EXHIBIT 10.58
ASSET PURCHASE AGREEMENT
AMONG
CORONADO TECHNOLOGY GROUP, L.L.C.,
XXXXXXXXX XXXXX, XXXXX XXXX, XXXXXX XXXXXXX,
XXXXXX XXXX, AND XXXXXXXX XXXX
AND
XXXXX INSTRUMENTS CORP. AND CORONADO, INC.
DATED
OCTOBER 20, 2004
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of October 20,
2004, is made and entered into by and between Coronado Technology Group, L.L.C.,
an Arizona limited liability company ("Coronado") on the one hand, and Xxxxx
Instruments Corp., a Delaware corporation ("Buyer Parent"), and Coronado, Inc.,
a California corporation and a wholly owned subsidiary of Buyer Parent
("Buyer"), on the other. In addition, Xxxxxxxxx Xxxxx, an individual ("Xxxxx"),
Xxxxx Xxxx, an individual ("Xxxx"), Xxxxxx Xxxxxxx, an individual ("Xxxxxxx"),
Xxxxxx X. Xxxx, an individual ("X. Xxxx"), and Xxxxxxxx X. Xxxx, an individual
("Ilka" and together with Hogan, Lunt, Xxxxxxx and X. Xxxx, the "Principals")
are executing this Agreement for purposes of certain Sections as set forth
herein.
WHEREAS, Coronado is engaged in the manufacture, marketing, sale,
distribution and servicing of optical instruments, including without limitation,
telescopes and filters, used for solar observation under the Coronado brand name
(the "Business");
WHEREAS, Coronado owns all of the assets used in connection with the
Business and such assets represent all the assets necessary to operate the
Business as it has been operated in the past and as it is currently contemplated
for the foreseeable future; and
WHEREAS, Coronado desires to sell, transfer and assign to Buyer, and the
Buyer desires to purchase and acquire from Coronado, on the terms and subject to
the conditions set forth in this Agreement, all of the assets, and substantially
all of the liabilities, of Coronado; and
WHEREAS, the Principals collectively own all of the issued and outstanding
ownership interests and are the directors and officers of Coronado.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements and the conditions set forth in this Agreement, the
parties agree as follows:
ARTICLE I
DEFINITIONS
In addition to terms that may be defined elsewhere herein, the following terms
shall have the respective meanings set forth below:
1.1 "Action" means any action, claim, arbitration, demand, proceeding,
grievance, subpoena, inquiry, audit, hearing, investigation, litigation or
suit, whether civil, criminal, administrative, judicial or investigative,
whether formal or informal, whether public or private, commenced, brought,
conducted or heard by or before, or otherwise involving, any Governmental
Body or private arbitrator or mediator.
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1.2 "Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common
control with, Buyer or Coronado.
1.3 "Business" means the business of manufacturing, marketing, selling,
distributing and servicing of optical instruments, namely, telescopes and
filters used for solar observation and marketed under the Coronado brand
name and such other business as conducted by Coronado immediately prior to
the Closing Date (as defined below).
1.4 "Business Assets" means all properties, assets and rights of Coronado of
every kind and nature, tangible and intangible (including goodwill),
whether real, personal or mixed, whether accrued, contingent or otherwise
existing as of the Closing Date, such assets representing all of the
assets necessary to operate the Business as it currently operated.
1.5 "Business Interests" means all of the issued and outstanding ownership
interests of Coronado.
1.6 "Buyer" means Coronado, Inc., a California corporation and wholly owned
subsidiary of Xxxxx Instruments Corp., together with its successors and
permitted assigns.
1.7 "Buyer Parent" means Xxxxx Instruments Corp., a Delaware corporation.
1.8 "Claim" means any legal claim, legal demand or Action.
1.9 "Closing Date" means the date on which all of the transactions
contemplated by this Agreement shall have taken place, as described in
section 2.4 of this Agreement.
1.10 "Code" means the Internal Revenue Code of 1986, as amended, including
without limitation, any successor revenue code of the United States
federal government, together with the rules and regulations promulgated
thereunder.
1.11 "Coronado" means Coronado Technology Group, L.L.C., an Arizona limited
liability company.
1.12 "Earnout Payment" means a dollar amount equal to the greater of (a)
seventy- five percent (75%) of Coronado's Net Sales for the Earnout
Period, determined in accordance with GAAP, less the Initial Payment, or
(b) the product of three (3) and the dollar amount of Coronado's EBITDA
for the Earnout Period, determined in accordance with GAAP, less the
Initial Payment; provided, however, that the amount determined pursuant to
clause (a) immediately above shall in no event be utilized if Coronado's
EBITDA associated with the applicable Net Sales is less than twenty-five
percent (25%) of such Net Sales.
1.13 "Earnout Period" means that period of time that begins on January 1, 2005
and ends on December 31, 2005.
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1.14 "Earnout Objection Period" means that period of time Coronado shall notify
Buyer in writing of such disagreement within fifteen (15) business days
after Coronado receives the Written Report referenced in Section 2.3(c).
1.15 "EBITDA" means earnings before interest, taxes, depreciation and
amortization, calculated in accordance with GAAP (as defined below). All
consulting or salary payments made to the Principals during the Earnout
Period shall be included in SG&A (selling, general and administrative)
expense for purposes of calculating EBITDA pursuant to Section 2.3.
1.16 "Employee" means any current or former or retired employee, consultant, or
director of Coronado.
1.17 "Employee Plan" means any plan, program, policy, practice, contract,
agreement or other arrangement providing for compensation, severance,
termination pay, retirement pay or benefits, pension, deferred
compensation, performance or incentive awards, profit sharing, bonus,
stock or stock-related awards (including, without limitation, stock
options and stock purchase arrangements), welfare benefits or fringe
benefits or perquisites (including, without limitation, relating to any
airplanes, automobiles, clubs, vacation, child care, parenting,
sabbatical, sick leave, medical, dental, hospitalization, life insurance
and other types of insurance), or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or
unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which either (1) is or has
been maintained, contributed to, or required to be contributed to, by
Coronado, or (2) with respect to which Coronado has or may have any
liability or obligation.
1.18 "Employment Agreement" means each management, employment, severance,
consulting, retainer, relocation, repatriation, expatriation, visas, work
permit or other agreement, contract or understanding relating to
employment or compensation entered into by Coronado or with respect to
which Coronado has or may have any liability or obligation.
1.19 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, including without limitation, any successor employee retirement
income security law of the United States federal government, together with
the rules and regulations promulgated thereunder.
1.20 "ERISA Affiliate" means (1) any corporation which is a member of a
controlled group of corporations, within the meaning of Section 414(b) of
the Code and the regulations issued thereunder of which Coronado or any
subsidiary of Coronado is a member, (2) any trade or business (whether or
not incorporated) which is a member of a group of trades or businesses
under common control within the meaning of Section 414(c) of the Code and
the regulations issued thereunder of which Coronado or any subsidiary of
Coronado is a member, (3) any member of an affiliated service group within
the meaning of Section 414(m) or (o) of the Code and the regulations
issued thereunder of which Coronado, any subsidiary of
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Coronado, or any corporation identified in clause (1) or any trade or
business described in clause (2) is a member (in each case, a former ERISA
Affiliate of Coronado or any subsidiary of Coronado shall continue to be
considered an ERISA Affiliate with respect to any period such entity was
an ERISA Affiliate of Coronado or any subsidiary of Coronado with respect
to liabilities arising after such period for which Coronado or any
subsidiary of Coronado could be liable under the Code or ERISA).
1.21 "Environmental Law" means any Law or order relating to pollution,
contamination or protection of the Environment, including, without
limitation, the following statutes and all rules and regulations relating
thereto, all as amended from time to time: the Comprehensive Environmental
Response, Compensation and Liability Act as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C. Sections 9601 et
seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
Section 6901 et seq., the Clean Air Act, 42 U.S.C. Sections 7401 et seq.,
the Federal Water Pollution Control Act, 33 U.S.C. Sections 1251 et seq.,
the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq., the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections 136
et seq. and similar state laws.
1.22 "Environmental Permit" means any permit, license, certificate of
compliance, approval or other authorization required under applicable
Environmental Laws to conduct the Business and own or operate the Business
Assets, including, without limitation the Real Property.
1.23 [Reserved].
1.24 "GAAP" means generally accepted accounting principles in the United
States.
1.25 "Governmental Body" means any government or agency, administration,
department, commission, board, bureau or instrumentality or any body
thereof.
1.26 "Governmental License" means any permission, license, permit, consent,
registration, exemption, approval, authorization or qualification formally
issued in writing by a Governmental Body.
1.27 "Hazardous Materials" means (A) any dangerous, toxic or hazardous
pollutant, contaminant, chemical, waste, material or substance as defined
in or regulated or governed by any current Environmental Law, including
without limitation any pollutant, contaminant, chemical, waste, material
or substance that could reasonably be expected to subject Coronado to any
imposition of costs or liability under any current Environmental Law, and
(B) urea-formaldehyde, polychlorinated biphenyls, asbestos or
asbestos-containing materials, petroleum and petroleum products.
1.28 "Initial Payment" means the portion of the Purchase Price paid pursuant to
Section 2.2 below.
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1.29 "Intellectual Property" means all of the following, each as defined
herein: the Patents, Trademarks and Know How.
1.30 "Key Employee" means the Principals, any officer of Coronado other than
the Principals, and such other key employees listed on Schedule 1.30
attached hereto.
1.31 "Know-How" means all of the following to the extent they are used or held
by the Business: (1) all of the trade secrets, manufacturing processes and
the like associated with the Business, (2) quality assurance information,
(3) design documents, (4) specifications and performance criteria, (5)
operating instructions and maintenance manuals, (6) prototypes, models or
samples and (6) files relating to applications for Intellectual Property.
1.32 "Knowledge of Coronado and/or the Principals" means knowledge of a
particular fact or other matter if (a) any Principal or Key Employee is,
or at any time was, actually aware of such fact or other matter, or (b)
such Principal, Key Employee or officer should be aware of such fact or
other matter given such person's responsibilities or interests in the
Business and/or Coronado and the circumstances surrounding the fact or
matter in question.
1.33 "Laws" means all applicable domestic and foreign laws (whether statutory,
common law, or otherwise), rules, regulations, orders, ordinances,
judgments, decrees, writs and injunctions of all Governmental Bodies.
1.34 "Liabilities" means any and all Claims, causes of action, assessments,
losses, damages (compensatory, punitive or other), liabilities,
obligations, reimbursements, costs and expenses of any kind or nature,
actual, contingent, present or future, including, without limitation,
where applicable, interest, penalties and reasonable attorneys' and
experts' fees and expenses.
