EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into this 20th day of March, 1998, is
by and between WEB Technology, Inc., a Delaware corporation ("SELLER"), and
Aetrium Incorporated, a Minnesota corporation ("BUYER").
RECITALS:
FIRST, Seller is engaged through its equipment division (the
"DIVISION") in the business of development, manufacture and distribution of
acceleration test equipment, gross leak detection equipment, preconditioning
equipment, burn-in board loaders and unloaders and test handlers used in the
semiconductor industry and automated handling components used as component parts
of third party equipment supplied to the semiconductor industry (the
"BUSINESS"); and
SECOND, Buyer desires to purchase and Seller desires to sell
substantially all of the assets of the Division;
NOW, THEREFORE, in consideration of the recitals and the mutual
representations, warranties, covenants and agreements contained herein, and upon
the terms and subject to the conditions hereinafter set forth, the parties
hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.1 Transfer of Assets. Subject to the terms and conditions of this
Agreement, and except as otherwise provided in Sections 1.2 and 1.6 hereof, on
the Closing Date (as hereinafter defined), Seller will sell, assign, transfer,
and convey to Buyer, and Buyer will purchase, acquire and accept from Seller,
all of Seller's right, title and interest in and to all of the assets,
properties, rights, contracts and claims employed in connection with the
Business, wherever located, whether tangible or intangible, real, personal or
mixed, as the same exist at the Closing (as hereinafter defined) (collectively,
the "ASSETS"), free and clear of all liens, security interests, or other
encumbrances of any character whatsoever ("ENCUMBRANCES"), except as set forth
in the disclosure schedule delivered by Seller to Buyer in connection herewith
(the "DISCLOSURE SCHEDULE"). The Assets include, without limitation, the assets,
properties, rights, contracts and claims described in the following paragraphs
(a) through (l):
(a) Seller's leasehold interests in the real property leased
by Seller and operated by the Division, as described in Schedule 3.8 of the
Disclosure Schedule (the "REAL PROPERTY");
(b) title to, or Seller's leasehold interests in, all the
furnishings, furniture, office supplies, vehicles, spare parts, tools, machinery
and equipment that are used in the operation of the Business (the "EQUIPMENT");
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(c) title to, or Seller's leasehold interests in, all fixed
assets, other than the Equipment, that are used in connection with the Business;
(d) all quantities of inventory, including without limitation
raw materials, work-in-process, finished goods and supplies, used in connection
with the Business (the "INVENTORY");
(e) all accounts receivable and all notes receivable (whether
short-term or long-term) from third parties arising out of the operation of the
Business, together with any unpaid interest accrued thereon and any security or
collateral therefor, including without limitation recoverable deposits (the
"ACCOUNTS RECEIVABLE");
(f) all rights of Seller under or pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers and contractors
in connection with products or services of the Business, or affecting the
Assets;
(g) all rights and interests of Seller in and to patents and
patent applications owned by Seller or licensed to Seller by third parties and
used in connection with the Business, including without limitation those that
are listed in the Disclosure Schedule, and all rights and interests of Seller in
and to research, development and commercially practiced processes, trade
secrets, know-how, inventions and manufacturing, engineering and other technical
information, whether owned by Seller or licensed from third parties by Seller,
which are used in connection with the Business;
(h) all rights and interests of Seller in and to all
trademarks, trade names and service marks (other than Seller's name), and
registrations and applications for such trademarks, trade names and service
marks, used in connection with the Business, including without limitation those
that are listed in the Disclosure Schedule, and all rights and interests of
Seller in and to copyrights, and registrations and applications for such
copyrights, used in connection with the Business, including without limitation
those that are listed in the Disclosure Schedule;
(i) all contracts, agreements, arrangements and/or commitments
of any kind which relate to the Business or the Assets, including without
limitation those contracts listed in the Disclosure Schedule, exclusive,
however, of those contracts Buyer elects not to assume pursuant to Section 1.6
hereof;
(j) all customer and vendor lists relating to the Business,
and all files and documents (including credit information) relating to such
customers and vendors, and other business and financial records, files, books
and documents relating to the Assets and/or the Business, including without
limitation computer programs (including computer modeling programs), manuals and
data, sales and advertising materials, sales, distribution and purchase
correspondence and trade association memberships relating to the Assets and/or
the Business; and
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(k) all prepaid charges, prepaid rent, sums and fees and all
rights to lease deposits, travel advances to employees, and refunds pertaining
to the Business.
1.2 Excluded Assets. Notwithstanding any other terms contained herein,
Seller is not hereunder selling, assigning, transferring or conveying to Buyer
the following assets, rights and properties (the "EXCLUDED ASSETS"):
(a) any cash, depository accounts, certificates of deposit or
securities;
(b) any rights or interest in or to Seller's name, except as
provided under Section 7.4 hereof;
(c) any policies of insurance relating to the Business or the
Assets or any rights thereunder;
(d) any refunds for income or franchise Taxes (as hereinafter
defined);
(e) any receivables from employees for 401(k) plan advances;
(f) any receivables due on stock option exercises;
(g) any intercompany receivables from or investments in
Subsidiaries (as hereinafter defined), exclusive of trade credits (e.g., for
returns, rework or warranty claims);
(h) any assets exclusively used in or arising from Seller's
fluids distribution business;
(i) 1998 Cadillac Seville under the Automobile Lease (as
hereinafter defined);
(j) postage meter under the Postage Meter Lease (as
hereinafter defined);
(k) except as otherwise set forth in the last sentence of
Section 1.6 hereof, any right, title and interest under all leases, contracts,
agreements, licenses, permits, exemptions, franchises, variances, waivers,
consents, approvals and other authorizations which are not transferable without
consent (unless such consent has been obtained); and
(l) minute books, stock record books and corporate
certificates of authority.
1.3 Obtaining Permits and Licenses. Seller will assign, transfer or
convey to Buyer at the Closing those governmental permits and licenses described
in the Disclosure Schedule which are held or used by Seller in connection with
the Business and with respect to which any necessary third party consents to
assignment have been obtained or which can be assigned without having to obtain
the consent of any third party. Subsequent to the Closing, to the extent
permitted by law, Seller will have the right to cancel any permits or licenses
and any bonds, guarantees or undertakings by Seller now applicable to the Assets
or the Business to the extent such is not so assigned or transferred to
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Buyer pursuant to this Section 1.3 and is not subject to Seller's continuing
obligations under Section 1.6 hereof.
1.4 Assumed Liabilities of Buyer. Subject to Section 1.6 hereof, Buyer
will assume and pay, perform and discharge as and when due the following
liabilities and obligations, whether known, unknown, contingent, absolute,
determined, indeterminable or otherwise on the Closing Date and whether incurred
or accruing prior to, on or after the Closing Date, to the extent relating to or
arising from the Business ("ASSUMED LIABILITIES"):
(a) all liabilities and obligations of Seller not performed or
satisfied as of the Closing Date under all of the Commitments (as hereinafter
defined) listed on Schedule 3.16 of the Disclosure Schedule;
(b) all liabilities of Seller disclosed in the Disclosure
Schedule;
(c) all liabilities of Seller under that certain Promissory
Note of Seller dated December 3, 1997 to the order of Inwood National Bank in
the principal amount of Thirty-Nine Thousand Nine Hundred Twenty-Three and
70/100 Dollars ($39,923.70) secured by Seller's telephone system, including
accrued interest thereon; and
(d) all other liabilities of Seller reflected or reserved
against in the Latest Balance Sheet (as hereinafter defined) or incurred since
December 31, 1997 in the ordinary course of business and consistent with past
practice.
1.5 Liabilities Not Assumed. Except as specifically set forth in
Section 1.4 hereof, Buyer will not assume and will not be liable for any
liabilities or obligations of Seller, whether known, unknown, contingent,
absolute, determined, indeterminable or otherwise on the Closing Date, whether
incurred or accruing prior to, on or after the Closing Date, and whether or not
relating to or arising from the Business. Specifically but without limiting the
scope of or being limited by the preceding sentence, Buyer will not assume and
will not be liable for any of the following liabilities or obligations of
Seller:
(a) any liability or obligation for or with respect to income
or franchise Taxes, including without limitation income or franchise Taxes
incurred on the sale of Assets contemplated hereby;
(b) any liability or obligation incurred by Seller in
connection with the negotiation and consummation of this Agreement as set forth
in Section 13.7(a) hereof;
(c) any liability or obligation under Seller's bank line of
credit evidenced by that certain Promissory Note dated June 14, 1997 to the
order of Inwood National Bank in the stated principal amount of Seven Hundred
Fifty-Thousand Dollars ($750,000) (the "BANK LINE"), including without
limitation accrued interest thereon;
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(d) any liability or obligation under that certain automobile
lease with Xxxxxx Village Cadillac Company Inc. dated January 12, 1998 for a
1998 Cadillac Seville (the "AUTOMOBILE LEASE");
(e) any liability or obligation under that certain postage
meter lease with Neopost dated September 23, 1996 (the "POSTAGE METER LEASE");
(f) any liability or obligation of Seller with respect to the
claim by PSA Inc. for commissions as stated in its letter to Seller dated March
9, 1998;
(g) any liability or obligation of Seller under any sales
representative agreement or sales distribution agreement scheduled as a
Commitment, except commissions or discounts accrued thereunder as of Closing or
with respect to purchase orders assumed hereunder or with respect to
post-termination commissions or discounts that may accrue under the terms
thereof on the basis that such agreements terminate effective March 31, 1998;
(h) any liability or obligation for profit sharing;
(i) sponsorship of Seller's 401(k) plan or any liability or
obligation in connection therewith.
1.6 Assignments Requiring Consents. Seller will use reasonable efforts,
and Buyer will cooperate with Seller, to obtain all non-governmental approvals,
consents or waivers necessary to assign to Buyer all leases, contracts,
licenses, agreements, sales or purchase orders, commitments, property interests,
qualifications or other assets described in Section 1.1 hereof or any claim,
right or benefit arising thereunder or resulting therefrom (the "INTERESTS") as
soon as practicable; provided, however, that neither Seller nor Buyer will be
obligated to pay any consideration therefor (except for filing fees and other
ordinary administrative charges which will be paid by Buyer) to the third party
from whom such approval, consent or waiver is requested.
To the extent any of the approvals, consents or waivers referred to
above have not been obtained by Seller as of the Closing, Buyer may elect by
written notice to Seller to exclude the applicable Interests and liabilities in
connection therewith from the Assets and the Assumed Liabilities. In the event
Buyer does not make such election, and without limiting the rights of Buyer
under this Agreement, Seller will (a) take all reasonable steps necessary to
obtain the consent of any such third party, (b) cooperate with Buyer in any
reasonable and lawful arrangements designed to provide the benefits of such
Interests to Buyer so long as Buyer fully cooperates with Seller in such
arrangements and promptly reimburses Seller for all payments, charges or other
liabilities made or suffered by Seller in connection therewith (provided that
nothing herein will require Buyer to make any payment or reimbursement of any
consideration for third party consent not agreed to by Buyer), and (c) enforce,
at the request of Buyer and at the expense and for the account of Buyer, any
rights of Seller arising from such Interests against such issuer thereof or the
other party or parties thereto (including the right to elect to terminate any
such Interests in accordance with the terms thereof upon the written advice of
Buyer). To the extent that Seller enters into lawful arrangements designed to
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provide the benefits of any Interests as set forth in clause (b) above, such
Interests will be deemed to have been assigned to Buyer for purposes of Section
1.1 hereof.
