ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of the 3rd day of October, 2003 between PerfectData Corporation, a California
corporation (the "Seller"), and Spray Products Corporation, a Pennsylvania
corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Seller is engaged in the business (the "Business") of
computer/office care and cleansing products; and
WHEREAS, the Seller desires to sell all of its inventory and other assets
related to the Business to the Purchaser, and the Purchaser desires to acquire
such assets.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and conditions
hereinafter set forth, the parties do hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase of Assets. Subject to the terms and conditions of this
Agreement, the Seller hereby agrees to sell, transfer, convey, assign and
deliver to the Purchaser, and the Purchaser hereby agrees to purchase, acquire
and accept from the Seller:
1.1.1 All inventories of the Seller, including finished goods, raw
materials and work in process existing on the Closing Date (as defined below)
(the "Inventory");
1.1.2 The following books and records of the Seller, including
customer lists and customer data, supplier lists and supplier data and other
operating data, files, credit information, records of sales and inventory data,
know how, computer software (including source codes and object codes), product
development documentation product development procedures, computer generated
product designs and artwork, catalogues, sales literature displays, and
advertising materials, artwork used in the Business, Non-Disclosure Agreements,
Confidentiality Agreements, telephone numbers, SKU numbers, the trade name
"PerfectData Corporation" and all other names utilized in connection with the
Business and all derivations thereof and other intangibles related to the
Business ( the "Intangibles"); provided, however, that the Seller or its
representative shall have the right, upon reasonable notice and during regular
business hours, for five (5) years after the Closing (as hereinafter defined),
to enter the premises of the Purchaser to review and copy any such books and
records for the purpose of the compilation of the financial records of the
Seller for use in the preparation of any required tax returns, in response to
any federal and/or state tax auditor, for use in the preparation of any report
to be filed pursuant to the Securities Exchange Act of 1934, as amended, or any
securities inquiry.
1.1.3 The Seller's goodwill relating to the Business (the
"Goodwill");
E-2
1.1.4 Such accounts receivable of the Seller as to which the
Purchaser and the Seller may mutually agree upon (such purchased receivables
shall be referred to herein as the "Receivables");
1.1.5 all of the Seller's machinery and equipment, office
furniture, supplies, fixed assets, fixtures and equipment, warehouse equipment,
tooling, molds, and computer hardware except for such pieces of equipment as the
Seller reasonably determines is necessary for the establishment of a new office
(the "Equipment");
1.1.6 all intellectual property related to the Business, including,
but not limited to, software, patents, pending patent applications, patents in
development, copyrights, pending copyright applications, copyrights in
development and all derivative works thereof, trademarks, trade names, logos,
service marks, assumed or fictitious names, trade secrets, manufacturing
know-how, and any and all websites related in whole or in part to the Business
and the data and intellectual property related thereto (collectively, the
"Intellectual Property").
The Inventory, Intangibles, Goodwill, Receivables, Equipment and Intellectual
Property are collectively referred to herein as the "Purchased Assets".
1.2 Retained Assets. Except for the Purchased Assets, the Purchaser is
not purchasing any other assets of the Seller including, the Retained Assets.
The term "Retained Assets" shall mean the following assets of the Seller as of
the Closing Date which, although they relate to the Business, are not Purchased
Assets and are to be retained by the Seller: (a) the Seller's franchise to be a
corporation, Certificate of Incorporation, by-laws, minute books, company seals
and other company records having to do with the organization and capitalization
of the Seller; (b) all canceled checks, bank statements and tax returns of the
Seller relating to the Business; (c) any contract, agreement or lease of the
Seller which is not assumed by the Purchaser hereunder; (d) the Seller's
insurance policies including the cash value of life insurance policies; (e) the
Seller's cash and cash equivalents; (f) the Seller's accounts, notes and
receivables, other than the Receivables; (g) taxes and deposits; (h) all
accounting books and records of the Seller and (i) all other assets not
identified herein as the "Purchased Assets".
1.3 Purchase Price.
1.3.1 The total consideration for the Purchased Assets (the
"Purchase Price") shall be an amount equal to the difference of:
1.3.1.1 the Seller's landed cost for the Inventory (excluding
obsolete items) (the "Inventory Value"); plus
1.3.1.2 An amount equal to the collectible Receivables that,
as of the Closing Date, are no older than sixty-five
(65) days; plus
1.3.1.3 The sum of One Hundred Thousand ($100,000.00)
Dollars; less:
E-3
1.3.1.4 The dollar amount of the Assumed Liabilities (as
hereinafter defined).
