EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement"), dated as of July 16, 2002,
is by and between Nidec America Corporation, a Delaware corporation ("Seller"),
and Xxxx Incorporated, a Minnesota corporation ("Buyer").
WHEREAS, Seller is engaged, among other business activities, in the
business of developing, manufacturing, marketing and selling DC/DC converters,
power supplies and other power conversion products under the Power General brand
name through its Power General division; and
WHEREAS, Seller wishes to sell or cause to be sold to Buyer, and Buyer
wishes to purchase from Seller, substantially all of the operating assets and
properties used exclusively or primarily in the Power General Business
(hereinafter defined), upon the terms and subject to the conditions of this
Agreement, including the assumption of certain specified liabilities.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows
ARTICLE I
DEFINITIONS
As used in this Agreement, in addition to capitalized terms defined
elsewhere in this Agreement, the following terms have the meanings set forth
below, and where those meanings are intended, those terms are capitalized:
1.1 "Acquired Assets" means all of the business, properties, assets,
goodwill and rights of Seller used by Seller exclusively or primarily in the
Power General Business, including, without limitation, all Intellectual
Property; all Plans; all Inventory; all Fixed Assets; all Acquired Contracts;
all Books and Records; telephone numbers; and all other assets of Seller
exclusively or primarily related to the Power General Business, including all
items expensed when purchased and all fully depreciated assets currently used
exclusively or primarily in conducting the Power General Business, whether or
not such assets are reflected on the Recent Pro Forma Balance Sheet; provided,
however, that the term Acquired Assets does not include any assets which are
Excluded Assets.
1.2 "Acquired Contracts" means all of Seller's interest in and to the
contracts, commitments and agreements which relate to the Acquired Assets and/or
the Power General Business (including agreements with customers, suppliers,
distributors, manufacturers and representatives and open purchase orders) listed
on Schedule 1.2.
1.3 "Assumed Liabilities" means the following liabilities of the Seller
as of the Closing Date:
(a) All obligations, liabilities, agreements and commitments of
Seller under the Acquired Contracts arising after the Closing Date (but not
including any liability or obligation for any breach or default thereof
occurring on or prior to the Closing Date);
(b) Accrued Expenses reflected on the Recent Pro Forma Balance
Sheet and additional accrued expenses of the same character under GAAP arising
in the ordinary course of business from the date of the Recent Pro Forma Balance
Sheet to the Closing Date; and,
(c) Seller's accrued obligations to Retained Employees for
vacation pay, holiday pay, sick pay and/or personal time off as of the Closing
Date (the "Retained Employee Accruals") as specified on Schedule 1.25.
1.4 "Books and Records" means all of Seller's tangible (and, to the
extent available, copies of electronic) books and records relating to the
Acquired Assets or the Power General Business, including without limitation,
lists of customers and suppliers, and records with respect to pricing, volume,
payment history, cost, inventory, machinery and equipment, mailing lists,
distribution and customer lists, sales, purchasing and materials, and including
any such records which are maintained on computer; provided that the term "Books
and Records" does not include personnel records of the Transition Employees and
any other books and records relating to the Power General Business that Seller
is required by law to retain.
1.5 "Closing Date Statement of Selected Assets and Liabilities" means (i)
the net book value of the Inventory as of the Closing Date determined according
to GAAP (less reserves reflected on the Recent Pro Forma Balance Sheet and
reserves arising between the date thereof and Closing), minus (ii) the Accrued
Expenses as of the Closing Date, in each case prepared on the same basis, and in
accordance with GAAP using the same methods and procedures applied on a basis
consistent with the methods and procedures used to prepare the Recent Closing
Date Statement of Selected Assets of Liabilities. In preparing the Closing Date
Statement of Selected Assets and Liabilities, the reserve levels shall be
determined on a basis consistent with that used to determine such reserves in
the Recent Closing Date Statement of Selected Assets and Liabilities.
1.6 "Commission" means the Securities and Exchange Commission.
1.7 "Common Stock" means the Buyer's Common Stock, no par value.
1.8 "Excluded Assets" means all of the following:
(a) Seller's cash and cash equivalents on hand or in banks;
(b) All of Seller's assets which are not exclusively or primarily
related to the Power General Business;
(c) Any real property, including without limitation, the real
property currently allocated on Seller's corporate records to Power General;
(d) The items specifically identified on Schedule 1.8 (the
"Excluded Operating Assets");
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(e) Accounts Receivable related to the Power General Business
arising on or prior to Closing Date; and
(f) All claims for refunds of taxes and other governmental
charges.
1.9 "Fixed Assets" means all of Seller's tangible assets, other than the
Excluded Operating Assets, which are used by Seller exclusively or primarily in
the Power General Business, including, but not limited to furniture, fixtures,
machinery, equipment, workstations, computers, test equipment, tooling, tools
and supplies listed on Schedule 1.9, as well as items expensed when purchased
and fully depreciated assets which may not be reflected on Schedule 1.9 and all
other tangible assets exclusively or primarily related to the Power General
Business which are acquired by Seller from the date of Schedule 1.9 through the
Closing Date.
1.10 "GAAP" means generally accepted accounting principles as
consistently applied by Seller in accordance with the Seller's past practices
and assuming the continued operation of the Power General Business as a going
concern.
1.11 "Intellectual Property" means all patents, patent applications,
copyrights, trademarks, trade names (including the name "Power General" and
variations thereof, and any logos associated with such names and variations
thereof), assumed names, trade secrets, licenses, software, software licenses,
product designs, documentation for finished products and products under
development and know how, and marketing collateral and artwork required by
Seller to manufacture and sell the products currently offered for sale by the
Power General Business or otherwise used by Seller primarily in the operation of
the Power General Business, including the intellectual property listed on
Schedule 1.11, but excluding the intellectual property listed on Schedule 1.8.
1.12 "Inventory" means all of Seller's parts, raw materials, work in
process, and finished goods held for sale as of the Closing Date which are
related to the Power General Business.
1.13 "Lease" means the written agreement attached hereto as Exhibit A
pursuant to which Buyer will lease from Seller from the Closing Date to the end
of the Transition Period portions of the Seller's facility located in Canton,
Massachusetts.
1.14 "Liabilities and Obligations" means any direct or indirect
indebtedness, claim, obligation, liability, deficiency or guaranty of any kind
or nature whatsoever, whether absolute or contingent, liquidated or
unliquidated, due or to become due, accrued or not accrued, matured or
unmatured, or otherwise of Seller.
1.15 "Material" means individual items, claims or events (or related
items, claims or events) representing an actual or potential cost, loss, damage
or adverse financial impact equal to or greater than $5,000.
1.16 "MIS Services Agreement" means the written agreement attached hereto
as Exhibit B.
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1.17 "Power General Business" means Seller's business of developing,
manufacturing, marketing and selling DC/DC converters, power supplies and other
power conversion products under the Power General brand name through its Power
General division.
1.18 "Plans" means all blueprints, designs, processes, computer files,
computer programs and related documents, bills of material, formulae, process
sheets, drawings, instructions, machine manuals, any non-expired warranties and
guarantees, and similar written or digital records (i) used by Seller to
manufacture the products currently offered for sale by the Power General
Business, (ii) currently in existence with respect to products under
development, or (iii) used by Seller in the operation of the Power General
Business, but, in each case, excluding any designs which are the property of any
customer of Seller.
1.19 "Preferred Stock" means the Buyer's Series B 7% Convertible
Preferred Stock issued pursuant to the terms of the Certificate of Designation
attached hereto as Exhibit C.
1.20 "Prepaid Expenses" means prepaid expenses incurred in the ordinary
course of the Power General Business determined in accordance with GAAP.
1.21 "Registration Rights Agreement" means the written agreement attached
hereto as Exhibit D.
1.22 "Registration Statement" means the Registration Statement on Form
S-3 to be filed by Buyer with the Commission to register for resale the shares
of Common Stock issuable to Seller upon conversion of the Preferred Stock issued
to Seller under this Agreement and any Common Stock hereafter issued to Seller
in payment of dividends on the Preferred Stock.
1.23 "Recent Statement of Selected Assets and Liabilities" means the net
book value of Inventory reflected on Recent Pro Forma Balance Sheet determined
according to GAAP (less any reserves indicated on the Pro Forma Balance Sheet),
minus the Accrued Expenses specified on the Recent Pro Forma Balance Sheet.
1.24 "Recent Pro Forma Balance Sheet" means the statement attached hereto
as Schedule 1.24.
1.25 "Retained Employees" means the employees of the Power General
Business listed on Schedule 1.25 who, effective as of the Closing Date, will
cease to be employees of Seller and will become employees of the Buyer, as to
which Buyer shall assume the Retained Employee Accruals respectively indicated
opposite each such employee's name on Schedule 1.25.
1.26 "Securities Act" means the Securities Act of 1933, as amended.
1.27 "Transition Employees" means the employees of the Power General
Business listed on Schedule 1.27 whom Seller will continue to employ during all
or a portion of the Transition Period in accordance with the terms of the
Transition Services Agreement.
1.28 "Transition Period" means the period beginning at the Closing Date
and running through January 15, 2003 during which period Seller will lease the
services of the Transition Employees to Buyer pursuant to the Transition
Services Agreement.
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1.29 "Transition Services Agreement" means the written agreement attached
hereto as Exhibit E.
ARTICLE II
PURCHASE AND SALE OF ACQUIRED ASSETS
2.1 Purchase and Sale of the Acquired Assets. Upon the terms and subject
to the conditions of this Agreement, Seller agrees to sell, assign, transfer,
convey and deliver, or cause to be sold, assigned, transferred, conveyed and
delivered to Buyer, and Buyer agrees to purchase, on the Closing Date (as
defined in Section 3.1), all of the Acquired Assets. Except as expressly
provided in Section 2.2(a), Buyer shall acquire the Acquired Assets free and
clear of all Liabilities and Obligations. Buyer shall not, however, purchase,
nor have any right with respect to the Excluded Assets.
