Exhibit 10.55
ASSET PURCHASE AGREEMENT
by and among
SCAN-OPTICS, INC.
as Buyer,
PHOTOMATRIX IMAGING CORPORATION
as Seller,
I-PAC MANUFACTURING, INC.
and
PHOTOMATRIX, INC.
June _____, 1999
ASSET PURCHASE AGREEMENT
INDEX
SECTION 1. PURCHASE AND SALE OF ASSETS.................................................................2
1.1 Sale of Assets........................................................................2
1.2 Assumption of Liabilities............................................................13
1.3 Closing Date Payment.................................................................20
1.4 Calculation and Payment of Purchase Price............................................21
1.5 Time and Place of Closing............................................................22
1.6 Delivery of Agreement for Assumption of Liabilities, Lease Assignments and Licenses..23
1.7 Transfer of Subject Assets...........................................................23
1.8 Delivery of Records and Contracts....................................................23
1.9 Further Assurances...................................................................24
1.10 Allocation of Purchase Price.........................................................24
1.11 Sales and Transfer Taxes.............................................................25
1.12 Accounts Receivable..................................................................25
1.13 Procedures for Assets not Transferable...............................................26
1.14 Employees, Wages and Benefits........................................................28
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER.............................................31
2.1 Making of Representations and Warranties.............................................31
2.2 Organization and Qualifications of Seller............................................32
2.3 Subsidiaries.........................................................................32
2.4 Authority of Seller, I-PAC and Parent................................................32
2.5 Real and Personal Property...........................................................34
2.6 Financial Statements.................................................................38
2.7 Taxes................................................................................39
2.8 Account Receivables..................................................................42
2.9 Inventory............................................................................43
2.10 Ordinary Course; Absence of Certain Changes..........................................43
2.11 Intellectual Property................................................................46
2.12 Contracts............................................................................48
2.13 Litigation...........................................................................50
2.14 Compliance with Laws.................................................................51
2.15 Insurance............................................................................51
2.16 Warranty or Other Claims.............................................................51
2.17 Powers of Attorney...................................................................52
2.18 Permits; Burdensome Agreements.......................................................52
2.19 Corporate Records; Copies of Documents...............................................52
2.20 Related Transactions.................................................................53
2.21 Employee Benefit Programs............................................................53
2.22 Environmental Matters................................................................56
2.23 Employees; Labor Matters.............................................................58
2.24 Customers, Distributors and Suppliers................................................58
2.25 Purchase Commitments.................................................................59
2.26 Required Consents....................................................................59
2.27 Adequacy of Subject Assets...........................................................59
2.28 Year 2000 Compliance.................................................................59
2.29 Brokers..............................................................................60
2.30 Disclosure...........................................................................61
SECTION 3. COVENANTS OF SELLER AND BUYER........................................................61
3.1 Making of Covenants and Agreements...................................................61
3.2 Notice of Default....................................................................61
3.3 Consummation of Agreement............................................................62
3.4 Cooperation of Seller................................................................62
3.5 Non-competition......................................................................63
3.6 No Solicitation of Employees.........................................................63
3.7 Confidentiality......................................................................64
3.8 Tax Returns..........................................................................65
3.9 Bank Accounts........................................................................65
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER..............................................65
4.1 Making of Representations and Warranties.............................................65
4.2 Organization of Buyer................................................................65
4.3 Authority of Buyer...................................................................65
4.4 Litigation...........................................................................67
4.5 Brokers..............................................................................67
SECTION 5. U.K. VAT MATTERS.....................................................................67
5.1 Transfer of a Going Concern..........................................................67
5.2 Effect of Certain Representations....................................................68
