EXHIBIT 2b
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is dated as of
July 22, 1996, by and between SENSES INTERNATIONAL, a
California corporation, dba SAFECOM PRODUCTS ("Seller") and
DETECTION SYSTEMS, INC., a New York corporation ("Buyer").
RECITALS
WHEREAS, Seller has determined that it is in its best
interest to sell substantially all of its assets to Buyer for
the price and on the terms and conditions set forth below; and
WHEREAS, Buyer is willing to buy those assets offered by
Seller for the price and on the terms and conditions set forth
below;
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties contained in this
Agreement, the parties agree as follows:
AGREEMENT
1. Sale and Purchase of Assets.
a. Assets Transferred by Seller. Seller sells,
assigns, transfers and conveys to Buyer all the right, title
and interest of Seller in the following assets, together with
any and all goodwill adhering thereto, held by Seller
(collectively the "Assets"):
i. All U.S. and foreign patents and patent
applications, inventions and designs whether or not patentable
or otherwise registrable, more fully described on Schedule 1
("Patents").
ii. All U.S. and foreign copyrights, source
codes, permissions and licenses to use copyrighted material
owned by others, more fully described on Schedule 2
("Copyrights").
iii. Those certain trademarks, service marks,
trade names, logos and slogans more fully described on Schedule
3 ("Trademarks").
iv. Those certain contracts, including
executory contracts, related to or useful in the Seller's
business more fully described on Schedule 4. ("Contracts").
v. All customer lists, supplier lists, mailing
lists, advertising and promotional materials, catalogs, price
and product lists, sales and credit records and files, and
papers, software, correspondence and reports, including
computerized reports, relating thereto ("Business Records").
vi. Seller's claims and rights against third
parties relating to the Assets, including without limitation,
insurance claims, vendors' warranties, rights of recovery,
set-offs and credits.
vii. All trade secrets, know-how, procedures,
software files, market surveys and marketing know-how ("Trade
Secrets").
viii. All Underwriters Laboratories ("UL") and
Federal Communications Commission ("FCC") and National Fire
Protection Association ("NFPA") listings more fully described
on Schedule 5 ("Listings") to the extent such Listings are
transferable.
ix. Seller's inventory of raw materials, work
in process and finished goods exclusive of inventory determined
to be obsolete by Buyer pursuant to Section 4.a.(3) below
("Inventory").
x. Seller's accounts receivable, rights to
deposits, cash, prepayments and notes receivable, and all
proceeds thereof, other than those receivables purchased by
Concord Growth Corporation ("CGC") pursuant to (a) that certain
Factoring Agreement dated August 28, 1995, between Seller and
CGC, (b) that certain Continuation Agreement dated as of April
1, 1996 between Seller and CGC and (c) that certain Stipulation
Between Debtor And Concord Growth Corporation For Secured
Post-Petition Financing On A Priority Basis (the "Concord
Receivables") and the proceeds of such Concord Receivables.
However, the Concord Receivables and the proceeds of the
Concord Receivables shall not include any receivables or
proceeds of receivables which CGC redelivers to Seller pursuant
to any of the agreements described above. (Such accounts
receivable, rights to deposits, prepayments and notes
receivable, and all proceeds therefrom exclusive of (i) the
Concord Receivables and (ii) the proceeds of any Concord
Receivables are hereafter referred to as the "Receivables").
xi. All equipment, furniture, fixtures, and
other fixed assets more fully described on Schedule 6 ("Fixed
Assets").
xii. Seller's goodwill.
b. Assets Not Transferred by Seller. Seller does
not sell, assign, transfer and convey to Buyer, and Seller
retains all right, title and interest in and to, the following
assets:
i. Inventory determined to be obsolete by
Buyer pursuant to Section 4.a.(3) below.
c. No Assumption of Seller's Liabilities. Except
for any of the Contracts identified on Schedule 4, Buyer is not
assuming any obligations or liabilities of the Seller.