2.2 Assumption of Certain Liabilities.
(a) Assumed Liabilities. Upon the terms and subject to the
conditions of this Agreement, Buyer shall execute and deliver to Seller on the
Closing Date an agreement pursuant to which Buyer shall assume and agree to pay,
perform and discharge, and to indemnify Seller and its affiliates against and
hold them harmless from, in accordance with the indemnification provisions of
Article IX, all Liabilities and Obligations of Seller existing on the Closing
Date which are Assumed Liabilities.
(b) All Other Liabilities Excluded. Buyer will have no
responsibility for, and Seller agrees to indemnify and hold Buyer harmless, in
accordance with the indemnification provisions of Article IX, from, any
Liabilities and Obligations of Seller of any nature whatsoever which are not
specifically included in the Assumed Liabilities, whether now existing or
hereafter arising, and whether known or unknown to Buyer or Seller, including
without limitation (i) all indebtedness for borrowed money; (ii) all accounts
payable determined in accordance with GAAP; (iii) all product liability claims
and warranty claims (except that Buyer shall be obligated as provided in Section
6.7 to provide warranty and customer support services) related to or arising out
of Seller's products that are shipped prior to or on the Closing Date; (iv)
environmental liabilities asserted against Buyer and arising out of actions or
operations of Seller prior to the Closing Date; and (v) except to the extent
specifically included in the Assumed Liabilities, all present and future
Liabilities and Obligations owed by Seller to its Power General Business
employees, whether or not arising in the ordinary course of business, pursuant
to such employees' employment by Seller, including, but not limited to any
accrued payroll, annual leave, benefit plan contributions, accrued vacation pay,
severance or termination payments, unpaid wages, including such liabilities as
are incurred through the Closing Date.
2.3 Purchase Price. The consideration to be paid for the Acquired Assets
(in addition to the assumption of the Assumed Liabilities) shall be $2,074,000
principal amount of the Preferred Stock and $366,000 cash, subject to adjustment
pursuant to the provisions of Section 2.4.
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2.4 Purchase Price Adjustment. The Purchase Price described in Section
2.3 above shall be increased or reduced (the "Purchase Price Adjustment") if the
difference between the Recent Statement of Selected Assets and Liabilities and
the Closing Date Statement of Selected Assets and Liabilities is greater than
$200,000, which increase or reduction, if any, shall be determined based on the
following procedure:
(a) Within twenty (20) days after Closing, Seller shall prepare
and deliver to Buyer a list of Inventory and Accrued Expenses as of the Closing
Date, valued on the same basis and using the same methods and procedures applied
on a basis consistent with the methods and procedures used to prepare the Recent
Statement of Selected Assets and Liabilities, and promptly thereafter Buyer and
Seller shall jointly conduct a review of Inventory and Accrued Expenses,
including, at the request of either party, a physical inventory count.
(b) Buyer must, as soon as reasonably practicable after the
Closing Date but not later than twenty (20) days after receiving the Seller's
list of Inventory and Accrued Expense, prepare its proposed Closing Date
Statement of Selected Assets and Liabilities (setting forth, in reasonable
detail, Buyer's calculation as of the Closing Date of the value of the Inventory
and amount of Accrued Expense as of the Closing Date, which items shall be
valued on the same basis and using the same methods and procedures applied on a
basis consistent with the methods and procedures used to prepare the Recent
Statement of Selected Assets and Liabilities) (the "Closing Statement").
(c) Within twenty (20) days after receipt of the Closing
Statement, Seller must give Buyer written notice of any exceptions to Buyer's
calculation of the Closing Date Statement of Selected Assets and Liabilities.
(i) If Seller has not given Buyer such written notice
within that twenty-day period, then the values set forth in the
Closing Statement will be conclusive and binding on the parties.
(ii) If Seller gives Buyer such written notice within that
twenty-day period, then Buyer and Seller shall promptly endeavor
to resolve any disputes. If Seller and Buyer fail to reach an
agreement with respect to such matters on or before twenty (20)
days after Seller has delivered written notice to Buyer of
exceptions to the Closing Statement, then, as to such matters
remaining in dispute, the Seller and the Buyer shall promptly
retain an accounting firm ("Firm") acceptable to Buyer and Seller,
which has not rendered accounts or other services to either Buyer
or Seller for at least three years. The Firm shall be instructed
to apply the same methods, policies and procedures as were applied
in preparing the Recent Statement of Selected Assets and
Liabilities. Subject to the foregoing, the Firm shall make an
independent determination of any matters in dispute and deliver an
opinion to Buyer and Seller within 45 days of the Firm's
retention, which determination will be conclusive and binding on
the parties. All fees and expenses of the Firm must be paid by the
party to this Agreement not generally prevailing on the issues as
determined by the Firm, except that if the Firm determines that
neither party could fairly found to be the prevailing party, then
such fees and expenses of the Firm shall be paid equally by Buyer
and Seller.
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2.5 Payment of Purchase Price Adjustment.
(a) If the net amount indicated on the Recent Statement of
Selected Assets and Liabilities is $200,000 or less than the amount indicated on
the Closing Date Statement of Selected Assets and Liabilities, then Buyer shall
pay the difference between the Closing Date Statement of Selected Assets and
Liabilities and the Recent Statement of Selected Assets and Liabilities to
Seller, within five (5) days after final determination of the Closing Date
Statement of Selected Assets and Liabilities, by a wire transfer of good funds
or a cashiers check.
(b) If the net amount indicated on the Recent Statement of
Selected Assets and Liabilities is $200,000 or greater than the Closing Date
Statement of Selected Assets and Liabilities, then Seller shall pay the
difference between the Closing Date Statement of Selected Assets and Liabilities
and the Recent Statement of Selected Assets and Liabilities to Buyer, within
five (5) days after final determination of the Closing Date Statement of
Selected Assets and Liabilities, by a wire transfer of good funds or a cashiers
check.
2.6 Allocation of Purchase Price. The allocation of the Purchase Price
for tax purposes will be determined by mutual agreement of the Buyer and Seller
following the completion of the Purchase Price Adjustment described in Section
2.4 of this Agreement and upon reaching agreement of the allocation of the
Purchase Price, such agreement will be set forth in a written schedule signed by
both parties and which shall be incorporated by reference into this Agreement as
Schedule 2.6B. It is further agreed that the allocation of the consideration to
the Assets as set forth in Schedule 2.6B will be binding on Seller and Buyer for
federal and state income tax purposes and will be consistently so reflected by
Buyer and Seller on their respective federal and state income tax returns. Buyer
and Seller agree that the allocation of the Purchase Price set forth in Section
2.3, prior to any Purchase Price Adjustment, is as set forth in Schedule 2.6A.
ARTICLE III
THE CLOSING
3.1 Closing Date. The closing of the sale and transfer of the Acquired
Assets (hereinafter called the "Closing") shall take place at the offices of
Day, Xxxxx & Xxxxxx LLP, 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000 at 8:00 a.m. on
July 16, 2002, or at such other time, date and place as shall be fixed by
agreement among the parties hereto (such date of the Closing being herein
referred to as the "Closing Date").
3.2 Transactions To Be Effected at the Closing. At the Closing:
(a) Seller's Deliveries. On the Closing Date, subject to the terms
and conditions set forth in this Agreement, Seller shall make the following
deliveries:
(i) A Xxxx of Sale in a form reasonably acceptable to
Buyer, and other instruments of conveyance reasonably requested by
Buyer, duly executed by Seller;
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(ii) Assignments of all Intellectual Property in a form
reasonably requested by Buyer;
(iii) Appropriate releases or termination statements for
any security interest in the Acquired Assets;
(iv) A certificate of an executive officer of the Seller
certifying to the fulfillment of the conditions described in
Sections 7.2(a) and 7.2(b) herein;
(v) A certificate of the Secretary of Seller, certifying a
copy of the resolutions of Seller's Board of Directors which
authorize the execution, delivery and performance of this
Agreement as having been duly adopted and as being in full force
and effect on the Closing Date.
(vi) The Lease, duly executed by Seller;
(vii) The MIS Services Agreement, duly executed by Seller;
(viii) The Transition Services Agreement, duly executed by
Seller;
(ix) The Registration Rights Agreement, duly executed by
Seller; and
(x) All other items or documents reasonably requested by
Buyer or its counsel.
(b) Buyer's Deliveries. On the Closing Date, subject to the terms
and conditions set forth in this Agreement, Buyer shall make the following
deliveries:
(i) Delivery of the shares of Preferred Stock specified in
Section 2.3
(ii) Payment of the cash amount specified in Section 2.3;
(iii) An Assignment and Assumption Agreement in a form
reasonably acceptable to Seller, duly executed by Buyer;
(iv) A certificate of an executive officer of the Buyer
certifying to the fulfillment of the conditions described in
Sections 7.3(a) and 7.3(b) herein;
(v) A certificate of the Secretary of Buyer, certifying a
copy of the resolutions of Buyer's Board of Directors which
authorize the execution, delivery and performance of this
Agreement as having been duly adopted and as being in full force
and effect on the Closing Date;
(vi) The Lease, duly executed by Buyer;
(vii) The MIS Services Agreement, duly executed by Buyer;
(viii) The Transition Services Agreement, duly executed by
Buyer;
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(ix) The Registration Rights Agreement, duly executed by
Buyer; and
(x) The legal opinion of Buyer's counsel referred to in
Section 7.3(e) of this Agreement.
(xi) A copy of the Articles of Incorporation, including all
amendments thereto and the Certificate of Designation, certified
by the Secretary of State of Minnesota.
(xii) All other items or documents reasonably requested by
Seller or Seller's counsel.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to and agrees with the Buyer
as follows, except to the extent exceptions or qualifications are set forth in
the schedules provided under this Article IV (collectively the "Disclosure
Schedule"):
4.1 Organization and Good Standing. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Seller has full corporate power and authority to conduct its
business as now conducted and to own and operate the assets and properties now
owned and operated by it; and is duly qualified to do business and is in good
standing in each jurisdiction wherein the conduct of its business or the
ownership of its assets and properties requires such qualification and the
failure to be so qualified would have, or could be reasonably expected to have,
a material adverse effect on the business, operations, condition, (financial or
otherwise), results of operations, business relationships, assets, liabilities
or prospects of the Power General Business.
