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EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
BY AND BETWEEN
NATURAL FUELS CORPORATION, AS BUYER,
AND
XXXXXX FUEL SYSTEMS, INC., DVCO FUEL SYSTEMS, INC.
AND XXXXXX CNG SYSTEMS, INC., AS SELLER,
DATED AS OF
JUNE 27, 1997
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TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS...................................................................................................2
1.1 Affiliate.........................................................................................................2
1.2 Assets............................................................................................................2
1.3 Assumed Jobs......................................................................................................2
1.4 Book Value........................................................................................................2
1.5 Business Day......................................................................................................2
1.6 Closing...........................................................................................................3
1.7 Encumbrance.......................................................................................................3
1.8 Environmental Law.................................................................................................3
1.9 Fair Market Value.................................................................................................3
1.10 GAAP.............................................................................................................3
1.11 Governmental Authority...........................................................................................3
1.12 Governmental Permits.............................................................................................3
1.13 Hazardous Substance..............................................................................................3
1.14 Intangibles......................................................................................................4
1.15 Intellectual Property............................................................................................4
1.16 Jobs in Progress.................................................................................................4
1.17 Jobs in Progress Inventory.......................................................................................4
1.18 Legal Requirement................................................................................................4
1.19 Licensed Marks...................................................................................................4
1.20 MNGS.............................................................................................................4
1.21 Outsourced Work in Process Components............................................................................4
1.22 Pending Jobs.....................................................................................................4
1.23 Person...........................................................................................................5
1.24 PP&E.............................................................................................................5
1.25 PP&E Purchase Price..............................................................................................5
1.26 Purchased Inventory..............................................................................................5
1.27 Rejected Inventory...............................................................................................5
1.28 Residual Inventory...............................................................................................5
1.29 Residual Inventory Purchase Price................................................................................5
1.30 Segregated Inventory.............................................................................................5
1.31 Work in Process Components.......................................................................................5
1.32 Work in Process Purchase Price...................................................................................5
1.33 Other Definitions................................................................................................6
SECTION 2. SALE OF ASSETS................................................................................................6
2.1 Purchase and Sale of Assets.......................................................................................6
SECTION 3. CONSIDERATION.................................................................................................7
3.1 Base Purchase Price...............................................................................................7
3.2 Determination of Base Purchase Price..............................................................................7
3.3 Royalty...........................................................................................................7
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3.4 Holdbacks.........................................................................................................8
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.......................................................................9
4.1 Assignment and Assumption.........................................................................................9
4.2 Assumed Warranty Obligations......................................................................................9
4.3 Laclede Obligations...............................................................................................9
4.4 Excluded Assets...................................................................................................9
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER.....................................................................10
5.1 Organization and Qualification...................................................................................10
5.2 Authority and Validity...........................................................................................10
5.3 No Breach or Violation...........................................................................................11
5.4 Assets...........................................................................................................11
5.5 Compliance with Law..............................................................................................11
5.6 Patents, Trademarks and Copyrights...............................................................................12
5.7 Financial Statements.............................................................................................13
5.8 Legal Proceedings................................................................................................13
5.9 Tax Returns; Other Reports.......................................................................................13
5.10 Employment Matters..............................................................................................13
5.11 Customers and Suppliers.........................................................................................14
5.12 Warranty Obligations............................................................................................14
5.13 Jobs in Progress, Pending Jobs and Job Quotes...................................................................14
5.14 Finders and Brokers.............................................................................................15
5.15 Disclosure......................................................................................................15
5.16 Disclaimer......................................................................................................15
5.17 New and Ordered Inventory.......................................................................................16
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES.......................................................................16
6.1 Organization and Qualification...................................................................................16
6.2 Authority and Validity...........................................................................................16
6.3 No Breach or Violation...........................................................................................17
6.4 Finders and Brokers..............................................................................................17
SECTION 7. ADDITIONAL COVENANTS.........................................................................................17
7.1 Access to Premises and Records...................................................................................17
7.2 Continuity and Maintenance of Operations; Financial Statements...................................................17
7.3 Pending Jobs, Etc................................................................................................18
7.4 Employee Matters.................................................................................................20
7.5 No Shopping......................................................................................................20
7.6 Notification of Certain Matters..................................................................................20
7.7 Risk of Loss; Condemnation.......................................................................................20
7.8 Transfer Taxes...................................................................................................21
7.9 Additional Agreements..........................................................................................21
7.10 Satisfaction of Conditions......................................................................................21
7.11 Confidentiality.................................................................................................22
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7.12 Post-Closing Transitional Matters...............................................................................22
7.13 Post-Closing Use of Name........................................................................................22
7.14 Bonds...........................................................................................................22
7.15 Subcontract Arrangements........................................................................................23
SECTION 8. CLOSING......................................................................................................24
SECTION 9. CONDITIONS TO CLOSING........................................................................................24
9.1 Conditions to the Obligations of Buyer...........................................................................24
9.2 Conditions to Obligations of Seller..............................................................................25
9.3 Waiver of Conditions.............................................................................................26
SECTION 10. TERMINATION.................................................................................................26
10.1 Events of Termination...........................................................................................26
10.2 Liabilities in Event of Termination.............................................................................26
10.3 Procedure Upon Termination......................................................................................26
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.................................................27
11.1 Survival of Representations and Warranties......................................................................27
11.2 Indemnification by Seller.......................................................................................27
11.3 Indemnification by Buyer........................................................................................28
11.4 Third Party Claims..............................................................................................28
11.5 Limitations on Indemnification - Seller.........................................................................29
11.6 Limitations on Indemnification - Buyer..........................................................................29
SECTION 12. MISCELLANEOUS...............................................................................................30
12.1 Parties Obligated and Benefited.................................................................................30
12.2 Notices.........................................................................................................30
12.3 Attorneys' Fees.................................................................................................31
12.4 Right to Specific Performance...................................................................................31
12.5 Waiver..........................................................................................................31
12.6 Captions........................................................................................................31
12.7 Choice of Law...................................................................................................31
12.8 Terms...........................................................................................................31
12.9 Rights Cumulative...............................................................................................31
12.10 Further Actions................................................................................................31
12.11 Time...........................................................................................................32
12.12 Counterparts...................................................................................................32
12.13 Entire Agreement...............................................................................................32
12.14 Severability...................................................................................................32
12.15 Construction...................................................................................................32
12.16 Expenses.......................................................................................................32
12.17 Joint and Several Obligations..................................................................................32
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
A - Xxxx of Sale
B - Assignment and Assumption of Contracts
C - License Agreement
D - Noncompetition Agreement
E - Guaranty
F - Seller's Counsel Opinion
G - Form of Amendment to EMCO License
H - Buyer's Counsel Opinion
SCHEDULES
1.17 Jobs in Progress Inventory
1.19 Licensed Marks
1.24 Excluded PP&E Items
1.30 Segregated Inventory
2.1-A Work in Process Components
2.1-B Residual Inventory
2.1-C Intangibles
2.1-D PP&E
5.3 Required Consents
5.4 Encumbrances
5.6 Intellectual Property Matters
5.8 Legal Proceedings
5.10 Employee Matters
5.12 Warranty Obligations
5.13-A Jobs in Progress Information
5.13-B Pending Jobs Information
5.13-C Job Quotes Information
5.17.1 New Inventory
5.17.2 Ordered Inventory
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made as of the
27th day of June, 1997, by and between Natural Fuels Corporation, a Colorado
corporation ("Buyer"), and Xxxxxx Fuel Systems, Inc. ("MFS"), DVCO Fuel
Systems, Inc. ("DVCO") and Xxxxxx CNG Systems, Inc. ("MCNG"), each of which is
a Colorado corporation (with MFS, DVCO and MCNG collectively referred to in
this Agreement as "Seller").
RECITALS
Seller is engaged in the business of packaging and assembling
compressed natural gas vehicle fueling equipment (the "Business"). Buyer
desires to purchase and Seller desires to sell certain assets of Seller used or
useful in connection with the Business.
AGREEMENT
In consideration of the above recitals and the mutual
agreements stated in this Agreement, the parties agree as follows:
SECTION 1. DEFINITIONS.
In addition to terms defined elsewhere in this Agreement, the
following capitalized terms, when used in this Agreement, will have the
meanings set forth below:
1.1 Affiliate. With respect to any Person, any other
Person controlling, controlled by or under common control with such Person,
with "control" for such purpose meaning the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities or voting
interests, by contract or otherwise.
1.2 Assets. All of the Purchased Inventory, PP&E and
Intangibles and all accounts receivable relating to Assumed Jobs (whether
arising before or after Closing), except the $22,038 account receivable from
Xxxxxx Electric, Inc. (which is being treated as a prepayment in calculating
the Base Purchase Price).
1.3 Assumed Jobs. Pending Jobs and Assumed Quoted Jobs.
1.4 Book Value. Book value as determined in accordance
with GAAP.
1.5 Business Day. Any day other than Saturday, Sunday
or a day on which banking institutions in Denver, Colorado are required or
authorized to be closed.
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1.6 Closing. The consummation of the transactions
contemplated by this Agreement, as described in Section 8, the date of which is
referred to as the "Closing Date."
1.7 Encumbrance. Any mortgage, lien, security interest,
security agreement, conditional sale or other title retention agreement,
limitation, pledge, option, charge, assessment, restrictive agreement,
restriction, encumbrance, adverse interest, restriction on transfer or any
exception to or defect in title or other ownership interest (including
reservations, rights of way, possibilities of reverter, encroachments,
easements, rights of entry, restrictive covenants, leases and licenses).
1.8 Environmental Law. Any Legal Requirement relating to
pollution or protection of public health, safety or welfare or the environment,
including those relating to emissions, discharges, releases or threatened
releases of Hazardous Substances into the environment (including ambient air,
surface water, ground water or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances.
1.9 Fair Market Value. The price, as to any property, at
which a willing seller would sell and a willing buyer would buy such property
having full knowledge of the relevant facts in an arm's length transaction.
1.10 GAAP. Generally accepted accounting principles
as in effect from time to time in the United States of America.
1.11 Governmental Authority. (i) The United States of
America, (ii) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including counties,
municipalities and the like), (iii) any foreign (as to the United States of
America) sovereign entity and any political subdivision thereof or (iv) any
agency, authority or instrumentality of any of the foregoing, including any
court, tribunal, department, bureau, commission or board.
1.12 Governmental Permits. All franchises, approvals,
authorizations, permits, licenses, easements, registrations, qualifications,
leases, variances and similar rights obtained from any Governmental Authority.
1.13 Hazardous Substance. Any pollutant, contaminant,
chemical, industrial, toxic, hazardous or noxious substance or waste which is
regulated by any Governmental Authority, including (a) any petroleum or
petroleum compounds (refined or crude), flammable substances, explosives,
radioactive materials or any other materials or pollutants which pose a hazard
or potential hazard or cause any violation of laws, regulations or ordinances
of federal, state or applicable local governments, (b) asbestos or any
asbestos-containing material of any kind or character, (c) polychlorinated
biphenyls ("PCBs"), as regulated by the Toxic Substances Control Act, 15 U.S.C.
ss. 2601 et seq., (d) any materials or substances designated as "hazardous
substances" pursuant to the Clean Water Act, 33 U.S.C. ss. 1251 et seq., (e)
"economic poison," as defined in the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. ss. 135 et seq., (f) "chemical substance," "new
chemical substance" or "hazardous chemical substance or mixture" pursuant to
the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., (g) "hazardous
substances" pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. ss. 9601 et seq. and (h) "hazardous waste"
pursuant to the
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Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq.
