seller's best knowledge, no such organization or party has made or is making any
attempt to organize or represent, in any way relating to or affecting the
Business, employees of Seller or the Business; (ii) there is no pending
grievance or arbitration and no unsatisfied or unremedied grievance or
arbitration award against Seller with respect to the Business; or any agent,
representative or employee thereof, in any way relating to or affecting the
Business, and to Seller's best knowledge, there is no basis for any such
grievance or arbitration; (iii) there is no unfair labor practice charge,
pending trial of unfair labor practice charges, unremedied unfair labor practice
finding or adverse decision of the National Labor Relations Board or any state
labor authority, or any hearing officer or administrative law judge thereof,
against Seller or any Subsidiary, or any agent, representative or employee
thereof, in any way relating to or affecting the Business and, to Seller's best
knowledge, there is no basis for any such unfair labor practice charge; and (iv)
there is not pending or, to Seller's best knowledge, threatened with respect to
Seller, or its employees any labor dispute, strike or work stoppage in any way
relating to or affecting the Business.
(b) The Business is in full compliance with all applicable laws,
rules,
26
regulations, standards and contracts relating to employment, including those
relating to wages, hours, working conditions, leaves of absence, hiring,
promotion, equal employment opportunity, collective bargaining, occupational
health and safety (including those dealing with employee handling or use of or
exposure to hazardous or toxic substances and the training of employees with
respect to such substances), and the payment and withholding of taxes, special
assessments and other similar obligations, except for any non-compliance that
does not have a material adverse effect on the Business, and Seller has not, in
any way relating to or affecting the Business, received any notice of any
violation of any such law, rule, regulation, standard or contract. Seller and
the Business are in full compliance with all applicable affirmative action and
equal employment opportunity obligations arising under any state or federal law,
regulation, executive order or ordinance or any contract or subcontract with any
governmental entity or other Person, except for any noncompliance that would not
have a material adverse effect on the Business. Seller and the Business has
withheld from the wages and salaries of their employees as is required by law
and to the Seller's best knowledge is not liable for any arrears of wages or any
tax or penalty in connection therewith.
(c) There is no employment-related claim, cause of action,
grievance, judgment or other adverse charge or decision of any kind in any way
relating to or affecting the Business (including any in the nature of employment
discrimination of any type, breach of contract, wrongful discharge, retaliation,
health, safety or right-to-know violations, child labor violations or
non-payment of wages, benefits or wage supplements), under any law, rule,
regulation, standard, collective bargaining agreement or other contract, pending
against the
27
Business or Seller related to the Business, or any of their officers, employees
or agents, and to Seller's best knowledge, there is no basis for any such claim,
cause of action, grievance, judgment or other adverse charge or decision.
(d) To the Seller's best knowledge, no current or former employee
of the Business has any claim against Seller, its officers, employees or agents
under any law, rule, regulation, standard or contract on account of or for: (i)
overtime pay (other than overtime pay for the current payroll period); (ii)
wages or salary for any period other than the current payroll period (other than
obligations to employees resulting from Seller's termination of their employment
on the Closing Date); (iii) vacation, holiday or other time off pay or pay in
lieu thereof (other than time off or pay in lieu thereof earned in respect of
the current year, or obligations to employees resulting from Seller's
termination of their employment on the Closing Date); or (iv) any violation of
any law, rule, regulation, standard or contract relating to the payment of
wages, fringe benefits, wage supplements or hours of work, which amounts and
claims shall remain the sole liability and responsibility of Seller, and Seller
will pay the same in full by the respective due dates.
26. ENVIRONMENTAL.
(a) As used herein, the term "ENVIRONMENTAL LAWS OR REGULATION"
means and includes regulatory programs involving: air emissions; liquid
discharges to streams, ponds, ditches or other surface waters, ground waters, or
publicly-owned treatment works; disposal of solid and/or hazardous wastes;
marking, maintenance and/or removal of electrical equipment containing PCB's;
manufacture and/or construction (including renovation) involving
28
asbestos materials; activities in or adjacent to fresh water wetlands, flood
hazard areas, coastal zone management areas and/or historic preservation areas;
registration, operation, testing and/or removal or replacement of storage tanks
for petroleum products and/or hazardous substances; or emergency, planning and
community right-to-know laws, including submission of hazardous substance
inventory information to federal, state or local authorities.
