PURCHASE AGREEMENT
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THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into on
March 7, 1997, by and among Xxxxxx Technologies Incorporated, a California
corporation ("Company"), a wholly-owned subsidiary of Xxxxxxxxx Holdings,
Inc., a California corporation ("ZHI"), and ZHI, on the one hand, and Xxxxxx
Acquisition Corporation, a Delaware corporation ("Buyer"), a wholly-owned
subsidiary of Penn Octane Corporation, a Delaware corporation ("POC"), and
POC, on the other hand.
RECITALS
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A. Company is engaged in the business of selling, designing,
manufacturing, installing and servicing compressed natural gas ("CNG")
refueling stations and related products for use in the CNG industry throughout
the world (the "Business").
B. Company desires to sell to Buyer certain of its assets and to
assign to Buyer certain of its liabilities and Buyer desires to purchase from
Company such assets and to assume from Company such liabilities, on the terms
and conditions set forth herein.
C. Company also is engaged in the Business through its affiliates, ZH
Canada, Inc., a company formed under the laws of Ontario, Canada ("ZH
Canada"), Xxxxxx Technologies Incorporated, a Company formed under the laws of
Ontario, Canada ("Xxxxxx Canada"), and Xxxxxx Technologies de Mexico, S.A. de
C.V., a company formed under the laws of Mexico ("Xxxxxx Mexico"; ZH Canada,
Xxxxxx Canada and Xxxxxx Mexico are referred to herein collectively as the
"Affiliated Entities"); ZHI owns all of the issued and outstanding capital
stock of Company, ZH Canada and Xxxxxx Mexico; Xxxxxx Canada is a wholly-owned
and the sole subsidiary of ZH Canada.
E. ZHI desires to sell to Buyer, and Buyer desires to purchase from
ZHI, (i) all of the issued and outstanding shares of capital stock of ZH
Canada, the owner of all of the issued and outstanding shares of capital stock
of Xxxxxx Canada, and (ii) all of the issued and outstanding shares of capital
stock of Xxxxxx Mexico, on the terms and conditions set forth herein.
AGREEMENT
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NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties agree as follows:
1. PURCHASE OF ASSETS OF COMPANY.
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1.01 Purchased Assets. Subject to the terms and conditions set forth in
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this Agreement, at the Closing (as defined in Section 11.01), Company agrees
to sell, convey, transfer, assign and deliver to Buyer, and Buyer agrees to
purchase from Company, all the assets, properties and business of Company
owned on the Closing Date (as defined in Section 11.01), of every kind,
character, and description, whether tangible, intangible, real, personal, or
mixed, and wherever located (other than those assets specifically excluded
from this sale pursuant to Section 1.02) (collectively referred to as the
"Purchased Assets") including, without limitation, the following:
(a) all goodwill associated with the Business as a going
concern;
(b) all accounts and notes receivable of Company, together with
any unpaid interest accrued thereon and all rights of collection with respect
thereto, including, without limitation, those set forth in Schedule 1.01(b)
(the "Assumed Accounts Receivable"), other than the Excluded Receivables (as
defined in Section 1.02(g)) and any Assumed Accounts Receivable collected by
Company between the date hereof and the Closing Date;
(c) all inventory (including, without limitation, parts, raw
materials, work in process, stock inventory, finished goods and goods in
transit) (the "Purchased Inventory"), other than the Excluded Inventory (as
defined in Section 1.02(h));
(d) all other tangible personal property including, without
limitation, all packaging, promotional materials, catalogs, supplies,
machinery, vehicles, furniture, equipment, testing equipment, computers,
office materials, tooling and all other tangible assets, wherever located,
including, without limitation, the tangible personal property set forth in
Schedule 1.01(d);
(e) all intellectual property, proprietary and business
information of Company related to the Business including, without limitation,
rights to each (i) fictitious business name, trade name and other name
(including, without limitation, the name "Xxxxxx Technologies" and any
derivative thereof), registered and unregistered trademark, service xxxx and
related application, including without limitation, the trademarks identified
in Schedule 1.01(e), (ii) patent, patent right and patent application
including, without limitation, the patents identified in Schedule 1.01(e), if
any, (iii) copyright in published and unpublished works, computer programs and
software, and (iv) proprietary formula, trade secret, formulation, invention,
product design and drawing, and any and all research and development related
thereto;
(f) all deposits (including, without limitation, deposits
securing orders from suppliers), prepaid value added taxes and other prepaid
expenses (including, without limitation, all prepaid personal property taxes)
other than any prepaid insurance;
(g) all right, title and interest in, to and under the leases
set forth in Schedule 1.01(g) (the "Assumed Leases");
(h) all right, title and interest in, to and under sales orders
set forth in Schedule 1.01(h) and any additional sales orders entered into
after the date hereof with the written consent of Buyer (the "Assumed Sales
Orders"), other than the Excluded Sales Orders (as defined in Section
1.02(f));
(i) all right, title and interest in, to and under all purchase
orders, contracts, agreements and all other leases of real and personal
property (including, without limitation, facilities leases, auto leases and
equipment leases) including, without limitation, the purchase orders,
contracts and agreements set forth in Schedule 1.01(i) (collectively, the
"Assumed Contracts"), other than the Excluded Contracts (as defined in Section
1.02(i));
(j) all books, records, files, papers and other documents (in
whatever form, including computer files) including, without limitation, all
such documents relating to inventory, purchasing, accounting, sales, export,
import, manufacturing, marketing, banking and shipping and all files, customer
and supplier lists, records, literature and correspondence, whether or not
physically located on the premises of Company, other than any thereof within
the definition of Excluded Assets;
(k) any other tangible or intangible assets which are used by or
of value to Company and which are of a nature not customarily reflected in the
books and records of a business, such as causes of action and legal rights and
assets which have been written off for accounting purposes (except those
relating exclusively to the Excluded Assets (as defined in Section 1.02) or
Excluded Liabilities (as defined in Section 1.04));
(l) to the extent permitted by applicable law, all rights and
interest in, to and under any authorization, registration, license,
certificate, permit or approval of any nature;
(m) the health insurance policies of Company to the extent such
policies relate exclusively to Company set forth in Schedule 1.01(m) (the
"Assumed Medical Plans"), and all rights and claims of Company thereunder; and
(n) any and all rights of Company as licensor or licensee under
all licenses related to the Business (the "Assumed Licenses").
1.02 Excluded Assets. The only assets of Company that shall not be
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transferred and sold to Buyer pursuant to Section 1.01 shall be the following
(the "Excluded Assets"):
(a) corporate seals, articles of incorporation, minute books,
stock books, general ledgers and books of account, tax returns and records
pertaining to Company's organization and capitalization;
(b) rights which accrue or will accrue to Company under this
Agreement;
(c) intercompany receivables due to Company from ZHI, Xxxxxxx X.
Xxxxxxxxx ("Xxxxxxxxx"), or any other affiliate of ZHI, Xxxxxxxxx or Company
except for intercompany receivables between or among Company and/or the
Affiliated entities;
(d) rights and claims of Company to any tax refunds, credits or
deductions with respect to any taxes paid by Company or ZHI;
(e) except as set forth in Section 1.01(m), all insurance
policies of Company and all rights and claims of Company, and all prepaid
insurance thereunder;
(f) the sales orders set forth in Schedule 1.02(f) (the
"Excluded Sales Orders");
(g) the accounts and notes receivable, together with any unpaid
interest accrued thereon, and all rights of collection with respect thereto,
set forth in Schedule 1.02(g) (the "Excluded Receivables");
(h) the inventory, whether work in progress or stock inventory,
which Company shall use from time to time for completion of the Excluded Sales
Orders and which Company and Buyer shall have separated, segregated, marked or
otherwise identified prior to the Closing (the "Excluded Inventory");
(i) all right, title and interest in, to and under all purchase
orders, contracts and all other leases of real and personal property set forth
on Schedule 1.02(i) (the "Excluded Contracts"); and
(j) such other assets, if any, set forth in Schedule 1.02(j).
1.03 Assumed Liabilities. At the Closing, Buyer shall assume and
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agree to pay, perform and discharge, or cause to be paid, performed and
discharged, when due, each of the following obligations and liabilities of
Company incurred in connection with the Business (other than those liabilities
and obligations excluded from assumption pursuant to Section 1.04) (the
"Assumed Liabilities"):
(a) Company's liabilities and obligations to be performed or
discharged after the Closing under the Assumed Leases;
(b) Company's liabilities and obligations to be performed or
discharged after the Closing under the Assumed Sales Orders, the Assumed
Contracts and the Assumed Licenses;
(c) Company's liabilities and obligations for vacation pay,
sales incentives and any other amounts accrued to the employees identified on
Schedule 13.01 prior to the Closing Date as set forth in Schedule 1.03(c)
including, without limitation, any increase in such amounts from the date
hereof until the Closing which result solely from the passage of time or which
are approved in writing by Buyer; and
(d) the liabilities and obligations of Company set forth in
Schedule 1.03(d) hereto, to be performed or discharged after the Closing.
