EXHIBIT 10.20
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("AGREEMENT") is entered into effective
this 1st day of December, 2000, by and among Xxxxxx Manufacturing, Inc., a
Minnesota corporation ("BUYER") and Magstar Technologies, Inc., a Minnesota
corporation ("SELLER"). Buyer and Seller are hereinafter collectively referred
to as the "PARTIES".
RECITALS
WHEREAS, Seller is, among other things, in the business of
manufacturing and selling certain assets (the "BUSINESS");
WHEREAS, Seller desires to sell, assign and transfer to Buyer, and
Buyer desires to purchase and acquire from Seller, certain of the assets and
properties held in connection with the Business, upon the terms and subject to
the conditions set forth herein.
AGREEMENTS
NOW THEREFORE, in consideration of the foregoing, and the mutual
agreements, covenants, representations and warranties contained in this
Agreement, the receipt and sufficiency of which are acknowledged, the Parties
hereby agree as follows:
1. PURCHASE OF ASSETS.
1.1. PURCHASED ASSETS. On the terms and subject to the conditions of
this Agreement, Buyer will purchase from Seller and Seller will sell to
Buyer as and when provided below, certain of the assets of Seller
described below (the "PURCHASED ASSETS"):
1.1.1 INVENTORY. All inventories of raw materials or parts,
work-in-process (less obsolescence), finished goods (including all
inventories consigned to dealers, sales representatives, and others),
accessories related to the Business, and pre-paid expenses all as
reflected on Seller's unaudited balance sheet as of November 30, 2000
attached as Exhibit A hereto (the "LATEST BALANCE SHEET"), wherever
located.
1.1.2 ACCOUNTS RECEIVABLE. All accounts receivable (as
reflected on the Latest Balance Sheet) including all of Seller's right,
title, and interest in and to all customer purchase orders relating to
the Purchased Assets that arrive on or after the Closing Date (as
defined below) and all purchase orders that are unfulfilled as of the
Closing Date (the "PURCHASE ORDERS"). Prior to Closing, Seller shall
furnish to Buyer all then-existing Purchase Orders, the obligations of
each shall be assumed by Buyer. For a period of one (1) year, ending on
the first anniversary of the Closing Date, Seller shall continue to
promptly furnish to Buyer all Purchase Orders as they are received by
Seller.
1.1.3 NO RESTRICTIONS. The Purchased Assets will be
transferred by Seller to Buyer free and clear of any and all claims,
liens, mortgages, security interests, encumbrances, charges,
obligations, and other restrictions, except for restrictions arising
from and solely related to the Assumed Liabilities (as defined below).
1.2. RETAINED ASSETS. Notwithstanding the foregoing, the Seller will
NOT sell, transfer, convey, assign or deliver to the Buyer, and the
Buyer will NOT purchase from the Seller, the following assets: (I) the
"Equipment" set forth in the Equipment Lease (as defined below); (II)
the consideration delivered to Seller pursuant to this Agreement; (III)
the minute books, corporate seal and stock records of the Seller; (IV)
shares of the capital stock of Seller, including shares held by Seller
as treasury shares; (V) cash, money and deposits with financial
institutions and others, certificates of deposit, commercial paper,
notes, evidences of indebtedness, stocks, bonds and other investments;
(VI) all of Seller's claims, causes, or rights of action and intangible
property rights arising from or concerning any of the Purchased Assets;
and (VII) all other "Current Assets" and "Fixed Assets" as such terms
are defined in the Latest Balance Sheet except for the Purchased
Assets.
1.3. ASSUMED LIABILITIES. Upon satisfaction of all conditions to the
obligations of the Parties contained herein (other than such conditions
as will have been made in accordance with the terms hereof), the Buyer
will assume all "Trade Accounts Payable" as set forth in the Latest
Balance Sheet and all "Accrued 401K" as set forth in the Latest Balance
Sheet (collectively, the "ASSUMED LIABILITIES" ).
1.4. RETAINED LIABILITIES. Except for the Assumed Liabilities, the
Buyer has not agreed to pay, will not be required to assume and will
have no liability or obligation, direct or indirect, absolute or
contingent, of the Business, the Seller or any affiliates or associates
or of any other person (the "RETAINED LIABILITIES"), including without
limitation: (I) all "Current Liabilities" as set forth in the Latest
Balance Sheet except for the Assumed Liabilities; (II) all "Long Term
Liabilities" as set forth in the Latest Balance Sheet; (III) any debt,
liability or obligation of the Business, the Seller or any of its
affiliates or associates, direct or indirect, known or unknown, fixed,
contingent or otherwise, that (a) is unrelated to the Purchased Assets;
(b) is unrelated to the Business; or (c) relates to the Purchased
Assets and is based upon or arises from any act, omission, transaction,
circumstance, sale of goods or services, state of facts or other
condition occurring or existing on or before the Closing Date, whether
or not then known, due or payable; (IV) any obligation for Taxes
related to any of the Purchased Assets for any Tax period or portion
thereof ending on or before the Closing Date and any obligation for
other Taxes of the Seller; and (V) any pollution or threat to human
health or the environment or violation of any Environmental and
Occupational Safety and Health Law that is related in any way to the
Seller's or any previous owner's or operator's management, use,
control, ownership or operation of the Purchased Assets and that
occurred, existed, arises out of conditions or circumstances that
occurred or existed, or was caused, in whole or in part, on or before
the Closing Date and any environmental claim against any person or
entity whose liability for such environmental claim the Seller has or
may have assumed or retained either contractually or by operation of
law.