5.3 Buyer VAT Representations............................................................70
SECTION 6. CONDITIONS...........................................................................70
6.1 Conditions to Obligations of Buyer...................................................70
6.2 Conditions to Obligations of Seller..................................................73
SECTION 7. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.........................................75
7.1 Survival of Representations and Warranties...........................................75
7.2 Collection of Assets.................................................................75
7.3 Payment of Obligations...............................................................76
7.4 Assistance After Closing.............................................................76
SECTION 8. INDEMNIFICATION......................................................................76
8.1 Indemnification by Seller, I-PAC and Parent..........................................76
8.2 Limitations on Indemnification by Seller, I-PAC and Parent...........................77
8.3 Indemnification by Buyer.............................................................78
8.4 Limitation on Indemnification by Buyer...............................................79
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8.5 Notice; Defense of Claims............................................................80
8.6 Additional Provisions................................................................83
SECTION 9. MISCELLANEOUS........................................................................84
9.1 Bulk Sales Law.......................................................................84
9.2 Fees and Expenses....................................................................84
9.3 Governing Law........................................................................84
9.4 Notices..............................................................................84
9.5 Entire Agreement.....................................................................85
9.6 Assignability; Binding Effect........................................................86
9.7 Captions and Gender..................................................................86
9.8 Execution in Counterparts............................................................86
9.9 Amendments...........................................................................87
9.10 Publicity and Disclosures............................................................87
9.11 Dispute Resolution...................................................................87
9.12 Consent to Jurisdiction..............................................................91
9.13 Third Party Beneficiaries............................................................91
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ASSET PURCHASE AGREEMENT
AGREEMENT entered into as of June _____, 1999 by and among Scan-Optics,
Inc., a Delaware corporation with offices at 000 Xxxxxxxx Xxxxx, Xxxxxxxxxx,
Xxxxxxxxxxx 00000-0000 (the "Buyer"), and Photomatrix Imaging Corporation, a
Nevada corporation with offices at 0000 Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx
00000 (the "Seller"), I-PAC Manufacturing Inc., a California corporation with
offices at 0000 Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000 ("I-PAC") and
Photomatrix, Inc., a California corporation with offices at 0000 Xxxxxxx Xxxxxx,
Xxxxxxxx, Xxxxxxxxxx 00000 (the "Parent").
W I T N E S S E T H
WHEREAS, subject to the terms and conditions set forth herein, Buyer
desires to purchase from Seller, and Seller desires to sell, transfer and assign
to Buyer, the Subject Assets (as defined in Section 1.1 hereof), which
constitute certain properties and assets of Seller related to, used or held for
use in connection with the scanner product manufacturing, engineering, sales and
service portion of the business and operations of Seller (such business and
operations are referred to herein as the "Business");
WHEREAS, subject to the terms and conditions hereof, Buyer desires to
purchase such Subject Assets and to assume the Assumed Liabilities (as defined
in Section 1.2 hereof) for the consideration specified herein; and
WHEREAS, Parent owns all of the outstanding capital stock of Seller and
I-PAC and Buyer will not purchase the Subject Assets and assume the Assumed
Liabilities unless I-PAC and Parent agree to indemnify Buyer as provided herein;
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements and consents set forth herein, the
parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1 SALE OF ASSETS.
(a) SUBJECT ASSETS. Subject to the provisions of this
Agreement, Seller agrees to sell and Buyer agrees to purchase, at the Closing
(as defined in Section 1.5 hereof), all of Seller's right, title and interest
in, to and under all of the following properties, assets and business of Seller
related to, used in or held for use in the Business, including without
limitation, goodwill (except as hereinafter provided in Section 1.1(b)), of
every kind and description, tangible and intangible, real, personal or mixed,
and wherever located:
(i) INVENTORY. All inventory related to manufacturing
(including raw materials, work in process, rework products, including
those for Xxxx & Xxxxxx Company ("Xxxx & Xxxxxx"), and finished goods),
engineering, service and spare parts for products, including, but not
limited to, document scanners, aperture card scanners, duplicators and
any other systems currently under maintenance (including those under
maintenance for Xxxxxxx Kodak Corporation), sold as part of the
Business, including but not limited to Inventory identified in SCHEDULE
1.1(a)(i), (collectively, the "Inventory"), all warranties held by
Seller with respect to the Inventory, and, to the extent assignable,
any rights of Seller to the warranties received from other suppliers
and any related claims,
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credits, rights of recovery and set off with respect to such Inventory;
provided, however, that if any such rights are not so assignable,
Buyer's rights in respect thereof shall be governed pursuant to the