1.7 Purchase Price. The aggregate consideration to be paid by Buyer to
Seller for the Assets (the "PURCHASE PRICE") will be Seven Million Eight Hundred
Thirty-Five Thousand Dollars ($7,835,000) (the "CASH CONSIDERATION") and nine
hundred thousand (900,000) shares of the common stock of Aetrium Incorporated
(the "SHARES"), subject to reduction pursuant to the remainder of this Section
1.7:
(a) The Cash Consideration will be reduced on a
dollar-for-dollar basis by the amount, if any, by which Seller's Net Current
Assets (as hereinafter defined) on Closing is less than the sum of Three Million
Three Hundred Thirty-Five Thousand Dollars ($3,335,000).
(b) Promptly after Closing, Buyer and Seller will cooperate to
prepare a schedule of Seller's Net Current Assets as of Closing in accordance
with United States generally accepted accounting principles ("GAAP") on a basis
consistent with the Latest Balance Sheet (as hereinafter defined), provided that
such schedule will be prepared in accordance with the instructions listed on
Exhibit A hereto regardless of whether such instructions conform to GAAP or are
consistent with the Latest Balance Sheet. In the event the parties cannot agree
on Seller's Net Current Assets as of Closing, any unresolved issues will be
submitted to Ernst & Young, Dallas, Texas office (the "ARBITRATOR ACCOUNTANTS"),
whose decision on any such issues will be final and binding on the parties. "NET
CURRENT ASSETS" means aggregate Accounts Receivable and Inventory less aggregate
trade payables included in Assumed Liabilities. Seller's Net Current Assets as
of Closing as so determined will be binding upon the parties. Buyer and Seller
will use their best efforts to cause Net Current Assets to be determined within
thirty (30) days after Closing. Buyer and Seller will each bear the costs of
their respective accountants and will share equally any fees of the Accountant
Arbitrator incurred in the determination of Seller's Net Current Assets as of
Closing as hereinabove provided.
1.8 Payment of Purchase Price. The Purchase Price will be payable as
follows:
(a) Seven Million Three Hundred Thirty-Five Thousand Dollars
($7,335,000) of the Cash Consideration will be paid at Closing to Seller by wire
transfer of immediately available funds to accounts designated by Seller prior
to Closing.
(b) The remainder of the Cash Consideration will be paid to
Seller, together with interest thereon from the Closing Date to the date paid at
the annual rate of six percent (6%) (subject to increase to the late payment
rate provided below if applicable), by wire transfer of immediately available
funds to accounts designated by Seller prior to Closing promptly upon the
earlier of final determination of Seller's Net Current Assets as of Closing or
ninety (90) days after Closing. In the event any adjustment under Section 1.7(a)
reduces the Cash Consideration below the amount then received by Seller
therefor, immediately upon determination of such adjustment Seller will promptly
reimburse Buyer the amount of any such deficit, together with interest thereon
from the Closing Date to the date paid at the annual rate of six percent (6%)
(subject to increase to the late payment rate provided below if applicable), in
immediately available funds to accounts designated by Buyer. In
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the event of any delay in any payment due under this Section 1.8(b), such amount
will bear interest from three (3) business days after the due date until paid in
full at the annual rate of twelve percent (12%).
(c) The Shares will be issued at Closing under such individual
certificates in such amounts and in the names of such holders (the "SHARE
DESIGNEES") as Seller designates prior to Closing.
1.9 Allocation of Purchase Price.
(a) Buyer will prepare (or cause to be prepared) an allocation
(the "ALLOCATION SCHEDULE") of the Purchase Price (plus Assumed Liabilities and
Buyer's expenses of the transaction) among the Assets. Such allocation will be
made in accordance with Code (as hereinafter defined) Section 1060 and any
applicable rules or regulations thereunder.
(b) Seller and Buyer (1) will be bound by the allocation
contained in the Allocation Schedule for purposes of determining any and all
consequences with respect to Taxes of the transactions contemplated herein, (2)
will prepare and file all Tax Returns (as hereinafter defined) in a manner
consistent with such Allocation Schedule (including Form 8594, "Asset
Acquisition Statement"), and (3) will take no position inconsistent with such
Allocation Schedule in any Tax Return, any discussion with or proceeding before
any tax Authority (as hereinafter defined), or otherwise. In the event that such
Allocation Schedule is disputed by any tax Authority, the party receiving notice
of such dispute will promptly notify the other party thereof.
ARTICLE II
CLOSING
2.1 The Closing. The closing of the transactions contemplated hereby
(the "CLOSING") will take place at the offices of Xxxxxxxxxxx Xxxxx & Xxxxxxxx
in Minneapolis, Minnesota, at 10:00 a.m. on April 1, 1998 or, if later, two (2)
business days following the satisfaction or waiver of all of the conditions to
the parties' obligations set forth in Articles IX and X, unless the parties
otherwise mutually agree (the "CLOSING DATE"). All matters at the Closing will
be considered to take place simultaneously effective immediately upon the
opening of business on the Closing Date and no de livery of any document will be
deemed complete until all transactions and deliveries of documents are
completed.
2.2 Deliveries of Seller. At the Closing, Seller will deliver the
following documents to Buyer:
(a) such bills of sale, endorsements, assignments (together
with any necessary consents), deeds and other good and sufficient instruments of
conveyance and transfer, in form and substance reasonably satisfactory to Buyer
and its counsel, to vest in Buyer valid legal title to the Assets;
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(b) resolutions of the board of directors and shareholders of
Seller authorizing the execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby by Seller certified by the
Secretary of Seller to be complete, correct and as in effect as of the Closing
Date;
(c) the certificate required of Seller pursuant to Section 9.1
hereof;
(d) an opinion of counsel for Seller, substantially in the
form of Exhibit B attached hereto; and
(e) any other documents reasonably requested by Buyer, to
confirm the accuracy of the representations and warranties and the performance
of the agreements of Seller hereunder.
2.3 Deliveries of Buyer. At the Closing, Buyer will deliver to Seller
the following:
(a) the Cash Consideration to be paid at Closing together with
the Note and Shares in accordance with Section 1.8 hereof;
(b) such instruments of assumption, in form and substance
reasonably satisfactory to Seller and its counsel, to constitute an assumption
by Buyer of all Assumed Liabilities;
(c) resolutions of the board of directors of Buyer authorizing
the execution, delivery and performance of this Agreement and the Note and
consummation of the transactions contemplated hereby by Buyer, certified by the
Secretary of Buyer to be complete, correct and as in effect as of the Closing
Date;
(d) the certificate required of Buyer pursuant to in Section
10.1 hereof;
(e) the opinion of counsel for Buyer, in the form of Exhibit C
attached hereto; and
(f) any other documents reasonably requested by Seller, to
confirm the accuracy of the representations and warranties and the performance
of the agreements of Buyer hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
3.1 Corporate Organization. Seller is a corporation duly organized,
validly existing and in good standing under the Laws (as hereinafter defined) of
the state of Delaware, has full corporate power and authority to carry on its
business as it is now being conducted and to own, lease and operate its
properties and assets, and is duly qualified or licensed to do business as a
foreign corporation in good standing in every other jurisdiction in which the
character or location of the properties and assets owned, leased or operated by
it or the conduct of its business requires such
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qualification or licensing, except in such jurisdictions in which the failure to
be so qualified or licensed and in good standing would not, individually or in
the aggregate, have a material adverse effect on the condition (financial or
otherwise), working capital, assets, properties, liabilities, obligations,
reserves, businesses, prospects, customers, customer relations, goodwill or
going concern value ("MATERIAL ADVERSE EFFECT") with respect to Seller. Schedule
3.1 of the Disclosure Schedule contains a list of all jurisdictions in which
Seller is qualified or licensed to do business. The charter, bylaws, minute
books, stock transfer books and other corporate records of Seller, all of which
have been made available to Buyer, are complete and correct in all material
respects, have been maintained in accordance with reasonable business practices,
and contain accurate and complete records of all formal meetings held of, and
corporate actions taken by, the shareholders, board of directors and committees
of the board of directors of Seller. Schedule 3.1 of the Disclosure Schedule
sets forth the name and Seller's percentage ownership of each legal entity as to
which more than forty percent (40%) of the outstanding equity securities having
ordinary voting rights or power at the time of determination is being made is
owned or controlled, directly or indirectly, by Seller (individually and
collectively, the "SUBSIDIAR(Y)(IES)").
3.2 Authorization. Seller has all requisite corporate power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby have been duly authorized by all necessary corporate action.
This Agreement has been duly and validly executed by Seller and constitutes the
valid and binding legal obligation of Seller, enforceable against Seller in
accordance with its terms, except to the extent that such enforceability (a) may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally, and (b) is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.3 Non-Contravention. Except as set forth in Schedule 3.3 of the
Disclosure Schedule, neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
violate or be in conflict with any provision of the articles or certificates of
incorporation or bylaws of Seller, or (b) be in conflict with, or constitute a
default, however defined (or an event which, with the giving of due notice or
lapse of time, or both, would constitute such a default), under, or cause or
permit the acceleration of the maturity of, or give rise to any right of
termination, cancellation or imposition of fees or penalties under, any debt,
instrument, agreement, permit or other obligation, commitment or authorization
to which Seller is a party or by which Seller or any of Seller's properties or
assets is or may be bound, or (c) result in the creation or imposition of any
Encumbrance upon any property or assets of Seller, or (d) violate any treaty,
law, rule, regulation, order, judgment or decree (individually and collectively,
"LAW(S)") of any foreign, federal, state or local governmental or
quasi-governmental administrative, regulatory or judicial court, department,
commission, agency, board, bureau, instrumentality or other authority
(individually and collectively, "AUTHORIT(Y)(IES)") to which Seller is subject.
3.4 Consents and Approvals. Except as set forth in Schedule 3.4 of the
Disclosure Schedule, with respect to Seller, no consent, approval, order or
authorization of or from, or registration, notification, declaration or filing
with, any Authority or any individual or other private entity (individually and
collectively, "CONSENT(S)") is required in connection with the execution,
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delivery or performance of this Agreement by Seller or the consummation by
Seller of the transactions contemplated hereby.