1.04 Excluded Liabilities. Except as expressly provided in Section
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1.03, Buyer shall not directly or indirectly assume or be responsible for any
liabilities or obligations of Company or any of its affiliates or predecessors
of any nature whatsoever whether liquidated or unliquidated, known or unknown,
actual or
inchoate, accrued, contingent or otherwise (the "Excluded Liabilities")
including, without limitation:
(a) Company's liabilities and obligations for trade accounts
payable and accrued accounts payable reflected on the books and records of
Company on the date hereof or incurred after the date hereof and prior to the
Closing Date (the "Excluded Payables");
(b) any obligation or liability for product liability for
products manufactured and sold or leased and for services performed prior to
the Closing Date;
(c) any obligation or liability of Company for any taxes,
including, without limitation, any obligation for state, local, foreign,
federal, franchise, unitary business, capital stock, sales, payroll or income
taxes (including, without limitation, deferred taxes), except to the extent
set forth in Section 1.08 hereinbelow);
(d) any liability or obligation relating to, under or in
connection with the Excluded Assets;
(e) any liability or obligation arising prior to or as a result
of the Closing, to any employees, agents or independent contractors of
Company, whether or not employed by Buyer after the Closing, or under any
benefit arrangement with respect thereto, except as expressly set forth in
Section 1.03(c) hereof;
(f) any obligation to repay any amount of indebtedness for
borrowed money incurred by Company or by any other person;
(g) any obligation, duty or liability incurred prior to Closing
relating to Company's use, discharge, treatment, storage, generation or
disposal of hazardous substances as defined by any federal, state or local
statute, rule or regulation concerning or related to the protection of the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. '9601
et seq; and,
(h) such other liabilities, if any, set forth in Schedule
1.04(h).
1.05 Royalty Note. In addition to assuming the Assumed Liabilities,
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Buyer shall deliver to Company, at the Closing, as consideration for the
Purchased Assets, a royalty note made by Buyer in favor of Company in the form
of Exhibit A hereto (the "Royalty Note").
1.06 Royalty Note Adjustment. As of the first anniversary of the
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Closing Date, the principal amount of the Royalty Note shall be reduced by the
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amount of the "Royalty Note Adjustment." The Royalty Note Adjustment shall be
the excess, if any, of One Million One Hundred Thousand Dollars
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($1,100,000.00) over the sum of the amount of the "Inventory Valuation" and
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the "Assumed Receivables Valuation."
(a) Inventory Valuation. For purposes of determining the amount
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of the Royalty Note Adjustment, the Inventory Valuation shall be the sum of
(i) the fair market value of the Purchased Inventory remaining on the books of
Buyer as of the first anniversary of the Closing Date, other than Excluded
Inventory (the "Remaining Purchased Inventory"), plus (ii) the book value of
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any Purchased Inventory utilized by Buyer after the Closing and before the
first anniversary of the Closing Date; provided, however, that Company and
Buyer may agree, in writing, to a value other than book value for any item of
Purchased Inventory, plus (iii) the book value of any inventory purchased by
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Buyer prior to the Closing pursuant to that certain Interim Operating
Agreement between Buyer and Company of even date herewith (the "Interim
Operating Agreement"); provided, however, that Company and Buyer may agree, in
writing, to a value other than book value for any item of Purchased Inventory,
as set forth in the Interim Operating Agreement. For purposes of subpart (i)
of the preceding sentence, Remaining Purchased Inventory shall include any
item of Excluded Inventory, if any, remaining on the books of Company as of
the first anniversary of the Closing Date and which Company, in its sole
discretion, deems unnecessary for the completion of the Unfinished Safeco
Orders (as defined in Section 13.02). Any such item of Excluded Inventory so
identified shall thereafter be deemed Purchased Inventory for purposes of this
Agreement. For purposes of subpart (ii) of the preceding sentence, Purchased
Inventory shall be deemed utilized if it is actually utilized or directly tied
and related to an existing contract or purchase order to be shipped within
twelve (12) months after the first anniversary of the Closing.
As of the first anniversary of the Closing Date, Buyer and Company
shall in good faith determine the amount of the Inventory Valuation. If Buyer
and Company, in good faith, are unable to agree upon the Inventory Valuation
as of the first anniversary of the Closing Date, then the parties shall refer
the matter to the accounting firm of Price Waterhouse LLP which shall
determine the amount of the Inventory Valuation. Buyer and Company agree to
execute, if required by Price Waterhouse LLP, a reasonable engagement letter.
All fees and expenses relating to the work performed by Price Waterhouse LLP
shall be borne equally by the parties. Within ten (10) days after Price
Waterhouse LLP has been retained, both parties shall submit statements of
their positions and issues with respect to the Inventory Valuation. Thirty
(30) days thereafter, Price Waterhouse LLP shall determine the amount of the
Inventory Valuation. The determination by Price Waterhouse LLP shall be set
forth in a written statement and shall be binding and conclusive upon the
parties hereto absent fraud or manifest error.
(b) Assumed Accounts Receivable Valuation. For purposes of
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calculating the Royalty Note Adjustment, the Assumed Accounts Receivable
Valuation shall be the actual amount collected thereon by Buyer as of the
first anniversary of the Closing Date.
(c) Insufficient Royalty Note Principal. To the extent the unpaid
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principal amount of the Royalty Note is less than the Royalty Note Adjustment,
Company shall pay the amount of such deficiency, if any, in cash, promptly to
Buyer.
1.07 Allocation of Purchase Price. The parties have determined the
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fair market value of the Purchased Assets and the other rights and benefits
conferred hereunder (excluding the Shares (as defined in Section 2.01)), which
fair market values are set forth on Schedule 1.07. The parties agree that the
consideration described in this Section 1.07 (taking into account transaction
costs paid by such party) shall be allocated, for tax purposes, among the
Assets in a manner consistent with Schedule 1.07 and the provisions of Section
1060 of the Internal Revenue Code of 1986, as amended (the "Tax Code"), and
the regulations promulgated thereunder. Each of the parties hereto agrees to
report this transaction for federal tax purposes in accordance with the
provisions of this Section 1.07 and Schedule 1.07, and shall not take any
position inconsistent therewith upon examination of any tax return, in any
refund claim, in any litigation, investigation or otherwise.
1.08 Sales and Transfer Taxes. Buyer shall be responsible for and
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shall timely pay all sales and/or use taxes arising out of or relating to the
transfer of the Purchased Assets.
2. PURCHASE OF STOCK OF AFFILIATED ENTITIES.
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2.01 Purchase of Stock. At the Closing, ZHI shall transfer, assign
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and set over to Buyer all of the issued and outstanding capital stock of ZH
Canada (the "ZH Canada Shares") and all of the issued and outstanding capital
stock of Xxxxxx Mexico (the "Xxxxxx Mexico Shares"; the ZH Canada Shares and
the Xxxxxx Mexico Shares are collectively referred to as the "Shares").
2.02 Convertible Debenture. As consideration for the transfer of the
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Shares at the Closing, Buyer shall deliver to ZHI a convertible debenture
issued by POC in the face amount of Two Hundred Twenty Thousand Dollars
($220,000) in the form of Exhibit B hereto (the "Convertible Debenture").
3. AS-IS, WHERE-IS. The Purchased Assets, the Shares and the Affiliated
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Entities are being sold on an AS-IS, WHERE-IS basis with no representation or
warranty of any kind except as expressly set forth herein. The parties hereto
acknowledge that Company and the Affiliated Entities each has provided Buyer
with unrestricted access to its facilities, employees and records and that
Buyer's decision to enter into this Agreement and to consummate the
transactions contemplated hereby is based solely upon the results of Buyer's
due diligence investigation, except for the express representations and
warranties of Company and ZHI herein.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY.
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Company represents and warrants to Buyer and POC as of the date of this
Agreement and as of the Closing Date as follows:
4.01 Corporate Existence. Company is a corporation duly organized,
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validly existing and in good standing under the laws of the State of
California. Company has all requisite corporate power and authority to own,
lease and operate its property and to carry on its business in the manner in
which and in the places such business is now being conducted.
4.02 Authority; Enforceability. Company has the right, power, legal
--------------------------
capacity and authority to enter into, and to perform its obligations under,
this Agreement and the transactions herein contemplated. The execution,
delivery and performance of this Agreement by Company has been duly authorized
by its board of directors. This Agreement has been validly executed and
delivered by Company and, assuming due execution and delivery hereof by the
other parties hereto, constitutes a valid, binding and enforceable obligation
of Company subject to applicable bankruptcy, insolvency, receivership,
moratorium, reorganization or similar state or federal laws or equitable
principles relating to or affecting creditors' rights and to the discretion of
a court to grant equitable remedies.