(b) Seller's assets and the Business being conveyed hereunder are
and have been in full compliance with all applicable Environmental Laws or
Regulations, and all orders and directives of federal, state or local
governments or governmental authorities relating to Environmental Laws or
Regulations, in any way relating to or affecting the Business. The Business has
not ever disposed of hazardous or toxic substances, hazardous wastes or
petroleum (collectively, ("HAZARDOUS SUBSTANCES")) on any of the premises on
which the Business is or has been conducted, and to Seller's best knowledge,
there has been no such disposal by any other Person, including any current or
prior owner or operator of any of such premises. To Seller's best knowledge,
there is no asbestos or asbestos-containing material in any premises on which
the Business is or has been conducted.
(c) (i) to Seller's best knowledge, there are no underground
Hazardous Substance storage tanks located on any premises on which the Business
is conducted; (ii) Seller has NEVER received any requests for information from
federal, state or local agencies concerning the alleged disposal, spill or
release of Hazardous Substances on any premises on which the Business is
conducted: and (iii) Seller has not ever been and is not now, in any way
relating to or affecting the Business, a "potentially responsible party" under
the Comprehensive Environmental
29
Response, Compensation and Liability Act, as amended, or any corresponding state
statute. From the date hereof through and including the Closing Date, Seller
will immediately provide Buyer with a copy of any notice, citation, complaint or
other directive from any Person whereby compliance by Seller, or the Business
with Environmental Laws or Regulations is called into question. To the Seller's
best knowledge, there have been no spills or discharges of Hazardous Substances
on any premised where the Business has been conducted in violation of any
Environmental Law or Regulation.
27. RELATED PARTY TRANSACTIONS. Seller has not, in any way relating
to or affecting the Business or any Asset, indebted in any amount whatsoever to,
nor is there, in any way relating to or affecting the Business or any Asset, any
business relationship, whether under any Contract or otherwise, between Seller
(or an Subsidiary) and any Related Party, nor is any Related Party indebted to
Seller or any Subsidiary in any amount whatsoever in any way relating to or
affecting the Business or any Asset. No Related Party has any interest in any
competitor, supplier or customer of the Business, except for immaterial
interests in publicly held companies. "RELATED PARTY" means any five percent
(5%) or greater stockholder of Seller or of any of its Subsidiaries or any
officer, director or any person who was previously an officer or director in the
last three (3) years, or any spouse, child or Affiliate of any of the foregoing.
28. COMMUNICATIONS AND INQUIRIES. Seller agrees to remit, at no cost
to Seller, all communications pertaining to the Business, subsequent to Closing,
to Buyer. Seller agrees to refer all inquiries received, subsequent to Closing,
pertaining to the Business in accordance with the terms of the IT Agreement and
Telephone Usage Agreement.
30
29. GOING CONCERN. Seller represents that it shall remain an
operating business and a going concern for the twelve (12) months following the
Closing Date.
B. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller and agrees as follows:
1. ORGANIZATION. Buyer is a corporation duly formed and organized
and validly existing and is in good standing under the laws of the State of Ohio
and has the power and authority to own its properties and carry on its business
as now conducted.
2. BINDING AGREEMENT. Buyer possesses full power and authority to
enter into this Agreement and to consummate the transactions contemplated by
this Agreement as provided herein, and this Agreement is a valid and binding
Agreement of Buyer in accordance with its terms.
