EXHIBIT 2.1
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASSET PURCHASE AGREEMENT
between
REEL-TECH, INC., A WASHINGTON CORPORATION
and
REEL TECH, INC., AN INDIANA CORPORATION
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is effective as of August 31, 1995 ("Effective Date"), by
and among REEL TECH, INC., an Indiana corporation ("Seller"), XXXXXX X. XXXX and
XXXXXXX X. XXXX (together, the "Shareholders"), REEL-TECH, INC., a Washington
corporation ("Purchaser"), a wholly-owned subsidiary of DATA I/O CORPORATION, a
Washington corporation ("Data I/O").
RECITALS
Seller designs, develops, manufactures and markets automation
equipment and systems which support manufacturers and users of semiconductors
and the Shareholders are the sole shareholders of Seller.
Seller, the Shareholders and Purchaser desire to enter into an
agreement pursuant to which Seller will sell and assign to Purchaser its assets
listed or generally described in SCHEDULE 1.1 hereto (the "Assets") and
Purchaser will assume certain of Seller's liabilities and contracts. The semi-
conductor equipment business heretofore conducted with the Assets by Seller and
the continuing semi-conductor equipment business to be conducted with the Assets
hereafter is referred to herein as the "SCE Business."
NOW THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
SECTION 1. TRANSACTIONS
1.1 SALE, TRANSFER AND ASSIGNMENT. Seller hereby sells, assigns,
transfers and conveys to Purchaser, and Purchaser does hereby purchase, all
right, title and interest in and to the Assets, free and clear of any lien,
charge, mortgage, pledge, conditional sales agreement, assessment, encumbrance
or claim of any nature whatsoever.
1.2 ASSIGNMENT AND ASSUMPTION OF CERTAIN LIABILITIES. Seller hereby
assigns, transfers and sets over to Purchaser all of its rights, benefits,
duties and obligations under the leases, contracts and other agreements listed
in SCHEDULE 1.2 (the "Contracts") and the additional payment obligations listed
on SCHEDULE 1.2. The duties and obligations under the Contracts and the
additional payment obligations listed in SCHEDULE 1.2 are collectively referred
to herein as the "Assumed Liabilities." Purchaser hereby agrees faithfully to
perform the Assumed Liabilities, but only to the extent that such duties and
obligations have been expressly described in SCHEDULE 1.2. Purchaser does not
assume or agree to pay or indemnify Seller or any other person or entity against
any other liability, obligation, payable, duty or expense, whether presently
existing
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
or hereafter arising, including, without limitation, employee severance costs
and accrued vacation, personal or sick time. Nor does Purchaser assume any
contingent liabilities of Seller such as those associated with pending or
threatened litigation. As of the Effective Date, Seller shall have terminated
all of its employees and independent contractors. At the request of Purchaser,
Seller shall assist Purchaser in hiring any former employees and retaining any
independent contractors of Seller. Except for hiring the Shareholders as per
Section 3.6, Purchaser is under no obligation to hire any employee or retain any
independent contractor of Seller but is free to do so in its sole discretion.
The Assets and the Contracts are collectively referred to herein as the
"Purchased Assets."
SECTION 2. PURCHASE PRICE
2.1 AMOUNT AND ESCROW ARRANGEMENT The total purchase price (the
"Purchase Price") for the Purchased Assets shall be the sum of $2,000,000 plus
the additional amount, if any, calculated in accordance with Section 2.4 (the
"Earn-Out Payment"), subject to possible reduction in accordance with Section
2.2 below. $1,500,000 is paid in cash herewith, the receipt of which is hereby
acknowledged by Seller. $500,000 (the "Escrowed Funds") is delivered herewith
to Seattle-First National Bank (the "Escrow Agent") to be held in accordance
with the terms of the Escrow Agreement attached hereto as EXHIBIT 2.1 (the
"Escrow Agreement") for the purpose of effecting, if necessary, adjustments in
the Purchase Price in accordance with Section 2.2 or to satisfy indemnity claims
in accordance with Section 7 below.
2.2 POSSIBLE REDUCTION OF PURCHASE PRICE.
2.2.1 The Purchase Price shall be reduced by the amount, if any,
by which the liabilities of Seller paid by Purchaser ("Actual Liabilities")
exceeds the value of the Purchased Assets at the Effective Date (the "Closing
Value") minus $150,000 (such excess, if any, being a "True-Up Amount"). The
Actual Liabilities shall be the actual amount of liabilities of Seller which
existed as of the Effective Date or arose from the operations, actions or
failures to act of Seller on or before the Effective Date which are reasonably
paid by Purchaser. The Closing Value shall be the sum of (i) the amount of cash
which is transferred hereby plus the amount of Seller's accounts, notes or other
receivables actually collected by Purchaser as of the end of the sixth complete
"Fiscal Month", as described below, following the Effective Date (the "True-Up
Date"), plus (ii) the book value of all of Seller's inventory on hand at the
Effective Date which is used by the SCE Business or Purchaser in the ordinary
course by the True-Up Date plus the book value as of the Effective Date of those
items listed on SCHEDULE 2.2.1A (the
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
"Excluded Inventory") which remain in inventory at the True-Up Date plus (iii)
the value of all fixed assets, as noted on SCHEDULE 2.2.1B, which are part of
the Purchased Assets. All inventory owned by Seller as of the Effective Date is
listed on SCHEDULE 2.2.1C. "Fiscal Month(s)" shall mean the Purchaser's fiscal
month(s) as described in SCHEDULE 2.2.1D. No later than forty-five (45) days
after the True-Up Date, Purchaser shall provide to Seller a written report
setting forth Purchaser's calculation of the amount of the Actual Liabilities
and the Closing Value including an explanation of material adjustments, if any,
in the value of the Purchased Assets from the amount assigned thereto in the
actual balance sheet of Seller as of August 31, 1995 (the "True-Up Report").
The True-Up Report shall specify the True-Up Amount. Notwithstanding the
foregoing, within twenty-one (21) days after the Effective Date, Purchaser may
make a good faith determination that it will be entitled to a True-Up Amount
based upon a difference between the actual balance sheet of Seller as of August
31, 1995 and the estimated balance sheet of Seller as of August 31, 1995 (an
"Initial True-Up Amount"). If Purchaser makes such a determination, Purchaser
shall provide to Seller a written report, within twenty-one (21) days after the
Effective Date, setting forth the difference between such balance sheets and
specifying the Initial True-Up amount (the "Initial True-Up Report").
Notwithstanding any other provision(s) to the contrary, Seller may and is hereby
authorized to retain, or to distribute prior to the Effective Date, cash to
reduce the amount of Purchased Assets included in the Closing Value so that the
value of the Purchased Assets less the Actual Liabilities is no greater than
$150,000. Such retention or distribution of cash by Seller shall be determined
in good faith.
2.2.2 The Purchase Price shall be further reduced by the book
value as of the Effective Date (an "Excluded Inventory Adjustment Amount") of
the Excluded Inventory that has not been used by the SCE Business or Purchaser
in the ordinary course by the "Release Date", as defined below, but only if (i)
a True-Up Amount would have been due under Section 2.2.2 if the Excluded
Inventory Adjustment Amount had been deducted from the Closing Value and then
only to the extent of such True-Up Amount or (ii) a True-Up Amount was
previously due under Section 2.2.2. No later than thirty (30) days after the
"Release Date", as defined below, Purchaser shall provide to Seller a written
report setting forth Purchaser's calculation of the Excluded Inventory
Adjustment Amount (the "Excluded Inventory Adjustment Report"). The Excluded
Inventory Adjustment Report shall specify the Excluded Inventory Adjustment
Amount.