4.03 No Violation. Neither the execution, delivery or performance of
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this Agreement nor the consummation of the transactions contemplated hereby
nor compliance by Company with any of the provisions hereof will violate or
conflict with any provisions of the Certificate of Incorporation or bylaws of
Company or any judicial or administrative order, judgment or decree to which
Company is a party or is subject.
4.04 Consents and Approvals. No approval, authorization, consent or
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other action by, or filing with, any governmental authority is required in
connection with the execution and delivery by Company of this Agreement or the
consummation of the transactions contemplated hereby by Company.
4.05 Title to Assets. Except as set forth in Schedule 4.05, Company
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has good and marketable title to the Purchased Assets. Except as set forth in
Schedule 4.05, the Purchased Assets are or will be at the Closing free and
clear of mortgages, liens, pledges, charges, encumbrances, equities, claims,
easements, rights of way, covenants, conditions or restrictions, except for
(a) minor imperfections of title which do not, individually or in the
aggregate, adversely affect the marketability of, or the ability of Company to
utilize, the Purchased Assets; (b) liens for current taxes not yet due and
payable; and (c) liens of landlords, carriers, warehousemen, mechanics,
materialmen and repairmen incurred in the ordinary course of business for sums
not yet due and payable.
5. REPRESENTATIONS AND WARRANTIES OF ZHI.
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ZHI represents and warrants to Buyer and POC as of the date of this
Agreement and as of the Closing Date as follows:
5.01 Corporate Existence.
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(a) ZHI is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. ZHI has all
requisite corporate power and authority to own, lease and operate its property
and to carry on its business in the manner in which and in the places such
business is now being conducted.
(b) ZH Canada is a corporation duly organized, validly existing
and in good standing under the laws of Ontario, Canada. ZH Canada has all
requisite corporate power and authority to own, lease and operate its property
and to carry on its business in the manner in which and in the places such
business is now being conducted.
(c) Xxxxxx Canada is a corporation duly organized, validly
existing and in good standing under the laws of Ontario, Canada. Xxxxxx
Canada has all requisite corporate power and authority to own, lease and
operate its property and to carry on its business in the manner in which and
the places such business is now being conducted.
(d) Xxxxxx Mexico is a corporation duly organized, validly
existing and in good standing under the laws of Mexico. Xxxxxx Mexico has all
requisite corporate power and authority to own, lease and operate its property
and to carry on its business in the manner in which and in the places such
business is now being conducted.
5.02 Authority; Enforceability. ZHI has the right, power, legal
--------------------------
capacity and authority to enter into, and to perform its obligations under,
this Agreement and the transactions herein contemplated. The execution,
delivery and performance of this Agreement by ZHI has been duly authorized by
its board of directors. This Agreement has been validly executed and
delivered by ZHI and, assuming due execution and delivery hereof by the other
parties hereto, constitutes a valid, binding and enforceable obligation of ZHI
subject to applicable bankruptcy, insolvency, receivership, moratorium,
reorganization or similar state or federal laws or equitable principles
relating to or affecting creditors' rights and to the discretion of a court to
grant equitable remedies.
5.03 No Violation. Neither the execution, delivery or performance of
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this Agreement nor the consummation of the transactions contemplated hereby
nor compliance by ZHI with any of the provisions hereof will violate or
conflict with any provisions of the Certificate of Incorporation or bylaws of
ZHI or any judicial or administrative order, judgment or decree to which ZHI
is a party or is subject.
5.04 Consents and Approvals. No approval, authorization, consent or
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other action by, or filing with, any governmental authority is required in
connection with the execution and delivery by ZHI of this Agreement or the
consummation of the transactions contemplated hereby by ZHI.
5.05 Capitalization of Affiliated Entities. All of the issued and
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outstanding shares of capital stock of each of the Affiliated Entities have
been duly authorized and are validly issued, fully paid and non-assessable.
Except as set forth in Schedule 5.05, ZHI holds of record and owns
beneficially all of the outstanding shares of capital stock of ZH Canada and
Xxxxxx Mexico, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), taxes,
liens, options, warrants, purchase rights, contracts, commitments, equities,
claims and demands. ZH Canada holds of record and owns beneficially all of
the outstanding shares of capital stock of Xxxxxx Canada, free and clear of
any restrictions on transfer (other than restrictions under the Securities Act
and state securities laws), taxes, liens, options, warrants, purchase rights,
contracts, commitments, equities, claims and demands. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require ZHI or ZH Canada, as the case may be, to sell, transfer or
otherwise dispose of any capital stock of any of Company or Affiliated
Entities or that could require any of Company or the Affiliated Entities to
issue, sell, or otherwise cause to become outstanding any of its own capital
stock (other than this Agreement). There are no outstanding stock
appreciation, phantom stock, profit participation, or similar rights with
respect to Company or any of the Affiliated Entities. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of any capital stock of Company or any of the Affiliated Entities.
Neither Company nor any of the Affiliated Entities controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other
business association which is not one of the Affiliated Entities. Neither
Xxxxxx Mexico nor Xxxxxx Canada has any subsidiaries.
6. REPRESENTATIONS AND WARRANTIES OF BUYER.
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Buyer represents and warrants to Company and ZHI as of the date of this
Agreement and as of the Closing Date as follows:
6.01 Corporate Existence. Buyer is a corporation duly organized,
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validly existing and in good standing under the laws of the State of Delaware.
Buyer has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business in the manner of and in
the places such business is now being conducted.
6.02 Authority; Enforceability. Buyer has the right, power, legal
--------------------------
capacity and authority to enter into, and to perform its obligations under
this Agreement and the transactions herein contemplated. The execution,
delivery and performance of this Agreement by Buyer has been duly authorized
by the board of directors of Buyer. This Agreement has been validly executed
and delivered by Buyer and, assuming due execution and delivery by the other
parties hereto, constitutes a valid, binding and enforceable obligation of
Buyer, subject to applicable bankruptcy, insolvency, receivership, moratorium,
reorganization or similar state or federal laws or equitable principles
relating to or affecting creditors' rights generally and to the discretion of
a court to grant equitable remedies.
6.03 No Violation. Neither the execution, delivery or performance of
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this Agreement nor the consummation of the transactions contemplated hereby
nor compliance by Buyer with any of the provisions hereof will violate or
conflict with any provisions of the Certificate of Incorporation or bylaws of
Buyer or any judicial or administrative order, judgment or decree to which
Buyer is a party or is subject.
6.04 Consents and Approvals. No approval, authorization, consent or
----------------------
other action by, or filing with, any governmental authority is required in
connection with the execution and delivery by Buyer of this Agreement or the
consummation of the transactions contemplated hereby by Buyer.
7. REPRESENTATIONS AND WARRANTIES OF POC.
-----------------------------------------
POC represents and warrants to Company and ZHI as of the date of this
Agreement and as of the Closing Date as follows:
7.01 Corporate Existence. POC is a corporation duly organized, validly
-------------------
existing and in good standing under the laws of the State of Delaware. POC
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business in the manner of and in the places
such business is now being conducted.
7.02 Authority; Enforceability. POC has the right, power, legal
--------------------------
capacity and authority to enter into, and to perform its obligations under
this Agreement and the transactions herein contemplated. The execution,
delivery and performance of this Agreement by POC has been duly authorized by
the board of directors of POC. This Agreement has been validly executed and
delivered by POC and, assuming due execution and delivery by the other parties
hereto, constitutes a valid, binding and enforceable obligation of POC,
subject to applicable bankruptcy, insolvency, receivership, moratorium,
reorganization or similar state or federal laws or equitable principles
relating to or affecting creditors' rights generally and to the discretion of
a court to grant equitable remedies.
7.03 No Violation. Neither the execution, delivery or performance of
------------
this Agreement nor the consummation of the transactions contemplated hereby
nor compliance by POC with any of the provisions hereof will violate or
conflict with any provisions of the Certificate of Incorporation or bylaws of
POC or any judicial or administrative order, judgment or decree to which POC
is a party or is subject.
7.04 Consents and Approvals. No approval, authorization, consent or
----------------------
other action by, or filing with, any governmental authority is required in
connection with the execution and delivery by POC of this Agreement or the
consummation of the transactions contemplated hereby by POC.
8. OBLIGATIONS OF THE PARTIES UNTIL CLOSING.
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8.01 Conduct of the Business. From the date hereof through the
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Closing, Company shall conduct the Business in accordance with the provisions
of this Agreement and the Interim Operating Agreement; provided, however, that
Company shall not, without the consent of Buyer, incur any material
indebtedness or enter into any material transaction. Notwithstanding the
foregoing, nothing herein shall prohibit Company from entering into material
transactions with respect to (a) that certain Agreement dated December 6,
1996, between Safeco Insurance Company of America, A & A Associates, Company,
Xxxxxxx X. Xxxxxxxxx, WRZ/VDK Acquisition Corporation, and Xxxxxxx X.