3. NO VIOLATION. The execution, delivery and performance of this
Agreement by Buyer and the consummation of the transactions contemplated
hereunder will not, at the Closing, violate, with or without the giving of
notice or the lapse of time, or both, any provision of law applicable to Buyer
and will not conflict with, or result in the breach or termination of any
provision of, or constitute a default under, any provision of any indenture,
mortgage, deed of trust, pension or retirement plan, or other instrument or
agreement, or any order, judgment or decree to which Buyer is a party or by
which Buyer is bound.
4. BROKER. Buyer has not taken any action or dealt with any person
in any manner which will result in any liability of Seller for any brokerage fee
or commission or finder's
31
fee with respect to this Agreement or the transactions contemplated hereby.
Buyer shall be solely responsible for any claim for commission or finder's fee
made by any person or entity from any act or action arising of Buyer.
5. ABSENCE OF LITIGATION. Buyer is not a party to any action, suit,
proceeding or to its knowledge, any investigation presently pending, nor to its
knowledge, are any claims threatened which are related to or might adversely
affect the transactions contemplated by this Agreement.
VI. INDEMNIFICATION
---------------
A. INDEMNIFICATION BY SELLER. Seller shall defend, indemnify and hold
harmless Buyer, from and against any and all claims, damages, losses,
liabilities, costs and expenses (including reasonable legal fees and
disbursements), and including (but not limited) to the claims of any taxing
authority or of any creditor of the Seller, caused by or arising out of (1) the
breach or alleged breach by Seller of any of its warranties, representations,
obligations or agreements contained in this Agreement or (2) any product
liability or warranty claims for any products or services sold by the Seller
prior to the Closing Date.
B. INDEMNIFICATION BY BUYER. Buyer shall defend, indemnify and hold
harmless Seller from and against any and all claims, damages, losses,
liabilities, costs and expenses (including reasonable legal fees and
disbursements), and including (but not limited to) the claims of any creditor of
the Buyer, caused by or arising out of the breach or alleged breach by Buyer of
any of its
32
warranties, representations, obligations or agreements contained in this
Agreement, or arising out of the Buyer's operation of the Business or ownership
or use of the Assets subsequent to the Closing.
C. INDEMNIFICATION PROCEDURES.
1. All Claims for indemnification by any party will be asserted and
resolved as set forth in this Section VI.C. In the event that any written claim
or demand for which an indemnifying party would be liable to any indemnified
party hereunder is asserted against or sought to be collected from any
indemnified party by a third party, such indemnified party will promptly, but in
no event more than fifteen (15) days following such indemnified party's receipt
of such claim or demand, notify the indemnifying party of such claim or demand
and the amount or the estimated amount thereof to the extent then feasible
(which estimate will not be conclusive of the final amount of such claim or
demand) (the "Claim Notice").
2. The indemnifying party will have thirty (30) days from the
personal delivery or mailing of the Claim Notice (the "Notice Period") to notify
the indemnified party (a) whether or not the indemnifying party disputes the
liability of the indemnifying party to the indemnified party hereunder with
respect to such claim or demand and (b) whether or not it desires to defend the
indemnified party against such claim or demand. All reasonable costs and
expenses incurred by the indemnifying party in defending such claim or demand
will be a liability of, and will be paid by, the indemnifying party, subject to
the respective limitations set forth in Article VI. In the case an objection is
made in writing in accordance with this Section VI.C, the indemnified party
shall have thirty (30) days to respond in a written statement to the objection.
If after such thirty (30) day period
33
there remains a dispute as to any claims, the parties shall attempt in good
faith for thirty (30) days to agree upon the rights of the respective parties
with respect to each of such Claims.
3. Except as provided in Section VI.C.4., if an indemnifying party
notifies the indemnified party within the Notice Period that it desires to
defend the indemnified party against such claim or demand, the indemnifying
party will have the right to defend the indemnified party by appropriate
proceedings with counsel of the Indemnifying party's choosing, and will have the
sole power to direct and control such defense. If any indemnified party desires
to participate in any such defense it may do so at its sole cost and expense.
