EXHIBIT 10
PURCHASE AND SALE AGREEMENT
This Agreement is made and entered into as of the 5th day of September,
2002, by and between Xxxxxxxx Acquisition Corp. d/b/a "Allied Xxxxxx" a
Minnesota corporation with its principal offices in Minneapolis, Minnesota
("Buyer"), TangibleData, Inc., a Colorado corporation with its principal
offices in Thornton, CO ("TangibleData", "Seller" or "Company") and each of
the following individuals: Xxxxx Xxxxx, Xxxx XxxxxXxxx, Xxxxxx Xxxx, Xxxx de
St. Simon and Xxxxxx Xxxxxx de St. Simon (collectively the "Shareholders").
WHEREAS, Seller is engaged in the sale and duplication of compact discs
and the development of technology related to automating on-demand production
and fulfillment processes for its duplication business.
WHEREAS, the Buyer wishes to purchase and the Seller wishes to sell
certain of the assets of the Seller on the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants of Seller, Shareholders and Buyer set forth herein, Seller,
Shareholders and Buyer hereby agree as follows:
1. Purchase and Sale of the Assets
1.1 Upon the terms and subject to the conditions set forth in this
Agreement, the Seller hereby agrees to sell, assign and transfer to Buyer and
Buyer agrees to buy the Assets as defined in Section 2.1 (B) of this
Agreement.
2. Definitions
2.1 As used throughout this Agreement the following words and phrases
shall have the following meanings:
(A) AGREEMENT means this Purchase and Sale Agreement by and between
Seller and Buyer and Shareholders along with all schedules and exhibits and
amendments thereto.
(B) ASSETS means all those assets purchased hereunder including, without
limitation all assets of every type and nature, used in Seller's Business,
unless specifically excluded herein below. Assets shall include, without
limitation, those assets set forth on Exhibits 2.1 (F), (G), (H), (I), and
(J), together with Schedules 4.5 (A), (B), (C), (D), (E), (F), (G) and (L).
Buyer is not acquiring any right or interest in Seller's Current Assets other
than Seller's Inventory.
(C) LIABILITIES means all those all liabilities of the Seller including
Current Liabilities, Notes and Contracts Payable, and Other Liabilities so
identified. It is understood and agreed that Buyer is not assuming or
otherwise acquiring any of Seller's Liabilities.
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(D) BUSINESS means the sale and duplication of optical disks and the
development of technology related to automating on-demand production and
fulfillment processes for Seller's duplication business, all as presently
conducted by Seller. Buyer agrees that, during the 60 month period following
Closing, for financial reporting purposes the Business shall be operated and
accounted for as a separate division of Buyer and shall be identified as the
TangibleData Branch of Buyer.
(E) CLOSING or CLOSING DATE means the date on which the transaction
contemplated by the Agreement shall be completed. Buyer and Seller recognize
the need to perform the obligations, obtain the rights and complete the
transactions contemplated by the Agreement within the time periods herein
specified.
(F) FIXED ASSETS means equipment, desktop and laptop computers, servers,
accessories, machinery and fixtures identified in Exhibit 2.1(F) attached
hereto.
(G) INTANGIBLES means all items which are not tangible including:
including without limitation, non-compete agreements, business and financial
records relating to the Business, computer records and tapes, copyrights,
copyright applications, unregistered copyrights, corporate names, including
the customer lists, goodwill, patents, patent applications, proprietary
information, trademarks, trademark applications, trade names, trade secrets,
any other intellectual property in which Seller has an interest and any and
all of Seller's rights to any in the foregoing as are identified in Exhibit
2.1(G) attached hereto.
(H) INVENTORY means all finished goods, raw materials, work in process,
supplies and inventory of Seller identified in Exhibit 2.1(H) attached hereto.
(I) COMPUTER SOFTWARE INCLUDING SOURCE CODE means, without limitation,
the exclusive right to and use of all software, software programming and
source code used and usable in operating the Business, including without
limitation, such Software and Source Code developed by the Seller, identified
in Exhibit 2.1(I) attached hereto.
(J) OTHER ASSETS means those assets identified in Exhibit 2.1(J)
attached hereto.
(K) CURRENT ASSETS means all cash, accounts receivable and notes
receivable, Inventory and other current assets, net of the amount reserved for
bad debt, all as identified on Exhibit 2.1(K) attached hereto. Buyer is not
acquiring any right or interest in any Current Assets set forth on Exhibit
2.1(K), provided however, Buyer is acquiring all of Seller's Inventory as set
forth on Exhibit 2.1(H).
(L) CURRENT LIABILITIES means all accounts payable, current portion of
long term debt, and accrued taxes. No Current Liabilities, taxes or other
liabilities not yet payable at the Closing Date, or otherwise, shall be
assumed or otherwise acquired by Buyer and shall be retained by Seller and
paid as and when due.
(M) NOTES AND CONTRACTS PAYABLE means all debt owed or contracts to pay
by the Seller. No Notes And Contracts Payable shall be assumed or otherwise
acquired by Buyer and shall be retained and paid by Seller as and when due.
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(N) OTHER LIABILITIES means those liabilities identified in Exhibit
2.1(N) attached hereto, which shall be limited to third party leases of
personal property identified in such Exhibit 2.1(N). Unless specifically
agreed in writing, no Other Liabilities shall be assumed or otherwise acquired
by Buyer and shall be retained and paid by Seller as and when due.
(O) INCOME means the pre-tax earnings of the Company and of the
continuing operation of the Business (following Closing) as reported under
accounting methods consistent with previous Company practice, including
appropriate reserve for doubtful accounts and accrual of vacation, bonus,
leases and rent and interest paid.
(P) OPERATING PROFIT means the Net Sales of the TangibleData Branch
reduced by cost of goods sold and reduced by selling expense and general
administrative expense of the TangibleData Branch. Selling expense is further
defined as selling expense specifically incurred by the TangibleData Branch in
connection with Sales of the TangibleData Branch. For purposes of calculating
Operating Profit for this Agreement, no allocation shall be made to such
calculation for Buyer's corporate overhead, for the purchase money costs or
good will amortization expense incurred by Buyer in connection with the
purchase described in this Agreement.
(Q) NET SALES means all revenue from the TangibleData Branch invoiced to
third party customers, net of the amount reserved for bad debt, for services
and products provided to all customers of the Business, which customers were
customers of the Business prior to Closing, and prospective customers actively
being solicited by the Business, and/or products and services delivered by
Buyer using TangibleData's software systems or technology.
3. Purchase Price:
3.1 Subject to all adjustments to which Buyer or Seller may be entitled in
accordance with other sections of this Agreement, the Purchase Price to be
paid by Buyer to Seller (the "Purchase Price") shall be contingent upon the
Operating Profit of the TangibleData Branch during the 60 month period (as
defined herein) following Closing, and in no case shall the Purchase Price
paid to Seller exceed a cumulative maximum amount of $3.5 million.
(A) The Purchase Price shall be an amount equal to thirty percent (30%)
of the Operating Profit of the TangibleData Branch of Buyer, calculated and
distributed (and subject to the setoffs and adjustments) as described in this
Agreement.
3.2 Calculation and Distribution of Purchase Price: The
Purchase Price shall be calculated for each 12-month period following the
Closing (for purposes of this Agreement, the first such period shall be
shorter than 12 months and shall begin on the day of Closing and shall end on
August 31, 2003; each subsequent period shall be 12 months). For purposes of
calculating the Operating Profit, each such 12-month period shall be a
stand-alone period (and shall be referred to as a "Payment Period").
(A) The portion of the Purchase Price attributable to any such
Payment Period shall be calculated and paid to Seller within 45 days of the
end of such Payment Period.
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(B) To the extent that there is no Operating Profit or there is
an operating loss for a Payment Period, Buyer shall have no obligation to pay
Seller any amount for such Payment Period (and shall have no setoff
specifically related to such operating loss) for such Payment Period; and
Seller shall have no obligation to reimburse Buyer for such operating loss.