Xxxxxxxxx Living Trust (the "Safeco Agreement"), a copy of which has been
delivered to Buyer, (b) the Excluded Sales Orders, (c) the Excluded
Receivables, and (d) the Excluded Payables.
8.02 Bulk Sales. Buyer shall give notice, in compliance with
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Division 6 of the California Corporation Code, of the bulk transfer
contemplated by this Agreement. Company shall furnish Buyer with the
information necessary to prepare this notice.
8.03 Creditors of Company. Company shall use its best efforts to
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obtain the written consent of the creditors of Company to the transactions
contemplated hereby. The terms and conditions of any such consent shall be
subject to the approval of Company, in its sole discretion; provided, that,
the terms of any such consent shall not adversely affect Buyer or its
operations after the Closing and shall include a release by the creditors of
Company from any and all liability relating to or arising in connection with
Company and the transactions contemplated by this Agreement. Buyer shall use
its best efforts to cooperate fully in obtaining any such consents.
8.04 Resale Certificate. Buyer shall furnish any resale certificate
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or other documents reasonably requested by Company to comply with the
provisions of the sales and use taxes of the State of California.
8.05 Confidentiality.
---------------
(a) Obligations of Company and ZHI. Neither Company nor ZHI
------------------------------
(including, in each case, its directors, officers, employees, shareholders,
agents, successors, assigns, attorneys and personal representatives) shall, in
any way, directly or indirectly, use or disclose or otherwise reveal to any
person any concept, design, device, process, use, technology, trade secret,
sales data, work of authorship, customer list, prospective customer list,
customer requirement, plan, embodiment, invention, discovery, idea, research,
engineering method, practice, system, formula, development, improvement or
related work product or any other intellectual property or confidential or
financial information (the "Information") owned by Company or Buyer prior to
the date hereof and either conveyed by Buyer hereunder or made available by
Buyer to Company or ZHI in connection with this Agreement. Such obligation of
confidentiality shall not extend to any Information which is: (i) generally
known to others, other than as a result of a breach by Company or ZHI of their
obligations hereunder; (ii) part of public knowledge or literature, other than
as a result of a breach by Company or ZHI of their obligations hereunder;
(iii) lawfully received by Company or ZHI from a third party who in disclosing
such information does not breach a confidentiality obligation owed to Buyer or
Company or ZHI; or (iv) required to be disclosed in any legal or governmental
proceeding or by applicable law. If the transactions contemplated hereby are
not consummated, the foregoing shall apply only to Information made available
by Buyer to ZHI or Company, and ZHI or Company, as the case may be, shall
return to Buyer all documents containing proprietary information. The
obligations of Company and ZHI under this Section 8.05(a) shall survive
Closing.
(b) Obligations of Buyer and POC. From the date hereof until
----------------------------
the Closing and in the event that transactions contemplated hereby are not
consummated, neither Buyer nor POC (including, in each case, its directors,
officers, employees, shareholders, agents, successors, assigns, attorneys and
personal representatives) shall, in any way, directly or indirectly, use or
disclose or otherwise reveal to any person any concept, design, device,
process, use, technology, trade secret, sales data, work of authorship,
customer list, prospective customer list, customer requirement, plan,
embodiment, invention, discovery, idea, research, engineering method,
practice, system, formula, development, improvement or related work product or
any other intellectual property or confidential or financial information (the
"Xxxxxx Information") (a) owned by Company or any of the Affiliated Entities
prior to the date hereof and made available by Company to Buyer or POC in
connection with this Agreement. Such obligation of confidentiality shall not
extend to any Information which is: (i) generally known to others, other than
as a result of a breach by Buyer or POC of their obligations hereunder; (ii)
part of public knowledge or literature, other than as a result of a breach by
Buyer or POC of their obligations hereunder; (iii) lawfully received by Buyer
or POC from a third party who in disclosing such information does not breach a
confidentiality obligation owed to Company or ZHI; or (iv) required to be
disclosed in any legal or governmental proceeding or by applicable law. In
addition, in such case, Buyer or POC, as the case may be, shall return to
Company all documents containing proprietary information. The obligations of
Buyer and POC under this Section 8.05(b) shall survive Closing.
8.08 Public Announcements. Any public announcement or similar
---------------------
publicity with respect to this Agreement shall be issued at such time and in
such manner as Buyer and Company shall mutually agree. Company and Buyer
shall consult with each other concerning the means by which Company's
employees, customers, and suppliers and others having dealings with Company
with respect to the Business will be informed of the transactions contemplated
by this Agreement.
8.09 Sales, General and Administrative Expenses. The parties
---------------------------------------------
acknowledge that from and after December 16, 1996, Company has continued to
incur sales, general and administrative expenses in connection with the
conduct of the Business ("SG&A Expenses"). At the Closing, Buyer shall pay to
Company the amount of the SG&A Differential (as defined in Section 5.02 of the
Interim Operating Agreement; the "SG&A Payment"), it being understood that,
for purposes of this Section 8.09, if there is no Cessation Date (as defined
in Section 5 of the Interim Operating Agreement), then the term "Closing Date"
shall be substituted for the term "Cessation Date" in the definition of the
SG&A Differential. Buyer shall pay the SG&A Payment to Company as follows:
one-half (1/2) in cash at the Closing (the "Closing SG&A Payment"), and
one-half (1/2) in a note due and payable within thirty (30) days after the
Closing Date in the form of Exhibit C hereto (the "SG&A Note"), which shall
bear interest at the rate of eight and one quarter percent (8.25%) per annum.
8.10 Expenses for the Benefit of Buyer. Company and Buyer acknowledge
-----------------------------------
that Company has incurred expenses at the request of Buyer as set forth in
Schedule 8.10. At the Closing, Buyer shall reimburse Company for such
expenses and any additional expenses incurred at the written request of POC
prior to the Closing (other than expenses in connection with the consummation
of this transaction), in cash (the "Expense Reimbursement").
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND POC. The
----------------------------------------------------
obligations of Buyer and POC to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment by or at the Closing of
each of the following conditions, any or all of which may be waived by Buyer
or POC in their sole discretion:
9.01 Representations and Warranties. The representations and
--------------------------------
warranties of Company and ZHI shall have been true and correct in all material
respects as of the date of this Agreement and shall be true and correct in all
material respects at or as of the Closing Date as though such representations
and warranties were made at such time.
9.02 Performance of Covenants. Company and ZHI shall have performed
------------------------
or complied in all material respects with all of the agreements, covenants and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing.
9.03 Approvals. All consents or approvals listed on Schedule 9.03
---------
shall have been obtained.
9.04 Creditors. The outstanding creditors of Company shall have
---------
consented in writing to the transactions contemplated by this Agreement as set
forth in Section 8.03, and the Purchased Assets, the assets owned by the
Affiliated Entities and the Shares shall be free of all liens and
encumbrances.
9.05 Legal Matters. The Closing shall not violate any order or
--------------
decree of any court or governmental body of competent jurisdiction and no
suit, action, proceeding or investigation, shall have been brought or
threatened by any person or entity (other than Buyer or an affiliate of Buyer)
which questions the validity or legality of this Agreement or the transactions
contemplated hereby.
9.06 SG&A Payment and Expense Reimbursement Amount. Company and
---------------------------------------------
Buyer shall have agreed upon the amount of the SG&A Payment and the Expense
Reimbursement.
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ZHI AND COMPANY.
----------------------------------------------------------------
The obligations of ZHI and Company to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment by or at
the Closing of each of the following conditions, any or all of which may be
waived by Company in its sole discretion:
10.01 Representations and Warranties. The representations and warranties
------------------------------
of Buyer and POC shall have been true and correct in all material respects as
of the date of this Agreement and shall be true and correct in all material
respects at or as of the Closing Date as though such representations and
warranties were made at such time.
10.02 Performance of Covenants. Buyer and POC shall have performed or
--------------------------
complied in all material respects with all of the agreements, covenants and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing.
10.03 Approvals. All consents or approvals listed on Schedule 10.03
---------
shall have been obtained.
10.04 Creditors. The outstanding creditors of Company shall have
---------
consented in writing to the transactions contemplated by this Agreement as set
forth in Section 8.03.
10.05 Legal Matters. The Closing shall not violate any order or decree
--------------
of any court or governmental body of competent jurisdiction and no suit,
action, proceeding or investigation, shall have been brought or threatened by
any person or entity (other than Company or an affiliate of Company) which
questions the validity or legality of this Agreement or the transactions
contemplated hereby.
