EXHIBIT 2
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ASSET PURCHASE AGREEMENT
dated as of
November 28, 1997
among
GENERAL SCANNING INC.
and
REEL-TECH, INC.
and
DATA I/O CORPORATION
TABLE OF CONTENTS
Page
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(S)1. PURCHASE AND SALE........................................ 1
(S) 1.1 Acquired Assets............................. 1
(S) 1.2 Excluded Assets............................. 4
(S)2. ASSUMPTION OF CERTAIN OBLIGATIONS........................ 5
(S)3. PURCHASE PRICE........................................... 5
(S) 3.1 Delivery of Purchase Price.................. 5
(S) 3.2 Purchase Price Adjustments.................. 6
(S) 3.3 Release of Escrowed Funds................... 9
(S)4. CLOSING.................................................. 9
(S) 4.1 Time and Place.............................. 9
(S) 4.2 Transactions at Closing..................... 9
(S)5. REPRESENTATIONS AND WARRANTIES OF THE SELLER............. 11
(S) 5.1 Organization of Selling Group; Authority.... 11
(S) 5.2 Corporate Approval; Binding Effect.......... 11
(S) 5.3 Non-Contravention........................... 12
(S) 5.4 Subsidiaries................................ 12
(S) 5.5 Capitalization.............................. 12
(S) 5.6 Government Consents; Transferability
of Licenses................................ 12
(S) 5.7 Financial Statements........................ 13
(S) 5.8 Absence of Certain Changes.................. 13
(S) 5.9 Litigation.................................. 13
(S) 5.10 Conformity to Law and Contracts............. 14
(S) 5.11 Title to Acquired Assets.................... 14
(S) 5.12 Real Property............................... 14
(S) 5.13 Equipment................................... 15
(S) 5.14 Inventories................................. 16
(S) 5.15 Broker...................................... 16
(S) 5.16 Contracts................................... 16
(S) 5.17 Employment Matters.......................... 16
(S) 5.18 Employee Benefit Plans...................... 17
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(S) 5.19 Labor Relations............................. 17
(S) 5.20 Trademarks, Patents......................... 17
(S) 5.21 Suppliers and Customers..................... 18
(S) 5.22 No Undisclosed Liabilities.................. 18
(S) 5.23 Taxes....................................... 18
(S) 5.24 Disclosure.................................. 19
(S)6. REPRESENTATIONS AND WARRANTIES OF THE BUYER.............. 19
(S) 6.1 Organization of Buyer; Authority............ 19
(S) 6.2 Corporate Approval; Binding Effect.......... 19
(S) 6.3 Non-Contravention........................... 20
(S) 6.4 Governmental Consents....................... 20
(S) 6.5 Broker...................................... 20
(S) 6.6 Litigation.................................. 20
(S) 6.7 Capitalization.............................. 20
(S) 6.8 SEC Reports................................. 21
(S)7. CONDUCT OF BUSINESS BY SELLING GROUP
PENDING CLOSING.......................................... 21
(S) 7.1 Full Access................................. 21
(S) 7.2 Carry on in Regular Course.................. 21
(S) 7.3 No Dividends, Issuances, Repurchases........ 22
(S) 7.4 Insurance................................... 22
(S) 7.5 Preservation of Organization................ 22
(S) 7.6 Advice of Change............................ 22
(S) 7.7 No Shopping................................. 22
(S) 7.8 Consents of Third Parties................... 23
(S)8. COVENANTS................................................ 23
(S) 8.1 Separate Entity............................. 23
(S) 8.2 Coyote License Agreement.................... 23
(S) 8.3 401(k) Plan................................. 23
(S)9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS 23
(S) 9.1 Representations and Warranties True
at Closing................................. 24
(S) 9.2 Compliance with Agreement................... 24
(S) 9.3 No Material Adverse Change.................. 24
(S) 9.4 Closing Certificate......................... 24
(S) 9.5 Opinion of Counsel.......................... 24
(S) 9.6 Approvals; Consents......................... 24
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(S) 9.7 No Litigation............................... 24
(S) 9.8 Non-Competition Agreements.................. 25
(S) 9.9 License Agreements.......................... 25
(S) 9.10 Escrow Agreement............................ 25
(S) 9.11 Consents.................................... 25
(S) 9.12 Due Diligence............................... 25
(S) 9.13 Registration Rights Agreement............... 25
(S) 9.14 Arrangements with Hall, Inc................. 25
(S) 9.15 Proceedings and Documents Satisfactory...... 25
(S)10. CONDITIONS PRECEDENT TO SELLER'S AND
PARENT'S OBLIGATIONS..................................... 26
(S)10.1 Representations and Warranties True
at Closing................................. 26
(S)10.2 Compliance with Agreement................... 26
(S)10.3 Closing Certificate......................... 26
(S)10.4 Opinion of Counsel.......................... 26
(S)10.5 Approvals; Consents......................... 26
(S)10.6 No Litigation............................... 26
(S)10.7 Agreements.................................. 26
(S)10.8 Account Receivable.......................... 27
(S)10.9 Non-Competition Agreement................... 27
(S)10.10 Coyote License Agreement.................... 27
(S)10.11 Stock Certificate and Registration
Rights Agreement........................... 27
(S)10.12 Proceedings and Documents Satisfactory...... 27
(S)10.13 No Material Adverse Change.................. 27
(S)11. CONFIDENTIAL INFORMATION................................. 27
(S)12. INDEMNIFICATION.......................................... 28
(S)12.1 Indemnity by the Seller..................... 28
(S)12.2 Indemnity by the Buyer...................... 29
(S)12.3 Claims...................................... 29
(S)12.4 Method of Manner of Paying Claims........... 30
(S)12.5 Limitations on Indemnification.............. 30
(S)12.6 General Limitations on Liability............ 31
(S)13. USE OF NAME.............................................. 32
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(S)14. GENERAL.................................................. 32
(S)14.1 Survival of Representations and Warranties.. 32
(S)14.2 Expenses.................................... 32
(S)14.3 Notices..................................... 32
(S)14.4 Entire Agreement............................ 33
(S)14.5 Governing Law............................... 34
(S)14.6 Sections and Section Headings............... 34
(S)14.7 Assigns..................................... 34
(S)14.8 Severability................................ 34
(S)14.9 Further Assurances.......................... 34
(S)14.10 No Implied Rights or Remedies............... 34
(S)14.11 Counterparts................................ 35
(S)14.12 Satisfaction of Conditions Precedent........ 35
(S)14.13 Public Statements or Releases............... 35
(S)14.14 Business Records............................ 35
(S)14.15 Attorneys' Fees............................. 36
(S)15 CERTAIN DEFINITIONS...................................... 36
Exhibits:
Exhibit A - Escrow Agreement
Exhibit B - Pro Forma Balance Sheet
Exhibit C - Opinion of Seller's Counsel
Exhibit D - Selling Group Non-Competition Agreement
Exhibit E-1 - 9500 License Agreement
Exhibit E-2 - Coyote License Agreement
Exhibit F - Opinion of Buyer's Counsel
Exhibit G - Buyer Non-Competition Agreement
Exhibit H - Registration Rights Agreement
Schedules:
Schedule 1.1(a)(i) - Equipment
Schedule 1.1(a)(ii) - Personal Property Leases
Schedule 1.1(a)(iii) - Real Property Leases
Schedule 1.1(a)(v) - Employee Agreements
Schedule 1.1(a)(vi)- Other Contracts
Schedule 1.1(a)(viii) - Intangibles
Schedule 1.1(b)(i) - Singapore Equipment
Schedule 1.1(b)(ii) - Singapore Personal Property Leases
Schedule 1.1(b)(iii) - Singapore Real Property Lease
Schedule 1.1(b)(v) - Singapore Employee Agreements
Schedule 1.1(b)(vi)- Singapore Other Contracts
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Schedule 1.1(b)(viii) - Singapore Intangibles
Schedule 2(c) - Data I/O GmbH Accounts
Schedule 3.1 - Allocation of Purchase Price
Schedule 4.2(a) - Permitted Encumbrances
Schedule 5.6 - Consents of Government Authorities (Seller)
Schedule 5.7 - Financial Statements
Schedule 5.8 - Changes
Schedule 5.9 - Litigation
Schedule 5.10 - Compliance with Law
Schedule 5.11 - Required Consents
Schedule 5.12 - Real Property Lease Issues
Schedule 5.18 - Employee Benefit Plans
Schedule 5.19 - Labor Matters
Schedule 5.20 - Intellectual Property
Schedule 5.21 - Suppliers and Customers
Schedule 5.23 - Tax Matters
Schedule 7.3 - Distributions
ASSET PURCHASE AGREEMENT
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This ASSET PURCHASE AGREEMENT is dated as of the 28th day of November, 1997
by and among (i) GENERAL SCANNING INC., a Massachusetts corporation (the
"Buyer"), (ii) REEL-TECH, INC., a Washington corporation (the "Seller"), and
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(iii) DATA I/O CORPORATION, a Washington corporation (the "Parent"). The
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Seller, the Parent and Reel-Tech Singapore (as defined below) are referred to
herein collectively, as the "Selling Group".
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WHEREAS, the Seller is engaged, directly and through its subsidiary Reel-
Tech Singapore, in the semi-conductor equipment business (the "Business"); and
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WHEREAS, the Buyer desires to purchase the Business by acquiring
substantially all of the assets owned by the Seller and Reel-Tech Singapore as
well as certain assets of the Parent related to the Business, subject to certain
obligations, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the Buyer and the Seller and the Parent hereby agree as follows:
(S)1. PURCHASE AND SALE.
(S)1.1. Acquired Assets. (a) Subject to the terms and conditions set
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forth in this Agreement, at the Closing referred to in (S)4 hereof, the Seller
shall sell, assign, transfer and deliver to the Buyer, and the Buyer shall
purchase, acquire and take assignment and delivery of, all of the assets (other
than the Excluded Assets specified in (S)1.2 hereof) of the Seller (all of which
assets are hereinafter referred to collectively, with the Singapore Assets, as
the "Acquired Assets"), including, without limitation, the following assets:
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(i) any and all plants, fixtures, machinery, installations,
equipment, furniture, tools, spare parts, supplies, materials and other personal
property used in conjunction with the Seller's operations, including without
limitation, those items described on Schedule 1.1(a)(i) attached hereto, with
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such additions thereto and deletions therefrom as may hereafter arise in the
ordinary course of business prior to the Closing consistent with (S)7 hereof
(the "Equipment");
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(ii) all of the Seller's title to, interest in and rights under the
leases of personal property described on Schedule 1.1(a)(ii) attached hereto
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(the "Personal Property Leases");
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(iii) all of the Seller's title to, interest in and rights under the
leases for the real property located in Indianapolis, Indiana and Kent,
Washington and described on Schedule 1.1(a)(iii) attached hereto (the "Real
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Property Leases");
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(iv) all of the Seller's inventories, including raw materials, parts,
work in process and finished goods (the "Inventories");
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(v) all of the Seller's rights under the Contracts with respect to
employees including commission and bonus agreements, in each case listed on
Schedule 1.1(a)(v) attached hereto (collectively, the "Employee Agreements"),
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provided that the Parent shall be permitted to retain copies of all such
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Contracts;
(vi) all of the Seller's rights (i) under all purchase orders and
Contracts for the purchase or sale of utilities, goods, materials and services,
including, without limitation, the Contracts described on Schedule 1.1(a)(vi)
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attached hereto which provide for payments in excess of $25,000, and (ii) under
all other Contracts of the Seller entered into in the ordinary course of
business prior to the Closing (the Contracts referred to in this paragraph (vi),
including without limitation, those described on Schedule 1.1(a)(vi), being
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referred to collectively as the "Other Contracts");
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(vii) all of the Seller's transferable rights under its governmental
licenses, permits and approvals (the "Permits");
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(viii) all of the Seller's trademarks, trade names, trade secrets,
corporate names (including without limitation the name "Reel-Tech"), copyrights,
designs, patents, licenses (as licensee or licensor), other Contracts and
applications with respect to the foregoing, production records, technical
information, manufacturing know-how, processes, trade secrets, customer lists,
telephone numbers and other intangible assets, including without limitation
those described on Schedule 1.1(a)(viii) attached hereto (the "Intangibles");
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and
(ix) all of the Seller's employment and personnel records for all
employees of the Seller and all other documents and records relating to the
Acquired Assets; provided that the Parent shall be permitted to retain copies of
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all such employment and personnel records.