1.35 "Liens" means any lien, pledge, mortgage, security interest, charge,
voting trust, restriction on transfer, or other encumbrance.
1.36 "Material Adverse Effect" means any circumstance, change or effect that is
materially adverse to the business, assets, financial condition, business
prospects or results of operations of the Business.
1.37 "Net Sales" means gross sales less returns, allowances, and discounts.
1.38 "Patents and Trademarks" means all patents, trademarks and applications
for patents and trademarks owned by Coronado or licensed by Coronado for
use in connection with the Business or owned by the Principals,
individually or in the aggregate, that are used in connection with the
Business, together with all registrations or applications for registration
of any of the foregoing, as set forth on Schedule 3.12.
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1.39 "Permitted Liens" means:
(a) Liens arising by operation of law, such as mechanic's,
materialman's, landlord's, warehouseman's and carrier's liens and
other similar laws, securing obligations incurred in the ordinary
course of business which are not past due in accordance with their
terms or which are being contested in good faith by appropriate
proceedings and which do not preclude delivery of the Purchased
Assets to Buyer;
(b) Liens for current taxes, assessments or governmental charges or
levies not yet due or payable; and
(c) Liens or security interests that attach to any property by operation
of contractual obligation or law as a result of a progress payment
clause having been included in any contract.
1.40 "Person" means any individual, corporation, Governmental Body,
association, partnership, limited liability company, or other entity.
1.41 "Real Property Lease" means any and all real property leases used in
connection with the Business, together with all addendums, modifications
and amendments thereto.
1.42 "Retained Liabilities" means those liabilities of Coronado which are to be
retained by Coronado and not assumed in anyway by Buyer and are set forth
on Schedule 1.42.
1.43 "Taxes," except as otherwise limited herein, means the United States,
state, local, provincial and foreign income, payroll, withholding, excise,
value added, social security, sales, use, real and personal property,
occupancy, business and occupation, mercantile, capital stock, franchise,
profits, gross receipts, transfer, employment, wage, severance, real
estate, stamp, alternative or add-on minimum, environmental, license,
capital, intangible, services, premium, ad valorem, windfall profits,
import, custom, and any other taxes, fees, duties, assessments or
governmental charges of any kind whatsoever (including interest, other
additions to Taxes and penalties thereon and including estimated taxes
thereof).
1.44 "Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
1.45 "$" means U.S. Dollar.
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ARTICLE II
SALE OF ASSETS; ASSUMPTION OF LIABILITIES; PURCHASE PRICE
PROVISIONS
2.1 Purchase and Sale of Assets; Assumption of Liabilities
(a) On the terms and subject to the conditions of this Agreement,
Coronado shall sell, transfer, assign and deliver to Buyer, and
Buyer shall purchase and acquire from Coronado, all of the Business
Assets.
(b) Buyer shall assume liability for all liabilities of Coronado of
every kind, whether accrued, contingent or otherwise existing as of
the Closing Date, except for the Retained Liabilities.
2.2 Purchase Price; Manner of Payment.
As consideration for the Buyer's purchase of the Business Assets, Buyer
shall pay to Coronado, on the Closing Date, the sum of $2,500,000 plus the
adjustments specified in Sections 2.3(a) below (the "Purchase Price"). The
Purchase Price shall be paid by wire transfer of immediately available
funds to an account designated by Coronado. The Purchase Price shall be
adjusted in accordance with Section 2.3.
2.3 Adjustments to Purchase Price.
(a) The Purchase Price shall be increased by an amount equal to the
Retained Liabilities as such amounts are set forth on Coronado's
financial statements dated as of August 31, 2004 and as set forth on
Schedule 1.42 attached hereto.
(b) The Purchase Price shall also be increased by the amount of the
Earnout Payment, if any. The Earnout Payment shall be paid by Buyer
to Coronado by wire transfer of immediately available funds to an
account designated by Coronado within ten (10) business days after
the day the Written Report referenced in Section 2.3(c) hereof is
agreed to, or deemed to be agreed to, by Coronado.
(c) As soon as practicable after the termination of the Earnout Period,
and in no event more than 60 days thereafter, Buyer shall calculate
Coronado's Net Sales for the Earnout Period, determined in
accordance with GAAP, and Coronado's EBITDA for the Earnout Period,
determined in accordance with GAAP, and shall deliver to Coronado a
written report setting forth in reasonable detail, with the related
work papers included, the amount and determination of such amounts.
The written report and the financial statements and accountants'
work papers accompanying such report are collectively referred to
herein as the "Written Report." The Written Report shall be used for
purposes of determining the Earnout
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Payment, if any. Coronado and Buyer hereby agree that all
information given to Coronado for the purpose of making such
calculations shall be kept confidential and shall not be used except
for the purpose of determining the Earnout Payment, if any.
During preparation of the Written Report, each party shall cooperate
fully with the other, including the provision on a timely basis of
all information reasonably necessary or useful in preparing the
Written Report, including, but not limited to its accountants' work
papers, books, records and useful source documentation.
(d) If Coronado disagrees with the calculations set forth on the Written
Report, it shall notify Buyer in writing of such disagreement within
fifteen (15) business days after Coronado receives the Written
Report (the "Earnout Objection Period"), setting forth in such
notice in reasonable detail the reasons for such disagreement and
Coronado's calculation of such amounts. If Coronado fail to provide
such written notice within the Earnout Objection Period, then the
calculations as set forth in the Written Report will be final and
binding. If Buyer timely receives such written notice, Buyer and
Coronado will attempt in good faith to reach an agreement as to the
matters in dispute. If Buyer and Coronado, notwithstanding such good
faith effort, fail to resolve all matters in dispute within ten (10)
business days thereafter, then Coronado and Buyer agree to jointly
retain a nationally recognized accounting firm which is independent
of, and is not auditing, the books and records of either of Coronado
or any of its Affiliates or Buyer or any of its Affiliates (the
"Accounting Firm") to arbitrate the dispute and render a decision
regarding the Written Report within thirty (30) days of such
retention, which decision shall be final and binding. The Accounting
Firm shall conduct such arbitration by reviewing the Written Report
with the understanding that such calculations determined therein
were prepared in accordance with GAAP. The Accounting Firm's work
shall be limited to resolving the matters that Coronado raised in
its notice of objection, and the Accounting Firm's decision on such
matter shall be final and binding and not reviewable for error of
any kind. Coronado and Buyer shall each bear their own costs and
expenses of any such arbitration and shall share equally the fees
and expenses of the Accounting Firm. If Coronado and Buyer cannot
agree to jointly retain the Accounting Firm, each shall delegate one
Certified Public Accountant. The two Certified Public Accountants
shall select a third Certified Public Accountant. The three
Certified Public Accountants shall select the Accounting Firm to
conduct the arbitration.
(e) During the term of the Earnout Period, Buyer shall operate the
Business as a separate business division and the Business shall not
be allocated expenses from Buyer Parent or Buyer's other divisions
and/or subsidiaries, unless the parties otherwise agree. Buyer shall
use commercially reasonable efforts to offer the products sold in
the Business through
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Buyer's distribution system as soon and as fully as practicable. On
or before the thirtieth (30th) day following the end of each fiscal
quarter of Buyer Parent occurring during the Earnout Period, Buyer
shall provide Coronado with quarterly statements setting forth Net
Sales and EBITDA for Coronado for such fiscal quarter or portion
thereof.
2.4 Closing.
The closing of the acquisition of the Business Assets (the "Closing")
shall take place at the offices of Buyer Parent in Irvine, California, at
a time to be agreed upon between Buyer and Coronado (the "Closing Date"),
or such other time, date and place as the parties may agree in writing,
provided that all conditions to the Closing have been satisfied or waived
in writing. On the Closing Date, Coronado shall execute and deliver to
Buyer, and Buyer shall execute and deliver to Coronado the documents
identified in Sections 8.8 and 9.5, respectively. The Closing shall be
effective at 5:00 p.m. Pacific time on the applicable Closing Date.
ARTICLE III
CORONADO'S REPRESENTATIONS AND WARRANTIES
As of the date of this Agreement, Coronado and the Principals, jointly and
severally, represent and warrant to and agree with Buyer as follows:
3.1 Existence, Power, Authorization and Qualifications of Coronado.
Coronado is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Arizona and has the
requisite power and authority to carry on its business as it is now being
conducted, and is duly qualified to do business and is in good standing in
every jurisdiction in which the Business is required to be so qualified.
This Agreement has been, and the Related Agreements will be, duly executed
and delivered by Coronado and the Principals and constitute or will
constitute valid and legally binding obligations of Coronado and the
Principals enforceable against them in accordance with their terms, except
as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the enforcement of creditors' rights
generally, and by general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or law), including
without limitation, possible unavailability of specific performance,
injunctive relief, or other equitable remedies.
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3.2 Capitalization.
(a) The authorized ownership interests of Coronado consist solely of the
Business Interests, which represent all of the issued and
outstanding interests in Coronado.
(b) The Principals are the only members of, or owners of equity
interests in, Coronado and the Business Interests comprise all of
the outstanding ownership interests in Coronado. All of the Business
Interests are duly authorized, validly issued, fully paid,
nonassessable and are free of preemptive rights or any other third
party rights. All of the Business Interests have been offered, sold
and delivered by Coronado and the Principals in compliance with
applicable securities and corporate laws. None of the Business
Interests have been issued in violation of any preemptive rights,
rights of first refusal or similar rights.
(c) There are no options, warrants, calls, subscriptions, convertible
securities, rights (including preemptive rights), commitments or
agreements of any character to which Coronado or the Principals are
a party or by which Coronado or the Principals are bound obligating
Coronado to issue, exchange, transfer, sell, repurchase, redeem or
otherwise acquire any of its interests or obligating Coronado or the
Principals to grant, extend, accelerate the vesting of or enter into
any such subscription, option, warrant, equity security, call,
right, commitment or agreement. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation
or similar rights with respect to Coronado. Except as contemplated
by this Agreement, there are no registration rights agreements,
voting trusts, proxies or other agreements or understandings to
which Coronado or the Principals are a party or by which Coronado or
the Principals are bound with respect to any equity security of any
class of Coronado.