10.06 SG&A Payment and Expense Reimbursement Amount. Company and Buyer
---------------------------------------------
shall have calculated the amount of the SG&A Payment and the Expense
Reimbursement.
11. CLOSING.
-------
11.01 The Closing Date. The consummation of the sale of the Purchased
------------------
Assets and the Shares (the "Closing") shall take place at the office of Rodi,
Pollock, Pettker, Galbraith & Xxxxxx, A Law Corporation, 000 Xxxxx Xxxxx
Xxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000 within five (5) business days
after the conditions set forth in Sections 9 and 10 hereof are satisfied (the
"Closing Date"). Such Closing shall be deemed to be effective for all
purposes as of the close of business on the Closing Date.
11.02 Actions and Deliveries by Company and ZHI. At the Closing, Company
-----------------------------------------
and ZHI, as the case may be, shall deliver or cause to be delivered to Buyer
the following which shall be reasonably satisfactory in form and substance to
Buyer and its counsel and which shall constitute conditions precedent to
Buyer's obligations hereunder:
(a) such instruments of assignment and conveyance as are necessary
or appropriate to transfer title to the Purchased Assets by Company to Buyer,
including, without limitation, a xxxx of sale and assignment of contracts;
(b) duly endorsed stock assignments and certificates for the
Shares executed by ZHI;
(c) copies of resolutions by the board of directors of Company
authorizing the execution and delivery of this Agreement and the performance
of Company's covenants and obligations under it, which resolutions shall be
certified by Company's Secretary or Assistant Secretary;
(d) certificate of good standing for Company, as of a date not more
than five (5) days before the Closing Date;
(e) copies of resolutions by the board of directors of ZHI
authorizing the execution and delivery of this Agreement and the performance
of ZHI's covenants and obligations under it, which resolutions shall be
certified by ZHI's Secretary or Assistant Secretary;
(f) certificate of good standing for ZHI, as of a date not more
than five (5) days before the Closing Date;
(g) opinions from counsel for Company and ZHI, in a form
reasonably satisfactory to Buyer and its counsel in which counsel for Company
and ZHI may rely on representations of officers and directors of Company and
ZHI as to factual matters and on certificates of government officers; and
(h) a certificate in a form satisfactory to Buyer certifying
that the conditions set forth in Sections 10.01 and 10.02 have been satisfied.
11.03 Actions and Deliveries by Buyer and POC. At the Closing, Buyer and
---------------------------------------
POC, as the case may be, shall deliver or cause to be delivered to Company and
ZHI, as the case may be, the following which shall be reasonably satisfactory
in form and substance to Company and its counsel and which shall constitute
conditions precedent to Company's obligations hereunder:
(a) a limited assumption of liability agreement;
(b) the Royalty Note;
(c) the Convertible Debenture;
(d) the SG&A Note;
(e) the Closing SG&A Payment;
(f) the Expense Reimbursement;
(g) copies of resolutions pertaining to Buyer's authorization of
the execution and delivery of this Agreement and the performance of Buyer's
covenants and obligations under it, which resolutions shall be certified by
Buyer's Secretary or Assistant Secretary;
(h) copies of resolutions pertaining to POC's authorization of
the execution and delivery of this Agreement and the performance of POC's
covenants and obligations under it, which resolutions shall be certified by
POC's Secretary or Assistant Secretary;
(i) certificate of good standing for Buyer, as of a date not
more than five (5) days before the Closing Date;
(j) certificate of good standing for POC, as of a date not more
than five (5) days before the Closing Date;
(k) an opinion from counsel for Buyer and POC, in a form
satisfactory to Company and its counsel in which may rely on representations
of officers and directors of Buyer and on certificates of government officers;
(l) a resale certificate or other documents reasonably requested
by Company to comply with the provisions of the sales and use tax laws of the
State of California;
(m) a check from POC in an amount sufficient to cover applicable
sales and use taxes imposed by the State of California on the transactions
contemplated by this Agreement; and
(n) a certificate in a form satisfactory to Seller certifying
that the conditions set forth in sections 9.01 and 9.02 have been satisfied.
12. TERMINATION.
-----------
12.01 Termination Events. This Agreement by notice given prior to or at
------------------
the Closing may be terminated:
(a) by either Buyer, POC, Company or ZHI if a material breach of
any provision of this Agreement or the Interim Operating Agreement has been
committed by any other party and the breach has not been waived;
(b) (i) by Buyer or POC if any of the conditions in Section
9 has not been satisfied as of the Closing Date or if satisfaction of such a
condition becomes impossible (other than through the failure of Buyer or POC
to comply with its obligations under this Agreement) and Buyer or POC, as the
case
may be, has not waived such condition on or before the Closing Date, or
(ii) by Company or ZHI, if any of the conditions in Section
10 has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Company
or ZHI to comply with its obligations under this Agreement) and Company or
ZHI, as the case may be, has not waived such condition on or before the
Closing Date; or
(c) by mutual consent of Buyer, POC, Company and ZHI; provided,
however, that notwithstanding the foregoing, this Agreement shall terminate by
its terms if the Closing has not occurred within three (3) years after the
date hereof.
12.02 Effect of Termination. Each party's right of termination under
-----------------------
Section 12.01 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination shall not
be an election of remedies. If this Agreement is terminated pursuant to
Section 12.01, all further obligations of the parties under this Agreement
shall terminate, except the obligations in Section 8.05 shall survive;
provided, however, that if this Agreement is terminated by a party because of
a breach of the Agreement by the other party or parties or because one or more
of the conditions to the terminating party's obligations under this Agreement
is not satisfied as a result of the other party or parties failure to comply
with its or their obligations, the terminating party's right to pursue all
legal remedies shall survive such termination unimpaired.
13. POST-CLOSING OBLIGATIONS.
-------------------------
13.01 Employees. Effective immediately upon Closing, Buyer shall offer
---------
to continue to employ each person set forth on Schedule 13.01 who immediately
prior to Closing is an employee of Company. Each such person who continues
employment shall be employed at the same salary and wages as were in effect
immediately prior to the Closing, and on substantially the same terms and
conditions as those covering such employee immediately prior to the Closing
subject to Buyer's rights, except to the extent limited by law or agreement,
to revise and modify any terms, conditions, practices, policies, and benefits.
Nothing in this Agreement shall require Buyer to continue the employment of
any employee for any specific duration or the continuation by Buyer after
Closing of any existing terms, conditions, practices, policies, or benefit
plans of Company, nor obligate Buyer to continue such terms, conditions,
practices, policies, or benefits for any specific duration, except as required
by law or other agreements.
13.02 Unfinished Safeco Orders. Until such time as the sales orders
--------------------------
retained by Company and identified on Schedule 13.02 are complete (the
"Unfinished Safeco Orders"), Buyer shall make Xxxxx X. Xxxxxxxx, Xxxx Xxxxxxx,
Xxxxx Xxxx, Xxxxxxx Xxxxxxxxx, Xxxxxx Xxxxxxxxx, Xxxx Xxxxxx and Xxxx Xxxxxx,
(the "Loaned Employees") available to Company, at no cost to Company, to
perform all work necessary to complete the Unfinished Safeco Orders in an
expeditious manner. Until the earlier of May 30, 1997 or such time as the
Unfinished Safeco Orders have been completed, each of the Loaned Employees
shall be available for use by Company for at least one-half of each work week
for each Loaned Employee. From and after May 30, 1997, until the earlier of
December 1, 1997, or the completion of the Unfinished Safeco Orders, the
Loaned Employees shall be available for use by Company for not more than a
combined total of forty (40) hours per week; provided, however, that Company
shall designate the Loaned Employees utilized for each forty (40) hour period
each week. In the event that the Unfinished Safeco Orders are not completed
by December 1, 1997, Buyer shall make such employees available to Company at
cost plus ten percent (10%). During such hours as the Loaned Employees are
available for use by Company, such employees shall work at the direction and
control of Company. Until the earlier of December 1, 1997, or such time as
Company notifies Buyer that the Unfinished Safeco Orders are complete, Buyer
shall not terminate the Loaned Employees other than for cause.
13.03 Access to Records. From and after Closing, Buyer will provide
-----------------
to Company whatever assistance Company may reasonably request, including
making records, information, witnesses and personnel available for the
purposes of (a) preparing any tax returns, audit or other examination by any
taxing authority or judicial or administrative proceeding related to liability
for taxes, or (b) for such other purposes for which access to such documents
is reasonably believed by Company to be necessary; provided, however, that
access to such books, records, documents and employees shall not unreasonably
interfere with the normal operation of Buyer. Buyer shall maintain and
preserve all such books, records and other documents for the greater of six
(6) years after Closing or any applicable statutory or regulatory retention
period, and shall notify Company before such records are destroyed.