2.2.3 All determinations pursuant to this Section 2.2 shall be
made by Purchaser in good faith in accordance with generally accepted accounting
principles applied in a manner consistent with the accounting policies,
practices and
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
assumptions employed by Purchaser in preparing its own financial statements.
For this purpose, inventories shall be valued at original cost on a first-in,
first-out (FIFO) basis less an appropriate reserve for excess and obsolete
items. The Shareholders and Seller will provide Purchaser with such assistance
and access to personnel, books and records as Purchaser may reasonably request
in connection with Purchaser's audit of the Assumed Liabilities, the Assets and
the Excluded Inventory.
2.3 RELEASE OF ESCROWED FUNDS. The Escrowed Funds shall be released
as follows:
2.3.1 If Purchaser has a good faith belief that it is entitled
to an Initial True-Up Amount, it shall provide a copy of the Initial True-Up
Report to Seller and the Escrow Agent. The Escrow Agent shall deliver to
Purchaser from the Escrowed Funds cash in the amount of the Initial True-Up
Amount within ten (10) days of receipt of such Initial True-Up Report.
2.3.2 If Purchaser has a good faith belief that it is entitled
to any True-Up Amount in addition to any Initial True-Up Amount delivered to
Purchaser pursuant to Section 2.3.1 above or to an Excluded Inventory Adjustment
Amount, it shall provide a copy of the True-Up Report or the Excluded Inventory
Adjustment Report, as applicable, to Seller and the Escrow Agent. Seller may
contest such claim by Purchaser by giving Purchaser and the Escrow Agent written
notice within thirty (30) days after Purchaser gives written notice of the claim
for a True-Up Amount or an Excluded Inventory Adjustment to Seller. If Seller
does not timely contest the True-Up Report or the Excluded Inventory Adjustment
Report, as the case may be, the Escrow Agent shall promptly after expiration of
the thirty (30) day response period deliver to Purchaser from the Escrowed Funds
cash in the True-Up Amount or the Excluded Inventory Adjustment Amount, as
applicable. If Seller timely contests such claim of Purchaser, then the Escrow
Agent shall release any portion of the True-Up Amount or Excluded Inventory
Adjustment Amount not disputed by Seller and shall continue to hold Escrowed
Funds in the amount of the True-Up Amount or Excluded Inventory Adjustment
Amount in dispute for delivery to Purchaser in such amount, if any, as shall be
specified by any of the following:
(a) Written instructions executed by both Purchaser
and Seller; or
(b) A court order adjudicating such dispute issued by
a court of competent jurisdiction.
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
2.3.3 If on or prior to the last day of the ninth complete
Fiscal Month after the Effective Date (the "Release Date") Purchaser has a good
faith belief that it or any other Indemnified Party, as defined below, is
entitled to indemnification pursuant to Section 7 hereof, it shall give written
notice to Seller and the Escrow Agent of such claim (an "Indemnity Claim"),
which notice shall specify the basis for the claim and the estimated dollar
amount required to satisfy such claim (the "Claim Amount"). Seller may contest
any Indemnity Claim by giving Purchaser and the Escrow Agent written notice
within thirty (30) days after Purchaser gives written notice of the Indemnity
Claim to Seller. If Seller does not timely contest the Indemnity Claim pursuant
to the preceding sentence, the Escrow Agent shall promptly after expiration of
the thirty-day response period deliver to Purchaser from the Escrowed Funds cash
in the amount of the Claim Amount. If Seller timely contests the Indemnity
Claim, then the Escrow Agent shall continue to hold Escrowed Funds in the amount
of such disputed Claim Amount for delivery to Purchaser in such amount, if any,
as shall be specified by any of the following:
(a) Written instructions executed by both Purchaser and
Seller; or
(b) A court order adjudicating such dispute issued by a
court of competent jurisdiction.
2.3.4 On the forty-first day following the Release Date (or
the next business day if such day is not a business day), the Escrow Agent shall
release to Seller all remaining Escrowed Funds less the sum of all True-Up
Amounts, Excluded Inventory Adjustment Amounts and Claim Amounts which have not
been resolved in accordance with Section 2.3.2 or 2.3.3 above by that date. All
Escrowed Funds not so released shall continue to be held until the conditions
for release in Section 2.3.2 or 2.3.3 are met.
2.4 CALCULATION AND PAYMENT OF EARN-OUT.
2.4.1 Subject to the requirements of Section 2.4 hereof,
Purchaser shall make additional cash payments of an aggregate amount not to
exceed $2,000,000 should the continuing operations of the SCE Business acquired
hereby attain the revenue and pre-tax income as a percentage of revenue targets
set forth below. The period for attainment of these targets will be the period
beginning with the first day following the Effective Date and ending on August
20, 1998 (the "Earn-Out Period"), after which no earn-out will accrue. The
revenue and pre-tax income targets and related Earn-Out Payments are as follows:
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
EARN-OUT PAYMENTS(1) (2)
Earn-Out Earn-Out Earn-Out
Payment 1 Payment 2 Payment 3
EARN-OUT PAYMENT AMOUNTS:
Achievement of minimum targets(1) $666,000 $667,000 $667,000
Achievement of bonus targets(1) $832,750 $833,750 $333,500
MINIMUM TARGETS(1):
Revenues(2) $4,500,000 $5,500,000 $6,500,000
and
Pre-tax income as a % of revenues(3) CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL
BONUS TARGETS(1)
Revenues(2) $4,500,000 $5,500,000 $6,500,000
and
Pre-tax income as a % of revenues(3) CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL
REQUIREMENTS:
(1) For any Earn-Out Payments, both the revenue target and pre-tax income as a
% of revenue target must be met in an Annual Earn-Out Period, as defined
below. Any Earn-Out Payment may be earned during any of the three Annual
Earn-Out Periods during the Earn-Out Period and more than one Earn-Out
Payment may be earned in any Annual Earn-Out Period, provided that each
Earn-Out Payment may be earned only once and under no circumstances will
the aggregate amount of Earn-Out Payments exceed $2,000,000.
(2) For purposes of calculating Earn-Out Payments, revenue shall mean revenues
generated by the SCE Business from the sale of semi-conductor equipment or
the provision of related services plus the transfer price of the ProMaster-
Registered Trademark- 9500 at the price therefor under the OEM/Purchase
Agreement dated October 7, 1994, between Data I/O and Seller (the "9500
Transfer Price") plus actual revenues from the sale of any other products
as mutually agreed in writing, in each case net of discounts, returns,
credits and allowances. Revenues shall not include sales to third party
customers of any of Data I/O's ProMaster-Registered Trademark- line of
products or of similar products which include programming capabilities.
Acceptance of orders will be governed by Purchaser-approved operating plans
and profit criteria. All exceptions will require approval by the Chief
Executive Officer, Treasurer or Chief Financial Officer of Purchaser.
(3) Pre-tax income shall mean the aggregate net income (including losses which
shall be taken into account negatively) for the Annual Earn-Out Period in
question before any deductions for federal, state or local taxes measured
by income. The costs to be used in calculating pre-tax income will be
determined substantially as follows:
(a) All direct costs, except for costs associated with producing
Data I/O's ProMaster-Registered Trademark- 9500, associated with the
Indianapolis operations or otherwise associated with the SCE Business
or any product for which revenue is included in this earn-out
calculation, per note 2 above, will be charged against earnings.