2. Purchase Price and Payment. The purchase price to
be paid by Buyer to Seller for the Assets ("Purchase Price")
shall consist of the following:
a. Cash. Cash in the amount of $400,000 payable in
good collected funds on the Closing Date, as defined below.
b. Promissory Note. A promissory note issued on
the Closing Date by Buyer in favor of Seller in the principal
amount of $200,000, in a form substantially similar to Exhibit
A (the "Note"), attached hereto and incorporated by this
reference, payable 180 days following the Closing Date, subject
to adjustment and prepayment as set forth in Section 4, below.
c. Royalty. Buyer shall pay to Seller a royalty
for a period of four (4) years, commencing with the Closing
Date ("Royalty"). The Royalty shall be derived from the
Safecom Product line which shall be defined as all existing
Safecom products and future products that are configured with
the Safecom proprietary software and/or firmware (hereinafter
referred to as "Safecom Product".) If the Safecom Product is
integrated into a Buyer product, then Buyer shall pay the
Royalty in the amount of 7% of all sales of the complete
product sold by Buyer; if the Safecom Product is sold as a
separate component, then Buyer shall pay the Royalty in the
amount of 7% of all sales of the Safecom Product component
only. The Royalty shall be net of all credits, allowances,
returns, taxes and freight. Buyer shall pay the Royalty within
fifteen (15) days of the last day of each calendar quarter
beginning September 30, 1996 and ending September 30, 2000, and
at such time shall also provide an appropriate accounting for
the calculation of the Royalty setting forth each product sold,
the quantity sold, the sales price and the Royalty calculated
thereon. The Buyer shall not enter into an agreement to sell
or license the Safecom Product including the proprietary
software and/or firmware to a third party during the four year
period following the Closing Date unless such agreement to sell
or license provides for payment of the Royalty as described
herein by such third party to Seller. Buyer shall provide
Seller with a copy of any such proposed agreement to sell or
license prior to the execution of the same. Buyer's execution
of an agreement to sell or license the Safecom Product that
does not comply with the Buyer's obligations under this
Section, shall constitute a material default under this
Agreement.
3. Closing Date. The closing of the purchase and sale of
the Assets shall occur eleven (11) days after the entry of any
order by the United States Bankruptcy Court, Northern District
of California ("Bankruptcy Court"), approving this Agreement
("Closing Date") unless extended by written agreement of the
parties.
4. Adjustments to Purchase Price.
a. Adjustment to Amounts Owing Under Note. Within
15 days after the Closing Date, Buyer will commence and
complete an appraisal of the Seller's Inventory, Receivables,
and Fixed Assets to determine their fair market value. Buyer
and Seller have agreed in entering into the Agreement, that
these assets shall have the following values ("Appraised
Value"):
(1) Fixed Assets shall have an Appraised Value
of $75,000 regardless of actual value;
(2) Receivables shall have an Appraised Value
equal to the amount of such Receivables collected within 180
days of the Closing Date, exclusive of any amount paid on
account of the Concord Receivables and any proceeds of the
Concord Receivables; and
(3) Inventory shall have an Appraised Value of
actual purchase price (cost basis) on the date of appraisal.
Inventory determined by Buyer to be obsolete shall have no
value and shall not be an asset transferred to Buyer under this
Agreement, but
If the combined Appraised Value for items (1), (2) and (3)
above is less than $700,000, the amount Buyer shall pay to
Seller under the Note shall be reduced dollar-for-dollar, for
every dollar less than $700,000, up to a maximum reduction of
$200,000, which would constitute a reduction of the Purchase
Price.
b. Prepayments. If the Appraised Value of the
Fixed Assets, Receivables as collected and Inventory exceed
$500,000 on or before ninety (90) days after the Closing Date,
Buyer will prepay the Note within 120 days of the Closing Date,
in part, dollar for dollar of the combined Appraised Value
exceeding the $500,000 as of ninety (90) days after the Closing
Date.
5. Seller's Obligation Before Closing. Seller agrees
that from the date of this Agreement until the Closing Date:
a. Buyer's Access to Premises and Information.
Buyer and its counsel, accountants, and other representatives
shall have reasonable access during normal business hours to
all properties, books, accounts, records, contracts and
documents of Seller dealing with the sale of the Assets for the
sole purpose of allowing Buyer to complete its due diligence in
connection with the sale contemplated by this Agreement.
b. Conduct of Business in Normal Course. Except as
otherwise provided, Seller shall carry on its business
diligently and in substantially the same manner as it
previously has been carried out, and shall not make or
institute any unusual or novel methods of operation,
maintenance, management or accounting that will vary materially
from those methods used by Seller as of the date of this
Agreement; provided, however, that Seller shall comply with the
requirements of the Bankruptcy Court and applicable bankruptcy
laws.
c. Bankruptcy Court Approval. Seller shall use its
best efforts to obtain approval of the Bankruptcy Court to sell
the assets free and clear of liens and encumbrances and for any
appropriate orders, findings of fact and conclusions of law,
and other documentation as required by that Court. This
Agreement is subject to the approval of the Bankruptcy Court.