1.14 Intangibles. All intangible assets, including
Intellectual Property, Assumed Jobs, licenses, contract rights, bonds, goodwill
and rights under manufacturer's or other third party warranties, if any, owned,
used or held for use in the Business, including those assets described in
SCHEDULE 2.1-C and SCHEDULE 5.6, but excluding the Licensed Marks and the name
"Xxxxxx Fuel Systems, Inc." (as to which Section 7.13 will apply).
1.15 Intellectual Property. All (a) inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b)
trademarks, service marks, trade dress, logos, trade names and corporate names,
excluding the Licensed Marks, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (c) copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (d) mask works and all
applications, registrations and renewals in connection therewith, (e) trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) computer software (including data and
related documentation), (g) other proprietary rights and (h) all copies and
tangible and intangible embodiments thereof (in whatever form or medium).
1.16 Jobs in Progress. Seller's jobs for the Business for
which production has been commenced as of the Closing Date and which are
described on SCHEDULE 5.13-A, as such Schedule may be modified after the date
of this Agreement with the prior written consent of Buyer (not to be
unreasonably withheld).
1.17 Jobs in Progress Inventory. The items of Seller's
inventory required for the completion by Seller of Jobs in Progress described
on SCHEDULE 1.17.
1.18 Legal Requirement. Any statute, ordinance, code,
law, rule, regulation, order or other requirement, standard or procedure
enacted, adopted or applied by any Governmental Authority, including judicial
decisions applying common law or interpreting any other Legal Requirement.
1.19 Licensed Marks. The name "Xxxxxx Fuel Systems,
Inc." and the registered and unregistered trademark(s), logo(s) and trade
name(s) listed on SCHEDULE 1.19.
1.20 MNGS. Xxxxxx Natural Gas Services, Inc., a Delaware
corporation.
1.21 Outsourced Work in Process Components. All
components and other items of Seller's inventory that are being manufactured by
an unrelated third party on behalf of Seller for performance of any Pending Job
and as to which Seller has made advance payments prior to Closing, provided
that Buyer has approved such third party (such approval not to be unreasonably
withheld).
1.22 Pending Jobs. Seller's jobs for the Business for
which Seller has received a
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purchase order, contract or binding notice to proceed, and approval of Buyer
as Seller's assignee of such purchase order, contract or binding notice to
proceed, but which do not constitute Jobs in Progress, which Pending Jobs are
described on SCHEDULE 5.13-B, as such Schedule may be modified after the date
of this Agreement with the prior written consent of Buyer (not to be
unreasonably withheld).
1.23 Person. Any natural person, corporation,
partnership, trust, unincorporated organization, association, limited liability
company, Governmental Authority or other entity.
1.24 PP&E. All property, plant and equipment owned and
used or held for use by Seller in the Business, including office equipment and
furniture, shop equipment, testing equipment, computers and data processing
equipment, vehicles and similar tangible assets, including the property, plant
and equipment described on SCHEDULE 2.1-D, but excluding any leasehold
improvements and excluding the items described on SCHEDULE 1.24.
1.25 PP&E Purchase Price. An amount equal to $140,000.
1.26 Purchased Inventory. The Work in Process Components,
the New Inventory, the Ordered Inventory and the Residual Inventory, but
excluding Rejected Inventory.
1.27 Rejected Inventory. All items of Residual Inventory
rejected by Buyer because of Buyer's reasonable determination that they are
either (i) not related to the Business, (ii) obsolete or (iii) inappropriately
valued.
1.28 Residual Inventory. All of Seller's inventory used
or held for use in the Business, except (i) Work in Process Components, (ii)
Segregated Inventory and (iii) Jobs in Progress Inventory.
1.29 Residual Inventory Purchase Price. An amount
equal to the lesser of (i) 50% of the Book Value as of the Closing Date of the
Residual Inventory (but excluding Rejected Inventory), or (ii) $350,000.
1.30 Segregated Inventory. The items of Seller's
inventory described on SCHEDULE 1.30.
1.31 Work in Process Components. All (i) raw materials,
components, equipment, parts and other items of Seller's inventory that have a
Book Value as of the Closing Date in excess of $30 per item and are
specifically earmarked for use with any Pending Job, (ii) the surety bonds
obtained by Seller for the Pending Jobs that the applicable bonding companies
permit to be assigned to Buyer and that are assigned to Buyer at (or, if
applicable under Section 7.15.4, after) Closing without cost to Buyer (the
"Assignable Pending Job Bonds") and (iii) Outsourced Work in Process
Components; provided, however, that "Work in Process Components" does not
include any New Inventory or Ordered Inventory.
1.32 Work in Process Purchase Price. An amount, calculated
with respect to the Work in Process Components for which Buyer, as of the time
of Closing, has been approved by the related customers as assignee of Seller
for the related Pending Jobs, equal to the sum of the lesser of (i)
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100% of the Book Value of such Work in Process Components as of the Closing
Date, or (ii) $475,000. For purposes of this Section, the "Book Value" of
Outsourced Work in Process Components will be the amount of advance payments
paid in cash by Seller prior to Closing for the purchase of such items, and the
"Book Value" of Assignable Pending Job Bonds will be the amount of advance
payments paid in cash by Seller prior to Closing that relate to periods after
Closing for the Assignable Pending Job Bonds assigned to Buyer.
1.33 Other Definitions. The following terms are defined
in the Sections indicated:
Term Section
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Action 11.4
Assignable Pending Job Bonds 1.31
Assumed Liabilities 4.1
Assumed Quoted Job 7.3.4
Assumed Warranty Obligations 4.2
Base Purchase Price 3.1
Buyer Damages 11.5
Closing Date 1.6
ERISA 5.10.1
Excluded Assets 4.4
Final Report 3.2.2
Financial Statements 5.7
First Royalty Period 3.3.2
Gross Margin 7.3.5
Indemnified Party 11.4
Indemnifying Party 11.4
Job Quote 5.13
Laclede Obligations 5.12
New Inventory 5.17.1
Ordered Inventory 5.17.2
Preliminary Report 3.2.1
Proprietary Dispenser 3.3.1
Required Consents 5.3
Second Royalty Period 3.3.3
Seller Contracts 5.13
Seller Damages 11.6
Survival Period 11.1
Taking 7.7.2
Warranty Reduction Amount 4.2
SECTION 2. SALE OF ASSETS.
2.1 Purchase and Sale of Assets. Subject to the terms
and conditions set forth in this Agreement, at the Closing, Seller will sell to
Buyer, and Buyer will purchase from Seller, all of Seller's rights, titles and
interests in, to and under the Assets. SCHEDULE 2.1-A identifies the Assets
consisting of Work in Process Components, including the Book Value of such
items as of the date of this
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Agreement. SCHEDULE 2.1-B identifies the Assets consisting of Residual
Inventory, including the Book Value of such items as of the date of this
Agreement.
SECTION 3. CONSIDERATION.
3.1 Base Purchase Price. Subject to adjustment as set
forth in this Agreement, at Closing, Buyer will pay Seller as consideration for
the transfer of the Assets and the transaction described in this Agreement, a
cash purchase price (the "Base Purchase Price") equal to: (i) the sum of the
Work in Process Purchase Price, the Residual Inventory Purchase Price and the
PP&E Purchase Price, minus (ii) the sum of the Warranty Reduction Amount, the
aggregate amount of prepayments received by Seller with respect to any Assumed
Jobs and, if the Laclede Obligations are assigned to and assumed by Buyer, the
$50,000 reduction referred to in Section 4.3.
3.2 Determination of Base Purchase Price. Preliminary
and final calculations to the Base Purchase Price will be determined as
follows:
3.2.1 At least two Business Days prior to the
Closing, Seller will deliver to Buyer a report (the "Preliminary Report"),
showing in detail the preliminary determination of the Base Purchase Price.
Absent manifest error, the amount shown in the Preliminary Report as the Base
Purchase Price will be the preliminary Base Purchase Price payable at Closing.
3.2.2 Within 60 days after the Closing, Buyer
will deliver to Seller a report (the "Final Report") showing in detail the
final determination of all components of the Base Purchase Price and containing
any corrections to the Preliminary Report, together with any documents
substantiating the adjustments proposed in the Final Report. Seller will
provide Buyer with reasonable access to all records which Seller has in its
possession as necessary for Buyer to prepare the Final Report.
3.2.3 Within 30 days after receipt of the Final
Report, Seller will give Buyer written notice of Seller's objections, if any,
to the Final Report. If Seller makes any such objection, the parties will agree
on the amount, if any, which is not in dispute within 30 days after Buyer's
receipt of Seller's notice of objections to the Final Report and the
responsible party will pay such amount in accordance with this Section. Any
disputed amounts will be resolved within 120 days after the Closing Date by the
accounting firm of SKB Xxxxxx, Denver, Colorado, whose resolution will be
conclusive. Seller and Buyer will bear the fees and expenses payable to such
firm in connection with such determination in proportion to the allocation of
the disputed amount by such accounting firm. The payment required will be made
by the responsible party by wire transfer of immediately available funds to the
other party within ten days after the final determination (whether by agreement
or an accounting firm), together with interest on such amount from the Closing
Date to the date of payment at a rate of 12% per year.
3.3 Royalty.
3.3.1 As additional contingent consideration,
Buyer will pay Seller a royalty as set forth below, for each Apex S, fleet or
transit compressed natural gas vehicle fueling dispenser, or similar successor
compressed natural gas fueling dispenser, that incorporates a metering system
using sonic nozzles or the Xxxxxx densitometer (each such dispenser referred to
as a "Proprietary
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Dispenser") sold by Buyer or its Affiliates during the periods described in
Sections 3.3.2 and 3.3.3 below.
3.3.2 Buyer will pay Seller a royalty of $750.00
per Proprietary Dispenser sold by Buyer or its Affiliates through the end of
the "First Royalty Period," which will commence on the Closing Date and
continue until the earlier to occur of (i) the sale of the first 500
Proprietary Dispensers subject to such royalty or (ii) five years after the
Closing Date.
3.3.3 Buyer will pay Seller a royalty of $500.00
per Proprietary Dispenser sold by Buyer or its Affiliates during the "Second
Royalty Period," which will commence at the end of the First Royalty Period and
continue until the earlier to occur of (i) the sale of the first 500
Proprietary Dispensers subject to such royalty during the Second Royalty Period
or (ii) five years after completion of the First Royalty Period.
3.3.4 Notwithstanding anything to the contrary
in this Agreement, no royalty will be due or payable on Proprietary Dispensers
sold in connection with Jobs in Progress or Assumed Jobs.
3.3.5 No Proprietary Dispenser will be deemed
sold for purposes of this Agreement until Buyer (or its applicable Affiliate)
has received payment in full for such Proprietary Dispenser from the applicable
customer (and for this purpose Seller will have the option to pay Buyer any
deficiency owed by such customer in order to cause such payment in full). The
royalty for any Proprietary Dispenser sold by Buyer or its Affiliate will be
due and payable by Buyer to Seller not later than the 30th day of the calendar
month following the calendar month in which Buyer or its Affiliate received
payment in full for the applicable Proprietary Dispenser(s).