Amortization of the purchase price of this transaction shall be
excluded.
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
(b) Interest expense will be charged against earnings at a rate equal to
the prevailing prime rate as published by the Wall Street Journal in
effect on the first day of each Purchaser fiscal quarter to the extent
that the operations of the SCE Business consume cash beyond the amount
of cash included in the Purchased Assets or generated by the SCE
Business after the Effective Date. For purposes of this calculation
all sums paid as Purchase Price will be excluded. Such use of cash
will be calculated on a daily basis. A "line of credit" shall be
established by Purchaser for the SCE Business. Such "line of credit"
will provide the SCE Business with working capital as approved by
Purchaser and may be paid down to reduce the balance based on cash
generated by the SCE Business.
(c) The costs of producing Data I/O's ProMaster-Registered Trademark- 9500
will be included in the calculation of the Earn-Out Payment at
percent ( ) of the 9500 Transfer Price. CONFIDENTIAL
(d) New product development will be funded at 8% of revenues of the SCE
Business unless otherwise mutually agreed by Purchaser and the
Shareholders. The actual direct costs to the SCE Business of any NRE
funded by customers of the SCE Business for development of new
products will be considered product development expenditures for
purposes of calculating such 8%.
(e) Data I/O corporate senior staff time and costs will not be charged to
the Indianapolis operation; provided, however, other corporate
personnel time and costs will be charged to the SCE Business on a pro-
rata basis at Direct, Unburdened Cost, plus a 5% administrative fee,
if such personnel devote more than one-half of their time in any
Fiscal Month to direct support of the SCE Business. "Direct,
Unburdened Cost" shall include all salaries, benefits and taxes for
personnel and other direct costs associated with the support of the
SCE Business.
(f) The following also shall be excluded from the calculation of pre-tax
income:
(i) Revenue derived from non-operating sources, such as interest
income and income or loss from non-business related investments;
(ii) Gain from the sale of capital assets or other non-recurring
events; and
(iii) The results of any operations acquired by the SCE Business
or Purchaser after the Effective Date.
2.4.2 All Earn-Out Payments are contingent on or subject to the
following:
(a) The parties agree that the target date for ISO 9001 certification of
the Indianapolis, Indiana facility is January 31, 1997. No Earn-Out
Payment shall be made unless and until the SCE Business obtains
ISO 9001 certification. If ISO 9001 certification is not obtained by
the end of the Earn-Out Period, no Earn-Out Payments shall accrue or
be made.
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
(b) Earn-Out Payments 2 and 3 are contingent on completion by the SCE
Business of engineering and manufacturing documentation for all
products being sold by the SCE business and for Data I/O's ProMaster-
Registered Trademark- 900 and 9500 products which satisfy the
standards set forth in SCHEDULE 2.4.2. The parties agree that the
target date for completion of such documentation is January 31, 1997;
provided, however, that if such documentation has not been completed
by the end of the Earn-Out Period, Earn-Out Payments 2 and 3 shall not
accrue or be paid.
(c) Payment of Earn-Out Payments is also contingent on both of the
Shareholders continued employment (unless such employment is
terminated as a result of death or disability) by Purchaser pursuant
to their Employment Agreements with Purchaser.
2.4.3 The measurement of the achievement of the revenue and pre-
tax income as a percentage of revenue targets will be done based on three
consecutive twelve (12) Fiscal Month periods, the first of which will begin on
September 1, 1995, and end on August 22, 1996; the second of which will begin on
August 23, 1996 and end on August 21, 1997; and the third of which will begin on
August 22, 1997, and end on August 20, 1998. Each such period is referred to as
an "Annual Earn-Out Period". The calculation of the actual results will be
completed by Purchaser within sixty (60) days following the last day of each
Annual Earn-Out Period. All calculations of performance of the SCE Business
against the foregoing targets shall be determined by Purchaser in good faith
based on the foregoing and in accordance with generally accepted accounting
principles applied in a manner consistent with the accounting policies,
practices and assumptions employed by Purchaser in preparing its own financial
statements.
2.4.4 Earn-Out Payments shall be made to the Seller within
thirty (30) days of completion of the measurement of actual results as noted in
Section 2.4.3 or within thirty (30) days of the completion of the requirements
as specified in Section 2.4.2, whichever is later.
2.5 ALLOCATION OF PURCHASE PRICE The Purchase Price shall be
allocated among the Purchased Assets in accordance with SCHEDULE 2.5. The
parties shall report consistently with such allocations on all income tax
returns and other statements (including, without limitation, filing of Form 8594
for 1995) and in the course of any tax audit, tax review or tax litigation
relating thereto. Not later than ten days prior to the filing of their
respective Form 8594 relating to this transaction, each party shall deliver to
the other party a copy of its Form 8594. Seller shall timely pay all taxes
payable by Seller as a result
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
of the sale of the Purchased Assets; provided, however, that Purchaser shall
remit all sales taxes payable as a result of its purchase of the Purchased
Assets.
SECTION 3. COVENANTS AND AGREEMENTS
3.1 LOCATION OF SEMI-CONDUCTOR SCE BUSINESS. Unless otherwise agreed
by the Shareholders, and provided that either of the Shareholders continue to be
employed by Purchaser, Purchaser will maintain a semi-conductor equipment
engineering and design facility in Indianapolis, Indiana or the surrounding area
for the Earn-Out Period. Purchaser further agrees that during the Earn-Out
Period it will not discontinue a semiconductor equipment manufacturing operation
in Indianapolis or its surrounding area without first conferring with the
Shareholders concerning whether such move would have an adverse effect on the
ability of the Shareholders to achieve the minimum targets for the Earn-Out
Payments as specified in Section 2.4.1. With the exception of the ProMaster-
Registered Trademark- 9500, production of which shall be relocated to Redmond,
Washington on or before April 1, 1996, Data I/O's semi-conductor handling and
programming systems will not be manufactured by the SCE Business (except for any
prototype units for Data I/O's ProMaster-Registered Trademark- 900 and 950 or
equivalent products) unless otherwise agreed by Data I/O, Purchaser and the
Shareholders.
3.2 DELIVERY OF PURCHASED ASSETS. Commencing on the Effective Date
and continuing thereafter, Seller shall cause to be delivered into the
possession or control of Purchaser all of the Purchased Assets, which shall
include, without limitation, the original copies of Contracts and the original
copies of all records, files, documents, correspondence and papers pertaining to
the Purchased Assets. Seller hereby constitutes and appoints Purchaser as
Seller's true and lawful attorney and attorneys, with full power of substitution
in Seller's name, place and stead, on behalf and for the benefit of Purchaser,
its successors and assigns, to demand and receive any and all of the Purchased
Assets, and to give receipts and releases for and in respect of the same, and
any part thereof, and from to time to institute and prosecute in Seller's name,
or otherwise, for the benefit of Purchaser, its successors and assigns, any and
all proceedings at law, in equity or otherwise, which Purchaser may deem proper
in order to collect or reduce to its possession any of the Purchased Assets, and
to do all acts and things relating to the Purchased Assets which Purchaser shall
deem desirable, Seller hereby declaring that the foregoing powers are coupled
with an interest and are and shall be irrevocable by Seller and shall not be
affected by its dissolution or in any manner or for any reason whatsoever.