(b) Subject to the terms and conditions set forth in this Agreement, at the
Closing referred to in (S)4 hereof, the Parent and Seller shall cause Reel-Tech
Singapore Pte Ltd., a corporation organized under the laws of Singapore ("Reel-
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Tech Singapore"), to sell, assign, transfer and deliver to the Buyer, and the
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Buyer shall purchase, acquire and take assignment and delivery of, all of the
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assets (other than the Excluded Assets specified in (S)1.2 hereof) of Reel-Tech
Singapore (the "Singapore Assets"), including, without limitation the following
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assets:
(i) any and all plants, fixtures, machinery, installations,
equipment, furniture, tools, spare parts, supplies, materials and other personal
property used in conjunction with Reel-Tech Singapore's operations, including
without limitation, those items described on Schedule 1.1(b)(i) attached hereto,
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with such additions thereto and deletions therefrom as may hereafter arise in
the ordinary course of business prior to the Closing consistent with (S)7 hereof
(the "Singapore Equipment");
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(ii) all of Reel-Tech Singapore's title to, interest in and rights
under the leases of personal property described on Schedule 1.1(b)(ii) attached
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hereto (the "Singapore Personal Property Leases");
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(iii) all of Reel-Tech Singapore's title to, interest in and rights
under the lease for the real property located in Singapore and described on
Schedule 1.1(b)(iii) attached hereto (the "Singapore Real Property Lease");
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(iv) all of Reel-Tech Singapore's inventories, including raw
materials, parts, work in process and finished goods (the "Singapore
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Inventories");
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(v) all of Reel-Tech Singapore's rights under the Contracts with
respect to employees including commission and bonus agreements, in each case
listed on Schedule 1.1(b)(v) attached hereto (collectively, the "Singapore
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Employee Agreements"), provided that the Parent shall be permitted to retain
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copies of all such Contracts;
(vi) all of Reel-Tech Singapore's rights (i) under all purchase orders
and Contracts for the purchase or sale of utilities, goods, materials and
services, including, without limitation, the Contracts described on Schedule
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1.1(b)(vi) attached hereto which provide for payments in excess of $25,000, and
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(ii) under all other Contracts of Reel-Tech Singapore entered into in the
ordinary course of business prior to the Closing (the Contracts referred to in
this paragraph (vi) including, without limitation, those described on Schedule
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1.1(b)(vi), being referred to collectively as the "Singapore Other Contracts");
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(vii) all of Reel-Tech Singapore's transferable rights under its
governmental licenses, permits and approvals (the "Singapore Permits");
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(viii) all of Reel-Tech Singapore's trademarks, trade names, trade
secrets, corporate names (including without limitation the name "Reel-Tech
Singapore"), copyrights, designs, patents, licenses (as licensee or licensor),
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other Contracts and applications with respect to the foregoing, production
records, technical information, manufacturing know-how, processes, trade
secrets, customer lists, telephone numbers and other intangible assets,
including without limitation those described on Schedule 1.1(b)(viii) attached
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hereto (the "Intangibles"); and
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(ix) all of Reel-Tech Singapore's employment and personnel records for
all employees of Reel-Tech Singapore and all other documents and records
relating to the Singapore Acquired Assets; provided that the Parent shall be
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permitted to retain copies of all such employment and personnel records.
(c) Subject to the terms and conditions set forth in this Agreement, at the
Closing referred to in (S)4 hereof, the Parent shall sell, assign, transfer and
deliver to the Buyer, and the Buyer shall purchase, acquire and take assignment
and delivery of, any and all rights the Parent may have in and to any of the
Acquired Assets.
(S)1.2. Excluded Assets. Notwithstanding the foregoing, the Selling Group
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is not selling and the Buyer is not purchasing pursuant to this Agreement, and
the term "Acquired Assets" shall not include, any of the following assets (the
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"Excluded Assets"):
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(a) the consideration received by the Seller pursuant to this
Agreement;
(b) the Seller's cash, commercial paper and cash equivalents, on
hand or in bank accounts;
(c) the Seller's trade accounts receivable, notes receivable and
miscellaneous receivables;
(d) the name "Data I/O";
(e) the 9500-Specific Handler Technology (as defined in the 9500
License Agreement);
(f) the Coyote-Specific Handler Technology (as defined in the
Coyote License Agreement);
(g) the rights of the Seller under this Agreement; and
(h) the outstanding shares of capital stock of Reel-Tech
Singapore.
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(S)2. ASSUMPTION OF CERTAIN OBLIGATIONS. At the Closing, the Buyer shall
assume, and agree to pay, perform, fulfill and discharge, the following
obligations of the Seller and of Reel-Tech Singapore (the "Assumed
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Obligations"):
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(a) all of the obligations of the Seller under the Personal
Property Leases referred to in (S)1.1(a)(ii) hereof, the Real Property Leases
referred to in (S)1.1(a)(iii) hereof, the Employee Agreements referred to in
(S)1.1(a)(v) hereof, the Other Contracts referred to in (S)1.1(a)(vi) hereof and
the licenses referred to in (S)1.1(a)(viii) hereof, in each case only to the
extent that such obligations arise or accrue from and after the Closing Date or
are included in the Final Closing Statement;
(b) all of the obligations of Reel-Tech Singapore under the
Singapore Personal Property Leases referred to in (S)1.1(b)(ii) hereof, the
Singapore Real Property Lease referred to in (S)1.1(b)(iii) hereof, the
Singapore Employee Agreements referred to in (S)1.1(b)(v) hereof, the Singapore
Other Contracts referred to in (S)1.1(b)(vi) hereof and the licenses referred to
in (S)1.1(b)(viii) hereof, in each case only to the extent that such obligations
arise or accrue from and after the Closing Date or are included in the Final
Closing Statement;
(c) all of the obligations of the Seller to Data I/O GmbH under
that certain Agreement dated October 1, 1996 between the Seller and Data I/O
GmbH for commissions relating to the potential orders on which Data I/O GmbH
expects to consummate sales on or before December 31, 1997 as described on
Schedule 2(c) attached hereto; and
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(d) the Seller's obligation under the first two sentences of
Section 3.1 of the 1995 Asset Purchase Agreement solely as it relates to
maintaining certain operations in Indianapolis, Indiana and the surrounding area
until December 31, 1998 and the Seller's obligation to pay Earn-Out Payment 1
under Section 2.4 of the 1995 Asset Purchase Agreement.
Anything in this Agreement to the contrary notwithstanding the Buyer shall not
assume, and shall not be deemed to have assumed, (i) any liability or obligation
of the Seller or Reel-Tech Singapore whatsoever, other than as specifically set
forth in this (S)2 or (ii) any obligation of the Parent (with all such unassumed
liabilities and obligations referred to herein as the "Excluded Liabilities").
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(S)3. PURCHASE PRICE.
(S)3.1. Delivery of Purchase Price. At the Closing, the Buyer shall pay
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to the Seller, as the aggregate purchase price for the Acquired Assets,
$13,300,000, subject to adjustment as provided in (S)3.2 hereof (the "Purchase
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Price"), to be paid as follows: (a) cash in an amount equal to $10,550,000
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shall be paid by the Buyer to the Seller, (b) cash in an amount equal to
$750,000 (the "Escrowed Funds") shall be deposited by the Buyer in escrow in an
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interest-bearing account with State Street Bank and Trust Company, as escrow
agent (the "Escrow Agent"), pursuant to an escrow agreement to be entered into
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among the Buyer, the Seller and the Escrow Agent substantially in the form of
Exhibit A attached hereto (the "Escrow Agreement") for the purposes of
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satisfying the Seller's indemnification obligations described in (S)12 hereof
and (c) the number of shares (the "Shares") of the common stock of the Buyer,
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par value $0.01 per share, having a value of $2,000,000 based upon the average
of the closing price of such common stock on the NASDAQ National Market System
at the close of trading on the trading day immediately before the Closing Date
and each of the four next preceding trading dates (with any fractional Shares
rounded up to one Share) shall be delivered by the Buyer to the Seller (or an
undertaking to deliver such Shares within three (3) business days). The fees and
expenses of the Escrow Agent shall be shared equally between the Buyer and the
Seller. The cash portion of the Purchase Price will be paid by the Buyer to the
Seller and the Escrow Agent as set forth above by wire transfer of immediately
available funds or by delivery of one or more certified or bank checks. The
Purchase Price shall be allocated among the Acquired Assets, which include
intangible assets, in the manner set forth on Schedule 3.1 attached hereto. The
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Buyer, the Seller and the Parent shall treat and report the transactions
contemplated by this Agreement in all respects consistently for purposes of any
federal, state or local tax, including without limitation with respect to
calculation of gain, loss and basis with reference to the allocations of the
Purchase Price set forth on Schedule 3.1 hereto. Both the Buyer and the Seller
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agree to file with the Internal Revenue Service an IRS Form 8594 (Asset
Acquisition Statement under Section 1060) with respect to the acquisition by the
Buyer of the Acquired Assets, with their respective federal income tax returns
for the year in which the Closing Date occurs, consistent with the allocations
made pursuant to this (S)3.1.
(S)3.2. Purchase Price Adjustments.
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(a) As used herein, (i) "GAAP" means generally accepted accounting
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principles applied on a basis consistent with the Financial Statements and (ii)
"True-Up Amount" means the difference, if any, obtained by subtracting the total
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liabilities of the Seller and Reel-Tech Singapore on the Final Closing Statement
from the total assets of the Seller and Reel-Tech Singapore on the Final Closing
Statement.
(b) Not later than the close of business one business day prior to the
Closing Date, the Seller shall estimate in good faith the True-Up Amount and
shall notify the Buyer of such estimated True-Up Amount (the "Estimated True-Up
--------- ---- --
Amount") in writing. If the Estimated True-Up Amount is positive, the Buyer
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shall pay to the Seller on the Closing Date, by wire transfer of immediately
available funds or by delivery of one or more certified or bank checks, 66-2/3%
of the Estimated True-Up Amount. If the Estimated True-Up Amount is negative,
the Seller shall pay to the Buyer on the Closing Date, by wire transfer of
immediately available funds or by delivery of one or more certified or bank
checks, 66-2/3% of the Estimated True-Up Amount (or the Buyer may reduce the
amount of the Purchase Price payable to the Seller in cash pursuant to (S)3.1(a)
hereof by the Estimated True-Up Amount).
(c) Within twenty (20) days after the Closing Date, the Parent shall
prepare and deliver to the Buyer a consolidating and consolidated balance sheet
of the Seller and Reel-Tech Singapore as of the Closing Date (the "Final Closing
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Statement") immediately prior to giving effect to the Closing, together with
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copies of all working papers and supporting documents for the balance sheet
accounts, prepared in accordance with GAAP applied in a manner consistent with
the preparation of the Pro Forma Balance Sheet (M & A view) attached as
Exhibit B to the letter of intent dated as of July 28, 1997 among the Buyer,
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the Seller and the Parent.