3.3.6 Buyer will maintain accurate and complete
records of all Proprietary Dispensers sold by Buyer and its Affiliates. Buyer
will furnish Seller with an annual statement on or before each April 1,
certifying that the amount paid to Seller as a royalty for the prior calendar
year is accurate and complete with respect to the sales of Proprietary
Dispensers by Buyer and its Affiliates during such calendar year or the
amounts, if any, remaining due to Seller. Seller will have the right, for
twelve months following the receipt of such annual statement, conduct an audit,
at its sole cost and expense, of Buyer's Proprietary Dispenser sales records
and Buyer will cooperate with Seller and its agents and provide them with
access to such substantiating documentation as they may reasonably request. If
the audit shows amounts due Seller in excess of 3% of the aggregate royalties
paid to Seller for the calendar year in question, the parties will use their
best efforts to resolve the discrepancy within 30 days of Seller's written
notice describing the discrepancy. If the discrepancy is not resolved by mutual
agreement, then the parties will submit the issue to binding arbitration by a
certified public accountant acceptable to both parties (or if the parties
cannot agree, then by the accounting firm of SKB Xxxxxx, Denver, Colorado),
whose resolution will be conclusive. The cost of the arbitration will be
allocated to the parties proportionate to the arbitrator's allocation of the
discrepancy, and any payment will be made by the responsible party to the other
within ten days after final resolution (whether by agreement or arbitration),
together with interest on such amount from the date due until payment at a rate
of 12% per year.
3.4 Holdbacks. Notwithstanding anything to the contrary
in this Agreement, Buyer will not be obligated to pay (a) $15,115 and $3,620 of
the Base Purchase Price otherwise payable until
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Seller delivers to Buyer the certificate of title transferring the 1994 Ford
Explorer XLT and 1991 Dodge Ramcharger, respectively, transferring title to
such vehicle to Buyer free and clear of all Encumbrances and (b) $29,000 of the
Base Purchase Price otherwise payable until Seller delivers to Buyer releases
of the Encumbrances on Xxxxx 1990 model C500Y155 Pneumatic Tire Forklift Truck
in form satisfactory to Buyer. Buyer will pay for each of such items the amount
of the related holdback within one Business Day after Buyer's receipt of the
required delivery by Seller.
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 Assignment and Assumption. Seller will assign, and
Buyer will assume and perform, the Assumed Liabilities. The "Assumed
Liabilities" means Seller's obligations accruing and relating to periods after
the Closing Date under (a) the Assumed Jobs (including the sales commissions
applicable to the Assumed Jobs to the extent specified as Buyer's
responsibility in SCHEDULE 5.13-B or 5.13-C, but only upon Buyer's receipt of
payment in full for the applicable Assumed Jobs), (b) to the extent specified
in Section 4.2, the Assumed Warranty Obligations and (c) Seller's purchase
orders for payments due to the applicable suppliers with respect to the New
Inventory and Ordered Inventory (as disclosed in SCHEDULES 5.17.1 and 5.17.2)
actually delivered to Buyer. In addition, the Laclede Obligations will be
Assumed Liabilities, but only if Buyer assumes such obligations at Closing, as
further described in Section 4.3. Buyer will not assume or have any
responsibility whatsoever for any liabilities or obligations of Seller or the
Business other than the Assumed Liabilities. Without limiting the generality of
the preceding sentence, Buyer will have no responsibility for accounts payable
accruing prior to Closing (whether invoiced to Seller before or after Closing),
leases or other real estate agreements.
4.2 Assumed Warranty Obligations. At Closing, provided
that Seller's representations and warranties in Section 5.12 are correct and
complete, Buyer will assume the following warranty obligations of Seller (the
"Assumed Warranty Obligations"): (a) for all equipment sold by Seller within
one year prior to Closing with respect to the Business, as disclosed on
SCHEDULE 5.12, (b) for all equipment sold by Seller with respect to Jobs in
Progress, provided that the warranty period for such equipment will not
commence until acceptance of such equipment by the applicable customer and the
expiration of 30 consecutive days of operation of such equipment without
problems, and (c) for all equipment sold pursuant to Assumed Jobs. In
consideration for such assumptions (which specifically exclude the Laclede
Obligations which are dealt with separately in Section 4.3), Buyer will be
entitled to a reduction of the Base Purchase Price in an amount equal to the
"Warranty Reduction Amount," which is defined as (x) $50,000 plus (y) the
amount equal to 3% of the sum of (i) Seller's gross sales attributable to the
warrantied jobs disclosed on SCHEDULE 5.12, other than those for the project
associated with the Laclede Obligations, plus (ii) the aggregate sales price of
Jobs in Progress.
4.3 Laclede Obligations. At Closing, Buyer will assume
the Laclede Obligations, provided that Seller has the legal right, and all
applicable third party consents required under contract, to assign such
contracts to Seller in accordance with their terms. Seller and Buyer will use
commercially reasonable efforts to obtain any third party consents needed to
permit such assignment and assumption to occur. If such assignment and
assumption are so permitted, then the Base Purchase Price will be reduced by an
additional $50,000, and in addition Buyer will be entitled to receive all
consideration payable under the Laclede Obligations for post-Closing
performance of the service contract which is part of the Laclede Obligations.
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4.4 Excluded Assets. The Excluded Assets, which will be
retained by Seller, will consist of all of Seller's assets other than the
Assets. Without limiting the preceding sentence, the Excluded Assets include
the following: (a) those Assets disposed of in accordance with this Agreement
prior to the Closing; (b) the corporate franchise of Seller and the records of
all matters pertaining to its corporate existence including minute books, stock
transfer books, tax returns, tax indemnifications, books of accounts and other
records pertaining to Seller's corporate organization; (c) the Base Purchase
Price, the rights to the Gross Margin payments under Section 7.3.5, and all
other rights, privileges and benefits accruing to Seller under this Agreement,
the License Agreement and the other agreements contemplated by this Agreement;
(d) except as otherwise specified in this Agreement, the accounts receivable of
Seller arising before the Closing; (e) Seller's claims for any federal, state,
local or foreign tax refunds or adjustments arising prior to Closing; (f)
except as otherwise specified in this Agreement, the rights to insurance
proceeds for claims accrued or outstanding prior to the Closing; (g) cash and
cash equivalent items; (h) all property, plant and equipment described on
SCHEDULE 1.24; (i) the items of Seller's inventory described on SCHEDULES 1.17
or 1.30 or which are Rejected Inventory; (j) all Jobs in Progress, including
the right to all sales proceeds therefrom and (k) stock or other securities
owned by MFS issued by DVCO or MCNG. In addition, Buyer may designate items
that would otherwise constitute Assets to instead constitute Excluded Assets,
if in Buyer's judgment the transfer to Buyer could subject it to liability
under Environmental Laws or other statutes, ordinances, codes, rules or
regulations, by giving written notice to such effect to Seller either before
Closing or, in the case of Assets maintained by Seller at its existing facility
after Closing pursuant to Section 7.12, within 60 days after Closing.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER.
To induce Buyer to enter into this Agreement, Seller
represents and warrants to Buyer, as of the date of this Agreement and as of
the Closing, as follows:
5.1 Organization and Qualification. Each Seller is a
corporation duly organized, validly existing and in good standing under the
laws of Colorado and has all requisite corporate power and authority to own,
lease and use the Assets as they are currently owned, leased and used and to
conduct the Business as it is currently conducted. Each Seller is duly
qualified or licensed to do business and is in good standing under the laws of
Colorado and each jurisdiction in which the character of the properties owned,
leased or operated by it or the nature of the activities conducted by it makes
such qualification necessary, except any such jurisdiction where the failure to
be so qualified or licensed and in good standing would not have a material
adverse effect on Seller or on the validity, binding effect or enforceability
of this Agreement.
5.2 Authority and Validity. Each Seller has all
requisite corporate power and authority to execute and deliver, to perform its
obligations under, and to consummate the transactions contemplated by, this
Agreement and the other agreements to be executed and delivered by it pursuant
to this Agreement. The execution and delivery by Seller of, the performance by
Seller of its obligations under, and the consummation by Seller of the
transactions contemplated by, this Agreement and the other agreements to be
executed and delivered by it pursuant to this Agreement have been duly
authorized by all requisite corporate action of Seller. This Agreement and the
other agreements to be executed and delivered by Seller pursuant to this
Agreement have been duly executed and delivered by Seller and are the valid and
binding obligations of Seller, enforceable against Seller in
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accordance with their terms, except insofar as enforceability may be affected
by applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect affecting creditors' rights generally or by
principles governing the availability of equitable remedies.
5.3 No Breach or Violation. The execution, delivery and
performance of this Agreement and the other agreements to be executed and
delivered by it pursuant to this Agreement by Seller will not: (a) violate any
provision of the charter or bylaws of Seller; (b) violate any Legal
Requirement; (c) require any consent, approval or authorization of, or any
filing with or notice to, any Person, except those (the "Required Consents")
described on SCHEDULE 5.3; or (d) (i) violate, conflict with or constitute a
breach of or default under, (ii) permit or result in the termination,
suspension or modification of, (iii) result in the acceleration of (or give any
Person the right to accelerate) the performance of Seller under, or (iv) result
in the creation or imposition of any Encumbrance under, any agreement or
instrument evidencing any of the Assets or any instrument or other agreement to
which Seller is a party or by which Seller or any of its assets is bound or
affected, except for purposes of this clause (d) such violations, conflicts,
breaches, defaults, terminations, suspensions, modifications, and accelerations
as would not, individually or in the aggregate, have a material adverse effect
on the Business or Seller.
5.4 Assets. Seller has exclusive, good and marketable
title to the Assets . The Assets are free and clear of all Encumbrances of any
kind or nature, except Encumbrances disclosed on SCHEDULE 5.4 which will be
removed and released at or prior to the Closing. None of the Assets are leased
by Seller from any other Person. The Assets are all the assets necessary to
permit Buyer to conduct the Business substantially as it is being conducted on
the date of this Agreement in compliance with all Legal Requirements and to
perform all the Assumed Liabilities. All the Assets are in good operating
condition and repair, ordinary wear and tear excepted and are generally
suitable and adequate for continued use in the manner in which presently used.
SCHEDULES 2.1-A and 2.1-B include correct and complete descriptions of the Work
in Process Components and Residual Inventory, respectively, and the associated
Book Values. SCHEDULE 2.1-C and 2.1-D include correct and complete descriptions
of the Intangibles and PP&E, respectively.
5.5 Compliance with Law.
5.5.1 The ownership and use of the Assets as
they are currently owned and used and the conduct of the Business as it is
currently conducted do not violate any Legal Requirement in any material
respect. Seller has received no notice claiming a violation by Seller or the
Business of any Legal Requirement applicable to Seller or the Business as it is
currently conducted and, to Seller's best knowledge, there is no basis for any
claim that such a violation exists.
5.5.2 Without limiting the generality of the
foregoing, Seller is in compliance with all Legal Requirements with respect to
pollution or protection of the environment, including Legal Requirements
relating to actual or threatened emissions, discharges or releases of Hazardous
Substances into ambient air, surface water, ground water, land or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances. Seller has received no
notice of, and has no knowledge of circumstances relating to, any past, present
or future events, conditions, circumstances, activities, practices or incidents
(including the presence, use, generation, manufacture, disposal, release or
threatened release of any Hazardous Substances in connection with the
Business), which could interfere with or prevent continued
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compliance, or which are reasonably likely to give rise to any liability with
respect to Seller or the Business, based upon or related to the processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge, release or threatened release into the environment, of any
Hazardous Substance. Seller has received no notice that it is the subject of
any "Superfund" evaluation or investigation, or that it is the subject of any
investigation or proceeding of any Governmental Authority evaluating whether
any remedial action is necessary to respond to any release of Hazardous
Substances on Seller's property or in connection with the Business.
5.5.3 Seller has provided Buyer with complete
and correct copies of (a) all studies, reports, surveys or other materials in
Seller's possession or to which Seller has access relating to the presence or
alleged presence of Hazardous Substances affecting the Business, (b) all
notices or other materials in Seller's possession or to which Seller has access
that were received from any Governmental Authority having the power to
administer or enforce any Environmental Laws relating to current or past
ownership, use or operation of or activities with respect to the Business and
(c) all materials in Seller's possession or to which Seller has access relating
to any Environmental Law litigation or allegation by any Person concerning the
Business.