3.3 Non-Contravention.
Neither the execution and delivery by Coronado and the Principals of this
Agreement, the Related Agreements and any other documents and agreements
contemplated by this Agreement, nor the consummation by Coronado and the
Principals of the transactions contemplated by this Agreement, will
violate any provision of the Articles of Organization or the Operating
Agreement of Coronado, or will violate any material Law, judgment, decree,
order, award, citation, policy, standard, official interpretation, writ,
injunction, regulation or rule of any court or other Governmental Body.
3.4 Governmental Bodies; Consents.
Coronado is not required to submit any notice, report or other filing with
any Governmental Body in connection with its execution or delivery of this
Agreement or the Related Agreements or the consummation of the
transactions
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contemplated hereby or thereby. Except for the consents set forth in
Schedule 3.4 (collectively, the "Required Corondao Consents"), Coronado is
not required to obtain any consent, approval, authorization, waiver,
permit, grant, license, franchise, concession, agreement, license or
exemption (each, a "Consent") of any Governmental Body or any Consent of
any other party or person in connection with its execution, delivery and
performance of this Agreement or the Related Agreements or the
transactions contemplated hereby and thereby.
3.5 Financial Statements.
(a) Coronado and the Principals have delivered to Buyer the unaudited
consolidated financial statements of the Business as of and for the
periods ended December 31, 2003 and 2002, and August 31, 2004 (the
"Unaudited Business Financial Statements"), including a balance
sheet, statements of income and a statement of cash flows.
(b) The Unaudited Business Financial Statements are based upon the
information contained in the books and records of Coronado and
fairly present the financial condition of the Business as of the
dates thereof and results of operations for the periods referred to
therein. The Unaudited Business Financial Statements have been
prepared on an income tax basis applicable to unaudited interim
financial statements (and thus may not contain all notes and may not
contain prior period comparative data which are required to be
prepared in accordance with GAAP), and reflect all adjustments
necessary to fairly state the results for the period(s) presented.
3.6 Absence of Undisclosed Liabilities.
There are no material liabilities or obligations of a nature required by
GAAP to be reflected on the Unaudited Business Financial Statements or in
the Knowledge of Coronado or the Principals (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due, and
regardless of when asserted) through the date hereof, except (a) as
reflected or reserved against in the Unaudited Business Financial
Statements, (b) current liabilities which have arisen after August 31,
2004 in the ordinary course of business consistent with past practice, or
(c) as otherwise set forth in Schedule 3.6.
3.7 Absence of Certain Developments.
Except as set forth in Schedule 3.7, and except for the solicitation and
negotiation of a transaction to dispose of the Business and the
transactions contemplated by this Agreement, since August 31, 2004 through
the date hereof, Coronado and the Principals have conducted the Business
only in the ordinary course of business consistent with past practice and
has not, on behalf of, in connection with or relating to the Business or
the Business Assets:
(a) suffered or otherwise incurred or experienced any Material
Adverse Effect;
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(b) sold, leased, transferred or assigned any material assets,
tangible or intangible, outside the ordinary course of
business;
(c) entered into any material agreement, contract, lease or
license outside the ordinary course of business;
(d) suffered any theft, damage, destruction or loss of or to any
property or properties owned or used by it, whether or not
covered by insurance, that would have, individually or in the
aggregate, a Material Adverse Effect;
(e) made any material capital expenditure or commitment outside
the ordinary course of business;
(f) entered into or modified any employment, severance or similar
agreements or arrangements with or granted any bonuses, salary
or benefits increases, severance or termination pay to any Key
Employee outside the ordinary course of business consistent
with past practice;
(g) adopted or amended any bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, trust, fund or
group arrangement for the benefit or welfare of any employees,
officer, director or affiliate;
(h) made any change in accounting principles or practices from
those utilized in the preparation of the Unaudited Business
Financial Statements;
(i) sold, pledged, encumbered or otherwise burdened the Business
Interests;
(j) taken any action or entered into any agreement not described
in subsections (a) through (i) above that is material to the
Business or Coronado; or
(k) agreed or committed, whether orally or in writing, to do any
of the foregoing.
3.8 Real Property.
The real property described in the Real Property Lease, including all
buildings, structures, improvements, fixtures, systems and equipment
thereon and attached or appurtenant thereto, together with all rights and
easements appurtenant to and benefiting such real property (the "Real
Property"), constitutes all of the real property used by Coronado and the
Principals in connection with the Business. Coronado and the Principals
have delivered to Buyer a complete and accurate copy of the Real Property
Lease, which lease has not been modified in any
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respect, except to the extent that such modifications are disclosed by the
copy delivered to Buyer. Except as set forth in Schedule 3.8, with respect
to the Real Property Lease:
(a) Coronado is the owner or holder of the leasehold estate or interest
in the Real Property that is the subject of the Real Property Lease,
free and clear of all Liens (other than Permitted Liens);
(b) the Real Property Lease is legal, valid, binding, enforceable, and
in full force and effect in all material respects, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
affecting enforcement of creditors rights generally;
(c) the Real Property Lease will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby,
except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors rights generally;
(d) no party to the Real Property Lease is in breach or default, and no
event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification,
or acceleration thereunder;
(e) there are no disputes, oral agreements, or forbearance programs in
effect as to the Real Property Lease;
(f) Coronado has not assigned, transferred, conveyed, mortgaged, deeded
in trust, or encumbered any interest in the leasehold;
(g) all facilities leased thereunder have received all material
approvals of Governmental Bodies (including licenses and permits)
required in connection with the operation thereof as currently used
and have been operated and maintained in all material respects in
accordance with applicable laws, rules, and regulations;
(h) all facilities leased thereunder are supplied with utilities and
other services necessary in all material respects for the operation
of such facilities as currently used; and
(i) Coronado and the Principals have not received any notice from any
Governmental Body that such parcel is in violation of the provisions
of any legal requirement, including, without limitation, any zoning,
subdivision, environmental protection, building, fire or health
laws, rules or regulations.
13
3.9 Assets.
(a) Except as set forth in Schedule 3.9(a), Coronado has good and
marketable title to, or a valid leasehold interest in, all of the
material tangible Business Assets, free and clear of all Liens
(other than Permitted Liens), except for assets and properties
disposed of in the ordinary course of business.
(b) The Business Assets comprise all assets required for the continued
conduct of the Business as it is now being conducted by Coronado.
(c) The Business Assets are in all material respects adequate for the
purposes for which such assets are currently used or are held for
use. The Business Assets are in good repair and operating condition
(subject to normal wear and tear) and there are no defects, facts or
conditions affecting the Business Assets which could, individually
or in the aggregate, interfere in any respect with the use,
occupancy or operation thereof as currently used, occupied or
operated, or their adequacy for such use except, in each case, as
would not have, individually or in the aggregate, a Material Adverse
Effect.
3.10 Accounts Receivable.
The accounts and notes receivable of Coronado (including, without
limitation, the accounts receivable reflected on the Unaudited Business
Financial Statements which have not been collected prior to the Closing
Date) are valid receivables, are not subject to valid counterclaims or
setoffs and are collectible in accordance with their terms, except (a) as
otherwise described in Schedule 3.10, and (b) to the extent of the bad
debt reserve reflected on the Unaudited Business Financial Statements.
3.11 Inventory.
All inventories of supplies, raw materials, parts, finished goods,
work-in-process, product prototypes and developments, product labels,
packaging materials and office and other supplies of Coronado (the
"Inventory") are of good and usable and, with respect to finished
products, saleable quality, except as set forth in Schedule 3.11.
3.12 Intellectual Property.
(a) Schedule 3.12(a) sets forth a correct and complete list and summary
description of all Patents and Trademarks. The Business Assets
include all Patents and Trademarks.
(b) Except as set forth in Schedule 3.12(b), Coronado is the owner of
all right, title and interest in and to such Patents and Trademarks,
free and clear of all Liens except Permitted Liens, and has the
right to use such Patents and Trademarks without payment to any
third-party.
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(c) Except as set forth in Schedule 3.12(c), the Intellectual Property
comprise all intellectual property owned or used or held for use by
Coronado in connection with, and constitute all intellectual
property necessary for the conduct of, the Business as presently
conducted.
(d) Except as set forth in Schedule 3.12(d): (i) all patents and
registrations identified in Schedule 3.12(a) are in force; (ii)
Coronado has the right to bring actions for infringement or
unauthorized use of the Patents and Trademarks, and (iii) to the
Knowledge of Coronado and the Principals, no other Person is
infringing upon or has infringed upon the Intellectual Property at
any time during the five (5) years preceding the date hereof.
(e) Except as set forth in Schedule 3.12(e): (i) during the five (5)
years before the date hereof, no written or recorded claim has been
made or asserted that alleges that the products associated with the
Business or Intellectual Property infringe the intellectual property
of another Person; (ii) no intellectual property-related litigation,
arbitration or other proceeding is to the Knowledge of Coronado or
the Principals, currently pending with respect to the Business or
Intellectual Property; and (iii) during the five (5) years before
the date of this Agreement, no written or recorded claim has been
made or asserted that challenges the validity or ownership of any
Intellectual Property.
3.13 [Reserved]
3.14 Litigation; Orders.
(a) Except as set forth in Schedule 3.14(a) (which also identifies the
parties to and briefly describes the basis for each pending or
threatened Action), there is no pending or threatened Action that
relates to or that may affect in any manner the Business or the
Business Assets; and there is no pending or threatened Action that
challenges or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with any of the transactions
contemplated by this Agreement or the Related Agreements. Coronado
has made available to Buyer copies of all pleadings, correspondence
and other documents and materials relating to each Action described
in Schedule 3.14(a), and no Action listed or required to be listed
therein could have a Material Adverse Effect.
(b) No order or agreement related to litigation or the settlement
thereof is in effect that relates to or that may affect in any
material manner the Business or any of the Business Assets.
3.15 Products.
Coronado has made available to Buyer access to copies of the standard
terms and conditions of sale for each of the products or services of the
Business (containing applicable guaranty, warranty and indemnity
provisions). Except as set forth in Schedule 3.15: (a) no product
manufactured, sold, leased or delivered by, or
15
service rendered by or on behalf of, Coronado in connection with the
Business is subject to any guaranty, warranty or other indemnity, express
or implied, beyond such standard terms and conditions; and (b) each
product manufactured, sold, leased or delivered by, or service rendered by
or on behalf of, Coronado in connection with the Business has been in
conformity with all applicable contractual commitments and all express and
implied warranties.