(C) In addition, Buyer shall pay Seller an advance (the
"Advance Payment") on the Purchase Price equal to 30% of the Operating Profit
for each Payment Period calculated pursuant to the terms of this Agreement as
of the end of the first six (6) months of each Payment Period (providing the
such calculation date in the first Payment Period shall be February 28, 2003)
(the "Advance Calculation Date"). Such Advance Payment shall be due and
payable within 45 days following the Advance Calculation Date.
Notwithstanding anything to the contrary set forth in this Agreement, to the
extent that the Advance Payment for a Payment Period exceeds the amount of
Purchase Price due in any given Payment Period (such excess referred to as the
"Advance Overpayment"), any future Purchase Price payments to Seller shall be
reduced by an amount equal to such Advance Overpayments until Buyer has
received a full credit against the Purchase Price for all such Advance
Overpayments. Following the calculation and payment of the full amount of the
Purchase Price due to Seller under this Agreement, to the extent Buyer has not
received a credit against the Purchase Price in the full amount of all Advance
Overpayments, Seller shall pay Buyer an amount equal to (i) the amount of
Purchase Price (including Advance Payments) actually paid to Seller, LESS (ii)
the total Purchase Price owed to Seller hereunder. Seller shall make such
payment within 45 days of notification by Buyer to Seller of any such amount
due from Seller.
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3.3 Allocation: It is agreed that the purchase price to be paid
Seller by Buyer under the terms of this Agreement shall be allocated among the
Assets to be purchased as will be set forth in Exhibit 3.3 prepared by Buyer
and Seller at Closing. The parties agree to report or cause the reporting of
this transaction for state and federal income tax purposes on a basis
consistent with and reflecting the allocation of purchase price set forth in
Exhibit 3.3 as of the Date of Closing.
3.4 Shareholder Consent: Shareholders hereby consent to the terms of
this
Agreement. The parties acknowledge that Seller must execute a proxy
solicitation and meeting of all shareholders and owners of capitol stock in
order to ratify this Agreement. TangibleData guarantees through written
agreement attached as Exhibit 3.4 that it has sufficient shareholder approval
to ratify the agreement at the time of signing. The parties expressly
acknowledge that the Shareholders (as specifically defined herein) shall be
liable for obligations of Seller pursuant to Section 11 of this Agreement.
3.5 Buyer agrees that it shall pay an amount equal to 10% of the
Operating Profit in any Payment Period to key employees of the TangibleData
Branch of Buyer within 45 days following the end of any applicable Payment
Period. Buyer shall have sole discretion to determine which such key
employees shall receive any such payments and in what amount.
4. Conduct of the Business
4.1 Operation Until Closing: It is agreed that Seller shall move the
Assets to Buyers operating location in Denver, Colorado immediately upon the
signing of this Agreement. Pending consummation of the sale and purchase of
the Assets pursuant to this Agreement and until the Closing, Seller shall
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continue to operate the Business in the same manner as it has been operated by
Seller prior to the execution of this Agreement. Seller shall not sell, lend,
lien, pledge, hypothecate, mortgage or otherwise encumber the Assets nor shall
Seller make any acquisition, enter into any purchase contracts, sales
contracts, leases or other commercial or financial arrangements which may
affect the Assets or the Business nor take any other action not in the
ordinary course of business without the prior express written consent of
Buyer.
4.2 Negative Covenants: From the date hereof through the Closing
Date, unless and until Buyer otherwise consents in writing, Seller will not
cause or permit the Company to (a) change or alter the makeup of the Current
Asset components or the physical contents or character of the Inventories, so
as to adversely affect the nature of its Business or adversely change the
total dollar valuation of such components from that reflected on the Exhibit
2.1(K) attached other than in the ordinary course of business; (b) incur any
obligations or liabilities (absolute or contingent) other than current
liabilities incurred and obligations under contracts entered into in the
ordinary course of business; (c) mortgage, pledge or voluntarily subject to
lien, charge or other encumbrance any Assets, tangible or intangible, other
than the lien of current property taxes not due and payable; (d) sell, assign
or transfer any of its Assets or cancel any debts or claims, other than in the
ordinary course of business; (e) waive any right of any substantial value
whether or not in the ordinary course of business; or (f) enter into any
transaction other than in the ordinary course of business.
4.3 Access to Books and Records, Premises: From the date of this
Agreement through the Closing Date, Seller shall cause the Company to grant
Buyer and its authorized representatives full access to the properties, books
and records, premises, employees, distributors, customers and auditors of the
Company during reasonable business hours for purposes of enabling Buyer to
fully investigate the business of the Company. Any information obtained by
Buyer in connection with such review shall be maintained by Buyer on a
confidential basis (subject only to review by Buyer's counsel and
accountants), and shall not be disclosed to any other person in the event that
the transactions contemplated by this Agreement are not consummated.
4.4 Risk of Loss: The risk of loss shall remain with the Seller until
the later of the Closing or the time at which the assets are relocated to
Buyer's location in Denver, Colorado. The Seller shall continue in force any
and all fire, casualty, theft or other insurance policies relating to the
business and assets for so long as Seller retains the risk of loss.
4.5 Additional Schedules: No later than at Closing, Seller shall prepare
and deliver to Buyer each of the following schedules:
Schedule 4.5(A): This schedule sets forth a list of all equipment,
machinery, furniture, fixtures, furnishings, leasehold improvements and other
similar property that are owned by the Company and that are being used by the
Company in connection with the Business conducted by it.
Schedule 4.5(B): This schedule lists each motor vehicle owned or leased by the
Company, together with vehicle identification numbers, any outstanding loan
against such vehicle, the person to whom the vehicle is assigned and the
location of the vehicle.
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Schedule 4.5(C): This schedule lists all Intangible personal
property used by the Company in the conduct of its trade or Business,
including without limitation, all trademarks, trade names, service names,
service marks, copyrights, patents, patent licenses, all software and source
code, applications for any and all of the foregoing and registrations thereof
owned by the Company or used in its operations.
Schedule 4.5(D): This schedule lists each policy of fire, liability
and other forms of insurance owned by the Company, the amount of premium
thereon and the expiration date thereof.
Schedule 4.5(E): This schedule lists all permits, licenses and
other approvals and authorizations which are necessary to conduct the Business
of the Company and sets forth the title, issuing agency and expiration thereof
and indicates which of such permits, licenses and approvals are not possessed
or held by the Company.
Schedule 4.5(F): This schedule lists all personal property owned by
any third parties (whether a customer, supplier or other person) in the
possession of the Company or for which the Company is responsible, other than
leased property set forth on schedule 4.5(K) or 4.5(L).
Schedule 4.5(G): This schedule lists each bank or other financial
institution in which the Company has an account or depository arrangement,
together with the name of all persons authorized to take actions with respect
thereto.
Schedule 4.5(H): This schedule includes the 6-month plan memo
detailing compensation and budgets for all employees.
Schedule 4.5(I): This schedule lists the amount of sales made
during the past calendar year to the Company's ten (10) largest accounts, the
principal contact at each such account and the Company's responsible sales
employee for each such account.
Schedule 4.5(J): This schedule contains a true and complete
description of all real properties owned by the Company, including the legal
description thereof, a list of all buildings or other improvements located
thereon and list of all restrictions, easements or other encroachments or
encumbrances affecting such property. Including description of any
underground storage tanks owned or used.
Schedule 4.5(K): This schedule describes each lease for real
property, whether written or oral, to which the Company is a party to,
together with the term and other material details. Furnish copies of all such
leases.
Schedule 4.5(L): This schedule lists and describes each lease for,
or license for the use of equipment or personal property, whether written or
oral, to which the Company is a party, together with the term, rental,
security agreements, and other material provisions thereof. Furnish copies of
all such leases or licenses.
Schedule 4.5(M): This schedule lists the following agreements,
whether oral or written, to which the Company is a party, as of the date of
such schedule, to the extent such agreements are not set forth in other
schedules. Seller shall furnish copies of all such agreements to Buyer before
closing.
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(a) Each contract, agreement or arrangement made in the ordinary course of
business by the Company, not terminable by the Company on less than thirty
(30) days notice and involving an expenditure of more than $1,000.00 for
purchase of any services, materials, supplies or equipment.