(d) When the Parent delivers the Final Closing Statement, the Parent
shall also deliver a certificate (i) certifying that the Final Closing Statement
was prepared in accordance with GAAP in compliance with the procedures set forth
in paragraph (c) above and (ii) containing the Parent's calculations, based on
the Final Closing Statement (the "Parent's Proposed Calculations"), of the True-
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Up Amount. Within twenty (20) days after receipt of the Final Closing Statement
and the accompanying certificate, the Buyer shall notify the Parent in writing
of its agreement or disagreement with the Final Closing Statement and the
accuracy of any of the Parent's Proposed Calculations. If the Buyer disputes
any aspect of the Final Closing Statement or the Parent's Proposed Calculations,
then the Buyer shall have the right to direct its independent accountants, at
the Buyer's expense, to review and test the Final Closing Statement. The Seller
and the Parent shall fully cooperate with the reasonable requests of the Buyer's
accountants in any such review and test. The Buyer's accountants shall complete
their review and test within twenty (20) days after the date the Buyer notifies
the Parent that the Buyer disagrees with the Final Closing Statement and/or the
Parent's Proposed Calculations, and the Parent shall have twenty (20) days
thereafter to accept or reject the Buyer's proposed alternative calculations of
the True-Up Amount (the "Buyer's Proposed Calculations"). If the Buyer and its
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independent accountants, after such review and test, still disagree with the
Parent's Proposed Calculations, and the Parent does not accept the Buyer's
Proposed Calculations, then the Parent and the Buyer shall within twenty (20)
days by mutual agreement select another nationally recognized independent
accounting firm (other than the Parent's independent accountants and the Buyer's
independent accountants) (the "Third Accountants") to resolve the remaining
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disputed items (the "Remaining Disputed
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Items"). The Seller and the Parent shall instruct the Third Accountants to
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conduct their own review and test of the Final Closing Statement and to select
either the Buyer's Proposed Calculations of the Remaining Disputed Items or the
Parent's Proposed Calculations of the Remaining Disputed Items or an amount in
between the two. The Seller and the Parent shall fully cooperate with the
reasonable requests of the Third Accountants in any such review and test. Each
of the Buyer, the Parent and the Seller shall be bound by the Third Accountants'
determination of the Remaining Disputed Items. The fees and expenses of the
Third Accountants shall be paid in equal shares by the Buyer and the Seller.
(e) Upon the determination pursuant to paragraph (d) of this (S)3.2 of
the Final Closing Statement:
(i) if a payment in respect of the Estimated True-Up Amount was
previously made by the Buyer to the Seller under (S)3.2(b) hereof (the
"Interim Payment") then:
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(A) if the True-Up Amount is positive and exceeds the
Interim Payment, the Buyer shall pay to the Seller an amount equal to
the difference of the True-Up Amount minus the Interim Payment;
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(B) if the True-Up Amount is positive but is less than the
Interim Payment, the Seller and the Parent, jointly and severally,
shall pay to the Buyer an amount equal to the difference of the
Interim Payment minus the True-Up Amount;
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(C) if the True-Up Amount is negative, the Seller and the
Parent, jointly and severally, shall pay to the Buyer an amount equal
to the sum of the True-Up Amount plus the Interim Payment; and
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(D) if the True-Up Amount is zero, the Seller and the
Parent, jointly and severally, shall pay to the Buyer an amount equal
to the Interim Payment;
(ii) if the Interim Payment was previously made by the Seller to
the Buyer then:
(A) if the True-Up Amount is positive, the Buyer shall pay
to the Seller an amount equal to the sum of the True-Up Amount plus
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the Interim Payment;
(B) if the True-Up Amount is negative and exceeds the
Interim Payment, the Seller and the Parent, jointly and severally,
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shall pay to the Buyer an amount equal to the difference of the True-
Up Amount minus the Interim Payment;
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(C) if the True-Up Amount is negative and is less than the
Interim Payment, the Buyer shall pay to the Seller an amount equal to
the difference of the Interim Payment minus the True-Up Amount; and
-----
(D) if the True-Up Amount is zero, the Buyer shall pay to
the Seller an amount equal to the Interim Payment; and
(iii) if no Interim Payment was previously made then:
(A) if the True-Up Amount is positive, the Buyer shall pay
to the Seller an amount equal to the True-Up Amount;
(B) if the True-Up Amount is negative, the Seller and the
Parent, jointly and severally, shall pay to the Buyer an amount equal
to the True-Up Amount; and
(C) if the True-Up Amount is zero, there shall be no payment
made pursuant to this (S)3.2(e).
Any such payment shall be made by wire transfer of immediately available funds
or by delivery of one or more certified or bank checks.
(S)3.3. Release of Escrowed Funds. The Escrowed Funds shall be held by
-------------------------
the Escrow Agent and released to the Seller or the Buyer as provided in the
Escrow Agreement.
(S)4. CLOSING.
(S)4.1. Time and Place. The closing of the transfer and delivery of all
---- --- -----
documents and instruments necessary to consummate the transactions contemplated
by this Agreement (the "Closing") shall be held at the offices of Xxxxxxx Xxxx
-------
LLP, 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx on a mutually acceptable date,
not later than December 31, 1997, or at such other place as the Buyer, the
Parent and the Seller may agree. The date on which the Closing is actually held
hereunder is sometimes referred to herein as the "Closing Date".
------- ----
(S)4.2. Transactions at Closing. At the Closing:
------------ -- -------
(a) The Seller shall duly execute and deliver to the Buyer or its
nominee or nominees such deeds, certificates of title or other instruments of
assignment and transfer with respect to the Acquired Assets as the Buyer may
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reasonably request and as may be necessary or convenient to vest in the Buyer
good and marketable title to all of the Acquired Assets, in each case subject to
no Encumbrance except for the Encumbrances specified on Schedule 4.2(a) attached
-------- ------
hereto (the "Permitted Encumbrances").
--------- ------------
(b) The Parent shall duly execute and deliver to the Buyer or its
nominee or nominees such deeds, certificates of title or other instruments of
assignment and transfer with respect to the Parent's interest, if any, in the
Acquired Assets as the Buyer may reasonably request.
(c) The Buyer shall duly execute and deliver to the Seller and to
Reel-Tech Singapore such instruments of assumption and other documents with
respect to the Assumed Obligations as the Seller may reasonably request.
(d) The Buyer shall pay the Purchase Price to the Seller (or to such
other entity or entities as the Seller shall designate in writing to the Buyer)
and the Escrow Agent as provided in (S)3.1 hereof.
(e) Each of the Parent and the Seller shall duly execute and deliver
to the Buyer the Selling Group Non-Competition Agreement.
(f) The Buyer shall duly execute and deliver to the Parent the Buyer
Non-Competition Agreement.
(g) The Buyer, the Seller and the Parent shall execute and deliver
each of the License Agreements.
(h) The Buyer and the Seller shall execute and deliver the Escrow
Agreement to the Escrow Agent for signature.
(i) Reel-Tech Singapore shall duly execute and deliver to the Buyer or
its nominee or nominees, such deeds, certificates of title or other instruments
of assignment and transfer (all such documents, collectively, the "Singapore
Xxxx of Sale") as the Buyer may reasonably request and as may be necessary or
convenient to vest in Buyer or its designee good and marketable title to the
Singapore Assets, in each case subject to no Encumbrance except for Permitted
Encumbrances.
(j) The Buyer and the Parent shall execute and deliver the
Registration Rights Agreement.
(k) The Buyer shall have duly executed and delivered to the Parent a
stock certificate or certificates, as requested by the Parent, representing the
Shares or an undertaking as provided in Section 3.1 hereof.
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(l) The Seller shall have notified the Buyer of the Estimated True-Up
Amount pursuant to (S)3.2(b) hereof and the Seller or the Buyer, as applicable,
shall have paid the Interim Payment in accordance with (S)3.2(b) hereof.
(m) The Parent shall have duly executed and delivered a letter
concerning its investment in the Shares, and such letter shall be satisfactory
to the Buyer in all respects.
(n) The Parent shall have duly executed and delivered a letter
concerning the Savings Plan, and such letter shall be satisfactory to the Buyer
in all respects.
(S)5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents
and warrants to the Buyer as set forth in this (S)5 below. All representations
as to the Business and its conduct relate to periods after the closing under the
1995 Asset Purchase Agreement.
(S)5.1. Organization of Selling Group; Authority. Each member of the
------------ -- ------------- ---------
Selling Group is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each member of
the Selling Group is duly qualified and in good standing as a foreign
corporation in all jurisdictions in which the character of the properties owned
or leased or the nature of the activities conducted by it makes such
qualification necessary. The Seller has all requisite power and authority to
own and hold the Acquired Assets owned or held by it and to carry on the
Business as such business is now conducted. Reel-Tech Singapore has all
requisite power and authority to carry on its business as such business is now
conducted and to own and hold the Singapore Assets. Each of the Seller, the
Parent and/or Reel-Tech Singapore, as appropriate, has all requisite power and
authority to execute and deliver this Agreement, the License Agreements, the
Escrow Agreement, the Selling Group Non-Competition Agreement, the Buyer Non-
Competition Agreement, the Singapore Xxxx of Sale, the Registration Rights
Agreement and the other documents, instruments and agreements contemplated
hereby or thereby (collectively, the "Transaction Documents") to which it is a
----------- ---------
party and to carry out all actions required of it pursuant to the terms of the
Transaction Documents.
(S)5.2. Corporate Approval; Binding Effect. Each member of the Selling
--------- -------- ------- ------
Group has obtained all necessary authorizations and approvals from its Board of
Directors and stockholders required for the execution and delivery of the
Transaction Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby. Each of the Transaction Documents
to which a member of the Selling Group is a party has been, or at the Closing
shall be duly, executed and delivered by such entity, and constitutes
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or upon such execution and delivery will constitute the legal, valid and binding
obligation of such entity, enforceable against it in accordance with its terms,
except as enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other laws affecting creditors' rights generally
or by general principles of equity.
(S)5.3. Non-Contravention. The execution and delivery by each member of
--- -------------
the Selling Group of the Transaction Documents to which it is a party and the
consummation by each member of the Selling Group of the transactions
contemplated hereby and thereby will not (a) violate or conflict with any
provision of its Articles of Incorporation or Bylaws (or such similar
organizational documents of Reel-Tech Singapore), each as amended to date; or
(b) constitute a violation of, or be in conflict with, or constitute or create a
default under, or result in the creation or imposition of any Encumbrance upon
any of its property (including without limitation any of the Acquired Assets)
pursuant to (i) any Contract to which it is a party or by which it or any of its
properties (including without limitation any of the Acquired Assets) is bound or
to which it or any of such properties is subject, or (ii) any Government Mandate
to which it is subject.
(S)5.4. Subsidiaries. The Seller does not have any subsidiaries other
------------
than Reel-Tech Singapore and does not own or hold of record and/or beneficially
any shares of any class in the capital of any corporation other than the capital
stock of Reel-Tech Singapore. Reel-Tech Singapore does not have any
subsidiaries and does not own or hold of record and/or beneficially any shares
of any class in the capital of any corporation. Neither the Seller nor Reel-
Tech Singapore owns any legal and/or beneficial interests in any partnerships,
business trusts or joint ventures or in any other unincorporated trade or
business enterprises.
(S)5.5. Capitalization. The authorized capital of Reel-Tech Singapore
--------------
consists of 10,000 shares of common stock, par value Singapore $10 per share,
two shares of which are issued and outstanding on the date hereof. All of the
issued and outstanding shares of the capital stock of Reel-Tech Singapore are
owned of record and beneficially by the Seller.
(S)5.6. Government Consents; Transferability of Licenses. Except as set
---------- -------- --------------- -- --------
forth on Schedule 5.6 attached hereto, no consent, approval or authorization of,
-------- ---
or registration, qualification or filing with, any Government Authority is
required for the execution and delivery by any member of the Selling Group of
the Transaction Documents to which it is a party or for the consummation by any
member of the Selling Group of the transactions contemplated hereby or thereby.
Each of the Seller and Reel-Tech Singapore has and maintains all licenses,
permits and other authorizations from all Government Authorities as are
necessary for the conduct of the Business or in connection with the ownership or
use of the Acquired Assets. Except as expressly designated on
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Schedule 5.6 attached hereto, all of the Permits and Singapore Permits which are
-------- ---
material to the operation of the Business are transferable to the Buyer and will
remain in full force and effect upon their transfer to the Buyer. No proceedings
to terminate, suspend or materially modify any Permits or Singapore Permits
which are material to the operation of the Business are pending nor, to the
knowledge of the Seller, have any such proceedings been threatened, or is there
any basis for any such proceeding.
(S)5.7. Financial Statements. The Parent and the Seller have delivered
--------- ----------
the following financial statements (the "Financial Statements") to the Buyer,
--------- ----------
and there are attached as Schedule 5.7 hereto: (a) the unaudited consolidating
-------- ---
balance sheet of the Seller and Reel-Tech Singapore as of December 26, 1996
(such balance sheet being referred to herein as the "Balance Sheet"), and the
------- -----
related unaudited consolidating statement of income of the Seller and Reel-Tech
Singapore for the 12 month period then ended (collectively, the "Financials")
----------
and (b) the unaudited consolidated balance sheet of the Seller and Reel-Tech
Singapore as of September 25, 1997 and the related consolidated statement of
income of the Seller and Reel-Tech Singapore for the 9 month period then ended
(collectively, the "Interim Financials"). Each of the Financial Statements is
------- ----------
true and correct and has been prepared in accordance with GAAP (subject, in the
case of the Interim Financials, to normal year-end adjustments); each of such
balance sheets fairly and accurately presents the financial condition of the
Seller and Reel-Tech Singapore on a consolidated basis as of its respective date
(other than intercompany reporting of commissions and expenses which will be
completed by the Closing); and such statements of income fairly and accurately
present the results of operations for the periods covered thereby.