Buyer and Seller acknowledge that the sale of the Assets to
Buyer will be subject to such overbids as may be presented to
and approved by the Bankruptcy Court.
6. Buyer's Evidence of Necessary Approvals. Buyer has
delivered to Seller and Seller acknowledges receipt of written
approvals of the transaction contemplated by this Agreement
from the Buyer's Board of Directors and from Buyer's primary
lender, Fleet Bank.
7. Seller's Representations and Warranties. Seller
represents and warrants that:
a. Organization in Good Standing. Seller is a
California corporation, duly organized under the laws of the
State of California and has all necessary corporate powers to
own and transfer the Assets, as contemplated by this Agreement.
b. Authority and Consents. Seller has the right,
power, legal capacity and authority to enter into and perform
its obligations under this Agreement, subject to the approval
of the Bankruptcy Court. Seller's execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereunder have been duly authorized and no
further corporate authorization is necessary on the part of
Seller.
c. Absence of Undisclosed Liabilities and
Obligations. To the best of Seller's information, knowledge
and belief, Seller has no liabilities or obligations (whether
accrued, absolute, contingent or otherwise) other than the
liabilities and obligations set forth in the Seller's
Statements of Affairs and Schedules filed with the Bankruptcy
Court April 25, 1996, as they may be amended from time to time,
Seller's monthly operating reports as filed with the Bankruptcy
Court, or as otherwise disclosed to Buyer.
d. Licensing Agreements. To the best of Seller's
information, knowledge and belief, the Patents, Copyrights and
Trademarks are not subject to any license agreements,
encumbrances or impairments, except as otherwise disclosed to
Buyer.
e. List of Properties and Contracts. To the best
of Seller's information, knowledge and belief, Schedules 1
through 6 hereto contain accurate lists and summary
descriptions of the following:
(1) Schedule 1: Patents. All Patents of any
description and pending applications therefor, and inventions
and designs, whether or not patentable or otherwise
registrable.
(2) Schedule 2: Copyrights. All U.S. and
foreign copyrights, source codes, permissions and licenses to
use copyrighted materials, all copyright registrations and
pending applications therefor, and all other copyrights.
(3) Schedule 3: Trademarks. All registrations
of trademarks and of other marks, all registrations of trade
names, labels, or other trade rights, all registered user
entries, all pending applications for any such registrations or
entries, common law trademarks, and other marks, trade names
and other trade rights and licenses therefor (collectively,
"Trademarks").
(4) Schedule 4: Contracts. All contracts
related to or useful in the Seller's business ("Contracts").
(5) Schedule 5: Listings, Licenses and
Permits. All governmental or regulatory licenses, permits,
franchises, approvals and certificates, including but not
limited to UL listings, FCC listings and NFPA listings.
(6) Schedule 6: Fixed Assets. All items of
machinery, equipment, computer hardware, motor vehicles, office
furniture, fixtures, and other similar personal property owned
by Seller.
f. Accounts Receivable. To the best of Seller's
information, knowledge and belief, the Receivables have and
shall have arisen only from bona fide transactions in the
ordinary course of business and represent valid and binding
obligations of the account debtors to which such receivables
relate.
x. Xxxx-Xxxxx-Xxxxxx. The Seller together with all
such persons and entities which are controlled by, controlling
or under common control with the Seller do not have annual
total sales or net assets, as such terms are defined in 16 CFR
'801.11(c), of more than $10,000,000, and no pre-merger
notification is required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act (15 U.S.C. ' 18(a)).
8. Buyer's Representations and Warranties. Buyer
represents and warrants that:
a. Organization and Good Standing. Buyer is a New
York corporation which is duly organized, validly existing and
in good standing under the laws of the State of New York.
Buyer has all necessary corporate powers to own its properties
and to operate its business as now owned and operated by it.
b. Authority and Consents. Buyer has the right,
power, legal capacity and authority to enter into and perform
its obligations under this Agreement, and no approvals or
consents of any persons, other than Bankruptcy Court approval,
are necessary in connection with it. The execution and
delivery of this Agreement on behalf of Buyer has been duly
authorized by its Board of Directors.