3.5 Financial Statements. Seller has furnished to Buyer the unaudited
balance sheets of the Division as of December 31, 1996 and 1997 (the December
31, 1997 balance sheet is herein referred to as the "LATEST BALANCE SHEET") and
related statements of operations and retained earnings and cash flows of the
Division for the years then ended respectively (together, the "FINANCIAL
STATEMENTS"). Except as set forth in Schedule 3.5 of the Disclosure Schedule,
the Financial Statements are in accordance with the books and records of Seller,
have been prepared in conformity with GAAP consistently applied throughout the
periods (except as stated therein or in the notes thereto), and are true,
complete and accurate in all material respects and fairly present the financial
position of Seller as of the respective dates thereof, and the operations and
retained earnings and cash flows for the periods then ended. Except as set forth
in Schedule 3.5 of the Disclosure Schedule, Seller has no liabilities or other
obligations related to the Division (whether fixed, absolute or contingent,
accrued or unaccrued, matured or unmatured, known or unknown, direct or
indirect, joint or several, or otherwise) ("LIABILITIES") except (a) Liabilities
which are reflected or reserved against in the Latest Balance Sheet, which
reserves reflected therein are appropriate and reasonable, and (b) Liabilities
incurred in the ordinary course of business and consistent with past practice
since the date of the Latest Balance Sheet and not resulting from, arising out
of, relating to, in the nature of or caused by any breach of contract, tort,
infringement of third party rights, violation of Law or application of doctrines
of strict liability.
3.6 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.6 of the Disclosure Schedule, since the date of the Latest Balance
Sheet, Seller has not (a) suffered any damage, destruction or casualty loss
resulting in any Material Adverse Effect with respect to the Division, the
Business or the Assets or experienced any event or failed to take any action
which reasonably could be expected to result in a Material Adverse Effect with
respect to the Division, the Business or the Assets, (b) discharged or incurred
any material obligation or liability with respect to the Business, except under
the Bank Line or in the ordinary course of business, (c) entered into any
transaction with respect to the Business not in the ordinary course of its
business, except as permitted in or contemplated by other Sections of this
Agreement, (d) suffered any loss of key employees, sales representatives,
distributors, customers or suppliers or other favorable business relationships
with respect to the Division, the Business or the Assets, (e) declared, set
aside or paid any dividend or other distribution (whether in cash, stock,
property or any combination thereof) in respect of its capital stock, or
redeemed or acquired any of its capital stock, (f)(1) increased the rate or
terms of compensation payable or to become payable to any director, officer or
employee of the Division or modified or entered into any Employee Benefit Plan
(as hereinafter defined) to increase any bonus, insurance, pension or other
employee benefit for any such directors, officers or employees, except increases
in compensation or benefits and new hires of employees occurring in the ordinary
course of business in accordance with its customary practices (which includes
normal periodic performance reviews and related compensation and benefit
increases) or (2) paid, lent or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with any such
directors, officers or employees, other than the regular payment of salaries and
travel advances in the ordinary course of business and consistent with past
practice, (g) sold, otherwise disposed of or
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encumbered any asset of the Division, except sales and other dispositions in the
ordinary course of business consistent with past practice of inventory or of
other tangible property that has been replaced with property of at least
equivalent usefulness to the operation of the Business or that was not material
to the operation of the Business, (h) entered into any commitment for capital
expenditures for additions to plant, property or equipment with respect to the
Division, or (i) incurred or guaranteed any indebtedness for borrowed money
except under the Bank Line.
3.7 Title to Assets. Seller has good title or a valid lease or license
with respect to all Assets (including without limitation all assets reflected on
the Latest Balance Sheet, except for such assets sold, consumed or otherwise
disposed of in the ordinary course of business since the date of the Latest
Balance Sheet), free and clear of all Encumbrances, except (a) as set forth in
Schedule 3.7 of the Disclosure Schedule, and (b) mechanics', carriers', workers'
or other like liens arising in the ordinary course of the Business with respect
to obligations not yet due and payable, liens for current Taxes not yet due and
payable, and other Encumbrances which, individually or in the aggregate, do not
have a Material Adverse Effect with respect to the Division, the Business or the
Assets.
3.8 Real Properties.
(a) The Real Property is the only real property utilized by
the Division. Schedule 3.8 of the Disclosure Schedule sets forth the lease
agreements on the Real Property to which Seller is a party or is bound.
(b) Except as set forth in Schedule 3.8 of the Disclosure
Schedule, to Seller's knowledge the Real Property is free from structural
defects, in good operating condition and repair, with no material maintenance,
repair or replacement having been deferred or neglected, suitable for the
intended use and free from other material defects.
(c) Except as set forth in Schedule 3.8 of the Disclosure
Schedule, (1) all certificates of occupancy, permits and licenses of all
Authorities having jurisdiction over the Real Property required to have been
issued to Seller, as applicable, to enable the Real Property to be lawfully
occupied and used for all of the principal purposes for which it is currently
occupied and used have been lawfully issued and are, as of the date hereof, in
effect, (2) the Real Property and its present use conform in all respects to all
occupational, safety, health, zoning, planning, subdivision, platting and
similar Laws, (3) all public utilities necessary for the use and operation of
the Real Property and the facilities located thereon are available for use or
access at the Real Property, and (4) there is no legal or physical impairment to
free ingress to or egress from the Real Property.
(d) Except as set forth in Schedule 3.8 of the Disclosure
Schedule, Seller has not received any written notice of any pending, threatened
or contemplated condemnation proceeding affecting the Real Property or any part
thereof, or of any sale or other disposition of the Real Property or any part
thereof in lieu of condemnation.
3.9 Machinery, Equipment, Vehicles and Personal Property. Except as set
forth in Schedule 3.9 of the Disclosure Schedule, all items of Equipment which
are necessary to the conduct of the Business are in good operating condition and
repair and fit for the intended purposes thereof
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and no material maintenance, replacement or repair has been deferred or
neglected. Schedule 3.9 of the Disclosure Schedule sets forth a list of all
Equipment leased by or to Seller and each lease thereof.
3.10 Inventories. Except as set forth in Schedule 3.10 of the
Disclosure Schedule, all Inventory consists of a quality and quantity usable and
salable in the ordinary course of business consistent with past practice, and
the present quantities of all Inventory are reasonable in the present
circumstances of the Business as currently conducted.
3.11 Warranty and Product Defect or Return Claims. Schedule 3.11 of the
Disclosure Schedule sets forth a list of all pending warranty and other product
defect or return claims against Seller with respect to the Business which
individually exceed Five Thousand Dollars ($5,000) in cost of remedy. All
pending warranty and other product defect or return claims against Seller do not
exceed in the aggregate Fifty Thousand Dollars ($50,000) in cost of remedy.
3.12 Accounts Receivable. Except as set forth in Schedule 3.12 of the
Disclosure Schedule, all Accounts Receivable have arisen only from bona fide
transactions in the ordinary and regular course of business and are collectible
in the aggregate amounts thereof through the continuation of existing collection
procedures, after allowance for credits in the ordinary course of business and
subject to bad debt reserves established by Seller consistent with past
practice, and there are no known claims, refusals to pay or other rights of
set-off against any thereof.
3.13 Bank Accounts; Powers of Attorney. Schedule 3.13 of the Disclosure
Schedule sets forth (a) the names of all financial institutions, investment
banking and brokerage houses, and other similar institutions at which Seller
maintains accounts, deposits, safe deposit boxes of any nature, the names of all
persons authorized to draw thereon or make withdrawals therefrom, and any
limitations or restrictions as to use, withdrawal or otherwise, and (b) the
names of all persons or entities holding general or special powers of attorney
from Seller and a summary of the terms thereof.
3.14 Insurance. Schedule 3.14 of the Disclosure Schedule contains an
accurate and complete list of all policies of fire and other casualty, general
liability, theft, life, workers' compensation, health, directors and officers,
business interruption and other forms of insurance owned or held by Seller,
specifying the insurer, the policy number, the term of the coverage and, in the
case of any "occurrence" coverage, the same information as to predecessor
policies for the previous five (5) years. All present policies are in full force
and effect and all premiums with respect thereto have been paid. Seller has not
been denied any form of insurance and no policy of insurance has been revoked or
rescinded during the past five (5) years, except as described on Schedule 3.14
of the Disclosure Schedule. Schedule 3.14 also describes all third party
administered self-insurance arrangements that Seller has.
3.15 Intellectual Property Rights. Except as disclosed in Schedule 3.15
of the Disclosure Schedule, (a) Seller owns or possesses adequate licenses or
other valid rights to use all patents, patent rights, trademarks, service marks,
trade names, copyrights, applications for any thereof, trade secrets, know-how
and other intellectual property ("INTELLECTUAL PROPERTY RIGHTS") used in or
12
necessary for the conduct of the Business, (b) the conduct of the Business does
not conflict with or infringe on any valid Intellectual Property Rights of
others in any way which might result in a Material Adverse Effect with respect
to the Division, the Business or the Assets, and (c) to Seller's knowledge no
third party has come into conflict with or infringed on any Intellectual
Property Rights of Seller. Schedule 3.15 of the Disclosure Schedule sets forth a
list of all material United States and foreign patents, trademarks, service
marks, trade names and registered copyrights, and applications for any thereof,
used by Seller in the conduct of the Business and all licenses to or by Seller
of Intellectual Property Rights which Seller owns or uses in the conduct of the
Business.
3.16 Commitments. Schedule 3.16 of the Disclosure Schedule contains a
list of or cross references to other applicable Schedules of the Disclosure
Schedule with respect to all contracts, agreements and other commitments to
which Seller is a party or by which Seller or any of its properties is bound and
which are individually material to the Business (individually and collectively,
the "COMMITMENT(S)"). Except as disclosed in Schedule 3.16 of the Disclosure
Schedule, (a) all Commitments are valid and in full force and effect and
enforceable against Seller and any other party thereto in accordance with their
terms (subject to bankruptcy, insolvency, creditors' rights, equitable
considerations and public policy, and except that no representation or warranty
is given concerning the availability of specific performance or other equitable
remedies), and (b) neither Seller nor any other party thereto is in material
default thereunder, nor are there circumstances which with the giving of notice
or passing of time or both would constitute a material default thereunder by
Seller or any other party thereto, nor has Seller received any notice claiming
any such default or circumstance.
3.17 Taxes.
(a) Except as set forth in Schedule 3.17 of the Disclosure
Schedule, (1) Seller and/or its shareholders have duly and timely filed (and
until the Closing Date will duly and timely file or obtain valid extensions to
file) all tax and information reports, returns, declarations, statements and
related documents required to be filed with any Authority ("TAX RETURNS") by it
with respect to net or gross income, profits, windfall profits, franchise, gross
receipts, premium, sales, use, ad valorem, service, service use, license, lease,
occupation, employment, withholding, excise, transfer, real and personal
property, customs, duties and other taxes, charges and levies and all interest,
penalties, assessments and deficiencies with respect thereto ("TAXES") and have
duly paid, or made adequate provision for the due and timely payment of, all
such Taxes due or claimed to be due from or with respect to Seller by any
Authority, (2) all Tax Returns were (or will be) true, correct and complete in
all material respects when filed for all periods ending on or before the Closing
Date, (3) no deficiencies for any Taxes for which Seller may be liable have been
asserted in writing or assessed against Seller or any former subsidiary of
Seller for which Seller may be liable which remain unpaid nor has Seller
received notification of any pending or proposed examination by any taxing
Authority, (4) there are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any such Tax Returns for any
period, and (5) for purposes of computing Taxes and the filing of Tax Returns,
Seller has not failed to treat as "employees" any individual providing services
to Seller who would be classified as an "employee" under the applicable rules or
regulations of any Authority with respect to such classification.