(S)5.8. Absence of Certain Changes. Except as set forth on Schedule 5.8
------- -- ------- ------- -------- ---
attached hereto, since December 26, 1996, each of the Seller and Reel-Tech
Singapore has carried on its business only in the ordinary course, and without
limiting the generality of the foregoing there has not been (a) any change in
the assets, liabilities, sales, capital stock, income or business of the Seller
or Reel-Tech Singapore or in their relationships with suppliers, customers or
lessors, other than changes which were both in the ordinary course of business
and have not been, either in any case or in the aggregate, materially adverse;
(b) any declaration, setting aside or payment of any dividend or any other
distributions in respect of the Seller's or Reel-Tech Singapore's capital stock;
or (c) any increase in the compensation, pension or other benefits payable or to
become payable by the Seller or Reel-Tech Singapore to any of its officers or
employees, or any bonus payments or arrangements made to or with any of them,
other than pursuant to the terms of the Employee Agreements or the Singapore
Employee Agreements and other than in the ordinary course of business.
(S)5.9. Litigation. Except as set forth on Schedule 5.9 attached hereto,
---------- -------- ---
no judicial or administrative action, proceeding or investigation is pending or,
to the
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knowledge of the Seller, threatened, relating to or affecting any of the
Acquired Assets or against or involving the Seller or Reel-Tech Singapore, or
which questions the validity of the Transaction Documents or challenges any of
the transactions contemplated hereby or thereby, nor, to the knowledge of the
Seller, is there any basis for any such action, proceeding or investigation.
(S)5.10. Conformity to Law and Contracts. Except as set forth on Schedule
---------- -- --- ------------- --------
5.10 attached hereto and except for circumstances in which noncompliance would
----
not have a material adverse effect on the Business or the Acquired Assets, each
of the Seller and Reel-Tech Singapore has complied with, and is in compliance
with, (a) all Government Mandates applicable to it, the Real Property or any of
the Acquired Assets (including, without limitation, any labor, environmental,
occupational health, zoning or other Government Mandate) and (b) all unwaived
terms and provisions of all Contracts to which it is a party, or to which it or
any of the Acquired Assets is subject. Except as set forth in Schedule 5.10
-------- ----
attached hereto, neither the Seller nor Reel-Tech Singapore is subject to any
judicial or administrative action, proceeding or investigation relating to any
actual or, to the Seller's knowledge, alleged violation of any Government
Mandate.
(S)5.11. Title to Acquired Assets. The Seller or Reel-Tech Singapore, as
----- -- -------- ------
applicable, is lawful owner of and has good and valid record and marketable
title to all of the Acquired Assets, and has the full right to sell, convey,
transfer, assign and deliver the Acquired Assets, without the need to obtain the
consent or approval of any third party except as set forth on Schedule 5.11
-------------
attached hereto (the "Required Consents"). Except for Permitted Encumbrances,
-----------------
all of the Acquired Assets are entirely free and clear of any Encumbrances. At
and as of the Closing, upon the delivery of the instruments described in
(S)4.2(a), (b) and (i) hereof, the Buyer will have good and valid record and
marketable title to all of the Acquired Assets, free and clear of all
Encumbrances other than Permitted Encumbrances.
(S)5.12. Real Property.
---- --------
(a) Neither the Seller nor Reel-Tech Singapore owns any real property.
Schedules 1.1(a)(iii) and 1.1(b)(iii) attached hereto set forth all leases for
--------- ----------- -----------
real property leased by the Seller or Reel-Tech Singapore (the "Real Property").
---- --------
The Real Property Leases and the Singapore Real Property Lease include all
leases and other Contracts pursuant to which the Seller or Reel-Tech Singapore
occupies or has the use of any space or Real Property. The buildings, plants,
improvements and fixtures included as part of the Real Property are in good
condition and repair for their present use in the Business. To the Seller's
knowledge, all Real Property Leases and the Singapore Real Property Lease are in
full force and effect. Schedule 5.12 lists (i) any material notices given or
-------- ----
received by the Seller, the Parent, or Reel-Tech Singapore since January 1,
-15-
1996 under any Real Property Lease or the Singapore Real Property Lease, and
(ii) any material dispute since January 1, 1996 relating to any Real Property
Lease or the Singapore Real Property Lease.
(b) Except as set forth on Schedule 5.12 attached hereto, the Real
-------- ----
Property is free from contamination of every kind, including without limitation,
groundwater, surface water, soil, sediment and air contamination, and no Real
Property contains asbestos in any form, urea formaldehyde foam insulation,
transformers or other equipment containing polychlorinated biphenyls or any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any Government Mandate pertaining to environmental matters or
public health or safety (hereinafter, "Environmental Laws"), or which poses a
------------------
hazard to the health and safety of the occupants of such Real Property or those
adjacent thereto ("Hazardous Materials"). None of the Seller, the Parent or
-------------------
Reel-Tech Singapore has received any notice from any Government Authority with
respect to any release, investigation or clean-up of Hazardous Materials
relating to any of the Real Property.
(c) Attached hereto as part of Schedule 5.12 is a list of all
-------- ----
documents, reports, site assessments, data, communications or other materials,
in the Parent's, the Seller's or Reel-Tech Singapore's possession or control or
to which any such entity has access, which contain any material information with
respect to potential environmental liabilities associated with any Real Property
or relating to compliance with Environmental Laws or the environmental condition
of any Real Property or adjacent properties. The Seller has furnished to the
Buyer complete and accurate copies of all of the documents, reports, site
assessments, data, communications and other materials listed on Schedule 5.12
-------- ----
attached hereto. The Parent joins in the representation and warranty set forth
in this (S)5.12(c).
(S)5.13. Equipment. Schedules 1.1(a)(i) and 1.1(b)(i) attached hereto set
--------- --------- --------- ---------
forth a complete and accurate list of all of the Equipment and the Singapore
Equipment other than (a) items having a value individually of less than $5,000,
(b) items acquired by the Seller or Reel-Tech Singapore in the ordinary course
of business from the date hereof through the Closing Date, and (c) items
disposed of in the ordinary course of business from the date hereof through the
Closing Date. The Seller will identify in writing to the Buyer, prior to the
Closing, each item so acquired or disposed of and which has a value of $10,000
or more. The Personal Property Leases and the Singapore Personal Property
Leases listed on Schedules 1.1(a)(ii) and 1.1(b)(ii) attached hereto include all
--------- ---------- ----------
leases by the Seller or Reel-Tech Singapore of any item of personal property
used by the Seller or Reel-Tech Singapore in the Business. The Equipment, and
all personal property held by the Seller under the Personal Property Leases, are
utilized by the Seller in the ordinary course of business and are in good
condition and repair (subject to normal wear and tear) for their present use in
the Business. The
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Singapore Equipment, and all personal property held by Reel-
Tech Singapore under the Singapore Personal Property Leases, are utilized by
Reel-Tech Singapore in the ordinary course of business and are in good condition
and repair (subject to normal wear and tear) for their present use in the
Business. To the Seller's knowledge, each Personal Property Lease and Singapore
Personal Property Lease is in full force and effect.
(S)5.14. Inventories. The Inventories and the Singapore Inventories
-----------
consist solely of material and goods of a quality and quantity which are usable
or saleable in the normal course of the businesses carried on by the Seller and
Reel-Tech Singapore, net of any reserve for excessive or obsolete inventories
reflected on the Final Closing Statement.
(S)5.15. Broker. Except for Xxxxxxx & Co., none of the Parent and the
------
Seller has retained, utilized or been represented by any broker, agent, finder
or intermediary in connection with the negotiation or consummation of the
transactions contemplated by this Agreement. The Parent joins in the
representation and warranty set forth in this (S)5.15.
(S)5.16. Contracts. Schedules 1.1(a)(vi) and 1.1(b)(vi) attached hereto
--------- --------- ---------- ----------
set forth a complete and accurate list of all Contracts for goods or services
involving payments or receipts in excess of $25,000 to which the Seller or Reel-
Tech Singapore is a party or by which the Seller or Reel-Tech Singapore is bound
or to which the Seller or Reel-Tech Singapore or any of the Acquired Assets is
subject, except (a) Contracts entered into in the ordinary course of business
after the date hereof and prior to the Closing, and (b) Contracts specifically
identified in other Schedules hereto. The Seller has delivered to the Buyer
true, correct and complete copies of all such Contracts for goods or services
involving payments or receipts in excess of $25,000, together with all
modifications and supplements thereto. To the Seller's knowledge, each of the
Contracts listed on Schedules 1.1(a)(vi) and 1.1(b)(vi) attached hereto or any
--------- ---------- ----------
of the other Schedules hereto, including without limitation the Other Contracts
and the Singapore Other Contracts, is in full force and effect. Each of the
Seller and Reel-Tech Singapore has in all material respects performed all
obligations required to be performed by it to date under each such Contract to
which it is a party.
(S)5.17. Employment Matters. Except for the Employee Agreements and
------------------
Singapore Employee Agreements listed in Schedules 1.1(a)(v) and 1.1(b)(v)
--------- --------- ---------
attached hereto, neither the Seller nor Reel-Tech Singapore has an employment
Contract, written or oral, with any currently active employee, including without
limitation any Contract to provide any bonus or benefit to any such employee.
To the Seller's knowledge, each of the Employee Agreements and the Singapore
Employee Agreements is in full force and effect.
-17-
(S)5.18. Employee Benefit Plans.
-------- ------- -----
(a) Except as set forth on Schedule 5.18 attached hereto, none of the
-------- ----
Seller, Reel-Tech Singapore, or any trade or business (whether or not
incorporated) that is a member of a group described in Section 414(b) or Section
414(c) of the United States Internal Revenue Code of 1986, as amended (the
"Code"), of which the Seller or Reel-Tech Singapore is a member (a "Related
---- -------
Entity") maintains or has any obligation to make contributions to any employee
------
benefit plan (an "ERISA Plan") within the meaning of Section 3(3) of the United
----------
States Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
-----
any other retirement, profit sharing, deferred compensation, stock option,
bonus, share appreciation right, severance, group or individual health, dental,
medical, life insurance, survivor benefit or other written benefit program (a
"Non-ERISA Plan") for officers, employees, consultants or directors, current or
---------------
former.
(b) None of the Seller, Reel-Tech Singapore nor any Related Entity has
ever contributed to a multiemployer plan within the meaning of Section 3(37) of
ERISA or a plan subject to Title IV of ERISA. Each ERISA Plan which is a "group
heath plan" for purposes of Sections 4980B and 4980D of the Code has been
operated in all material respects in compliance with the health care
continuation and other health plan requirements of said Sections (and comparable
provisions of ERISA) including any such requirements arising as a result of the
transactions contemplated by this Agreement.
(S)5.19. Labor Relations. There is no labor strike, dispute, slow-down or
----- ---------
work stoppage actually pending or, to the Seller's knowledge, threatened against
or involving the Seller or Reel-Tech Singapore. Except as set forth on Schedule
--------
5.19 attached hereto, no one has petitioned since January 1, 1996, and no one is
-----
now petitioning, for union representation of any of the Seller's or Reel-Tech
Singapore's employees. Except as described on Schedule 5.19 attached hereto,
-------- ----
none of the employees of the Seller or Reel-Tech Singapore is covered by any
collective bargaining agreement, and no collective bargaining agreement is
currently being negotiated by the Seller or Reel-Tech Singapore. Except as
fully described on Schedule 5.19 attached hereto, neither the Seller nor Reel-
-------- ----
Tech Singapore has experienced any work stoppage since January 1, 1996.