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
3.3 USE OF NAMES. As of the date of this Agreement, Seller will
refrain from using any of the Names or any similar names as a trade name,
trademark or service xxxx in connection with any business or activity, and
within ten days of the date of this Agreement, Seller will change its corporate
name.
3.4 FURTHER ACTIONS. Seller shall, at any time and from time to time
hereafter, but only upon the request of Purchaser, do, execute, acknowledge and
deliver or shall cause to be done, executed, acknowledged and delivered all such
further reasonable acts, assignments, transfers, conveyances, assurances and
other instruments as may be reasonably required for the transferring, conveying,
assigning, delivering, assuring and assisting in collecting and reducing to the
possession of Purchaser of any and all of the Purchased Assets. Without
limiting the generality of the foregoing, Seller will use its best efforts to
provide to Purchaser and/or Data I/O any financial statements or other
information which may be required by the Securities and Exchange Commission (the
"SEC") or other regulatory authority. Purchaser shall bear the cost of any
independent public accountant for the review or audit of financial statements of
Seller for any period for which reviewed or audited financial statements do not
presently exist. The parties further agree to perform or cause to be performed
at and after the Effective Date any and all further acts as may be reasonably
necessary to consummate the transactions contemplated hereby.
3.5 INCOME AND OTHER TAXES. Seller shall in a timely manner file all
income, sales, use, franchise and other tax returns and pay related required
taxes associated with the operations of Seller on or prior to the Effective Date
and those arising from the transactions contemplated hereby except that
Purchaser shall pay all sales taxes arising from the purchase of the Assets
pursuant to this Agreement.
3.6 EMPLOYMENT AGREEMENTS. The Shareholders each shall execute and
deliver to Purchaser their respective Employment Agreements in the forms
attached hereto as EXHIBITS 3.6A AND 3.6B (the "Employment Agreements
3.7 OPINION OF SELLER'S COUNSEL. Seller delivers herewith to
Purchaser an opinion of Xxxxx, Xxxxxx and Xxxxxxx, dated as of the Effective
Date, in the form attached hereto as EXHIBIT 3.7.
3.8 OPINION OF PURCHASER'S COUNSEL. Purchaser delivers herewith to
Seller an opinion of Heller, Ehrman, White & XxXxxxxxx, dated as of the
Effective Date, in the form attached hereto as EXHIBIT 3.8.
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
3.9 NON-DISCLOSURE. Except as required by applicable law, including
without limitation, as required by the SEC or other regulatory authority,
neither Seller, the Shareholders nor Purchaser shall disclose to any third party
(other than persons engaged by the parties for the purpose of negotiating this
Agreement or consummating the proposed transactions) any information about this
Agreement or the transactions proposed herein, without the prior written consent
of the other parties to this Agreement.
3.10 NON-COMPETITION AND NON-SOLICITATION.
3.10.1. APPLICABILITY AND DEFINITION OF THE COMPANY. This
Section 3.10 shall survive the termination or expiration of this Agreement. For
purposes of Section 3.10 of this Agreement, "the Company" shall include the
Purchaser and all affiliates, including without limitation, subsidiaries,
parents, partnerships, and any business ventures in which the Purchaser and/or
such affiliates may participate.
3.10.2 NON-COMPETITION. The Seller agrees that it will not,
directly or indirectly, during the Earn-Out Period and for a period of two (2)
years thereafter, directly or indirectly, own, manage, operate, join, control or
participate in the ownership, management, operation or control of or be
connected with, in any manner, any person or entity engaged in any business or
activities that are, or are preparing to be, in competition with the Company
with respect to any product or service sold or activity engaged in by the
Company during the Earn-Out Period (including without limitation, products or
services used in the "Semi-conductor Equipment Market" or the "IC Programmer
Products Market" as defined below) in any geographical area in which such
product or service is sold or activity is engaged in during the Earn-Out Period
or which the Company was preparing to sell or engage in at the end of the Earn-
Out Period. "Semi-conductor Equipment Market" means the design, development,
manufacture, sale or distribution of materials handling equipment or marking
equipment and "IC Programmer Products Market" means the design, development,
manufacture, sale or distribution of any device or system used to program
programmable integrated circuits. The Seller shall be deemed to be connected
with such business if such business is carried on by a partnership, corporation
or association of which the Seller is a partner, shareholder, member or agent,
provided that nothing herein shall prevent the purchase or ownership by the
Seller of shares which constitute less than five percent (5%) of the outstanding
equity securities of a publicly-held corporation.
3.10.3 NON-SOLICITATION. The Seller shall not, in addition,
directly or indirectly solicit, influence or entice any employee or consultant
of the Company to cease his
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OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
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relationship with the Company or solicit, entice or in any way divert any
customer or supplier of the Company to do business with the Seller or any entity
described herein. This Section 3.10.3 shall apply during the time period and
geographic region described in Section 3.10.2 of this Agreement.
3.10.4 EQUITABLE RELIEF. The Seller acknowledges that the
provisions of this Section 3.10 are essential to the Company, that the Purchaser
would not enter into this Agreement if it did not include covenants not to
compete or solicit and that damages sustained by the Company as a result of a
breach of such covenants cannot be adequately remedied by money damages, and the
Seller agrees that the Company, notwithstanding any other provision of this
Agreement, in addition to any other remedy the Company may have under this
Agreement or at law, shall be entitled to injunctive and other equitable relief
to prevent or curtail any breach of any provision of this Section 3.10. The
Seller acknowledges that the covenants in this Section 3.10 are reasonable.
3.10.5 ADEQUATE CONSIDERATION. The Seller and the Purchaser
agree that adequate consideration has been given for the Seller to enter into
this Section 3.10 and assume the obligations contained in this Section 3.10.
The Seller recognizes that (i) the provisions of this Section 3.10 are
reasonable and necessary for the protection of the Company in light of the
consideration paid and payable by the Purchaser to the Seller under this
Agreement, and (ii) the Purchaser would not have entered into this Agreement and
consummated the transactions contemplated hereunder without the Seller having
agreed to be bound by provisions contained in this Section 3.10.
3.11 BULK TRANSFER LAWS. Purchaser hereby waives the requirements of
the bulk transfer provisions of the Indiana Uniform Commercial Code, to the
extent such provisions may be applicable. Seller and the Shareholders have
agreed to defend, indemnify and hold harmless Purchaser from any liabilities
arising from failures to comply with such provisions, as more particularly set
forth in Section 7 hereof.
SECTION 4. REPRESENTATION AND WARRANTIES. Seller represents, covenants
and warrants to Purchaser as follows:
4.1 CORPORATE EXISTENCE AND POWER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Indiana, and has all corporate powers and all material governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted. Seller is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the
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OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
nature of its activities make such qualification necessary, except for those
jurisdictions where failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on its business, assets or condition
(financial or otherwise).
4.2 AUTHORIZATION. The execution, delivery and performance by Seller
of this Agreement and the consummation of the transactions contemplated hereby
are within Seller's corporate powers and have been duly authorized by all
necessary corporate action (shareholder or otherwise) on the part of Seller.
This Agreement, the Employment Agreements and the Escrow Agreement (the
"Agreements") are the legal, valid and binding obligations of Seller and are
enforceable against Seller in accordance with their terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws of general application that may affect the enforcement of
creditors' rights generally and by general equitable principals.