2. PURCHASE PRICE.
2.1. PURCHASE PRICE. The total consideration to be paid by the Buyer to
the Seller for the Purchased Assets will be $363,587 (the "PURCHASE
PRICE"). The Purchase Price will be paid by the Buyer through the
execution and delivery to the Seller of a promissory note in
substantially the form attached hereto as Exhibit B, in the principal
amount of the Purchase Price (the "PROMISSORY NOTE"). In addition, the
Buyer will assume the Assumed Liabilities as of the Closing Date.
2.2. ALLOCATION. The Purchase Price will be allocated among the
Purchased Assets in the manner required by Section 1060 of the Code.
The Buyer and the Seller will negotiate in good
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faith the values of the Purchased Assets and the resulting allocation
of the Purchase Price among the various assets; it being understood
that such determination will be binding on the Buyer and the Seller
only for the purposes of U.S. Federal, state and local taxation. The
Seller and the Buyer will file all Tax Returns and tax reports
(including IRS Form 8594) in accordance with and based upon such
allocation and will take no position in any Tax Return, tax proceeding
or tax audit which is inconsistent with such allocation.
3. CLOSING. The purchase and sale contemplated by this Agreement (the "CLOSING")
shall take place and shall be effective for all purposes at a place upon which
the Parties mutually agree, at 10:00 A.M. local time on December 1, 2000 (the
"CLOSING DATE"). At the Closing, Buyer will deliver or cause to be delivered to
Seller: (a) the Promissory Note as set forth in Section 2.1; (b) the executed
Equipment Lease substantially in form attached as Exhibit C (the "EQUIPMENT
LEASE"); and (c) any and all other instruments and documents required of Buyer
under this Agreement. At the Closing, Seller will deliver or cause to be
delivered to Buyer (a) the executed Equipment Lease; (b) bills of sale and
assignments reasonably acceptable to Buyer, sufficient to transfer to Buyer
title in the Purchased Assets described in Section 1 in accordance with this
Agreement; and (c) all records and other documents included in the Purchased
Assets; and any and all other instruments and documents required of Seller under
this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrant to
Buyer as follows:
4.1. ORGANIZATION AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of
Minnesota with requisite corporate power and authority to carry on its
business as it is now being conducted and to own, operate and lease its
properties and assets. Seller is duly qualified or licensed to do
business as a foreign corporation in good standing in every other
jurisdiction in which the character or location of the properties and
assets owned, leased or operated by it or the conduct of its business
requires such qualification or licensing, except in such jurisdictions
in which the failure to be so qualified or licensed and in good
standing would not have a material adverse effect upon the business,
properties, prospects or condition, financial or otherwise, of the
Seller.
4.2. ORGANIZATIONAL DOCUMENTS. Seller is not currently in violation of
any of the provisions of its Articles of Incorporation or the bylaws
("CHARTER DOCUMENTS").
4.3. AUTHORIZATION. Seller has the requisite corporate power and
authority to enter into and to carry out its obligations under this
Agreement. The execution and delivery of this Agreement by the Seller
and the consummation by the Seller of the transactions contemplated
hereby have been duly authorized by its Board of Directors and
shareholders and no other corporate proceedings on the part of the
Seller are necessary to authorize this Agreement. This Agreement
constitutes a valid and binding agreement of the Seller enforceable
against the Seller in accordance with its terms, except to the extent
that enforceability thereof may be limited by bankruptcy and other
similar laws and general principles of equity.
4.4. NO CONFLICT WITH OTHER INSTRUMENTS OR PROCEEDINGS. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement will not: (a) result in the breach of
any of the terms or conditions of, or constitute a default under
Seller's Charter Documents, any contract, agreement, lease, commitment,
mortgage, note, or other instrument or obligation to which Seller is
now a party or by which any of its assets may be bound or affected; (b)
violate any law, rule, or regulation of any administrative agency or
governmental body or any order, writ, injunction, or decree of any
court, administrative agency,
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or governmental body applicable to Seller; or (c) result in the
imposition of any lien or encumbrance on any of the Purchased Assets.
All consents, approvals, or authorizations of, or declarations,
filings, or registrations with, any third parties or governmental or
regulatory authorities required of Seller in connection with the
execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement will be
obtained or made by Seller before the Closing Date.
4.5. INVENTORY. All Purchased Assets, including without limitation all
raw materials, work-in-process, finished goods, consigned goods, and
other items of the inventory of Seller, will be of a quality and
quantity usable and salable in the ordinary and usual course of
business.
4.6. TITLE. Upon Closing, Seller shall have good and marketable title
to all of the Purchased Assets, subject to no security interest,
mortgage, pledge, lien, tax lien, encumbrance, charge, obligation,
assignment, or other restriction.
4.7. INTELLECTUAL PROPERTY. In developing or manufacturing the Purchase
Assets, Seller has not infringed or unlawfully used the patents,
service marks, trade names, trademarks, logos, copyrights, or other
proprietary rights of any other person or entity.