3.16 Insurance.
Coronado maintains policies of fire and casualty, liability and other
forms of insurance with respect to the Business and the Business Assets in such
amounts, with such deductibles and against such risks and losses as are, in the
judgment of Coronado and the Principals, reasonable for the Business and the
Business Assets. The insurance policies maintained by Coronado and the
Principals with respect to the Business and the Business Assets are set froth in
Schedule 3.16. All such policies are in full force and effect, no invoiced
premiums are overdue for payment, and no notice of cancellation or termination
has been received with respect to any such polity which has not been replaced on
substantially similar terms prior to the date of such cancellation.
3.17 Contracts and Commitments.
(a) Schedule 3.17(a) lists the following agreements to which Coronado is
a party (collectively, the "Business Contracts"):
(i) any agreement for the lease of personal property to or from
any Person providing for lease payments in excess of $20,000
per year;
(ii) any agreement for the sale or purchase of raw materials,
commodities, supplies, products or other personal property or
for the furnishing or receipt of services, the performance of
which will extend over a period of more than one year or
involve consideration in excess of $20,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement under which Coronado has created, incurred,
assumed or guaranteed any indebtedness for borrowed money, or
any capitalized lease obligation, in excess of $20,000 or
under which it has imposed a Lien on any of its net assets,
tangible or intangible;
(v) any material agreement concerning confidentiality or
noncompetition by Coronado or the Principals;
(vi) any agreement with the Principals or the Principals'
Affiliates;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other
material plan or arrangement for the benefit of Coronado's
current or former
16
directors, officers and employees, including, without
limitation, the Principals;
(viii) any collective bargaining agreement;
(ix) any written or oral agreement for the employment of any
individual on a full-time, part-time, consulting or other
basis providing annual compensation in excess of $40,000 or
providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, owners and
employees outside the ordinary course of business, including,
without limitation, the Principals;
(xi) any agreement under which the consequence of a default or
termination could have a Material Adverse Effect;
(xii) any agreement under which Coronado has advanced or loaned any
other Person amounts in the aggregate in excess of $20,000;
or
(xiii) any other agreement the performance of which involves
consideration in excess of $20,000.
(b) Subject to obtaining any requisite consents of third parties (such
consents being identified on Schedule 3.17(a) hereto), the
enforceability of the Business Contracts will not be affected in any
material manner by the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby;
(c) Neither Coronado nor any other party, is in default under or in
violation of, nor is there any basis for any valid claim of default
under or violation of, any Business Contract that could,
individually or in the aggregate, have a Material Adverse Effect;
(d) Subject to obtaining any requisite consents of third parties, each
Business Contract is in all material respects valid, binding and in
full force and effect and is enforceable by Coronado in accordance
with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general principles
of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law), including, without limitation,
possible unavailability of specific performance, injunctive relief
or other equitable remedies; and there have been no cancellations or
threatened cancellations thereof nor outstanding material disputes
thereunder.
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3.18 Books and Records.
The books, records and accounts of Coronado have been maintained on an
income tax basis in all material respects in accordance with good business
practice and in sufficient detail to reflect accurately and fairly the
operations, transactions and disposition of the assets, liabilities and
equities concerning Coronado and to prepare financial statements of
Coronado.
3.19 Brokers.
Neither Coronado nor any of its respective Affiliates has employed any
broker, agent or finder in connection with any transaction contemplated by
this Agreement.
3.20 Employees; Labor Matters.
(a) Schedule 3.20(a) contains a complete and accurate list of the
following information for each current employee of Coronado,
including each employee on leave of absence or layoff status (each,
a "Coronado Employees"): name; job title; date of hiring or
engagement; and current compensation paid or payable together with
current employee benefit information.
(b) Coronado has not violated the Worker Adjustment and Retraining
Notification Act (the "WARN Act") or any similar state or local Law.
(c) Except as set forth in Schedule 3.20(c), with respect to each
employee previously or presently employed by Coronado:
(i) no such person is bound by any contract, agreement,
understanding or other arrangement that purports to limit
his, her or its ability to engage in or continue or perform
any conduct, activity, duties or practice relating to the
Business or to assign to Coronado or to any other person any
rights to any invention, improvement, or discovery;
(ii) Coronado has complied in all material respects with all Laws
relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and
other Taxes;
(iii) there are no pending material labor relations problems
relating to the Business, and to the Knowledge of Coronado
and the Principals, the labor relations of the Business are
satisfactory;
(iv) there is no collective bargaining agreement to which Coronado
is a party, no collective bargaining agreement is currently
being negotiated or proposed and to the Knowledge of Coronado
and the
18
Principals no person is making any attempt or effort to form
a labor union;
(v) there are no workers' compensation claims pending against
Coronado and Coronado and the Principals have no Knowledge of
any facts that would give rise to such a claim; and
(vi) Coronado is the exclusive owner of all Intellectual Property
developed by such persons and no such person has any claim
with respect to any Intellectual Property.
3.21 Employee Benefit Plans.
(a) Schedule 3.21(a) contains an accurate and complete list of each
Employee Plan and each Employment Agreement. Neither Coronado nor
any ERISA Affiliate maintains, has in the past maintained,
contributes to, or has in the past been required to contribute to
any "multiemployer plan" within the meaning of Section 3(37) of
ERISA.
(b) To the extent required (either as a matter of law or to obtain the
intended tax treatment and tax benefits), all Employee Plans comply
in all material respects with the requirements of ERISA, the Code
and any other applicable law, except for instances of non-compliance
that would not have, individually or in the aggregate, be material.
With respect to the Employer Plans, (i) all required contributions
which are due have been paid, (ii) there are no material actions,
suits or claims pending, other than routine uncontested claims for
benefits, and (iii) to the Knowledge of Coronado and the Principals,
there have been no prohibited transactions (as defined in ERISA
Section 406 or Code Section 4975) except for instances that would
not be material, individually or in the aggregate.
(c) Coronado has made available to Buyer true and complete copies of (i)
all documents embodying each Employee Plan and each Employment
Agreement including without limitation all amendments thereto; (ii)
the most recent available summary plan description together with the
summary(ies) of material modifications thereto, if any, required
under ERISA with respect to each Employee Plan; (iii) the most
recent Internal Revenue Service determination letters for the
pension and 401(k) plan in which Coronado Employees participate;
(iv) a written description of each Employee Plan and each Employment
Agreement that is not in writing; and (v) the most recent annual
report (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in
connection with each pension or 401(k) Employee Plan.
(d) To the Knowledge of Coronado and the Principals, Coronado has never
represented, promised or contracted (whether in oral or written
form) to any Employee (either individually or to Employees as a
group) or any other person that such Employee(s) or other person
would be provided
19
with post-employment health, life insurance, accident or other
welfare or other types of benefits except to the extent required by
statute, except as described on Schedule 3.21, and except to the
extent that Coronado could terminate such benefits at any time.
(e) Coronado and, to the extent applicable, each Employee Plan, is in
material compliance with the requirements of Code Sections 4980B and
4975, Part 6 of Title I and Section 502(i) of ERISA, the Family
Medical Leave Act of 1933, the Health Insurance Portability and
Accountability Act of 1996, the Women's Health and Cancer Rights Act
of 1998, the Newborns' and Mothers' Health Protection Act of 1996,
or any amendment to each such act, or any similar provisions of
state law.
(f) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an
event under any Employee Plan, Employment Agreement, trust or loan
that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits
with respect to any Employee or with respect to which Coronado
reasonably could have any liability.
(g) Except as expressly contemplated herein, Coronado and the Principals
have no intent or commitment to establish, adopt, enter into, or
amend any Employee Plan or Employment Agreement.
3.22 Affiliate Transactions.
Except as described in Schedule 3.22, and other than pursuant to this
Agreement, no officer, director, employee or Principal ("Insider") of
Coronado has any agreement with Coronado (other than normal employment
arrangements) or any interest in any property, real, personal or mixed,
tangible or intangible, used in or pertaining to the Business. To the
Knowledge of Coronado and the Principals, no Insider of Coronado has any
direct or indirect interest in any competitor, supplier or customer of
Coronado or in any person, firm or entity from whom or to whom Coronado
leases any property, or in any other person, firm or entity with whom
Coronado transacts business of any nature in any material manner.
3.23 Compliance with Laws, Licenses.
(a) Laws. To the Knowledge of Coronado and the Principals, Coronado has
conducted the Business in compliance with all applicable Laws except
where the failure to be in such compliance would not, individually
or in the aggregate, have a Material Adverse Effect.
(b) Governmental Licenses. Schedule 3.23(b) lists the Governmental
Licenses issued to or possessed by Coronado concerning the Business.
The Governmental Licenses set forth in Schedule 3.23(b) comprise all
of the Governmental Licenses required to operate the Business as
presently
20
conducted by Coronado. Coronado and the Principals have not received
any written, or to the Knowledge of Coronado and the Principals,
other notification of any threatened suspension or cancellation of
any of the Governmental Licenses. Each of the Governmental Licenses
is valid and in full force and effect and Coronado has not received
notice of any claim or threat to revoke any of the Governmental
Licenses or to declare them invalid.
3.24 Environmental Matters.
Except as set forth on Schedule 3.24:
(a) Coronado, in its operation of the Business, to the Knowledge of
Coronado and the Principals, is now, and at all times has been, in
compliance with all applicable Environmental Laws except where the
failure to be in compliance would not have a Material Adverse Effect
on the Business.
(b) Coronado has or has applied (and if applied for, is operating as
permitted during the application period) for all Environmental
Permits required for the operation of the Business as presently
conducted and, to the Knowledge of Coronado and the Principals,
there are now, and at all times there have been, no violations, and
no pending or threatened, investigations or proceedings with respect
to such Environmental Permits except where the failure to have such
Environmental Permits or where the violation, investigation or
proceeding relating thereto would not, individually or in the
aggregate, have a Material Adverse Effect.
(c) To the Knowledge of Coronado and the Principals, no written notice,
notification, demand, request for information, citation, summons,
complaint or order has been received by, is pending, or threatened
by any Person against Coronado nor has any penalty been assessed
against Coronado for any alleged violation of any Environmental Law
or liability thereunder.
(d) To the Knowledge of Coronado and the Principals, (i) no Hazardous
Materials have been buried, incinerated, deposited, stored, or
released on or under any part of the Real Property or at any
off-site disposal location, except in compliance with applicable
Environmental Laws, (ii) no Hazardous Materials, radon at levels
above natural background or pesticides are located on or under the
Real Property in violation of applicable Environmental Laws, and
(iii) no aboveground or underground storage tanks are located on or
under the Real Property or have been located on or under the Real
Property and then subsequently been removed or filled.