4.2 Authority and Compliance. The Seller has full power and lawful
authority to execute and deliver this Agreement and to consummate and perform
the transactions contemplated hereby. This Agreement has been duly authorized by
all necessary corporate action and this Agreement has been duly executed and
delivered by the Seller and constitutes the legal, valid and binding obligation
of the Seller, enforceable in accordance with its terms. Neither the execution
and delivery of this Agreement by the Seller nor the consummation and
performance of the transactions contemplated hereby (i) will conflict with or
violate the Certificate of Incorporation or Bylaws (or other governing
instrument) of the Seller or any agreement to which the Seller is a party or by
which it is bound, or any federal, state, local or other governmental law or
ordinance or (ii), except as set forth on the Disclosure Schedule, will require
the authorization, approval or consent by, or any notice to or filing with, any
third party.
4.3 Financial Information. Attached as Schedule 4.3 is the following
financial information: (i) income statement data for the Power General Business
for the four years ended Xxxxx 00, 0000, (xx) interim income statement data for
the Power General Business for the period from April 1, 2002 through June 2,
2002 and (iii) Recent Pro Forma Balance Sheet (collectively, the "Financial
Information"). The Financial Information has been derived from Seller's
financial statements which were prepared in accordance with GAAP, subject to the
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exception that such Financial Information does not include footnotes or related
schedules that may be required by GAAP, and, except as set forth therein, items
(i) and (ii) of the Financial Information present the results of operations of
the Power General Business as of the dates and for the periods then ended as
reported within Seller for financial and operational management purposes, and
item (iii) of the Financial Information presents fairly the book value of the
assets and liabilities indicated.
4.4 Liabilities. Since June 2, 2002, other than Liabilities or
Obligations arising in the ordinary course of business consistent with past
practice or as set forth on the Disclosure Schedule, the Power General Business
has not incurred Liabilities or Obligations which in the aggregate are greater
than $20,000.
4.5 No Material Change. Except as set forth on the Disclosure Schedule,
since June 2, 2002, there has not been (a) any Material diminution in the value
of any of the Acquired Assets, (b) any Material damage, destruction or loss,
whether covered by insurance or not, adversely affecting any of the Acquired
Assets, the operations, or condition (financial or otherwise) of the Power
General Business, (c) any Material actual or, to the knowledge of Seller,
threatened trouble or disruption of the Power General Business' relations with
its agents, customers, distributors or suppliers, (d) any failure to pay or
discharge when due any Material liability related to the Power General Business
or any of the Acquired Assets, (e) any Material sale, encumbrance, assignment or
transfer of any assets or properties associated with the Power General Business,
except in the ordinary course of business consistent with past practice, (f) any
Material amendment or termination of any of the Acquired Contracts, or any
waiver by it of any rights of Material value whether or not in the ordinary
course of business, (g) any Material commitment or agreement made for capital
expenditures or capital additions or betterments of the Power General Business,
(h) any change in the procedures by which new customers are qualified before
accepting orders from such new customers or the methods of applying such
procedures. Except as set forth on the Disclosure Schedule, since June 2, 2002,
the Seller has conducted the Power General Business only in the ordinary course
consistent with past practice and has not entered into any Material transaction,
contract or arrangement with respect to the Power General Business, except in
the ordinary course of business, consistent with past practice.
4.6 Assets and Properties. The Seller has and at the Closing will convey
to the Buyer good, valid and marketable title to all of the Acquired Assets,
free and clear of all liens, pledges, mortgages, security interests, claims or
encumbrances of any nature whatsoever, except liens for current taxes not yet
due and payable. All of the Fixed Assets are in good operating condition and
repair (subject only to ordinary wear and tear) and are usable in the ordinary
course of the Power General Business consistent with their intended purpose.
Except for the Excluded Operating Assets, the Acquired Assets represent all
assets which are reasonably necessary to enable Buyer to continue to conduct in
the ordinary course of business consistent with past practice the research and
development, manufacturing, testing, and sales and marketing functions currently
conducted by the Power General Business.
4.7 Power General Products. Except as set forth on the Disclosure
Schedule, all products produced, manufactured, distributed or sold by the Power
General Business conform in all Material respects to all applicable laws,
ordinances, regulations, and customer specifications in effect at the time of
such production, manufacture, distribution or sale. To Seller's
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knowledge, there are no events, conditions, circumstances, activities,
practices, incidents, actions, omissions, or plans which might reasonably be
expected to give rise to any Material liability related to any products
produced, manufactured or sold by the Power General Business.
4.8 Acquired Contracts; Consents Required. True and complete copies of
the Acquired Contracts have been delivered to Buyer and each Acquired Contract
is a valid and binding obligation of each of the parties thereto and is in full
force and effect. The Seller is not in default under any of the Acquired
Contracts, and, to the knowledge of Seller, no third party is in default under
any of the Acquired Contracts. The Acquired Contracts include all contracts,
commitments and agreements reasonably necessary to enable Buyer to carry on the
Power General Business as it has heretofore been conducted, except for those
contracts, commitments and agreements used by Buyer to provide accounting,
finance and administrative support to the Power General Business. Except as set
forth on the Disclosure Schedule, the execution, delivery and performance of
this Agreement or the consummation of the sale of the Acquired Assets to the
Buyer does not require the consent of any natural person, corporation,
partnership, proprietorship, association, trust or other legal entity (including
without limitation, consents from parties to the Acquired Contracts).
4.9 Changes in Suppliers and Customers. Without regard to the effect the
transactions contemplated by this Agreement may have (as to which no
representation is given), and except as set forth on the Disclosure Schedule,
Seller has no knowledge of any facts which indicate that any of the customers of
the Power General Business which individually purchased more than $50,000 from
Seller in the last twelve months intends to cease being a customer of Seller (or
knows of any reason why any of such customers would not continue as a customer
with the Power General Business after the Closing Date), nor is Seller aware of
any facts which indicate that any material supplier to Seller intends to cease
doing business with Seller, (or knows of any reason any of such suppliers would
not act as suppliers to the Power General Business after the Closing Date).
4.10 Inventory. Except as set forth on the Disclosure Schedule, the
Inventory consists of items of a quality and condition that are usable (and in
the case of finished goods, saleable) in the ordinary course of business for the
purposes for which intended net of any applicable reserves reflected in the
Recent Pro Forma Balance Sheet. Since the date of the Recent Pro Forma Balance
Sheet, all acquisitions and sales of Inventory have been made in the ordinary
course of business consistent with past practice.
4.11 Legal Proceedings; Compliance with Law. Except as set forth on the
Disclosure Schedule, there are no disputes, claims, actions, suits or
proceedings, arbitrations or investigations pending or, to the knowledge of
Seller, threatened against the Seller with respect to the Power General
Business. Seller has no knowledge of any facts or circumstances that could
reasonably be expected to form the basis of any Material claim, liability or
litigation against the Seller with respect to the Power General Business or the
Acquired Assets. Excluding for purposes of this representation, compliance with
product laws, employment laws and Environmental Laws, which compliance is
addressed by the representations set forth in Sections 4.07, 4.13 and 4.15,
respectively, the conduct of the Power General Business by the Seller, and its
use of the Acquired Assets, are in Material compliance with all applicable
federal, state, local or other governmental laws, ordinances, codes, rules and
regulations. The Seller owns or has the
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right to use in the operation of the Power General Business all Material
franchises, licenses, permits, consents, approvals, rights, waivers and other
authorizations, governmental or otherwise, which are necessary for it to conduct
the Power General Business as now conducted; the Seller is not in default, nor
has it received any notice of any claim or default, thereunder or any notice of
any other claim or proceeding or threatened proceeding relating thereto; and
neither the execution or delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will require any notice or consent thereunder
or have any material adverse effect thereon.
4.12 Intellectual Property. Seller has not received notice or claim that
its respective title to or use of the Intellectual Property is impaired,
encumbered or invalid or is unenforceable by it, except as set forth on the
Disclosure Schedule. Seller's use of any item of the Intellectual Property does
not, to the knowledge of Seller, infringe upon any intellectual property owned
by any other entity or person, and there is no claim or action pending or
threatened with respect thereto. Except as set forth on the Disclosure Schedule,
to the knowledge of Seller, there has been no infringement or improper use of
any item of the Intellectual Property by any third party and there is no legal
action instituted by Seller in which an act allegedly constituting an
infringement of any of the rights to any item of the Intellectual Property was
alleged to have been committed by a third party.
4.13 Labor and Employment Matters.
(a) No employees of the Power General Business are represented by
a labor union and the Seller is not a party to and does not have any obligation
under any collective bargaining agreement related to any of the employees of the
Power General Business.
(b) There are no pending or, to Seller's knowledge, threatened
representation campaigns, elections or questions concerning union representation
involving any employees of the Power General Business.
(c) The Seller has no knowledge of any efforts of any labor union
to organize any employees of the Power General Business nor of any demands for
recognition or collective bargaining, nor of any labor disputes, strikes or work
stoppages of any kind, or threats thereof, by or with respect to any employees
of the Power General Business and, to the knowledge of Seller, except as set
forth in the Disclosure Schedule, no such activities occurred during the
twenty-four (24) month period preceding the date hereof.
(d) Seller has complied in all Material respects with all
applicable laws relating to the employment of labor, including provisions
relating to wages, hours, equal opportunity, collective bargaining, age and sex
discrimination and the withholding and payment of social security and other
taxes related to the Power General Business employees. There are no disputes,
claims, actions, suits or proceedings, arbitrations or investigations pending
or, to the knowledge of Seller, threatened by, against or affecting any of the
Power General Business employees related to their employment by the Seller.
(e) Seller has not violated in any Material respect, to its
knowledge has no liability under, and has not received a notice or charge
asserting any violation of or liability
12
under, the federal Occupational Safety and Health Act of 1970 or any other
federal, state, local or foreign acts (including rules and regulations
thereunder) regulating or otherwise affecting the employee health and safety of
any of the Power General Business employees.