4.8. TAXES. Seller has properly prepared and timely filed with the
United States, any state or other political subdivision and all
appropriate governmental agencies all tax returns and tax reports
required to be filed by it. All federal, state, and local income,
profit, withholding, franchise, sales, use, occupation, property,
social security, unemployment, workers' compensation, ad valorem,
excise or other taxes of Seller, and all assessments, deficiencies,
interest, and penalties related to such taxes, whether disputed or not,
due and payable on or before the date hereof have been paid or provided
for, and no agreements are currently in effect with respect to Seller
waiving or providing for an extension of time with respect to the
filing of any tax returns or the payment or assessment of any tax or
deficiency or waiving or extending the provisions of any statute of
limitations.
4.9. BROKERS' FEES. Neither Seller nor Buyer, will incur any liability
for brokers' fees, finders' fees, agents' commissions, financial
advisory fees, or other similar forms of compensation in connection
with this Agreement or any transaction contemplated by this Agreement
as a result of any action by Seller.
4.10. WARRANTIES. To the best of Seller's knowledge, all Purchased
Assets are free from design or manufacturing defects (except for minor
defects which do not adversely affect the use or merchantability
thereof or create any claim against Seller or Buyer), of merchantable
quality, safe and fit for the purpose intended, and in connection with
such sales, Seller has not breached any express or implied warranty.
4.11. DISCLOSURE. No representation or warranty by Seller in this
Agreement or in any Schedule or Exhibit hereto, or in any list,
statement, document or information set forth in or attached to any
Schedule or Exhibit delivered or to be delivered pursuant to this
Agreement contains or will contain any untrue statement of a material
fact or omits or will omit any material fact necessary in order to make
the statements contained therein not misleading. Seller has disclosed
to Buyer all material facts pertaining to the transactions contemplated
by this Agreement.
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5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
Seller as follows:
5.1. ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Minnesota. Buyer has all requisite corporate power and
authority to own, lease, and operate the properties now owned or leased
by it and to carry on its businesses as presently conducted.
5.2. NO CONFLICT WITH OTHER INSTRUMENTS OR PROCEEDINGS. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement will not (a) result in the breach of any
of the terms or conditions of, or constitute a default under, Buyer's
Charter Documents or any contract, agreement, lease, commitment,
mortgage, note, or other instrument or obligation to which Buyer is now
a party or by which any of its assets may be bound or affected or (b)
violate any law, rule, or regulation of any administrative agency or
governmental body or any order, writ, injunction, or decree of any
court, administrative agency, or governmental body applicable to Buyer.
All consents, approvals, or authorizations of, or declarations,
filings, or registrations with, any third parties or governmental or
regulatory authorities required of Buyer in connection with the
execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement will be
obtained or made by Buyer before the Closing Date.
5.3. COMPLIANCE WITH LAWS AND OTHER REGULATIONS. Buyer is not subject
to, and has not been threatened with, any fine or penalty as the result
of a failure to comply with any requirement of any applicable law or
regulation (including those relating to product labeling) or any
requirement of any governmental body or agency having jurisdiction over
it, the conduct of its business or the use of its assets or properties.
5.4. BROKERS' FEES. Neither Seller nor Buyer will incur any liability
for brokers' fees, finders' fees, agents' commissions, financial
advisory fees, or other similar forms of compensation in connection
with this Agreement or any transaction contemplated by this Agreement
as a result of any action by Buyer.
6. REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
6.1. REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of the Buyer and Seller set forth in this Agreement or in
any Exhibit or Schedule hereto, or in any certificate, document or
other writing delivered hereunder or in connection herewith, shall
survive and continue past the Closing. No investigation by any Party
shall reduce obligations with respect to such representations and
warranties or shall reduce the degree to which each Party may and will
rely upon such representations and warranties.
6.2. INDEMNIFICATION FOR LITIGATION. The Seller agrees to hold Buyer
harmless and to indemnify Buyer from and against any and all losses,
claims, damages (whether incidental, consequential, punitive or
otherwise and whether foreseeable or not), expenses, liabilities,
deficiencies and threats thereof incurred or paid or suffered by Seller
or Buyer after the Closing and arising for a period of two years after
the Closing Date (including, but not limited to, fees and disbursements
of counsel), and other obligations of whatever kind or nature, arising
directly or indirectly out of, by reason of or in connection with any
pending or threatened litigation, government action, investigation,
cause of action, mediation, arbitration, grievance, judgment, lien or
other proceeding against Seller or Buyer based upon events or
occurrences (including
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environmental matters) prior to or on the Closing Date. All amounts
payable by the Seller pursuant to this Section 6.2 may, at Buyer's
option, be paid by direct set-off against any other amounts owing or
potentially owing by Buyer to it under this Agreement or otherwise.
6.3. OTHER INDEMNIFICATION OF BUYER. The Seller agrees to hold Buyer
harmless and to indemnify Buyer from and against any and all claims
that are based upon, arise out of, or are related to any breach of any
of its representations or warranties (whether due to commissions,
omissions or otherwise and whether or not material) set forth in this
Agreement or in any Exhibit or schedule hereto, or in any certificate,
document or other writing delivered hereunder or in connection herewith
and that arise from a period two years after the Closing Date. All
amounts payable by the Seller pursuant to this Section 6.3 may, at
Buyer's option, be paid by direct set-off against any other amounts
owing or potentially owing by Buyer to it under this Agreement or
otherwise; provided, however, that (a) no amount will be payable by
Seller hereunder except to the extent that the aggregate of all
liabilities incurred by Buyer under this Section 6.3 exceeds $5,000 and
(b) no amount payable by Seller hereunder shall be payable to the
extent the total amounts paid under this Section 6.3 exceed the
Purchase Price.