terms and conditions of Section 1.13 hereof;
(ii) EVALUATION UNITS. All products of the Business
that are located at a customer's or prospective customer's site as an
evaluation unit, for purposes of evaluation for purchase as identified
on SCHEDULE 1.1(a)(ii) ("Evaluation Units");
(iii) EQUIPMENT. All machinery, furnishings,
equipment and leasehold and personal property to the extent related to
the Business and all tools and dies and other machinery and equipment
for the manufacture of products sold in the Business, located in
Carlsbad, California, Chandler, Arizona, the United Kingdom and
elsewhere, including, but not limited to, those identified in SCHEDULE
1.1(a)(iii) (collectively, the "Fixed Assets"), and, to the extent
assignable, any rights of Seller to the warranties received from the
manufacturers and distributors of said items and to any related claims,
credits, rights of recovery and set off with respect to such items;
provided, however, that if any such rights are not so assignable,
Buyer's rights in respect thereof shall be governed pursuant to the
terms and conditions of Section 1.13 hereof;
(iv) INTELLECTUAL PROPERTY. All goodwill and
intellectual property rights, including, but not limited to, the
Millennium Technology (as defined in Section 1.l(a)(v)), trade secrets,
proprietary business information,
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designs, styles, technologies, inventions, works of authorship,
know-how, formulae, processes, industrial models, industrial designs,
trade secrets, trade secret rights, procedures, research records, test
information, software and software documentation (including but not
limited to market surveys, marketing know-how and manufacturing,
research and technical information, trade names, emblems, logos,
insignias, copyrights and copyright registrations, service marks and
trademarks and related trademarks and registrations (including
applications and registrations therefor), patents and patent
applications (including, without limitation, the trade names,
copyrights and copyright registrations, service xxxx and trademark
registrations and applications and patents and patent applications
described in SCHEDULE 1.1(a) (iv)), specifications, technical manuals
and data, libraries, blueprints, drawings, proprietary processes,
product information and development work-in-process and all licenses to
or from third parties with respect to the foregoing or rights related
thereto, in each case which is related to, used in or held for use in
the Business (collectively, the "Intellectual Property"), excluding the
trade name "Photomatrix" and its associated insignia and logo;
(v) MILLENNIUM TECHNOLOGY. Subject to the terms and
conditions contained in this Agreement, Seller does hereby assign to
Buyer all of its right, title, and interest, now owned or hereafter
acquired, in and to the Millennium Hardware, Millennium Software,
Documentation, Intangible Property, and Related Technology
(collectively, "Millennium Technology"), including the right to xxx and
recover for past and future infringements of the Millennium Technology.
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(1) DEFINITIONS.
a. MILLENNIUM HARDWARE. "Millennium
Hardware" shall mean all Seller's right, title, and interest,
throughout the world, in and to any products, prototypes, projects,
components, or parts, or any tangible items relating thereto, at any
stage of development, in any way related to the desktop scanners known
as "Millennium," including, without limitation, the products described
on SCHEDULE 1.1(a)(v).
b. MILLENNIUM SOFTWARE. "Millennium
Software" shall mean all Seller's right, title, and interest,
throughout the world, in and to the software known as "Millennium," and
any other software used or useful in connection with the Millennium
Hardware, all supplements, enhancements, and modifications thereto
(regardless of the state of development), and all personal property
relating thereto, including, without limitation, source codes, object
codes, technical documentation, and similar information necessary for
the practical utilization thereof. For purposes of further
identification, the Millennium Software includes, without limitation,
the source code modules listed on SCHEDULE 1.1(a)(v).
c. DOCUMENTATION. "Documentation" shall mean
all user manuals, brochures, and other written information describing
any aspect of the Millennium Hardware, Millennium Software, Intangible
Property, or Related Technology, or designed to facilitate the use or
modification or enhancement of any of the foregoing.
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d. INTANGIBLE PROPERTY. "Intangible
Property" shall mean all patents, copyright, copyright registrations,
and patent applications therefor, together with all divisions,
renewals, and continuations of any of the foregoing, and all know-how,
unpatented inventions, trade secrets, and other intangible,
intellectual property embodied in or pertaining to the Millennium
Hardware, Millennium Software, Documentation, or Related Technology.
e. RELATED TECHNOLOGY. "Related Technology"
shall mean all things authored, discovered, developed, made, perfected,
improved, designed, engineered, acquired, produced, conceived, or first
reduced to practice by Seller or any of its employees or agents that
are embodied in, derived from, or relate to the Millennium Hardware,
Millennium Software, Documentation, or Intangible Property, in any
stage of development, including without limitation, inventions, whether
or not patentable, patents and patent rights, patent applications,
trade secrets, know-how, and proprietary information, whether or not
reduced to writing, software and source code, engineering and
manufacturing information, electronic control circuits, specifications,
diagrams, drawings, schematics, blueprints, and parts lists,
modifications, enhancements, designs, concepts, techniques, methods,
ideas, flow charts, coding sheets, programs, programmers' notes,
prototypes, techniques, methods, ideas, concepts, data, and all other
information relating to the Millennium Hardware, Millennium Software,
Documentation, or Intangible Property, and not generally known within
the computer or technology industries.