(b) Each contract, agreement or commitment for the same by the Company for
delivery of its products or services over a period of more than thirty (30)
days from the date of this agreement and for an aggregate price of more than
$5000.00.
(c) Each contract or commitment for capital expenditures of any amount.
(d) Each contract continuing over a period of twelve (12) months or more from
its date, which cannot be terminated by Seller upon thirty (30)
days notice, or less.
(e) Each employment contract or agreement relating thereto between the
Company and any officer or employee, including any bonus, incentive or
deferred compensation plans, any confidentiality or non-compete agreements,
amounts of indebtedness of employee to the Company or Company to employee, and
any arrangements which encourage or compensate Company's employees to stay
with Company following the Closing Date. Seller has provided Buyer with a
copy of the current employment agreement between Seller and Xxxxx Xxxxx which
is now in effect.
(f) Each agreement for the sale of any capital equipment or real property.
(g) Each plan or contract or arrangement of the Company, providing for
pensions, life insurance, medical insurance, disability insurance, vacations
and other employees' benefits or compensation plans, whether formal or
informal.
(h) Each agreement, if any, with any union covering employees in the
bargaining unit represented by such union.
(i) Each agreement not made in the ordinary course of the Company's business.
(j) Each contract between the Company and any dealer, distributor, broker,
agent or sales representative.
(k) Each contract or agreement relating to the property listed on Schedule
4.5(C) to be delivered to Buyer by Seller.
(l) Each agreement not otherwise listed on Section 4 to which the Company is
a party or which has, or may have, a material effect on the Company or its
future business prospects.
True and correct copies of all documents listed in any schedule delivered
pursuant to this Section 4 will be delivered or made available to Buyer or
will be made available upon request and will be signed by an officer of the
Company for identification upon request by Buyer.
4.6 Updating of Schedules: Between the date of this Agreement and the
Closing Date, Seller shall deliver to Buyer updated schedules to reflect any
material changes in the schedules delivered to Buyer pursuant to this
Agreement. On the Closing Date, Seller shall deliver to Buyer an officer's
certificate confirming the accuracy, as of the Closing Date, of each of the
schedules delivered to Buyer pursuant to this Agreement; provided, however,
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that Buyer shall not be obligated to proceed with the closing of the
transactions contemplated by this Agreement if there are material adverse
changes from the schedules initially delivered to Buyer.
4.7 Contractual Obligations: Buyer will use its best efforts to obtain
an assignment for the obligations identified in Exhibit 2.1(N). Buyer's
agreement to obtain an assignment of such obligations is limited to those
obligations identified on Exhibit 2.1(N) for which Seller has provided to
Buyer, prior to Closing, a true and complete copy of each and every writing
evidencing such obligation.
5. Representations and Warranties of Seller
Seller hereby represents and warrants to Buyer that:
5.1 General: The statements set forth in Sections 4 and 5 of this
Agreement are true, accurate, complete and not misleading in any respect on
the date of this Agreement and will remain so as of the Closing.
5.2 Standing: Seller is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Colorado. Seller has all
the necessary corporate powers to own properties, and to carry on the business
as now owned and operated by it. Seller is qualified to do business in each
state or jurisdiction where its failure to so qualify would materially
adversely affect its ability to transfer the Assets to Buyer as required
hereunder.
5.3 Authority: Seller has the right, power, legal capacity and
authority to enter into and perform its obligations under this Agreement, and
no approval or consent of any person, authority or entity that has not been
obtained is necessary in connection herewith. The execution and delivery of
this Agreement by Seller has been duly authorized by its Board of Directors
and by all requisite shareholder action.
4.4 Material Change: Since the signing of this agreement the Company has
not:
(A) engaged in a transaction relating to the business except in the
ordinary course of business except as disclosed on Exhibit 5.4(A).
(B) experienced any material change in the information set forth in the
documents furnished or schedules or exhibits to this Agreement between the
date of such schedule or exhibit and the date of this Agreement or the Closing
Date. Seller has not withheld from Buyer any material fact relating to the
Assets, Business, operations, financial condition or prospects of the Company.
No representation or warranty in this Agreement or other document furnished in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state any material fact required to
be stated therein to make the statements therein not misleading. Without
limiting the scope of the foregoing, Seller is not aware of any change or
occurrence that has taken place or is pending that could have a material
adverse effect on the value of the Assets or the Business of the Company, or
the ability of the Company to operate its Business subsequent to the Closing
Date in the manner in which it has been operated by the Company before the
Closing Date, or which could materially increase the costs incurred by the
Company in operating its business subsequent to the Closing Date, including
any pending or present change in any law or regulation, or other requirement,
concerning license or approvals.
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(C) given any waivers releases of any claim or right pertaining to the
Business.
(D) instituted, been named as a party, settled or agreed to settle any
litigation, action or proceeding before any court or governmental body;
(E) failed to replenish the Company's inventories and supplies in a
normal and customary manner consistent with the Company's prudent business
practices, nor made any purchase commitments in excess of the normal, ordinary
and usual requirements of the Company's business or at any price materially in
excess of the then current market price, or upon terms and conditions more
onerous in any material respect than those usual and customary in the
Company's business, nor made any material changes in the Company's marketing,
selling, pricing, advertising or personnel practices inconsistent with the
Company's past practices;
(F) failed to pay its liabilities as and when due in the ordinary course
of the Company's business except as disclosed on Exhibit 5.4(F).
(G) suffered any change, event or condition which has materially and
adversely affected the Company's condition (financial or otherwise),
properties, assets, liabilities, business or prospects;
(H) paid or agreed to pay, conditionally or otherwise, any bonus,
additional compensation, pension, or severance pay to any of Seller's present
or former employees, directors or officers whose annual base compensation
(including bonuses and commissions) exceeded $20,000.00 whether under any
existing profit sharing, pension or other plan or otherwise;
(I) altered or revised its accounting principles, procedures, methods or
practices;
(J) removed, or permitted to be removed, from any building, facility or
real property, any machinery, equipment, fixture, vehicle or other personal
property or parts thereof, except in the ordinary course of business (and in
compliance with this Agreement);
(K) changed its credit policy as to sales of inventories or collection
of receivables;
(L) received a written communication from any customer which accounted
for more than two percent (2%) of Seller's revenues for the Business during
the last full fiscal year to the effect that such customer does not intend to
continue to purchase merchandise from Seller;
(M) other events or conditions that have or might have a material
adverse affect on the business.
5.5 No Liens or Encumbrances: The Company has good and marketable title
to all of the personal property and assets, tangible and intangible, employed
in the operation of its business, free of any mortgages, liens, claims,
charges, leases, security interests, pledges, easements, encumbrances and
title retention agreements of any kind whatsoever except such property and
assets as may be leased by the Company pursuant to leases described on
Schedules 4.5(B), 4.5(K), 4.5(L) or pledged to secure debts described on
Exhibit 5.5 (which pledge or security interest will be listed and described on
Exhibit 5.5) ("Permitted Encumbrances").
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5.6 Liabilities: There are no liabilities, responsibilities, debts,
claims or obligations known or unknown, liquidated or contingent, fixed or
contingent related to the Assets or the Business which could become the
obligation or responsibility of Buyer other than those set out on Exhibit
2.1(N). All other liabilities shall be retained by Seller and are expressly
not assumed by Buyer.
5.7 Financial Statements: Financial statements of the Company
("Financial Statements") are attached to this Agreement as Exhibit 5.7 and
will have been furnished to Buyer as follows:
(A) Unaudited balance sheets of the Company as of June 30,
2002 and unaudited statements of income and expenditures, retained earnings
and statement of change in financial position for the period then ended will
be furnished with the signing of this agreement.
(B) Audited balance sheets of the Company as of March 30, 2001 and March
30, 2002 and the Audited statements of income for the fiscal periods then
ended, prepared by the Company, will be furnished by the date of the signing
of this Agreement.
Such Financial Statements present fairly and accurately in all material
respects the results of operations of the Company for the periods covered by
such statements, have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with past practices, and
include all adjustments (consisting only of normal recurring accruals) that
are necessary for a fair presentation of the financial condition of the
Company and the results of the Company's Business operations for the periods
covered by such statements.