(e) Coronado is not potentially responsible for (i) any release of
Hazardous Materials in violation of Environmental Laws or
Environmental Permits,
21
or (ii) any costs arising under or in violation of Environmental
Laws or Environmental Permits.
(f) Coronado has not received any notice that the Real Property has been
listed under the U.S. Environmental Protection Agency National
Priorities List of Hazardous Waste Sites, or any other similar list,
schedule, law, inventory or record of hazardous or solid waste sites
maintained by a governmental authority, nor does Coronado or any of
the Principals have any Knowledge of any such listing.
ARTICLE IV
BUYER'S REPRESENTATIONS AND WARRANTIES
As of the date of this Agreement, Buyer and Buyer Parent hereby represent and
warrant to and agree with Coronado as follows:
4.1 Existence, Power, Authorization and Qualifications of Buyer and Buyer
Parent.
Buyer and Buyer Parent are each corporations duly organized, validly
existing and in good standing under the laws of California and Delaware,
respectively, and each has the corporate power and authority to execute,
deliver and perform this Agreement, and the Related Agreements to own all
its properties and assets, and to carry on its business as it is now being
conducted, and each is duly qualified to do business and is in good
standing in every jurisdiction in which the business of each requires it
to be so qualified. Buyer and Buyer Parent each has all requisite
corporate power and authority to execute and deliver this Agreement and
consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the Related Agreements by Buyer and
Buyer Parent have been duly authorized by all necessary corporate action
of Buyer and Buyer Parent, and this Agreement has been, and the Related
Agreements will be, duly executed and delivered by Buyer and Buyer Parent
and constitute or will constitute valid and legally binding obligations of
Buyer and Buyer Parent enforceable against it in accordance with their
terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally, and by general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or law), including without limitation, possible unavailability of
specific performance, injunctive relief, or other equitable remedies.
4.2 Non-Contravention.
Neither the execution and delivery by Buyer and Buyer Parent of this
Agreement, the Related Agreements and the other documents and agreements
contemplated hereby, and thereby, nor the consummation by Buyer of the
transactions contemplated hereby or thereby, will violate any provision of
the articles of incorporation, bylaws or any other charter documents of
Buyer, or will violate any Law or any judgment, decree, order, award,
citation, policy, standard, official
22
interpretation, writ, injunction, regulation or rule of any court or other
Governmental Body.
4.3 Brokers.
Neither Buyer nor any of its Affiliates has employed any broker, agent or
finder in connection with any transaction contemplated by this Agreement.
ARTICLE V
COVENANTS
5.1 Conduct Pending Closing.
Except to the extent consented to in writing by Buyer, Coronado agrees
that pending the Closing, it shall conduct the Business only in the
ordinary course of business and consistent with past practices. Without
limiting the generality of the foregoing, from the date hereof to the
Closing, Coronado shall not, without the written consent of Buyer:
(a) permit, allow or suffer any of its material assets (tangible or
intangible) included in the Business Assets to be subjected to any
Liens other than Permitted Liens, nor permit any Liens to be
foreclosed;
(b) sell, transfer or otherwise dispose of any of its assets or other
rights (tangible or intangible) included in the Business Assets
other than in the ordinary course of business consistent with past
practice;
(c) dispose of or permit to lapse any material right to the use of any
material Patents, Trademarks and Copyrights or disclose to any
person other than representatives of Buyer any proprietary
information or included in the Business Assets not a matter of
public knowledge;
(d) terminate or amend in any material respect any material Business
Contract;
(e) exercise any option to renew any material lease or any option to
purchase any material property included in the Business Assets or
permit any such option to expire without first notifying Buyer of
the option expiration date;
(f) omit to do any act, or permit any act or omission to act, which
would cause a material breach of any Business Contract, or any
material breach of any representation, warranty, covenant or
agreement made by Coronado or the Principals herein;
(g) fail to notify Buyer of any Claim which is threatened or commenced
against Coronado between the date of this Agreement and the Closing
Date which may have a Material Adverse Effect;
23
(h) make any distributions to the Principals other than payments of
salaries and draws in amounts paid consistent with past practices;
(i) materially increase or decrease the present list prices for the
products or related services sold by Coronado; and,
(j) agree, whether in writing or otherwise, to do any of the foregoing.
5.2 Preservation of Business.
During the period beginning on the date hereof and ending on the Closing
Date, (a) Coronado and the Principals will use their best efforts to
preserve the Business and Business Assets and to preserve the goodwill of
customers, suppliers and others having business relations with Coronado,
(b) Coronado and Buyer will consult with each other concerning, and
Coronado and Buyer each will cooperate to keep available to Buyer, the
services of the employees of Coronado as well as the Principals, and (c)
Coronado shall pay all accounts payable in a timely manner in accordance
with stated terms thereof.
5.3 Access to Records and Properties Prior to Closing.
Between the date of this Agreement and the Closing Date, Coronado and the
Principals shall give to Buyer, its employees, consultants and its
representatives, including its attorneys and accountants, reasonable
access during business hours to all those premises, assets, books and
records (excluding personnel files, medical and Workers' Compensation
files, and drug-free workplace testing results), officers, employees,
consultants, agents, accountants and attorneys of Coronado necessary to
consummate the transactions contemplated by this Agreement, and to such
financial and operating data and other information which relate to
Coronado as Buyer shall from time to time reasonably request (excluding
all legally privileged or protected documents); provided, however, that
such access shall be granted in such manner as not to interfere
unreasonably with the normal operation of Coronado, as determined in
Coronado's reasonable discretion. Buyer and its representatives will hold
in confidence all confidential information obtained from Coronado or its
Affiliates, the Principals, or their officers, agents, representatives or
employees. Buyer agrees that all confidential information obtained from
Coronado and its Affiliates or the Principals concerning the Business of
Coronado or any of its Affiliates not concerning the Products or Purchased
Assets shall be held in confidence in accordance with the provisions of
the Confidentiality Agreement between Buyer and the Principals dated March
24, 2004, as such agreement was extended on June 24, 2004 and October 8,
2004 (the "Confidentiality Agreement"). In the event of termination of
this Agreement for any reason, if requested, Buyer and its representatives
and lenders will either destroy or return to Coronado and the Principals
all documents, work papers and other material (including all copies made
thereof) obtained from Coronado or the Principals or prepared by Buyer
from information given to or learned by Buyer at any time in connection
with the transactions contemplated by this Agreement and will keep
confidential and not use any such information so
24
obtained unless such information is (a) readily ascertainable from public
or published information or trade sources, (b) previously known by Buyer
as specifically shown in the books and records of the Buyer as they exist
at the time of receipt of such information, (c) received by the Buyer from
a third party not in privity with Coronado who has a bona fide right to
disclose such information, or (d) disclosed pursuant to the written
permission of Coronado or the Principals.
5.4 Access to Records and Personnel After the Closing.
(a) The parties shall, and shall cause their Affiliates to, retain the
books, records, documents, instruments, accounts, correspondence,
writings, evidences of title and other papers relating to the
Business in their possession (the "Books and Records") for the
period of time set forth in their respective records retention
policies in effect on the Closing Date or for such longer period as
may be required by law or any applicable court order.
(b) The parties and their Affiliates will allow each other reasonable
access to such Books and Records (excluding personnel files, medical
and Workers' Compensation files, benefit plan claim files, and
drug-free workplace testing results), and to their personnel having
knowledge of the whereabouts and/or contents of such Books and
Records, for legitimate business reasons, including, without
limitation, the completion of all financial audits required of Buyer
by applicable securities regulations. Each party shall be entitled
to recover its reasonable out-of-pocket costs (including, without
limitation, reasonable copying costs) incurred in providing such
Books and Records and/or personnel to the other party. The
requesting party will hold in confidence all information obtained
from the disclosing party, any of its officers, agents,
representatives or employees (collectively, the "Disclosing Party"),
provided, however, that the following shall not be deemed to be
confidential information for purposes of this Agreement: (i)
information which is or becomes generally available to the public
other than as a result of a disclosure by the Disclosing Party, (ii)
information which was already known to the receiving party on a
non-confidential basis prior to being furnished to the receiving
party by the Disclosing Party or (iii) information which becomes
available to the receiving party on a non-confidential basis from a
source other that the Disclosing Party if such source was not
subject to any prohibition against transmitting the information to
the receiving party.
5.5 Efforts; Obtaining Consents; Government Filings.
(a) Subject to the terms and conditions of this Agreement, Coronado, the
Principals and Buyer each agree to use commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable, the
transactions contemplated by this Agreement and to cooperate with
the other in connection with the
25
foregoing (i) to obtain all necessary waivers, consents and
approvals from other parties to material Business Contracts and
Governmental Licenses, and (ii) to fulfill all conditions to this
Agreement. Coronado, the Principals and Buyer further covenant and
agree, with respect to a threatened or pending order or Law that
would adversely affect the ability of the parties hereto to
consummate the transfer of assets under this Agreement, to use their
respective best efforts to prevent the entry, enactment or
promulgation thereof, as the case may be (it being understood that
such efforts shall not include any requirement of either party to
expend material sums of money or grant any material financial or
other accommodation).
(b) The parties will cooperate with each other to the extent necessary
to make, as soon as practicable following the execution of this
Agreement, all filings required by any Law or Governmental Body.
(c) Within one week after the Closing Date, Coronado will file
assignments to Buyer or such other entity designated by Buyer in the
United States Patent and Trademark Office for those United States
trademarks listed in Schedule 3.12(a) listed as recorded in the
names of entities other than Coronado. Within one week after the
Closing Date, Coronado will have its foreign associate law firms
initiate assignments to Buyer in foreign patent and trademark
offices for those foreign trademarks listed in Schedule 3.12(a) as
recorded in the names of entities other than Coronado. Buyer will
pay all expenses associated with the assignment of such United
States and foreign trademarks, and Buyer will prosecute and maintain
all such trademarks at its sole expense.
5.6 Further Assurances; Cooperation.
Subject to the terms and conditions of this Agreement, the parties to this
Agreement shall in good faith perform their obligations under this
Agreement and use their reasonable efforts to cause the transactions
contemplated by this Agreement to be carried out promptly in accordance
with the terms of this Agreement. Upon the execution of this Agreement and
thereafter, each party shall take such actions and execute and deliver
such documents as may be reasonably requested by the other party hereto in
order to effect the transactions contemplated by this Agreement. The
parties shall cooperate fully with each other and their respective counsel
and accountants or designees in connection with any actions required to be
taken as part of their respective obligations under this Agreement.