1.3.2 Allocation of Purchase Price. The Purchase Price shall be
allocated prior to the Closing in accordance with Section 1060 of the Internal
Revenue Code. The Purchaser and the Seller shall cooperate with each other in
the preparation and filing of I.R.S. Form 8594 in connection with the Purchase
Price allocation. Neither the Purchaser nor the Seller, nor any of their
respective affiliates, shall take any position (whether in financial statements,
audits, tax returns or otherwise) which is inconsistent with the allocation of
the consideration unless required to do so by applicable law or regulation.
1.3.3 Within seven (7) days prior to the Closing, the Seller and
the Purchaser shall jointly conduct a physical count of the Inventory in order
to determine the Inventory Value.
1.3.4 The Purchase Price shall be payable at the Closing by the
Purchaser to the Seller as follows:
1.3.4.1 An amount equal to the Purchase Price less the
Holdback Amount (as hereinafter defined) shall be
paid via bank or certified check.
1.3.4.2 An amount equal to ten (10%) percent of the Purchase
Price (the "Holdback Amount") shall be delivered to
Xxxxxxx & Masyr, LLP (the "Escrow Agent").
1.4 Post-Closing Adjustment. At any time after seventy-five (75) days
after the Closing, but no later than ninety (90) days after the Closing, the
Purchaser shall have the right to put (the "Put") any uncollected Receivables
(the "Assigned Receivable") to the Seller. In the event of a Put, the Seller
shall deliver to the Purchaser, within thirty (30) days after the date of such
Put, an amount equal to the face-dollar amount of such Assigned Receivable(s).
In the event that Seller does not timely deliver the value of the Assigned
Receivable to the Purchaser, the Purchaser shall send written notice to the
Escrow Agent and the Seller of such event, and the Escrow Agent shall be
instructed to deliver an amount equal to the face amount of the Assigned
Receivable to the Purchaser. The terms of the escrow herein are set forth in the
Escrow Agreement by and among the Purchaser, the Seller and the Escrow Agent,
the form of which is attached hereto as Exhibit A. Notwithstanding the
foregoing, the Purchaser shall have no right to Put any Receivable that is
generated during such period that the Purchaser is managing the Business,
pursuant to Section 5.6 herein.
1.5 Assumption of Liabilities and Obligations. The Purchaser shall assume
and be responsible for all trade payables of the Seller at the Closing (the
"Assumed Liabilities"). The parties agree that the Purchaser is not assuming any
liability or obligation of the Seller other than the Assumed Liabilities.
1.6 Preparation of the Purchased Assets. The parties acknowledge that the
Purchaser shall make all arrangements and shall be responsible for all costs
incurred in connection with the packaging and transport of the Purchased Assets
from the Seller to the Purchaser.
E-4
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
2.1 Organization of the Seller. The Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California, with all requisite power and authority to own, lease and operate
its properties and to carry on the Business as it is now being conducted. The
Seller is qualified or licensed as a foreign entity in each jurisdiction in
which it is required as a result of the conduct of the Business or location of
the property owned, leased or operated by it in connection with the Business
except where failure to be so qualified or licensed would not have a material
adverse effect on the value of the Purchased Assets, taken as a whole (a
"Material Adverse Effect").
2.2 Authorization of the Seller. The Seller has full power, capacity and
authority to execute this Agreement and all other agreements and documents
contemplated hereby. The execution and delivery of this Agreement and such other
agreements and documents by the Seller and the consummation by the Seller of the
transactions contemplated hereby have been duly authorized and no other action
on the part of the Seller is necessary to authorize the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Seller and constitutes the valid and binding obligation of the Seller,
enforceable in accordance with its terms, except that (i) enforcement may be
subject to (A) bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally, and (B) proper shareholder and
regulatory consent and (ii) the remedies of specific performance and injunctive
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceedings may be brought.