5.8 No Defaults: Schedules 4.5(B), 4.5(D), 4.5(K), 4.5(L) and 4.5(M)
accurately and completely list all contracts or leases to which the Company is
a party or by which it is bound or affected (the "Contracts"). All Contracts
required to be listed on these Schedules are valid and binding, enforceable in
accordance with their respective terms, and in full force and effect. Except
as noted in Exhibit 5.4(A), there is not under any Contract any default by the
Company, or, to the knowledge of Seller, any other party thereto, or event
which, after notice or lapse of time, or both, would result in a default which
would enable any party thereto to terminate such Contract. Except as
expressly set forth in Exhibit 5.4(A), Seller has no knowledge of any
intention by any party with regard to any Contract to (1), terminate or amend
the terms thereof, (2) refuse to renew the same upon expiration of its term,
or (3) renew the same upon expiration only on terms and conditions which are
more onerous than those pertaining to the existing Contract. True and
complete copies of all Contracts (together with any and all amendments
thereto) and a copy of the Company's forms of invoices and purchase orders
have been delivered to the Buyer. Except as reflected in Exhibit 5.4(A), none
of the Contracts relating to Personal Property would be classified for
accounting purposes as capital or financing leases. Other than the Contracts,
the Company requires no contract, agreement, license, franchise or permit to
enable it to carry on its business substantially as presently conducted. None
of the Contracts would be breached by virtue of the consummation of the
transactions contemplated hereby, and the consummation of the transactions
contemplated hereby will not affect the validity, enforceability or
continuation of any of the Contracts. All such Contracts are assignable to
Buyer and, to the extent specifically set forth and agreed to in this
Agreement, will be assigned to Buyer at Closing along with the consent, if
required, of the parties thereto.
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5.9 Inventory: All inventories reflected in the Financial Statements
are stated at the lower of cost or market first in, first out method and, as
so stated, are in good condition and are currently usable or salable, in the
ordinary course of business of the Company, without discount.
5.10 Taxes: The Company has filed all income, excise, corporate
franchise, property, payroll and other tax returns or reports required to be
filed by it, as of the date hereof and has paid all taxes and assessments
relating to the time periods covered by such returns or reports. The amounts
set up as provisions for taxes in the Financial Statements are sufficient for
the payment of all unpaid federal, state or local taxes of the Company accrued
for or applicable to all periods ended on or prior to the date of this
Agreement, or which may subsequently be determined to be owing by the Company
with respect to all periods ending on or prior to the Closing Date. There are
no present disputes as to taxes of any nature payable by the Company. The
Company's federal income tax returns and/or state income tax returns have not
been audited by the Internal Revenue Service for any tax year.
5.11 Lawsuits, Proceedings, etc.: Except as described on Exhibit 5.11
there is no action or proceeding (whether or not purportedly on behalf of the
Company) pending or, to the best knowledge of Seller, threatened against the
Company, nor, to the best knowledge of Seller, does there exist any basis
therefore, which might result in any adverse change in the condition,
financial or otherwise, of the Company's Business or Assets. No order, writ
or injunction or decree has been issued by, or requested of, any court or
governmental agency which does or may result in any adverse change in the
Company's Assets or properties or in the financial condition of the Company or
its Business. The Company is not liable for damages to any employee or former
employee as a result of any violation of any state or federal laws directly or
indirectly relating to such employee or former employee.
5.12 Regulatory Violations:
(A) The Company is not currently being charged with nor is it operating
its Business in violation of the federal Occupational Safety and Health Act of
1970, or the regulations promulgated thereunder, the Environmental Quality
Improvement Act of 1970, or the regulations promulgated thereunder, or any
other applicable law or regulation relating to the environment or occupational
health and safety.
(B) Except as disclosed in Exhibit 5.12(B), (i) the Company has not
received written notice of any violation by the Company of any Environmental
Law, and no condition or event has occurred which, with notice or passage of
time or both, would constitute a violation of any Environmental Law; (ii) no
pollutants, contaminants or hazardous or toxic wastes, substances or
materials, as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource Conservation
and Recovery Act of 1976, as amended, the Toxic Substances Control Act, or any
other similar Federal, state or local statute, have been manufactured,
generated, stored, handled, disposed, buried, dumped or used on, at or in
connection with the Business; (iii) no asbestos, asbestos-containing
materials, polychlorinated biphenyls (PCB's) PCB compounds, or other
pollutants, contaminants, hazardous or toxic wastes, substances or materials
have been placed on the real property of Seller, or to Seller's knowledge, by
any other occupant of the real property, nor have they been used in the
construction, repair, or alteration of any portion of the real property by the
Seller, or to the Seller's knowledge, by any other occupant of the real
property; and (iv) there are no above-ground or underground storage tanks,
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xxxxx, pools, settling ponds, traps, drains or other similar above-ground or
subsurface structures present on or under the real property.
5.13 Post Balance Sheet Changes: The Company has not (a) mortgaged,
pledged or subjected to lien, charge or other encumbrance any asset, tangible
or intangible, other than the lien of current or real property taxes not yet
due and payable; (b) suffered any damage, destruction or loss, whether or not
covered by insurance, materially adversely affecting its assets or its
business; (c) made or suffered any amendment or termination of any material
business; (d) received notice or had knowledge of any labor organizing efforts
or labor trouble other than routine grievance matters, none of which is
material; (e) revalued any of its assets; or (f) entered into any transactions
not in the ordinary course of business.
5.14 Compliance with Laws and Licenses: Schedule 4.5(E) is an accurate
and complete list of all of the Licenses issued to or held by the Company.
Except for such non-compliance which could not have a materially adverse
effect upon the Assets or the operation of the Company's business, the Company
has complied with the Licenses listed on Schedule 4.5(E) and all laws, rules,
regulations and ordinances of any government or governmental agency. Neither
the ownership nor use of the Company's properties nor the conduct of the
Business conflicts in any material respect with the rights of any other
person, firm or corporation. The Company is not in violation of, or in
default under, any terms or provisions of any lien, mortgage, lease, license,
deed of trust, agreement, instrument, order, judgment or decree, except for
such violations or defaults which could not have a materially adverse affect
upon the Assets or the operation of the Business. All of the Licenses listed
on Schedule 4.5(E) are valid and binding and in full force and effect without
conditions. There is not under any License listed on Schedule 4.5(E) any
default by either Seller or the Company or any event which, after notice or
lapse of time, or both, would constitute a default, which, in either case,
could result in a revocation, termination, non-renewal or impairment of such
License. The Company has delivered true and complete copies of all Licenses
listed on Schedule 4.5(E) (together with any and all amendments thereto) to
Buyer. All reports of Sellers and the Company to municipal authorities are
true in all material respects and have been duly filed. Other than the
Licenses listed on Schedule 4.5(E), the Seller and the Company require no
license, franchise or permit to carry on the Company's business as now
conducted. None of the Licenses listed on Schedule 4.5(E) would be breached
by virtue of the transactions contemplated hereby, provided the Consents are
obtained.
5.15 Condition of the Company's Assets: All of the Company's tangible
Assets are currently in good and usable condition and are fit for their
intended purposes, ordinary wear and tear excepted. There are no defects in
such Assets or other conditions which, in the aggregate, materially and
adversely affects the operation or value of such Assets. The Assets delivered
by Seller to Buyer pursuant to this Agreement constitute everything necessary
to operate the Business.
5.16 Real Estate: The Company does not own any real property in fee simple.
Schedule 4.5(K) contains a complete list and description of all leases to
which the Company is a party or of which the Company is a beneficiary.
Schedule 4.5(K) includes a full legal or location description of the Real
Property which is the subject of such leases. All of the leases required to
be listed on Schedule 4.5(K) are valid, binding and enforceable in accordance
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with their respective terms, except as noted on Schedule 4.5(K). Prior to or
at Closing and as a condition to Buyer's obligations hereunder, Seller shall
provide to Buyer a Release (the "Lessor's Release") whereby the lessor of
any lease described in Schedule 4.5(K) releases Seller and any and all of
Seller's assets from any lien (or encumbrance, claim security interest or
other cloud on title of any sort) such lessor has of might have in the future
based on the terms of any existing lease.