5.6 Patents, Trademarks and Copyrights. SCHEDULE 5.6
lists each registered patent, trademark, service xxxx, and each other logo,
trade name, corporate name, copyright and each application therefor owned by
Seller or which is used by Seller in the Business and, in each case where
Seller is not the owner, the owner thereof. Seller owns or has the legal right
to use each such item of Intellectual Property, and none of such Intellectual
Property is subject to any Encumbrance. Each item of Intellectual Property
described on SCHEDULE 5.6 will be owned or available for use by the Buyer on
identical terms and conditions after the Closing as on the date of this
Agreement. Seller has taken all commercially reasonably necessary and desirable
action to maintain and protect each item of Intellectual Property that it owns
or uses. To Seller's best knowledge, Seller has not interfered with, infringed
upon, misappropriated or otherwise come into conflict with any Intellectual
Property rights of any other Person in any material respect, and none of Seller
and the directors and officers (and employees with responsibility for
Intellectual Property matters) of Seller has ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation or violation (including any claim that Seller
must license or refrain from using any Intellectual Property rights of any
other Person). The continued operation of the Business as currently conducted
will not, in any material respect, interfere with, infringe upon,
misappropriate or conflict with any current Intellectual Property rights of
another Person known to Seller. To the best knowledge of Seller and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of Seller, no other Person has, in any material respect,
interfered with, infringed upon, misappropriated or otherwise come into
conflict with any current Intellectual Property rights of Seller. Seller has
not granted any license, sublicense or permission with respect to any
Intellectual Property owned or used in the Business, except that Seller has
sold equipment incorporating the technology included in such Intellectual
Property to customers for their own use in the ordinary course of business.
With respect to each item of Intellectual Property required to be identified in
SCHEDULE 5.6, no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the best knowledge of Seller, is
threatened which challenges the legality, validity, enforceability, use or
ownership of the item and Seller has never agreed to indemnify any Person for
or against any interference, infringement, misappropriation or other conflict
with respect to the item. Seller is not obligated to pay any royalty or license
or sublicense fee with respect any Intellectual Property. With respect to each
item of Intellectual Property required to be identified in SCHEDULE 5.6 which
is not owned by Seller: (a) the
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license, sublicense, agreement or permission under which Seller has the right
to use the item is legal, valid, binding, enforceable and in full force and
effect and (b) neither Seller nor, to the best of Seller's knowledge, any other
party to the license, sublicense, agreement or permission is in breach or
default, and no event has occurred which, with notice or lapse of time or both,
would constitute a breach, default or repudiation or permit termination,
modification or acceleration thereunder.
5.7 Financial Statements. Seller has delivered to Buyer
correct and complete copies of its unaudited balance sheets and statements of
operations as of and for the year ended December 31, 1996 and as of and for the
three-month period ended March 31, 1997 (collectively, the "Financial
Statements"). The Financial Statements were prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby and fairly
present in all material respects Seller's financial position and results of
operations as of the dates and for the periods indicated, subject in the case
of the unaudited interim Financial Statements only to normal year-end
adjustments (none of which will be material in amount), adjustments related to
the discontinuation of the Business and the omission of footnotes. Except as
disclosed by, or reserved against in, its most recent balance sheet included in
the Financial Statements, Seller did not have as of the date of such balance
sheet any liability or obligation, whether accrued, absolute, fixed or
contingent (including liabilities for taxes or unusual forward or long-term
commitments), which was or would be material to the business, results of
operations or financial condition of Seller, nor to Seller's best knowledge
does any aspect of the Business form a basis for any claim by a third party
which, if asserted, could result in a liability not disclosed by or reserved
against in such balance sheet. Since the date of the most recent balance sheet
included in the Financial Statements (a) the Business has been operated only in
the ordinary course (except as otherwise required or permitted by this
Agreement), (b) Seller has not sold or disposed of any assets other than in the
ordinary course of business, (c) there has been no material adverse change in,
and, to the best knowledge of Seller, no event has occurred which is likely,
individually or in the aggregate, to result in any material adverse change in,
the business, operations, assets, prospects or condition (financial or
otherwise) of the Business.
5.8 Legal Proceedings. Except as set forth on SCHEDULE
5.8, there is no judgment or order outstanding, or any litigation, action,
suit, claim, complaint, proceeding or investigation by or before any
Governmental Authority or any arbitrator pending, or to Seller's best
knowledge, threatened, involving or affecting all or any part of the Business
or Seller.
5.9 Tax Returns; Other Reports. Seller has duly and
timely filed in proper form all income, franchise, sales, use, property,
excise, payroll and other tax returns and all other reports (whether or not
relating to taxes) required to be filed with the appropriate Governmental
Authority. All taxes, fees and assessments of whatever nature due and payable
by Seller or otherwise with respect to the Business have been paid, except such
amounts as are being contested diligently and in good faith and are not in the
aggregate material. Except as set forth on SCHEDULE 5.8, there are no
outstanding agreements or waivers extending the statutory period of limitations
applicable to any federal, state, local or foreign income tax return for any
period and there are no tax audits pending.
5.10 Employment Matters.
5.10.1 SCHEDULE 5.10 includes a complete and
correct list of names and positions of all employees of Seller engaged in the
Business and their current hourly wages or monthly salaries and other
compensation as of May 31, 1997. Seller has complied in all material respects
with
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all Legal Requirements relating to the employment of labor, including the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
continuation coverage requirements with respect to group health plans, and
those relating to wages, hours, collective bargaining, unemployment
compensation, worker's compensation, equal employment opportunity, age and
disability discrimination, immigration control and the payment and withholding
of taxes. No reportable event, within the meaning of Title IV of ERISA, has
occurred and is continuing with respect to any "employee benefit plan" or
"multiemployer plan" (as those terms are defined in ERISA) maintained by Seller
or any Affiliate of Seller. No prohibited transaction, within the meaning of
Title I of ERISA, has occurred with respect to any such employee benefit plan
or multiemployer plan, and no material accumulated funding deficiency (as
defined in Title I of ERISA) or withdrawal liability (as defined in Title IV of
ERISA) exists with respect to any such employee benefit plan or multiemployer
plan.
5.10.2 Seller is not a party to any contract
with any labor organization, and Seller has not recognized or agreed to
recognize and is not required to recognize any union or other collective
bargaining unit. No union or other collective bargaining unit been certified as
representing any of its employees, nor has Seller received any requests from
any party for recognition as a representative of employees for collective
bargaining purposes. To Seller's best knowledge, its employees are not engaged
in organizing activity with respect to any labor organization. Seller has no
employment agreement of any kind, oral or written, express or implied, that
would require Buyer to employ any Person after the Closing Date.
5.11 Customers and Suppliers. Seller's relations with its
customers and suppliers are good and there is no pending or, to Seller's best
knowledge, threatened claim or controversy with any customer or supplier except
as set forth on SCHEDULE 5.8.
5.12 Warranty Obligations. SCHEDULE 5.12 sets forth a
description of all current and pending warranty and service obligations of
Seller to its customers with respect to the Business for equipment sold by
Seller within the one-year period prior to the date of this Agreement,
including beginning and ending dates of such warranty obligations. Prior to
Closing, Seller will update such list to include a description of all warranty
obligations of Seller for equipment sold by Seller from the date of this
Agreement through Closing with respect to the Business, with beginning and
ending dates of such warranty obligations. Except as disclosed on SCHEDULE
5.12, there are no pending or, to Seller's best knowledge threatened, claims
under such warranties. A copy of Seller's written warranty on equipment sold by
Seller in connection with the Business is attached as SCHEDULE 5.12, and such
warranty obligation is and will be the only form of warranty provided by Seller
to its customers since at least January 1, 1996. SCHEDULE 5.12 also sets forth
under the heading "Amount" a calculation of the "Warranty Reduction Amount"
based on sales through the Closing Date, which are set forth in such SCHEDULE.
Each of the documents relating to Seller's warranty and service obligations
(the "Laclede Obligations") for the Laclede Venture Corporation, Bi-State
Development Corporation project is described on SCHEDULE 5.12, and Seller has
delivered correct and complete copies of each such document to Buyer. Seller
has provided Buyer with true, complete and correct copies of each of the
documents described on SCHEDULE 5.12 (the "Warranty Documents"). None of the
Warranty Documents has been amended, nor has Seller waived any right
thereunder. Except as set forth on SCHEDULE 5.12, (a) Seller has performed all
obligations required to be performed by it to date under the Warranty
Documents, (b) Seller is not in breach or default under any such Warranty
Document, and (c) to Seller's best knowledge, there exists no condition or
event which, after the giving of notice or lapse of time or both, would
constitute any such breach or default.
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5.13 Jobs in Progress, Pending Jobs and Job Quotes. All
Jobs in Progress are described on SCHEDULE 5.13 -A, which sets forth for each
Job in Progress the name and address of the customer and identification of the
applicable purchase orders, bids, contracts or other documents and each Seller
employee entitled to a commission (and the amount and payment terms of such
commission) for such Job in Progress. All Pending Jobs are described on
SCHEDULE 5.13-B, which sets forth for each Pending Job the name and address of
the customer and identification of the applicable purchase orders, bids,
contracts or other documents, any related Assignable Pending Job Bonds
(including the amount paid by Seller therefor) and each Seller employee
entitled to a commission (and the amount and payment terms of such commission)
for such Pending Job. Except as specified in SCHEDULE 5.13-B, Seller has not
received any prepayment with respect to any Pending Jobs. All outstanding
quotes submitted by Seller seeking jobs for the Business ("Job Quotes") are
described on SCHEDULE 5.13-C, which sets forth for each Job Quote the name and
address of the customer and identification of the applicable purchase orders,
bids, contracts or other documents, including Seller's interpretation of the
conditions on which such quotes may be withdrawn and any penalty or deposit
loss that would be associated with withdrawal, and each Seller employee
entitled to a commission (and the amount and payment terms of such commission)
for such Job Quote. Except as set forth on SCHEDULES 5.13-A, 5.13-B or 5.13-C
(collectively, "SCHEDULE 5.13"), none of the documents listed or described on
SCHEDULE 5.13 has been amended, nor has Seller waived any right thereunder.
Seller has provided Buyer with true, complete and correct copies of each of the
documents described on SCHEDULE 5.13 (the "Seller Contracts"). Except as set
forth on SCHEDULE 5.13, (a) Seller has performed all obligations required to be
performed by it to date under the Seller Contracts, (b) neither Seller nor, to
the best of Seller's knowledge, any other party to any Seller Contract has
improperly terminated or is in breach or default under such Seller Contract,
(c) to Seller's best knowledge, there exists no condition or event which, after
the giving of notice or lapse of time or both, would constitute any such
breach, termination or default, (d) each of the Seller Contracts is in full
force and effect and is a legal, binding and enforceable obligation of Seller
and, to the best of Seller's knowledge, each of the other parties to the Seller
Contracts and (e) none of the Seller Contracts is presently being renegotiated,
either in whole or in part.
5.14 Finders and Brokers. Seller has not employed any
financial advisor, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement for which Buyer could be
liable.
5.15 Disclosure. No representation or warranty by Seller
in this Agreement or in any Schedule or Exhibit to this Agreement, or any
statement, list or certificate furnished or to be furnished by Seller pursuant
to this Agreement, contains or will contain any untrue statement of 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 in
light of the circumstances in which made.