2.3 No Violations. The execution, delivery and performance of this
Agreement and the other agreements and documents contemplated hereby by the
Seller and the consummation of the transactions contemplated hereby will not (i)
violate any provision of the Certificate of Incorporation or by-laws of the
Seller, (ii) violate any statute, rule, regulation, order or decree of any
public body or authority by which the Seller or its properties or assets are
bound, or (iii) result in a violation or breach of, or constitute a default
under, or result in the creation of any lien, mortgage, pledge, security
interest, charge, claim, option or other encumbrance (collectively, the "Liens")
upon, or create any rights of termination, cancellation or acceleration in any
person with respect to any license, franchise or permit of the Seller, or any
other agreement, contract, indenture, mortgage or instrument to which the Seller
is a party or by which any of its properties or assets is bound except (in the
case of (ii) and (iii)) where any such violation, breach or default would not
have a Material Adverse Effect on the Seller.
2.4 Consents. Except for the consent of the shareholders of the Seller
pursuant to the California General Corporation Law and the approval of the
Securities and Exchange Commission, no consent, approval or other authorization
of any governmental authority or third party, is required as a result of or in
connection with the execution and delivery of (i) this Agreement and the other
E-5
agreements and documents to be executed by the Seller in connection herewith or
(ii) the consummation by the Seller of the transactions contemplated hereby,
except for those that have been, or prior to the Closing will be, obtained. At
the Closing, the Seller shall be in complete compliance with all applicable
laws, rules, regulations, including health, environmental, building, zoning,
safety and labor.
2.5 Litigation and Related Matters. There are no actions, suits,
proceedings, investigations or grievances pending or, to the knowledge of the
Seller, threatened against the Seller, the Business or the Purchased Assets, at
law or in equity, before or by any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign (i) that could reasonably be expected to
affect the transactions contemplated hereby or (ii) relating to the Business or
the Purchased Assets.
2.6 Title. At the Closing, the Seller will deliver the Purchased Assets
free and clear of all Liens. -----
2.7 Disclaimers. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT, ALL
OF THE PURCHASED ASSETS (AS DEFINED) ARE BEING SOLD AND TRANSFERRED TO THE
PURCHASER "AS IS" AND ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR USE, ARE EXCLUDED FROM THE SALE AND TRANSFER
OF THE PURCHASED ASSETS. THE SELLER MAKES NO REPRESENTATIONS OR WARRANTIES OF
ANY NATURE WITH RESPECT TO THE PURCHASED ASSETS (EXCEPT AS EXPRESSLY SET FORTH
IN ARTICLE II) OR THE FINANCIAL CONDITION OF THE BUSINESS, INCLUDING BUT NOT
LIMITED TO THE LEVEL OF SALES, PROFITABILITY, INCOME OR FUTURE PROSPECTS. THE
PURCHASER ACKNOWLEDGES THAT ANY FINANCIAL OR OPERATING INFORMATION RELATING TO
THE SELLER'S OPERATION OF THE BUSINESS WAS PROVIDED SOLELY FOR INFORMATIONAL
PURPOSES AND THAT THE SELLER HAS NO RESPONSIBILITY TO THE PURCHASER WITH RESPECT
TO SUCH FINANCIAL OR OPERATING INFORMATION.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to the Seller as follows:
3.1 Corporate Existence. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, with all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
The Purchaser is qualified or licensed as a foreign corporation in each
jurisdiction in which it is required as a result of the character of its
business or location of the property owned, leased or operated by it in
connection with its business except where failure to be so qualified or licensed
would not have a material adverse effect on the Purchaser.
3.2 Authorization of Purchaser. The Purchaser has full corporate power,
capacity and authority to execute this Agreement and all other agreements and
E-6
documents contemplated hereby. The execution and delivery of this Agreement and
such other agreements and documents by the Purchaser and the consummation by the
Purchaser of the transactions contemplated hereby have been duly authorized and
no other corporate action on the part of the Purchaser is necessary to authorize
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and constitutes the valid and binding obligation of
the Purchaser, enforceable in accordance with its terms, except that (i)
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally, and (ii) the remedies of
specific performance and injunctive relief arc subject to certain equitable
defenses and to the discretion of the court before which any proceedings may be
brought.
3.3 No Violations. The execution and delivery of this Agreement and the
other agreements and documents contemplated hereby by the Purchaser and the
consummation of the transactions contemplated hereby will not (i) violate any
provision of the certificate of incorporation or bylaws of the Purchaser, (ii)
violate any statute, rule, regulation, order or decree of any public body or
authority by which the Purchaser or its properties or assets are bound, or (iii)
result in a violation or breach of, or constitute a default under or result in
the creation of any Lien upon, or create any rights of termination, cancellation
or acceleration in any person with respect to, any agreement, contract,
indenture, mortgage or instrument to which the Purchaser is a party or any of
its properties or assets is bound except (in the case of (ii) and (iii)) where
any such violation, breach or default would not have a material adverse effect
on the Purchaser.