4.3 NON-CONTRAVENTION. The execution, delivery and performance by
Seller of the Agreements do not and will not (i) contravene or conflict with the
Articles of Incorporation or Bylaws of Seller; (ii) contravene or conflict with
or constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to Seller or any of its
assets; (iii) constitute a default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of Seller
or to a loss of any benefit to which Seller is entitled under any provision of
any agreement, contract or other instrument binding upon Seller or to which
Seller is a party by which Seller or any of its assets are or may be bound, or
constitute a default (or an event which, with the lapse of time or the giving of
notice, or both, would constitute a default) thereunder, or violate any license,
franchise, permit or other similar authorization held by Seller; (iv) result in
the creation or imposition of any lien, security interest, charge or encumbrance
of any nature on any of the Purchased Assets; or (v) give to others any interest
or rights, including rights of termination, acceleration or cancellation, in or
respect to any item of the Purchased Assets.
4.4 TITLE TO AND CONDITION OF ASSETS. Seller has and does hereby
convey to Purchaser good and marketable title in and to the Purchased Assets
(whether personal, tangible or intangible), free and clear of any liens,
charges, assessments, taxes, mortgages, pledges, conditional sales agreements,
security agreements or encumbrances of any nature. All inventories of finished
goods, parts and supplies are of good and merchantable quality, saleable or
useable within a reasonable period of time in the ordinary course of business.
All equipment is in good
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OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
operating condition and state of repair, normal wear and tear excepted, has been
maintained consistent with standards generally followed in the industry and is
suitable for its present uses.
4.5 REQUIRED CONSENTS. SCHEDULE 4.5 sets forth each agreement,
contract or other instrument binding upon Seller, or any license, franchise,
permit or similar authorization held by Seller, requiring a consent as a result
of the execution, delivery and/or performance of the Agreements or the
consummation of the transactions contemplated hereby and thereby (each such
consent, a "Required Consent" and together, the "Required Consents"). Except
for the Required Consents, there are no consents, approvals, authorizations,
orders, registrations or qualifications of or with any person, court, regulatory
authority or governmental body which are required for the consummation by Seller
of the transactions contemplated by the Agreements.
4.6 COMPLIANCE WITH CONTRACTS. The Contracts constitute all
presently effective contracts and agreements, whether written or oral, to which
Seller is a party and which are used or useful in connection with the SCE
Business or to which any of the Purchased Assets is subject. True and complete
copies of all written Contracts (with all amendments thereto) have been
delivered to Purchaser. Except as set forth in SCHEDULE 4.6, Seller has
complied with all material provisions of the Contracts, is not in arrears with
respect to any amounts owed thereunder and is not otherwise in default under any
thereof nor has any party asserted that Seller is in default under any thereof
and to the best knowledge of the officers of Seller, no condition exists which
with the passage of time or the giving of notice would constitute a default
under any thereof. All of the Contracts are valid and in full force and effect.
4.7 PRODUCTS. Each of the products produced or sold by Seller in
connection with the SCE Business is, and at all times has been, in compliance in
all material respects with all applicable federal, state and local laws and
regulations and is, and at all relevant times has been, fit for the ordinary
purposes for which it is intended to be used and conforms in all material
respects to any promises or affirmations of fact made in connection with its
sale. There is no design defect with respect to any of such products, and each
of such products contains adequate warnings, presented in a reasonably prominent
manner, in accordance with applicable laws and current industry practice with
respect to its use.
4.8 FINANCIAL STATEMENTS. Attached hereto as EXHIBIT 4.8 are (i)
balance sheets of Seller as of December 31, 1994, together with the statement of
operations, stockholder's equity and cash flows, including the notes thereto,
for the year ended December 31, 1994 (ii) actual balance sheets of Seller as
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
of July 31, 1995 (the "Balance Sheet"), together with the statement of
operations, stockholders equity and cash flows for the seven month period then
ended and (iii) estimated balance sheets of Seller as of August 31, 1995. Such
financial statements, including, if any, the notes thereto, are true and
complete in all material respects and accurately and fairly present the
financial condition of Seller at the respective dates of each such financial
statement and the results of operations, stockholders' equity and cash flows for
the periods indicated, all in conformity with generally accepted accounting
principles applied on a consistent basis. At the Effective Date, Seller has no
material liabilities (fixed or contingent, including without limitation, any tax
liabilities due or to become due) which were not fully disclosed, reflected or
provided for in the Balance Sheet. The tangible assets reflected in the Balance
Sheet are shown thereon at actual cost, less depreciation and amortization.
4.9 AGING REPORTS. Attached hereto as EXHIBIT 4.9 are receivables
and payables aging reports dated as of the Effective Date (the "Aging Reports").
The Aging Reports are true, accurate and correct in all material respects as of
the dates thereof and correctly reflect the payment histories of the various
accounts shown thereon. All accounts receivable as reflected in the Balance
Sheet and the Aging Report constituted at the date thereof bona fide accounts
receivable resulting from the sale of goods or services in the ordinary course
of business and, to the best knowledge of Seller, such accounts receivable are
collectable in full in the ordinary course of business and are subject to no
conditions as to payment, or to offsets, counterclaims or defenses of any kind,
or to any returns, allowances or credits other than to the extent of the
allowance for doubtful accounts and warranty reserve reflected in the Balance
Sheet.
4.10 NO MATERIAL CHANGES. Except as set forth in SCHEDULE 4.10,
since the date of the Balance Sheet there has not been:
(a) Any material adverse change in the condition (financial or
otherwise), assets, liabilities, business or prospects of Seller from that
reflected in the Balance Sheet, any material decline in the rate of sales by
Seller or any occurrence, circumstance, development, condition of any character
known to the officers of Seller which materially adversely affects, or
reasonably could be expected to so affect, the condition (financial or
otherwise), assets, liabilities, business or prospects of Seller;
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
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(b) Any damage, destruction or loss of any of the Purchased
Assets (whether or not covered by insurance) or any write-down in the value of
any material inventory or write-off as uncollectible of any material notes or
accounts receivable;
(c) Any material increase in compensation payable to or for the
benefit of, or committed to be paid to or for the benefit of, any director,
shareholder, officer or employee of Seller; or
(d) Any modification, waiver, change, amendment, release,
recision, accord and satisfaction or termination of, or with respect to, any
material term, condition or provision of any material contract, agreement,
license or other instrument to which Seller is a party, including the Contracts,
other than any satisfaction by performance in accordance with the terms thereof.
4.11 PROPRIETARY RIGHTS. SCHEDULE 4.11 sets forth a true and
complete list of all patents, patent applications, registrations, applications
for registration, assignments, license agreements (whether written or oral) and
other documents evidencing any patent, copyright, trademark, trade name, service
xxxx or other intellectual property rights which are used in the conduct of the
SCE Business (the "Intellectual Properties"). Except as set forth in SCHEDULE
4.11, Seller possesses full right and authority to use all know-how, proprietary
information, copyrights, trademarks, patent rights and other proprietary and
intellectual properties necessary to the conduct of the SCE Business as
presently conducted and as proposed to be conducted without infringing the
rights of others, including the Intellectual Properties, all of which are
transferred to Purchaser pursuant to this Agreement, free and clear of all
liens, claims, options, charges, encumbrances, security interests or claims of
ownership of any person or of any obligation to pay royalties. Seller has taken
reasonable steps and precautions to protect and preserve the confidentiality of
all trade secrets and confidential information of Seller or others entrusted to
Seller. Except for any agreements with Purchaser, Seller has not entered into
any agreement pursuant to which it has agreed not to compete with any person.