5.16 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT OR THE SCHEDULES HERETO OR IN ANY OTHER AGREEMENT DELIVERED BY SELLER
OR ANY OF ITS AFFILIATES TO BUYER PURSUANT TO THIS AGREEMENT, AND EXCEPT FOR
ANY EXPRESS WARRANTIES OF OR CONCERNING TITLE CONTAINED IN ANY XXXX OF SALE OR
OTHER INSTRUMENT OF TRANSFER DELIVERED BY SELLER HEREUNDER, BUYER UNDERSTANDS
AND AGREES THAT NEITHER SELLER NOR ANY PERSON
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ACTING ON ITS BEHALF IS MAKING ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT TO SELLER, THE ASSETS OR THE BUSINESS INCLUDING, BUT NOT
LIMITED TO, MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Except as may be set forth in this Agreement and the Schedules hereto or in any
other agreement delivered by Seller or any of its Affiliates pursuant to this
Agreement, Seller expressly disclaims any and all obligations and liabilities
for any representations and warranties, expressed or implied, contained in any
oral communication heretofore made by Seller or any of its representatives to
Buyer or any of its Affiliates in the course of its investigation of Seller,
the Assets and the Business.
5.17 New and Ordered Inventory.
5.17.1 Seller represents and warrants that the New
Inventory consists of inventory recently delivered to Seller with respect to
Pending Jobs for which payment to the supplier has not yet been made. SCHEDULE
5.17.1 provides a description of the New Inventory, each purchase order for
such New Inventory, the Pending Job for which it was ordered, the amount owed
to the supplier and the applicable due date for such payment due. Seller has
furnished complete copies of such purchase orders and any related invoices to
Buyer. None of the New Inventory is listed on any Schedule to this Agreement
other than SCHEDULE 5.17.1.
5.17.2 Seller represents and warrants that the
Ordered Inventory consists of inventory ordered but not yet delivered to Seller
with respect to Pending Jobs for which payment to the supplier has not yet been
made. SCHEDULE 5.17.2 provides a description of the Ordered Inventory, each
purchase order for such Ordered Inventory, the Pending Job for which it was
ordered, the amount that will be owed to the supplier upon its performance of
the purchase order and, if known, the applicable due date for such payment due.
Seller has furnished complete copies of such purchase orders and any related
invoices to Buyer. None of the Ordered Inventory is listed on any Schedule to
this Agreement other than SCHEDULE 5.17.2.
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES.
To induce Seller to enter into this Agreement, Buyer
represents and warrants to Seller, as of the date of this Agreement and as of
the Closing, as follows:
6.1 Organization and Qualification. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of Colorado and has all requisite corporate power and authority to carry
on its business as currently conducted and to own, lease, use and operate its
assets. Buyer is duly qualified or licensed to do business and is in good
standing under the laws of each jurisdiction in which the character of the
properties owned, leased or operated by it or the nature of the activities
conducted by it makes such qualification necessary, except any such
jurisdiction where the failure to be so qualified or licensed and in good
standing would not have a material adverse effect on Buyer or on the validity,
binding effect or enforceability of this Agreement.
6.2 Authority and Validity. Buyer has all requisite corporate
power and authority to execute and deliver, to perform its obligations under,
and to consummate the transactions contemplated by, this Agreement and the
other agreements to be executed and delivered by it pursuant to this Agreement.
The execution and delivery by Buyer of, the performance by Buyer of its
obligations
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under, and the consummation by Buyer of the transactions contemplated by, this
Agreement and the other agreements to be executed and delivered by Buyer
pursuant to this Agreement have been duly authorized by all requisite corporate
action of Buyer, and this Agreement and the other agreements to be executed and
delivered by it pursuant to this Agreement constitute the valid and binding
obligations of Buyer, enforceable in accordance with their terms, except
insofar as enforceability may be limited or affected by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect affecting creditors' rights generally or by principles governing the
availability of equitable remedies.
6.3 No Breach or Violation. The execution, delivery and
performance of this Agreement and the other agreements to be executed and
delivered by it pursuant to this Agreement by Buyer will not: (a) violate any
provision of the charter or bylaws of Buyer; (b) violate any Legal Requirement;
(c) require any consent, approval or authorization of, or any filing with or
notice to, any Person; or (d) (i) violate, conflict with or constitute a breach
of or default under (without regard to requirements of notice, passage of time
or elections of any Person), (ii) permit or result in the termination,
suspension, modification of, (iii) result in the acceleration of (or give any
Person the right to accelerate) the performance of Buyer under, or (iv) result
in the creation or imposition of any Encumbrance under, any instrument or other
agreement to which Buyer is a party or by which Buyer or any of its assets is
bound or affected, except for purposes of this clause (d) such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications and
accelerations as would not, individually or in the aggregate, have a material
adverse effect on Buyer or on the validity, binding effect or enforceability of
this Agreement.
6.4 Finders and Brokers. Buyer has not employed any
financial advisor, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement for which Seller could be
liable.
SECTION 7. ADDITIONAL COVENANTS.
7.1 Access to Premises and Records. Between the date of
execution and delivery of this Agreement and the Closing Date, Seller will give
Buyer and its representatives full access at reasonable times to all the
premises and books and records of the Business and to all the Assets and will
furnish to Buyer and its representatives all information regarding the Business
and the Assets as Buyer may from time to time reasonably request.
Notwithstanding any investigation that Buyer may conduct of the Business and
the Assets, Buyer may fully rely on Seller's representations, warranties,
covenants and indemnities, which will not be waived or affected by or as a
result of such investigation.
7.2 Continuity and Maintenance of Operations;
Financial Statements. Except as Buyer may otherwise agree in writing or as
provided by this Agreement, until the Closing:
7.2.1 Seller will continue to operate the
Business in the ordinary course consistent with past practices (including
completing jobs and fulfilling warranty and servicing obligations) and will use
commercially reasonable efforts to keep available the services of its employees
employed in connection with the Business and to preserve any beneficial
business relationships with customers, suppliers and others having business
dealings with Seller relating to the Business. Without limiting the generality
of the foregoing, Seller will maintain the Assets in good
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condition and repair, ordinary wear and tear excepted, and will keep all of its
business books, records and files in the ordinary course of business in
accordance with past practices.
7.2.2 Seller will not, without the prior
written consent of Buyer: (a) sell, transfer or assign any of the Assets
(except as required by the Seller Contracts) or permit the creation of any
Encumbrance on any Asset; (b) permit the amendment or cancellation of any of
the Seller Contracts; or (c) take or omit to take any action that would cause
Seller to be in breach of any of its representations or warranties in this
Agreement.
7.2.3 Seller will deliver to Buyer correct and
complete copies of financial statements and any reports with respect to the
operations of the Business prepared by or for Seller at any time between the
date of this Agreement and the Closing. All financial statements so delivered
will be prepared in accordance with GAAP on a basis consistent with the
Financial Statements.
7.3 Pending Jobs, Etc.
7.3.1 Except with Buyer's prior written
approval (not to be withheld unreasonably), (a) Seller will not take any
actions that would require SCHEDULE 5.13-A or SCHEDULE 5.13-B to be modified to
remain correct and complete as of the date of this Agreement or as of the
Closing Date and (b) Seller will not accept any new purchase orders. In
addition, Seller will not cause there to be any additional Job Quotes between
the date of this Agreement and the Closing Date, except (i) Job Quotes that can
be withdrawn without penalty or loss of deposit by Seller or Buyer at or after
Closing or (ii) Job Quotes that are prepared by Seller in good faith, in the
ordinary course of the Business and in a manner consistent with past practices
of the Business.
7.3.2 Prior to and after Closing, Seller will
remain fully responsible for completion of Jobs in Progress and all related
installation, start-up and training services, and Buyer will not assume any
obligations with respect to Jobs in Progress (except as otherwise specifically
provided in Section 4.2) or such related installation, start-up or training
services, and for this purpose Seller will retain the right to use the
Intellectual Property, but only to the extent necessary to complete such work.
Without limiting the generality of the preceding, Seller will be responsible
for payment of all sales commissions with respect to Jobs in Progress.
7.3.3 At Closing, Buyer will assume
responsibility for completion of all Pending Jobs and all related installation,
start-up and training services, and Seller will not retain any obligations with
respect to Pending Jobs or such related installation, start-up or training
services (except as specified in Section 7.15 and except that Seller will be
responsible for payment of certain sales commissions as described in SCHEDULE
5.13-B). Prior to Closing, Seller will take all steps with respect to Pending
Jobs as are necessary or appropriate to satisfy the obligations as to such
Pending Jobs, with such work to be performed in a manner consistent with normal
industry standards.
7.3.4 At and after Closing, Buyer will have the
right, in its sole discretion (including in cases where Buyer has submitted a
separate quote), to withdraw one or more outstanding Job Quotes, provided that
either (a) such Job Quote(s) are permitted to be withdrawn under contract or
law without monetary penalty or loss of deposit, (b) Buyer indemnifies and
holds Seller harmless from any monetary penalty or loss of deposit associated
with withdrawal of such Job Quote or (c) such Job Quote was not made by Seller
in compliance with this Agreement. Buyer will assume responsibility
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for completion of any Job Quote as to which Buyer does not exercise such
withdrawal right and as to which the customer subsequently accepts Seller's
quote (without modification) and its performance by Buyer by virtue of a bona
fide purchase order, contract or notice to proceed (an "Assumed Quoted Job").
7.3.5 Within 10 days after Buyer's receipt of
payment in full (or within 3% thereof) for Buyer's completion of an Assumed
Job, Buyer will pay Seller an amount equal to 30% of Buyer's Gross Margin for
such Assumed Job. For this purpose, "Gross Margin" will mean the gross revenues
received by Buyer for the Assumed Job, less all direct costs, including direct
production labor, materials, direct third-party engineering costs, installation
project management expenses, travel costs associated with site visits, start-up
and training expenses, sales commissions (if applicable) and other similar
expenses which are directly attributable to the Assumed Job. For this purpose,
direct production labor may be allocated to an Assumed Job on the basis of
Buyer's direct labor rate in effect during the production time period
applicable to the Assumed Job (currently expected to be in the range of $30-$35
per hour). Costs and expenses that will not be deducted from gross revenues in
the computation of Gross Margin will be general and administrative expenses,
production overhead, engineering costs, sales and marketing expenses, and other
similar expenses which are not directly attributable to a specific Assumed Job.
The Gross Margin in a particular Assumed Job will be determined as if the
equipment was assembled in Buyer's production facility, if Buyer would
typically have assembled such equipment in Buyer's facility. Buyer will
maintain accounts and complete books and records relative to the Gross Margin
calculation for all Assumed Jobs, and Seller will have the right, at its own
cost, no more than two times during any calendar year, upon reasonable notice,
to conduct an audit, directly or through its independent accountants, of such
books and records; provided that Seller's right to audit the books and records
of any particular Assumed Job will expire one year from the date Seller
receives payment for such Assumed Job.
7.3.6 For one year after Seller receives payment
for any Assumed Job, Seller will have the right to give written notice to Buyer
of Seller's objections, if any, to the Gross Margin calculation for such
Assumed Job. If Seller makes any such objection, the parties will use
commercially reasonable efforts to resolve any such dispute within 30 days
after Buyer's receipt of Seller's notice of objection to the Gross Margin
calculation. Any amounts which remain in dispute after 30 days will be
submitted for resolution within 60 days by the accounting firm of SKB Xxxxxx,
Denver, Colorado, whose resolution will be conclusive; however such submission
will occur no more than two times during any calendar year. Seller and Buyer
will bear the fees and expenses payable to such firm in connection with the
determination in proportion to the allocation of the disputed amounts by such
accounting firm. Any payment required will be made by the responsible party to
the other within ten days after the final determination (whether by agreement
or an accounting firm), together with interest on such amount from the Closing
Date to the date of payment at a rate of 12% per year.