3.4 Consents. No consent, approval or other authorization of any
governmental authority or third party is required as a result of or in
connection with the execution and delivery of (i) this Agreement and the other
agreements and documents to be executed by the Purchaser in connection herewith
or (ii) the consummation by the Purchaser of the transactions contemplated
hereby, except for those that have been, or prior to the Closing will be,
obtained.
ARTICLE 4
COVENANTS
4.1 Course of Conduct by the Seller. From the date hereof through the
Closing Date, except as may be first approved in writing by the Purchaser or as
otherwise permitted or contemplated by this Agreement, the Business shall be
conducted only in the ordinary course of business consistent with past practice,
and the Seller shall comply with the following covenants:
4.1.1 Disposition of Assets. The Seller shall not sell, transfer or
otherwise dispose of any part of the Purchased Assets, tangible or intangible,
except for inventory and supplies, disposed of or consumed in the ordinary
course of business.
4.1.2 Relations with Suppliers and Customers. The Seller will use
commercially reasonable efforts to preserve its relationships with material
suppliers, customers and others having material business dealings with it with
respect to the Business.
4.1.3 Liens. The Seller will not mortgage, pledge, encumber, create
or allow any Liens not existing on the date hereof upon any of the Purchased
Assets.
E-7
4.2 Approvals and Consents. Each party shall use its reasonable efforts
(i) to cause all conditions to the obligations of the other party under this
Agreement over which it is able to exercise influence or control to be satisfied
prior to the Closing Date and (ii) to obtain promptly and to comply with all
requisite statutory, regulatory or court approvals, third party releases and
consents, and other requirements necessary for the valid and legal consummation
of the transactions contemplated hereby.
4.3 Investigations. The Seller shall provide the Purchaser and its
representatives and agents such access to the books and records of the Seller
and furnish to the Purchaser such financial and operating data and other
information with respect to the Purchased Assets as Purchaser may reasonably
request from time to time. If the transactions provided for herein are not
consummated, the provisions of the Confidentiality Agreement, dated as of May
30, 2003 between the Seller and the Purchaser shall be binding on the Purchaser
as if such Confidentiality Agreement was entered into as of the date hereof.
Notwithstanding the foregoing, the Purchaser acknowledges that it has conducted
its due diligence with respect to the Seller the Business and the Purchased
Assets and it may not terminate this Agreement based on further due diligence.
4.4 No Solicitation. Except with respect to the Purchaser and its
affiliates, after the date hereof, until the earlier of the Closing or the
termination of this Agreement, the Seller shall not (i) initiate or solicit,
directly or indirectly, any inquiries or the making of any proposal with respect
to a purchase of all or any significant portion of the Purchased Assets (other
than in the ordinary course of business) (an "Acquisition Transaction"), or (ii)
engage in any negotiations concerning, or provide to any other person any
information or data relating to the Seller for the purposes of or have any
discussions with any person relating to, or otherwise cooperate in any way with,
or assist or participate in, facilitate or encourage any effort or attempt by
any other person to seek or effect, an Acquisition Transaction.
4.5 Public Announcements. Without the prior written consent of the other
party hereto, neither party shall make any press release, public announcement or
other disclosure to third parties including customers (other than disclosures to
lenders and professional advisors who agree to keep such information
confidential) with respect to the transactions contemplated by this Agreement,
except as required by law, or pursuant to any securities laws or regulations.
4.6 Future Business. From the date hereof through the Closing, the
Purchaser will continue to sell inventory to the Seller in its ordinary course
and will continue to extend open credit to the Seller.
ARTICLE 5
CLOSING
5.1 Closing. Unless this Agreement is first terminated as provided in
Section 5.4, and subject to the satisfaction or waiver of all conditions to the
consummation of the transactions contemplated hereby, the closing of the
transactions contemplated hereby (the "Closing") shall take place at the offices
of Xxxxxxx & Masyr, LLP, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 on the
E-8
twenty first (21) day following the date that notice of the sale contemplated
herein is sent to the shareholders of the Seller, pursuant to Section 603(b)(1)
of the California General Corporation Law; provided however, that the parties
may agree to extend the Closing for up to thirty (30) days.