9. Conditions to Buyer's Obligations at Closing. The
obligation of Buyer to consummate the transaction contemplated
hereby shall be subject to the fulfillment, or the waiver by
Buyer, on or before the Closing Date, of the following
conditions:
a. Seller shall execute and deliver to Buyer
assignments of the Patents in Schedule 1 in a form to be
prepared by Buyer, substantially similar to Exhibit B attached
hereto and incorporated by reference.
b. Seller shall execute and deliver assignments of
the Copyrights in Schedule 2 in a form prepared by Buyer
substantially similar to Exhibit C attached hereto and
incorporated by this reference.
c. Seller shall execute and deliver assignments of
the Trademarks on Schedule 3 in a form prepared by Buyer,
substantially similar to Exhibit D, attached hereto and
incorporated by reference.
d. Seller shall execute and deliver assignments of
the Contracts on Schedule 4 in a form prepared by Buyer,
substantially similar to Exhibit E, attached hereto and
incorporated by reference.
e. Seller shall execute and deliver assignments of
the Listings on Schedule 5 in a form prepared by Buyer,
substantially similar to Exhibit F, attached hereto and
incorporated by reference.
f. Seller shall execute and deliver a xxxx of sale
of all the Assets in a form prepared by Buyer, substantially
similar to Exhibit G, attached hereto and incorporated by
reference.
g. Seller shall make available to Buyer by the
Closing Date, or at such other time as is mutually agreed by
Buyer and Seller, all of the business records of Seller
reasonably necessary for purchase of the Assets and
continuation of the Safecom Product line.
h. Seller shall obtain an Order of the Bankruptcy
Court, authorizing the sale of the Assets free and clear of all
liens and encumbrances, and ensure its entry on the docket, in
form satisfactory to the Buyer in its sole discretion, eleven
days before the Closing Date of the sale of Assets contemplated
by this Agreement. The form of the Order (without exhibits)
approving the Agreement by the Bankruptcy Court is attached
hereto as Exhibit H and incorporated by reference.
i. All consents and approvals of any third parties,
court, governmental or entity required to permit the Buyer to
consummate the transactions contemplated hereby shall have been
obtained by the Buyer.
j. No material adverse change in the Assets shall
have occurred.
10. Conditions to Seller's Obligations at Closing. At
Closing, Buyer shall pay to the Seller that portion of the
Purchase Price in good collected funds as set forth in Section
2a. above, and shall issue and deliver to Seller the Note in
favor of Seller as set forth in Section 2b. above.
11. Broker's Indemnity. Each of the parties represents
and warrants that it has dealt with no broker or finder in
connection with any of the transactions contemplated by this
Agreement, and insofar as it knows, no broker or other person
is entitled to any commission or finder's fee in connection
with any of these transactions. Both Buyer and Seller shall
each for themselves indemnify and hold harmless one another
against any loss, liability, damage, cost, claim or expenses
incurred by reason of any brokerage, commission or finder's fee
alleged to be payable because of any act, omission or statement
of the indemnifying party.
12. Uniform Tax Treatment. The parties agree that the
allocation of consideration set forth herein shall be used by
them for all federal and state income tax purposes, including,
but not limited to, reporting pursuant to Section 1060 of the
Internal Revenue Code of 1986, as amended. In preparing and
filing IRS Form 8594 ("Asset Acquisition Statement Under
Section 1060"), the parties shall report that the allocation of
consideration set forth herein and the fair market value of the
assets to which such consideration is allocated is the same.
Prior to filing Form 8594 with respect to the transactions
described herein, the parties shall provide to each other a
true and correct copy of Form 8594 which each intends to file
with respect to these transactions.
13. Power of Attorney. The Seller hereby appoints the
Buyer, effective upon the Closing Date, its agent and attorney
to receive, collect, enforce and xxx for any and all Assets and
to endorse any check or other instrument payable to the Seller
or to the order of the Seller received in payment therefor
either in the name of the Buyer or in the name of the Seller in
connection with the Assets, all as the Seller's agent and
attorney thereunto duly authorized, but, in any event, for the
use and benefit of the Buyer, the powers set forth herein being
irrevocable and powers given for security. The foregoing
powers are coupled with an interest and are and shall be
irrevocable whether by the Seller or by reason of the Seller's
dissolution or in any manner or for any reason whatsoever.
Subsequent to the Closing Date Seller will not use any of the
Assets for its own use or benefit or that of anyone else or
make any effort to receive, collect, enforce or xxx for any of
the Assets at any time after the Closing Date, other than for
the benefit of the Buyer. If any proceeds of any of the Assets
or any payments thereon are for any reason received by the
Seller subsequent to the Closing Date, the Seller will remit
the same to the Buyer immediately and in the form in which
received together with all necessary assignments and
endorsements.