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7.4 Employee Matters.
7.4.1 Seller will pay to employees employed in
the Business all compensation, including salaries, commissions, bonuses,
deferred compensation, severance, insurance, pensions, profit sharing,
vacation, sick pay and other compensation or benefits to which they are
entitled for periods prior to the Closing. Seller will not, without the prior
written consent of Buyer, change the compensation or benefits of any employees
of the Business. Buyer may, but will have no obligation to, offer employment to
any of the current employees of Seller as Buyer may desire.
7.4.2 Seller will be responsible for maintenance
and distribution of benefits accrued under any employee benefit plan (as
defined in ERISA) maintained by Seller pursuant to the provisions of such
plans. Buyer will assume neither any liability for any such accrued benefits
nor any fiduciary or administrative responsibility to account for or dispose of
any such accrued benefits under any employee benefit plans maintained by
Seller.
7.4.3 All claims and obligations under,
pursuant to or in connection with any welfare, medical, insurance, disability
or other employee benefit plans of Seller or arising under any Legal
Requirement affecting employees of Seller incurred on or before the Closing
Date or resulting or arising from events or occurrences occurring or commencing
on or prior to the Closing Date will remain the responsibility of Seller,
whether or not such employees are hired by Buyer after the Closing. Buyer will
have and assume no obligation or liability under or in connection with any such
plan and will assume no obligation with respect to any preexisting condition of
any employee of Seller who is hired as an employee of Buyer.
7.5 No Shopping. None of Seller, its shareholders, or
their respective officers, directors or employers, or any agent or
representative of any of them will, during the period commencing on the date of
this Agreement and ending with the earlier to occur of the Closing or the
termination of this Agreement, directly or indirectly (a) solicit or initiate
the submission of proposals or offers from any Person for, (b) participate in
any discussions pertaining to or (c) furnish any information to any Person
other than Buyer relating to, any direct or indirect acquisition or purchase of
all or any portion of the Assets or the Business (except as required by the
Seller Contracts).
7.6 Notification of Certain Matters. Seller will
promptly notify Buyer of any fact, event, circumstance or action of which it
obtains knowledge (a) which, if known on the date of this Agreement, would have
been required to be disclosed to Buyer pursuant to this Agreement or (b) the
existence or occurrence of which would cause any of Seller's representations or
warranties under this Agreement not to be correct and complete.
7.7 Risk of Loss; Condemnation.
7.7.1 Seller will bear the risk of any loss or
damage to the Assets resulting from fire, theft or other casualty (except
reasonable wear and tear) at all times prior to the Closing. If any such loss
or damage involves any material portion of the Business, Seller will
immediately notify Buyer of that fact and Buyer, at any time within 10 days
after receipt of such notice, may elect by written notice to Seller either (i)
to waive such defect and proceed toward consummation of the acquisition of the
Assets in accordance with terms of this Agreement or (ii) terminate this
Agreement. If Buyer elects so to terminate this Agreement, Buyer and Seller
will be discharged of any and all
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obligations hereunder. If Buyer elects to consummate the transactions
contemplated by this Agreement notwithstanding such loss or damage and does so,
there will be no adjustment in the consideration payable to Seller on account
of such loss or damage but all insurance proceeds payable as a result of the
occurrence of the event resulting in such loss or damage will be delivered by
Seller to Buyer, or the rights to such proceeds will be assigned by Seller to
Buyer if not yet paid over to Seller, and Seller will pay to Buyer (or Buyer
may withhold from the Base Purchase Price) an amount equal to the difference
between the amount of such insurance proceeds and the full replacement cost of
the damaged or lost Assets.
7.7.2 If, prior to the Closing, any part of or
interest in the Assets is taken or condemned as a result of the exercise of the
power of eminent domain, or if a Governmental Authority having such power
informs Seller or Buyer that it intends to condemn all or any part of the
Assets (such event being called, in either case, a "Taking"), then Buyer may
terminate this Agreement. If Buyer does not elect to terminate this Agreement,
then (a) Buyer will have the sole right, in the name of Seller, if Buyer so
elects, to negotiate for, claim, contest and receive all damages with respect
to the Taking, (b) Seller will be relieved of its obligation to convey to Buyer
the Assets or interests that are the subject of the Taking, (c) at the Closing
Seller will assign to Buyer all of Seller's rights to all damages payable with
respect to such Taking and will pay to Buyer all damages previously paid to
Seller with respect to the Taking and (d) following the Closing, Seller will
give Buyer such further assurances of such rights and assignment with respect
to the taking as Buyer may from time to time reasonably request.
7.7.3 All risk of loss, theft or destruction of,
or a Taking of, the Assets, wherever located, will pass to Buyer at the
Closing, including all risk of loss, theft and destruction of any Assets
maintained at Seller's facility after the Closing.
7.8 Transfer Taxes. Seller will be responsible for the
payment of any state or local sales, use, transfer, excise, documentary or
license taxes or fees or any other charge (including filing fees) imposed by
any Governmental Authority with respect to the transfer of any of the Assets
pursuant to this Agreement. Buyer represents and warrants to Seller that (a)
the Purchased Inventory is being acquired by Buyer for resale in the usual
course of its business and the Purchased Inventory will not be consumed or
otherwise used by Buyer (except in the ordinary course of business, in which
case Buyer will pay use tax if applicable), and (b) Buyer holds and on the
Closing Date will hold all necessary permits, exemption certificates, and other
documentation required under the laws of the State of Colorado which will
relieve the Seller from any obligation to collect and/or remit any sales or use
tax in connection with Buyer's acquisition of the Purchased Inventory.
7.9 Additional Agreements. At the Closing, Seller will
sign and deliver a License Agreement in the form of EXHIBIT C and Seller will
cause MNGS and W. Xxxxxxx Xxxxxx to sign and deliver to Buyer the
Noncompetition Agreement in the form of EXHIBIT D and Seller will cause MNGS to
sign and deliver to Buyer a Guaranty in the form of EXHIBIT E.
7.10 Satisfaction of Conditions. Each party will use
commercially reasonable efforts to satisfy, or to cause to be satisfied, the
conditions to the obligations of the other party to consummate the transactions
contemplated by this Agreement, as set forth in Section 9, provided that Buyer
will not be required to agree to any increase in the amount payable with
respect to, or any modification that makes more burdensome in any material
respect, any of the Assumed Liabilities.
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7.11 Confidentiality. The provisions of Paragraphs 15 and
16 of the letter of intent between Seller and Buyer dated May 1, 1997 are
incorporated into this Agreement by this reference and made a part hereof as if
fully set forth herein.
7.12 Post-Closing Transitional Matters.
7.12.1 For the 60-day period after the Closing,
Seller will, and will cause its Affiliates to, provide, without additional cost
to Buyer or out-of-pocket cost to Seller (except as provided in this Section),
such assistance as is reasonably requested by Seller in order to effect an
orderly transition in the ownership of the Business. Without limiting the
generality of the foregoing, Seller, at its expense, will maintain the Assets
at its existing facility for not more than 60 days after Closing, and Buyer
will have the right to remove the Assets at any time during such 60-day period.
Any costs incurred or associated with Seller maintaining any Assets (other than
any such Assets which Buyer has elected in writing prior to the end of such
60-day period to treat as Excluded Assets pursuant to Section 4.4) in Seller's
facility after the expiration of such 60-day period will be borne and paid
solely by Buyer.
7.12.2 For a period of three years after the
Closing, Buyer will (a) preserve all files and records relating to the Assets
and the Business that are delivered to Buyer in connection with the Closing,
(b) allow Seller access to such files and records and the right, at Seller's
expense, to make copies and extracts therefrom at any time during normal
business hours, and (c) not dispose of any thereof, provided that if Buyer
determines that it wishes to dispose of any such files or records, it will so
notify Seller, and Seller may take possession of such items within 30 days
after receipt of such notice (or failing such action by Seller, Buyer may
dispose of such items). Each of Buyer and Seller will cooperate and cause its
respective employees to cooperate with each other in the preparation of
financial and other reports and statements relating to the Assets and the
Business for the periods ending on or prior to the Closing.
7.13 Post-Closing Use of Name. For a period of four years
commencing on the Closing Date, Seller will not, and it will not authorize any
third party (other than Buyer) to, use the name "Xxxxxx Fuel Systems, Inc." in
any manner that is directly or indirectly related to any business associated
with compressed natural gas fueled vehicles, fueling, alternative vehicle fuels
or the like. During the one-year period commencing on the Closing Date, Buyer
will have the exclusive right to use the name "Xxxxxx Fuel Systems, Inc." and
the Licensed Marks as set forth in the License Agreement. Notwithstanding any
provision to the contrary in this Section 7.13, Buyer acknowledges and agrees
that Seller and its Affiliates will have the right to use the name "Xxxxxx Fuel
Systems, Inc." in any historical description of Seller's business, buy only to
the extent necessary in reports and filings (and related press releases)
required under the Securities Act of 1933, the Securities Exchange Act of 1934
and regulations promulgated thereunder with the Securities and Exchange
Commission, or with the Internal Revenue Service and other Governmental
Authorities.
7.14 Bonds. Buyer will use commercially reasonable
efforts to (a) assume the obligations of Seller, its shareholder, and their
Affiliates under the Assignable Pending Job Bonds agreements and obligations
thereunder currently in effect with their bonding surety companies or, in the
alternative (including if this alternative would decrease Buyer's direct or
indirect cost), to replace such Assignable Pending Job Bonds in form acceptable
to the customers, and (b) cause the customers
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and the bonding surety companies to release Seller, its shareholder, and their
Affiliates from their obligations under all Assignable Pending Job Bonds.
7.15 Subcontract Arrangements.
7.15.1 The Required Consent to the assignment
of the Pending Job described on SCHEDULE 5.13-B as "Greater Cleveland RTA" (the
"Cleveland Job") will not be available at Closing. From and after Closing,
Seller will subcontract to Buyer, and Buyer will perform, all of Seller's
obligations for work required under the contract documents applicable to the
Cleveland Job pending such consent, and Seller represents that such contract
documents permit such subcontracting arrangement. Upon receipt of the Required
Consent for the Cleveland Job reasonably satisfactory to Buyer, the applicable
contract documents will be deemed to automatically be assigned to, and assumed
by, Buyer pursuant to the Xxxx of Sale, Assignment and Assumption Agreement
delivered by Seller and Buyer at Closing without the need for further action by
the parties.
7.15.2 The assignment of the Pending Job
described on SCHEDULE 5.13-B as "City of Phoenix" (the "Phoenix Job") cannot be
completed until Buyer obtains the Arizona Class A Contractor license and any
Required Consent required by the applicable contract documents. From and after
Closing, Seller will subcontract to Buyer, and Buyer will perform, all of
Seller's obligations for work required under the contract documents applicable
to the Phoenix Job pending receipt of such license and any Required Consent,
and Seller represents that such contract documents permit such subcontracting
arrangement. Upon receipt of the license for the Phoenix Job and any Required
Consent reasonably satisfactory to Buyer, the applicable contract documents
will be deemed to automatically be assigned to, and assumed by, Buyer pursuant
to the Xxxx of Sale, Assignment and Assumption Agreement delivered by Buyer and
Seller at Closing without the need for further action by the parties.
7.15.3 All payments or other proceeds from the
Cleveland Job and the Phoenix Job and related contract documents that relate to
work performed after Closing will be for the account of Buyer, and if Seller
receives any such payments or proceeds it will immediately pay them over to
Buyer, and pending such payment Seller will hold such payments and proceeds in
trust for Buyer's benefit, and Seller will have no right of set off against any
such payments or proceeds.