5.2 Conditions to the Purchaser's Obligations. The obligation of the
Purchaser to effect the Closing shall be subject, at its option, to the
satisfaction or waiver of each of the following conditions at or prior to the
Closing:
5.2.1 Representations, Warranties and Compliance with Covenants.
Each representation and warranty of the Seller contained in this Agreement and
in any Schedule shall be true and correct when made, and shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representation and warranty had been made on and as of the
Closing Date. Each of the covenants and agreements herein on the part of the
Seller to be complied with or performed on or before the Closing Date shall have
been complied with and performed in all material respects. The Purchaser shall
have received a certificate, dated the Closing Date, of the Seller to the
foregoing effect.
5.2.2 Xxxx of Sale. The Seller shall have executed and delivered to
the Purchaser a Xxxx of Sale in form and substance attached hereto as Exhibit B.
5.2.3 Certificates. The Seller shall have delivered to the
Purchaser certificates of the appropriate governmental authorities, dated as of
a date not more than thirty (30) days prior to the Closing Date, attesting to
the existence and good standing of the Seller in the State of California.
5.2.4 Litigation. No investigation, suit, action, or other
proceeding shall be threatened or pending before any court or governmental
agency that seeks the restraint, prohibition, damages, or other relief in
connection with this Agreement or the consummation of the transactions
contemplated by this Agreement.
5.3 Conditions to Obligations of the Seller. The obligation of the Seller
to effect the Closing shall be subject, at its option, to the satisfaction or
waiver of each of the following conditions at or prior to the Closing:
5.3.1 Accuracy of Representations and Warranties and Compliance
with Covenants. Each representation and warranty of the Purchaser contained in
this Agreement shall be true and correct when made, and shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representation and warranty had been made on and as of the
Closing Date. Each of the covenants and agreements herein on the part of the
Purchaser to be complied with or performed on or before the Closing Date shall
have been fully complied with and performed in all material respects. The Seller
shall have received a certificate, dated the Closing Date, of the Purchaser to
the foregoing effect.
5.3.2 Certificates. The Purchaser shall have delivered to the
Seller a certificate of the appropriate governmental authorities, dated as of a
E-9
date not more than thirty (30) days prior to the Closing Date, attesting to the
existence and good standing of the Purchaser in the state of its incorporation.
5.3.3 Consents and Approvals. All material authorizations,
consents, approvals, waivers and releases necessary for the Seller to consummate
the transactions contemplated hereby shall have been obtained, including,
without limitation, the obtaining of shareholder and director approvals pursuant
to the California General Corporation Law and the Seller shall have complied
with Section 14(c) of the Securities Exchange Act of 1934, as amended.
5.3.4 Approval, Litigation. No investigation, suit, action, or
other proceeding shall be threatened or pending before any court or governmental
agency that seeks the restraint, prohibition, damages, or other relief in
connection with this Agreement or the consummation of the transactions
contemplated by this Agreement.
5.3.5 Purchase Price. The Purchaser shall have delivered the
Purchase Price to the Seller and the Escrow Agent.
5.3.6 Assumption of Liabilities. The Purchaser shall have delivered
an Assumption of Liabilities to the Seller, in substantially the form attached
hereto as Exhibit C.
5.4 Termination.
5.4.1 This Agreement may be terminated and abandoned at any time
prior to the Closing:
5.4.1.1 By the written mutual consent of the Purchaser and
the Seller;
5.4.1.2 By the Purchaser on the Closing Date if any of the
conditions set forth in Section 5.2 shall not have
been fulfilled or waiver on or prior to the Closing
Date; and
5.4.1.3 By the Seller on the Closing Date if any of the
conditions set forth in Section 5.3 shall not have
been fulfilled or waived on or prior to the Closing
Date.
5.5 Rights on Termination.
5.5.1 If this Agreement is terminated pursuant to Section 5.4
hereof, all further obligations of the parties under or pursuant to this
Agreement shall, subject to Section 7.12 herein, terminate without further
liability of either party to the other, except that (i) the Purchaser's
obligations contained in Section 4.3 of this Agreement, (ii) the representations
of the parties contained in Section 7.10 and (iii) the provisions of Section
7.11, shall all survive any such termination.