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f. NET SALES PRICE. "Net Sales Price" shall
mean the actual price invoiced by Buyer for any Millennium Product,
less quantity discounts granted at the time of invoice, amounts
refunded for faulty or defective products, freight, insurance and other
transportation, costs, duties, income taxes, and other governmental
charges paid.
(2) ROYALTIES. In exchange for the grant of rights
under this Agreement, and upon satisfactory Delivery of the Millennium
Technology by Seller to Buyer, Buyer will pay Seller quarterly
royalties on the aggregate Net Sales Price of products incorporating
the Millennium Technology ("Millennium Products") as follows: three
percent (3.0 %) of the Net Sales Price over the first three (3) years
from the date of first commercial shipment of the initial Millennium
product, with the aggregate amount of royalties paid hereunder
("Aggregate Royalty") not to exceed Two Hundred Fifty Thousand Dollars
($250,000). For any Millennium Products sold together with other
products that are not subject to royalty hereunder ("Bundled
Products"), the aggregate Net Sales Price for such Millennium Products
is calculated by multiplying the aggregate net sales price for the
Bundled Products by [A/(A+B)] where A and B are the average Net Sales
price of (A) the Millennium Product and (B) all other products that are
not subject to royalty hereunder, respectively. Royalty payments are
due forty-five (45) days after the end of each calendar quarter (i.e.,
on February 15 for the quarter ending December 31, on May 15 for the
quarter ending March 31, etc.) including the calendar quarter during
which the first commercial shipment occurs. Notwithstanding any
contrary provisions contained
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herein, no royalty shall be paid on the Net Sales Prices after
aggregate Royalties have amounted to Two Hundred Fifty Thousand Dollars
($250,000).
(3) DELIVERY. Not later than ten (10) days after the
Closing, Seller shall deliver to Buyer the Millennium Technology,
including a master copy of all currently available Millennium Software,
Documentation, and source code, as identified on SCHEDULE 1.1(a)(v)
("Delivery").
(4) CONFIDENTIALITY AND NON-DISCLOSURE. Seller
acknowledges and agrees that the Millennium Technology constitutes
valuable confidential and proprietary information and trade secrets
(the "Confidential Information"). Seller agrees to use commercially
reasonable efforts to prevent disclosure of the Confidential
Information to third parties. This Section shall survive the
consummation of the sale and termination of this Agreement.
(vi) ACCOUNTS RECEIVABLE. All accounts receivable of
Seller from customers of the Business (the "Receivables");
(vii) CONTRACTS. To the extent related to the
Business, and to the extent assignable, all of Seller's rights and
interests in and to all contracts, contract deposits, deferred revenue
obligations, agreements, leases, supply contracts, purchase orders,
sales orders, commitments, consulting agreements and instruments that
Seller has received or is a party to, including, but not limited to,
all license agreements under which Seller has licensed other parties to
use, distribute, modify, manufacture or re-sell products (including
software) of the Business, the backlog of orders for the manufacture,
sale or lease of products or
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services for which no revenues have been recognized by Seller
(collectively, the "Contracts"), including, but not limited to, those
Contracts identified on SCHEDULE 1.1(a)(vii) hereto; but excluding any
contracts or agreements pursuant to which Seller or an affiliate
purchases products or services from a third party for any purpose other
than solely for the Business, none of which such excluded contracts are
material to the Business; provided, however, that to the extent any
such rights and interests in and to such Contracts are not so
assignable, Buyer's rights and interests in respect thereof shall be
governed pursuant to the terms and conditions of Section 1.13 hereof;
(viii) REAL PROPERTY LEASES. To the extent related to
the Business, and to the extent assignable, all of Seller's rights and
interests in and to the real property leases of Seller listed on
SCHEDULE 1.1(a)(vii) hereto (the "Leases");
(ix) APPROVALS, GOVERNMENT PERMITS. All of Seller's
right, title and interest in and to all franchises, licenses, permits,
certifications, registrations, certificates of inspection, approvals
and authorizations used solely in the Business issued by any unit,
division, department, commission, board, agency, bureau or official of
any federal, state, local or foreign governmental entity (collectively,
the "Governmental Permits"), but only to the extent that any such
Governmental Permits are assignable or transferable by Seller to Buyer.