(f) Except as set forth on the Disclosure Schedule, there are no
workers' compensation claims pending or, to the knowledge of Seller, threatened
concerning any of the Power General Business employees.
(g) Except as set forth on the Disclosure Schedule, the Seller is
not a party to any agreements, arrangements or understandings which would
restrict the ability of the Seller to terminate the employment of any of the
Retained Employees or the Transition Employees at any time, for any lawful
reason or at will, without penalty or other Liabilities or Obligations.
(h) The qualifications of each Power General Business employee for
employment under applicable immigration laws have been reviewed by Seller and a
properly completed Form I-9 is on file with respect to each employee. Seller has
complied with the U.S. Immigration and Nationality Act, as amended from time to
time, and the rules and regulations promulgated thereunder, and to the knowledge
of the Seller, there is no basis for any claim that Seller is not in compliance
with the terms thereof with respect to any employee of the Power General
Business.
4.14 Employee Information; Benefit Plans. The name of each employee of
the Power General Business and other information, to the extent provided,
relating to Retained Employee Employees and Transition Employees are correctly
set forth, respectively, on Schedules 1.25 and 1.27. Set forth on the Disclosure
Schedule is an accurate list or description of all employee benefit plans
maintained by the Seller for the employees of the Power General Business (the
"Power General Employee Benefit Plans"). Except as disclosed on the Disclosure
Schedule, no Power General Employee Benefit Plan is subject to the Employment
Retirement Income Security Act of 1974, as amended ("ERISA") and no pension plan
is or since 1977 has been sponsored or maintained by the Seller for the benefit
of the Power General Business employees. The Seller has no liability, actual or
contingent, with respect to any plan that is: (a) a defined benefit pension plan
subject to Title IV of ERISA, (b) a multi-employer pension plan, as that term is
defined in section 4001(a)(3) and 3(37) of ERISA, (c) a plan providing health or
medical benefits to retired employees of the Seller or (d) a welfare benefit
fund under Section 419 of the Internal Revenue Code.
4.15 Environmental Matters.
(a) For purpose of this Section 4.15, the following definitions
apply:
"Environmental Laws" as used herein means all applicable local, state,
federal and international laws, regulations, orders, permits, ordinances or
other requirements concerning or related to the protection of human health,
safety, and the environment, all as may be amended from time to time.
"Hazardous Substances" as used herein means any hazardous or toxic
substance, materials, chemical, pollutant, contaminant or waste as those terms
are defined under any applicable Environmental Laws, including, without
limitation, the Comprehensive
13
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq.
("CERCLA"), and the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et
seq. ("RCRA"), and any solid wastes, polychlorinated biphenyls, urea
formaldehyde, asbestos, radioactive materials, radon, explosives, petroleum
products and derivatives or constituents of the above.
"Environmental Claim" shall mean any investigation, notice, violation,
demand allegation, action, suit injunction, judgments, order, consent, decree,
penalty, claims, cost recovery, actions, environmental or other liens, lawsuits
or proceedings (including any regulatory or governmental actions) arising (a)
pursuant to, or in connection with, an actual or alleged violation of any
Environmental Law, (b) in connection with any Hazardous Substance, (c) from any
abatement, removal, corrective action, or other response action in connection
with a Hazardous Substance, Environmental Law or requirement of any governmental
authority, of (d) from any actual or alleged damage, injury, threat or harm to
health, safety, property, natural resources or the environment.
(b) Except as set forth on the Disclosure Schedule, Seller
represents and warrants as follows:
(i) At all times during their ownership or operation by
Seller, the Power General Business, all real property used in the
Power General Business, and the Acquired Assets have been operated
in Material compliance with all Environmental Laws, including, but
not limited, Environmental Laws related to the use, transport,
storage or disposal (either off-site or on-site) of Hazardous
Substances.
(ii) Seller has obtained all Material permits, licenses,
certificates of compliance, approvals and other authorizations
(collectively "Permits") required under Environmental Laws
necessary for operation of the Power General Business, and use of
all real property used in the Power General Business, and Seller
has filed all reports and notifications required to be filed under
and pursuant to all Environmental Laws.
(iii) Seller has disclosed and delivered to Buyer copies of
all Permits, all environmental reports or other investigations
which Seller has obtained or ordered with respect to the Power
General Business.
(iv) Seller has not, and has no knowledge of any other
person who has, caused any release, threatened release or disposal
of any Hazardous Substance at any real property used in the Power
General Business in such form or quantities and so situated as to
create any liability or obligation under any Environmental Law.
(v) To Seller's knowledge, the real property used in the
Power General Business is not affected by any release, threatened
release or disposal of any Hazardous Substance originating or
migrating from any other property.
(vi) To the knowledge of Seller, the real property used in
the Power General Business does not contain any asbestos,
landfills or dumps, or Hazardous
14
Substances regulated under Environmental Laws. To the knowledge of
Seller, no real property used in the Power General Business is
listed or proposed for listing on the National Priorities List
(NPL) promulgated under Federal Environmental Laws or any similar
state-listed superfund sites.
(vii) Seller has not owned or operated any above ground or
underground storage tanks in connection with the Power General
Business, the real property used in the Power General Business or
the Acquired Assets.
(viii) Seller has not generated, placed, handled, treated,
stored, transported or disposed of, released, spilled, emitted or
discharged any Hazardous Substance from, upon, within, below, into
or on the real property used in the Power General Business or the
Acquired Assets so as to create liability under any Environmental
Law.
(ix) Seller is not subject to, has no notice or knowledge
of and is not required to give notice of any Environmental Claim
involving the Power General Business, the real property used in
the Power General Business or the Acquired Assets. To Seller's
knowledge, there are no conditions or occurrences at the real
property used in the Power General Business caused by Seller or
any third party which could form the basis for any Environmental
Claim against Seller of the real property used in the Power
General Business or the Acquired Assets.
4.16 The Plans applicable to products currently offered for sale by the
Power General Business are of such quality that competent personnel by use of
such Plans can manufacture and assemble such products to meet the specifications
and requirements applicable thereto.
4.17 Consents and Approvals of Governmental Authorities. No consent,
approval or authorization of, or declaration, filing or registration with, any
federal or state governmental body is required to be made or obtained by the
Seller prior to and in connection with the consummation of the sale of the
Acquired Assets to the Buyer.
4.18 Transactions with Affiliates. Except as set forth on the Disclosure
Schedule, neither the Seller, nor any affiliate of the Seller, nor any director
or officer of the Seller or any member of his or her immediate family
(collectively "Seller Affiliates"), owns or has a controlling ownership interest
in any corporation or other entity that is a party to any Acquired Contract or
Material business arrangement or relationship with respect to the Power General
Business. Except as set forth on the Disclosure Schedule, all transactions
between the Power General Business and Seller or a Seller Affiliate have been on
substantially the same terms and conditions as similar transactions between
non-affiliated parties and are properly recorded on the books and records of the
Seller.
4.19 Books of Account. The books, records and accounts of the Seller
accurately reflect in reasonable detail the transactions and the assets and
liabilities of the Power General Business. The Seller has not engaged in any
transaction, maintained any bank account or used any funds except for
transactions, bank accounts and funds which have been and are reflected in the
normally maintained books and records of the business.
15
4.20 Disclosure. No representation or warranty hereunder or information
contained in any schedule or any certificate, statement or other document
delivered by the Seller in connection herewith contains any untrue statement of
fact or omits to state a fact necessary in order to make the statements
contained therein or herein not misleading.
4.21 Investment Representation. Seller is acquiring the Preferred Stock
for its own account and not with a present view to the public resale or
distribution of all or any part thereof, except pursuant to sales that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act; provided, however that in making such
representation, Seller does not agree to hold the Preferred Stock for any
minimum or specific term and reserves the right to sell, transfer or otherwise
dispose of the Preferred Stock and the shares of Common Stocks issuable upon
conversion of the Preferred Stock at any time in accordance with the provisions
of the Registration Rights Agreement and with Federal and state securities laws
applicable to such sale, transfer or disposition.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Buyer hereby represents and warrants to, and agrees with, Seller as
follows:
5.1 Organization, Good Standing and Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota. Buyer has full corporate power and authority to conduct its business
as now conducted and to own and operate the assets and properties now owned and
operated by it; and is duly qualified to do business and is in good standing in
each jurisdiction wherein the conduct of its business or the ownership of its
assets and properties requires such qualification and the failure to be so
qualified would have, or could be reasonably expected to have, a material
adverse effect on the business, operations, condition (financial or otherwise),
results of operations, business relationships, assets, liabilities or prospects
of its business as a whole.
5.2 Authority. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Buyer. This Agreement has been
duly executed and delivered by Buyer and constitutes a valid and binding
obligation of Buyer enforceable in accordance with its terms except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought. Neither the execution and delivery of this Agreement nor the
consummation and performance of the transactions contemplated hereby (i) will
conflict with or violate any federal, state, local or other governmental law or
regulation, (ii) conflict with or violate any provision of the Articles of
Incorporation or Bylaws of Buyer or any agreement to which Buyer is a party or
by which it is bound or (iii) require the consent, approval, order or
authorization of, or the registration, declaration or filing with, any
governmental entity or other person, other than filing of the Registration
Statement with the Commission and related filings under the state "blue sky"
laws.
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5.3 Notices, Consents and Approvals. Buyer does not need to give notice
to, make any filing with, or obtain any authorization, consent or approval of
any governmental authority or other person or entity in order for the parties
hereto to consummate the transactions contemplated hereby.