7.15.4 The Assignable Pending Job Bonds relating
to the Cleveland Job and the Phoenix Job will not be assigned to or assumed by
Buyer until the corresponding Pending Job documents are assigned to and assumed
by Buyer in accordance with this Section 7.15. At such time, the parties will
sign and deliver documents needed to accomplish such transfers (to the extent
otherwise required by Section 7.14). The parties acknowledge that the Base
Purchase Price is calculated as if such bonds were Assignable Pending Job Bonds
assigned to Buyer at Closing for purposes of the Work in Process Purchase
Price, notwithstanding the fact that such bonds are not. Seller will promptly
pay all additional costs associated with assignment or replacement of the bonds
required by the contract documents for the Cleveland Job and the Phoenix Job in
connection with the assignment to, and assumption by, Buyer of the related
Pending Job documents, it being the intent of the parties that the amount
included in the Base Purchase Price will be the only cost to Buyer in such
regard, with Seller to pay any other such costs.
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SECTION 8. CLOSING.
The Closing will be held on a date acceptable to both Buyer
and Seller that is within 10 days after all conditions to the Closing contained
in this Agreement (other than those based on acts to be performed at the
Closing) have been satisfied or waived. The Closing will be held at 10:00 a.m.
local time at the offices of Xxxxxxx & Xxxxxx L.L.C. located at 000 00xx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000, or will be conducted by mail or at
such other place and time as Buyer and Seller may agree.
SECTION 9. CONDITIONS TO CLOSING.
9.1 Conditions to the Obligations of Buyer. The
obligations of Buyer to consummate the transactions contemplated by this
Agreement to take place at the Closing are subject to the satisfaction or
waiver, to the extent permitted by applicable Legal Requirements, at or prior
to the Closing Date, of each of the following conditions:
9.1.1 All representations and warranties of
Seller contained in this Agreement are, if specifically qualified by
materiality, true in all respects and, if not so qualified, are true in all
material respects, in each case on and as of the Closing Date with the same
effect as if made on and as of the Closing Date, except to the extent a
different date is specified therein, in which case such representation and
warranty will be true as of the date specified and except to the extent
permitted by this Agreement.
9.1.2 Seller in all material respects has
performed and complied with each obligation, agreement, covenant and condition
required by this Agreement to be performed or complied with by Seller at or
prior to the Closing.
9.1.3 No action, suit or proceeding is pending or
threatened by or before any Governmental Authority and no Legal Requirement has
been enacted, promulgated or issued or deemed applicable to any of the
transactions contemplated by this Agreement by any Governmental Authority,
which would (a) prohibit Buyer's ownership or operation of all or a material
portion of the Assets, (b) compel Buyer to dispose of or hold separate all or a
material portion of the Assets as a result of any of the transactions
contemplated by this Agreement; (c) prevent or make illegal the consummation of
any transactions contemplated by this Agreement or (d) would, if determined
adversely to Buyer's interest, materially impair the ability of Buyer to
realize the benefits of the transactions contemplated by this Agreement.
9.1.4 All Required Consents have been obtained in
form and substance reasonably satisfactory to Buyer and remain effective as of
the Closing Date.
9.1.5 Seller has executed (or caused to be
executed) and delivered to Buyer each of the following items:
(a) a Xxxx of Sale in the form attached
as EXHIBIT A;
(b) an Assignment and Assumption of
Contracts in the form attached as EXHIBIT B;
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(c) a License Agreement in the form
attached as EXHIBIT C;
(d) a Noncompetition Agreement signed
by Seller, MNGS and W. Xxxxxxx Xxxxxx in the form attached as EXHIBIT D;
(e) a Guaranty signed by MNGS in the
form attached as EXHIBIT E;
(f) an opinion of Xxxxxx Xxxxx Xxxx
& Xxxxxx, counsel to Seller, in the form attached as EXHIBIT F; and
(g) such assignments as required to
transfer any Intellectual Property registered with any Governmental Authority.
9.1.6 Seller has delivered releases, in form
satisfactory to Buyer, of all Encumbrances affecting any of the Assets.
9.1.7 There has not been any material adverse
change in the Business or Assets since the date of this Agreement.
9.1.8 Seller has delivered to Buyer: (a) a
certificate, dated the Closing Date, signed by the Seller's president, stating
that to his knowledge, the conditions set forth in Sections 9.1.1 and 9.1.2 are
satisfied; and (b) such other documents as Buyer may reasonably request in
connection with the transactions contemplated by this Agreement.
9.1.9 Seller has delivered to Buyer a fully
executed original of the Amendment to the EMCO License in the form attached as
EXHIBIT G.
9.2 Conditions to Obligations of Seller. The obligations
of Seller to consummate the transactions contemplated by this Agreement to take
place at the Closing are subject to the satisfaction or waiver by Seller, to
the extent permitted by applicable law, at or prior to the Closing Date, of
each of the following conditions:
9.2.1 All representations and warranties of
Buyer contained in this Agreement are, if not specifically qualified by
materiality, true and correct in all respects and, if so qualified, are true
and correct in all material respects, in each case on and as of the Closing
Date with the same effect as if made on and as of the Closing Date, except for
changes permitted or contemplated by this Agreement.
9.2.2 Buyer in all material respects has
performed and complied with each obligation, agreement, covenant and condition
required by this Agreement to be performed or complied with by Buyer at or
prior to the Closing.
9.2.3 No action, suit or proceeding is pending or
threatened by or before any Governmental Authority and no Legal Requirement has
been enacted, promulgated or issued or deemed applicable to any of the
transactions contemplated by this Agreement by any Governmental Authority,
which would prevent or make illegal the consummation of any transactions
contemplated by
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this Agreement.
9.2.4 Buyer has delivered the preliminary Base
Purchase Price required to be delivered at Closing.
9.2.5 Buyer has executed and delivered to Seller
an Assignment and Assumption of Contracts in the form attached as EXHIBIT B and
a License Agreement in the form attached as EXHIBIT C.
9.2.6 Buyer has delivered to Seller the
following: (a) a certificate, dated the Closing Date, signed by an executive
officer of Buyer, stating that to his or her knowledge, the conditions set
forth in Sections 9.2.1 and 9.2.2, are satisfied; and (b) such other documents
as Seller may reasonably request in connection with the transactions
contemplated by this Agreement.
9.2.7 Buyer has caused an opinion of Xxxxxxx &
Xxxxxx L.L.C., counsel to Buyer, to be delivered in the form attached as
EXHIBIT H.
9.3 Waiver of Conditions. Any party may waive in
writing any or all of the conditions to its obligations under this Agreement.
SECTION 10. TERMINATION.
10.1 Events of Termination. This Agreement may be
terminated and the transactions contemplated by this Agreement may be abandoned
at any time prior to the Closing:
(a) by the mutual written consent of Buyer and
Seller;
(b) by either party, if the transactions
contemplated by this Agreement to take place at the Closing have not been
consummated by July 15, 1997, for any reason other than (i) a breach or default
by such terminating party in the performance of any of its obligations under
this Agreement or (ii) the failure of any representation or warranty of such
terminating party to be accurate;
(c) by either party in the event of a material
breach or default by the other party under this Agreement;
(d) by either party if any court or
Governmental Authority of competent jurisdiction has issued an order or
judgment or taken any other action restraining, enjoining, or otherwise
prohibiting the transactions contemplated by this Agreement.
10.2 Liabilities in Event of Termination. The termination
of this Agreement will in no way limit any obligation or liability of any party
based on or arising from a breach by such party with respect to any of its
representations or warranties contained in this Agreement.
10.3 Procedure Upon Termination. In the event of the
termination of this Agreement by Buyer or Seller pursuant to this Section 10,
notice of such termination will promptly be given by the terminating party to
the other.
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SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
11.1 Survival of Representations and Warranties. The
representations and warranties of Seller in this Agreement and in the documents
and instruments to be delivered by Seller pursuant to this Agreement will
survive until the second anniversary of the Closing, except that (a) all such
representations and warranties with respect to any federal, state or local
taxes, environmental or Intellectual Property matters will survive until 180
days after the expiration of the applicable statute of limitations (including
any extensions) for such federal, state or local taxes, environmental or
Intellectual Property matter, respectively. The representations and warranties
of Buyer in this Agreement and in the documents and instruments to be delivered
by Buyer pursuant to this Agreement will survive until the second anniversary
of the Closing Date. The periods of survival of the representations and
warranties prescribed by this Section 11.1 are referred to as the "Survival
Period." The liabilities of the parties under their respective representations
and warranties will expire as of the expiration of the applicable Survival
Period; provided, however, that such expiration will not include, extend or
apply to any representation or warranty, the breach of which has been asserted
by Buyer in a written notice to Seller before such expiration or about which
Seller has given Buyer written notice before such expiration indicating that
facts or conditions exist that, with the passage of time or otherwise, can
reasonably be expected to result in a breach (and describing such potential
breach in reasonable detail). The covenants and agreements of the parties in
this Agreement and in the other documents and instruments to be delivered by
Seller or Buyer pursuant to this Agreement will survive the Closing and will
continue in full force and effect in accordance with their terms.
11.2 Indemnification by Seller. Seller will indemnify,
defend and hold harmless Buyer and its shareholders and its and their
respective Affiliates, and the shareholders, directors, officers, employees,
agents, successors and assigns of any of such Persons, from and against:
(a) all losses, damages, liabilities,
deficiencies or obligations of or to Buyer or any such other indemnified Person
resulting from or arising out of (i) any breach of any representation or
warranty made by Seller in this Agreement, (ii) any breach of any covenant,
agreement or obligation of Seller contained in this Agreement or the License
Agreement, (iii) any act or omission of Seller with respect to, or any event or
circumstance related to, the ownership or operation of the Assets or the
conduct of the Business, which act, omission, event or circumstance occurred or
existed prior to or at the time of Closing, without regard to whether a claim
with respect such matter is asserted before or after the Closing, including
with respect to any legal proceedings disclosed on SCHEDULE 5.8, (iv) any
liability or obligation not included in the Assumed Liabilities, (v) any claim
that the transactions contemplated by this Agreement violate the Worker
Adjustment and Retraining Notification Act, as amended, or any similar state or
local law or any bulk transfer or fraudulent conveyance laws of any
jurisdiction; and
(b) all claims, actions, suits, proceedings,
demands, judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and
other fees, costs and expenses) incident or relating to or resulting from any
of the foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) through (a)(v) of this Section 11.2, Buyer's
rights to pursue its claim under clauses (a)(ii) through (a)(v), as applicable,
will exist notwithstanding the expiration of the Survival Period applicable
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to such claim under clause (a)(i).
11.3 Indemnification by Buyer. Buyer will indemnify,
defend and hold harmless Seller and Seller's shareholder, and its and their
respective Affiliates, and the shareholders, directors, officers, employees,
agents, successors and assigns of any such Persons, from and against:
(a) all losses, damages, liabilities,
deficiencies or obligations of or to Seller or any such other indemnified
Person resulting from or arising out of (i) any breach of any representation or
warranty made by Buyer in this Agreement, (ii) the breach of any covenant,
agreement or obligation of Buyer contained in this Agreement or the License
Agreement or any act or omission of Buyer in connection with its subcontracting
work on the Cleveland Job or the Phoenix Job pursuant to Section 7.15 or (iii)
the failure by Buyer to perform any of its obligations in respect of the
Assumed Liabilities; and
(b) all claims, actions, suits, proceedings,
demands, judgments, assessments, fines, interest, penalties, costs and expenses
(including, without limitation, settlement costs and reasonable legal,
accounting, experts' and other fees, costs and expenses) incident or relating
to or resulting from any of the foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) or (a)(iii) of this Section 11.3, Seller's
rights to pursue its claim under clauses (a)(ii) or (a)(iii), as applicable,
will exist notwithstanding the expiration of the Survival Period applicable to
such claim under clause (a)(i).