5.17 Employees:
(A) Seller has no information indicating that any management or key
employee of the Company intends to terminate his employment with the Company.
(B) Schedule 4.5(H) contains, as of the dates shown on such Schedule,
accurate and complete information as to names and rates of compensation
(whether in the form of salaries, bonuses, commissions or other supplemental
compensation now or hereafter payable) and shows each such employee's
compensation for the two (2) years immediately prior to the date of this
Agreement, including amounts and dates of change in compensation, of all
employees of the Company (grouped by categories as indicated thereon).
Schedule 4.5(M) contains information as to any employment contracts or
severance arrangements involving the indebtedness of such employees to the
Company and any arrangements involving the indebtedness of the Company to such
employees in any amount.
(C) The Company is not a party to any collective bargaining agreement
or any employment agreement with any employee of the Company, other than oral
employment agreements at the sufferance of the Company and the employment
agreement between the Seller and Xxxxx Xxxxx described in Section 4.5(M)(e)
hereof. The Company has complied in all material respects and shall comply in
all material respects with all laws and regulations relating to the employment
of labor, including those related to wages, hours, collective bargaining,
discrimination and the payment of Social Security or similar taxes. There are
no unfair labor practice charges or claims pending against the Company, nor
any pending or, to the best of Seller's or the Company's knowledge, threatened
charges against the Company with respect to any wage and hour, employment
discrimination or other statutory violation by the Company. There is no union
campaign being conducted to solicit cards from employees to authorize the
union to request an NLRB certification election with respect to any employees
of the Company.
5.18 Changes in Suppliers and Customers: Seller is not aware of any
fact which indicates that any of the suppliers supplying products, components
or materials to the Company intends to cease selling such products to the
Company or to limit or reduce such sales of products to the Company; nor is
Seller aware of any fact which indicates that any material customer of the
Company intends to terminate, limit or reduce its business relations with the
Company.
5.19 Intangible Property Rights: Schedules 4.5(C) and 4.5(E) are true
and complete lists of all Intangibles applied for, issued to or owned by the
Company, under which the Company is licensed or franchised or in which the
Company holds any rights. All of the Intangibles listed on Schedules 4.5(C)
and 4.5(E) are valid and in good standing are assignable and, to Seller's
knowledge, uncontested, and the Company had delivered to Buyer copies and
required assignments of all documents establishing those Intangibles. The
Intangibles listed on Schedules 4.5(C) and 4.5(E) are all such property
necessary to operate the Business as now operated. The Company is not
infringing upon or otherwise acting adversely to any Intangibles owned by any
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other person or persons. No employee of the Company has any right in or to
the Company's proprietary information, including without limitation, computer
programs used in the Company's business.
The Company owns or exclusively holds all rights to, free and clear of
all liens, claims and restrictions, all patents, software trademarks, service
marks, trade names, and copyrights used in the conduct of the Business as now
conducted. The Company does not, to the knowledge of Seller, after due
inquiry and the exercise of reasonable diligence, infringe upon the right or
claimed right or claimed right of any person under or with respect to any of
the above. The Company is not obligated or under any liability whatsoever to
make any payments by way of royalties, fees or otherwise to any owner of,
licensor of, or other claimant to any patent used in the conduct of its
Business, nor is the Company presently under any license or contract
obligation to pay royalties or fees with respect to third-party trademarks,
copyrights or other intellectual property in connection with the conduct of
the Business.
Seller has no knowledge of, nor has Seller received any notice of, any
facts which indicate that the Company does not either (i) own or (ii) have the
right to the use of all know-how, customer lists, inventions, designs,
processes, computer programs, software (and source code) and technical data
necessary to the development, manufacture, operation and sale of all products
and services sold by it, including trade secrets, free and clear of any
rights, liens and claims of others. To the knowledge of Seller, after due
inquiry and the exercise of reasonable diligence, the Company is not using any
confidential information or trade secrets of any former employer or any of its
past or present employees.
5.20 No Brokers or Finders: No person, firm or corporation has any
right, interest or valid claim against Buyer for any commission, fee or other
compensation as a finder or broker in connection with the transactions
contemplated by this Agreement.
5.21 ERISA:
(A) All "employee benefit plans," as defined in Section 3(3) of ERISA,
sponsored, maintained or contributed to by the Company are listed on Schedule
4.5(M) hereto, and complete and accurate copies of the plans (or related
insurance policies) have been furnished to Buyer. Except as disclosed in
Schedule 4.5(M), the Company is not a party to, does not have in effect or to
become effective after the date of this Agreement any bonus, cash or deferred
compensation, severance, medical, health or hospitalization, pension, profit
share or thrift, retirement, stock option, employee stock ownership, life or
group insurance, death benefit, welfare, salesmen incentive, vacation, sick
leave, disability, trust agreement, arrangement or other welfare or pension
benefit plan (as such terms are defined by ERISA).
(B) Each employee benefit plan required to be listed in Schedule
4.5(M) hereto has been administered in compliance with applicable provisions
of ERISA and the Code.
(C) All reporting and disclosure requirements under ERISA and the Code for
the plans listed in Schedule 4.5(M) here to have been complied with, except
for such non-compliance which could not result in a termination or fine or
have a materially adverse affect upon such plans.
Page 14
(D) All benefits provided under all employee benefit plans listed in Schedule
4.5(M) hereto are covered by insurance, other than Company policies for profit
sharing, sick leave, personal leave and vacation.
(E) The Company does not contribute to and is not required to contribute to
any "multi-employer plan," as defined in Section 414(f) of the Code and
Section 3(37) of ERISA, and the Company has not incurred or does not
reasonably expect to incur any "withdrawal liability" under Section 4201 et
seq. of ERISA.
(F) Neither Buyer, nor any trade or business under common control with Buyer
(within the meaning of Sections 414(b) and 414(c) of the Code) or any
officers, directors, employees or affiliates of the same shall, from and after
the Closing Date, have any liability, obligation or responsibility with
respect to any employee benefit plan maintained or provided by the Company, or
any affiliate thereof, before the Closing Date (including but not limited to
liability for contributions to or the benefits payable under any such employee
benefit plan), except for the continuation of insurance plans, the
continuation of insurance protection to employees as mandated by applicable
law or such benefits as Buyer, in its sole discretion, may determine to
provide to the Company's employees after the Closing Date.
5.22 Insurance: Schedule 4.5(D) is an accurate and complete list of
all fire, theft, casualty, liability and other insurance policies insuring the
Company, its business, or any of the Assets specifying the type and amount of
coverage and expiration dates. All such policies are in full force and
effect.
5.23 Full Disclosure: There has been and will be no material change in
the information set forth in the documents furnished or schedules or exhibits
to this Agreement between the date of such schedule or exhibit and the date of
this Agreement or the Closing Date. Seller has not knowingly withheld from
Buyer any material fact relating to the Assets, Business, Operations,
Financial Condition or Prospects of the Company. No representation or
warranty in this Agreement or other document furnished in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein to make
the statements therein not misleading. Without limiting the scope of the
foregoing, Seller is not aware of any change or occurrence that has taken
place or is pending that could have a material adverse effect on the value of
the Assets or the Business of the Company, or the ability of the Company to
operate its Business subsequent to the Closing Date in the manner in which it
has been operated by the Company before the Closing Date, or which could
materially increase the costs incurred by the Company in operating its
Business subsequent to the Closing Date, including any pending or present
change in any law or regulation, or other requirements, concerning license or
approvals.
5.24 Accounts and Notes Receivable: Any accounts and notes receivable
of the Company set forth in Exhibit 2.1(K) are valid, assignable, and
enforceable obligations due to the Company and shall be collectible by the
Seller and are the property of Seller and shall not be acquired by Buyer
pursuant to this Agreement. The goods and services sold and delivered by the
Company that gave rise to such accounts and notes receivable were sold and
delivered in conformity with the applicable purchase orders, agreements and
specifications. Such accounts and notes receivable are subject to no valid
defense or offsets except routine customer complaints of an immaterial nature.