The operations of Seller as currently conducted do not infringe any copyright,
trademark, service xxxx, trade name, patent rights or any other right of any
person, whether registered or unregistered, nor do they involve the
misappropriation of any trade secret of any person. Seller has not received
notice from any person alleging that such infringement or misappropriation has
occurred or is continuing.
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
4.12 ENVIRONMENTAL COMPLIANCE. Except as described on SCHEDULE 4.12:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity (i) with respect to any alleged
violation by Seller of any environmental law, ordinance, rule, regulation or
order of any governmental entity; (ii) with respect to any alleged failure by
Seller to have any environmental permit, certificate, license, approval,
registration or authorization or (iii) with respect to any generation,
treatment, storage, recycling, transportation or disposal or release of any
toxic, caustic or otherwise hazardous substance ("Hazardous Substance").
(b) In connection with the operation of the SCE Business,
(i) Seller has not handled any Hazardous Substance on any property now or
previously owned or leased by Seller; (ii) there are no underground storage
tanks for Hazardous Substances, active or abandoned, at any property now or
previously owned or leased by Seller; (iii) no Hazardous Substance has been
released at, or under any property now or previously owned or leased by Seller;
and (iv) no Hazardous Substance has been released or is present, in a reportable
or threshold planning quantity, where such quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under any property now
or previously owned or leased by Seller.
(c) In connection with the operation of the SCE Business, Seller
has not transported or arranged for the transportation (directly or indirectly)
of any Hazardous Substance to any location which is listed or proposed for
listing under CERCLA, or on any similar state list or which is the subject of
federal, state or local enforcement actions or other investigations which may
lead to claims against Purchaser for clean-up costs, remedial work, damages to
natural resources or for personal injury or property damage claims, including
but not limited to, claims under CERCLA, or an any similar state list or which
is the subject of federal, state or local enforcement actions or other
investigations which may lead to claims against Purchaser for clean-up costs,
remedial work, damages to natural resources or for personal injury or property
damage claims, including, but not limited to, claims under CERCLA.
(d) No oral or written notification of a release of a Hazardous
Substance has been filed by or on behalf of Seller with respect to the SCE
Business and no property now or previously owned or leased by Seller with
respect to the SCE
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Business is listed or, to Seller's knowledge, proposed for listing, on the
National Priorities List promulgated pursuant to CERCLA or on any similar state
list of sites requiring investigation or clean-up.
4.13 SOLVENCY. No insolvency proceedings of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
Seller, its predecessor or any of their assets or properties are pending and
Seller has not made an assignment for the benefit of creditors, nor taken any
action with a view to, or which would constitute the basis for, the institution
of any such insolvency proceedings.
4.14 LITIGATION. Except as described on SCHEDULE 4.14, there are no
legal actions, suits or other legal or administrative proceedings or
investigations pending or, to the knowledge of Seller, threatened against Seller
or affecting any of its assets, and Seller is not aware of any facts which might
form the basis for any such action, suit or other proceeding or investigation,
and there are no outstanding judgments against Seller or any of its assets.
4.15 BROKERAGE COMMISSION. No broker, finder, agent or similar
intermediary has acted for or on behalf of Seller or the Shareholders in
connection with this Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to any broker's,
finder's or similar fee or other commission in connection with this Agreement
based on any agreement, arrangement or understanding with Seller or either
Shareholder or any action taken by Seller or the Shareholders.
4.16 TAXES. For all periods ended on or prior to the Effective Date,
Seller has filed or will file within the time prescribed by law all tax returns
and reports required to be filed by all federal, state and local taxing
authorities. Seller has not failed, and will not fail, to timely pay all such
taxes relating to the Purchased Assets.
4.17 OTHER INFORMATION. None of the documents or information
delivered to Purchaser in connection with the transactions contemplated by this
Agreement contains any untrue statement of material fact or omits to state any
material fact necessary in order to make the statements contained therein not
misleading. There is no significant adverse fact or condition relating to the
SCE Business which has not been specifically disclosed in writing by Seller to
Purchaser.
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. As an
inducement to the execution of this Agreement by Purchaser and the carrying out
of the provisions of this Agreement to be performed by Purchaser, each
Shareholder hereby represents and warrants that he has full power and authority
to enter into this Agreement and his Employment Agreement (including, for
purposes of this Section 5, the documents attached as exhibits thereto) and to
deliver and perform his obligations and undertakings set forth herein and
therein. This Agreement and his Employment Agreement have been duly executed
and delivered by him and constitutes his legal, valid and binding obligations,
enforceable in accordance with their terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general application that may affect the enforcement of creditors' rights
generally and by general equitable principles. The execution, delivery and
performance by him of this Agreement and his Employment Agreement do not and
will not (i) to the best of his knowledge, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to him; (ii) conflict
with or result in the breach (or constitute an event which, with the lapse of
time or the giving of notice, or both, would constitute a breach) of any
agreement, deed, contract, mortgage, indenture, writ, order, decree, legal
obligation or instrument to which he is a party, or constitute a default
thereunder.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants that:
6.1 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Washington, and has
all corporate powers and all material governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted.
6.2 AUTHORIZATION. The execution, delivery and performance by
Purchaser of this Agreement and the consummation by Purchaser of the
transactions contemplated hereby are within Purchaser's corporate powers and
have been duly authorized by all necessary corporate action on the part of
Purchaser. This Agreement is binding upon Purchaser and is enforceable against
Purchaser in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general application that may affect the enforcement of creditors' rights
generally and by general equitable principles.
6.3 NON-CONTRAVENTION. The execution, delivery and performance by
Purchaser of this Agreement do not and will not (i) contravene or conflict with
the Articles of Incorporation or
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Bylaws of Purchaser; (ii) contravene or conflict with or constitute a violation
of any provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to Purchaser; (iii) constitute a default under or
give rise to any right of termination, cancellation or acceleration of any right
or obligation of Purchaser or to a loss of any benefit to which Purchaser is
entitled under any provision of any material agreement, contract or other
instrument binding upon Purchaser or to which Purchaser is a party, or
constitute a default (or an event which, with the lapse of time or the giving of
notice, or both, would constitute a default) thereunder.
6.4 BROKERAGE COMMISSION. No broker, finder, agent or similar
intermediary has acted for or on behalf of Purchaser in connection with this
Agreement or the transactions contemplated hereby, and no broker, finder, agent
or similar intermediary is entitled to any broker's, finder's or similar fee or
other commission in connection with this Agreement based on any agreement,
arrangement or understanding with Purchaser or any action taken by Purchaser.
SECTION 7. INDEMNIFICATION.
7.1 SELLER AND SHAREHOLDER INDEMNIFICATION. Seller and the
Shareholders (the "Indemnitors") jointly and severally agree to defend,
indemnify and hold harmless Purchaser and its officers, directors, shareholders,
successors and assigns (each an "Indemnified Party") from and against any
claims, losses, damages, expenses, liabilities or proceedings (including,
without limitation, diminutions in value and reasonable attorneys' and experts'
fees and all amounts reasonably paid in investigation, defense or settlement of
any of the foregoing) which may be sustained, suffered or incurred by an
Indemnified Party to the extent that such claims, losses, damages, expenses or
liabilities arise out of or result from (i) the breach by Seller or the
Shareholders of any covenant or warranty or the inaccuracy of any representation
made by Seller or the Shareholders in this Agreement; and (ii) any actions,
failures to act, obligations or defaults of Seller or the Shareholders before,
on or after the Effective Date other than the Assumed Liabilities including,
without limitation, those attributable to defaults under the Contracts and those
arising under bulk transfer, insolvency, fraudulent conveyance, bankruptcy, tax
or other laws or any other theory of successor liability. All payments pursuant
to this Section 7 shall be equal to an amount which, after taking into account
any taxes imposed on the receipt of such payments by the Indemnified Party and
any tax benefits actually recognized by such Indemnified Party as a result of
the incurring such loss or expenses, shall equal the amount of such loss or
expense.