5.4 Claims and Proceedings. There is no legal action, suit, arbitration,
or governmental proceeding or investigation pending or, to the knowledge of
Buyer, threatened against or affecting Buyer that could adversely affect or
prevent the consummation of the transactions contemplated hereby, or which might
result, either in any case or in the aggregate, in any Material adverse change
in the business, operations, affairs or condition of Buyer or its properties or
assets. Buyer has no knowledge of any facts or circumstances that could
reasonably be expected to form the basis of any Material claim, liability or
litigation against Buyer. Buyer is in Material compliance with all applicable
federal, state, local or other governmental laws, ordinances, codes, rules and
regulations in connection with the conduct of its business. Buyer owns or
possesses all Material franchises, licenses, permits, consents, approvals,
rights, waivers and other authorizations, governmental or otherwise, which are
necessary for it to conduct its business as now conducted; Buyer is not in
default, nor has it received any notice of any claim or default, thereunder or
any notice of any other claim or proceeding or threatened proceeding relating
thereto.
5.5 Disclosure. The representations and warranties hereunder or
information contained in any schedule or any certificate, statement or other
document delivered by the Buyer in connection herewith, taken as a whole, do not
contain any untrue statements of fact or omit to state a fact necessary in order
to make the statements contained therein or herein not misleading.
5.6 Disclosure Documents; Financial Statements; Other Information. Buyer
has filed with the Commission: (i) Buyer's Annual Report on Form 10-K for the
year ended June 3, 2001, (ii) Quarterly Reports on Form 10-Q for the quarters
ended September 2, 2001, December 2, 2001, and Xxxxx 0, 0000, (xxx) all Current
Reports on Form 8-K, and any other reports, required to be filed with the
Commission between June 3, 2001 and the date hereof and (iv) Buyer's definitive
Proxy Statement for its 2001 Annual Meeting of Stockholders (collectively, the
"Disclosure Documents"). Buyer is not aware of any event occurring on or prior
to the Closing (other than the transactions effected hereby) that would require
the filing of, or with respect to which Buyer intends to file, a Form 8-K after
the Closing. Each Disclosure Document, as of the date of the filing thereof with
the Commission, conformed in all Material respects to the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder and, as of the date of such filing, such Disclosure Documents did not
contain an untrue statement of a Material fact or omit to state a Material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. All
Material agreements required to be filed as exhibits to the Disclosure Documents
have been filed as required. As of their respective dates, the financial
statements of Buyer included in the Disclosure Documents complied as to form in
all Material respects with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied at the times and during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be
17
condensed or summary statements) and fairly present in all Material respects the
financial position of Buyer as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year end adjustments).
5.7 Valid Issuance. The shares of Preferred Stock to be issued to Seller
pursuant to this Agreement are duly authorized and, when issued, sold and
delivered in accordance with the terms hereof, (i) will be duly and validly
issued, fully paid and nonassessable, free and clear of any taxes, liens,
claims, preemptive or similar rights or encumbrances imposed by or through Buyer
(collectively, "Encumbrances"), (ii) based in part upon the representations of
Seller in this Agreement, will be issued, sold and delivered in compliance with
all applicable Federal and state securities laws and (iii) will be entitled to
all of the rights, preferences and privileges set forth in the Certificate of
Designation. The shares of Common Stock issuable upon conversion of the
Preferred Stock are duly authorized and reserved for issuance and, when issued
upon conversion of the Preferred Stock in accordance with the terms of the
Certificate of Designation, will be duly and validly issued, fully paid and
nonassessable, free and clear of any Encumbrances.
5.8 Listing on Nasdaq. The Common Stock is authorized for quotation on
the Nasdaq National Market, and trading in the Common Stock on the Nasdaq
National Market has not been suspended. Buyer is, to its knowledge, in full
compliance with the listing criteria of the Nasdaq National Market, and does not
reasonably anticipate that the Common Stock will lose its listing on the Nasdaq
National Market, and is not aware of any inquiry by or received any notice from
the Nasdaq regarding any failure or alleged failure by Buyer to comply with such
criteria.
5.9 Capitalization. The authorized capital stock of Buyer consists of
10,000,000 shares of Common Stock, of which 4,573,110 shares were issued and
outstanding on the date hereof, and 1,000,000 shares of Preferred Stock, of
which 50,000 shares were designated as Series A Junior Participating Preferred
Stock, and none of which were issued and outstanding on the date hereof.
5.10 Liabilities. Since March 3, 2002, Buyer has not incurred any
Material liabilities or obligations, direct or contingent, other than in the
ordinary course of business, and there has not been any Material adverse change
in the condition (financial or other) or results of operations of Buyer taken as
a whole.
5.11 No Other Representations and Warranties of Seller; No Knowledge of
Misrepresentations.
(a) With respect to the Acquired Assets, the Power General
Business, or any other rights or obligations to be transferred hereunder or
pursuant hereto, Buyer has not been induced by and has not relied upon any
representations, warranties or statements, whether express or implied, made by
Seller or any of its agents, employees, attorneys or other representatives or by
any person representing or purporting to represent Seller that are not expressly
set forth in this Agreement (including the schedules and exhibits hereto),
whether or not any such representations, warranties or statements were made in
writing or orally. It is hereby agreed by Buyer that, except as otherwise
expressly provided herein and therein, Seller
18
does not make any other representations or warranties with respect the Acquired
Assets or the Power General Business.
(b) Buyer acknowledges that it has made its own assessment of the
future of the Power General Business and is sufficiently experienced to make an
informed judgment with respect thereto. Buyer further acknowledges that Seller
has not made any warranty, express or implied, as to the future of the Power
General Business or its profitability for Buyer or with respect to any
forecasts, projections or business plans prepared by Seller and delivered to
Buyer in connection with the sale of the Power General Business by the Seller
and the negotiation and the execution of this Agreement.
ARTICLE VI
COVENANTS
6.1 Covenants of Seller Relating to Conduct of Business. During the
period from the date of this Agreement and continuing until the Closing, Seller
agrees that it shall (i) regularly consult with Buyer and its authorized
representatives with respect to the conduct of the Power General Business and
(ii) disclose to Buyer all Material changes in the business, financial
condition, operations or results of operation of the Power General Business.
6.2 Access to Information. Seller shall afford to Buyer and Buyer's
accountants, legal counsel, environmental consultants and other representatives
reasonable access during normal business hours during the period prior to the
Closing to all Power General Business properties, books, contracts, commitments,
tax returns and records and, during such period shall furnish promptly to Buyer
any information concerning Seller's business, properties and personnel related
exclusively to the Power General Business as Buyer may reasonably request.
6.3 Legal Conditions to Closing. Each of Buyer and Seller will take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on it with respect to the Closing and will promptly
cooperate with and furnish information to each other in connection with any such
legal requirements. Each of Buyer and Seller will take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any person,
required to be obtained or made by it in connection with any of the transactions
contemplated by this Agreement.
6.4 Seller's Books and Records.
(a) Except as provided in this Section, the Acquired Assets shall
include originals or copies of all of Seller's Books and Records related to the
Power General Business as are reasonably designated by Buyer; provided, however,
Seller shall retain ownership of all Books and Records, or copies or extracts
thereof, that relate to periods before the Closing Date except for such Books
and Records primarily related to the Power General Business as are reasonably
requested by Buyer, and all Books and Records that pertain to Seller's corporate
organization, regardless of date. Seller shall be permitted to retain copies,
electronic or otherwise, of all Books and Records transferred as part of the
Acquired Assets.
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(b) Each of the parties hereto agrees to maintain all Books and
Records in its possession relating to Seller or the Power General Business or
the Acquired Assets for the period respectively required by applicable laws.
(c) If, in order properly to prepare its tax returns, other
documents or reports required to be filed with any federal or state governmental
entities or its financial statements, it is necessary that any party hereto be
furnished with additional information relating exclusively to the Acquired
Assets or any other party and such information is in such other party's
possession, the party in possession of that information will use all reasonable
efforts to furnish such information to the requesting party.
6.5 Additional Agreements. Seller will use all reasonable efforts to
facilitate and effect the implementation of the transfer of the Acquired Assets
to Buyer and, for such purpose but without limitation, Seller promptly will at
and after the Closing Date execute and deliver to Buyer such assignments, deeds,
bills of sale, consents and other instruments necessary to effect the transfer
of the Acquired Assets to Buyer as contemplated hereby, as Buyer or its counsel
may reasonably request as necessary or desirable for such purpose, including
without limitation assignments of Intellectual Property set forth on Schedule
1.11.
6.6 Employment Matters.
(a) Transition Employees. Immediately following the Closing,
Transition Employees will continue to be employees of Seller upon the same terms
and conditions applicable to each such employee immediately prior to the Closing
and the services of such employees will be leased to Buyer pursuant to the
Transition Services Agreement for all or a portion of the Transition Period.
(b) Retained Employees. Retained Employees will be terminated by
Seller at Closing and, concurrently, Buyer shall offer employment to the
Retained Employees, which offer, as to each employee, shall provide for base
compensation no less than the base compensation currently paid to each such
employee and otherwise on such terms and conditions as Buyer in its sole
discretion determines. The Retained Employees shall receive credit following the
Transition Period for services recognized by Seller for all purposes, including,
without limitation, participation in employee benefit programs of Buyer or any
other term or condition of employment which varies with seniority, and shall
carry over all accrued but unused vacation and sick time. Seller shall continue
to cover the Retained Employees under its existing health and dental insurance
plans through July 31, 2002, and Buyer shall pay Seller at the COBRA rates for
the period from July 16, 2002 through July 31, 2002 for maintaining such
coverage. In the event that any claims are made by the Retained Employees under
such insurance plans for the period from the Closing Date through July 31, 2002,
Seller shall be responsible for the first $25,000 aggregate amount of claims,
Buyer shall be responsible for the next $50,000 aggregate amount of claims, and
Seller shall be responsible for the aggregate amount of claims in excess of
$75,000.
6.7 Warranty and Customer Support.
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(a) Following the Closing, Buyer will fulfill Seller's warranty
obligations with respect to Power General products sold before the Closing;
provided that Seller reimburse Buyer at Buyer's cost for fulfilling such
warranty obligations. In addition, Buyer shall provide customer support to
customers of the Power General Business consistent with the standard level of
customer support Buyer provides to its existing customers, including performing
repairs and upgrades on Power General products at customer expense in a manner
reasonably similar to Seller's current practice.