Page 15
5.25 Shareholder Approval. By October 31, 2002 Seller will have
obtained the necessary approval of shareholders and owners of capitol stock
and of its Board of Directors (all as required by applicable statute) for
Seller entering into this Agreement and for Seller complying with the terms
and conditions of this Agreement, including the completion of all transactions
contemplated by this Agreement and shall have provided true and correct copies
of all such approvals to Buyer, certified by officers of the Seller.
5.26 The representations and warranties made by Seller in this
Agreement are made as of the date of this Agreement and as of the Closing
Date. Such representations and warranties shall survive the Closing Date and
shall continue until their expiration in accordance with the terms of this
Agreement.
6. Representations and Warranties of Buyer
The Buyer hereby represents and warrants to the Seller as follows:
6.1 Organization and Standing: Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Minnesota, and has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement.
6.2 Corporate Authorization: The execution, delivery and performance of
this Agreement by Buyer have been duly authorized by proper corporate action
of Buyer and are within its corporate powers. This Agreement constitutes the
legal, valid and binding obligation of Buyer and is enforceable against Buyer
in accordance with its terms.
6.3 No Brokers or Finders: No person, firm or corporation has any
right, interest or valid claim against Buyer for any commission, fee or other
compensation as a finder or broker in connection with the transactions
contemplated by this Agreement.
6.4 No Defaults: The Buyer is not in default or breach under any
provisions of this Agreement or any other Agreement between the parties on the
date of this Agreement and will not be in default or breach as of the Closing.
6.5 Lawsuits, Proceedings, etc.: Except as disclosed to Seller in
writing there is no action or proceeding (whether or not purportedly on behalf
of the Buyer) pending or, to the best knowledge of Buyer, threatened against
the Buyer, nor, to the best knowledge of Buyer, does there exist any basis
therefore, which might result in any adverse change in the condition,
financial or otherwise, of the Buyer's Business or Assets. No order, writ,
or injunction or decree has been issued by, or requested of, any court or
governmental agency which does or may result in any adverse change in the
Buyer's Assets or properties or in the financial condition of the Buyer or its
Business. The Buyer is not liable for damages to any employee or former
employee as a result of any violation of any state or federal laws directly or
indirectly relating to such employee or former employee.
6.6 No Breaches: The Buyer is not in violation of, and the execution,
delivery and performance of this Agreement will not result in any breach or
acceleration of, any of the terms or conditions of its articles of
incorporation or bylaws or of any mortgage, bond, indenture, agreement,
contract, license or other instrument or obligation to which the Buyer is a
party or by which its assets are bound, nor will they result in any violation
of any statute, regulation, judgment, writ, injunction or decree of any court,
Page 16
threatened or entered in a proceeding or action in which the Buyer may be
bound or to which any of its Assets are subject.
7. Employees
7.1 Buyer will not, subsequent to Closing, have any obligation to offer
employment to any individuals employed by Seller, except as indicated by
Section 8.3. Except as disclosed on Schedule 4.5(M), there are no other
written or oral agreements or commitments to employees which cannot be
terminated at anytime by Seller.
7.2 Whether or not Buyer after Closing offers employment to any employee
of Seller, Seller shall retain and remain solely liable for any and all
claims, including without limitation, retirement benefits, accrued vacation,
xxxxxxx'x compensation and medical claims which arise out of, are associated
with, or are based upon conditions or events which occurred prior to Closing.
8. Closing
8.1 General Procedure: At the Closing each party shall deliver to the
other party, in form and substance satisfactory to the other party, such
documents, instruments and materials required to effectuate the provisions of
this Agreement.
8.2 Time and Place: The Closing shall take place on ______________ in
_____________, at a time and place mutually determined, or such other date and
location as is determined by the parties.
8.3 Additional Agreements:
(A) Employment Agreements: On the Closing Date, each of Xxxxx Xxxxx, Xxxxxx
Xxxx and Xxxx de St. Simon must enter into an employment agreement with Buyer
in the form as attached hereto as Exhibit 8.3(A).
(B) Non-Competition Agreements: On the Closing Date, each of Xxxxxx Xxxxxx de
St. Simon and Xxxx XxxxxXxxx must enter in a non-completion agreement with
Buyer in the form as attached hereto as Exhibit 8.3(B).
9. Conditions of Buyer's Obligation
9.1 The obligation of Buyer to complete the purchase of the Assets on
the Closing Date in accordance with the terms set forth in this Agreement is,
at the option of the Buyer, subject to the satisfaction (or waiver or
extension of time for satisfaction by Buyer) of each of the following
conditions:
(A) Accuracy of Representations and Warranties: The representations and
warranties made by Seller in this Agreement shall be correct in all material
respects on and as of the Closing Date with the same force and effect as
though such representations and warranties had been made on the Closing Date.
(B) Employment and Non-Competition Agreements: Each agreement required under
Section 8.3 (A) and 8.3 (B) must be executed by the individuals indicated in
Section 8.3 (A) and 8.3 (B) and otherwise complete in all respects.
(C) Opinion of Counsel: Buyer shall have received the opinion of Krys,
Boyle, Xxxxxxxx and Xxxxxx, the Seller's legal counsel ("Counsel"), dated the
Page 17
Closing Date, addressed to Buyer, and in form and substance satisfactory to
Buyer's legal counsel, stating the substance of the representations and
warranties set forth in Sections 5.2 and 5.3 of this Agreement. Counsel shall
be entitled to rely upon certificates of governmental officials and, as to
factual matters, upon certificates of the president of the Company.
(D) Delivery of Closing Documents: Seller shall have delivered to Buyer each
of the items listed in Section 2.1, including those on Schedules related to
Section 2.1, Section 4.5 and 4.6 and 5.7 and such items shall be satisfactory
in form to Buyer and include:
(1) Xxxx of Sale transferring the Assets to Buyer duly executed by Seller in
the form attached as Exhibit 9.1(D)(1).
(2) Assignments executed by Seller to the corporate name, trademarks, trade
names, copyrights and other Intangibles listed on Exhibit 9.1(D)(2).
(3) Assignments or consents executed by Seller or third parties for leases,
licenses, contracts or other agreements listed in Section 4.5 herein and
Exhibit attached as Exhibit 9.1(D)(3).
(4) Certified copy of corporate resolutions, and if required by statute,
shareholder approval authorizing the execution of this Agreement and the
consummation by Seller of the transactions of the Agreement.
(5) The results of UCC, tax, bankruptcy and judgment lien searches, obtained
by Buyer at its expense and dated within seven (7) days prior to the Closing
Date, in the name of the Seller, the Company and any trade name used by the
Company in the Secretary of State's records of the State of Colorado and in
all appropriate local filing offices are satisfactory to Buyer.
(6) Appropriate payoff letters from the Company's creditors with respect to
all Long-Term Debt and other indebtedness of the Company, and, if such debt is
to be repaid pursuant to the terms of this Agreement, releases in form
reasonably satisfactory to counsel for Buyer from all persons holding liens or
other interests in any of the Assets (other than liens for current taxes not
yet due and payable).
(7) A Certificate of Good Standing for the Company from the State of
Colorado and the Articles of Incorporation of the Company certified by an
appropriate government official as of the Closing Date, delivered within two
weeks of the Closing.
(8) All other documents, certificates, instruments and writings required
hereunder to be delivered by the Company and/or Seller, or that may reasonably
be requested by Buyer at or prior to the Closing Date.
(9) Lessor's Release as described in Section 5.16 hereof.
(E) Covenants and Conditions: Seller shall have performed or caused the
company to perform in all material respects all of his obligations and
agreements and complied or caused the Company to comply in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with on or before the Closing Date.
(F) Adverse Change: Between the date of this Agreement and the Closing Date,
in Buyer's sole judgment, using a standard of reasonable business judgment,
there shall have been no material adverse change in the Company or its
condition (financial or otherwise), operations, business or prospects, and the
Page 18
Company shall not have suffered any material loss by fire, flood, act of God,
natural disaster, blizzard, windstorm, or other casualty which has not been
fully restored or replaced.