13.04 Inventory. Commencing at the Closing and ending on the first
---------
anniversary of the Closing, Buyer shall use its reasonable best efforts to use
inventory purchased from Company pursuant to this Agreement first before
purchasing inventory to replace such inventory. Buyer shall utilize such
inventory notwithstanding the availability of replacement inventory at a cost
lower than the book value of the inventory purchased hereunder. Commencing at
the Closing and ending on the first anniversary of the Closing, Buyer shall
account for inventory for purposes of this Agreement on a first in, first out
(FIFO) basis.
13.05 Assumed Accounts Receivable. From and after the Closing, Buyer
-----------------------------
shall exercise prompt and diligent efforts to collect the Assumed Accounts
Receivable; provided, however, that Buyer may not compromise or discount any
such Assumed Accounts Receivable. To the extent that any uncollected Assumed
Accounts Receivable are excluded from the Assumed Accounts Receivable
Valuation, Buyer shall transfer, set over and assign all of its right, title
and interest to Company in and to such uncollectible Assumed Accounts
Receivable.
13.06 Covenant Not to Compete; No Raid.
-------------------------------------
(a) Company and ZHI each agree that it shall not and shall not
permit any affiliate (including, in each case, its directors, officers and
shareholders), to engage in, and shall use their best efforts to prevent any
joint venture of Company or ZHI or any such affiliate from, for a period of
five (5) years after the Closing Date, engaging in, the Business ("Competitive
Activities"); provided, however, that the foregoing shall not prohibit:
-------- -------
(i) Company, ZHI and any of their affiliates, any such joint
venture or any of the accounts managed by them, including, without limitation,
any pension or other benefit plan of Company and ZHI, from owning any
outstanding capital stock or other equity interests of any person engaging in
any Competitive Activities, provided the aggregate beneficial ownership of
Company and ZHI (without reference to pension or other benefit plan assets)
does not exceed more than five percent (5%) of all issued and outstanding
securities of any such person;
(ii) Company, ZHI and any of their affiliates or any such
joint venture from engaging in the Competitive Activities with respect to any
or all of the Excluded Assets or any other businesses other than the Business;
(iii) Company, ZHI and any of their affiliates or any such
joint venture from acquiring a business that engages in Competitive Activities
provided that (x) such activities do not constitute more than twenty percent
(20%) of the revenues or assets of the business to be acquired (based on the
sales of such business during the preceding four full calendar quarters), and
(y) Company, ZHI and any affiliate or joint venture, as the case may be,
divests that portion of the business to be acquired that engages in
Competitive Activities within twelve (12) months after the acquisition
thereof; and
(iv) Company, ZHI and any of their affiliates from managing,
operating and/or disposing of any of the Excluded Assets, including, without
limitation, liquidation of the inventory constituting Excluded Assets;
provided, further, that the prohibitions in this Section 13.06 shall cease to
-------- -------
apply (effective as of the time of such transfer) to any businesses or
operations of Company, ZHI or any of their subsidiaries which are transferred
to any third party (other than to a subsidiary or affiliate or any such joint
venture of Company or ZHI) after the date hereof.
(b) No-Raid Covenant. Except as otherwise provided in Section
----------------
13.06 of this Agreement, for a period of five (5) years following the Closing
Date, without the prior written approval of POC or Buyer, neither Company nor
ZHI (nor any of their affiliates) shall solicit or induce (or initiate
discussions relating to future employment with), any salaried employee or
person employed by Buyer in a management position in the Business on the date
of such solicitation or inducement or the initiation of such discussions to
accept employment with Company, ZHI or any affiliate thereof, except for
persons whose employment is solicited or procured through newspaper ads or
through the services of executive search firms engaged in a broad-based search
(and not engaged for the purpose of circumventing this Section 13.06).
13.07 Warranty. At the request of Company, in writing, Buyer shall
--------
perform warranty work in connection with products manufactured and sold by
Company prior to Closing. To the extent any warranty work is requested, in
writing, by Company in connection with such products, Company shall reimburse
Buyer in the amount of the cost of such warranty work plus ten percent (10%).
Payment shall be due and payable within thirty (30) days of invoice.
13.08 Guaranty. POC hereby unconditionally guarantees that to the
--------
extent Buyer fails to make a payment due under either the Royalty Note or the
SG&A Note then, upon written demand of Company, POC will promptly make such
payment or cause it to be made. Company shall not be required to seek any
recovery from Buyer prior to enforcing POC's obligations hereunder.
13.09 Change of Corporate Name. As soon as practicable after the
---------------------------
Closing, Company shall take all action necessary or
appropriate to change its name to a name which does not include the name
"Xxxxxx" or any derivation thereof.
13.10 Bids. Company and Buyer shall use their reasonable best efforts to
----
transfer from Company to Buyer open bids, if any, upon their acceptance by the
customer, to the extent that Buyer determines that it desires to enter into a
contract with the customer based upon the bid (each, an "Accepted Bid").
Notwithstanding the foregoing, Company shall have no obligation hereunder to
enter into any contract with any customer in connection with any such bid
accepted by customer.
14. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
----------------------------------------------------------------
14.01 Indemnities by Company. Company shall indemnify, defend and hold
-----------------------
harmless Buyer, its directors, officers, employees, shareholders, agents,
successors, assigns, attorneys and personal representatives from, against and
in respect of any and all actions, suits, proceedings, claims, demands,
losses, costs, expenses, obligations, liabilities, judgments, damages,
recoveries and deficiencies, including, without limitation, interest,
penalties and reasonable attorneys' fees (collectively "Damages") that Buyer
shall incur or suffer which arise out of, result from or relate to any of the
following:
(a) any misrepresentation, breach of warranty or nonfulfillment of
any agreement on the part of Company under this Agreement or any of the
documents, agreements or instruments delivered in connection herewith or from
any misrepresentation in or omission from any certificate, schedule, exhibit
or other instrument furnished or to be furnished by Company hereunder or
thereunder to the extent, and only to the extent, that such representations,
warranties or agreements survive the Closing; and
(b) the Excluded Liabilities; provided, however, that Company shall
not have liability under this Section 14.01 to the extent, and only to the
extent, of Damages caused as a result of any action taken or omitted to be
taken by Buyer after the Closing Date.
14.02 Indemnities by ZHI. ZHI shall indemnify, defend and hold harmless
------------------
Buyer, its directors, officers, employees, shareholders, agents, successors,
assigns, attorneys and personal representatives from, against and in respect
of any and all Damages that Buyer shall incur or suffer which arise out of,
result from or relate to any of the following:
(a) any misrepresentation, breach of warranty or nonfulfillment of
any agreement on the part of ZHI under this Agreement or any of the documents,
agreements or instruments delivered in connection herewith or from any
misrepresentation in or omission from any certificate, schedule, exhibit or
other instrument furnished or to be furnished by ZHI hereunder or thereunder
to the extent, and only to the extent, that such representations, warranties
or agreements survive the Closing;
(b) any obligation or liability for product liability for products
manufactured and sole and for services performed prior to the Closing Date;
and
(c) any obligation, duty or liability incurred prior to Closing
relating to Company's use, discharge, treatment, storage, generation or
disposal of hazardous substances as defined by any federal, state or local
statute, rule or regulation concerning or related to the protection of the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. '9601
et seq; provided, however, that neither ZHI nor Company shall have any
liability under this Section 14.02 to the extent, and only to the extent, of
Damages caused as a result of any action taken or omitted to be taken by Buyer
after the Closing Date.
14.03 Indemnities by Buyer and POC. Buyer and POC, jointly and
--------------------------------
severally, shall indemnify, defend and hold harmless Company and ZHI, their
directors, officers, employees, shareholders, agents, successors, assigns,
attorneys and personal representatives against and in respect of any and all
Damages that Company or ZHI shall incur or suffer which arise out of, result
from or relate to any of the following:
(a) any misrepresentation, breach of warranty or nonfulfillment of
any agreement on the part of Buyer or POC under this Agreement or any of the
documents, agreements or instruments delivered in connection herewith or from
any misrepresentation in or omission from any certificate, schedule, exhibit
or other instrument furnished or to be furnished by Buyer or POC hereunder
or thereunder to the extent, and only to the extent, that such
representations, warranties or agreements survive the Closing;
(b) the Assumed Liabilities; provided, however, that neither Buyer
or POC shall have any liability under this Section 14.03 to the extent, and
only to the extent, of Damages caused as a result of any action taken or
omitted to be taken by Company after the Closing Date; and
(c) any Accepted Bid.