(b) Following the Closing, Buyer will cooperate with and provide
reasonable assistance to Seller in connection with the resolution of certain
outstanding issues between Seller and PowerWave and Foresight Electronics,
respectively, which issues have previously been disclosed to Buyer. In
connection with the resolution of the PowerWave matter, if PowerWave determines
to accept delivery of certain products currently in dispute with Seller, Buyer
agrees to complete the manufacturing and shipping of such products on behalf of
Seller, provided that Seller shall reimburse Buyer for Buyer's cost in
completing such work. In connection with the resolution of the Foresight
Electronics matter, Buyer agrees to accept the return of certain inventory from
Foresight Electronics, attempt to resell such inventory in the ordinary course
of business, and remit the proceeds of any such resale to Seller. Buyer agrees
to similarly cooperate with and provide reasonable assistance to Seller in
resolving any other issues with customers of Seller relating to the Power
General Business following the Closing.
6.8 Payments to Vendors. Following the Closing, Seller shall promptly pay
in the ordinary course of business consistent with its past practice accounts
payable with respect to vendors to the Power General Business relating to goods
and services received by Seller prior to the Closing Date.
6.9 WARN Act. Buyer will fulfill all requirements, if any, under the WARN
Act, 29 U.S.C. ss. 2101, et seq. (the "WARN Act") with respect to the Retained
Employees and shall be responsible for any cost or expense (including any cost
or expense incurred by Seller) related to its failure to fulfill such
requirements. Seller will fulfill all requirements, if any, under the WARN Act
with respect to the Transition Employees and shall be responsible for any cost
or expense (including any cost or expense incurred by Buyer) related to its
failure to fulfill such requirements; provided, however, that notwithstanding
the foregoing, in the event that, at Buyer's direction, Seller separates the
employment of the Transition Employees beyond the time period specified in the
Transition Services Agreement, and such action results in the Seller incurring
obligations under the WARN Act, then Buyer shall indemnify Seller for all costs
incurred by Seller related to Seller's WARN Act obligations in accordance with
Article IX hereof.
6.10 No Solicitation.
(a) Seller will not, nor shall Seller authorize or permit any of
its officers, directors, employees or investment bankers, attorneys or other
agents retained by or acting on behalf of Seller to, directly or indirectly (i)
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal that constitutes or could result in an Acquisition
Proposal (as hereinafter defined), (ii) except as permitted below, engage,
participate in discussions or negotiations with, or continue negotiations or
discussions with, or furnish any
21
information or data to, or take any other action to, facilitate any inquiries or
making any proposal by, any third party relating to an Acquisition Proposal, or
(iii) except as permitted by and pursuant to the terms and conditions in this
Agreement, enter into any agreement with respect to any Acquisition Proposal or
approve an Acquisition Proposal. Notwithstanding anything to the contrary
contained in this Section 6.10 or in any other provision of this Agreement,
prior to Closing Seller may participate in discussions or negotiations with and
furnish information to any third party making an unsolicited Acquisition
Proposal (a "Potential Acquiror") or approve an unsolicited Acquisition Proposal
if both (A) Seller's Board of Directors duly determines in good faith, that a
Potential Acquiror has submitted to Seller an Acquisition Proposal that is a
Superior Proposal (as hereinafter defined), and (B) Seller's Board of Directors
determines in good faith, after receiving advice from outside legal counsel
experienced in such matters (including Seller's counsel named in Section 11.11),
that the failure to participate in such discussions or negotiations or to
furnish such information is reasonably likely to violate the Board's fiduciary
duties under applicable law.
(b) In the event that Seller shall receive any Acquisition
Proposal, it shall promptly (and in no event later than 24 hours after receipt
thereof) furnish to Buyer the identity of the Potential Acquiror and the terms
of such Acquisition Proposal. Seller will keep the Buyer fully informed (and
respond to Buyer's inquiries) regarding the status of negotiations concerning
any Acquisition Proposal. Copies of any information supplied to the Potential
Acquiror not previously supplied to Buyer shall be simultaneously supplied to
Buyer.
(c) Nothing contained in this Section 6.10 shall prohibit Seller's
Board of Directors from accepting an Acquisition Proposal by a Potential
Acquiror; provided, that, if the Seller's Board determines to accept an
Acquisition Proposal, Buyer's right to terminate this Agreement (assuming no
other breach by Buyer) pursuant to paragraph (e) of Section 10.1 shall
immediately arise, with the consequences set forth in subparagraph (f) of this
Section 6.10.
(d) For the purposes of this Agreement, the term "Acquisition
Proposal" shall mean any unsolicited, bona fide proposal made by any person or
entity other than Buyer to, directly or indirectly, purchase or otherwise
acquire beneficial ownership of all or a material portion of the assets of the
Power General Business.
(e) For the purposes of this Agreement, the term "Superior
Proposal" means any Acquisition Proposal which has financial terms that Seller's
the Board of Directors determines, in good faith, to be more favorable to Seller
than this Agreement. The parties agree that for purposes of the preceding
sentence (but for no other purpose), an offer which is conditioned on completion
of due diligence shall be deemed to constitute a "Superior Proposal" if such
offer otherwise meets the definition of "Superior Proposal."
(f) Notwithstanding any other provision in this Agreement to the
contrary, if this Agreement is terminated pursuant to Section 10.1(e), then
Seller shall pay to Buyer $100,000 (the "Termination Fee") in cash or by wire
transfer of immediately available funds to an account designated in writing by
Buyer, such payment to be made promptly, but in no event later than the second
(2nd) business day following such termination. Buyer acknowledges that, except
for liability that Seller might have to Buyer arising from a breach of this
Agreement due to the fraudulent or willful misconduct of Seller, the Termination
Fee, once paid as contemplated
22
by this Section 6.10(f), shall be the sole remedy of Buyer in the circumstances
described in this Section 6.10. Seller shall also be obligated to pay the
Termination Fee pursuant to the provisions in the last clause of Section
10.1(d). Seller acknowledges that the agreements contained in this Section
6.10(f) and Section 10.1(d) and Section 10.1(e) are an integral part of the
transactions contemplated by this Agreement, and that, without such agreements,
Buyer would not enter into this Agreement. Accordingly if Seller fails promptly
to pay the amounts due pursuant to this Section 6.10(g) or the last clause of
Section 10.1(d), (i) Seller shall pay interest on such amounts at the prime rate
announced by U.S. Bank National Association, Minneapolis office, in effect on
the date the Termination Fee was required to be made, plus two percent (2%), and
(ii) if in order to obtain such payment Buyer commences a suit or takes other
action which results in a judgment or other binding determination against Seller
for the Termination Fee, Seller shall also pay to Buyer, its costs and expenses
(including reasonable attorneys' fees) in connection with such suit, together
with interest payable under the preceding clause (i).
6.11 Acquired Contracts. From and after the Closing Date, Buyer shall
perform its obligations under the Acquired Contracts in a manner which will not
adversely affect Seller's ability to collect its Accounts Receivable applicable
to such Acquired Contracts.
6.12 Reservation of Common Stock. Buyer shall at all times have
authorized and reserved for issuance, free from any preemptive rights, solely
for the purpose of effecting conversions of the shares of Preferred Stock to be
issued to Buyer hereunder, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all of such
Preferred Stock (the "Reserved Amount"). As of the Closing Date, the Reserved
Amount shall be 488,000 shares (subject to equitable adjustment for each of the
events specified in the Certificate of Designation) of Common Stock.
6.13 Quotation on Nasdaq. Buyer shall (i) promptly following the Closing,
take such action as may be necessary to include all of the shares of Common
Stock that constitute the Reserved Amount on the Nasdaq National Market, and
(ii) use its best efforts to maintain the designation and quotation, or listing,
of the Common Stock on the Nasdaq National Market or a national securities
exchange for a minimum of six (6) years following the Closing.
6.14 Form 8-K Current Report. Buyer will file a Current Report on Form
8-K with the Commission following the Closing, within the time period required
by such Form, to report the transaction provided for under this Agreement.
Seller will cooperate with Buyer in preparing such financial statements for the
Power General Business as may be required to be filed by Seller as part of its
Current Report on Form 8-K to be filed with the Commission following the
Closing, and further agrees to retain its accountants, PricewaterhouseCoopers
("PWC"), to conduct such audit of the financial statements as may be required by
the Form 8-K or the Commission. Buyer and Seller shall equally share the costs
of PWC for such audit, up to $100,000, and Buyer shall be responsible for all
such costs of PWC in excess of $100,000.
23
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation. The obligations of Buyer to
purchase the Acquired Assets and the obligation of Seller to sell the Acquired
Assets to Buyer shall be subject to the satisfaction prior to the Closing Date
of the following conditions:
(a) Consents and Approvals. All authorizations, consents, orders
or approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any governmental entity necessary for the transfer of title
to the Acquired Assets shall have been obtained or filed or shall have occurred.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other legal restraint or prohibition
preventing the transfer of title to the Acquired Assets shall be in effect.
7.2 Conditions to Obligations of Buyer. The obligation of Buyer to
purchase the Acquired Assets is subject to the satisfaction on and as of the
Closing Date of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Seller set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement.
(b) Performance of Obligations of Seller. Seller shall have
performed all obligations required to be performed by it under this Agreement at
or prior to the Closing Date.
(c) Required Consents. Seller shall have delivered to Buyer
written consents in form and substance reasonably satisfactory to Buyer from
those persons or entities listed on Schedule 7.2(c) attached hereto whose
consent is required to validly assign the Acquired Contracts respectively
designated on Schedule 7.2(c).
(d) Employee Retention. Buyer shall have entered into an agreement
in a form satisfactory to Buyer or received reasonable assurance, in its sole
discretion, that Xxxxxx X. Xxxxx will continue in his current position with the
Power General Business as an employee of the Buyer following Closing for a
period of time reasonably satisfactory to Buyer.
(e) Licenses, Etc. Buyer shall have obtained any required
governmental licenses, authorizations, certificates and permits required by
applicable governmental authorities to permit Buyer to acquire the Acquired
Assets, to establish and operate the Power General Business in the manner in
which it was operated immediately prior to the Closing and to use and occupy a
portion of Seller's leased property pursuant to the Lease.