(S)5.20. Trademarks, Patents. Schedule 5.20 attached hereto sets forth a
---------- ------- -------- ----
complete and accurate list of (a) all patents, trademarks and trade names
registered in the name of the Seller or Reel-Tech Singapore or used by the
Seller or Reel-Tech Singapore, all applications therefor, and all licenses (as
licensee or licensor) and other Contracts relating thereto, and (b) all
Contracts relating to other technology, know-how and processes which the Seller
or Reel-Tech Singapore is licensed or authorized by others to use and that is
material to the
-18-
conduct of the Business or which the Seller or Reel-Tech Singapore has licensed
or authorized for use by others. Except to the extent set forth in Schedule 5.20
-------- ----
attached hereto, the Seller or Reel-Tech Singapore, as applicable, owns or has
the right to use all patents, trademarks and trade names, and has the right to
use all technology, know-how and processes, used or necessary for the ordinary
course of business as presently conducted and that is material to the conduct of
the Business. Except as set forth on Schedule 5.20 attached hereto, no consent
-------------
or authorization is required for the transfer by the Seller or Reel-Tech
Singapore to the Buyer of the patents, trademarks and trade names listed on
Schedule 5.20 attached hereto. No claims have been asserted, and no claims are
-------------
pending, by any person or entity regarding the use by the Seller or Reel-Tech
Singapore of any patents, trademarks, trade names, copyrights, technology, know-
how or processes, or challenging or questioning the validity or effectiveness of
any license or Contract, and to the knowledge of the Seller there is no basis
for such claim. To the Seller's knowledge, all of the Contracts listed on
Schedule 5.20 attached hereto are in full force and effect. To the Seller's
-------------
knowledge, the use by the Seller and Reel-Tech Singapore of such patents,
trademarks, trade names, copyrights, technology, know-how or processes does not
infringe on the rights of any person or entity.
(S)5.21. Suppliers and Customers. Except as set forth on Schedule 5.21
--------- --- --------- -------- ----
attached hereto, during the last twelve (12) months no supplier or customer of
material importance to the Seller or Reel-Tech Singapore has cancelled or
otherwise terminated, or threatened to cancel or otherwise to terminate, its
relationship with the Seller or Reel-Tech Singapore.
(S)5.22. No Undisclosed Liabilities. Except to the extent (a) reflected
-- ----------- -----------
or reserved against in the Balance Sheet, (b) incurred in the ordinary course of
business after the date of the Balance Sheet and either discharged prior to
Closing or reflected or reserved against on the Final Closing Statement or (c)
described on any Schedule hereto, neither the Seller nor Reel-Tech Singapore has
material liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise (including without limitation as guarantor or otherwise
with respect to obligations of others), other than performance obligations with
respect to Contracts that would not be required to be reflected or reserved
against on a balance sheet prepared in accordance with GAAP or in the footnotes
thereto.
(S)5.23. Taxes. (a) Each of the Seller and Reel-Tech Singapore has timely
-----
filed with each appropriate Government Authority all tax returns required to be
filed and has timely paid in full all taxes shown to be due thereon. All tax
returns filed by each of the Seller and Reel-Tech Singapore are true, correct
and complete in all material respects. The Parent and the Seller have delivered
to the Buyer correct and complete copies of all of the schedules relating to the
Seller from the tax returns of the Parent for the most recently completed
taxable
-19-
year for which tax returns have been filed, all examination reports by
any Government Authority, and any statements of deficiencies proposed or
assessed against or agreed to by the Seller or Reel-Tech Singapore. Except as
set forth on Schedule 5.23 attached hereto, since January 1, 1996, there has not
-------------
been an examination or notice of potential examination of the tax returns of the
Seller or Reel-Tech Singapore by any Government Authority, and there is not
outstanding any waiver of any statute of limitations with respect to, or, except
as set forth on Schedule 5.23 attached hereto, any extension of a period for the
-------------
assessment or collection of, any taxes. Except as set forth on Schedule 5.23
-------------
attached hereto, since January 1, 1996 no claim has ever been made in writing by
any Government Authority with which the Seller or Reel-Tech Singapore does not
file tax returns that the Seller or Reel-Tech Singapore is or may be subject to
taxation by such Government Authority.
(b) All taxes that are required to have been withheld or collected by
the Seller or Reel-Tech Singapore have been duly withheld or collected and, to
the extent required, have been paid to the proper Government Authority or
properly deposited as required by applicable Government Mandates.
(S)5.24. Disclosure. No representation or warranty by the Seller in this
----------
Agreement or in any exhibit, schedule, written statement, certificate or other
document delivered or to be delivered to the Buyer pursuant hereto or in
connection with the consummation of the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading or necessary in order to
provide the Buyer with proper and complete information as to the Seller, Reel-
Tech Singapore and the identity, value and usability of the Acquired Assets.
There is no fact relating to the Acquired Assets or the Seller or Reel-Tech
Singapore which is likely to materially adversely affect the same and which has
not been disclosed to the Buyer in writing by the Parent or the Seller.
(S)6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Parent and the Seller as follows:
(S)6.1. Organization of Buyer; Authority. The Buyer is a corporation duly
------------ -- ----- ---------
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts. The Buyer has all requisite power and authority
to execute and deliver the Transaction Documents to which it is a party and to
carry out all of the actions required of it pursuant to the terms of such
Transaction Documents, including, without limitation, the issuance to the Parent
of the Shares as set forth in (S)4.2(k) hereof.
(S)6.2. Corporate Approval; Binding Effect. The Buyer has obtained all
--------- -------- ------- ------
necessary authorizations and approvals from its Board of Directors and
-20-
stockholders required for the execution and delivery of the Transaction
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the issuance to
the Parent of the Shares as set forth in (S)4.2(k) hereof. Each of the
Transaction Documents to which the Buyer is a party has been, or at the Closing
shall be duly executed and delivered by the Buyer and constitutes or upon such
execution and delivery will constitute the legal, valid and binding obligation
of the Buyer, enforceable against the Buyer in accordance with its terms, except
as enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other laws affecting creditors' rights generally
or by general principles of equity.
(S)6.3. Non-Contravention. The execution and delivery by the Buyer of the
--- -------------
Transaction Documents to which it is a party and the consummation by the Buyer
of the transactions contemplated hereby and thereby will not (a) violate or
conflict with any provisions of the Articles of Organization or By-Laws of the
Buyer, each as amended to date; or (b) constitute a violation of, or be in
conflict with, or constitute or create a default under (i) any Contract to which
the Buyer is a party or by which the Buyer or any of its properties is bound or
to which the Buyer or any of its properties is subject, or (ii) any Government
Mandate to which the Buyer is subject.
(S)6.4. Governmental Consents. Assuming the accuracy of the
------------ --------
representations and warranties of the Parent set forth in the letter to be
delivered to the Buyer pursuant to (S)4.2(m) hereof, no consent, approval or
authorization of, or registration, qualification or filing with, any Government
Authority is required for the execution and delivery by the Buyer of the
Transaction Documents to which it is a party or for the consummation by the
Buyer of the transactions contemplated hereby or thereby, including, without
limitation, the issuance to the Seller of the Shares as set forth in (S)4.2(k)
hereof.
(S)6.5. Broker. Except for Xxxxxxxxx & Xxxxx LLC, the Buyer has not
------
retained, utilized or been represented by any broker, agent, finder or other
intermediary in connection with the negotiation or consummation of the
transactions contemplated by this Agreement.
(S)6.6. Litigation. No judicial or administrative action, proceeding or
----------
investigation is pending or, to the knowledge of the Buyer, threatened, against
or involving the Buyer which questions the validity of the Transaction Documents
or challenges any of the transactions contemplated hereby or thereby, nor, to
the knowledge of the Buyer, is there any basis for any such action, proceeding
or investigation.
(S)6.7. Capitalization. The authorized capital stock of the Buyer
--------------
consists of 15,000,000 shares of common stock, par value $0.01 per share (the
"Buyer
-----
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Common Stock"). As of November 24, 1997, there were 12,332,437 shares of
------------
Buyer Common Stock issued and outstanding. The Shares shall be, when issued,
duly authorized and validly issued, fully paid, non-assessable and free of pre-
emptive rights with respect thereto.
(S)6.8. SEC Reports. None of the Buyer's annual report for its fiscal
-----------
year ended December 31, 1996 on Form 10-K or any of its quarterly reports for
the fiscal quarters ended March 31, 1997, June 30, 1997 or September 30, 1997 on
Form 10-Q contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(S)7. CONDUCT OF BUSINESS BY SELLING GROUP PENDING CLOSING.
Each of the Parent and the Seller shall perform and observe the following
covenants from the date of this Agreement through the Closing Date (or such
other date expressly set forth herein).
(S)7.1. Full Access. Each of the Parent and the Seller shall, and the
---- ------
Parent and the Seller shall cause Reel-Tech Singapore to, afford to the Buyer
and its authorized representatives full access during its normal business hours
to all properties, books, records, Contracts and documents of the Seller and
Reel-Tech Singapore and a full opportunity to make such reasonable
investigations as they shall desire to make of the Seller and Reel-Tech
Singapore or with respect to the Acquired Assets, and each of the Parent and the
Seller shall furnish or cause to be furnished to the Buyer and its authorized
representatives all such information with respect to the affairs and businesses
of the Seller and Reel-Tech Singapore and with respect to the Acquired Assets as
the Buyer may reasonably request.
(S)7.2. Carry on in Regular Course. The Seller shall, and the Parent
----- -- -- ------- ------
shall cause the Seller to, maintain the Acquired Assets (other than sales of
inventory in the ordinary course of business), and the Parent and the Seller
shall cause Reel-Tech Singapore to maintain the Singapore Acquired Assets (other
than sales of Singapore inventory in the ordinary course of business), in good
operating condition and repair (normal wear and tear excepted), and make all
necessary renewals, additions and replacements thereto. The Seller shall, and
the Parent shall cause the Seller to, and the Parent and the Seller shall cause
Reel-Tech Singapore to, carry on its business diligently and substantially in
the same manner as heretofore and the Seller shall not, the Parent shall not
permit the Seller to, and the Parent and the Seller shall not permit Reel-Tech
Singapore to, make or institute any unusual or novel methods of manufacture,
purchase, sale, lease, management, accounting or operation, engage in any
transactions not in the usual and ordinary course of business, or grant any
general or uniform increase in the rates of pay of its employees or in the
benefits under any bonus
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or pension plan or other Contract to, for or with any such employees. Without
limiting the generality of the foregoing, the Parent and the Seller shall not,
and shall not permit Reel-Tech Singapore to, enter into any Contract for the
purchase or sale of, or issue any options, warrants or other rights to subscribe
for or purchase, any securities of the Seller or Reel-Tech Singapore.
(S)7.3. No Dividends, Issuances, Repurchases. The Seller shall not, the
-- --------- --------- -----------
Parent shall not permit the Seller to, and the Parent and the Seller shall not
permit Reel-Tech Singapore to, declare or pay any dividends (whether in cash,
shares of stock or otherwise) on, or make any other distribution in respect of,
any shares of its capital stock, or issue, purchase, redeem or acquire for value
any shares of its capital stock except as set forth on Schedule 7.3 attached
------------
hereto.
(S)7.4. Insurance. The Seller shall maintain, the Parent shall cause the
---------
Seller to maintain, and the Parent and the Seller shall cause Reel-Tech
Singapore to maintain, insurance policies as the Seller reasonably believes are
consistent with prudent business practice.
(S)7.5. Preservation of Organization. The Seller and the Parent shall use
------------ -- ------------
commercially reasonable efforts to (a) preserve the business organization of the
Seller and Reel-Tech Singapore intact, (b) keep available to the Buyer the
present key officers and employees of the Seller and Reel-Tech Singapore and (c)
preserve for the Buyer the present relationships of the suppliers and customers
of the Seller and Reel-Tech Singapore. The Seller shall not, the Parent shall
not permit the Seller to, and the Parent and the Seller shall not permit Reel-
Tech Singapore to, amend any provision of its Articles of Incorporation or
Bylaws (or such similar organizational documents of Reel-Tech Singapore).
(S)7.6. Advice of Change. The Parent and the Seller will promptly advise
------ -- ------
the Buyer in writing of any material adverse change in the condition of any of
the Acquired Assets or the Business.