(G) Legal Proceedings: There shall not be pending or threatened any lawsuit,
claim, legal action, administrative proceeding or investigation involving
either Seller, the Company, the Assets or the Shares which would materially
adversely affect the Company, the Assets, the Shares of the transactions
contemplated by this Agreement.
(H) Licenses in Effect: All of the Licenses shall be in full force and
effect on the Closing Date without conditions.
(I) Encumbrances: Except for Permitted Liens (Exhibit 5.5) there shall be no
security interest, mortgage, pledge, conditional sales agreements, or other
lien or encumbrance, affecting any of the Assets (other than liens for current
taxes not yet due and payable).
10. Conditions to Obligations of Seller
10.1 The obligation of Seller hereunder to complete the sale of the
Assets on the Closing Date on the terms set forth in this Agreement is
subject to the satisfaction (or waiver by the Seller) of each of the following
conditions:
(A) Accuracy of Representations and Warranties: The representations and
warranties of Buyer in this Agreement shall be correct in all material
respects as of the Closing Date.
(B) Employment and Non-Competition Agreements: Each agreement required under
Section 8.3(A) and 8.3(B) must be executed by Buyer and otherwise complete in
all respects.
(C) Opinion of Counsel: Seller shall have received the opinion of Xxxx,
Plant, Xxxxx, Xxxxx & Xxxxxxx, P.A., the Buyer's legal counsel, dated the
Closing Date and in form and substance satisfactory to Seller's legal counsel,
stating the substance of the representations and warranties set forth in
Sections 6.1 and 6.2.
11. Indemnification
11.1 General: The covenants, representations and warranties contained
in this Agreement shall survive the Closing.
11.2 Seller: Seller shall indemnify and hold Buyer harmless against and
from any losses, claims, costs, demands, damages, suits or liabilities,
including without limitation in each case the cost, expenses and attorney's
fees reasonably incurred by Buyer resulting from, arising out of, incident to
or based upon: (i) Seller's ownership of the Assets and activities associated
with the conduct of the Business prior to Closing; (ii) any breach of any of
the Seller's representations, covenants or warranties provided in this
Agreement, or any Seller's misrepresentation in any certificate or document
delivered to Buyer hereunder; or (iii) any claims by third parties alleging
strict liability in tort, express or implied warranty or contract seeking
compensation for property damage, bodily injury and or death related to or
arising out of, incident to or associated with the design, manufacture, sale,
installation, operation, use, service and/or maintenance of any product
associated with the Business prior to Closing. Seller agrees to keep, pay and
Page 19
perform all such liabilities and obligations not expressly assumed hereunder
by Buyer in accordance with their respective terms and conditions and shall
indemnify, defend and hold harmless Buyer in respect thereto and any costs,
expenses (including reasonable attorneys' fees), or other liabilities incurred
by Buyer with respect to such liabilities and obligations of Seller.
11.3 Setoff and Reconciliation of Values:
(A) The exact value as of the Closing Date of Assets purchase and obligations
being assumed by Buyer shall be reconciled and verified by Buyer subsequent to
Closing.
Should the verification determine at any time that:
(1) liabilities exist which were undisclosed by Seller which liabilities
Buyer, in its sole discretion, elects to pay in order to preserve the business
operations and reputation of the Business, including attorneys' fees, then the
amount so paid (including attorney's fees) to discharge such undisclosed
liabilities will be set off as described below. This provision
notwithstanding, the parties agree and acknowledge that Buyer is not assuming
and shall not be required to pay any Liabilities.
(2) any matter described in Section 11.2 above has arisen, the cost to Buyer
of such matter will be set off as described below.
Any amounts to be set off in paragraphs 1 through 2 above will be applied
against any amounts then owed by Buyer to Seller. Amounts set off under this
provision will be adjustments to the Purchase Price as of the Closing Date.
Buyer shall notify Seller in writing of the nature, reason and amount of
Buyer's claim for setoff. Seller shall be entitled to contest any such
claimed setoff by written notice to Buyer within thirty (30) days after the
postmark date of Buyer's notice thereof. If Seller does not so contest, Buyer
shall effect the setoff by reducing payments due. If Seller does so contest,
and within sixty (60) days of Buyer's original notice, any dispute as to
claimed setoff cannot be settled by the parties, the dispute shall be resolved
according to the provisions of Section (B) below.
(B) Shareholders Guaranty: The parties acknowledge and agree that Seller may
make distribution of its assets to the Shareholders after consummation of the
transactions contemplated by this Agreement. Because such distributions may
leave Seller without significant assets, the Shareholders hereby jointly and
severally guaranty the indemnity obligations of Seller, but only to the extent
of distributions actually received from Seller. In the event of the existence
of an indemnification liability hereunder, Buyer agrees to look first to the
assets of Seller in accordance with the terms of this Agreement before looking
to the Shareholders in accordance with this Section. To the extent that Buyer
looks to the Shareholders for satisfaction of any indemnification liability,
such liability shall be satisfied as follows:
(i) First, by setoff against any amounts then owed by Buyer to the Seller
or the Shareholders
(ii) Second, by collection of any remaining amount of indemnification
liability from the Shareholders, up to but not exceeding the amount of any
distributions made by Seller to the Shareholders after the Closing Date.
It is understood by the parties that claims made under this Section 11 may be,
upon recovery by the Buyer, subsequently paid to third parties or may be
retained by the Buyer, depending upon the nature of the claim.
Page 20
11.4 Buyer: Buyer shall indemnify and hold Seller harmless against and
from any losses, claims, cost, demands, damages, suits or liabilities,
including, without limitation, in each case the costs, expenses and attorney's
fees reasonably incurred by Seller resulting from, arising out of or based
upon: (i) any breach of any of the Buyer's representations, covenants,
warranties provided in this Agreement, or any Buyer's misrepresentation in
any certificate or document delivered to Seller hereunder; or (ii) Buyer's
operation of the Business subsequent to Closing.
11.5 Indemnification Claims - Interest: Interest on any claim for
indemnification pursuant to this Section 11 shall accrue at a rate equal to
the reference rate as publicly announced from time to time by U.S. Bank
National Association, Minneapolis, Minnesota, from the date the claim arose
until the claim is satisfied by payment.
11.6 Legal Proceedings: In the event Buyer or Seller become involved in
any legal, governmental or administrative proceeding which may result in
damage to such party, or if any such proceeding is threatened or asserted
which will damage the business or reputation of the Company, such party shall
promptly notify the indemnifying party in writing and in full detail of the
filing, or the threat or assertion of such filing, and of the nature of any
such proceeding. If the Indemnifying Party does not elect to assume control
or otherwise participate in the defense of any third party claim, it shall be
bound by the results obtained by the Indemnified Party with respect to such
claim.
11.7 Bulk Sales Compliance: Seller has agreed to indemnify and hold
Buyer harmless from all liabilities arising from its operation of Seller's
business that have not been assumed by Purchaser as set forth above. In
reliance upon said indemnification, Buyer waives and releases Seller from its
obligation to execute and deliver an Affidavit listing creditors as required
by any Colorado Bulk Transfer Law.
12. Possession of Properties and Assets; Loss or Damage
12.1 Seller's Remedies: If the transaction contemplated by this
Agreement is not consummated because of a default by Buyer of its obligations
hereunder and provided Seller is not in default, Seller shall be entitled (but
not required), to seek any other remedies which may be available, including
money damages. In the event of a default by Buyer and the filling of a
lawsuit which results in a final judgment (not subject to further appeal) in
favor of Seller for damages or other remedy, Seller shall be entitled to
reimbursement by Buyer of the reasonable legal fees and expenses incurred by
Seller.
12.2 Buyer's Remedies: The parties recognize that if Seller refuses to
perform under the provisions of this Agreement, monetary damages alone will
not be adequate. Buyer shall therefore be entitled, to seek any other
remedies which may be available, including money damages. In the event of any
action to enforce this Agreement, Seller shall waive the defense that there is
an adequate remedy at law. In the event of a default by Seller and the filing
of a lawsuit which results in a final judgment (not subject to further appeal)
in favor of Buyer for damages or other remedy, Buyer shall be entitled to
reimbursement by Seller of the reasonable legal fees and expenses incurred by
Buyer. Without limiting the foregoing, Seller agrees that if Seller breaches
Section 5.25 of this Agreement then, in Buyer's sole discretion, this
Agreement and all of its terms and conditions, except for those terms and
conditions in Sections 11 and 12, shall be considered null and void.