(f) Releases. To the extent applicable, Buyer shall have received
releases of all of the Acquired Assets from all holders of Seller's indebtedness
for borrowed money and Seller shall have delivered to Buyer such additional
documentation (including, without
24
limitation, UCC termination statements) in connection therewith as Buyer shall
reasonably request.
(g) Due Diligence Review; Material Adverse Change. As a result of
its further due diligence review prior to Closing (i) Buyer shall not have
discovered that information previously provided to and reviewed by Buyer is, in
any respect, false or misleading so as to cause the representations and
warranties in Article IV of this Agreement to be incorrect in any material
respect or discovered any information regarding the Power General Business which
has the effect of causing the representations and warranties made by Seller
pursuant to Article IV of this Agreement to be incorrect in any material
respect, or (ii) there shall not have occurred any material adverse change in
the Acquired Assets or the condition (financial or otherwise), operations,
results of operations or prospects of the Power General Business.
(h) Delivery of Documents. Seller shall have delivered, or caused
to be delivered, to Buyer the documents detailed in Section 3.2(a).
7.3 Conditions to Seller's Obligations. The obligations of Seller to sell
the Acquired Assets is subject to the satisfaction on and as of the Closing Date
of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Buyer set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except as otherwise contemplated by
this Agreement.
(b) Performance of Obligations of Buyer. Buyer shall have
performed all obligations required to be performed by it under this Agreement
prior to the Closing Date.
(c) Delivery of Documents. Buyer shall have delivered, or caused
to be delivered, to Seller the documents detailed in Section 3.2(b).
(d) Due Diligence Review; Material Adverse Change. As a result of
its further due diligence review prior to Closing (i) Seller shall not have
discovered that information previously provided to and reviewed by Seller is, in
any respect, false or misleading so as to cause the representations and
warranties in Article V of this Agreement to be incorrect in any material
respect or discovered any information regarding the business of Buyer which has
the effect of causing the representations and warranties made by Buyer pursuant
to Article V of this Agreement to be incorrect in any material respect, or (ii)
there shall not have occurred any material adverse change in the business or the
condition (financial or otherwise), operations, results of operations or
prospects of the Buyer.
(e) Opinion of Buyer's Counsel. Seller shall have received an
opinion dated the Closing Date of Xxxxxxxxx & Xxxxxx, LLP, counsel to Buyer,
satisfactory to Seller, regarding the due authorization and issuance of (i) the
Preferred Stock, and (ii) when issued upon conversion of the Preferred Stock,
the Common Stock.
25
ARTICLE VIII
NON-COMPETITION AGREEMENT
8.1 Covenants of Seller. Seller shall not, for a period of two (2) years
following the Closing Date, directly or indirectly, either individually or in
partnership or in conjunction in any way with any other person or entity,
whether as principal, agent, employee, officer, consultant, shareholder,
guarantor, creditor or in any other manner whatsoever:
(a) Competitive Business. Engage anywhere in the world, in the
business of developing, manufacturing, marketing or selling products the same as
or similar to products being manufactured by the Power General Business as of or
prior to the Closing Date (the "Competitive Business");
(b) Employees. Offer employment to or endeavor to entice away from
the Power General Business or Buyer any Retained Employee, or interfere in any
way with the employment relationship between any such employee and the Power
General Business or Buyer, so long as such employee continues to be employed by
the Buyer or Buyer's successors or assigns; or
(c) 5% Ownership. Notwithstanding the foregoing, nothing in this
Agreement shall prevent Seller from acquiring and holding, directly or
indirectly (and including the holdings of any other person or entity not acting
at arm's length with Seller) not more than five percent (5%) of the outstanding
equity of any entity engaged in a Competitive Business if such equity is listed
on a stock exchange, provided that no shareholder, officer or director of Seller
is a member of the Board of Directors or an officer or employee of, or
consultant to, or otherwise involved with, directly or indirectly, such entity.
8.2 Independent Covenants. The covenants in Section 8.1 are intended to
be, and shall be, construed as separate and independent covenants for each
separate state within the United States of America, and for each foreign country
other than the United States of America. To the extent that any such covenant
shall be adjudicated to be unenforceable in any one or more states in the United
States of America, or in any county or other municipal subdivision thereof, or
in any foreign country, such adjudication shall not affect such covenant with
respect to each other state, county, country, or governmental subdivision. To
the extent that any such covenant shall be declared unenforceable beyond a time
limitation adjudicated with respect to such covenant, then such covenant shall
be limited to such time limitation, but shall be fully enforceable to the full
extent of such time limitation.
8.3 Covenant of Buyer. Buyer shall not, for a period of two (2) years
following the Closing Date, directly or indirectly, offer employment to or
endeavor to entice away from Seller any employee of Seller other than a
Transition Employee, or interfere in any way with the employment relationship
between any such employee and Seller, so long as such employee continues to be
employed by Seller or Seller's successors or assigns.
8.4 Remedies. The parties acknowledge and agree that a monetary remedy
for breach of any of the covenants set forth in this Article VIII would be
inadequate, and would be
26
impracticable and difficult to prove, and they further agree that any such
breach would cause the damaged party irrevocable harm. As a consequence, the
parties hereby acknowledge, confirm and agree that, in the event of any such
breach by a party of any covenants in this Article VIII, the damaged party shall
be entitled to temporary and permanent injunctive relief without the necessity
of proving actual damages. The parties further confirm and agree that the
damaged party shall be entitled to such relief, including temporary restraining
orders, preliminary injunctions and permanent injunctions, without the necessity
of posting a bond or making undertaking in connection therewith, and each of the
parties hereby waive any requirement for bond or undertaking. The parties
acknowledge that in the absence of such waiver, a court might require a bond or
undertaking in connection with an application for temporary or permanent
injunctive relief. The failure by a damaged party to enforce or seek to enforce
any of the covenants set forth in this Article VIII shall in no way affect or
limit its right at a future date to enforce or seek to enforce such covenants.
ARTICLE IX
INDEMNIFICATION AND SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
9.1 Indemnification by Seller. Seller hereby agrees to indemnify Buyer
and its affiliates and their respective officers, directors, employees,
stockholders, agents and representatives against, and agrees to hold them
harmless from any loss, liability, claim, deficiency, damage or expense
(including reasonable legal fees and expenses), as incurred (payable quarterly
upon written request), for or on account of or arising from or in connection
with or otherwise with respect to (i) any and all liabilities and obligations of
Seller, contingent or otherwise, that are not Assumed Liabilities, including,
without limitation, all liabilities and obligations of Seller and any of
Seller's affiliates for any and all state or federal taxes payable by Seller;
and (ii) any representation or warranty of Seller contained herein not being
true and correct as of the date hereof or as of the Closing Date; or (iii)
Seller's breach of any covenant contained in this Agreement or in any agreement
related hereto.
9.2 Indemnification by Buyer. Buyer hereby agrees to indemnify Seller and
its officers, directors, employees, stockholders, agents and representatives
against, and agrees to hold them harmless from, any loss, liability, claim,
deficiency, damage or expense (including reasonable legal fees and expenses), as
incurred (payable quarterly upon written request), for or on account of or
arising from or in connection with or otherwise with respect to (i) any and all
Assumed Liabilities, (ii) any representation or warranty of Buyer contained
herein not being true and correct as of the date hereof or as of the Closing
Date; or, (iii) Buyer's breach of any covenant contained in this Agreement or in
any agreement related hereto.
9.3 Indemnification Procedure.
(a) In order for a party (the "indemnified party"), to be entitled
to any indemnification provided for under this Agreement in respect of, arising
out of or involving a claim made by any Person against the indemnified party (a
"Third-Party Claim"), such indemnified party must notify the indemnifying party
in writing of the Third-Party Claim within a reasonable time after receipt by
such indemnified party of written notice of the Third-Party
27
Claim. Thereafter, the indemnified party shall deliver to the indemnifying
party, within a reasonable time after the indemnified party's receipt thereof,
copies of all notices and documents (including court papers) received by the
indemnified party relating to the Third-Party Claim.
(b) If a Third-Party claim is made against an indemnified party,
the indemnifying party will be entitled to participate in the defense thereof
and, if it so chooses, to assume the defense thereof with counsel selected by
the indemnifying party; provided such counsel is not reasonably objected to by
the indemnified party. Should the indemnifying party so elect to assume the
defense of a Third-Party Claim, the indemnifying party will not be liable to the
indemnified party for any legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
party elects to assume the defense of a Third-Party Claim, the indemnified party
will (i) cooperate in all reasonable respects with the indemnifying party in
connection with such defense, (ii) not admit any liability with respect to, or
settle, compromise or discharge, any Third-Party Claim without the indemnifying
party's prior written consent and (iii) agree to any settlement, compromise or
discharge of a Third-Party Claim which the indemnifying party may recommend and
which by its terms obligates the indemnifying party to pay the full amount of
the liability in connection with such Third-Party Claim and which releases the
indemnified party completely in connection with such Third-Party Claim. In the
event the indemnifying party shall assume the defense of my Third-Party Claim,
the indemnified party shall be entitled to participate in (but not control) such
defense with its own counsel at its own expense. If the indemnifying party does
not assume the defense of any such Third-Party Claim, the indemnified party may
defend the same in such manner as it may deem appropriate, including but not
limited to settling such claim or litigation after giving notice to the
indemnifying party of such terms, and the indemnifying party will promptly
reimburse the indemnified party upon written request for all cost, expense
(including reasonable attorneys' fees), loss, liability or damage incurred and
paid by the indemnified party in connection with such claim.