6.4. INDEMNIFICATION PROCEDURES. Whenever any claim shall arise for
indemnification under Sections 6.2 or 6.3, Buyer shall promptly notify
the Seller in writing of the claim and of the principal facts
constituting the basis for such claim. Seller shall exercise discretion
over the resolution of such claim to the extent of the indemnification,
provided no rights or interests of Buyer are given up without prior
written consent of Buyer. Seller shall, at all times keep Buyer
informed of the status of the claims, responding to every Buyer request
for information.
6.5. INDEMNIFICATION BY BUYER. Buyer agrees to hold Seller harmless and
to indemnify Seller from and against any and all claims that are based
upon, arise out of, or are related to (a) any breach of any Buyer's
representations and warranties set forth in this Agreement or (b)
ownership or operation of the Purchased Assets after the Closing Date;
provided, however, that (i) no amount will be payable by Buyer
hereunder, except to the extent that the aggregate of all liabilities
incurred by Seller under this Section 6.5 exceeds $5,000, and (ii) no
amount payable by Buyer hereunder shall be payable to the extent the
total amounts paid under this Section 6.5 exceeds the Purchase Price.
All amounts payable by Buyer pursuant to this Section 6.5 may, at
Seller's option, be paid by direct set-off against any other amounts
then due and payable by Seller to Buyer.
7. GENERAL PROVISIONS.
7.1. ASSIGNMENT AND BENEFITS. This Agreement is not assignable, either
directly or indirectly, without the prior written consent of both
Parties. All of the terms of this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the successors and
permitted assigns of Buyer and Seller.
7.2. CONFIDENTIALITY. Unless otherwise required by law, neither Party
will make any disclosure of the existence or terms of this Agreement or
the transactions contemplated by this Agreement without the prior
written consent of the other Party, except that each Party may disclose
the transactions contemplated by this Agreement to that Party's
attorneys, accountants, and other professional advisers, institutional
lenders, and management employees, to the extent that any of those
persons or entities needs to know of the transactions in connection
with the person's or entity's relationship with the disclosing Party.
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7.3. EXPENSES. The Parties will pay their respective expenses, costs,
and fees (including, without limitation, legal and accounting fees)
incurred in connection with this negotiation, preparation, execution,
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement.
7.4. ENTIRE AGREEMENT. This Agreement together with the agreements
referred to in this Agreement, set forth the entire agreement and
understanding of the Parties with respect to the transactions
contemplated by this Agreement and supersede all prior agreements,
arrangements, and understandings relating to the subject matter of this
Agreement.
7.5. AMENDMENT. This Agreement may be amended and any of the terms or
conditions of this Agreement may be waived, only by a written
instrument signed by both Parties, or, in the case of a waiver, by or
on behalf of the Party waiving compliance.
7.6. WAIVER. The failure of any Party at any time to require
performance of any provision in this Agreement shall not affect the
right of that Party at a later time to enforce the provision. No waiver
by any party of any condition, or of any breach of any term contained
in this Agreement, in any one or more instances, shall be deemed to be
or construed as a further or continuing waiver of any condition or of
any breach of any other term.
7.7. NO THIRD-PARTY BENEFICIARIES. The provisions of this Agreement are
solely between and for the benefit of the two Parties, and do not inure
to the benefit of, or confer rights upon, any third party, including,
without limitation, any employee of the Parties.
7.8. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall be construed in all respects as if
the invalid or unenforceable provision were omitted. All provisions of
this Agreement shall be enforced to the full extent permitted by law.
7.9. HEADINGS. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not restrict or
otherwise modify any of the terms or provisions of this Agreement.
7.10. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Minnesota as
applicable to contracts made and to be performed in that state as to
all matters, including, validity, construction, effect performance and
remedies, without regard to conflict of law principles.
BALANCE OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the date first written above.
XXXXXX MANUFACTURING, INC.
By /s/ Xxxxxxx X. Xxxx
Title: President
MAGSTAR TECHNOLOGIES, INC.
By /s/ X.X. XxXxxxxx
Title: CEO
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Exhibit A
NOVEMBER 30, 2000 BALANCE SHEET [OMITTED]
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EXHIBIT B
XXXXXX MANUFACTURING, INC.
PROMISSORY NOTE
$363,587.00 December 1, 0000
Xxxxxxxxxxx, Xxxxxxxxx
FOR VALUE RECEIVED, Xxxxxx Manufacturing, Inc. a Minnesota corporation,
("Company"), promises to pay to the order of Magstar Technologies, Inc., a
Minnesota corporation ("Holder"), at its principal office or such other place as
Lender may designate, the principal sum of Three Hundred Sixty-Three Thousand
Five Hundred Eighty-Seven and 00/100 Dollars ($363,587.00), in lawful money of
the United States, together with interest on the unpaid principal balance
compounded annually at the rate of eight percent (8.0%) per annum.
This Promissory Note ("Note") has been executed and delivered pursuant
to and in accordance with the terms and conditions of that certain Asset
Purchase Agreement (the "Purchase Agreement") dated as of December 1, 2000 by
and among Company and Holder, and is subject to the terms and conditions of the
Purchase Agreement. Capitalized terms used in this Note without definition shall
have the respective meanings set forth in the Purchase Agreement.