14.04 Notice of Indemnifying Party. If any party (the "Indemnitee")
-------------------------------
receives notice of any claim, assertion or other commencement of any action or
proceeding or becomes aware of any matter with respect to which the other
party is obligated to provide indemnification (the "Indemnifying Party")
pursuant to Section 14.01, 14.02 or 14.03, the Indemnitee shall promptly give
the Indemnifying Party written notice thereof. Failure to give such notice
shall not affect a party's right to be indemnified hereunder; provided,
--------
however, that the Indemnifying Party's liability hereunder shall be limited to
-
that which would have existed had prompt notice been given, and the Indemnitee
shall be solely responsible for, and shall indemnify the Indemnifying Party
from, such increased liability, if any, as shall have been occasioned by its
failure to provide the Indemnifying Party with prompt notice. The
Indemnifying Party shall have the right to defend, at such Indemnifying
Party's own expense and by such Indemnifying Party's counsel, any such matter
involving the asserted liability of the Indemnitee. In such event, the
Indemnitee, the Indemnifying Party and the Indemnifying Party's counsel shall
cooperate in the defense against any such asserted liability. The Indemnitee
may participate in the defense of such asserted liability at its own expense;
provided, however, that if the Indemnitee elects not to participate in such
-------- -------
defense, the Indemnifying Party shall keep the Indemnitee fully apprised at
--
all times as to the status of the defense or any settlement negotiations with
--
respect thereto. If the Indemnifying Party does not notify the Indemnitee
within thirty (30) days, or within such shorter response period as is required
to avoid prejudice to the ability to defend against such claim, assertion,
action or proceeding, after receipt of Indemnitee's notice of an action or
proceeding that the Indemnifying Party intends to assume the defense of such
claim, action, assertion or proceeding, then the Indemnitee may defend such
claim, action, assertion or proceeding. Neither party shall effect a
settlement of any action or claim without the prior written consent of the
other party, which consent shall not be unreasonably withheld; provided,
--------
however, that if the Indemnifying Party desires to effect a settlement of any
--
such action or claim for the payment of money only and in exchange for a
release of all known and unknown claims against Indemnitee, it shall present
to the Indemnitee for approval of such a bona fide settlement which is
acceptable to the other party to the claim or action (the "Proposed
Settlement") and, if the Indemnitee objects to the Proposed Settlement, the
Indemnitee shall cooperate fully in such defense and shall have the right, at
its sole expense, to proceed in the defense of such action or claim; provided,
--------
further, that, under such circumstance, in no event shall the Indemnifying
-------
Party's liability exceed the amount of the Proposed Settlement, and that the
---
Indemnitee shall indemnify and hold harmless the Indemnifying Party for
liabilities, if any, in excess of the amount of the Proposed Settlement. If
the Indemnifying Party chooses to defend any claim, the Indemnitee shall
cooperate fully in such defense and shall make available to the Indemnifying
Party any books, records or other documents within its control that are
reasonably necessary or appropriate for such defense.
14.05 Limitations on Liability of Company and ZHI.
-------------------------------------------------
(a) Company and ZHI shall have no obligation to indemnify Buyer, POC
or any other person against Damages pursuant to this Section 14 unless and
until the aggregate of all such Damages suffered or incurred by Buyer or such
persons exceed the sum of Fifty Thousand Dollars ($50,000.00) and then or in
for the amount by which such Damages exceeds Fifty Thousand Dollars
($50,000.00); provided, that in no event shall the aggregate liability of
Company or ZHI for Damages pursuant to this Section 14 exceed the unpaid
principal amount of the Royalty Note, as adjusted pursuant to its terms or the
terms of this Agreement, plus all amounts paid by Buyer to Company in respect
of the Royalty Note, in the case of Company, and Two Hundred Twenty Thousand
Dollars ($220,000.00) in the case of ZHI; provided, further, however, that the
foregoing limitations shall not apply (i) to Company's indemnification
obligations under Section 14.01(b) hereof or (ii) to ZHI's indemnification
obligations under Sections 14.02(b) and 14.02(c) hereof.
(b) Notwithstanding anything to the contrary herein, Company and
ZHI shall have no obligation to indemnify Buyer, POC or any other person
against Damages resulting from a breach of representation or warranty
hereunder to the extent that Buyer or POC had actual knowledge prior to the
date hereof that such representation or warranty was untrue or incorrect, or
to the extent that Buyer or POC acquired such actual knowledge after the date
hereof and prior to the Closing and with such actual knowledge consummated the
transactions contemplated hereby.
14.06 Offset. Buyer shall have the right to offset Damages hereunder
------
against the principal amount of, and payments due under, the Royalty Note.
14.07 Survival. All representations and warranties contained in or made
--------
pursuant to this Agreement or in any agreement, certificate, document or
statement delivered pursuant hereto shall survive the Closing for a period of
two (2) years; provided, however, that Company's indemnification obligations
under Section 14.01(b) and ZHI's indemnification obligations under Section
14.02(b) and Section 14.02(c) shall survive the Closing for their applicable
statutes of limitations.
14.08 Sole Remedies. The remedies provided for in this Section 14 are
--------------
exclusive and shall be in lieu of all other remedies for breach of this
Agreement, including, without limitation, for breaches of representations,
warranties, covenants and agreements hereunder; provided, however, that the
foregoing clause of this sentence shall not be deemed a waiver by any party of
any right to specific performance or any remedy arising by way of any claim of
fraud with respect to this Agreement.
15. MISCELLANEOUS.
-------------
15.01 Disclaimers.
-----------
(a) In connection with Buyer's investigation of the Business,
certain projections, and certain business plan information for succeeding
fiscal years were made available to Buyer. Buyer acknowledges that there are
uncertainties inherent in attempting to make such projections and other
forecasts and plans, that Buyer is familiar with such uncertainties, that
Buyer is taking full responsibility for making its own evaluation of the
adequacy and accuracy of all projections and other forecasts and plans so
furnished to it, and that Buyer shall not have any claim against Company with
respect thereto. Accordingly, Company makes no representation or warranty
with respect to such projections and other forecasts and plans.
(b) Buyer acknowledges that Company is not conducting business
in the ordinary course and that there have been material adverse changes in
the business, financial condition, operations, results of operations or
further prospects of Company and the Affiliated Entities. Accordingly,
Company makes no representation that it is conducting its business in the
ordinary course or that there has not been any material adverse change in the
Business, financial condition operations, results or operation or future
prospects of Company and the Affiliated Entities.
15.02 Further Assurances.
-------------------
(a) Company, at any time after the Closing Date, shall execute,
acknowledge, and deliver any further deeds, assignments, conveyances, bills of
sale, and other assurances, documents and instruments of transfer, reasonably
requested by Buyer and will take any other action consistent with the terms of
this Agreement that may be reasonably requested by Buyer for the purpose of
transferring, assigning, granting, conveying, delivering or confirming to
Buyer, or reducing to possession, any or all of the Assets transferred to
Buyer pursuant to this Agreement as of the Closing Date or that may be
requested by Buyer as necessary to carry out the purposes and intents of this
Agreement.
(b) Buyer, at any time after the Closing Date, shall execute,
acknowledge and deliver any further documents and instruments, and shall take
any other action consistent with the terms of this Agreement, that may be
reasonably requested by Company as necessary to carry out the purposes and
intents of this Agreement.
15.03 Brokers and Finders. Each of the parties agrees to indemnify and
--------------------
hold harmless one another against any loss, liability, damage, cost, claim or
expense incurred by reason of any brokerage commission or finder's fee alleged
to be payable because of any act, omission or statement of the indemnifying
party.
15.04 Other Costs. Each of the parties shall pay all costs and expenses
-----------
incurred or to be incurred by it in negotiating and preparing this Agreement
and in closing and carrying out the transactions contemplated by this
Agreement.
15.05 Headings. The subject headings of the Sections of this Agreement
--------
are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
15.06 Integration; Waiver. This Agreement, and the other agreements,
--------------------
documents, certificates and instruments delivered hereunder and the Schedules
hereto, constitute the entire agreement between the parties pertaining to the
subject matter herein and therein and supersede all prior and contemporaneous
agreements, representations and understandings of the parties including,
without limitation, the Letter of Commitment dated November 13, 1996 among the
parties. No party hereto is making any representation or warranty whatsoever,
express or implied, oral or written, beyond those expressly given in this
Agreement. No supplement, modification or amendment of this Agreement shall
be binding unless executed in writing by all the parties. No waiver of any of
the provisions of this Agreement shall be deemed, or shall constitute, a
waiver of any other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless executed in
writing by the party making the waiver.
15.07 Counterparts. This Agreement may be executed simultaneously in one
------------
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15.08 Schedules. Each Schedule delivered pursuant to the terms of this
---------
Agreement constitutes an integral part of this Agreement.
15.09 Severability. If any term or provision of this Agreement or the
------------
application thereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Agreement or the application
of such terms or provisions to persons or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby and each
term and provision of this Agreement shall be valid and enforced to the
fullest extent permitted by law.