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(b) Seller is not a foreign person within the meaning of
Section 1445(b)(2) of the Internal Revenue Code of 1986, as amended (the
"CODE").
(c) Seller has had in effect a valid election under Code
Section 1362 to be treated as an "S corporation" for each of its taxable years
ended after February 28, 1989. Seller has not taken any action to revoke such
election. Seller is not aware of any basis or the existence of any facts that
would permit the Internal Revenue Service to revoke such election for any period
prior to the Closing Date. Except as described on Schedule 3.17 of the
Disclosure Schedule, since the effective date of its election as an S
corporation to and including the Closing Date, Seller will not have incurred or
become liable for the payment of any corporate-level income tax, or any related
penalties or interest.
3.18 Employee Benefit Plans. Schedule 3.18 of the Disclosure Schedule
sets forth a true and complete list of each "employee benefit plan" (as that
term is defined under Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) and any other plan, practice, policy,
procedure, program, arrangement or agreement that is maintained by Seller
related to the employment of any present or former director, officer or employee
of the Division under which Seller has any present or future obligation or
liability (the "EMPLOYEE BENEFIT PLANS"). With respect to each such Employee
Benefit Plan, Seller has delivered or made available to Buyer copies of and has
scheduled on Schedule 3.18 of the Disclosure Schedule all (a) plans and related
trust documents and amendments thereto, (b) the most recent summary plan
description and the three (3) most recent annual reports on Treasury Form 5500,
including all schedules and attachments thereto, with respect to any Employee
Benefit Plan for which such report is required, (c) the three (3) most recently
issued actuarial valuations, and (d) the most recent determination letter
received from the Internal Revenue Service and the full and complete application
therefor submitted to the Internal Revenue Service. No event has occurred for
which, and there exists no condition or set of circumstances under which, Seller
or any Employee Benefit Plan that is an "employee pension benefit plan" (as
defined in ERISA Section 3(3)) ("PENSION PLAN") could be subject to any
liability under ERISA Section 502(i) or Code Section 4975. No Pension Plan is
subject to Title IV of ERISA or to Code Section 412. With respect to each
Employee Benefit Plan, except as set forth in Schedule 3.18 of the Disclosure
Schedule, (1) Seller is in compliance with the requirements prescribed by all
applicable Laws, including without limitation ERISA and the Code, (2) each
Pension Plan intended to qualify under Code Section 401(a) has received a
favorable determination letter from the Internal Revenue Service with respect to
such qualification, its related trust has been determined to be exempt from
taxation under Code Section 501(a), and nothing has occurred since the date of
such letter that would adversely affect such qualification or exemption, and (3)
there are no actions or proceedings (other than routine claims for benefits)
pending with respect to any Employee Benefit Plan or against the assets of any
Employee Benefit Plan. No Pension Plan is a "multiemployer plan," within the
meaning of ERISA Section 3(37), and neither Seller nor any former subsidiary of
Seller has participated in or contributed to a multiemployer plan. With respect
to each Employee Benefit Plan that is a "group health plan" within the meaning
of ERISA Section 601(a) and that is subject to Code Section 4980B, including but
not limited to any medical plan, dental plan, health care reimbursement plan or
employee assistance program, Seller has operated such plans in material
compliance with the continuation coverage requirements of those provisions and
Part 6 of Title I of ERISA and any applicable comparable state Laws, and no
Employee Benefit Plan provides for
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medical, health, life or other welfare benefits for present or future terminated
employees or their spouses or dependents in excess of those required to be
provided under such Laws. The transactions contemplated herein will not result
in the acceleration, accrual, vesting, funding or payment of any contribution or
benefit under any Employee Benefit Plan. No action or omission of Seller or any
director, officer, employee, or agent thereof in any way restricts, impairs or
prohibits Seller or any successor thereof from amending, merging, or terminating
any Employee Benefit Plan in accordance with the express terms thereof and
applicable Laws. Neither Seller nor any former subsidiary of Seller has taken
any action which has or could result in any liability to Seller under the Worker
Adjustment and Retraining Notification Act.
3.19 Labor Matters. Except as set forth in Schedule 3.19 of the
Disclosure Schedule, (a) Seller is not obligated by or subject to any collective
bargaining agreement or collective bargaining obligation with respect to the
Division, (b) there are no strikes, slowdowns or picketing against Seller with
respect to the Division previously experienced or pending, or to Seller's
knowledge threatened, nor are there nor have there been any efforts, to Seller's
knowledge, to organize any unions or employee associations at the Business, and
(c) there are no pending, or to Seller's knowledge threatened, grievances or
unfair labor charges with respect to the Division.
3.20 Permits and Other Operating Rights. Except as set forth in
Schedule 3.20 of the Disclosure Schedule, Seller does not require the Consent of
any Authority to permit it to operate the Business in the manner in which it
presently is being operated, and possesses and is in compliance with the
requirements of all permits, licenses and other authorizations from all
Authorities presently required necessary to permit it to operate the Business in
the manner in which it presently is conducted. Each of such permits, licenses
and other authorizations is scheduled on Schedule 3.20 of the Disclosure
Schedule, and no action is pending to revoke, terminate, modify or restrict any
thereof.
3.21 Compliance with Laws. Except as set forth in Schedule 3.21 of the
Disclosure Schedule, Seller has operated and is operating the Business in
compliance with all Laws applicable to the Business the failure to comply with
which could have, either individually or in the aggregate, a Material Adverse
Effect with respect to the Division, the Business or the Assets.
3.22 Environment.
(a) Schedule 3.22 of the Disclosure Schedule lists all
environmental studies made by or furnished to Seller relating to the Real
Property or any other property formerly owned, leased or operated by Seller or
any Subsidiary or former subsidiary (individually and collectively, "FORMER REAL
PROPERTY"), each of which studies has been delivered or made available to Buyer.
(b) Except as set forth in Schedule 3.22 of the Disclosure
Schedule, neither Seller nor any Subsidiary or former subsidiary nor any prior
or current other owner or lessee has generated, handled, manufactured, treated,
stored, used, transported, or discharged, leaked, pumped, injected, spilled,
emitted, dispersed, leached, migrated or otherwise released ("RELEASED" and any
thereof being a "RELEASE"), or deposited, placed, buried, dumped or otherwise
disposed of ("DISPOSED OF" and any thereof being a "DISPOSAL"), any
Environmentally Regulated Materials (as defined below)
15
on, beneath, to, from or about the Real Property or any Former Real Property or
been responsible therefor, except for the generation, handling, manufacture,
treatment, storage, use, transportation, Release and Disposal, in compliance
with all applicable Environmental Laws (as defined below) and other applicable
Laws, of such substances used in the ordinary course of the Business.
(c) Except as set forth in Schedule 3.22 of the Disclosure
Schedule, no Environmentally Regulated Material has been generated, handled,
manufactured, treated, stored, used, transported, Released or Disposed Of on,
from or off the Real Property or any Former Real Property which may give rise to
a clean-up responsibility, personal injury liability or property damage claim
against Seller, or give rise to Seller being named a potentially responsible
party for any such clean-up costs, personal injuries or property damage, or
create any cause of action by any third party against Seller under any
Environmental Laws.
(d) Except as set forth in Schedule 3.22 of the Disclosure
Schedule, Seller has not received any notices or claims of any inquiries,
evaluations, investigations, remediations, violations or liabilities relating to
Environmentally Regulated Materials or Environmental Laws involving Seller, any
Subsidiary or former subsidiary, or the Real Property or any Former Real
Property.
(e) Except as set forth in Schedule 3.22 of the Disclosure
Schedule, neither the Real Property nor to Seller's knowledge any Former Real
Property contains any (1) underground or aboveground storage tanks, (2)
asbestos, (3) equipment using PCBs, (4) underground injection xxxxx, or (5)
septic tanks into which process waste water or any Environmentally Regulated
Materials have been Disposed Of or Released.
(f) The term "ENVIRONMENTALLY REGULATED MATERIALS" means any
element, compound pollutant, contaminant, substance, material or waste, or any
mixture thereof, designated, listed, referenced, regulated or identified
pursuant to any Environmental Laws. The term "ENVIRONMENTAL LAWS" means the
National Environmental Policy Act, 42 U.S.C. ss. 4321 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss. 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
ss. 6901 et seq., the Federal Water Pollution Control Act, 33 U.S.C. ss.
1251 et seq., the Federal Clean Air Act, 42 U.S.C. ss. 7401 et seq., the
Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., the Emergency
Planning and Community Right to Know Act, 42 U.S.C. P. 11001, the Hazard
Communication Act ss. 651 et seq., and the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. ss. 136, each as amended, and the regulations
thereunder and applicable state and local counterparts.
3.23 Litigation. Except as set forth in Schedule 3.23 of the Disclosure
Schedule, there is no action, order or proceeding, or to Seller's knowledge
investigation, in, before or by any court or other Authority or before or by any
arbitrator or mediator ("LITIGATION") pending, or to Seller's knowledge
threatened, (a) by or against or involving Seller or any of its properties or
any of its officers, directors, agents or employees (but only in such
capacities) or the Business, or (b) which seeks to enjoin or obtain damages in
respect of the consummation of the transactions contemplated hereby, nor to
Seller's knowledge is there any basis therefor.
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3.24 Business Generally. Except as set forth in Schedule 3.24 of the
Disclosure Schedule, there has been no event, transaction or information which
has come to the attention of Seller which, as it relates directly to the
Business, could, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect with respect to the Business.
3.25 Absence of Certain Business Practices. Neither Seller nor any
officer, employee or agent thereof, nor any other person acting on behalf of any
thereof, has, directly or indirectly, within the past five (5) years given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a position to help or
hinder the Business (or assist Seller in connection with any actual or proposed
transaction related to the Business) which (a) might subject Seller or Buyer to
any damage or penalty in any civil, criminal or governmental litigation
proceeding, (b) if not given in the past, might have resulted in a Material
Adverse Effect with respect to Seller, or (c) if not continued in the future,
might have a Material Adverse Effect with respect to Seller or Buyer, or subject
Seller or Buyer to suit or penalty in any private or governmental litigation or
proceeding.
3.26 Brokers. Except as set forth in Schedule 3.26 of the Disclosure
Schedule, neither Seller nor any directors, officers or employees thereof, nor
any other person acting on behalf of any thereof, has employed any broker,
finder or financial advisor or incurred any liability for any brokerage fee or
commission, finder's fee or financial advisory fee in connection with the
transactions contemplated hereby, nor is there any basis known to Seller for any
such fee or commission to be claimed by any person or entity.
3.27 Accuracy of Information. No representation or warranty made by
Seller in this Agreement, the Disclosure Schedule or any agreement, instrument,
document, certificate, statement or letter furnished or to be furnished to Buyer
at the Closing by or on behalf of Seller in connection with any of the
transactions contemplated by this Agreement contains or will contain any untrue
statement of material fact or omits or will omit to state any material fact
necessary in order to make the statements herein or therein not misleading in
light of the circumstances in which they are made, and all of the foregoing do
or will when made completely and correctly present the information required or
purported to be set forth herein or therein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Buyer's Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the Laws of the state of Minnesota,
and has all requisite corporate power and authority to carry on its business as
it is now being conducted, and to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby.