This Note is subject to the following terms and conditions:
1. PAYMENT. Payment of the principal of and interest on this Note will be made
at the address of the Holder on the Company's books in such coin or currency as
is legal tender of the United States of America upon thirty six (36) months from
the date hereof. This Note may be prepaid in whole or in part at any time
without the consent of the Holder. All payments on this Note shall be applied
first to the payment of any costs of collection that may be due hereunder, then
to the payment of accrued interest, and the balance shall be applied to
principal.
2. DEFAULT
2.1 EVENTS OF DEFAULT. An "Event of Default" shall be deemed to occur
upon the happening of any of the following: (i) the failure to pay when due any
amount of principal or interest payable hereunder, (ii) the filing against the
Company which is not dismissed within sixty (60) days thereafter, or by the
Company, of a petition in bankruptcy or for an arrangement or reorganization,
(iii) the making by the Company of a general assignment for the benefit of
creditors, (iv) the appointment of a receiver or trustee for the Company, or (v)
the institution of liquidation or dissolution or reorganization proceedings with
respect to the Company.
2.2 RIGHTS ON DEFAULT. If an Event of Default occurs and is continuing,
the Holder may declare the principal of this Note, together with any accrued and
unpaid interest, if not already due, to be due and payable immediately, by
written notice to the Company. Upon any such declaration, such principal and
interest will become due and payable immediately, anything contained in this
Note to the contrary notwithstanding.
2.3 ENFORCEMENT. If the Holder declares the principal of this Note,
together with all accrued and unpaid interest on this Note, due and payable
immediately, the Holder may proceed, subject, however, to all the terms and
conditions hereof, to protect and enforce its rights by an action at law, suit
in equity, or other appropriate proceeding.
3. MISCELLANEOUS
3.1 RESTRICTION ON TRANSFER. By accepting this Note, the Holder agrees
that the transfer of this Note will be subject to the restriction that no such
transfer will be effected until the Holder has first obtained a written opinion
of counsel, satisfactory to the Company, that the proposed transfer, if
consummated, may be lawfully made without registration under the Securities Act
and any applicable state securities law.
3.2 HEADINGS. The headings in this Note are inserted for convenience
only and will not affect the meaning or interpretation of all or any part of
this Note.
3.3 GOVERNING LAW. This Note will be deemed to be a contract made under
the laws of the State of Minnesota, and for all purposes will be construed in
accordance with the laws of the State of Minnesota.
3.4 EXPENSES OF COLLECTION. In the event of any default by the Company
in its obligations hereunder, the Company shall reimburse the Holder on demand
the amount of its costs and expenses in enforcing its rights hereunder,
including reasonable attorneys fees.
3.5 PAYMENT DATE. In case the date of maturity of this Note is not a
business day, then payment of principal and interest to the Holder need not be
made on such date, but may be made on the next succeeding business day with the
same force and effect as if made on the date of maturity or the date fixed for
prepayment and no interest will accrue for the period after such date.
3.6 CONSTRUCTION. Wherever possible, each provision of this Note will
be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Note is prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Note.
3.7 AMENDMENTS. This Note may not be and will not be deemed or
construed to have been modified, amended, rescinded, canceled, or waived in
whole or in part, except by written instruments signed by the Company and the
Holder.
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IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the day and year first set forth above.
XXXXXX MANUFACTURING, INC.
By /s/ Xxxxxxx X. Xxxx
Its: President
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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") OR STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OFFERED, PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH LAWS COVERING SUCH SECURITIES OR
THE COMPANY RECEIVES AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT, OFFER, PLEDGE OR OTHER DISTRIBUTION FOR
VALUE IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT AND SUCH LAWS.
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EXHIBIT C
EQUIPMENT LEASE AGREEMENT
This Equipment Lease ("Lease") is entered into effective December 1,
2000, by and between Magstar Technologies, Inc., a Minnesota corporation
("Lessor"), and Xxxxxx Manufacturing, Inc., a Minnesota corporation ("Lessee").
1. LEASE. Lessor hereby lease to Lessee, and Lessee hereby leases and
hires from Lessor, upon the terms set forth herein all machinery, equipment,
vehicles and other property described in Exhibit A attached hereto (the
"Equipment")
2. TERM. The term of this Agreement respecting each item of Equipment
commences on the date of this Agreement and expires 72 months following the date
of this Agreement.
3. RENT. The rent for all of the Equipment, for the term of this
Agreement shall be a principal amount equal to $486,461 (the "Rent") which Rent
shall be payable in monthly installments of rent and interest of $4,512 per
month for the first six months, $8,100 per month for the next six months and
$8,988 per month for the last sixty months. Lessee shall pay Lessor each
installment of Rent in advance, on or before the 1st day of each month at the
offices of the Lessor, or to such other person and/or at such other place as
Lessor may from time to time designate in writing. In the event items in
addition to those specified in Exhibits A become Equipment, then any schedule
executed by the parties shall specify the additional amount to be paid as Rent
(and the additional monthly installment) in light of the additional items.
4. USE. Lessee shall use the Equipment in a careful and proper manner
and shall comply with and conform to all national, state, municipal, and other
laws, ordinances and regulations relating to the possession, use or maintenance
of the Equipment. If at any time during the term hereof Lessor supplies Lessee
with labels, plates or other markings, stating that the Equipment is owned by
Lessor, Lessee shall affix and keep the same upon a prominent place on the
Equipment.