(S)7.7. No Shopping. During the period commencing on the date of this
-- --------
Agreement and ending on the Closing Date, the Parent and the Seller shall not,
and shall not permit Reel-Tech Singapore to, negotiate for, solicit, respond to
solicitations or enter into any Contract (oral or written) with respect to the
sale or other disposition of the Business, any equity securities of the Seller
or Reel-Tech Singapore, any substantial portion of the Acquired Assets (other
than sales of inventory in the ordinary course of business), or any merger or
other business combination of the Seller or Reel-Tech Singapore, to or with any
person or entity other than the Buyer.
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(S)7.8. Consents of Third Parties. The Parent and the Seller will employ
-------- -- ----- -------
commercially reasonable efforts to secure, before the Closing Date, the consent,
in form and substance reasonably satisfactory to the Buyer and the Buyer's
counsel, to the consummation of the transactions contemplated by this Agreement
by each party to any of the Personal Property Leases, Singapore Personal
Property Leases, Real Property Leases, Singapore Real Property Lease, Employee
Agreements, Singapore Employee Agreements, Other Contracts, Singapore Other
Contracts, Permits and Singapore Permits under which such transactions would
constitute a default, would accelerate obligations of the Seller or Reel-Tech
Singapore, as applicable, or would permit cancellation of any such Contract or
Permit.
(S)8. COVENANTS.
---------
(S)8.1. Separate Entity. The Buyer covenants and agrees that, from and
---------------
after the Closing Date until the last day of the Earn-Out Period (as defined in
the 1995 Asset Purchase Agreement), it shall (a) maintain the Business as a
separate corporate entity or as a separate division of the Buyer and shall
prepare quarterly and annual income statements and balance sheets for such
corporate entity or division in accordance with GAAP, and (b) upon reasonable
prior notice and during normal business hours, provide the Parent with full
access to or, at the Parent's option, copies of such income statements and
balance sheets in order to permit the Parent to calculate the second and third
earn-out payments to be made by the Parent pursuant to the 1995 Asset Purchase
Agreement.
(S)8.2. Coyote License Agreement. The Buyer hereby covenants and agrees
------------------------
that it shall abide by all of the terms and conditions of the Coyote License
Agreement.
(S)8.3. 401(k) Plan. The Parent will retain all liability and
-----------
responsibility for the disposition of interests under the Data I/O Corporation
Tax Deferral Retirement Plan and Trust (the "Savings Plan"), with respect to all
------------
of the currently active employees of the Seller (the "Assumed Employees") (or
-----------------
their beneficiaries) who, as of the Closing Date, are participants in the
Savings Plan. With respect to the Savings Plan, the Parent agrees it will, not
later than March 15, 1998, contribute or cause to be contributed to the Savings
Plan all such amounts as may be required under the terms of the Savings Plan on
behalf of the Assumed Employees through the Closing Date in accordance with the
terms of the Savings Plan.
(S)9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The obligation of the
Buyer to consummate the Closing shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions (to the extent noncompliance
is not waived in writing by the Buyer):
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(S)9.1. Representations and Warranties True at Closing. The
--------------- --- ---------- ---- -- -------
representations and warranties made by the Seller in or pursuant to this
Agreement shall be true and correct at and as of the Closing Date with the same
effect as though such representations and warranties had been made or given at
and as of the Closing Date.
(S)9.2. Compliance with Agreement. Each of the Parent and the Seller
---------- ---- ---------
shall have performed and complied with all of its obligations under this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
(S)9.3. No Material Adverse Change. Since the date hereof, there shall
-- -----------------------
not have occurred any (a) material adverse change in the condition (financial or
otherwise), operations, business, prospects or assets of the Seller or Reel-Tech
Singapore or (b) imposition of any Government Mandate which would materially
adversely affect the condition (financial or otherwise), operations, business,
prospects or assets of the Seller or Reel-Tech Singapore.
(S)9.4. Closing Certificate. Each of the Parent and the Seller shall have
------- -----------
delivered to the Buyer in writing, at and as of the Closing, a certificate duly
executed by each of the Parent and the Seller, in form and substance
satisfactory to the Buyer and the Buyer's counsel, certifying that the
conditions in each of (S)(S)9.1, 9.2 and 9.3 hereof have been satisfied.
(S)9.5. Opinion of Counsel. Xxxxxx Xxxxxx White & XxXxxxxxx, counsel to
------- -- -------
the Parent and the Seller, shall have delivered to the Buyer a written opinion,
addressed to the Buyer and dated the Closing Date, substantially in the form of
Exhibit C attached hereto.
------- -
(S)9.6. Approvals; Consents. All corporate and other approvals in
--------- --------
connection with the transactions contemplated by the Transaction Documents and
the form and substance of all certificates and other documents delivered
hereunder shall be satisfactory in form and substance to the Buyer and its
counsel. The Buyer shall have obtained all necessary consents to the
transactions contemplated by the Transaction Documents.
(S)9.7. No Litigation. No restraining order or injunction shall prevent
-- ----------
the transactions contemplated by any of the Transaction Documents and no
judicial or administrative action, proceeding or investigation shall be pending
or threatened before any Government Authority in which it will be or is sought
to restrain or prohibit or obtain damages or other relief in connection with any
of the Transaction Documents or the consummation of the transactions
contemplated hereby or thereby.
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(S)9.8. Non-Competition Agreements. Each of the Seller and the Parent
--- ----------- ----------
shall have executed and delivered to the Buyer a non-competition agreement in
the form of Exhibit D attached hereto (the "Selling Group Non-Competition
------- - ----------------- -----------
Agreement"), and such Selling Group Non-Competition Agreement shall be in full
---------
force and effect.
(S)9.9. License Agreements. The Seller and the Parent shall have executed
------- ----------
and delivered to the Buyer (a) a license agreement in the form of Exhibit E-1
------- ---
attached hereto (the "9500 License Agreement") and (b) a license agreement in
----------------------
the form of Exhibit E-2 attached hereto (the "Coyote License Agreement") (the
----------- ------------------------
9500 License Agreement and the Coyote License Agreement shall be referred to
herein, collectively, as the "License Agreements"), and each such License
------------------
Agreement shall be in full force and effect.
(S)9.10. Escrow Agreement. Each of the Seller, the Parent and the Escrow
----------------
Agent shall have executed and delivered to the Buyer the Escrow Agreement, and
the Escrow Agreement shall be in full force and effect.
(S)9.11. Consents. The Seller will have obtained all Required Consents in
--------
form and substance reasonably satisfactory to the Buyer and the Buyer's counsel.
(S)9.12. Due Diligence. The Buyer shall have completed to its
-------------
satisfaction its due diligence with respect to the Seller, Real-Tech Singapore
and the Acquired Assets.
(S)9.13. Registration Rights Agreement. The Parent shall have executed
-----------------------------
and delivered to the Buyer a Registration Rights Agreement in the form of
Exhibit H attached hereto (the "Registration Rights Agreement"), and such
--------- -----------------------------
agreement shall be in full force and effect.
(S)9.14. Arrangements with Hall, Inc.__The amendments to the employment
---------------------- ----
agreements with Xxxxxxx Xxxx and Xxxxxx Xxxx referred to on Schedule 1.1(a)(v)
------------------
and entered into in connection with the Closing shall be in form and substance
satisfactory to the Buyer. There shall have been no amendments to the 1995 Asset
Purchase Agreement provisions to be assumed by the Buyer that are not acceptable
to the Buyer.
(S)9.15. Proceedings and Documents Satisfactory. All proceedings in
----------- --- --------- ------------
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to the Buyer in connection with the
transactions contemplated by this Agreement shall be reasonably satisfactory in
all respects to the Buyer and the Buyer's counsel, and the Buyer shall have
received the originals or certified or other copies of all such records and
documents as the Buyer may reasonably request.
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(S)10. CONDITIONS PRECEDENT TO SELLER'S AND PARENT'S OBLIGATIONS. The
obligations of the Seller and the Parent to consummate the Closing shall be
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (to the extent noncompliance is not waived in writing by
the Seller and the Parent):
(S)10.1. Representations and Warranties True at Closing. The
--------------- --- ---------- ---- -- -------
representations and warranties made by the Buyer in or pursuant to this
Agreement shall be true and correct at and as of the Closing Date with the same
effect as though such representations and warranties had been made or given at
and as of the Closing Date.
(S)10.2. Compliance with Agreement. The Buyer shall have performed and
---------- ---- ---------
complied with all of its obligations under this Agreement that are to be
performed or complied with by it at or prior to the Closing.
(S)10.3. Closing Certificate. The Buyer shall have delivered to the
------- -----------
Seller in writing, at and as of the Closing, a certificate duly executed by a
duly authorized officer of the Buyer, in form and substance satisfactory to the
Seller and the Seller's counsel, to the effect that the conditions in each of
(S)(S)10.1 and 10.2 hereof have been satisfied.
(S)10.4. Opinion of Counsel. Xxxxxxx Xxxx LLP, counsel to the Buyer,
------- -- -------
shall have delivered to the Seller a written opinion, dated the Closing Date and
addressed to the Seller, substantially in the form of Exhibit F attached hereto.
------- -
(S)10.5. Approvals; Consents. All corporate and other approvals in
--------- --------
connection with the transactions contemplated by the Transaction Documents and
the form and substance of all certificates and other documents delivered
hereunder shall be satisfactory in form and substance to each of the Seller and
the Parent and their counsel. Each of the Seller and the Parent shall have
obtained all necessary consents to the transactions contemplated by the
Transaction Documents.
(S)10.6. No Litigation. No restraining order or injunction shall prevent
-- ----------
the transactions contemplated by any of the Transaction Documents and no
judicial or administrative action, proceeding or investigation shall be pending
or threatened before any Government Authority in which it will be or is sought
to restrain or prohibit or obtain damages or other relief in connection with any
of the Transaction Documents or the consummation of the transactions
contemplated hereby or thereby.
(S)10.7. Agreements. The Buyer shall have executed and delivered the
----------
Transaction Documents to which it is a party (including the Selling Group Non-
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Competition Agreement and the Escrow Agreement), and such agreements shall be in
full force and effect.
(S)10.8. Account Receivable. On or before the Closing Date, the
------------------
outstanding $25,000 account receivable of the Buyer's View Engineering division
shall have been resolved and paid in cash to the satisfaction of the Seller and
the Parent.
(S)10.9. Non-Competition Agreement. The Buyer shall have executed and
-------------------------
delivered to the Parent a Non-Competition Agreement in the form of Exhibit G
---------
attached hereto (the "Buyer Non-Competition Agreement"), and such agreement
-------------------------------
shall be in full force and effect.
(S)10.10. Coyote License Agreement. The Buyer shall have executed and
------------------------
delivered to the Seller and the Parent the Coyote License Agreement, and the
Coyote License Agreement shall be in full force and effect.
(S)10.11. Stock Certificate and Registration Rights Agreement. The Buyer
---------------------------------------------------
shall have executed and delivered to the Parent (a) a stock certificate or the
stock certificates, as the case may be, representing the Shares (or an
undertaking as provided in Section 3.1), and (b) the Registration Rights
Agreement, and such agreement shall be in full force and effect.
(S)10.12. Proceedings and Documents Satisfactory. All proceedings in
----------- --- --------- ------------
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to the Parent and the Seller in connection
with the transactions contemplated by this Agreement shall be reasonably
satisfactory in all respects to the Parent and the Seller and their counsel, and
the Parent and the Seller shall have received the originals or certified or
other copies of all such records and documents as they may reasonably request.
(S)10.13. No Material Adverse Change. Since the date hereof, there shall
--------------------------
not have occurred any (a) material adverse change in the condition (financial or
otherwise), operations, business, prospects or assets of the Buyer or (b)
imposition of any Government Mandate which would materially adversely affect the
condition (financial or otherwise), operations, business, prospects or assets of
the Buyer.
(S)11. CONFIDENTIAL INFORMATION. The Buyer shall continue to abide by the
terms of that certain letter agreement between the Buyer and the Parent dated
April 9, 1997 (the "Nondisclosure Agreement") regarding the confidentiality and
-----------------------
non-disclosure of all Evaluation Material (as defined therein) through the
Closing. If the Closing does not take place for any reason on or before
December 31, 1997, the Buyer shall, within five (5) days after a request of the
Parent or the Seller for a return of all of its Evaluation Material, (a) either
-28-
redeliver to the appropriate entity or destroy all tangible Evaluation Material,
(b) delete all Evaluation Material from any electronic data storage device, and
(c) certify in writing to the Parent and the Seller that the terms of this (S)11
have been satisfied.