Where annual fees are payable and previously paid (as set forth in
SCHEDULE 1.1(a)(ix)), Buyer shall reimburse Seller for a PRO RATA share
of such payments;
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(x) INVESTMENTS, PREPAID EXPENSES. As allocable to
the Business, all assets, investments ("Investments") and prepaid
expenses ("Prepaid Expenses") related to the operations of the Business
(as set forth in SCHEDULE 1.1(a)(x));
(xi) PROPRIETARY BUSINESS INFORMATION. All mailing
lists, customer lists, customer records and histories, customer
invoices, lists of suppliers and vendors and all records relating
thereto, engineering drawings and files, records with respect to
production, manufacturing, engineering, product development and costs,
advertising matter, catalogues, photographs, sales literature and
materials, purchasing materials, media materials, manufacturing and
quality control records and procedures, research and development files,
data and laboratory books, vendor data, equipment maintenance records,
warranty information, records of operations, standard forms of
documents, service records, manuals of operation or business procedures
and other similar information used in the Business, and all trade
secret and copyright rights therein (collectively, in either hard copy
or electronic form, the "Proprietary Business Information");
(xii) BOOKS AND RECORDS. All books and records of
Seller (including all discs, tapes and other media-storing data and
other information) to the extent used in the Business, and all
confidentiality agreements entered into with third parties regarding
the Business, but excluding the Excluded Records (as defined in Section
1.l(b)(iv)(3)) (collectively, the "Books and Records");
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(xiii) CLAIMS, CAUSES OF ACTION. All of Seller's
rights, claims or causes of action against third parties related to any
Subject Asset or Assumed Liability (but not any Excluded Asset or
Excluded Liability) arising out of transactions occurring prior to the
Closing Date;
(xiv) LICENSES. All of Seller's right, title and
interest in and to the licenses, agreements and other arrangements
under which Seller has the right to use any propriety information of a
third party, or the right to use, reproduce, distribute or modify any
works of authorship of a third party, in either case, to the extent
used or held for use in the conduct of the Business, including, but not
limited to, those identified on SCHEDULE 1.1(a)(xiv) (the "Licenses"),
but only to the extent that any such License is by its terms or by law
assignable or transferable to Buyer; and
(xv) OTHER ASSETS. All other assets and properties of
every nature whatsoever tangible and intangible, wherever located and
to the extent related to, used in or held for use in connection with
the Business, including, but not limited to, all assets shown or
reflected in the Closing Balance Sheet (as defined in Section 2.6
hereof).
(b) EXCLUDED ASSETS. Notwithstanding the foregoing, there
shall be excluded from such purchase and sale the following property
and assets:
(i) OTHER ASSETS. Any assets or property of Seller
that are not Subject Assets, including those specified on
SCHEDULE 1.1(b)(i);
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(ii) ADMINISTRATION EQUIPMENT AND SUPPLIES.
Furnishings and equipment used in general administration and not
primarily used in the operation of the Business;
(iii) CLAIMS, CAUSES OF ACTION. Except for any of
Seller's rights, claims or causes of action related to a Subject Asset
or Assumed Liability, all of Seller's rights, claims or causes of
action against third parties relating to any Excluded Liability or
Excluded Asset; and
(iv) EXCLUDED RECORDS.
(1) CORPORATE RECORDS. Seller's corporate
franchise, stock record books, corporate record books containing
minutes of meetings of directors and stockholders and such other
records as have to do exclusively with Seller's organization or stock
capitalization, as well as any records not related to the Business
(collectively, the "Corporate Records");
(2) PERSONNEL RECORDS. Any of Seller's
personnel records pertaining to any employees of Seller, except
employees hired by Buyer after the Closing (collectively, the
"Personnel Records"); and
(3) RETAINED RECORDS. Any other books and
records related to the Business that Seller is required by law to
retain (the "Retained Records", and together with the Corporate Records
and the Personnel Records, the "Excluded Records"); provided, however,
that, except to the extent prohibited under any applicable law, Seller
shall provide Buyer with access to the Excluded Records for the purpose
of allowing Buyer to make copies.