5.7 Expenses.
Except as otherwise specifically provided in this Agreement and Related
Agreements, each party shall bear its own expenses in connection with and
in performance of this Agreement and Related Agreements.
26
5.8 Publicity.
Prior to the Closing Date each party shall consult with and obtain the
consent of the other before issuing any press release or other public
announcement regarding the transactions contemplated by this Agreement,
unless, in the reasonable judgment of the party making the announcement,
such announcement is required to discharge its or its Affiliates' legal
obligations or to comply with any applicable requirements of a securities
exchange.
5.9 Employee Matters.
(a) As of the close of business on the Closing Date, Coronado shall
cease to employ and shall terminate all then existing Coronado
Employees. Immediately after such termination, Buyer shall offer
employment to all such then existing Coronado Employees. The terms
and conditions of such employment by Buyer are set forth below. From
the time of such employment with Buyer, through the end of the
Earnout Period, Buyer agrees to employ X. Xxxx and Xxxx under
compensation arrangements substantially similar to their current
compensation arrangements; provided, however, that Buyer shall have
the right to terminate their employment for cause (as defined
below).
For purposes of this Agreement, the term "Cause" shall be defined as
any of the following:
(i) employee's commission or any act of fraud upon Buyer or any
personal dishonesty, incompetence, negligence, or willful or
negligent misconduct, including immoderate use of alcoholic
beverages or narcotics or other substance abuse;
(ii) employee's conviction by, or entry of a plea of guilty or
nolo contendere in, a court of competent jurisdiction for a
felony or any crime which materially adversely affects Buyer
and/or its reputation in the community and which involves
moral turpitude or is punishable by imprisonment in the
jurisdiction involved;
(iii) employee's willful failure or refusal to perform his duties
or responsibilities or employee's material violation of any
duty of loyalty to Buyer or a breach of employee's fiduciary
duties.
Except as set forth above or as contemplated by the Employment
Agreement with Xxxxxxx, effective as of the Closing Date and during
the Earnout Period, Buyer agrees to provide employment on an "at
will" basis to each Coronado Employee, and to the extent
commercially practicable, will provide such employment on terms and
conditions that are generally comparable to the terms under which
such employees are currently employed. Nothing in this Section
5.9(a) shall, however, obligate Buyer or its Affiliates to provide
continuing employment to any Coronado Employee for any specific time
period after the Closing Date. Coronado and the Principals shall use
their
27
best efforts to assist Buyer in obtaining and retaining the services
of such employees of the Business. Coronado and the Principals shall
not take any action, directly or indirectly, to prevent or
discourage any such employee of the Business from remaining employed
by Buyer as of the Closing Date and shall not solicit, invite,
induce or entice any such employee of the Business to remain in the
employ of Coronado or otherwise attempt to retain the services of
any such employee, except with the prior written consent of Buyer.
Coronado and the Principals agree to consult with Buyer on all
material oral or written communications or meetings primarily
regarding future employment with such employees.
(b) All obligations for compensation, wages, bonuses, severance pay,
vacation time, pay in lieu of vacation, sickness and accident
benefits, leaves of absence, profit sharing and similar employee
benefits provided by Coronado, the Principals or the Business and
due, earned or accrued, prior to the Closing Date shall be paid by
Coronado.
(c) Notwithstanding any possible inferences to the contrary, neither
Coronado, the Principals nor Buyer nor any of their respective
Affiliates intends for this Section 5.9 to create any rights or
obligations except among Coronado, the Principals and Buyer, and no
past, present, or future employees of Coronado or Buyer or any of
their respective Affiliates shall be treated as third-party
beneficiaries of this Section 5.9.
(d) Except as set forth above, nothing in this Section 5.9 shall
constitute an agreement or guaranty that any former Coronado
Employee shall be entitled to employment with Buyer or any Affiliate
of Buyer.
5.10 [Reserved]
5.11 Letters of Credit and Guarantees.
Buyer shall, effective as of the Closing Date or as soon as commercially
practicable thereafter, cause the letters of credit, guarantees and other
credit enhancements given by Coronado and its Affiliates set forth on
Schedule 5.11 hereof, to the extent they relate to the Business or the
Business Assets, to be replaced by letters of credit, guarantees or other
credit enhancements of Buyer and its Affiliates so that Coronado and its
Affiliates shall have no further obligation or liability thereunder. Buyer
shall indemnify and hold Coronado and its Affiliates harmless from any and
all Liabilities suffered or incurred by Coronado and its Affiliates after
the Closing Date arising from or relating to such letters of credit,
guarantees and other credit enhancements.
5.12 Supplemental Disclosure.
Coronado and the Principals shall have the continuing obligation between
the date of this Agreement and the Closing Date to promptly supplement or
amend the schedules hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement,
would have been required to be
28
set forth or described in such schedules. Further, Coronado and the
Principals shall have the continuing obligation between the date of this
Agreement and the Closing Date to promptly notify Buyer of any event of
which Coronado or the Principals obtain knowledge which has had or might
reasonably be expected to have a Material Adverse Effect on the Business
or Coronado, or if known as of the date hereof would have been required to
be disclosed to Buyer.
5.13 Notification of Certain Matters.
Between the date of this Agreement and the Closing Date, Coronado and the
Principals shall give prompt notice to Buyer, and Buyer shall give prompt
notice to Coronado and the Principals, of any failure on its part to
comply with or satisfy, in any material respect, any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement.
5.14 Damage or Destruction.
If any material assets included in the Business Assets shall be damaged or
destroyed by fire or other cause prior to the Closing Date, Coronado and
the Principals shall expeditiously notify Buyer and furnish to Buyer a
written statement of the amount of insurance, if any, payable on account
thereof. In the event of such damage or destruction, Buyer may elect (a)
to require that Coronado and the Principals use such insurance proceeds to
restore or replace such assets to the extent of such proceeds, (b) to
renegotiate the Purchase Price accordingly; or (c) to cancel, without
liability to Coronado and the Principals, the transactions contemplated by
this Agreement.
5.15 Exclusive Dealing.
Prior to the termination of this Agreement, neither Coronado, the
Principals nor any of their Affiliates shall, directly or indirectly,
conduct negotiations with, or solicit, accept or approve any bids from,
any firm, person, corporation or other entity relating to the sale or
transfer of the Business Interests, Business or Coronado, including
without limitation a merger or sale of the assets of Coronado, or any
investment in Coronado. During such time period, neither Coronado nor any
of the Principals will provide any information to anyone with respect to
any unsolicited inquiries, proposals or offers.
5.16 Conduct of Business during the Earnout Period.
During the Earnout Period, Buyer agrees:
(i) not to relocate the Business from the Tucson metropolitan area;
(ii) to conduct the Business in a commercially reasonable manner and to
operate the Business in line with Coronado's historical and
forecasted expense structure as provided by Coronado prior to the
Closing.
29
ARTICLE VI
ADDITIONAL CONTINUING COVENANTS
6.1 Non-Competition.
(a) Coronado and the Principals agree that in order to retain the
confidentiality of the Confidential Information and to provide Buyer
with the goodwill and going concern value of the Business to which
it is entitled, Coronado and the Principals hereby agree to protect
and preserve the same to the maximum extent permitted by law.
Coronado and the Principals also acknowledge that the Principals'
management contributions to the Business have been uniquely valuable
and involve proprietary information that would be competitively
unfair to make available to any competitor of the Business. For
these and other reasons and as a material inducement to Buyer and
Buyer's Parent to enter into this Agreement, Coronado and the
Principals each agree that for a period of three (3) years after the
Closing Date, neither Coronado nor any of the Principals shall,
directly or indirectly, for their own benefit or as agent for
another, carry on or participate in the ownership, management or
control of, or the financing of, or be employed by, or consult for
or otherwise render services to, or allow their name(s) or
reputation(s) to be used in or by any other present or future
business enterprise that competes with Buyer, or any Subsidiary or
Affiliate of Buyer, in activities that are the same as, or
substantially similar to, the Business as it is conducted as of the
Closing Date in the United States, United Kingdom, Canada, Mexico,
Europe, Scandinavia, and Asia.
(b) In addition, Coronado and the Principals further agree that in order
to retain the confidentiality of the Confidential Information and to
provide Buyer with the goodwill and going concern value of the
Business to which it is entitled, Coronado and the Principals hereby
agree that for a period of three (3) years following the Closing
Date, neither Coronado nor any of the Principals will make any
efforts, directly or indirectly, for their own benefit or as agent
for another, to cause employees of the Business to terminate their
employment. Coronado and the Principals acknowledge that the terms
and conditions of this Section are a material inducement to Buyer
and Buyer's Parent to enter into this Agreement.
(c) Coronado and the Principals recognize and agree that a breach by
Coronado or the Principals of any of the covenants set forth in this
Section 6.1 could cause irreparable harm to Buyer and its
Affiliates, that Buyer's and its Affiliates' remedies at law in the
event of such breach would be inadequate, and that, accordingly, in
the event of such breach a restraining order or injunction or both
may be issued against Coronado and/or the Principals, in addition to
any other rights and remedies which are available to Buyer and its
Affiliates. If this Section 6.1 is more restrictive than permitted
by the Laws of any jurisdiction in which Buyer or its Affiliates
30
seeks enforcement hereof, this Section 6.1 shall be limited to the
extent required to permit enforcement under such Laws. In
particular, the parties intend that the covenants contained in the
preceding portions of this Section 6.1 shall be construed as a
series of separate covenants, one for each county and city or other
location in which Coronado conducts business as of the Closing Date.
Except for geographic coverage, each such separate covenant shall be
deemed identical in terms. If, in any judicial proceeding, a court
shall refuse to enforce any of the separate covenants deemed
included in this Section 6.1, then such unenforceable covenant shall
be deemed eliminated from these provisions for the purpose of those
proceedings to the extent necessary to permit the remaining separate
covenants to be enforced.
(d) Buyer, Coronado and the Principal agree that $100,000 of the
Purchase Price under this Agreement shall be allocated to the
covenants in this Section 6.1.
6.2 Non-Disclosure of Proprietary Data.
After the Closing, neither Coronado, the Principals, nor any of their
representatives shall, at any time, make use of, divulge or otherwise
disclose, directly or indirectly, any trade secret or other proprietary
data (including, but not limited to, any Know-How, production process,
customer list, pricing or financial information) concerning the Business
or the business or policies of Coronado related to the Business that
Coronado, the Principals or any representatives of Coronado or the
Principals may have learned as an owner, shareholder, member, employee,
officer, director of Coronado or the Business. In addition, neither
Coronado, the Principals, nor any of their representatives shall make use
of, divulge or otherwise disclose, directly or indirectly, to Persons
other than Buyer and its Affiliates, any Confidential Information
concerning the Business that may have been learned in any such capacity.