4.2 Due Authorization, Execution and Delivery; Effect of Agreement. The
execution, delivery and performance by Buyer of this Agreement and the Note and
the consummation by Buyer
17
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Buyer. This Agreement has been duly
and validly executed and delivered by Buyer and constitutes, and the Note when
duly and validly executed and delivered by Buyer will constitute, the valid and
binding legal obligations of Buyer, enforceable against it in accordance with
their terms, except to the extent that such enforceability (a) may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally, and (b) is subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.3 Non-Contravention. Neither the execution, delivery and performance
of this Agreement or the Note nor the consummation of the transactions
contemplated hereby or thereby will (a) violate or be in conflict with any
provision of the articles of incorporation or bylaws of Buyer, or (b) be in
conflict with, or constitute a default, however defined (or an event which, with
the giving of due notice or lapse of time, or both, would constitute such a
default), under, or cause or permit the acceleration of the maturity of, or give
rise to any right of termination, cancellation or imposition of fees or
penalties under, any debt, instrument, commitment, contract or other agreement
or obligation to which Buyer is a party or by which Buyer or any of its
properties or assets is or may be bound, or (c) result in the creation or
imposition of any Encumbrance upon any property or assets of Buyer, or (d)
violate any Laws of any Authority to which Buyer is subject.
4.4 Consents. No Consent from any Authority or any individual or other
private entity is required in connection with the execution, delivery or
performance by Buyer of this Agreement or the taking of any other action
contemplated hereby.
4.5 Litigation. There is no Litigation pending or, to Buyer's
knowledge, threatened which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby.
ARTICLE V
COVENANTS OF SELLER
From and after the date hereof and until the Closing Date, Seller
hereby covenants and agrees with Buyer as follows:
5.1 Cooperation and Assignments. Seller will use its best efforts, and
will cooperate with Buyer, to secure all necessary consents, approvals,
authorizations, exemptions and waivers from third parties as are required in
order to enable Seller to effect the transactions contemplated hereby, and
otherwise will use its best efforts to cause the consummation of such
transactions in accordance with the terms and conditions hereof, provided that
Seller will not be obligated to incur any liability or expense in connection
therewith, except the cost and expense of its employees, agents and
representatives engaged in such efforts or as otherwise expressly set forth
herein.
5.2 Conduct of Business. Except as otherwise may be contemplated by
this Agreement or any of the documents listed in the Disclosure Schedule and
except as Buyer otherwise may
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consent to in writing (which consent will not be unreasonably withheld), in
consultation with Buyer Seller will (a) operate the Business in the ordinary
course in all material respects, (b) use its best efforts to preserve the
Business as a whole intact, (c) use its best efforts to continue in effect all
material existing policies of insurance (or comparable insurance) with
third-party carriers of or relating to the Business, (d) use its best efforts to
keep available the services of the present officers, employees and agents of the
Business, (e) use its best efforts to preserve its relationships with its
material suppliers, customers, licensors and licensees and others having
material business dealings with it such that the Business will not be
substantially impaired, and (f) not take any action which would result in a
breach of the representations and warranties contained in Section 3.6 or
otherwise contained in Article III as though made on and as of the Closing Date.
5.3 Access. Seller will provide Buyer with such information as Buyer
from time to time reasonably may request with respect to the Business and to
personnel of Seller and the transactions contemplated by this Agreement, and
will permit Buyer and its representatives reasonable access, during regular
business hours and upon reasonable notice, to the properties, books and records
of the Business and to personnel of Seller, as Buyer from time to time
reasonably may request.
5.4 Division Audited Financial Statements. On or before Closing, Seller
will deliver to Buyer an audited balance sheet of the Division as of December
31, 1997 and related audited statement of operations and retained earnings and
cash flows of the Division for the year then ended.
5.5 No Solicitation. Seller will not and will cause its directors,
officers, employees, agents and representatives not to encourage, solicit,
initiate or enter into, directly or indirectly, any discussions or negotiations
concerning any disposition (through a sale of assets, sale of stock, merger,
consolidation, exchange or otherwise) of all or substantially all of the Assets
or all or substantially all of the assets or capital stock of Seller (other than
pursuant to this Agreement), or any proposal therefor, or furnish or cause to be
furnished any nonpublic information concerning the Business or the assets or
capital stock of Seller to any third party in connection with any transaction or
proposed transaction involving the acquisition of the Assets or the assets or
capital stock of Seller by any third party (any such proposed disposition being
hereinafter referred to as an "ALTERNATIVE TRANSACTION"), provided that nothing
contained herein will restrict any thereof from taking any action determined in
good faith by Seller upon advise of counsel to be required by the fiduciary
duties of the members of Seller's board of directors. Seller will promptly
inform Buyer of any inquiry (including the terms and the identity of the third
party making such inquiry) which it receives in respect of an Alternative
Transaction and furnish to Buyer a copy of any such written inquiry.
5.6 Topping Fee. In the event this Agreement is terminated and within
one (1) year thereafter substantially all of the Assets or substantially all of
the assets or capital stock of Seller are sold (through a sale of assets, sale
of stock, merger, consolidation, exchange or otherwise) pursuant to an
Alternative Transaction, and provided this Agreement has not been terminated
because of a material breach of Buyer's obligations, representations or
warranties hereunder, thereupon Seller will pay to Buyer Eight Hundred Thousand
Dollars ($800,000) in immediately available funds.
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ARTICLE VI
COVENANTS OF BUYER
From and after the date hereof and until the Closing Date, Buyer hereby
covenants and agrees with Seller as follows:
6.1 Cooperation and Assumption. Buyer will use its best efforts, and
will cooperate with Seller, to secure all necessary consents, approvals,
authorizations, exemptions and waivers from third parties as are required in
order to enable Buyer to effect the transactions contemplated hereby, and will
otherwise use its best efforts to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions hereof, provided
that Buyer will not be obligated to incur any liability or expense in connection
therewith, except the cost and expense of its employees and representatives
engaged in such efforts or as otherwise expressly set forth herein.
ARTICLE VII
ADDITIONAL COVENANTS
7.1 Books and Records; Personnel. For a period of seven (7) years after
the Closing (or such longer period as may be required by any governmental agency
or ongoing Litigation or in connection with any administrative proceeding):
(a) Buyer will not dispose of or destroy any of the business
records and files of the Business. If Buyer wishes to dispose of or destroy such
records and files after that time, it will first give thirty (30) days' prior
written notice to Seller and Seller will have the right, at its option and
expense, upon prior written notice to Buyer within such thirty (30) day period,
to take possession of the records and files within sixty (60) days after the
date of Seller's notice to Buyer.
(b) Buyer will allow Seller and its representatives access,
when there is a legitimate business purpose not injurious to Buyer, to all
business records and files of the Business which are transferred to Buyer in
connection herewith, during regular business hours and upon reasonable notice at
Buyer's principal place of business or at any location where such records are
stored, and Seller will have the right, at its own expense, to make copies of
any such records and files; provided, however, that any such access or copying
will be had or done in such a manner so as not to interfere with the normal
conduct of Buyer's business or operations.
(c) Buyer will make available to Seller, upon written request
and at Seller's expense, personnel of the Business to assist Seller in locating
and obtaining records and files of the Business or whose assistance or
participation is reasonably required by Seller in anticipation of, or
preparation for, existing or future Litigation, tax return preparation or other
matters in which Seller or any of its affiliates are involved and which is
related to the Business, provided that Buyer will not be obligated to provide
such personnel to the extent that Buyer, in its reasonable discretion, believes
that such assistance would adversely affect the operations of the Business.
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7.2 Further Assurances. At any time or from time to time after the
Closing Date, either party will, at the request of the other party and at such
other party's expense, execute and deliver any further instruments or documents
and take all such further action as such party reasonably may request in order
to consummate and make effective the transactions contemplated by this
Agreement.
7.3 Confidentiality Agreement and Noncompetition Covenant of Seller
After Closing.
(a) From and after the Closing Date, except as otherwise
consented to by Buyer in writing, (1) Seller will not directly or indirectly
disclose or use in a manner adverse to Buyer any Business Confidential
Information (as defined below) except as required by the terms of a valid and
effective subpoena or order issued by a court of competent jurisdiction or by a
governmental body, (2) Business Confidential Information will be the exclusive
property of Buyer and, any time on or after the Closing Date, if requested by
Buyer, Seller will promptly deliver to Buyer all Business Confidential
Information, including all copies thereof, which are in the possession, or under
the control, of Seller or any of its agents or representatives, without making
or retaining any copies or extracts thereof, and (3) if Seller or any of its
agents or representatives receives a request to disclose all or any part of
Business Confidential Information, Seller will (A) immediately notify Buyer of
the existence, terms and circumstances surrounding such request, (B) consult
with Buyer on the advisability of taking legally available steps to resist or
narrow such request, and (C) if disclosure of such information is required, and
at Buyer's cost and expense, exercise its best efforts to obtain an order or
other reliable assurance that confidential treatment will be accorded such
portion of the disclosed information which Buyer so designates.
(b) "BUSINESS CONFIDENTIAL INFORMATION" means any and all
information relating to the management, operations, finances, products, trade
secrets, technology or services of Seller, including but not limited to any and
all financial data, computer programs and systems, computer based information,
plans, projections, existing and proposed and contemplated projects or
investments, formulae, processes, methods, products, manuals, drawings, supplier
lists, customer lists, purchase and sales records, marketing information,
commitments, correspondence and other information relating to the Business,
whether written, oral or computer generated, other than such information from
and after such time as it may be or become lawfully available to the general
public through no fault of Seller.
(c) Seller covenants that for a period of three (3) years
after Closing, it will not, and will cause each of its affiliates not to,
directly or indirectly, as an owner, operator, employee, agent, consultant or
otherwise, be involved in any business which competes with the Business or which
solicits the employment of any personnel employed by Seller on or within twelve
(12) months prior to the Closing Date.
(d) The covenants and undertakings contained in this Section
7.3 relate to matters which may be of a special, unique and extraordinary
character and a violation of any of the terms of this Section 7.3 may cause
irreparable injury to Buyer, the amount of which may be impossible to estimate
or determine and for which adequate compensation may not be available.
Therefore, Buyer may be entitled to an injunction, restraining order or other
equitable relief from a court of
21
competent jurisdiction, restraining any violation or threatened violation of any
such terms by Seller and such other persons as the court orders.
7.4 Use of Name. Buyer will have the right to use WEB Technology or any
derivative there of as a part of the name of the Business as operated by Buyer
or in any product designation of the Business.
7.5 Maintenance of Health Plan. Seller will maintain a group health
plan for at least six (6) months after the Closing Date and will offer COBRA
continuation coverage to all eligible employees of Seller whose employment
terminates as a result of the sale of Assets hereunder to Buyer.