Page 21
12.3 Buyer shall not acquire any title to or right in the Assets until
Closing, and accordingly, all risk of loss with respect to the Assets shall be
borne by Seller.
12.4 At Closing, the Assets shall be in substantially the same condition
as of the date of this Agreement except for normal transactions of the
business, and ordinary wear thereof, provided, however, that if at Closing the
Assets shall have suffered loss or damage to an extent which substantially
affects the value of such property, Buyer shall have the right, at its
election, to either: (i) complete the acquisition with a reduction in the
purchase price equal to the loss or damage, said reduction to be from the
amount to be paid by Buyer to Seller as set forth in Section 3.1 (A); or (ii)
to terminate this Agreement in accordance with Section 13 hereof.
13. Termination
13.1 Mutual Termination: This Agreement may be terminated by mutual
agreement of Buyer and Seller at any time.
13.2 Default: This Agreement may be terminated by either Buyer or
Sellers, if the terminating party is not then in material default, upon
written notice to the other party, upon the occurrence of the following:
prior to the Closing Date, Sellers or Buyer shall be come aware of any
material breach of any representation, warranty, obligation or agreement by
the other party (the "Breaching Party"), they shall give prompt written notice
to the Breaching Party of the nature of such breach. The Breaching Party
shall use its best efforts to cure the breach prior to the Closing Date. If
the Breaching Party has not cured the breach on or before the Closing Date,
the parties shall negotiate in good faith a mutually acceptable compromise
taking into account the economic effect of the breach on the Buyer or Sellers,
as the case may be, and shall consummate the transactions contemplated hereby.
If the parties are unable to reach agreement and consummate the transactions
contemplated by this Agreement, the Closing shall be postponed and the
Breaching Party shall use its best efforts to cure the breach as soon as
practicable. The exact date and time of the postponed Closing Date shall be
agreed upon by Buyer and Sellers, provided that in no event shall the
postponed Closing Date occur after September 30, 2002. If the Breaching Party
has not cured the breach before that date, then if Buyer is the non-defaulting
party, it shall have all rights and remedies provided in this Agreement and at
law or equity, including without limitation, (i) the right to terminate this
Agreement, and (ii) the Sellers shall be liable to Buyer for any damages
incurred or suffered by Buyer.
14. Miscellaneous
14.1 Binding Effect: This Agreement shall be binding upon and inure to
the benefit of and be enforceable against the parties hereto and their
respective successors.
14.2 Governing Law: This Agreement shall be governed by, and enforced
and interpreted in accordance with, the laws of the State of Minnesota without
giving effect to the principles of conflicts of law of Minnesota and any
disputes hereunder shall be venued in Hennepin County Minnesota.
14.3 Notices: All notices or other communications provided for herein
shall be in writing and shall be deemed validly given, when delivered
personally or sent by registered or express mail, postage prepaid, and,
pending the designation of another address, addressed as follows:
Page 22
If to Seller:
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
With a copy to:
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
If to Buyer:
X.X. Xxxxxxxx, Chairman
Xxxxxxxx Acquisition Corp.
0000 Xxxxxxxx Xxx.
Xxxxxxxxxxx, XX 00000
With a copies to:
M. Xxxxxxx Xxxxxxxx, Treasurer
Xxxxxxxx Acquisition Corp.
0000 Xxxxxxxx Xxx.
Xxxxxxxxxxx, XX 00000
And to:
Xxxxx X. Xxxxxxx
Attorney
Xxxx Plant Xxxxx Xxxxx & Xxxxxxx, P.A.
Suite 3400
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000
14.4 Entire Agreement and Counterparts: This Agreement, the exhibits
attached hereto, and schedules delivered pursuant to the provisions hereof,
set forth the entire agreement between Seller and Buyer relating to the
transaction contemplated herein, superseding any prior oral or written
agreement or understanding between them. This Agreement shall be amended or
modified only by written instrument signed by both parties.
14.5 Assignment: Seller hereby agrees that Buyer may assign its rights,
and delegate its responsibilities, under this Agreement to a wholly-owned
subsidiary corporation, in which case the Buyer shall remain fully obligated
to on all responsibilities and duties hereunder in all events and shall use
its best efforts cause such subsidiary corporation to complete the purchase of
the assets in the manner contemplated by this Agreement. The provisions of
this Section notwithstanding, this Agreement is not intended to and shall not
create any rights or third parties not signatories to this Agreement with
respect to Buyer or its assets.
Page 23
14.6 Expenses, Taxes: Each party shall pay for its own legal,
accounting and other similar expenses incurred in connection with the
transactions contemplated by this Agreement; provided, however, that in the
event a full certified Audited Financial Statement is required by the Buyer,
the audit fee for the audit agreed to under this Agreement shall be paid by
Sellers.
14.7 Publicity: All notices to third parties and other publicity
relating to the matters contemplated by this Agreement shall be jointly
planned and coordinated between Seller and Buyer, and neither party shall
unilaterally release such notices or publicity without the prior written
approval of the other party.
14.8 Negotiation: Unless this Agreement is terminated, Seller will not
enter into negotiations with any other party for the sale of the Company's
Assets or the capitol stock of the Company. Sellers will promptly notify
Buyer of any offer, inquiry or proposal received by Buyer or its
representatives for such sale.
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of
the date set forth in the first paragraph.
XXXXXXXX ACQUISITION CORP. TANGIBLEDATA, INC.
By /s/ E. Xxxxx Xxxxxxxx By /s/ Xxxxx Xxxxx
E. Xxxxx Xxxxxxxx Xxxxx Xxxxx
Chief Executive Officer President
SHAREHOLDERS:
By /s/ Xxxxx Xxxxx
Xxxxx Xxxxx
By /s/ Xxxx Xxxxxxxxx
Xxxx Xxxxxxxxx
By /s/ Xxxxxx Xxxx
Xxxxxx Xxxx
By /s/ Alex de St. Xxxxx
Xxxx de St. Simon
By /s/ Xxxxxx Xxxxxx de St. Simon
Xxxxxx Xxxxxx de St. Xxxxx
Xxxx 24
TABLE OF EXHIBITS AND SCHEDULES
Exhibit 2.1 (F) Fixed Assets
Exhibit 2.1 (G) Intangibles
Exhibit 2.1 (H) Inventory
Exhibit 2.1 (I) Computer Software Including Source Code
Exhibit 2.1 (J) Other Assets
Exhibit 2.1 (K) Current Assets
Exhibit 2.1 (N) Other Liabilities (Third Party Leases of Personal Property)
Exhibit 3.3 Allocation
Exhibit 3.4 Shareholder Consent
Exhibit 5.4 (A) Material Changes
Exhibit 5.4 (F) Liabilities Not Paid In The Ordinary Course
Exhibit 5.5 Liens and Encumbrances
Exhibit 5.7 Financial Statements
Exhibit 5.11 Lawsuits and Proceedings
Exhibit 5.12(B) Environmental Violations
Exhibit 8.3(A) Employment Agreements
Exhibit 8.3(B) Non-Competition Agreements
Exhibit 9.1(D)(1) Xxxx of Sale
Exhibit 9.1(D)(2) Assignment of Intangibles
Exhibit 9.1(D)(3) Assignment of Leases and Licenses
Schedule 4.5(A) Equipment, Machinery, Furniture, Etc.
Schedule 4.5(B) Motor Vehicles
Schedule 4.5(C) Intangibles
Schedule 4.5(D) Insurance
Schedule 4.5(E) Permits and Licenses
Schedule 4.5(F) Personal Property of Third Parties Possessed by Seller
Schedule 4.5(G) Bank Accounts
Schedule 4.5(H) Employee Compensation
Schedule 4.5(I) Ten Largest Customers
Schedule 4.5(J) Real Properties
Schedule 4.5(K) Leased Real Property
Schedule 4.5(L) Other Leases
Schedule 4.5(M) Agreements of Seller