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The assets, property and business of Seller to be sold to and purchased
by Buyer under Section 1.1(a) are hereinafter sometimes referred to as the
"Subject Assets", and the assets, property and business of Seller which are
excluded from the Subject Assets under this Section 1.1(b) are hereinafter
sometimes referred to as the "Excluded Assets".
1.2 ASSUMPTION OF LIABILITIES.
(a) ASSUMED LIABILITIES. Upon the sale and purchase of the
Subject Assets, Buyer shall assume and agree to pay or discharge when and as due
in accordance with their respective terms only the following liabilities:
(i) TRADE PAYABLES AND ACCRUED LIABILITIES. Those
trade payables and accrued liabilities of Seller directly attributable
to the Business or the Subject Assets, as listed on SCHEDULE 1.2(a)(i),
and which trade payables and accrued liabilities are outstanding at the
time of the Closing (collectively, the "Trade Payables");
(ii) SALES TAX. Any sales tax that has accrued with
respect to Receivables related to the Business and any tax that has
been collected but not remitted to the appropriate taxing authority,
but only to the extent that such Receivables (1) are acquired by Buyer
pursuant to Section 1.1(a)(vi) and (2) have not been collected by
Seller prior to the Closing (the "Sales Tax");
(iii) PERMITTED ENCUMBRANCES. Any Permitted
Encumbrances attaching to the Subject Assets including, but not limited
to, the Permitted Encumbrances listed on SCHEDULE 1.2(a)(iii). For the
purposes of this Agreement,
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"Permitted Encumbrances" means (1) to the extent arising by operation
of law, statutory liens for taxes not yet due and payable, (2) to the
extent arising by operation of law, statutory liens of landlords, liens
of carriers, warehouseman, mechanics and material men incurred in the
ordinary course of business, for sums not yet due and payable, (3) to
the extent arising by operation of law, liens incurred or deposits made
in the ordinary course of business to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return of money bonds and similar
obligations, (4) to the extent arising by operation of law, purchase
money liens incurred in the ordinary course of business, and (5) with
respect to leasehold interests, minor imperfections in title and minor
encroachments, if any, not material in amount and that, individually or
in the aggregate, do not materially interfere with the conduct of the
Business or with the use of such leasehold interests and do not
materially affect the value of the Business as a whole;
(iv) CUSTOMER DEPOSITS/DEFERRED REVENUE. Any deposits
or deferred revenue obligations that have been accepted with respect to
Contracts related to the Business, but only to the extent that such
Contracts and the cash related thereto are acquired by Buyer pursuant
to Section 1.1(a)(vii); and
(v) PROJECT MILLENNIUM OBLIGATION. The Widecom
obligation in the approximate amount of Sixty Thousand Dollar ($60,000)
arising out of Project Millennium.
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(b) ADDITIONAL ASSUMED LIABILITIES. With respect to the period
commencing from and after the Closing, Buyer shall also assume and agree to pay
the following liabilities:
(i) CONTRACTS, LICENSES, GOVERNMENT PERMITS. All
liabilities relating to the Contracts (including, but not limited to,
the employment contract between Seller and Xxx Xxxxx), the Leases, the
Licenses and the Governmental Permits in each case arising under such
Contracts, Leases, Licenses and Governmental Permits in accordance with
their terms for the period from and after the Closing in each case to
the extent assignable; provided, however, with respect to any Contract
or Lease not so assignable, Buyer's rights and obligations in respect
thereof shall be governed pursuant to the terms and conditions of
Section 1.13 hereof; and
(ii) EMPLOYMENT-RELATED LIABILITIES. As related to
the Business, any employment-related liabilities and obligations
arising from Buyer's employment after the Closing of any employees of
Seller. Buyer will also assume obligations for accumulated vacation,
holiday and sick leave to employees of Seller who are employed by
Buyer. Buyer will not assume employee liabilities related to the
employment and employment contract of Xxxxx Xxxxx and employee-related
liabilities and obligations arising from liabilities for those
employees who are not employed by Buyer.
The Assumed Liabilities not listed on SCHEDULE 1.2(a)(i) are listed on
SCHEDULE 1.2(b).
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(c) EXCLUDED LIABILITIES. Except for the Assumed Liabilities,
Buyer shall not assume or be bound by any obligations or liabilities of Seller
or any affiliate of Seller of any kind or nature, known, unknown, accrued,
absolute, contingent or otherwise, whether now existing or hereafter arising
whatsoever.