14. General Provisions.
a. Entire Agreement. This Agreement and the
documents referred to in it represent the entire agreement
between the parties with respect to the subject matter
contained in the Agreement and those other documents, and
supersede all prior and contemporaneous agreements,
representations, and understandings of the parties. All
Schedules attached hereto are a part hereof and are
incorporated herein.
b. Drafting of Agreement. The provisions of this
Agreement were negotiated by all of the parties to it and this
Agreement shall be deemed to have been drafted by all, and not
construed against any, of those parties.
c. Modification of Agreement. This Agreement may
not be altered, amended, modified, or otherwise changed in any
way, except in writing duly executed by the parties or their
authorized representatives.
d. Survival of Warranties and Representations.
Except as otherwise provided in this Agreement, the
representations and warranties contained in it shall survive
the sale and transfer of the Assets and Payment of the Purchase
Price and shall not be deemed merged in the documents to be
delivered by Seller under this Agreement, but shall remain in
full force and effect.
e. Validity of Terms. If any provision of this
Agreement or the application of it to any person or to any
circumstance shall be invalid or unenforceable to any extent,
the remainder of this Agreement and the application of that
provision to other persons or to other circumstances shall not
be affected thereby and shall be enforced to the greatest
extent permitted by law.
f. Waiver. No waiver of any of the provisions of
this Agreement shall be deemed, or constitute, a waiver of any
other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding
unless it is executed in writing by the party making the
waiver.
g. Attorneys' Fees. If any legal action,
arbitration, or other proceeding is brought to enforce this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation concerning the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled
to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief
to which it or they may be entitled.
h. Choice of Law. This Agreement shall be
construed in accordance with and governed by the laws of the
State of California.
i. Retention of Jurisdiction by Bankruptcy Court.
After the Closing Date, the Bankruptcy Court shall retain
jurisdiction to determine disputes between Buyer and Seller
under the Agreement or the interpretation thereof and to enter
such Orders as may be necessary or appropriate to implement or
consummate the provisions of this Agreement.
j. Expenses. Each party shall pay all costs and
expenses (including attorney's fees) it incurred or will incur
in negotiating, preparing and carrying out the terms of this
Agreement.
k. Parties in Interest. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons
other than the parties to it, their respective successors and
assigns, and any superseding trustee appointed in Seller's
bankruptcy case, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third
persons to either party hereto, nor shall any provision give
any third persons any right of subrogation or action over or
against any party hereto, their successors and assigns and any
superseding trustee appointed in Seller's bankruptcy case.
l. Assignment. This Agreement shall be binding on
and shall inure to the benefit of Buyer and Seller and their
respective successors and assigns. Except as provided in the
preceding sentence, this Agreement shall not be interpreted to
benefit any person other than the parties, their respective
successors and permitted assigns, and any superseding trustee
appointed in Seller's bankruptcy case. There are no other
intended or permitted beneficiaries of this Agreement.
m. Notices. All notices, requests, demands and
other communications under this Agreement shall be in writing
and shall be deemed to have been duly given on the date of
service if served personally or by receipted overnight courier
services (such as Federal Express) on the party to whom notice
is to be given, or on the third day after mailing if mailed to
the party to whom notice is to be given, by registered or
certified mail, postage prepaid, and properly addressed as
follows:
TO SELLER: Senses International
0000-X Xxxxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxx, President
With a copy to: Xxxxxx & Xxxxxx
A Professional Corporation
0000 Xxxxxx Xxx, Xxxxx 000
Xxxx Xxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxxx
TO BUYER: Detection Systems, Inc.
000 Xxxxxxxx Xxxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx,
Executive Vice President
A party may change its address for purposes of this
section by giving the other parties written notice of the new
address in the manner set forth above.
n. Section Headings. The section headings used in this
Agreement are for convenience and reference only and shall not
be held to expand, modify, amplify or aid in the
interpretation, construction or meaning of this Agreement.
o. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties to this Asset Purchase
Agreement have duly executed it on the date first written
above.
SELLER: SENSES INTERNATIONAL,
a California corporation
By /s/ Xxxxx Xxxxx
Xxxxx Xxxxxx
President
BUYER: DETECTION SYSTEMS, INC.
a New York corporation
By /s/ Xxxxx X. Xxxxxxx
Xxxxx Xxxxxxx
Executive Vice President
[Exhibits to this agreement will be provided by Detection
Systems upon request.]