5. LESSEE ACCEPTANCE; CONCLUSIVE PRESUMPTIONS. Lessee shall inspect the
Equipment within forty-eight (48) hours after receipt thereof. Unless Lessee
within said period of time gives written notice to Lessor, specifying any defect
in or other objection to the Equipment, Lessee agrees that it shall be
conclusively presumed, as between Lessor and Lessee, that Lessee has fully
inspected and acknowledged that the Equipment is in good condition and repair,
and that Lessee is satisfied with and has accepted the Equipment in good
condition and repair.
6. LESSOR INSPECTION. Lessor shall, at any and all times during
Lessee"s normal business hours, have the right to enter the premises where the
Equipment is located for the purpose of inspecting the same or observing the use
thereof. Lessee shall not be permitted to remove any item of Equipment from the
location indicated on the Schedule without the prior written consent of Lessor.
7. ALTERATIONS. Without the prior written consent of Lessor, which
consent shall not be unreasonably withheld, Lessee shall not make any
alterations, additions or improvements to the Equipment. Such permitted
alterations, additions or improvements may, at Lessee's option, be removed
by Lessee upon the expiration or earlier termination of this Agreement if and
only if such removal may be accomplished without damage to the Equipment or
otherwise reducing its value below that which it would have been in the event no
such alterations, additions or improvements had been made.
8. REPAIRS. Lessee, at its own cost and expense, shall keep the
Equipment in good repair, condition and working order, ordinary wear and tear
excepted, and shall furnish any and all parts, mechanisms and devices reasonably
required to keep the Equipment in good mechanical and working order.
9. LOSS AND DAMAGE. Lessee hereby assumes and shall bear the entire
risk of loss and damage to the Equipment from any and every cause whatsoever. No
loss or damage to the Equipment or any part thereof shall impair any obligation
of Lessee under this Agreement which shall continue in full force and effect. In
the event of loss or damage of any kind whatever to any item of Equipment,
Lessee shall, at its own election, promptly place the same in good repair,
condition and working order, or replace the same with like Equipment in good
repair, condition and working order, or pay to Lessor an amount equal to the
fair market value of the Equipment so lost, damaged or destroyed, or pay over to
Lessor any insurance proceeds received on account of said loss or destruction.
Notwithstanding the foregoing, in no event shall the total of all payments under
this Lease for rent and for Equipment lost or destroyed be less than the total
scheduled rent payments.
10. SURRENDER. Subject to the rights granted to Lessee pursuant to
paragraph 31 hereof, upon the expiration or earlier termination of this
Agreement, with respect to any item of Equipment, Lessee shall return the same
to Lessor in good repair, condition and working order, ordinary wear and tear
resulting from proper use thereof alone excepted, in the following manner as may
be specified by Lessor:
(a) By delivering such item of Equipment at Lessee's cost and
expense to such place as Lessor shall specify within the state of Minnesota; or
(b) By loading such item of Equipment at Lessee's cost and
expense on board such carrier as Lessor shall specify and shipping the same,
freight collect, to the destination designated by Lessor.
Lessee shall not be required to return the Equipment if Lessee
exercises its option to purchase the Equipment at the end of the Lease term in
accordance with this Agreement.
11. INSURANCE. Lessee shall keep the Equipment insured against all
risks of loss or damage by fire and such other risks as are covered by
endorsement commonly known as supplemental or extended coverage for not less
than the replacement value thereof. Lessee may effect such coverage under its
blanket policies. All such policies shall be written by companies presently
insuring the Lessee or other companies reasonably satisfactorily to the Lessor
and certificates showing such coverage to be in effect shall be furnished to the
Lessor upon request.
12. TAXES. Lessee shall keep the Equipment free and clear of all
levies, liens and encumbrances and shall pay when due all fees, assessments,
charges and taxes (municipal, state and federal) which may now or hereafter be
imposed upon the ownership, leasing, renting, sale possession or
use of the Equipment, excluding, however, all taxes on or measured by Lessor"s
income.
13. LESSOR PAYMENT. In case of failure of Lessee to procure or maintain
said insurance or to pay said fees, assessments, charges and taxes, all as
hereinbefore specified, Lessor shall have the right, but shall not be obligated,
to effect such insurance, or pay said fees, assessments, charges and taxes, as
the case may be. In that event, the cost thereof shall be repayable to Lessor
with the next installment of Rent, and failure to repay the same shall carry
with it the same consequence, including interest at ten percent (10%) per annum,
as failure to pay any installment of Rent.
14. REPRESENTATIONS AND WARRANTIES. Lessor represent and warrant that:
(a) Lessor is now and will at all times remain the absolute
and outright owners of the Equipment;
(b) Lessor has the power and authority to enter into this
Lease and to grant and fully perform the agreement to sell the Equipment upon
exercise of the purchase option
(c) This Lease does not conflict with any other agreement to
which Lessor is a party or of which Lessor has knowledge;
(d) This Lease is valid and binding upon Lessor;
(e) Lessor has not granted other options to purchase the
Equipment;
(f) Upon Lessee's exercise of the purchase option in
accordance with paragraph 31 of this Lease, Lessor will transfer the Equipment
to Lessee free and clear of all liens, claims and encumbrances of any kind or
nature;
(g) So long as Lessee is in compliance with the terms and
provisions of this Lease, Lessee shall peaceable and quietly have, hold and
enjoy the Equipment for the uses and purposes permitted under the Lease;
(h) Lessor shall indemnify, defend and hold harmless Lessee
from and against any claims asserted by third parties claiming ownership or
possessory rights to all or any of the Equipment except to the extent such
claims are the result of an act, omission or agreement of Lessee.