In connection therewith and notwithstanding the foregoing, except for
the Assumed Liabilities, it is specifically agreed that Buyer shall not assume
and shall not pay any other liabilities of Seller, including, without
limitation, the following:
(i) SELLER TRANSACTION EXPENSES. Liabilities incurred
by Seller in connection with or relating to this Agreement and the
transactions provided for herein, including, without limitation,
counsel and accountant's fees, any broker's commissions or finder's
fees and expenses pertaining to the performance by Seller and its
affiliates of its or their obligations hereunder;
(ii) TAXES. Taxes (as defined in Section 2.7 hereof),
other than the Sales Tax, of Seller (whether relating to periods before
or after the transactions contemplated in this Agreement or incurred by
Seller in connection with this Agreement, including any increase in
taxes as a result of the applicability of Section 280G of the Internal
Revenue Code of 1986 (the "Code") and the transactions provided for
herein);
(iii) WARRANTY LIABILITIES. Prior to the Closing,
with respect to the Business, any product or service warranty
liabilities arising from Seller's sales
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of products or services (the "Warranty Liabilities"); provided,
however, that with respect to all "9000 feeders", Seller agrees to
manufacture up to fifty (50) sets of replacement parts, within a
commercially reasonable amount of time, to enable the Buyer to re-build
the feeder to the latest feeder specifications, at no additional cost
to Buyer. When Buyer has repaired the feeder, Buyer shall re-install
the repaired feeder and pay the costs to ship the repaired feeder back
to the customer;
(iv) DEBT. Liabilities relating to all debt owed to
third parties or to related parties or affiliates of Seller, including,
but not limited to, any and all bank debt, other indebtedness for
borrowed money, obligations related to the promissory notes dated April
30, 1993, in the original aggregate principal amount of Seven Hundred
Seventy-Six Thousand Six Hundred Six Dollars and Eighty-One Cents
($776,606.81), from Seller to Xxxx (which Xxxx debt includes
non-negotiable term notes for First Dallas Limited, Xxxxxx Xxxxxx, Xxx
Xxxx, Xxxxxxx X. Xxxx, Xxxx Xxxx and Premier Partners Inc. as described
in SCHEDULE 1.2(c)(iv)) and any inter-company liabilities of Seller to
Parent or any related parties or affiliates of Parent;
(v) OTHER TRADE PAYABLES. All trade
liabilities of Seller which are not Trade Payables;
(vi) XXXXX CONTRACT. All obligations and liabilities
to Xxxxx Xxxxx, including, but not limited to, all obligations and
liabilities of Seller under the contract dated June 5, 1998 between
Seller and him; and
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(vii) LITIGATION AND PROCEEDINGS. Liabilities in
connection with or relating to all actions, suits, claims, proceedings,
demands, assessments and judgments, costs, losses, liabilities,
damages, deficiencies and expenses (whether or not arising out of
third-party claims), including, without limitation, interest,
penalties, reasonable attorneys' and accountants' fees and all amounts
paid in investigation, defense or settlement of any of the foregoing
Excluded Liabilities.
In furtherance of the foregoing, with the exception of claims based
upon the Assumed Liabilities, Seller shall be responsible for and pay any and
all of its losses, damages, obligations, liens, assessments, judgments, fines,
disposal and other costs and expenses, liabilities and claims, including,
without limitation, interest, penalties and reasonable fees of counsel,
engineers and experts, as the same are incurred, of every kind or nature
whatsoever (all the foregoing being a "Claim" or the "Claims"), made by or owed
to any person to the extent any of the foregoing relates to the operations and
assets of the Business and arises in connection with or on the basis of events,
acts, omissions, conditions or any other state of facts occurring or existing
prior to the Closing (including, in each case, without limitation, any Claim
relating to or associated with product liability matters, warranty claims, tax
matters, pension and benefit matters, any failure to comply with applicable laws
and/or permitting or licensing requirements, personal injury and property damage
matters and environmental and worker health and safety matters). Buyer shall be
responsible for and pay any and all Claims to the extent they relate to (1) the
liabilities set forth in Section 1.2(a) and (b) hereof to be assumed by Buyer or
(2) the operation by Buyer of the Subject Assets after the Closing and arise in
connection with or on the basis of events, acts, omissions, conditions or any
other state of facts occurring or
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existing after the Closing. Any Claim, other than for the payment of the Trade
Payables, relating to operations and assets of the Business and arising in
connection with or on the basis of events, acts, omissions, conditions or any
other state of facts (collectively, "Facts") occurring or existing both before
and after the Closing will be apportioned between Seller and Buyer according to
their relative degrees of causation. Pursuant to the foregoing, Seller agrees
with Buyer that Seller shall be responsible for any and all warranty claims or
claims for injury (including death) or claims for damage, direct or
consequential, resulting from or connected with products or services of the
Business manufactured, sold or provided on or prior to the Closing, and Buyer
shall have no liability for such claims. Buyer represents to Seller that its
product liability insurance is on an occurrence rather than a claims-made basis.