This Section 6.2 shall not apply to any such information concerning the
Business which becomes part of the public domain through no fault of
Coronado or the Principals.
6.3 Waiver of Xxxxxxx to Acquire Additional Business Interests.
Effective as of the date hereof, any right that Xxxxxxx may have to
acquire any additional Business Interests from Coronado or any right of
first refusal that Xxxxxxx may have with respect to acquisition of the
Business Interests pursuant to that certain Stock Purchase Agreement,
dated October 1, 2003, among Coronado, Xxxxx and Xxxxxxx shall terminate
and no longer have any force or effect.
6.4 Sales and Transfer Taxes.
Coronado shall pay all real and personal property transfer taxes, if any,
and all sales, use and other similar taxes, if any, imposed on or in
connection with the purchase, sales or transfer of the Business Assets to,
and the assumption of the liabilities of the Business by, Buyer pursuant
to this Agreement.
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ARTICLE VII
INDEMNIFICATION
7.1 Coronado's and the Principals Agreement to Indemnify.
(a) Subject to the terms and conditions of this Article VII, Coronado
and the Principals, jointly and severally, agree to indemnify,
defend and hold harmless Buyer from and against all Liabilities
suffered or incurred by Buyer arising from, relating to or otherwise
in respect of any breach of this Agreement by Coronado or the
Principals, including, without limitation, (i) any representations
or warranties contained in Article III hereof, and (ii) any breach
by Coronado or the Principals of any covenant in Article V and
Article VI in this Agreement (collectively, "Buyer Claims").
(b) With respect to Section 7.1(a) above, no Buyer Claim shall be
asserted unless it is equal to or greater than $10,000 in value.
With respect to indemnification arising out of Section 7.1(a) above,
in no event shall the total liability of Coronado and the Principals
exceed in the aggregate the Purchase Price (as adjusted pursuant to
Section 2.3 hereof). Notwithstanding the above, the forgoing
limitations set forth in this Section 7.1(b) shall not apply to any
Buyer Claim resulting from fraud or any intentional
misrepresentation by Coronado or the Principals or failure by
Coronado or the Principals to perform their obligations under this
Agreement, including such failure by reason of an obstacle
intentionally created by Coronado or the Principals.
(c) If any Buyer Claim is pending or unresolved at the time any payment
is due to Coronado from Buyer or one of its Affiliates pursuant to
Section 2.3 hereof, Buyer, its Affiliates or successors shall have
the right, in addition to other rights and remedies (whether under
this Agreement or applicable law), to withhold from such payment an
amount equal to the amount of such Buyer Claim until such matter is
resolved. If it is finally determined that such Buyer Claim is
covered by this Section 7.1, the amount of such Buyer Claim may be
offset against the amount owed to Coronado by Buyer or one of its
Affiliates pursuant to Section 2.3 hereof and the remainder of the
amount withheld, if any, shall be delivered to Coronado pursuant to
this Agreement together with interest on such remainder amount for
the actual number of days such payment was withheld at a rate equal
to 5% per annum.
7.2 Buyer Parent's Agreement to Indemnify.
(a) Subject to the terms and conditions of this Article VII, Buyer
Parent agrees to indemnify, defend and hold harmless Coronado from
and against all Liabilities suffered or incurred by Coronado arising
from, relating to or otherwise in respect of any breach of this
Agreement by Buyer or Buyer Parent, including, without limitation,
(i) any representations or warranties contained in Article IV
hereof, or (ii) any breach by Buyer or Buyer Parent
32
of any of its covenants in Article V of this Agreement, or (iii) the
operation of the Business arising after the Closing Date
(collectively, "Coronado Claims").
(b) With respect to Section 7.2(a) above, no Coronado Claim shall be
asserted unless it is equal to or greater than $10,000 in value.
With respect to indemnification arising out of Section 7.2(a) above,
in no event shall the liability of Buyer Parent exceed in the
aggregate an amount equal to the Purchase Price (as adjusted
pursuant to Section 2.3 hereof). Notwithstanding the above, the
forgoing limitations set forth in this Section 7.2(b) shall not
apply to any Coronado Claim resulting from fraud or any intentional
misrepresentation by Buyer or Buyer Parent or failure by Buyer or
Buyer Parent to perform its obligations under this Agreement,
including such failure by reason of an obstacle intentionally
created by Buyer or Buyer Parent.
7.3 Procedures for Resolution and Payment of Claims for Indemnification.
(a) Except as otherwise provided in this Agreement, in the event any
third party or party hereto asserts a Claim with respect to any
matter as to which the indemnities in this Agreement relate, the
party against whom the Claim is asserted (the "Indemnitee") shall
give prompt written notice to the other party (the "Indemnitor") in
reasonable detail so that the Indemnitor is or will be able to
reasonably understand the basis of the Claim; provided that the
failure of the Indemnitee to provide such notice shall not relieve
the Indemnitor of its obligations hereunder except to the extent the
Indemnitor is materially prejudiced thereby. Thereafter, the
Indemnitor shall have the right at its election to take over the
defense or settlement of the third party Claim at its own expense by
giving prompt notice to the Indemnitee; provided that such notice
includes an undertaking by Indemnitor to hold the Indemnitee
harmless from any expense or liability arising from the Claim. If
the Indemnitor does not give such notice and does not proceed
diligently so as to defend the third party Claim within 30 days
after receipt of the notice of the third party Claim, the Indemnitor
shall be bound by any defense or settlement that the Indemnitee may
make as to those Claims and shall reimburse the Indemnitee for its
Liabilities and expenses related to the defense or settlement of the
third party Claim. Subject to Indemnitor retaining control of the
Claim or settlement thereof, the Indemnitee shall, at its option and
expense, have the right to participate in the defense of any such
Claims defended by the Indemnitor (except that Indemnitor shall not
be responsible for the fees and expenses of counsel to Indemnitee
unless agreed to in writing). The parties shall cooperate in
defending against any asserted third party Claims.
(b) Anything in this Section 7.3 to the contrary notwithstanding, (i) if
there is a reasonable probability that a third party Claim may
materially and adversely affect the Indemnitee other than as a
result of money damages or
33
other money payments, the Indemnitee shall have the right, at its
own cost and expense, to defend, compromise or settle such Claim;
provided, however, that if such Claim is settled without the
Indemnitor's consent (which consent shall not be unreasonably
withheld or delayed), the Indemnitee shall be deemed to have waived
all rights hereunder against the Indemnitor for money damages
arising out of such Claim, and (ii) the Indemnitor shall not,
without the written consent of the Indemnitee, settle or compromise
any Claim or consent to the entry of any judgment (A) which does not
include as an unconditional term thereof the giving by the claimant
or the plaintiff to the Indemnitee a release from all liability in
respect to such Claim or (B) if such settlement, compromise or
consent involves the imposition of equitable remedies or the
imposition of any obligations on such Indemnitee other than
financial obligations for which such Indemnitee will be fully
indemnified hereunder.
7.4 Survival Periods.
All representations and warranties contained or made in, or in connection
with, this Agreement or in any Schedule delivered in connection herewith,
shall survive for a period of twenty-four (24) months following the
Closing Date; provided, however, that (i) the representations and
warranties contained in Section 3.1 (Existence, Power, Authorization and
Qualifications of Coronado), Section 3.2 (Capitalization), Section 3.19
(Brokers) and Section 3.24 (Environmental Matters) shall survive until the
expiration of the applicable statue of limitations (the "Indemnity
Period"). No claim for indemnification based on a breach of a
representation or warranty may be asserted after the expiration of the
applicable Indemnity Period. Notwithstanding anything herein to the
contrary, any representation or warranty which is the subject of a claim
which is asserted in writing prior to the expiration of the Indemnity
Period shall survive with respect to such claim or any dispute with
respect thereto until the final resolution thereof.
7.5 Not Exclusive Remedy.
This Article VII shall not be deemed to preclude or otherwise limit in any
way the exercise of any other rights or pursuit of other remedies for the
breach of this Agreement or with respect to any misrepresentation.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE
OBLIGATION OF BUYER TO CLOSE
The obligation of Buyer to consummate its purchase of the Business Assets from
Coronado under this Agreement is subject to the fulfillment, prior to or on the
Closing Date, of each of the following conditions precedent (any one or more of
which may be waived by Buyer in writing):
34
8.1 Fulfillment of Covenants.
Coronado and the Principals shall have performed and complied in all
material respects with all covenants, obligations and agreements required
by this Agreement to be performed or complied with by them at or prior to
the Closing Date.
8.2 Representation and Warranties.
The representations and warranties of Coronado and the Principals
contained in this Agreement shall be true and correct on the date when
made and shall also be true and correct on the Closing Date as if made on
such date, except for changes expressly permitted by the terms of this
Agreement and except to the extent such representations and warranties by
their terms speak of an earlier date (in which case they shall have been
true and correct as of such earlier date).
8.3 No Claims.
There shall not be threatened, instituted or pending any Claim by or
before any court or Governmental Body or other regulatory or
administrative agency or commission putting into effect, requesting or
looking toward an order, judgment or decree which (a) restrains,
prohibits, restricts or limits the consummation of the transactions
contemplated hereby, or (b) would have a Material Adverse Effect.
8.4 No Material Adverse Effect.
Between the date of this Agreement and the Closing Date, no event shall
have occurred that has a Material Adverse Effect.
8.5 [Reserved].
8.6 Buyer Parent's Board Approval.
The approval of this Agreement, and the transactions contemplated thereby,
by at least a majority of the members of the board of directors of Buyer
Parent.
8.7 Audit and Review.
Coronado and the Principals shall provide Buyer with financial statements
prepared in accordance with GAAP for Coronado's 2003 and 2004 fiscal years
(through the end of the most recently completed month). Further, an audit
will be performed for Coronado's Balance Sheets dated September 30, 2004
and November 30, 2004 and a Review (as defined by AICPA accounting and
review standards) will be performed for Coronado's Income Statements dated
September 30, 2004 and November 30, 2004. In addition, a Review will be
performed for the Financial Statements dated December 31, 2003. Coronado
and the Principals shall supply to Buyer GAAP basis quarterly Balance
Sheets and Income Statements for the four quarters of 2003 and the first
three quarters of 2004. Buyer shall pay the expenses associated with
obtaining such audits and reviews,
35
provided that Buyer shall not be responsible for fees for such audits and
Reviews in excess of $30,000 (the Principals shall pay any fees in excess
of $30,000) and such audits and Reviews do not reveal financial results
that are materially different from those provided by Coronado and the
Principals. In the event that such audits and Reviews do reveal financial
results that are materially different from those provided by Coronado and
the Principals, Buyer and the Principals shall equally share the expense
of such audits and Reviews.