5.5.2 In the event that either party hereto terminates this
Agreement for a reason other than as set forth in Section 5.4 herein, or refuses
E-10
to or is unable to close the transaction contemplated herein other than as is
permitted hereunder (such party being referred to herein as the "Non-Closing
Party"), and such inability to close is not the fault of the other party, the
Non-Closing Party shall pay a break-up fee to the other party in an amount equal
to One Hundred Thousand ($100,000) Dollars in cash.
5.6 Management.
5.6.1 If this Agreement is not terminated pursuant to Section 5.4
herein, the Purchaser shall, beginning November 1, 2003, act as the manager for
the fulfillment of orders from the Seller's customers. In connection therewith,
the Purchaser shall manufacture or otherwise obtain all finished goods required
by the Seller's customers and package such items for shipment to the Seller's
customers in accordance with each purchase order. In order to facilitate such
fulfillment obligations, the Seller shall, prior to October 31, 2003, deliver
all its finished goods and certain of its equipment and other fixed assets used
in connection with the operation of the Business, to a pre-designated warehouse
(the "Facility") of the Purchaser.
5.6.2 As compensation for the Purchaser's services under this
management arrangement, the Purchaser shall be entitled to a fee (the "Fee")
equal to seven and one-half (7.5%) percent of the "Net Sales" of all products
sold to the Seller's customers. For purposes of this Section 5.6, "Net Sales"
shall mean the gross invoice price of each product less all (i) commissions
payable in connection with the sale of such products and (ii) rebates given by
the Seller to its customers in the ordinary course of Seller's business. The Fee
shall be payable on a monthly basis within thirty (30) days after the end of the
following month in which payment was received by the Seller for such product.
5.6.3 In connection with the services to be provided under this
management arrangement by the Purchaser, (a) the Seller agrees to: (i) maintain
adequate facilities to process orders and invoices; and (ii) deliver to the
Purchaser in a timely manner all customer orders and (b) the Purchaser (i)
agrees to timely fulfill and ship all customer orders and (ii) shall be
responsible for all payments with respect to the transport of inventory from the
Facility to the customers.
5.6.4 Notwithstanding anything contained herein to the contrary,
the Seller has the right to reject any customer orders if the Seller, in its
sole discretion, deems the profit margins on such purchase orders to be
inadequate.
5.6.5 The obligations of each of the parties under this Section 5.6
shall survive until the earlier of the Closing or the termination of this
Agreement.
5.6.6 Upon the termination of this Agreement, in addition to all
rights and remedies under this Agreement, the Purchaser shall be required to
fulfill all existing customer orders sent by the Seller and shall immediately
return all unsold inventory of the Seller to the Seller.
E-11
ARTICLE 6
INDEMNIFICATION
6.1 Purchaser's Losses.
6.1.1 The Seller shall indemnify and hold harmless the Purchaser,
its directors, officers, employees, representatives, agents, and attorneys
("Purchaser Indemnified Parties") from, against and in respect of any and all
Purchaser's Losses (as defined below) suffered, sustained, incurred or required
to be paid by any of them by reason of (i) any representation or warranty made
by the Seller in or pursuant to this Agreement being untrue or incorrect in any
material respect; or (ii) any failure by the Seller to observe or perform its
covenants and agreements set forth in this Agreement or any other agreement or
document executed by the Seller in connection with the transactions contemplated
hereby; except in any instance to the extent the Purchaser's Losses results from
a Purchaser Indemnified Party's own negligence or willful misconduct.
6.1.2 "Purchaser's Losses" shall mean all damages, including,
without limitation, subject to Section 6.2.3 amounts paid in settlement with the
Seller's consent, which consent may not be unreasonably withheld, losses,
obligations, liabilities, liens, deficiencies, costs (including, without
limitation, reasonable attorneys' fees), taxes, penalties, fines, interest,
monetary sanctions and expenses, including, without limitation, reasonable
attorneys' fees and costs incurred to comply with injunctions and other court
and agency orders, and other costs and expenses incident to any suit, action,
investigation, claim or proceeding or to establish or enforce a Purchaser
Indemnified Party's right to indemnification hereunder. The Seller shall not
have any obligation under Section 6.1 to indemnify the Purchaser Indemnified
Parties with respect to (i) Purchaser's Losses until the aggregate combined
total of all such Purchaser's Losses incurred by the Purchaser Indemnified
Parties exceeds $25,000, whereupon the Purchaser Indemnified Parties shall be
entitled to indemnification with respect to the full amount of Purchaser's
Losses determined without regard to such limitation, and (ii) aggregate
Purchaser's Losses in excess of the amount of the Purchase Price actually paid
to the Seller.