(S)12. INDEMNIFICATION.
(S)12.1. Indemnity by the Seller. Subject to the overall limitations,
--------- -- --- ------
minimum amounts and time limitations set forth in (S)12.5 hereof, the Seller
shall indemnify and hold the Buyer harmless from and with respect to any and all
claims, liabilities, losses, damages, costs and expenses, including without
limitation the reasonable fees and disbursements of counsel (collectively, the
"Losses"), related to or arising directly or indirectly out of any of the
-------
following:
(i) any breach by any member of the Selling Group of any
representation or warranty, covenant, obligation or undertaking made by
such member of the Selling Group in or pursuant to this Agreement
(including the Schedules and Exhibits hereto), any other Transaction
Document or any other statement, certificate or other instrument delivered
pursuant hereto or thereto;
(ii) any claim, liability, obligation or damage with respect to
the Excluded Liabilities, including without limitation the following:
(A) any actual or alleged liability for the cleanup or removal
of, or for death or injury to person or property (to the extent not
covered by insurance) as a result of the release, emission or
discharge of, any Hazardous Materials relating to or affecting the
Acquired Assets or the Business, to the extent such liability arises
out of any matter that occurred or existed on or before the Closing
Date;
(B) any actual or alleged liability for death or injury to person
or property, to the extent not covered by insurance, as a result of
any actual or alleged defect in any product sold or manufactured by
the Seller or Reel-Tech Singapore on or prior to the Closing Date;
(C) any contractual product warranty claims arising out of
defects in any product sold or manufactured by the Seller or Reel-Tech
Singapore prior to the Closing Date; or
(D) any claim, obligation or liability arising in connection with
the employment or termination of employment of any persons on or
before the Closing Date, including any workmen's
-29-
compensation claims, any employee grievances, any liabilities with
respect to pension, medical or other employment benefits and any
liabilities for accrued vacation, bonus or severance payments arising
as a result of the consummation of the transactions contemplated by
this Agreement (but excluding any claim, obligation or liability
arising in connection with the Buyer's employment of, or failure to
employ, any such persons).
(iii) except for the Assumed Obligations, any claim or liability
arising under the bulk sales laws of the States of Indiana or Washington in
connection with transactions contemplated by this Agreement (in view of
such indemnification obligation the Buyer hereby waives compliance by the
Seller and by Reel-Tech Singapore with any such bulk sales laws as a
condition to the Closing hereunder); and
(iv) any liability with respect to any of the items disclosed on
the Schedules hereto that is not an Assumed Obligation.
(S)12.2. Indemnity by the Buyer. Subject to the overall limitations,
--------- -- --- -----
minimum amounts and time limitations set forth in (S)12.5 hereof, the Buyer
shall indemnify and hold the Parent and the Seller harmless from and with
respect to any and all Losses, related to or arising directly or indirectly out
of (a) any breach by the Buyer of any representation or warranty, covenant,
obligation or undertaking made by the Buyer in or pursuant to this Agreement
(including the Schedules and Exhibits hereto) or any other statement,
certificate or other instrument delivered pursuant hereto (including, without
limitation, the Assumed Obligations), or (b) the Buyer's operation of the
Business or the Acquired Assets after the Closing Date.
(S)12.3. Claims.
------
(a) Notice. Any party seeking indemnification hereunder (the
------
"Indemnified Party") shall promptly notify in writing the other party hereto
------------ -----
(the "Indemnifying Party") of any suit, action or other proceeding (a "Claim")
------------ ----- -----
with respect to which the Indemnified Party claims indemnification hereunder,
provided that failure of the Indemnified Party to give such notice shall not
--------
relieve the Indemnifying Party of its obligations under this (S)12 except to the
extent, if at all, that such Indemnifying Party shall have been materially
prejudiced thereby.
(b) Third Party Claims. If any Claim relates to any action instituted
----- ----- ------
against the Indemnified Party by a third party (a "Third Party Claim"), the
----- ----- -----
Indemnifying Party shall be entitled to assume the defense of such Third Party
Claim, in which case the Indemnifying Party shall have the authority to
-30-
defend such Third Party Claim, if and only if the following conditions are
satisfied:
(i) the Indemnifying Party shall have within thirty (30) days
after the notice of the Third Party Claim under (S)12.3(a) given the
Indemnified Party a notice undertaking to defend the Third Party Claim and
confirming that the Indemnifying Party is unconditionally obligated
hereunder to indemnify the Indemnified Party with respect to such Third
Party Claim; and
(ii) the Indemnified Party shall not have given the Indemnified
Party written notice that it has determined, in the exercise of its
reasonable discretion, that matters of corporate or management policy or a
conflict of interest make separate representation by the Indemnified
Party's own counsel advisable.
The Indemnified Party shall retain the right to employ its own counsel and to
participate in the defense of any Third Party Claim, the defense of which has
been assumed by the Indemnifying Party pursuant hereto, but the Indemnified
Party shall bear and shall be solely responsible for its own costs and expenses
in connection with such participation. The Indemnifying Party shall not settle
or consent to any settlement of any Third Party Claim without the prior approval
of the Indemnified Party. If the Indemnifying Party does not assume the defense
of any Third Party Claim as provided in this (S)12.3, the Indemnified Party may
defend the Third Party Claim as it determines in its sole discretion at the
expense and risk of the Indemnifying Party.
(S)12.4. Method of Manner of Paying Claims. Payment of any amount
---------------------------------
required to be paid by the Seller to the Buyer under this (S)12 shall, at the
Buyer's option, be made from the Escrowed Funds as provided in the Escrow
Agreement. Any unpaid balance of a Claim that is not paid within thirty (30)
days of written demand therefor shall bear interest at a rate per annum equal to
the rate announced by BankBoston, N.A. as its "Base Rate" plus two percent (2%)
----
from the date written notice thereof is given by the Indemnified Party to the
Indemnifying Party.
(S)12.5. Limitations on Indemnification.
----------- -- ---------------
(a) No Indemnifying Party shall be required to indemnify an Indemnified
Party hereunder except to the extent that the aggregate amount of Losses for
which the Indemnified Party is otherwise entitled to indemnification pursuant to
this (S)12 exceeds $50,000, whereupon the Indemnified Party shall be entitled to
be paid the aggregate amount of such Losses to the extent in excess of $50,000,
subject to the limitations on maximum amount of recovery set forth in (S)12.6
hereof.
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(b) No Indemnifying Party shall be liable for any Losses pursuant to this
(S)12 unless a notice under (S)12.3(a) hereof or a written claim for
indemnification is given by the Indemnified Party to the Indemnifying Party with
respect thereto or to the Claim to which such Losses relate on or before the
first anniversary of the Closing Date.
(S)12.6. General Limitations on Liability.
--------------------------------
(a) Except as otherwise provided in this (S)12.6, (i) the maximum amount
payable under this Agreement and the other Transaction Documents by the Seller
and/or the Parent shall not exceed in the aggregate $750,000 plus interest
accruals as provided in the Escrow Agreement, and (ii) the maximum amount
payable under this Agreement and the other Transaction Documents by the Buyer
shall not exceed in the aggregate $750,000.
(b) The limitation on liability set forth in (S)12.6(a) shall not apply to
any of the following:
(i) any amounts payable under or in respect of any breach of (S)(S)1,
2, 3, 4, 5.12(c), 5.15, 7.2, 7.7, 8.3, 11, 13, or 14.2 of this Agreement;
(ii) any amounts payable by the Buyer under (S)3(b) of the
Registration Rights Agreement;
(iii) any amounts payable under (S)14.15 hereof or any corresponding
provision of any other Transaction Document;
(iv) any amounts payable under the letters to be delivered by the
Parent as provided in (S)4.2(m) and (S)4.2(n) hereof; and
(v) any amounts payable under any Transaction Document that expressly
provides that it is not subject to this (S)12.6.
(c) This (S)12.6 shall not limit the right of any party to seek equitable
relief for any breach of this Agreement or any other Transaction Document,
including, without limitation, injunctive relief against any actual, threatened,
or apparent violation of the terms of this Agreement or any other Transaction
Document.
(d) In no event shall any party be liable for indirect, punitive, special,
or consequential damages under this Agreement or any other Transaction Document.
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(S)13. USE OF NAME. The Buyer is purchasing all of the Seller's and Reel-
Tech Singapore's rights to the business names of the Seller and Reel-Tech
Singapore used in the Business and therefore the Parent and Seller shall not be
entitled to, and shall not permit Reel-Tech Singapore to, use the name "Reel-
Tech" or variations thereof as corporate and business names or titles anywhere
in the world from and after the Closing. The Seller shall, simultaneously with
the Closing, (a) undertake and promptly pursue all necessary action to change
its business and corporate names to new names which do not include the name
"Reel-Tech" or any substantially similar name, and (b) cause Reel-Tech Singapore
to undertake and promptly pursue all necessary action to change its business and
corporate names to new names which do not include the name "Reel-Tech" or any
substantially similar name, in each case so as to permit the use of such names
by the Buyer.
(S)14. GENERAL.
(S)14.1 Survival of Representations and Warranties. The representations
-------- -- --------------- --- ----------
and warranties of the parties hereto contained in this Agreement or otherwise
made in writing in connection with the transactions contemplated hereby (in each
case except as affected by the transactions contemplated by this Agreement)
shall be deemed material and, notwithstanding any investigation by the Buyer,
shall be deemed to have been relied on by the Buyer and shall survive the
Closing, and the consummation of the transactions contemplated hereby, until the
expiration of one year from the Closing Date and any Claim based upon such
representations and warranties shall thereupon be of no further force and effect
(except to the extent the claiming party shall have asserted the Claim prior to
the expiration of such rights in accordance with (S)12.5 hereof).
(S)14.2. Expenses. All transfer and sales taxes payable with respect to
--------
the sale and conveyance of the Acquired Assets to the Buyer shall be paid by the
Buyer. All expenses of the preparation, execution and consummation of this
Agreement and of the transactions contemplated hereby, including without
limitation attorneys', accountants' and outside advisers' fees and
disbursements, shall be borne by the party incurring such expenses. The Parent
and the Seller are responsible for paying all fees, brokerage commissions and
expenses of Xxxxxxx & Co., and the Buyer is responsible for paying all fees,
brokerage commissions and expenses of Xxxxxxxxx & Xxxxx LLC.
(S)14.3. Notices. All notices, demands and other communications hereunder
-------
shall be in writing or by written telecommunication, and shall be deemed to have
been duly given if delivered personally or if mailed by certified mail, return
receipt requested, postage prepaid, or if sent by overnight courier, or sent by
written telecommunication, as follows:
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If to the Parent or the Seller, to:
Data I/O Corporation
P.O. Box 97046
00000 Xxxxxxx Xxxx X.X.
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx
with a copy sent contemporaneously to:
Data I/O Corporation
P.O. Box 97046
00000 Xxxxxxx Xxxx X.X.
Xxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx, General Counsel
If to the Buyer, to:
General Scanning Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
with a copy sent contemporaneously to:
Xxxxxx Xxxxx, Esq.
Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Any such notice shall be effective (a) if delivered personally, when
received, (b) if sent by overnight courier, when receipted for, (c) if mailed,
three (3) days after being mailed as described above, and (d) if sent by written
telecommunication, when dispatched, provided that a copy of such notice is sent
--------
on the same day as described above with an indication that the original was sent
by telecommunication and the date of its transmittal.
(S)14.4. Entire Agreement. This Agreement and the Nondisclosure Agreement
------ ---------
contain the entire understanding of the parties, supersede all prior agreements
and understandings relating to the subject matter hereof and shall not be
amended except by a written instrument hereafter signed by all of the parties
hereto. To the extent of any conflict between this Agreement and any other
Transaction Document with respect to a matter within the scope of such
Transaction Document, such Transaction Document shall control.
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(S)14.5. Governing Law. The validity and construction of this Agreement
--------- ---
shall be governed by the laws of the State of Washington without regard to any
choice of law rules that would require or permit the application of the laws of
any other jurisdiction.