EXCEPT AS SET FORTH ABOVE, LESSOR MAKES NO WARRANTIES, EITHER EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE
CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR ITS FITNESS FOR ANY
PARTICULAR PURPOSE.
15. INDEMNITY. Lessee shall indemnify Lessor against, and hold Lessor
harmless from, any and all claims, actions, suits, proceedings, costs, expenses,
damages and liabilities, including reasonable attorneys' fees arising out of,
connected with, or resulting from Lessee's use, possession, delivery or return
of the Equipment. Each party agrees that it will give the other prompt notice of
the assertion of any such claim or the institution of any such action, suit or
proceeding.
16. DEFAULT BY LESSEE. If Lessee with regard to any item or items of
Equipment fails to pay any amount herein provided within thirty (30) days after
the same is due and payable, or if Lessee with regard to any item or items of
Equipment fails to observe, keep or perform any other provision of this Lease,
required to be observed, kept or performed by Lessee, and if Lessee fails to
remedy, cure or remove such failure in payment of such other failure in
observing, keeping or performing the provisions of this Lease within thirty (30)
days after receipt of written notice thereof from Lessor, Lessor shall have the
right to exercise any one or more of the following remedies: (a) To declare the
entire amount of rent hereunder immediately due and payable as to any or all
items of Equipment, without notice or demand to Lessee; (b) To xxx for and
recover all rents, and other payments, then accrued or thereafter accruing with
respect to any or all items of Equipment; (c) To take possession of any or all
items of Equipment, without demand or notice, wherever same may be located,
without any court order or other process of law; (d) To terminate this Lease as
to any or all items of Equipment; or (e) To pursue any other remedy available to
Lessor at law or in equity. Lessee hereby waives any and all damages occasioned
by such taking of possession unless caused by Lessor"s gross negligence or
willful misconduct. Any such taking of possession shall not constitute a
termination of this Lease as to any or all items of Equipment unless Lessor
expressly so notifies Lessee in writing. Notwithstanding any said repossession,
or any other action which Lessor may take, Lessee shall be and remain liable for
the full performance of all obligations on the part of Lessee to be performed
under this Lease. All such remedies are cumulative, and may be exercised
concurrently or separately. In no event, however, shall these remedies be
exercised in such a manner that the Lessor recovers more than the balance of
rent and any other amounts payable by Lessee to Lessor hereunder, plus the fair
market value which the Equipment would have at the end of the initial term of
this Lease, discounted from the date of the default to the end of the initial
term of this Lease at a rate of nine percent (9%) per annum.
17. DEFAULT BY LESSOR. In the event Lessee is deprived of the peaceable
and quiet enjoyment of the Equipment for the uses and purposes permitted under
the Lease or in the event upon Lessee's exercise of the purchase option in
accordance with paragraph 31 of this Lease, Lessor fail to transfer the
Equipment to Lessee free and clear of all liens, claims and encumbrances of any
kind or nature, provided Lessor are first given thirty (30) days written notice
and an opportunity to cure, Lessee may, at its sole option: (i) proceed by
appropriate court action, either at law or in equity, to enforce performance by
Lessor of the applicable covenants of this Lease, or (ii) file an action to
recover damages for breach hereof. Lessor shall be liable for all damages,
assessments, reductions in value, losses, claims, obligations, liabilities,
costs, charges and expenses of any kind or nature, including reasonable
attorneys' fees, costs, expenses and disbursements incurred by Lessee by reason
of the occurrence of the foregoing default or exercise of any of Lessee's
remedies with respect thereto. The remedies provided herein shall be cumulative.
18. BANKRUPTCY. Neither this Agreement nor any interest therein is
assignable or transferable by operation of law. If any proceeding under the
United States Bankruptcy Code, as amended, is commenced by Lessee, or such an
action is commenced against Lessee and is not dismissed within sixty (60) days
after the commencement thereof, or if Lessee is adjudged insolvent, or if Lessee
makes any assignment for the benefit of its creditors, or if a writ of
attachment or execution is levied on any item or items of the Equipment and is
not released or satisfied within thirty (30) days thereafter, or if
a receiver is appointed in any proceeding or action to which Lessee is a party
with authority to take possession or control of any item or items of the
Equipment (each of the foregoing is referred to as an "Event"), Lessor shall
have and may exercise any one or more of the remedies set forth in paragraph 16
hereof; and this Agreement shall, at the option of Lessor on notice to Lessee,
immediately terminate effective on the date of such Event and shall not be
treated as an asset of Lessee after the exercise of said option.
19. LESSOR EXPENSES. Lessee shall pay Lessor all costs and expenses,
including reasonable attorneys' fees, incurred by Lessor in exercising any of
their rights or remedies hereunder or enforcing any of the terms, conditions, or
provisions hereof.