4. If the indemnifying party elects not to defend the indemnified
party against such claim or demand, whether by not giving the indemnified party
timely notice as provided by Section VI.C.2 or otherwise, then the portion of
any such claim or demand as to which the defense by the indemnified party is
unsuccessful (and the reasonable costs and expenses pertaining to such defense)
will be the liability of the indemnifying party hereunder, subject to the
respective limitations set forth in Section VI.F. The indemnified party will use
commercially reasonable efforts in the defense of all such claims.
5. The indemnified party will not settle a claim or demand without
the consent of the indemnifying party, which consent will not be unreasonably
withheld. The indemnifying party will not, without the prior written consent of
the indemnified party, settle, compromise or offer to settle or compromise any
such claim or demand on a basis that would result in the imposition of a consent
order, injunction or decree that would restrict the future activity or conduct
of the Indemnified party or any affiliate thereof, or impose any obligation on
the Indemnified party or any
34
affiliate thereof. Notwithstanding anything herein to the company, if the
indemnifying party denies it has any liability for a claim, and refuses to
defend, the indemnified party may settle or compromise any claim, and then ▇▇▇
the indemnifying party for indemnification hereunder.
6. To the extent that the indemnifying party directs, controls or
participates in the defense or settlement of any third party claim or demand,
the indemnified party will give the indemnifying party and its counsel, during
normal business hours, access to the relevant business records and other
documents, and will permit them to consult with the employees and counsel of the
indemnified party.
D. SOLE REMEDY. The rights and remedies expressly provided by this
Article VI will constitute the sole and exclusive basis for and means of
recourse between the parties with respect to the subject matter hereof, and
Buyer and Seller each expressly waives any and all other rights or causes of
action with respect to the subject matter hereof that it may have against the
other party now or in the future under any law; provided, however: that
equitable relief, including the remedies of specific performance and injunction,
will be available with respect to the breach of any covenant or agreement to be
performed after Closing insofar as and to the extent that such relief would be
available under any law, and If a claim is made, and an indemnifying party
denies liability, and refuses to indemnify, the indemnified party may pursue any
available remedies at law or in equity.
E. OFFSET. Without limiting any other rights or remedies available to
it under this Agreement, Buyer shall be entitled to offset any claim for
indemnity under Section VI.A against any payment by Buyer of the Holdback Amount
or the Contingency Payment. Buyer may, however, only exercise such right of
offset in respect of claims relating to losses actually incurred or claims
35
actually asserted by a third party for which it is entitled to indemnification
hereunder in the event that the Buyer has failed to assume the defense of such
claim, if it is a third party claim, under Section VI.C. 4 (in which case the
amount offset shall not exceed Buyer's good faith estimate of the amount that
will ultimately be payable to the person seeking indemnification). If any such
claim for indemnification is ultimately resolved in favor of Seller, or if the
amount withheld exceeds the amount ultimately payable to such person in respect
of such claim, then Buyer shall pay to Seller the excess amount withheld,
together with interest thereon for the period such excess amount was withheld at
a rate of 8% per year.
F. INDEMNIFICATION LIMITS. Seller will not be liable to Buyer for any
claim or loss under this Article VI unless and until the aggregate amount of all
such claims or losses exceeds $20,000, after which point the Seller will
indemnify the Buyer for the entire amount of all losses. In no event will
Seller's aggregate liability under this Article VI exceed $1,500,000.
G. GOING CONCERN. If Seller shall fail to remain a going concern for
twelve (12) months following the Closing Date, or shall file for protection
under the United States Bankruptcy Code, or the laws of any state, or file for a
receivorship, such that the Seller's continuing obligations under the
Information Technology Agreement, the Sublease or Telephone Usage Agreement are
impaired in any manner, then in addition to any other remedies Buyer has at law
or in equity, Buyer shall have no further obligation to make any remaining
payments due Seller hereunder.
H. DISTRIBUTION OF PRODUCTS. The Buyer understands that the Seller has
the exclusive right to purchase, inventory, promote and resell, among other
products,
36
the following products which are manufactured by Fluke Electronics Corp.