6.2 Seller's Losses.
6.2.1 The Purchaser shall indemnify and hold harmless the Seller
and its officers, directors, employees, representatives, agents, and attorneys
("Seller Indemnified Parties") from, against and in respect of any and all
Seller's Losses (as defined below) suffered, sustained, incurred or required to
be paid by any of them, by reason of (i) any representation or warranty made by
the Purchaser in or pursuant to this Agreement being untrue or incorrect in any
material respect, or (ii) any failure by the Purchaser to observe or perform its
covenants and agreements set forth in this Agreement or any other agreement or
document executed by it in connection with the transactions contemplated hereby
including a failure to pay an Assumed Liability, except in any instance to the
extent the Seller's Losses results from a Seller Indemnified Party's own
negligence or willful misconduct.
6.2.2 "Seller's Losses" shall mean all damages, including, without
limitation, subject to Section 6.2.3 amounts paid in settlement with the
E-12
Purchaser's consent, which consent may not be unreasonably withheld, losses,
obligations, liabilities, liens, deficiencies, costs (including, without
limitation, reasonable attorneys' fees), taxes, penalties, fines, interest,
monetary sanctions and expenses, including, without limitation, reasonable
attorneys' fees and costs incurred to comply with injunctions and other court
and agency orders, and other costs and expenses incident to any suit, action,
investigation, claim or proceeding or to establish or enforce a Seller
Indemnified Party's right to indemnification hereunder. The Purchaser shall not
have any obligation under Section 6.2 to indemnify the Seller Indemnified
Parties with respect to Seller's Losses until the aggregate combined total of
all such Seller's Losses incurred by the Seller Indemnified Parties exceeds
$25,000, whereupon the Seller Indemnified Parties shall be entitled to
indemnification with respect to the full amount of Seller's Losses determined
without regard to such limitation, provided, however, that this limitation shall
not apply to a failure to pay Purchase Price or a failure to pay an Assumed
Liability.
6.2.3 Claims Procedure. Whenever a Purchaser's Loss or Seller's
Loss subject to the indemnity provisions in this Article VI shall arise (a
"Claim"), the party entitled to indemnity (the "Indemnified Party") shall
promptly notify the party obligated to provide indemnity (the "Indemnifying
Party") of such Claim and, when known, the facts constituting the basis of such
Claim, provided, however, that in the event of a claim resulting from or in
connection with any Claim by a third party, the Indemnified Party shall use its
diligent efforts to give notice no later than ten (10) days prior to the time
any response to the asserted Claim is required. In the event of a Claim
resulting from or in connection with a Claim by a third party, the Indemnifying
Party may, at its sole cost and expense, assume the defense thereof. If an
Indemnifying Party assumes the defense of the Claim, the Indemnifying Party
shall be entitled to select counsel and take all steps necessary in the defense
thereof and shall have the right to effect a settlement of the Claim. The
Indemnified Party shall have the right, but not the obligation, to participate
at its own expense in the defense thereof by counsel of its own choice. In the
event that the Indemnifying Party fails to timely defend, contest or otherwise
protect against any such Claim, the Indemnified Party shall have the right to
defend, contest or otherwise protect against the same and may make any
compromise or settlement thereof and recover from the Indemnifying Party the
entire cost thereof, including, without limitation, reasonable attorneys' fees,
disbursements and all amounts paid as a result of such Claim or compromise or
settlement thereof.
ARTICLE 7
MISCELLANEOUS
7.1 Further Assurances. If, at any time after the Closing, either party
shall reasonably consider or be advised that any further assignments,
conveyances, certificates, filings, instruments or documents or any other things
are necessary or desirable to vest, perfect or confirm in the Purchaser title to
the Purchased Assets or to consummate any of the transactions contemplated by
this Agreement, the other party shall, upon request, promptly execute and
deliver all such assignments, certificates, filings, instruments and documents
and do all things reasonably necessary and proper to vest, perfect or confirm
title in the Purchaser and to otherwise carry out the purposes of this
Agreement.