20. ASSIGNMENT. Without the prior written consent of Lessor, which
consent shall be given or withheld in the Lessor's sole discretion, Lessee shall
not: (a) assign, transfer, pledge or hypothecate this Agreement, the Equipment
or any part thereof, or any interest therein; or, (b) sublet or lend the
Equipment or any part thereof, or permit the Equipment or any part thereof to be
used by anyone other than Lessee or Lessee's employees. Consent to any of the
foregoing prohibited acts applies only in the given instance; and is not a
consent to any subsequent like act by Lessee or any other person; provided,
however, that without such prior written consent but with notice to Lessor,
Lessee may assign this Agreement to any corporation or other legal entity into
which Lessee may merge or consolidate or which may acquire all or substantially
all of Lessee's assets, and may sublease any of the Equipment subject to this
Agreement to any subsidiary of Lessee or to Lessee's parent or any subsidiary of
Lessee's parent. No such permitted sublease shall operate to relieve Lessee of
its obligations hereunder which shall remain those of a principal and not a
guarantor.
Subject always to the foregoing, this Agreement inures to the benefit
of, and is binding upon, the heirs, legatees, personal representatives,
successors and assigns of the parties hereto.
21. LESSOR ASSIGNMENT. It is understood that Lessor, subject to the
terms of this Agreement, may assign this Agreement and/or mortgage the Equipment
and that said assignee may assign the same, and all rights of Lessor hereunder
may be assigned, pledged, mortgaged, transferred, or otherwise disposed of,
either in whole or in part, upon sixty (60) days notice to Lessee. Anything
herein contained to the contrary, Lessor shall not have the right to, and agree
that they will not, include in any such assignment any of Lessor' rights against
vendors, manufacturers or suppliers of any of the Equipment.
22. OWNERSHIP OF EQUIPMENT. The Equipment is, and shall at all times be
and remain, the sole and exclusive property of Lessor; and Lessee shall have no
right, title or interest therein or thereto except as expressly set forth in
this Agreement.
23. PERSONAL PROPERTY; UCC-1 FINANCING STATEMENT. The Equipment is, and
shall at all times be and remain, personal property notwithstanding that the
Equipment or any part thereof may now be, or hereafter become, in any manner
affixed or attached to, or imbedded in, or permanently resting upon, real
property or any building thereon, or attached in any manner to what is permanent
as by means of cement, plaster, nails, bolts, screws or otherwise, except as is
necessary or appropriate to operate the Equipment within manufacturer
specifications and instructions. Lessee agrees
to execute a Form UCC-1 Financing Statement and any financing statements or
other documents reasonably required by Lessor to provide notice of this Lease.
Upon termination of this Lease, Lessor shall promptly execute and deliver such
documents as may reasonably be requested by Lessee to terminate such notice
filing.
24. INTEREST. Should Lessee fail to pay any part of the Rent herein
reserved or any other sum required by Lessee to be paid to Lessor, within thirty
(30) days after the due date thereof, Lessee shall pay unto Lessor interest on
such delinquent payment from the expiration of said thirty (30) days until paid
at the rate of ten percent (10%) per annum.
25. NON WAIVER. No covenant or condition of this Agreement can be
waived except in writing. Forbearance or indulgence by either party in any
regard whatsoever shall not constitute a waiver of the covenant or condition to
be performed by the other party to which the same may apply, and, until complete
performance of said covenant or condition, the other party shall be entitled to
invoke any remedy available to such party under this Agreement or by law or in
equity despite said forbearance or indulgence.
26. ENTIRE AGREEMENT. This instrument constitutes the entire agreement
between Lessor and Lessee relating to and governing the lease and use of the
Equipment and it supersedes and replaces all prior agreements with respect
thereto. It shall not be amended, altered or changed except by a written
agreement signed by the parties hereto.
27. NOTICES. Service of all notices under this Agreement shall be
sufficient if given personally delivered, telecopied or mailed via registered
mail to the party involved at its respective address hereinafter set forth, or
at such address as such party may provide in writing from time to time. Any such
notice mailed to such address shall be effective as of the date personally
delivered or telecopied or five (5) days after being deposited in the United
States mail, duly addressed and with postage prepaid. Notices to Lessee shall
also be sent to Lessee at the address at which the Equipment is located.
28. GENDER; NUMBER. Whenever the context of this Agreement requires,
the masculine gender includes the feminine or neuter, and the singular number
includes the plural.
29. TITLES. The titles to the paragraphs of this Agreement are solely
for the convenience of the parties, and are not an aid in the interpretation of
the instrument.
30. TIME. Time is of the essence to this Agreement and each and all of
its provisions.
31. PURCHASE OPTION. Provided that Lessee has paid in full all amounts
owing hereunder and is not otherwise in default hereunder, Lessee shall have the
option to purchase Equipment at the then fair market value, as determined by an
independent appraiser. Lessee shall exercise such option by giving written
notice to Lessor not less than thirty (30) days prior to expiration of the
original term hereof.
32. CLAIMS. Lessor hereby appoint and constitute Lessee as their agent
and attorney-in-fact during the term of this Agreement to assert and enforce, at
the sole cost and expense of Lessee, whatever claims and rights Lessor may have
as owner of the Equipment against any vendors, manufacturers, suppliers or
contractors in respect thereof.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first written above.
LESSOR MAGSTAR TECHNOLOGIES, INC.
By /s/ X.X. XxXxxxxx
Title: CEO
LESSEE XXXXXX MANUFACTURING, INC.
By /s/ Xxxxxxx X. Xxxx
Title: President
EXHIBIT A
LEASED EQUIPMENT [OMITTED]