(collectively the "Products" and each a "Product"): Transmation 2800T,
Transmation 2800T-50Q, Transmation 2800T-EXP, Transmation 2950T and Transmation
10AI Loop Isolator, 2900T Universal 2 Wire Temperature, 2950T-50Q Universal 2
Wire Temperature Transmitter, 2950 EXP Universal 2 Wire Temperature Xmitter,
2750T Universal 2 Wire Temperature Transmitter. For period of five (5) years
after the Closing Date (the "Distribution Term"), the Seller agrees that it
shall only sell the Products to the Buyer, at the Seller's cost, and to no other
party. The Distribution Term shall automatically renew for additional one (1)
year terms. Notwithstanding the foregoing, the Seller shall not be required to
sell a Product to the Buyer if Fluke Electronics Corp. ceases to manufacture
such Product or if the Seller looses its right to distribute, purchase or resell
such Product. In addition, the covenant contained by this Section VI.H shall
automatically terminate if any agreement with respect to the Products terminates
or expires.
I. LAPTOP. The Seller agrees to payoff the lease related to a certain
laptop computer used by ▇▇▇▇ ▇▇▇▇▇▇▇ on or before the Closing Date.
J. COPIER. The Buyer and the Seller acknowledge and agree that the
Buyer is not assuming the lease for a certain Xerox copier located at the ▇▇▇▇
Valley, Maryland facility. Notwithstanding the foregoing, the Buyer will allow
the Seller to use such copier, on a non-exclusive basis, for one month after the
Closing in exchange for the Buyer paying the Seller $599 at Closing.
VII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Except as provided otherwise herein, the representations and warranties
and covenants of
37
the parties herein contained shall survive the execution and delivery of this
Agreement and the Closing for three (3) years, shall be deemed to have been
material and to have been relied upon, and shall not be affected regardless of
any investigation that may have been or may be made at any time by, or on behalf
of, the party to whom such representations and warranties are made. The
representations and warranties in Sections V.A.4 and V.A.25 shall survive for
the applicable statute of limitations. All representation made on any schedule
or exhibit attached hereto and in any agreement executed in connection herewith
shall be deemed to be part of this Agreement.
VIII. RECORDS
-------
The parties shall keep full and accurate records of the information
required by this Agreement. Each party shall make those records relating to this
Agreement or required to be kept by this Agreement available for review by a
representative of the other party during ordinary business hours of the first
party, provided that the other party is given reasonable notice in advance, in
writing, of the intended record review. Within ninety (90) days of Closing Date,
Buyer's attorneys shall complete Internal Revenue Service Form 8594 consistent
with the allocation in Section II.D, setting forth the terms of this transaction
which both parties agree to file with their respective Federal income tax
returns.
IX. NON-COMPETE AND NON-DISCLOSURE
------------------------------
Seller has represented to Buyer that subsequent to the Closing Date
Seller, its divisions, subsidiaries, and affiliates shall not be engaged in the
Business. Seller acknowledges this a material inducement to Buyer entering into
this Agreement.
38
As an inducement to Buyer to enter into this Agreement, Seller agrees
as follows:
A. Seller and Seller's subsidiaries, divisions, and any entity over
which Seller has control shall not, for five (5) years following the Closing
Date, (except as provided herein in Section VI.H), sell or distribute any
products which were sold or distributed by the Business during the three (3)
year period prior to the Closing Date; provided, however, that Seller may sell
or distribute products that it purchases from a vendor from whom the Business
being conveyed hereunder also purchases products, as long as the product so
purchased by the Seller was not a product sold or distributed by the Business
during the three (3) year period prior to the Closing Date.
B. Except as contemplated by Section IX.A, Seller shall not invest in,
receive commissions, royalties, or fees of any nature from any person or entity
engaged in the Business.
C. Except as contemplated by Section IX.A, Seller shall not consult
with, advise, or counsel any person or entity in the Business.