ARTICLE VIII
REGISTRATION OF SHARES
8.1 Registration.
(a) Aetrium Incorporated will prepare and file a registration
statement covering the Registrable Securities on Form S-3 (the "REGISTRATION
STATEMENT") promptly (and in any event within five (5) business days) following
the Closing Date and will use its best efforts to cause the Registration
Statement to become and remain effective for twelve (12) months following the
Closing Date (the "EFFECTIVENESS PERIOD"). Aetrium Incorporated will be
obligated to prepare, file and cause to become effective only one Registration
Statement pursuant to this Section 8.1. "REGISTRABLE SECURITIES" means any
Shares and any shares of the common stock of Aetrium Incorporated issued as a
dividend, stock split, reclassification, recapitalization or other distribution
with respect to, or in exchange for or replacement of, any Registrable
Securities; provided, however, that Registrable Securities will not include (1)
shares that have been sold to the public either pursuant to the Registration
Statement or Rule 144, or (2) shares sold in a transaction in which the
registration rights conferred by this Article VIII are transferred in violation
of Section 8.7 hereof. The "SECURITIES ACT" means the Securities Act of 1933, as
amended, or any similar successor statute, and the rules and regulations
thereunder, as the same are in effect from time to time. "RULE 144" means Rule
144 promulgated by the Commission under the Securities Act, as such rule may be
amended from time to time, or any successor rule thereto. The "COMMISSION" means
the Securities and Exchange Commission or any other federal agency at the time
administering the Securities Act.
(b) Aetrium Incorporated may delay the filing the of the
Registration Statement for not more than thirty (30) days if in the good faith
judgment of the Board of Directors of Aetrium Incorporated (the "BOARD"), there
is a material development relating to the condition (financial or otherwise) of
Aetrium Incorporated that has not been disclosed to the general public and the
Board determines that, under such circumstances, it would be in Aetrium
Incorporated's best interests to delay such registration.
8.2 Procedures for Sale of Registrable Securities. "HOLDER" means each
Share Designee with respect to the Shares issued to such Share Designee pursuant
to Section 1.8(c) and any other
22
Registrable Securities issued with respect thereto and each transferree of the
registration rights under this Article VIII with respect to such Registrable
Securities transferred in compliance with Section 8.7 hereof. Each time any
Holder desires to offer and sell any Registrable Securities pursuant to the
Registration Statement, the Holder agrees to comply with the following
procedures:
(a) The Holder will provide Aetrium Incorporated with a Sale
Notice prior to the sale of any Registrable Securities. "SALE NOTICE" means a
written notice provided to Aetrium Incorporated which specifies (1) the name,
address and facsimile number of or for the Holder, and (2) the number of
Registrable Securities such Holder desires to sell.
(b) Upon receipt of the Sale Notice, Aetrium Incorporated will
take the following steps:
(1) If Aetrium Incorporated determines that the
Registration Statement, the prospectus forming a part thereof
and any amendments and supplements thereto contain current and
updated information and do not contain any untrue statement of
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not
misleading, Aetrium Incorporated will promptly (and in any
event within five (5) business days of receipt of the Sale
Notice for any Holder entering into a Right of First Refusal
Agreement (as hereinafter defined) and otherwise within one
(1) business day of receipt of the Sale Notice) notify the
Holder that such Holder may sell the Registrable Securities.
If the Holder does not sell the Registrable Securities within
thirty (30) days after such notification from Aetrium
Incorporated, however, the Holder will once again become
subject to the procedures described in this Section 8.2 and
may not sell the Registrable Securities without first
complying with the procedures described herein.
(2) If Aetrium Incorporated determines that the
Registration Statement, the prospectus forming a part thereof
or any amendments or supplements thereto do not contain
current and updated information or contain any untrue
statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which
they were made, not misleading, Aetrium Incorporated will
promptly (and in any event within five (5) business days of
receipt of the Sale Notice for any Holder entering into a
Right of First Refusal Agreement and otherwise within one (1)
business day of receipt of the Sale Notice) notify the Holder
of such determination, and within thirty (30) days thereafter
will prepare and file with the Commission such amendments or
supplements thereto as may be necessary so that the
Registration Statement, the prospectus forming a part thereof
and any amendments and supplements thereto contain current and
updated information and do not contain any untrue statement of
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not
misleading. Promptly after any such amendments or supplements
have been filed and, if applicable, declared effective,
Aetrium Incorporated will notify the Holder that such Holder
may sell the Registrable Securities. If the Holder does not
sell the Registrable Securities within thirty (30) days after
such notification from Aetrium Incorporated, however, the
Holder will once again becomes subject to the procedures
described in this Section 8.2 and may not sell the Registrable
Securities without first complying with the procedures
described herein.
23
(c) Only after Aetrium Incorporated has reviewed the Registration
Statement and provided the Holder with the written notification provided in
Section 8.2(b) above may the Holder sell the Registrable Securities pursuant to
the Sale Notice.
(d) Any notice to be given hereunder by a Holder to Aetrium
Incorporated will be in writing and delivered personally or by telephonic
facsimile transmission or sent by registered or certified mail, postage prepaid
(and if by telephonic facsimile transmission with a copy sent by mail), to:
Aetrium Incorporated
0000 Xxxxx Xxxxxx
Xxxxx Xx. Xxxx, Xxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxxx
Facsimile No.: (000) 000-0000
or at such other address as may be specified by notice to the Holder. Any notice
to be given hereunder by Aetrium Incorporated to the Holder will be in writing
and delivered by telephonic facsimile transmission to the facsimile number
provided by the Holder in the applicable Sale Notice. Any notice which is
delivered personally or by telephonic facsimile transmission in the manner
provided herein will be deemed to have been duly given to the party to whom it
is directed upon actual receipt by such party if delivered personally or upon
completion of facsimile transmission. Any notice which is addressed and mailed
in the manner herein provided will be conclusively presumed to have been duly
given to the party to which 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.
8.3 Restrictions on Sale of Registrable Securities. Notwithstanding any
other provision in this Article VIII to the contrary, Holders are prohibited
from selling any Registrable Securities in the circumstances described below,
and any sale made in such circumstances will be deemed a breach of this
Agreement and may constitute a violation of the Securities Act, which could
subject such Holder to civil and criminal sanctions:
(a) Holders may not sell Registrable Securities during the period
that commences on the seventh day of the last month of each of Aetrium
Incorporated's fiscal quarters and ends on the third business day after Aetrium
Incorporated releases financial results for such quarter.
(b) Holders may not sell any Registrable Securities if the
Registration Statement, the prospectus forming a part thereof or any amendments
or supplements thereto, do not contain current and updated information or
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
8.4 Expenses. With respect to registration of Registrable Securities
pursuant to this Article VIII, Aetrium Incorporated will bear the following
fees, costs and expenses: all registration, filing and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for Aetrium
24
Incorporated, internal expenses of Aetrium Incorporated, and other expenses of
complying with state securities or blue sky laws of any jurisdictions in which
the Registrable Securities are to be registered or qualified. The Holder will
bear the following fees, costs and expenses: discounts and commissions, fees and
disbursements of counsel and accountants for the Holder and any other expenses
incurred by the Holder not expressly included above.
8.5 Indemnification.
(a) Aetrium Incorporated will indemnify and hold harmless
Seller, each Holder, and each person, if any, who controls such Holder within
the meaning of the Securities Act, from and against, and will reimburse such
Holder and each such controlling person with respect to, any and all loss,
damage, liability, cost and expense to which such Holder or any such controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in such
Registration Statement, any prospectus forming a part thereof or any amendments
or supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; provided, however, that Aetrium
Incorporated will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expense arises out of or is based upon (1) an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such Holder or such controlling
person in writing specifically for use in the preparation thereof, or (2) the
failure of such Holder to deliver a prospectus and any amendments or supplements
thereto in accordance with the requirements of this Article VIII and the
Securities Act.
(b) Seller and each holder jointly and severally will
indemnify and hold harmless Aetrium Incorporated, its directors and officers,
and any controlling person from and against, and will reimburse Aetrium
Incorporated, its directors and officers, and any controlling person with
respect to, any and all loss, damage, liability, cost or expense to which
Aetrium Incorporated or any controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue or alleged untrue statement of any material
fact contained in such Registration Statement, any prospectus forming a part
thereof or any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, in each case
to the extent, but only to the extent, that any such loss, damage, liability,
cost or expense arises out of or is based upon (1) an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in strict conformity with written information furnished by such Holder
specifically for use in the preparation thereof, or (2) the failure of such
Holder to deliver a prospectus and any amendments or supplements thereto in
accordance with the requirements of this Article VIII and the Securities Act.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of Section 8.5(a) or (b) hereof of notice of the commencement of
any action involving the subject matter of the foregoing indemnity provisions,
such indemnified party will, if a claim thereof is to
25
be made against the indemnifying party pursuant to the provisions of such
Section 8.5(a) or (b), promptly notify the indemnifying party of the
commencement thereof. In case such action is brought against any indemnified
party and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will have the right to participate in, and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any action
include both the indemnified party and the indemnifying party and the
representation of both parties by the same counsel would be inappropriate due to
a conflict of interest between them, the indemnified party or parties will have
the right to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of such Section 8.5(a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation, unless (1) the
indemnified party has employed counsel in accordance with the proviso of the
preceding sentence, (2) the indemnifying party has not employed counsel
reasonably satisfactory to the indemnified party to represent the indemnifying
party within a reasonable time after the notice of the commencement of the
action, or (3) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party. It is
understood that the indemnifying party will not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm for all indemnified parties.
8.6 Cooperation; Information by Holders. Each Holder of Registrable
Securities covered by the Registration Statement agrees to cooperate with all
reasonable requests by Aetrium Incorporated necessary to effectuate the purposes
of this Article VIII, including providing Aetrium Incorporated on a timely basis
with any required notices and with all information necessary in connection with
any registration or compliance described herein.
8.7 Transfer of Registration Rights. The registration rights provided
for herein may not be transferred or assigned in connection with the sale or
transfer of the Registrable Securities without the written consent of Aetrium
Incorporated. In the event Seller is a Share Designee, consent will not be
withheld for a transfer of registration rights with respect to Shares for which
Seller is a Share Designee to a shareholder of Seller in connection with
distribution of such Shares to such shareholder.
8.8 Termination of Registration Rights. The registration rights
described herein will terminate upon expiration of the Effectiveness Period.
ARTICLE IX
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the purchase of the Assets under
this Agreement will be subject to the satisfaction (or waiver by Buyer) on or
prior to the Closing Date of all of the following conditions:
26
9.1 Representations, Warranties and Covenants of Seller. Seller will
have complied in all material respects with all of their agreements and
covenants contained herein to be performed at or prior to the Closing Date, and
all the representations and warranties of Seller contained herein will be true
in all material respects on and as of the Closing Date with the same effect as
though made on and as of the Closing Date, except (a) as otherwise contemplated
hereby, and (b) to the extent that such representations and warranties were made
as of a specified date (and as to such representations and warranties the same
continue on the Closing Date to have been true as of the specified date). Buyer
will have received a certificate of Seller, dated as of the Closing Date and
signed by an officer of Seller, certifying as to the fulfillment of the
conditions set forth in this Section 9.1.