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
7.2 NOTICE OF CLAIM; ASSUMPTION OF DEFENSE; SETTLEMENT OF CLAIMS.
Any Indemnified Party shall promptly give written notice to the Indemnitors of
any claim for which indemnification will be sought under Section 7, which notice
shall state with reasonable specificity the nature of such claim. Except to the
extent the Indemnitors are prejudiced thereby, the failure by the Indemnified
Party to give the Indemnitor prompt notice of the claim will not eliminate the
obligation of the Indemnitor to indemnify the Indemnified Party under this
Agreement. The Indemnitors shall have the right to assume the defense of such
claim involving a third party through counsel selected by the Indemnitors and
approved by the Indemnified Party, and in connection therewith to conduct any
proceedings or negotiations relating thereto (subject to the provisions
hereinafter set forth), but the Indemnified Party may participate in the defense
or settlement thereof. If the Indemnitors elect to assume the defense of any
such claim, they shall give the Indemnified Party written notice of their
intention to do so within ten days of being notified of the claim, whereupon
they shall immediately assume the defense and use their best efforts to defend
such claim. Failure of an Indemnitor to notify the Indemnified Party of its
election to defend any such action within ten days after receipt of notice
thereof shall be deemed a waiver by the Indemnitor of its right to defend such
action. An Indemnitor shall not, in the defense of any such claim or any
litigation resulting therefrom, consent to entry of any judgments (except with
the prior written consent of the Indemnified Party) or enter into any settlement
(except with the prior written consent of the Indemnified Party) which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnified Party a release from all liability in respect of
such claim or litigation and in no event shall an Indemnitor have the right to
agree to a settlement involving injunctive relief or other equitable relief
against the Indemnified Party without obtaining the prior written consent of the
Indemnified Party. Should the Indemnitor fail to defend any claim or action,
then, in addition to any other remedies available to the Indemnified Party in
law or in equity, the Indemnified Party may settle or defend any such action or
proceeding through legal counsel of its own choosing and may recover from the
Indemnitors, jointly and severally, the amount of such settlement or any
judgment or decree and all of its costs and expenses incurred in connection
therewith as they are incurred, including, without limitation, reasonable
attorneys' and experts' fees and all other legal costs. Purchaser may, in
addition to all other available remedies and not as an exclusive remedy, reduce
the amount of any payments due to the Indemnitors under this Agreement, or any
other obligation, by the amount of any loss, damage, expenses or liabilities
suffered by it for which it is entitled to indemnification pursuant to Section
7. The right of an Indemnified Party to seek indemnification pursuant to
Section 7.1
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
shall be in addition to any other legal or equitable remedy available to the
Indemnified Party. Any and all payments which may become due and payable by an
Indemnitor under the terms of this Section shall become due and payable at once
without notice from an Indemnified Party or to an Indemnitor. To the extent
permitted by law, from and after the date on which payment becomes due and
payable, the amount of such payment shall bear interest at the lesser of
eighteen percent (18%) per annum or the maximum rate permitted by law, until
paid in full.
7.3 LIMITATION ON LIABILITY OF THE SHAREHOLDERS. Notwithstanding the
foregoing, the liability of each of the Shareholders hereunder shall not exceed
the sum of all payments made pursuant to Section 2 of this Agreement.
7.4 TERMINATION. If an Indemnified Party fails to give, within 120
days after the earlier of the end of the Earn-Out Period or the date on which
the total possible Earn-Out Payment in the amount of $2,000,000 has been made
under this Agreement, written notice to the Indemnitors of any claim for which
indemnification will be sought under Section 7, then such claim is barred;
provided, however, the time period for any Indemnified Party to give written
notice to the Indemnitors of any claim for which indemnification will be sought
under Section 7 relating to any federal, state, local or other taxes shall be
120 days after the five (5) year period from the Effective Date.
SECTION 8. DEFINITIONS. The following terms shall have the meaning stated
in the Section referenced opposite the term:
Definition Section
---------- -------
Actual Liabilities 2.2
Aging Reports 4.9
Agreement Introduction
Agreements 4.2
Annual Earn-Out Period 2.4.3
Assets Recitals
Assumed Liabilities 1.2
Balance Sheet 4.8
Claim Amount 2.3.3
Closing Value 2.2.1
Company 3.10.1
Contracts 1.2
Data I/O Introduction
Direct, Unburdened Cost 2.4.1
Earn-Out Payment 2.1
Earn-Out Period 2.4.1
Effective Date Introduction
Employment Agreements 3.6
Escrow Agent 2.1
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Escrow Agreement 2.1
Escrowed Funds 2.1
Excluded Inventory 2.2.1
Excluded Inventory Adjustment Amount 2.2.2
Excluded Inventory Adjustment Report 2.2.2
Fiscal Month(s) 2.2.1
Hazardous Substance 4.12
Indemnified Party 7.1
Indemnitors 7.1
Indemnity Claim 2.3.3
Initial True-Up Amount 2.2.1
Initial True-Up Report 2.2.1
Intellectual Properties 4.11
Names Schedule 1.1
Purchase Price 2.1
Purchased Assets 1.2
Purchaser Introduction
Receivables Schedule 1.1
Release Date 2.3.3
Required Consents 4.5
SCE Business Recitals
SEC 3.4
Seller Introduction
Shareholders Introduction
9500 Transfer Price 2.4.1
True-Up Amount 2.2.1
True-Up Date 2.2.1
True-Up Report 2.2.1
SECTION 9. MISCELLANEOUS.
9.1 NOTICES. All notices, demands and other communications called
for or required by this Agreement shall be in writing and shall be addressed to
the parties at their respective addresses stated below or to such other address
as a party may subsequently designate by ten (10) days' advance written notice
to the other parties. Communications hereunder shall be deemed to have been
received (i) upon delivery in person, (ii) five days after mailing it by U.S.
certified mail, return receipt requested and postage prepaid, (iii) the second
business day after depositing it with a commercial overnight carrier which
provides written verification of delivery or (iv) the day of transmission by
telefacsimile if sent before 2:00 p.m. recipient's time provided that a copy of
such notice is sent on the same day by U.S. certified mail, return receipt
requested and postage prepaid, with an indication that the original was sent by
facsimile and the date of its transmittal.
23
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Purchaser: Reel-Tech, Inc., a Washington corporation
Attention: President
00000 Xxxxxxx Xxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
CC: Data I/O Corporation
Attention: Chief Financial Officer
00000 Xxxxxxx Xxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Seller: Reel Tech, Inc., an Indiana corporation
Attention: Xxxxxxx X. Xxxx
0000 Xxxxxxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
Shareholders: Xxxxxxx X. Xxxx
0000 Xxxxxxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
To: Xxxxxx X. Xxxx
0000 Xxxxxxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
CC: Xxxxxx X. Xxxxxxx
Xxxxx, Xxxxxx & Xxxxxxx
0000 Xxxxxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Fax: (000) 000-0000
9.2 OPPORTUNITY TO PARTICIPATE IN DRAFTING. The parties have had an
equal opportunity to participate in drafting of this Agreement. No ambiguity
shall be construed against any party based upon a claim that party drafted the
applicable language.