15.10 Other Parties. Nothing in this Agreement, whether express or
--------------
implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended
to relieve or discharge the obligation or liability of any third persons to
any party to this Agreement, nor shall any provision give any third persons
any right of subrogation or action over against any party to this Agreement.
15.11 Inurement; Assignment. This Agreement shall be binding on, and
----------------------
shall inure to the benefit of, the parties to it and their respective heirs,
legal representatives, successors, and assigns, but may not be assigned by
either party without the prior written consent of the other party; provided,
however, that Company and ZHI, as the case may be, may assign its interest in
the, the Royalty Note or the Convertible Debenture and their respective
guarantees to any secured or unsecured creditors of Company or the Affiliated
Entities without the consent of Buyer or POC.
15.12 Notices. All notices, requests, demands, and other communications
-------
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice
is to be given, on the date of transmission if sent by telex, telecopier or
telegraph, or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by first-class mail, registered or certified\return
receipt requested, postage prepaid, and properly addressed as follows:
To Buyer: Xxxxxx Acquisition Corporation
c/o Penn Octane Corporation
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Copy to: Coudert Brothers
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
To POC: Penn Octane Corporation
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Copy to: Coudert Brothers
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
To Company: Xxxxxx Technologies Incorporated
c/x Xxxxxxxxx Holdings, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxx, XX 00000-0000
Attn.: Xxxxxxx X. Xxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Copy to: Rodi, Pollock, Pettker, Galbraith
& Xxxxxx, A Law Corporation
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn.: Xxxxx X. Xxxxxx, Xx., Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
To ZHI: Xxxxxxxxx Holdings, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxx, XX 00000-0000
Attn.: Xxxxxxx X. Xxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Copy to: Rodi, Pollock, Pettker, Galbraith
& Xxxxxx, A Law Corporation
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn.: Xxxxx X. Xxxxxx, Xx., Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
Any party may change its address for purposes of this paragraph by giving
the other party notice of the new address in the manner set forth above.
15.14 Governing Law.
--------------
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the State of California applicable to
contracts entered into in that state between citizens of that state and to be
performed wholly within that state without reference to any rules governing
conflicts of laws. The parties agree that any venue for any suit, action,
proceeding or litigation arising out of or in relation to this Agreement shall
be in any federal or state court in Los Angeles, California having subject
matter jurisdiction. Each of the parties consents to the jurisdiction of such
courts in any such action or proceeding and waives any objection to venue in
such courts in any such action or proceeding.
15.15 Attorneys' Fees. If any legal action or arbitration or other
----------------
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it may be
entitled.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it
on the day and year first above written.
BUYER
-----
XXXXXX ACQUISITION CORPORATION, a Delaware
corporation
By:
Title:
POC
---
PENN OCTANE CORPORATION,
a Delaware corporation
By:
Title:
[Signatures continued on next page]
COMPANY
-------
XXXXXX TECHNOLOGIES INCORPORATED, a California
corporation
By:
Title:
ZHI
---
XXXXXXXXX HOLDINGS, INC., a California corporation
By:
Title:
[Signatures continued from previous page]
iv
TABLE OF CONTENTS
-----------------
PAGE NO.
---------
Section 1. PURCHASE OF ASSETS OF COMPANY 2
1.01 Purchased Assets 2
1.02 Excluded Assets 6
1.03 Assumed Liabilities 7
1.04 Excluded Liabilities 8
1.05 Royalty Note 10
1.06 Royalty Note Adjustment 10
1.07 Allocation of Purchase Price 13
1.08 Sales and Transfer Taxes 13
Section n 2. PURCHASE OF STOCK OF AFFILIATED ENTITIES 14
2.01 Purchase of Stock 14
2.02 Convertible Debenture 14
Sectionn 3. AS-IS, WHERE-IS 14
Sectionn 4. REPRESENTATIONS AND WARRANTIES OF COMPANY 14
4.01 Corporate Existence 15
4.02 Authority; Enforceability 15
4.03 No Violation 15
4.04 Consents and Approvals 16
4.05 Title to Assets 16
Sectionn 5. REPRESENTATIONS AND WARRANTIES OF ZHI 16
5.01 Corporate Existence 16
5.02 Authority; Enforceability 17
5.03 No Violation 18
5.04 Consents and Approvals 18
5.05 Capitalization of Affiliated Entities 18
Section 6. REPRESENTATIONS AND WARRANTIES OF BUYER 20
6.01 Corporate Existence 20
6.02 Authority; Enforceability 20
6.03 No Violation 21
6.04 Consents and Approvals 21
Section 7. REPRESENTATIONS AND WARRANTIES OF POC 21
7.01 Corporate Existence 21
7.02 Authority; Enforceability 21
7.03 No Violation 22
7.04 Consents and Approvals 22
Section 8. OBLIGATIONS OF THE PARTIES UNTIL CLOSING 22
8.01 Conduct of the Business 22
8.02 Bulk Sales 23
8.03 Creditors of Company 23
8.04 Resale Certificate 24
8.05 Confidentiality 24
8.08 Public Announcements 26
8.09 Sales, General and Administrative Expenses 26
8.10 Expenses for the Benefit of Buyer 27
Sectionn 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND POC 27
9.01 Representations and Warranties 28
9.02 Performance of Covenants 28
9.03 Approvals 28
9.04 Creditors 28
9.05 Legal Matters 28
9.06 SG&A Payment and Expense Reimbursement Amount 28
Section n 10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ZHI
AND COMPANY 29
10.01 Representations and Warranties 29
10.02 Performance of Covenants 29
10.03 Approvals 29
10.04 Creditors 29
10.05 Legal Matters 29
10.06 SG&A Payment and Expense Reimbursement Amount 30
Section n 11. CLOSING 30
11.01 The Closing Date 30
11.02 Actions and Deliveries by Company and ZHI 30
11.03 Actions and Deliveries by Buyer and POC 32
Section n 12. TERMINATION 33
12.01 Termination Events 33
12.02 Effect of Xxxxxxxxxxx 00
Xxxxxxx 00. POST-CLOSING OBLIGATIONS 35
13.01 Employees 35
13.02 Unfinished Safeco Orders 35
13.03 Access to Records 36
13.04 Inventory 37
13.05 Assumed Accounts Receivable 37
13.06 Covenant Not to Compete; No Raid 38
13.07 Warranty 40
13.08 Guaranty 40
13.09 Change of Corporate Name 40
13.10 Bids 41
Section n 14. INDEMNIFICATION; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES 41
14.01 Indemnities by Company 41
14.02 Indemnities by ZHI 42
14.03 Indemnities by Buyer and POC 43
14.04 Notice of Indemnifying Party 44
14.05 Limitations on Liability of Company and ZHI 46
14.06 Offset 47
14.07 Survival 47
14.08 Sole Remedies 47
Section 15. MISCELLANEOUS 48
15.01 Disclaimers 48
15.02 Further Assurances 49
15.03 Brokers and Finders 49
15.04 Other Costs 50
15.05 Headings 50
15.06 Integration; Waiver 50
15.07 Counterparts 51
15.08 Schedules 51
15.09 Severability 51
15.10 Other Parties 51
15.11 Inurement; Assignment 52
15.12 Notices 52
15.14 Governing Law 54
15.15 Attorneys' Fees 55
iv
SCHEDULES
---------
Schedule 1.01 (b) Assumed Accounts Receivable
Schedule 1.01 (d) Purchased Tangible
Personal Property
Schedule 1.01 (e) Purchased Intellectual
Property
Schedule 1.01 (g) Assumed Leases
Schedule 1.01 (h) Assumed Sales Orders
Schedule 1.01 (i) Assumed Contracts
Schedule 1.01 (m) Assumed Medical Plans
Schedule 1.02 (f) Excluded Sales Orders
Schedule 1.02 (g) Excluded Receivables
Schedule 1.02 (i) Excluded Contracts
Schedule 1.02 (j) Other Excluded Assets
Schedule 1.03 (c) Assumed Employee Liabilities
Schedule 1.03 (d) Other Assumed Liabilities
Schedule 1.04 (h) Other Excluded Liabilities
Schedule 1.07 Purchase Price Allocation
Schedule 4.05 Title to Assets
Schedule 5.05 Title to Shares
Schedule 8.10 Reimbursement Expenses
Schedule 9.03 Required Company Consents
Schedule 10.03 Required Buyer Consents
Schedule 13.01 Employees
Schedule 13.02 Unfinished Safeco Orders
v
EXHIBITS
--------
A Royalty Note
B Convertible Debenture
C SG&A Note
viii
PURCHASE AGREEMENT
by and among
XXXXXX TECHNOLOGIES INCORPORATED,
XXXXXXXXX HOLDINGS, INC.
XXXXXX ACQUISITION CORPORATION,
AND
PENN OCTANE CORPORATION