(S)14.6. Sections and Section Headings. The headings of sections and
-------- --- ------- --------
subsections are for reference only and shall not limit or control the meaning
thereof.
(S)14.7. Assigns. This Agreement shall be binding upon and inure to the
-------
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. Neither this Agreement nor the obligations of any party
hereunder shall be assignable or transferable by such party without the prior
written consent of the other party hereto; provided, however, that nothing
-------- -------
contained in this (S)14.7 shall prevent a party, without the consent of the
other parties, (a) from transferring or assigning this Agreement or its rights
or obligations hereunder to another entity controlling, under the control of, or
under common control with such party, or (b) from assigning all or part of its
rights or obligations hereunder by way of collateral assignment to any bank or
financing institution providing financing for the acquisition contemplated
hereby or (c) from assigning this Agreement or its rights and obligations
hereunder to a third party in connection with the sale of all or substantially
all of its assets, business or capital stock, or pursuant to a merger,
consolidation or reorganization (provided, however, that is the case of either
-------- -------
(a) or (c) that the assignee shall first agree in writing to assume all of the
assigning party's rights and obligations hereunder), but no such transfer or
assignment made pursuant to clauses (a) or (b) shall relieve such party of its
obligations under this Agreement.
(S)14.8. Severability. In the event that any covenant, condition, or
------------
other provision herein contained is held to be invalid, void, or illegal by any
court of competent jurisdiction, the same shall be deemed to be severable from
the remainder of this Agreement and shall in no way affect, impair, or
invalidate any other covenant, condition, or other provision contained herein.
(S)14.9. Further Assurances. The parties agree to take such reasonable
------- ----------
steps and execute such other and further documents as may be necessary or
appropriate to fully evidence and effect the sale of the Acquired Assets
hereunder or to otherwise cause the terms and conditions contained herein to be
carried into effect.
(S)14.10. No Implied Rights or Remedies. Except as otherwise expressly
-- ------- ------ -- --------
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm or corporation, other than
the Seller, the Parent and the Buyer and their respective shareholders, any
rights or remedies under or by reason of this Agreement.
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(S)14.11. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(S)14.12. Satisfaction of Conditions Precedent. Each of the Parent, the
------------ -- ---------- ---------
Seller and the Buyer will use commercially reasonable efforts to cause the
satisfaction of the conditions precedent contained in this Agreement; provided,
--------
however, that nothing contained in this (S)14.12 shall obligate either party
-------
hereto to waive any right or condition under this Agreement.
(S)14.13. Public Statements or Releases. Each of the parties hereto
------ ---------- -- --------
agrees that prior to the consummation of the Closing no party to this Agreement
will make, issue or release any public announcement, statement or acknowledgment
of the existence of, or reveal the status of, this Agreement or the transactions
provided for herein, without first obtaining the consent of the other party
hereto which shall not be unreasonably withheld. Nothing contained in this
(S)14.13 shall prevent either party from making such disclosures as such party
may consider necessary in order to obtain financing for the transactions
contemplated hereby or to satisfy such party's legal or contractual obligations.
(S)14.14. Business Records. The Buyer acknowledges that business records
-------- -------
of the Seller relating to the Seller's operations prior to the Closing will be
conveyed to the Buyer as part of the Acquired Assets, and that the Seller may
from time to time require copies of such records in connection with, among other
things, tax matters, governmental investigations, legal proceedings and claims
arising with respect to the Seller's operations prior to the Closing, and the
Buyer agrees that upon reasonable prior notice from the Seller, it will provide
the Parent and the Seller with copies of such records as required for such
purposes. In particular, the Buyer will upon reasonable prior notice provide
the Parent and the Seller with copies of all tax returns and supporting papers
therefor relating to the Business and the Acquired Assets for periods prior to
the Closing Date, and furnish and request the independent accountants and legal
counsel of the Buyer to furnish the Parent and the Seller such additional tax
and other information and documents in their possession as the Parent and the
Seller may from time to time reasonably request. Each of the Parent and the
Seller agrees to hold any records so provided in confidence and to use such
records only for the purposes described above. The Buyer agrees that it will
not within five (5) years after the Closing Date destroy any material business
records of the Seller prepared prior to the Closing without first notifying the
Parent and affording it the opportunity to remove or copy them, at the Parent's
option. For purposes of the preceding sentence, any notice from the Buyer
delivered in accordance with (S)14.3 hereof shall be deemed to be adequate
notice if not responded to in writing by the Parent within thirty (30) days.
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(S)14.15. Attorneys' Fees. In the event that any dispute arising
---------------
hereunder is finally adjudicated by a court of a competent jurisdiction after
completion of all appeals or expiration of the period for filing the same, the
party that is awarded the greater amount of damages or that obtains equitable
relief restraining or enjoining violation of this Agreement shall be entitled to
recover from the other party reasonable attorneys' fees and costs incurred in
connection with such adjudication and any appeals relating thereto.
(S)15. CERTAIN DEFINITIONS. As used herein the following terms not
otherwise defined have the following respective meanings:
"1995 Asset Purchase Agreement": That certain Asset Purchase Agreement,
-----------------------------
dated as of August 31, 1995, as amended and in effect on the date hereof, among
Hall, Inc. (formerly, Reel-Tech, Inc.), Xxxxxx Xxxx, Xxxxxxx Xxxx and the
Seller.
"9500 License Agreement": As defined in (S)9.9 hereof.
----------------------
"Acquired Assets": As defined in (S)1.1(a) hereof.
---------------
"Assumed Employees": As defined in (S)8.3 hereof.
-----------------
"Assumed Obligations": As defined in (S)2 hereof.
-------------------
"Balance Sheet": As defined in (S)5.7 hereof.
-------------
"Business": As defined in the preamble.
--------
"Buyer": As defined in the preamble.
-----
"Buyer Common Stock": As defined in (S)6.7 hereof.
------------------
"Buyer Non-Competition Agreement": As defined in (S)10.9 hereof.
-------------------------------
"Buyer's Proposed Calculations": As defined in (S)3.2(d) hereof.
-----------------------------
"Claim": As defined in (S)12.3(a) hereof.
-----
"Closing": As defined in (S)4.1 hereof.
-------
"Closing Date": As defined in (S)4.1 hereof.
-----------
"Code": As defined in (S)5.18(a) hereof.
----
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"Contract": Any contract, agreement, mortgage, lease, bond, promissory
--------
note, debenture, guaranty, indenture, pledge, power of attorney, proxy, trust,
franchise, option, warrant, instrument, oral or written understanding that is
legally enforceable, or other binding obligation.
"Coyote License Agreement": As defined in (S)9.9 hereof.
------------------------
"Employee Agreements": As defined in (S)1.1(a)(v) hereof.
-------------------
"Encumbrances": Any lien, mortgage, security interest, pledge, charge,
------------
lease, beneficial or equitable interest or right, hypothecation, collateral
assignment, conditional sales agreement, title retention agreement, easement,
material defect in title, restriction on transfer or other encumbrance.
"Environmental Laws": As defined in (S)5.12(b) hereof.
------------------
"Equipment": As defined in (S)1.1(a)(i) hereof.
---------
"ERISA": As defined in (S)5.18(a) hereof.
-----
"ERISA Plan": As defined in (S)5.18(a) hereof.
----------
"Escrow Agent": As defined in (S)3.1 hereof.
------------
"Escrow Agreement": As defined in (S)3.1 hereof.
----------------
"Escrowed Funds": As defined in (S)3.1 hereof.
--------------
"Estimated True-Up Amount": As defined in (S)3.2(b) hereof.
------------------------
"Excluded Assets": As defined in (S)1.2 hereof.
---------------
"Excluded Liabilities": As defined in (S)2 hereof.
--------------------
"Final Closing Statement": As defined in (S)3.2(c) hereof.
-----------------------
"Financials": As defined in (S)5.7 hereof.
----------
"Financial Statements": As defined in (S)5.7 hereof.
-------------------
"GAAP": As defined in (S)3.2(a) hereof.
----
"Government Authority": The United States of America or any state,
--------------------
district, territory, or possession thereof, any local government within the
United States of America or any of its territories and possessions, any foreign
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government having appropriate jurisdiction or any province, state, territory,
possession or other political subdivision thereof, or any court, tribunal,
administrative or regulatory agency, or taxing or revenue authority of any of
the foregoing.
"Government Mandate": Any statute, law, rule, regulation, code, or
------------------
ordinance duly adopted by any Government Authority, any treaty or compact
between two (2) or more Government Authorities, and any judgment, order, decree,
ruling, finding, determination, or injunction of any Government Authority.
"Hazardous Materials": As defined in (S)5.12(b) hereof.
-------------------
"Indemnified Party": As defined in (S)12.3(a) hereof.
-----------------
"Indemnifying Party": As defined in (S)12.3(a) hereof.
------------------
"Intangibles": As defined in (S)1.1(a)(viii) hereof.
-----------
"Interim Financials": As defined in (S)5.7 hereof.
------------------
"Interim Payment": As defined in (S)3.2(e) hereof.
---------------
"Inventories": As defined in (S)1.1(a)(iv) hereof.
-----------
"License Agreements": As defined in (S)9.9 hereof.
------------------
"Losses": As defined in (S)12.1 hereof.
------
"Nondisclosure Agreement": As defined in (S)11 hereof.
-----------------------
"Non-ERISA Plan": As defined in (S)5.18(a) hereof.
--------------
"Other Contracts": As defined in (S)1.1(a)(vi) hereof.
---------------
"Parent": As defined in the preamble.
------
"Parent's Proposed Calculations": As defined in (S)3.2(d) hereof.
------------------------------
"Permits": As defined in (S)1.1(a)(vii) hereof.
-------
"Permitted Encumbrances": As defined in (S)4.2(a) hereof.
----------------------
"Personal Property Leases": As defined in (S)1.1(a)(ii) hereof.
------------------------
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"Purchase Price": As defined in (S)3.1 hereof.
--------------
"Real Property": As defined in (S)5.12(a) hereof.
-------------
"Real Property Leases": As defined in (S)1.1(a)(iii) hereof.
--------------------
"Reel-Tech Singapore": As defined in (S)1.1(b) hereof.
-------------------
"Registration Rights Agreement": As defined in (S)9.13 hereof.
-----------------------------
"Related Entity": As defined in (S)5.18(a) hereof.
--------------
"Remaining Disputed Items": As defined in (S)3.2(d) hereof.
------------------------
"Required Consents": As defined in (S)5.11 hereof.
-----------------
"Savings Plan": As defined in (S)8.3 hereof.
------------
"Seller": As defined in the preamble.
------
"Selling Group Non-Competition Agreement": As defined in (S)9.8 hereof.
---------------------------------------
"Selling Group": As defined in the preamble.
-------------
"Shares": As defined in (S)3.1 hereof.
------
"Singapore Assets": As defined in (S)1.1(b) hereof.
----------------
"Singapore Xxxx of Sale": As defined in (S)4.2(i) hereof.
----------------------
"Singapore Employment Agreements": As defined in (S)1.1(b)(v) hereof.
-------------------------------
"Singapore Equipment": As defined in (S)1.1(b)(i) hereof.
-------------------
"Singapore Intangibles": As defined in (S)1.1(b)(viii) hereof.
---------------------
"Singapore Inventories": As defined in (S)1.1(b)(iv) hereof.
---------------------
"Singapore Other Contracts": As defined in (S)1.1(b)(vi) hereof.
-------------------------
"Singapore Permits": As defined in (S)1.1(b)(vii) hereof.
-----------------
"Singapore Personal Property Leases": As defined in (S)1.1(b)(ii) hereof.
----------------------------------
"Singapore Real Property Lease": As defined in (S)1.1(b)(iii) hereof.
-----------------------------
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"Third Accountants": As defined in (S)3.2(c) hereof.
-----------------
"Third Party Claim": As defined in (S)12.3(b) hereof.
-----------------
"Transaction Documents": As defined in (S)5.1 hereof.
---------------------
"True-Up Amount": As defined in (S)3.2(a) hereof.
--------------
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IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed and delivered as a sealed
instrument as of the date and year first above written.
GENERAL SCANNING INC.
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Title: Vice President and
Chief Financial Officer
REEL-TECH, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Title: Chairperson of the Board
DATA I/O CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Title: President and Chief
Executive Officer