9.4 Limitations on Indemnification. Notwithstanding the foregoing: (i)
any claim for indemnification must be made on or prior to the August 31, 2003,
and (ii) no party to this Agreement shall be entitled to indemnification
pursuant to this Article IX until the aggregate amount for which indemnification
is sought exceeds $75,000 and, then, only to the extent such indemnification
exceeds such amount, and (iii) the aggregate obligations of either party under
this Article IX shall not exceed $750,000; provided, however, that the
limitations contained in the foregoing clauses (i), (ii) and (iii) shall not
apply to (A) claims based upon the Purchase Price Adjustment under Section 2.4;
or (B) claims for indemnification based on fraud or intentional
misrepresentation; (C) product liability claims and warranty claims arising from
or related to products sold by Seller and asserted against Buyer, but subject to
Buyer's obligations under Section 6.7 above; (D) representations and warranties
contained in Sections 4.1, 4.2, the first sentence of 4.6, 5.1, 5.2, 5.7, or 5.9
or Buyer's failure to pay amounts due Seller under the Lease, the MIS Services
Agreement, the Transition Services Agreement or the Preferred Stock. Seller and
Buyer each hereby acknowledge and agree that, except as set forth in the
Registration Rights Agreement, this Article IX shall be each party's sole and
exclusive remedy with respect to any loss, injury, damage or other liability
under this Agreement or the transactions contemplated hereby.
28
9.5 Indemnification Obligations. The indemnification obligations of the
parties hereunder relate to indemnification for all losses, injuries, damages,
deficiencies, liabilities, obligations, costs or expenses to the respective
other party or parties hereto, regardless of whether such loss, injury, damage,
deficiency, liability, obligation, cost or expense arises from a Third-Party
Claim against such indemnitee or otherwise.
9.6 Survival of Representation and Warranties. All representations and
warranties made herein by Seller or Buyer shall survive the execution and
delivery of this Agreement and shall remain in full force and effect until
August 31, 2003, and shall be deemed to have been relied upon by the other party
hereto, notwithstanding any investigation made by or on behalf of such party;
provided, however, that the representations and warranties set forth in Sections
4.1, 4.2 and the first sentence of Section 4.6, Sections 5.1, 5.2, 5.7 and 5.9
hereof shall survive the Closing and shall remain in full force and effect to
the extent permitted by law. All statements contained in any certificate,
instrument or other writing delivered by or on behalf of Seller of Buyer
pursuant hereto shall constitute representations and warranties of such party.
ARTICLE X
TERMINATION AND WAIVER
10.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual consent of Buyer and Seller;
(b) by Buyer if any of the conditions set forth in Sections 7.1
and 7.2 shall not have been satisfied in any Material respect and shall not have
been satisfied (or by its nature could not be satisfied) on or before July 31,
2002; or
(c) by Seller if any of the conditions set forth in Sections 7.1
and 7.3 shall not have been satisfied in any Material respect and shall not have
been satisfied (or by its nature could not be satisfied) on or before July 31,
2002.
(d) by either Seller or Buyer, if the Closing shall not have been
consummated on or before July 31, 2002, so long as such party has not breached
its obligations hereunder so as to cause a delay or lack of performance;
provided that if Seller shall terminate this Agreement pursuant to this
paragraph 7.1(d) and within one year after such termination enter into an
agreement with a person who submitted an Acquisition Proposal between the date
hereof and the date of termination hereunder, Seller shall be obligated to pay
to Buyer the Termination Fee and other amounts, if any, specified in Section
6.10(f) above.
(e) by Seller or Buyer, if Seller enters into an agreement
(including an agreement in principle) to effect a Superior Proposal or Buyer
receives written notice of Seller's determination to do so; provided, however,
that Seller may not terminate this Agreement pursuant to this Section 10.1(e)
unless (i) Seller has delivered to Buyer a written notice of Seller's intent to
enter into such an agreement to effect such Acquisition Proposal, (ii) five (5)
business days have elapsed following delivery to Buyer of such written notice by
Seller and (iii) during such five (5) business day period, Seller has fully
cooperated with Buyer, including without limitation, informing Buyer of the
terms and conditions of the Acquisition Proposal, to
29
allow Buyer within such five-business-day period to propose amendments to the
terms of this Agreement to be at least as favorable as the Acquisition Proposal;
provided, further, that Seller may not terminate this Agreement pursuant to this
Section 10.1(e) unless, at the end of such five-business-day period, the Board
of Directors of Seller continues reasonably to believe that the Acquisition
Proposal constitutes a Superior Proposal, and Seller pays to Buyer the amount
specified under and in accordance with Section 6.10(f) above.
10.2 Extension; Waiver. At any time prior to the Closing, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in my document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices under this Agreement must be in writing, and
may be delivered by hand or sent by facsimile transmission, telex, or certified
mail, return receipt requested. Notices sent by mail will be deemed received on
the date of receipt indicated by the returned verification provided by the U.S.
Postal Service. Notices sent by facsimile transmission or telex will be deemed
received the day on which sent, and will be conclusively presumed to have been
received in the event that the sender's copy of the facsimile transmission or
telex contains the "answer back" of the other party's facsimile transmission or
telex. Notices must be given, or sent to the parties at the following addresses:
(a) If to Buyer, to: Xxxx Incorporated
0000 Xxxxxxxxx Xxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attn: Xxxxxxxxx X. Xxxxx
Phone: 000-000-0000
Facsimile: 000-000-0000
E-mail: xxx@xxxxxxx.xxx
with a copy to: Xxxxxxxxx & Xxxxxx P.L.L.P.
0000 XXX Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxx
Phone: 000-000-0000
Facsimile: 612-371-3207
E-mail: xxxxxxxx@xxxxxxxxx.xxx
(b) If to Seller, to: Nidec America Corporation
000 Xxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
30
Phone: 000-000-0000
Facsimile: 000-000-0000
E-mail: Xxx.Xxxxxx@Xxxxx.xxx
with a copy to: Day, Xxxxx & Xxxxxx LLP
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxx
Phone: 000-000-0000
Facsimile 617-345-4745
E-mail: xxxxxxxxx@xxx.xxx
Any party may designate any other address for notices given it under this
Agreement by written notice to the other parties given at least ten (10) days
prior to the effective date of that change.
11.2 Interpretation. When a reference is made in this Agreement to a
Section, Schedule or Exhibit, such reference shall be to a Section, Schedule or
Exhibit of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". All accounting
terms not defined in this Agreement shall have the meanings determined by GAAP.
11.3 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
11.4 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (a) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (b) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
11.5 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Minnesota without regard to the rules
or principles of any jurisdiction with respect to conflict of laws.
11.6 Remedies Cumulative. Except as otherwise provided herein, the rights
and remedies provided herein shall be cumulative and the assertion by a party of
a right or remedy hereunder shall not preclude the assertion by such party of
any other rights or remedies against another party provided herein.
11.7 Arbitration. Any controversy, dispute or claim arising out of or
relating to this Agreement or any other agreement delivered pursuant hereto, any
breach or alleged breach hereof, the making of this Agreement or fraud in the
inducement, the transactions contemplated hereby, any modification or extension
of this Agreement or affecting this Agreement in any way shall be resolved by
arbitration in Minneapolis, Minnesota, in accordance with the then current
31
rules of the American Arbitration Association, by three independent and
impartial arbitrators, one of whom shall be appointed by Seller, one of whom
shall be appointed by Buyer, and one of whom shall be appointed by the other two
arbitrators; provided however that if the parties shall agree at the time any
dispute hereunder arises, only one arbitrator shall be appointed. In the event
that the dispute concerns any matter involving accounting issues, at least one
of the arbitrators shall be a mutually agreed upon independent certified public
accountant. Notwithstanding anything to the contrary provided in this Agreement,
the arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
ss. 1 et seq. The decision of the arbitrators shall be binding on the parties,
and judgment upon the award may be entered in any court having jurisdiction
thereof. Notwithstanding anything to the contrary provided in this Section 11.7
and without prejudice to the above procedures, any party may apply to any court
of competent jurisdiction for temporary injunctive or other provisional judicial
relief if in such party's sole judgment such action is necessary to avoid
irreparable damage or to preserve the status quo until such time as the
arbitration award is rendered or the controversy is otherwise resolved.
11.8 Confidentiality of Negotiations. The parties shall not disclose the
transactions contemplated by this Agreement or issue any press release or make
any public or general statements with respect to the transaction except as may
be mutually agreed to or required by law. If this Agreement terminates, no party
hereto shall disclose the existence of the negotiations pursuant hereto, except
as may be required by law.
11.9 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto without
the prior written consent of the other parties, except that Buyer may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to any direct or indirect wholly owned subsidiary of Buyer, provided
that Buyer shall not be released from any of its obligations hereunder by reason
of such assignment. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
11.10 Expenses. Buyer and Seller will each bear their respective costs
and expenses incurred in connection with the transaction contemplated by this
Agreement, including the fees and disbursements of all attorneys, accountants,
appraisers and advisors retained by or representing them in connection with the
transaction. It is the understanding of the parties that, except for Xxxxxx
Xxxxxxxx & Co., whose fees shall be the sole responsibility of Seller, there are
no brokers who will be entitled to receive any commissions with respect to the
transactions contemplated by this Agreement.
32
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
signed as of the date first written above.
NIDEC AMERICA CORPORATION
By /s/ Xxxxxx X. Xxxxxx
---------------------------------------------
Its: President and Chief Operating Officer
XXXX INCORPORATED
By /s/ Xxxxxxxxx X. Xxxxx
------------------------------------------
Its: President and Chief Executive Officer
33
LIST OF EXHIBITS
----------------
Exhibit A - Lease
Exhibit B - MIS Services Agreement
Exhibit C - Preferred Stock Certificate of Designation
Exhibit D - Registration Rights Agreement
Exhibit E - Transition Services Agreement
LIST OF SCHEDULES
-----------------
1.2 Acquired Contracts
1.8 Excluded Operating Assets
1.9 Fixed Assets
1.11 Intellectual Property
1.24 Recent Pro Forma Balance Sheet
1.25 Retained Employees
1.27 Transition Employees
2.6A Initial Purchase Price Allocation
2.6B Final Purchase Price Allocation
4.3 Financial Information
7.2(c) Required Consents
Disclosure Schedule (pertaining to Article IV representations and warranties)
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