9.2 No Prohibition. No statute, rule or regulation or order of any
court or other Authority will be in effect which prohibits Buyer from
consummating the transactions contemplated hereby.
9.3 Further Action. All consents, approvals, authorizations, exemptions
and waivers from third parties that are required in order to enable Buyer to
consummate the transactions contemplated hereby will have been obtained (except
where the failure to obtain any such consents, approvals, authorizations,
exemptions and waivers would not have a Material Adverse Effect with respect to
the Business).
9.4 Shareholder Agreements. The shareholders of Seller scheduled on
Exhibit D hereto holding not less than seventy-five percent (75%) of the
outstanding capital stock of Seller will have entered into agreements with
Aetrium Incorporated (each a "RIGHT OF FIRST REFUSAL AGREEMENT"), each in the
form of Exhibit E hereto, providing for a first right of refusal to Aetrium
Incorporated on the sale of any Shares within two (2) years after Closing, as
provided therein.
9.5 Xxxxxxxx Employment Agreement. Xxxxx X. Xxxxxxxx will have entered
into an employment agreement with Buyer in the form of Exhibit F hereto.
9.6 XXXXX Agreement. Buyer will have entered into an agreement with
XXXXX Technologies, L.P. on mutually acceptable terms providing for interim use
by XXXXX Technologies, L.P. of the facilities occupied by the Division,
termination of such use of facilities, and continued supply of parts for the
Division at existing prices and delivery terms, with provision for reasonable
price adjustments over time.
9.7 WEB Automation Agreement. Buyer will have entered into an agreement
with WEB Automation, L.P. on mutually acceptable terms providing for continued
supply of parts for the Division at existing prices and delivery terms, with
provision for reasonable price adjustments over time.
9.8 Fluids Business Sublease. Buyer and Seller will have entered into
an agreement on mutually acceptable terms providing for the continued use of the
facilities occupied by the Division by Seller's fluid distribution business.
9.9 Deliveries. Seller will have made or caused to be made delivery to
Buyer of the items set forth in Section 2.2 hereof.
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ARTICLE X
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the sale of the Assets under
this Agreement will be subject to the satisfaction (or waiver by Seller) on or
prior to the Closing Date of all of the following conditions:
10.1 Representations, Warranties and Covenants of Buyer. Buyer will
have complied in all material respects with all of its agreements and covenants
contained herein to be performed at or prior to the Closing Date, and all of the
representations and warranties of Buyer contained herein will be true in all
material respects on and as of the Closing Date with the same effect as though
made on and as of the Closing Date, except (a) as otherwise contemplated hereby,
and (b) to the extent that such representations and warranties were made as of a
specified date (and as to such representations and warranties the same continue
on the Closing Date to have been true as of the specified date). Seller will
have received a certificate of Buyer, dated as of the Closing Date and signed by
an officer of Buyer, certifying as to the fulfillment of the conditions set
forth in this Section 10.1.
10.2 No Prohibition. No statute, rule or regulation or order of any
court or other Authority will be in effect which prohibits Seller from
consummating the transactions contemplated hereby.
10.3 Further Action. All consents, approvals, authorizations,
exemptions and waivers from third parties that are required in order to enable
Seller to consummate the transactions contemplated hereby will have been
obtained (except where the failure to obtain any such actions, consents,
approvals, authorizations, exemptions and waivers would not have a Material
Adverse Effect with respect to the Business).
10.4 Xxxxxxxx Employment Agreement. Xxxxx X. Xxxxxxxx will have entered
into an employment agreement with Buyer in the form of Exhibit F hereto.
10.5 XXXXX Agreement. Buyer will have entered into an agreement with
XXXXX Technologies, L.P. on mutually acceptable terms providing for interim use
by XXXXX Technologies, L.P. of the facilities occupied by the Division,
termination of such use of facilities, and continued supply of parts for the
Division at existing prices and delivery terms, with provision for reasonable
price adjustments over time.
10.6 WEB Automation Agreement. Buyer will have entered into an
agreement with WEB Automation, L.P. on mutually acceptable terms providing for
continued supply of parts for the Division at existing prices and delivery
terms, with provision for reasonable price adjustments over time.
10.7 Fluids Business Sublease. Buyer and Seller will have entered into
an agreement on mutually acceptable terms providing for the continued use of the
facilities occupied by the Division by Seller's fluid distribution business.
28
10.8 Deliveries. Buyer will have made or caused to be made delivery to
Seller of the items set forth in Section 2.3 hereof.
ARTICLE XI
INDEMNIFICATION AND RELATED MATTERS
11.1 Indemnification by Seller. Subject to the provisions of this
Article XI, Seller will indemnify and hold harmless Buyer and each director,
officer, employee, stockholder, partner or affiliate thereof from and against
any and all damages, loss, cost or expense (including reasonable attorney's fees
and expenses actually incurred) (collectively, "LOSS") suffered by reason of,
arising out of or resulting from (a) any misrepresentation or breach of warranty
made by Seller in or pursuant to this Agreement (other than, with respect to any
such director, officer or employee who is an officer or director of Seller on
the date of this Agreement, any such misrepresentation or breach of warranty
known to such officer or director on the Closing Date), (b) any failure by
Seller to fulfill any covenants or agreements under this Agreement, or (c) any
and all liabilities of Seller not expressly assumed by Buyer hereunder, or third
party claims therefor.
11.2 Indemnification by Buyer. Buyer will indemnify and hold harmless
Seller and its officers and directors from and against any and all Loss suffered
by reason of, arising out of or resulting from (a) any material
misrepresentation or breach of warranty made by Buyer in or pursuant to this
Agreement, (b) any failure by Buyer to fulfill any covenants or agreements under
this Agreement, or (c) any and all Assumed Liabilities, or third party claims
therefor.
11.3 Notice of Indemnification. In the event any legal proceeding is
threatened or instituted or any claim or demand is asserted by any person
(including a party hereto) in respect of which payment may be sought by one
party hereto from the other party under the provisions of this Article XI, the
party seeking indemnification (the "INDEMNITEE") will promptly cause written
notice of the assertion of any such claim of which it has knowledge which is
covered by this indemnity to be forwarded to the other party (the "INDEMNITOR").
Any notice of a claim by reason of any of the representations, warranties or
covenants contained in this Agreement will state specifically the
representation, warranty or covenant with respect to which the claim is made,
the facts giving rise to an alleged basis for the claim, and the amount of the
liability asserted against the Indemnitor by reason of the claim.
11.4 Indemnification Procedure for Third-Party Claims. In the event of
the initiation of any legal proceeding against an Indemnitee by a third party,
the Indemnitor will have the absolute right after the receipt of notice, at its
option and at its own expense, to be represented by counsel of its choice, and
to defend against, negotiate, settle or otherwise deal with any proceeding,
claim, or demand which relates to any loss, liability or damage indemnified
against hereunder; provided, however, that the Indemnitee may participate in any
such proceeding with counsel of its choice and at its expense. The parties will
cooperate fully with each other in connection with the defense, negotiation or
settlement of any such legal proceeding, claim or demand. To the extent the
Indemnitor elects not to defend such proceeding, claim or demand, and the
Indemnitee defends against or otherwise deals with any such proceeding, claim or
demand, the Indemnitee may retain
29
counsel, at the expense of the Indemnitor, and control the defense of such
proceeding. Neither the Indemnitor nor the Indemnitee may settle any such
proceeding without the consent of the other party, such consent not to be
unreasonably withheld. After any final judgment or award has been rendered by a
court, arbitration board or administrative agency of competent jurisdiction and
the time in which to appeal therefrom has expired, or a settlement has been
consummated, or the Indemnitee and the Indemnitor have arrived at a mutually
binding agreement with respect to each separate matter alleged to be indemnified
by the Indemnitor hereunder, the Indemnitee will forward to the Indemnitor
notice of any sums due and owing by it with respect to such matter and the
Indemnitor will pay all of the sums so owing to the Indemnitee by wire transfer,
certified or bank cashier's check within thirty (30) days after the date of such
notice. Notwithstanding the foregoing, the provisions of Section 8.5 will govern
all indemnification claims made thereunder.
11.5 Survival of Representations, Warranties and Covenants. The
representations and warranties made in this Agreement and the covenants and
agreements contained herein to be performed or complied with at or prior to the
Closing Date will survive for twenty-four (24) months after the Closing Date,
and no legal action [or arbitration proceeding] may be commenced thereafter with
respect to any alleged breach thereof.
11.6 Exclusive Remedy. Except for equitable relief as provided under
Section 7.3, the exclusive remedy available to a party hereto in respect of the
matters covered by Section 10.1 or Section 10.2 hereof is to proceed in the
manner and subject to the limitations contained in this Article X (or Section
8.5 where applicable), provided that nothing herein will limit the rights and
remedies of Buyer under the Delaware General Corporation Law and common law
relevant thereto against the shareholders of Seller with respect to the
liabilities and obligations of Seller hereunder, and provided further that
nothing will limit the rights and remedies of each party with respect to any
intentionally wrongful acts of the other party.
ARTICLE XII
TERMINATION PRIOR TO CLOSING
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual written consent of Buyer and Seller; or
(b) by either Seller or Buyer in writing (provided the
conditions to such party's obligations stated in the applicable sections of
Article IX or X are not then satisfied or waived) if the Closing has not
occurred on or before April 30, 1998; or
(c) by either Seller or Buyer in writing, if there is in
effect a non-appealable order of a court of competent jurisdiction prohibiting
the consummation of the transactions contemplated hereby.
12.2 Effect on Obligations. Termination of this Agreement pursuant to
this Article will terminate all obligations of the parties hereunder, provided,
however, that termination pursuant to
30
clause (b) of Section 12.1 hereof will not relieve any defaulting or breaching
party from any liability to the other party hereto, and provided, further, that
the provisions of this Section 12.2 and Article XIII will survive termination of
this Agreement.
ARTICLE XIII
MISCELLANEOUS
13.1 Entire Agreement. This Agreement (including the Exhibits and the
Disclosure Schedule delivered pursuant hereto) constitutes the entire agreement
of the parties with respect to the matters provided for herein and supersedes
all prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. No amendment, modification
or alteration of the terms or provisions of this Agreement will be binding
unless the same is in writing and duly executed by the parties hereto.
13.2 Successors and Assigns. The terms and conditions of this Agreement
will inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties hereto. This Agreement may not be assigned by
any party without the prior written consent of the other party hereto, except
that Buyer may, at its election, assign its rights under this Agreement to any
direct or indirect wholly-owned subsidiary. Notwithstanding the foregoing, no
assignment of this Agreement or any of the rights or obligations hereof by Buyer
will relieve Buyer of its obligations under this Agreement to Seller and, upon
any such assignment, the representations, warranties, covenants and agreements
contained in this Agreement will be deemed to have been made by Buyer's assignee
as well as by Buyer. Any attempted assignment of this Agreement contrary to the
terms hereof will be null and void and of no force or effect.
13.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will for all purposes be deemed to be an original
and all of which will constitute the same instrument.
13.4 Headings. The headings of the articles and sections of this
Agreement are included for convenience only and will not be deemed to constitute
part of this Agreement or to affect the construction hereof.