8.8 Documents.
Buyer, or as may be designated prior to Closing by Buyer, an Affiliate or
Affiliates of Buyer, shall receive executed copies of the following
documents from Coronado and the Principals on the Closing Date:
(a) such fully executed deeds, bills of sale, certificates of title and
other instruments of assignment or transfer with respect to the
Business Assets as Buyer may reasonably request and as may be
necessary to vest in Buyer good record and marketable title to all
of the Business Assets; including, without limitation, (i) the Xxxx
of Sale, in substantially the form set forth on Exhibit C hereof,
and (ii) the Assignment and Estoppel Certificates/Statements in the
forms of Exhibit D hereof, respectively, with respect to all leases
of real property, including all necessary consents of lessors and
mortgage estoppel certificates from holders of mortgages affecting
any of the Business Assets;
(b) original releases of, or written authorizations from Coronado's
creditors (or the relevant debtor's creditors) to release, all Liens
on the Business Assets (other than Permitted Liens);
(c) a certificate of Coronado and the Principals in form and substance
reasonably acceptable to Buyer, dated the Closing Date, stating that
the conditions precedent set forth in Article VIII of this Agreement
have been satisfied;
(d) the written acceptance of Xxxx and Xxxxx to act as directors of
Buyer;
(e) a fully executed Consulting Agreement by and between Buyer and
Coronado attached hereto as Exhibit A;
(f) a fully executed Employment Agreement by and between Buyer and
Xxxxxxx attached hereto as Exhibit B;
(h) a copy of a certificate of good standing of Coronado, duly certified
as of a recent date (not more than five business days prior to the
Closing Date) by the Arizona Corporation Commission;
(i) transfer of Agreement between Blue Sky and Coronado attached hereto
as Schedule 8.8(i) from Coronado to Buyer.
36
ARTICLE IX
CONDITIONS PRECEDENT TO THE
OBLIGATION OF CORONADO AND THE PRINCIPALS TO CLOSE
The obligation of Coronado and the Principals to consummate the sale of the
Business Assets to Buyer under the terms of this Agreement is subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions precedent (any one or more of which may be waived by Coronado and the
Principals in writing).
9.1 Fulfillment of Covenants.
Buyer shall have performed and complied in all material respects with each
of its covenants, obligations and agreements required by this Agreement to
be performed or complied with by it at or prior to the Closing Date.
9.2 Representation and Warranties.
The representations and warranties of Buyer contained in this Agreement
shall be true and correct when made and shall also be true and correct on
the Closing Date as if made on such date, except for any changes expressly
permitted by the terms of this agreement and except to the extent such
representations and warranties by their terms speak of an earlier date (in
which case they shall have been true and correct as of such earlier date).
9.3 No Claims.
There shall not be threatened, instituted or pending any Claim by or
before any court or Governmental Body or other regulatory or
administrative agency or commission putting into effect, requesting or
looking toward an order, judgment or decree which (a) restrains,
prohibits, restricts or limits the consummation of the transactions
contemplated hereby, or (b) would have a Material Adverse Effect.
9.4 Payment of Purchase Price.
The payment of the $2,500,000 plus any adjustment pursuant to Section 2.3
above to Coronado by Buyer by wire transfer in immediately available funds
to an account designated by Coronado.
9.5 Documents.
Coronado shall have received executed copies of the following documents
from Buyer, or as may be designated prior to Closing by Buyer, an
Affiliate or Affiliates of Buyer on the Closing Date:
(a) a certificate of Buyer in form and substance reasonably acceptable
to Coronado, dated the Closing Date, stating that the conditions
precedent set forth in Article IX of this Agreement have been
satisfied;
37
(b) a fully executed Consulting Agreement by and between Buyer and
Coronado attached hereto as Exhibit A ;
(c) a fully executed Employment Agreement by and between Buyer and
Xxxxxxx attached hereto as Exhibit B;
ARTICLE X
MISCELLANEOUS
10.1 Reformation and Severability.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws effective during the term of
this Agreement, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable
consistent with the intentions of the parties, and the legality, validity
and enforceability of the remaining provisions shall not in any way be
affected or impaired.
10.2 Notices.
All notices, demands and other communications to be given or delivered
under or by reason of the provisions of this Agreement will be in writing
and will be deemed to have been given when personally delivered or three
business days after being mailed by first class U.S. mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy
or other electronic transmission device. Notices, demands and
communications to Buyer and Coronado will, unless another address is
specified in writing, be sent to the address indicated below:
Notices to Coronado:
Xxxxxxxxx Xxxxx
0000 X. Xxxxxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
With a copy to:
Xxxxx X. Xxxxxxx
Xxxx, Xxxxxxx & Xxxxx, P.C.
0000 Xxxxx Xxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000-0000
Notices to Buyer:
38
Xxxxx Instruments Corporation
0000 Xxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Attention: Legal Department
Facsimile: (000) 000-0000
With a copy to:
J. Xxx Xxxxxx
O'Melveny & Xxxxx LLP
000 Xxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000-0000
10.3 Headings and Interpretations.
The headings of Articles and Sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning
or construction of any provision of this Agreement.
10.4 Waiver.
The failure of any party to insist, in any one or more instances, upon
performance of any of the terms, covenants or conditions of this Agreement
shall not be construed as a waiver or a relinquishment of any right or
claim granted or arising hereunder or of the future performance of any
such term, covenant, or condition, and such failure shall in no way effect
the validity of this Agreement or the rights and obligations of the
parties hereto. Additionally, no waiver of any breach of this Agreement
shall be a waiver of any subsequent breach.
10.5 Bulk Sales Act.
In reliance on the representations of Coronado and the Principals that
bulk sales laws are not applicable to the transactions provided for
hererin, Buyer waives compliance by Coronado and the Principals with any
such bulk sales laws which may be applicable to the transactions
contemplated by this Agreement; provided, however that Coronado and the
Principals, jointly and severally, agree to indemnify Buyer and hold it
harmless from any loss, damage, liability, and expenses (including
reasonable legal fees) resulting from such noncompliance.
10.6 Choice of Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAWS RULES OR CHOICE OF LAWS RULES THEREOF.
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10.7 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, and all of which together shall
constitute one and the same instrument notwithstanding that any parties
are not signatories to each counterpart.
10.8 Assignability and Binding Effect.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. This
Agreement and the rights and obligations hereunder may not be assigned by
either party without the express written consent of the other, which
consent shall not be unreasonably withheld. Nothing in this Section 10.8
shall operate or be construed as a restriction on the assignability of any
of the Business Assets by Buyer after the Closing Date, and Coronado and
the Principals hereby consent to any such assignment of the Business
Assets or any portion thereof (including, without limitation, any and all
Business Contracts or licenses that comprise the Business Assets).
10.9 Amendments.
This Agreement may not be modified, amended or supplemented except by an
agreement in writing signed by each of the parties hereto.
10.10 Third Parties.
Nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person other than the parties hereto and their
successors or permitted assigns, any rights or remedies under or by reason
of this Agreement.
10.11 Number and Gender.
When the context so requires in this Agreement, words of gender shall
include either or both genders and the singular number shall include the
plural.
10.12 Entire Agreement.
This Agreement, together with the Schedules and Exhibits hereto and
thereto, shall constitute the entire agreement between the parties hereto
with respect to the transactions contemplated hereby and shall supersede
all prior negotiations, understandings and agreements.
10.13 Construction.
The parties have participated jointly in the negotiation and drafting of
this Agreement. If an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the
parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by
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virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign "law" shall be deemed
also to refer to all rules and regulations promulgated thereunder. The
terms "including" is not a limitation on that general statement and shall
mean "including without limitation." All references to Articles, Sections,
Schedules and Exhibits are to Articles, Sections, Schedules and Exhibits
of this Agreement.
10.14 Effective Date.
This Agreement shall become effective upon signature by both parties.
10.15 Termination.
This Agreement may be terminated at any time prior to the Closing Date:
(a) by the mutual written consent of the parties;
(b) by Buyer or its Affiliates, upon delivery of written notice to
Coronado or the Principals if any of the conditions to the Closing
set forth in Article VIII shall have become incapable of fulfillment
and shall not have been waived in writing by Buyer or its
Affiliates;
(c) by Coronado or the Principals, upon delivery of written notice to
Buyer if any of the conditions to the Closing set forth in Article
IX have become incapable of fulfillment and shall not have been
waived in writing by Coronado or the Principals; or
(d) by Buyer or Buyer Parent or Coronado or the Principals if the
Closing Date shall not have occurred by November 30, 2004.
10.16 Arbitration.
Any dispute arising out of this Agreement shall be determined by binding,
non-appealable arbitration. Each party to such dispute shall select one
arbitrator. The selected arbitrators shall select one other arbitrator,
who shall act as chairperson. The dispute shall be decided by hearing in
Orange County, California (if the Coronado initiates the arbitration, or
Pima County, Arizona (if Buyer initiates the arbitration) within thirty
(30) days of receipt of a request for arbitration and the arbitrators
shall decide the dispute by written award within five (5) business days of
the hearing. The prevailing party shall be awarded all costs and attorneys
fees.
(signature pages follows)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
CORONADO
CORONADO TECHNOLOGY GROUP, L.L.C.
By: /s/ Xxxxxxxxx Xxxxx
Name: Xxxxxxxxx Xxxxx
PRINCIPALS
XXXXXXXXX XXXXX
By: /s/ Xxxxxxxxx Xxxxx
Name: Xxxxxxxxx Xxxxx
XXXXX XXXX
By: /s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
XXXXXX XXXXXXX
By: /s/ Xxxxxx Xxxxxxx
Name: Xxxxxx Xxxxxxx
XXXXXX X. XXXX
By: /s/ Xxxxxx X. Xxxx
Name: Xxxxxx X. Xxxx
XXXXXXXX X. XXXX
By: /s/ Xxxxxxxx X. Xxxx
Name: Xxxxxxxx X. Xxxx
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BUYER
CORONADO, INC.
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
BUYER PARENT
XXXXX INSTRUMENTS CORP.
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
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SCHEDULES AND EXHIBITS OMITTED
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