E-13
7.2 Entire Agreement. This Agreement (including the exhibits and
schedules hereto) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties hereto
with respect to the subject matter hereof, and no party shall be liable or bound
to the other in any manner by any representations or warranties not set forth
herein. This Agreement has been jointly prepared by the parties hereto and the
terms hereof shall not be construed in favor of or against any party on account
of its participation in such preparation.
7.3 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. The Purchaser has the right to
assign its rights under this Agreement provided, that in the event it assigns
such rights, Spray Products Corporation, a Pennsylvania corporation, hereby
unconditionally guarantees the performance of each and every obligation of its
successor as the Purchaser under this Agreement and the Escrow Agreement.
7.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
7.5 Headings. The headings of the articles and sections of this Agreement
are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction hereof.
7.6 Modification and Waiver. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended by a written
instrument executed by all parties hereto. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by all
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
7.7 Schedules and Exhibits. All exhibits and schedules annexed hereto are
expressly made a part of this Agreement as though fully set forth herein and all
references to this Agreement herein or in any such exhibits or schedules shall
refer to and include all such exhibits and schedules.
7.8 Notices. Any notice, request, instruction, document or other
communication to be given hereunder by any party hereto to any other party
hereto shall be in writing and validly given if (i) delivered personally, (ii)
sent by telecopy, (iii) delivered by overnight express, or (iv) sent by
registered or certified mail, postage prepaid, as follows:
E-14
If to the Purchaser, to:
Spray Products Corporation
0000 Xxxxxxxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Eckell, Sparks, Levy, Auerbach, Monte, Rainer & Sloane, P.C.
X.X. Xxx 000
Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx, Xx., Esq.
Facsimile: (000) 000-0000
If to the Seller:
PerfectData Corporation
000 Xxxx Xxxx Xxxxxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Chairman
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx & Masyr, LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally, or sent by telecopy or overnight express
in the manner provided herein shall be deemed to have been duly given to the
party to whom it is directed upon actual receipt by such party. Any notice which
is addressed and mailed in the manner herein provided shall be conclusively
presumed to have been given to the party to whom it is addressed at the close of
business, local time of the recipient, on the third day after the day it is so
placed in the mail.
7.9 Governing Law. This agreement shall be construed, enforced, and
governed by the internal laws of the State of California without regard to its
choice of law principles. Each of the parties hereto hereby irrevocably and
unconditionally submits to the exclusive jurisdiction of any court of the State
of California (collectively, the "Courts") for purposes of any suit, action or
other proceeding arising out of this Agreement (and agrees not to commence any
action, suit or proceedings relating hereto except in such Courts). Each of the
E-15
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement, which is brought by or against it in the Courts and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such Court that any such action, suit or proceeding brought in any such Court
has been brought in an inconvenient forum.
7.10 Survival. The representations and warranties of the Purchaser and
Seller included or provided for herein, or in other instruments or agreements
delivered or to be delivered at or prior to the Closing in connection herewith,
shall survive for a period of one (1) year following the Closing Date. The
obligations of the Seller pursuant to Article 7 shall survive until the
expiration of the Covenant Period.
7.11 Brokers. The Purchaser, on the one hand, and the Seller, on the
other, each represent to the other that it has not used a broker or finder in
connection with the transactions contemplated by this Agreement and each shall
hold the other harmless from any such claim.
7.12 Expenses. The Purchaser, on the one hand, and the Seller, on the
other, shall each pay its own costs and expenses incurred by it, including, but
not limited, to the fees of their respective counsel in negotiating and
preparing this Agreement and in closing and carrying out the transactions
contemplated by this Agreement. Notwithstanding the foregoing, in the event that
the (a) the Purchaser breaches its obligations to purchase the Purchased Assets
other than pursuant to Section 5.4 herein, the Purchaser shall reimburse the
Seller for all out of pocket expenses incurred by the Seller (including
reasonable attorneys fees) in connection with this Agreement; or (b) the Seller
enters into a letter of intent or purchase agreement in violation of Section 4.4
herein, the Seller shall reimburse the Purchaser for all out of pocket expenses
incurred by the Purchaser (including reasonable attorneys fees) in connection
with this Agreement.
E-16
IN WITNESS WHEREOF, the parties have executed this Agreement as the
date first set forth above.
PURCHASER:
Spray Products Corporation
By: /s/ Xxxx Xxxxxxx
-------------------------------
Name: Xxxx Xxxxxxx
Title: President
SELLER:
PerfectData Corporation
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chairman of the Board and Chief
Executive Officer