9.3 FULL UNDERSTANDING. In executing this Agreement, each member of
each party fully, completely, and unconditionally acknowledges and agrees that
it (a) has consulted with, and had the advice and counsel of duly licensed and
competent attorney and that it has executed this Agreement after independent
investigation, voluntarily and without fraud, duress, or undue influence, and
(b) expressly consents that this Agreement be given full force and effect
according to each and every of its express terms and provisions.
24
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
9.4 ENTIRE AGREEMENT. This Agreement and all exhibits and schedules
hereto contain all of the terms and conditions agreed upon by the parties
relating to the subject matter hereof and supersede and cancel all other prior
agreements, negotiations, correspondence, undertakings, communications and
understandings of the parties, whether written or oral, respecting that subject
matter.
9.5 MODIFICATION. No waiver or modification of this Agreement or of
any provision contained herein shall be valid unless in writing and duly
executed by all parties hereto. No evidence of any waiver or modification shall
be offered or received in evidence in any proceedings, arbitration, or
litigation between the parties hereto arising out of or affecting this
Agreement, or the rights or obligations of the parties hereunder, unless such
waiver or modification is in writing and duly executed. The parties further
agree that the provisions of this section may not be waived except as set forth
herein.
9.6 NO WAIVER. Failure or delay on the part of any party in
exercising any rights, power or privileges under this Agreement shall not be
deemed a waiver of any exercise of any right, power or privilege.
9.7 CAPTIONS AND CONSTRUCTION. Captions in this Agreement are for
the convenience of the reader and are not to be considered in the interpretation
of the terms.
9.8 SEVERABILITY. In the event any one or more immaterial provisions
is found to be invalid, the finding shall not affect the validity or
enforceability of the other provisions.
9.9 SURVIVAL. Neither the investigation by a party or the acceptance
of delivery of property hereunder shall constitute a waiver of any covenant,
representation, warranty, agreement, obligation or undertaking of a party
hereunder, and the same shall survive and continue after the Effective Date.
9.10 GOVERNING LAW. This Agreement, including all matters of
construction, validity and performance, shall be governed by and construed and
enforced in accordance with the laws of the State of Washington, without regard
to its conflict of law provisions which might otherwise require the application
of the law of any other jurisdiction. The parties agree that the exclusive
jurisdiction and venue of any lawsuit between them arising under this Agreement
or out of the transactions contemplated herein shall be the Superior Court of
Washington for King County, or the United States District Court for the Western
District of Washington at Seattle, and each of the parties hereby irrevocably
agrees, acknowledges and submits itself to the
25
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
exclusive jurisdiction and venue of such courts for the purposes of such
lawsuit. The parties agree that provisions of this Section serve as a material
inducement for Purchaser to enter into this Agreement.
9.11 EXPENSES. Purchaser, Seller and the Shareholders shall each pay
their respective expenses, costs and fees (including, without limitation,
attorneys' and accountants' fees) incurred in connection with the negotiation,
preparation, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby.
9.12 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become a binding agreement when one or more counterparts
have been signed by each of the parties and either original or facsimile
counterparts have been delivered to the other party.
9.13 INVALID PROVISIONS. If any one or more of the provisions of
this Agreement, or the applicability of any such provision to a specific
situation, shall be held invalid or unenforceable, including but not limited to,
the duration of such provision, its geographical scope or the extent of the
activities prohibited or required by it, such provision shall be modified to the
minimum extent necessary to make it or its application valid and enforceable,
and the validity and enforceability of all other provisions of this Agreement
and all other applications of any such provision shall not be affected thereby.
9.14 ASSIGNMENT. None of the parties shall assign or delegate or in
any way transfer any rights, interests or obligations hereunder without the
prior written consent of the other parties, except that the parties agree that
this Agreement: (A) shall be transferred or assigned by the Purchaser to (i) an
entity resulting from any merger, consolidation or other reorganization to which
Purchaser is a party or (ii) a buyer of all or substantially all of Purchaser's
assets relevant to Purchaser's performance under this Agreement, whereupon such
assignee or transferee shall succeed to the rights and obligations of the
Purchaser hereunder, and (B) may be transferred or assigned by the Purchaser to
any entity in which Purchaser has a controlling interest or which is under
common control with Purchaser, whereupon such assignee or transferee shall
succeed to the rights and obligations of the Purchaser hereunder. Subject to
the foregoing restrictions, this Agreement will be fully binding upon, inure to
the benefit of, and be enforceable by the parties hereto and their respective
successors and permitted assigns.
26
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
9.15 ATTORNEYS' FEES. If legal proceedings are brought to enforce or
interpret any provision of this Agreement, the most prevailing party shall be
awarded its reasonable attorneys' fees and costs in addition to any other relief
or remedy which may be available.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
SELLER: REEL TECH, INC., PURCHASER: REEL-TECH, INC.
AN INDIANA CORPORATION A WASHINGTON CORPORATION
By: //S// XXXXXXX X. XXXX By: //S// XXXXX X. XXXXXX
---------------------------- --------------------------
Its: PRESIDENT Its: SECRETARY
--------------------------- -------------------------
SHAREHOLDERS
//S//XXXXXXX X. XXXX //S//XXXXXX X. XXXX
------------------------------ -----------------------------
Xxxxxxx X. Xxxx Xxxxxx X. Xxxx
27
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
OMITTED SCHEDULES AND EXHIBITS FROM EXHIBIT 2.1
The following Schedules and Exhibits have been omitted from Exhibit 2.1 in
accordance with Item 601(b)(2) of Regulation S-K. The Registrant will furnish
supplementally a copy of any omitted schedule or exhibit to the Commission upon
request.
SCHEDULE OR EXHIBIT NUMBER DESCRIPTION
1.1 Purchased Assets
1.2 Assumed Liabilities, Obligations and Contracts
(assumed trade payables and other ascertainable
liabilities totalling $1,193,794.62)
2.1 Escrow Agreement (filed as Exhibit 2.2 to this
Report on Form 8-K)
2.2.1A Excluded Inventory
2.2.1B Value of Fixed Assets
2.2.1C Inventory Listing
2.2.1D Reel-Tech, Inc.'s (Washington corporation) Fiscal
Months
2.4.2 Engineering and Manufacturing Documentation
Standards
2.5 Allocation of Purchase Price
3.6A Employment Agreement,
Xxxxxxx X. Xxxx
3.6B Employment Agreement,
Xxxxxx X. Xxxx
3.7 Opinion of Xxxxx, Xxxxxx & Xxxxxxx
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
3.8 Opinion of Xxxxxx Xxxxxx White & XxXxxxxxx
4.5 Required Consents
4.6 Exceptions to Section 4.6, Compliance with
Contracts
4.8 Financial Statements of Reel-Tech, Inc. (Indiana
corporation)
4.9 Accounts receivable and accounts payable aging
reports
4.10 Exceptions to Section 4.10, No Material Changes
4.11 Proprietary Rights
4.12 Exceptions to Section 4.12, Environmental
Compliance
4.14 Exceptions to Section 4.14,
Litigation