D. Seller shall not provide any information or records pertaining to
the Business or of Seller to any other person or entity other than Buyer;
provided, however, that the Seller may disclose such information which: (i) is
or becomes a matter of public knowledge through no fault of the Seller or its
agents or representatives or breach of this Agreement; (ii) is disclosed
pursuant applicable law (including required disclosures under the applicable
securities laws), court order or governmental order after prior notice to the
Buyer; or (iii) is disclosed by the Seller with the Buyer's prior written
consent.
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E. Seller shall not employ any person or entity to whom Buyer offers
employment for a period of five (5) years without Buyer's written consent which
may be freely withheld.
F. Upon breach of any of these covenants by Seller, Buyer shall be
entitled to injunctive relief in addition to and not in lieu of any other
remedies.
X. NOTICES
-------
All notices and other communications pursuant to this Agreement shall
be in writing and be sent by registered or certified mail, postage prepaid,
addressed as follow:
If to Seller: Transmation, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
With Copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
If to Buyer: ▇▇▇▇▇▇ Corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With Copy to: ▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇▇ and Company, L.P.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other address as either party shall have specified by notice in
writing to the other.
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XI. GOVERNING LAW
-------------
This Agreement, its formation, and all transactions contemplated in
connection herewith shall be governed, construed and interpreted in accordance
with the laws of the State of Ohio, without reference to conflicts of law
principles.
XII. MISCELLANEOUS
-------------
A. WAIVERS. Either Buyer or Seller may, by written notice to the other,
extend the time for the performance of any of the obligations or other actions
of the other party; waive any inaccuracies in the warranties or representations
to the other, or in any document delivered pursuant hereto; or waive or modify
compliance with any of the terms, conditions, covenants, obligation or
performance of the other party. The waiver by either party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any other or subsequent breach.
B. BINDING EFFECT, BENEFIT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assignees. Nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto, or their respective
successors or assignees, any rights, remedies, obligations or liabilities.
C. SEVERABILITY. If any one or more of the provisions of this Agreement
shall be held to be unenforceable in any respect, such unenforceability shall
not affect any other provision.
D. ENTIRE AGREEMENT, MODIFICATION. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof,
and may not be changed orally. No
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change, amendment or modification thereof shall be binding unless set forth in
writing and signed by the parties hereto.
E. HEADINGS. Headings used in this Agreement are for reference purposes
only and shall not be deemed to have any substantive effect.
F. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall be deemed to be one and the same instrument.
G. EXHIBITS AND SCHEDULES. All of the Exhibits and Schedules attached
hereto are incorporated herein by reference.
H. COSTS AND EXPENSES. Each of the parties shall be solely responsible
and liable for the attorney fees, accountant fees, advisory fees and any other
costs or expenses incurred by the party in relation to transactions described
herein. Buyer and the Seller will each be responsible to pay fifty-percent
(50%)of any sales tax due on the transfer of Assets hereunder.
I. BULK SALES. Both parties hereby waive any applicable provisions of
any Bulk Sales Law.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the date first above written.
SELLER:
TRANSMATION, INC.
BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President
Finance, Chief Financial Officer
BUYER:
▇▇▇▇▇▇ CORPORATION
BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
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SCHEDULES TO ASSET PURCHASE AGREEMENT
Schedule I.A.1 Inventory
Schedule I.A.2 Property and Equipment
Schedule I.A.3 Contracts and Leases
Schedule I.A.5 Trademarks and Intellectual Property
Schedule I.A.6 Software Licenses
Schedule I.A.8 Accounts Receivable
Schedule I.A.9 Prepayments and Deposits
Schedule I.C.1 Customer Deposits for Goods Shipped after Closing
Date
Schedule II.A.2.a. Current Asset Value & Values of Property,
Equipment and Inventory
Schedule III.C.1 Employee Matters
Schedule III.B.2.f. Officer's Certificate
Schedule V.A.7 Material Contracts
Schedule V.A.11 Financial Statements
Schedule V.A.14 Customer Deposits at Closing
Schedule V.A.17 Press Releases
Schedule V.A.20 Employment Related Claims