11.4 Third Party Claims. Promptly after the receipt by
any party of notice of any claim, action, suit or proceeding by any Person who
is not a party to this Agreement (collectively, an "Action"), which Action is
subject to indemnification under this Agreement, such party (the "Indemnified
Party") will give reasonable written notice to the party from whom
indemnification is claimed (the "Indemnifying Party"). The Indemnified Party
will be entitled, at the sole expense and liability of the Indemnifying Party,
to exercise full control of the defense, compromise or settlement of any such
Action unless the Indemnifying Party, within a reasonable time after the giving
of such notice by the Indemnified Party, (a) admits in writing to the
Indemnified Party the Indemnifying Party's responsibility to indemnify the
Indemnified Party for Losses, if any, associated with such Action under the
terms of this Section 11, (b) notifies the Indemnified Party in writing of the
Indemnifying Party's intention to assume such defense, (c) provides evidence
reasonably satisfactory to the Indemnified Party of the Indemnifying Party's
ability to pay the amount, if any, for which the Indemnified Party may be
liable as a result of such Action and (d) retains legal counsel reasonably
satisfactory to the Indemnified Party to conduct the defense of such Action.
The other party will cooperate with the party assuming the defense, compromise
or settlement of any such Action in accordance with this Agreement in any
manner that such party reasonably may request. If the Indemnifying Party so
assumes the defense of any such Action, the Indemnified Party will have the
right to employ separate counsel and to participate in (but not control) the
defense, compromise or settlement of the Action, but the fees and expenses of
such counsel will be at the expense of the Indemnified Party unless (i) the
Indemnifying Party has agreed to pay such fees and expenses, (ii) any relief
other than the payment of money damages is sought against the Indemnified Party
or (iii) the Indemnified Party will have been advised by its counsel that there
may be one or more defenses available to it which are different from or
additional to those available to the Indemnifying Party, and in any such case
that portion of the fees
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and expenses of such separate counsel that are reasonably related to matters
covered by the indemnity provided in this Section 11 will be paid by the
Indemnifying Party. No Indemnified Party will settle or compromise any such
Action for which it is entitled to indemnification under this Agreement without
the prior written consent of the Indemnifying Party, unless the Indemnifying
Party has failed, after reasonable notice, to undertake control of such Action
in the manner provided in this Section 11.4. No Indemnifying Party will settle
or compromise any such Action (A) in which any relief other than the payment of
money damages is sought against any Indemnified Party or (B) in the case of any
Action relating to the Indemnified Party's liability for any tax, if the effect
of such settlement would be an increase in the liability of the Indemnified
Party for the payment of any tax for any period beginning after the Closing
Date, unless the Indemnified Party consents in writing to such compromise or
settlement.
11.5 Limitations on Indemnification - Seller.
11.5.1 Seller will not be liable for
indemnification arising solely under Section 11.2(a)(i) for (a) any losses,
damages, liabilities, deficiencies or obligations of or to Buyer or any other
person entitled to indemnification from Seller or (b) any claims, actions,
suits, proceedings, demands, judgments, assessments, fines, interest,
penalties, costs and expenses (including settlement costs and reasonable legal,
accounting, experts' and other fees, costs and expenses) incident or relating
to or resulting from any of the foregoing (the items described in clauses (a)
and (b) collectively being referred to for purposes of this Section 11.5 as
"Buyer Damages") unless the amount of Buyer Damages for which Seller would, but
for the provisions of this Section 11.5, be liable exceeds, on an aggregate
basis, $10,000, in which case Seller will be liable for all such Buyer Damages,
which will be due and payable within 15 days after Seller's receipt of a
statement therefor along with reasonable substantiating documentation. Buyer
Damages otherwise payable will be reduced to the extent of proceeds, if any,
received by Buyer of any insurance policy with respect to the same matter that
gave rise to such Buyer Damages (if not otherwise taken into account in
calculating such Buyer Damages).
11.5.2 Buyer will not seek nor be entitled to
consequential damages or damages for loss profits and any claim for
indemnification under this Section 11, nor will it accept payment of any award
or judgment against Seller to the extent that such award or judgment includes
consequential damages or damages for lost profits.
11.6 Limitations on Indemnification - Buyer.
11.6.1 Buyer will not be liable for
indemnification arising solely under Section 11.3(a)(i) for (a) any losses,
damages, liabilities, deficiencies or obligations of or to Seller or any other
person entitled to indemnification from Buyer or (b) any claims, actions,
suits, proceedings, demands, judgments, assessments, fines, interest,
penalties, costs and expenses (including settlement costs and reasonable legal,
accounting, experts' and other fees, costs and expenses) incident or relating
to or resulting from any of the foregoing the items described in clauses (a)
and (b) collectively being referred to for purposes of this Section 11.6 as
"Seller Damages") unless the amount of Seller Damages for which Buyer would,
but for the provisions of this Section 11.6, be liable exceeds, on an aggregate
basis, $10,000, in which case Buyer will be liable for all such Seller Damages,
which will be due and payable within 15 days after Buyer's receipt of a
statement therefor along with reasonable substantiating documentation. Seller
Damages otherwise payable will be reduced to the extent of proceeds, if any,
received by Seller of any insurance policy with respect to the same matter that
gave
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rise to such Seller Damages (if not otherwise taken into account in calculating
such Seller Damages).
11.6.2 Seller will not seek nor be entitled to
consequential damages or damages for loss profits and any claim for
indemnification under this Section 11, nor will it accept payment of any award
or judgment against Buyer to the extent that such award or judgment includes
consequential damages or damages for lost profits.
SECTION 12. MISCELLANEOUS.
12.1 Parties Obligated and Benefited. Subject to the
limitations set forth below, this Agreement will be binding upon the parties
and their respective assigns and successors in interest and will inure solely
to the benefit of the parties and their respective assigns and successors in
interest, and no other Person will be entitled to any of the benefits conferred
by this Agreement. Without the prior written consent of the other parties, no
party will assign any of its rights under this Agreement or delegate any of its
duties under this Agreement, provided that Buyer may, with the consent of
Seller (which consent will not be unreasonably withheld), assign or delegate
its rights or obligations under this Agreement to any of its Affiliates, in
which case such assignee will be substituted for Buyer under this Agreement as
though it were the original party to this Agreement and Buyer will be released
from all obligations under this Agreement.
12.2 Notices. Any notice, request, demand, waiver or
other communication required or permitted to be given under this Agreement will
be in writing and will be deemed to have been duly given only if delivered in
person or by first class, prepaid, registered or certified mail, or sent by
courier or, if receipt is confirmed, by telecopier:
To Buyer at:
Natural Fuels Corporation
0000 Xxxxxxxxx Xxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxx Xxxxxxxxx
Telecopy: (000) 000-0000
With a copy to:
Xxxxxxx & Xxxxxx L.L.C.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
To Seller at:
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: W. Xxxxxxx Xxxxxx
Telecopy: (000) 000-0000
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With a copy to:
Xxxxxx Xxxxx Xxxx & Xxxxxx
0000 Xxxxxxx Xxxxxx
00 X. Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 12.2. All
notices will be deemed to have been received on the date of delivery or on the
third Business Day after mailing in accordance with this Section, except that
any notice of a change of address will be effective only upon actual receipt.
12.3 Attorneys' Fees. In the event of any action or suit
based upon or arising out of any alleged breach by any party of any
representation, warranty, covenant or agreement contained in this Agreement,
the prevailing party will be entitled to recover reasonable attorneys' fees and
other costs of such action or suit from the other party.
12.4 Right to Specific Performance. Seller acknowledges
that the unique nature of the Assets to be purchased by Buyer pursuant to this
Agreement renders money damages an inadequate remedy for the breach by Seller
of its obligations under this Agreement, and Seller agrees that in the event of
such breach, Buyer will upon proper action instituted by it, be entitled to a
decree of specific performance of this Agreement.
12.5 Waiver. This Agreement or any of its provisions may
not be waived except in writing. The failure of any party to enforce any right
arising under this Agreement on one or more occasions will not operate as a
waiver of that or any other right on that or any other occasion.
12.6 Captions. The article and section captions of this
Agreement are for convenience only and do not constitute a part of this
Agreement.
12.7 CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS OF THE
PARTIES UNDER IT WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD TO THE
CONFLICTS OF LAWS RULES OF COLORADO.
12.8 Terms. Terms used with initial capital letters will
have the meanings specified, applicable to both singular and plural forms, for
all purposes of this Agreement. The word "include" and derivatives of that word
are used in this Agreement in an illustrative sense rather than limiting sense.
12.9 Rights Cumulative. All rights and remedies of each
of the parties under this Agreement will be cumulative, and the exercise of one
or more rights or remedies will not preclude the exercise of any other right or
remedy available under this Agreement or applicable law.
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12.10 Further Actions. Seller and Buyer will execute and
deliver to the other, from time to time at or after the Closing, for no
additional consideration and at no additional cost to the requesting party,
such further assignments, certificates, instruments, records, or other
documents, assurances or things as may be reasonably necessary to give full
effect to this Agreement and to allow each party fully to enjoy and exercise
the rights accorded and acquired by it under this Agreement.
12.11 Time. Time is of the essence under this Agreement.
If the last day permitted for the giving of any notice or the performance of
any act required or permitted under this Agreement falls on a day which is not
a Business Day, the time for the giving of such notice or the performance of
such act will be extended to the next succeeding Business Day.
12.12 Counterparts. This Agreement may be executed in one
or more counterparts, each of which will be deemed an original.
12.13 Entire Agreement. This Agreement (including the
Schedules and Exhibits referred to in this Agreement, which are incorporated in
and constitute a part of this Agreement) contains the entire agreement of the
parties and supersedes all prior oral or written agreements and understandings
with respect to the subject matter. This Agreement may not be amended or
modified except by a writing signed by the parties.
12.14 Severability. Any term or provision of this
Agreement which is invalid or unenforceable will be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining rights of the Person intended to be benefited by
such provision or any other provisions of this Agreement.
12.15 Construction. This Agreement has been negotiated by
Buyer and Seller and their respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement or any
provision of this Agreement against the party drafting this Agreement will not
apply in any construction or interpretation of this Agreement.
12.16 Expenses. Except as otherwise expressly provided in
this Agreement, each party will pay all of its expenses, including attorneys'
and accountants' fees, in connection with the negotiation of this Agreement,
the performance of its obligations and the consummation of the transactions
contemplated by this Agreement.
12.17 Joint and Several Obligations. All representations,
warranties, covenants, agreements and obligations of Seller under this
Agreement are the joint and several representations, warranties, covenants,
agreements and obligations of MFS, DVCO and MCNG.
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The parties have executed this Agreement as of the day and
year first above written.
XXXXXX FUEL SYSTEMS, INC.
By: /s/ A. XXXXXXX XXXXXXX
---------------------------------------
Name: A. Xxxxxxx Xxxxxxx
Title: President
DVCO FUEL SYSTEMS, INC.
By: /s/ A. XXXXXXX XXXXXXX
---------------------------------------
Name: A. Xxxxxxx Xxxxxxx
Title: President
XXXXXX CNG SYSTEMS, INC.
By: /s/ A. XXXXXXX XXXXXXX
---------------------------------------
Name: A. Xxxxxxx Xxxxxxx
Title: President
NATURAL FUELS CORPORATION
By: /s/ XXXXXX X. XXXXXXXXX
---------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President
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