13.5 Modifications and Waivers. No waiver of any of the terms or
conditions of this Agreement or any right hereunder will be effective unless
given in a signed writing by the party entitled to the benefits thereof. No
waiver of any of the provisions of this Agreement or any rights hereunder will
be deemed to or will constitute a waiver of any other provisions hereof or
rights hereunder (whether or not similar). No failure or delay on the part of a
party in exercising any right hereunder will operate as a waiver of, or impair,
any such right. No single or partial exercise of any such right will preclude
any other or further exercise thereof or the exercise of any other right.
13.6 Broker's Fees. Each of the parties hereto represents and warrants
to the other that it has had no dealings with any broker or finder in connection
with the transactions contemplated by this Agreement. Seller will indemnify and
hold harmless Buyer from and against any and all liability
31
to which Buyer may be subjected by reason of any broker's or finder's fee with
respect to the transactions contemplated hereby to the extent such fee is
attributable to any action undertaken by or on behalf of Seller. Buyer will
indemnify and hold harmless Seller from and against any and all liability to
which Seller may be subjected by reason of any broker's or finder's fee with
respect to the transaction contemplated hereby to the extent such fee is
attributable to any action undertaken by or on behalf of Buyer.
13.7 Expenses.
(a) Seller will pay all costs and expenses incurred by or on
behalf of Seller, and Buyer will pay all costs and expenses incurred by or on
behalf of it, in connection with this Agreement, the negotiations in connection
herewith, and the transactions contemplated hereby, including without limitation
fees and expenses of their respective brokers, finders, financial consultants,
accountants and counsel, and including with respect to Seller all costs and
expenses incurred in providing audited financial statements as required under
Section 5.4.
(b) If any dispute between Seller and Buyer, either occurring
under, relating to or in connection with any of the provisions of this
Agreement, is submitted to a court, arbitrator or other appropriate tribunal,
then all costs and expenses of the parties (including tribunal costs and
reasonable attorneys' fees) will be paid by the party against whom a
determination by such court, arbitrator or other tribunal is made or, in the
absence of a determination wholly against one party, as such court, arbitrator
or other tribunal directs.
13.8 Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party will be in writing and
delivered personally or by telephonic facsimile transmission or sent by
registered or certified mail, postage prepaid (and if by telephonic facsimile
transmission with a copy sent by mail),
if to Seller to:
WEB Technology, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxx-Xxxxxx, P.C.
000 X. Xxxxxxxxx
XxXxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
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if to Buyer to:
Aetrium Incorporated
0000 Xxxxx Xxxxxx
Xxxxx Xx. Xxxx, Xxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxxxxxx Xxxxx & Xxxxxxxx
3400 Plaza VII Building
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
or at such other address for a party as may be specified by like notice. Any
notice which is delivered personally or by telephonic facsimile transmission in
the manner provided herein will be deemed to have been duly given to the party
to whom it is directed upon actual receipt by such party (or its agent for
notices hereunder) if delivered personally or upon completion of facsimile
transmission. Any notice which is addressed and mailed in the manner herein
provided will be conclusively presumed to have been duly given to the party to
which 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.
13.9 Arbitration. Subject to the last sentence of this Section, any
controversy or claim arising out of or relating to any provisions of this
Agreement or the breach hereof, unless resolved by mutual agreement of the
parties, will be finally settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in effect
on the effective date of this Agreement by a single arbitrator appointed in
accordance with said Rules. The determination of the arbitrator will be final
and binding upon the parties to the arbitration and judgment upon the award
rendered by the arbitrator will be entered in any court of competent
jurisdiction. The place of arbitration will be Minneapolis, Minnesota.
Notwithstanding the foregoing, either party may seek injunctive relief with
respect to any controversy or claim arising out of or relating to any provisions
of this Agreement in any court of competent jurisdiction.
13.10 Governing Law; Consent to Jurisdiction. This Agreement will be
construed in accordance with and governed by the laws of the state of Minnesota
applicable to agreements made and to be performed in such jurisdiction without
reference to conflicts of law principles. Each of Buyer and Seller irrevocably
consents that any legal action or proceeding against it under, arising out of or
in any manner relating to this Agreement or any other agreement, document or
instrument arising out of or executed in connection with this Agreement may be
brought only in an arbitration proceeding as provided in Section 13.9 or in a
court of the state of Minnesota or in the United States District Court for
Minnesota. Each of Buyer and Seller by the execution and delivery of this
Agreement, expressly and irrevocably assents and submits to the personal
jurisdiction of the
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arbitrators selected pursuant to Section 13.9 or any of such courts in any such
action or proceeding. Each of Buyer and Seller further irrevocably consents to
the service of any complaint, summons, notice or other process relating to any
such action or proceeding by delivery thereof to it by hand or by mail in the
manner provided for in Section 13.8 hereof. Each of Buyer and Seller hereby
expressly and irrevocably waives any claim or defense in any action or
proceeding based on any alleged lack of personal jurisdiction, improper venue or
forum non conveniens or any similar basis.
13.11 Confidentiality and Nonsolicitation.
(a) "SELLER CONFIDENTIAL INFORMATION" means information
received by Buyer or any of its agents, directors, officers, employees, counsel,
consultants, affiliates or advisors ("REPRESENTATIVES") from Seller or its
Representatives in the course of Buyer's investigation of Seller and negotiation
and performance of this Agreement, including without limitation trade secret and
other proprietary technical, financial and other information relating to the
Business or Seller's products, whether past, present or anticipated, including
information about Seller's research, development, manufacturing, purchasing,
accounting, engineering, marketing, selling or servicing, and any analyses,
compilations, studies, materials, memoranda, data, notes or documents prepared
by Buyer or its Representatives and concerning such information received by
Buyer or its Representatives.
(b) The Seller Confidential Information will be kept
confidential and will not, without the prior written consent of Seller, be
disclosed by Buyer or its Representatives in any manner whatsoever, in whole or
in part, and will not be used by Buyer or its Representatives other than in
connection with the transactions contemplated hereunder. The Seller Confidential
Information will be disclosed by Buyer and its Representatives only to Buyer's
Representatives who have a "need to know" such Seller Confidential Information
and who have been informed by Buyer of the confidential nature of the Seller
Confidential Information and who have first agreed to be bound by the terms and
conditions of this Section 13.11.
(c) Immediately upon termination of this Agreement, the Seller
Confidential Information which consists of analyses, compilations, studies,
material, memoranda, data, notes or other documents prepared by Buyer or its
Representatives in that capacity will be destroyed and such destruction will be
certified in writing to Seller by an authorized officer supervising such
destruction, and all other Seller Confidential Information will be returned to
Seller without Buyer retaining any copies thereof.
(d) In the event that Buyer or anyone to whom Buyer transmits
the Seller Confidential Information pursuant to the provisions of this Section
13.11 becomes legally compelled to disclose any of the Seller Confidential
Information, Buyer will provide Seller with prompt notice before such Seller
Confidential Information is disclosed so that Seller may seek a protective order
or other appropriate remedy and/or waive compliance with the provisions of this
Section 13.11. In the event that such protective order or other remedy is not
obtained, Buyer will furnish only that portion of the Seller Confidential
Information which Buyer is advised by written reasonable opinion of counsel is
legally required and will exercise Buyer's best efforts to assist Seller in
obtaining a
34
protective order or other reliable assurance that confidential treatment will be
accorded to the Seller Confidential Information that is disclosed.
(e) Nothing contained in this Section 13.11 will in any way
restrict or impair Buyer's right to use, disclose or otherwise deal with (1)
Seller Confidential Information which at the time of its disclosure is, or which
thereafter becomes through no fault of Buyer or its Representatives, part of the
public domain by publication or otherwise, and (2) Seller Confidential
Information which Buyer can show was in Buyer's possession or the possession of
one or more of its Representatives at the time of disclosure, and was not
acquired, directly or indirectly, under any secrecy obligation to Seller or
another party.
(f) The provisions of this Section 13.11 will lapse and be of
no further force or effect upon Closing.
13.12 Public Announcements. Neither Seller (nor any of its affiliates)
nor Buyer (nor any of its affiliates) will make any public statements, including
without limitation any press releases, with respect to this Agreement and the
transactions contemplated hereby without the prior written consent of the other
party (which consent may not be unreasonably withheld), except as may be
required by law and except that the party required to make such announcement
will, whenever practicable, consult with the other party concerning the timing
and content of such announcement before such announcement is made.
13.13 Severability. If any provision hereof is held by any court of
competent jurisdiction to be illegal, void or unenforceable, such provision will
be of no force and effect, but the illegality or unenforceability will have no
effect upon and will not impair the enforceability of any other provision of
this Agreement.
13.14 Definition of Seller's Knowledge. For purposes of this Agreement,
"KNOWLEDGE" of Seller includes only matters known or which would have been known
after due inquiry by Xxxxx X. Xxxxxxxx.
13.15 Disclosure Schedule; Buyer's Knowledge; Effect on Seller
Representations and Warranties; Effect of Materiality Qualification. Nothing in
the Disclosure Schedule will be deemed adequate to disclose an exception to a
representation or warranty of Seller made herein, unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
will not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself). Disclosures in any schedule of
the Disclosure Schedule will constitute disclosure only for purposes of such
schedule's counterpart section herein, and will not constitute disclosure for
purposes of any other section of this Agreement or any exhibit to or other
writing which is designated herein as being part of this Agreement. No
disclosure whatsoever during Buyer's due diligence investigation of Seller will
constitute an enlargement or restriction of the warranties or representations of
Seller hereunder or exceptions thereto beyond those specifically set forth in
this Agreement and the Disclosure Schedule. No
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representation or warranty of Seller will be deemed waived in whole or part, and
no Loss resulting from the breach thereof will be reduced, by reason of the fact
that Buyer or its representatives knew or should have known on or before the
Closing Date that such representation or warranty is or might be inaccurate in
any respect. If any representation or warranty of Seller that is qualified by
materiality (including a Material Adverse Effect) is breached after giving
effect to such materiality qualification, then Loss resulting from such breach
includes all Loss resulting from such breach from first dollar as if there were
no such materiality qualification.
13.16 No Third Party Beneficiaries. All Holders are intended
beneficiaries of the provisions of Article VIII, which provisions will inure to
the benefit thereof and be enforceable thereby. Except for the foregoing or as
otherwise expressly permitted by this Agreement, nothing in this Agreement will
confer any rights upon any person or entity which is not a party or permitted
assignee of a party to this Agreement.
13.17 Rule of Construction. The parties hereto acknowledge and agree
that each has negotiated and reviewed the terms of this Agreement, assisted by
such legal and tax counsel as they desired, and has contributed to its
revisions. The parties further agree that the rule of construction that any
ambiguities are resolved against the drafting party will be subordinated to the
principle that the terms and provisions of this Agreement will be construed
fairly as to all parties and not in favor of or against any party.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
AETRIUM INCORPORATED
By /s/ Xxxxxxx X. Xxxxx
Its Chief Financial Officer
WEB Technology, Inc.
By /s/ Xxxxx X. Xxxxxxxx
Its President
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