Buyer, for its part, shall be responsible for and pay any and all
Claims made by or owed to any person to the extent that the Claim (i) is based
upon an Assumed Liability, or (ii) relates to the operations and assets of the
Business and arises in connection with or on the basis of any Facts occurring or
existing after the Closing (including, in each case, except as otherwise
provided herein, any Claim relating to or associated with product liability
matters, warranty claims, tax matters, pension and benefit matters, any failure
to comply with applicable laws and/or permitting or licensing requirements,
personal injury and property damage matters and environmental and worker health
and safety matters). Seller shall be responsible for and pay any and all Claims
to the extent they relate to (1) the Excluded Liabilities set forth in Section
1.2(c) which will not be assumed by Buyer or (2) the operation by Seller of the
Subject Assets before the Closing and which arise in connection with or on the
basis of Facts occurring or existing before the Closing. Any
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Claim, other than for the payment of the Trade Payables, relating to operations
and assets of the Business and arising in connection with or on the basis of
Facts occurring or existing both before and after the Closing will be
apportioned between Seller and Buyer according to their relative degrees of
causation. Pursuant to the foregoing, Buyer agrees with Seller that Buyer shall
be responsible for any and all warranty claims or claims for injury (including
death) or claims for damage, direct or consequential, resulting from or
connected with products or services of the Business manufactured, sold or
provided after the Closing, and Seller shall have no liability for such claims.
The liabilities set forth in Section 1.2(a) and (b) hereof to be
assumed by Buyer under this Agreement are hereinafter sometimes referred to as
the "Assumed Liabilities" and all other liabilities which are not assumed by
Buyer under this Agreement are hereinafter sometimes referred to as the
"Excluded Liabilities." The assumption of said liabilities by any party
hereunder shall not enlarge any rights of third parties under contracts or
arrangements with Buyer or Seller and nothing herein shall prevent any party
from contesting in good faith with any third party any of said liabilities.
1.3 CLOSING DATE PAYMENT. In consideration of the sale by Seller to
Buyer of the Subject Assets, subject to the assumption by Buyer of the Assumed
Liabilities and the satisfaction of all of the conditions contained herein,
Buyer agrees that at the Closing, except as otherwise provided in Section 1.4,
it will deliver to Seller ninety percent (90%) of the Estimated Purchase Price
(as defined in Section 1.4) by bank cashier's checks, certified funds or other
same-day funds. In addition, Buyer shall pay such royalties to Seller as set
forth in Section 1.1(a)(v)(2).
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1.4 CALCULATION AND PAYMENT OF PURCHASE PRICE. Seller has provided to
Buyer an unaudited Closing Balance Sheet (as set forth in SCHEDULE 2.6), and on
the basis of it Seller and Buyer have agreed on an estimated purchase price of
Two Million One Hundred Thousand Dollars ($2,100,000) (the "Estimated Purchase
Price"), and ninety percent (90%) of that amount will be paid to Seller at the
Closing as provided in Section 1.3. The remaining ten percent (10%) of the
Estimated Purchase Price will be held in escrow (the "Escrow Amount"), in
accordance with the terms of the Escrow Agreement which shall be substantially
in the form attached hereto as EXHIBIT 1.4.
The Estimated Purchase Price will be subject to adjustment in
accordance with paragraphs (a) and (b) below and in accordance with Section 8.6.
The Estimated Purchase Price, if and as so adjusted, will be deemed to be, and
will be, the "Purchase Price" for the sale by Seller to Buyer of the Subject
Assets, subject to the assumption by Buyer of the Assumed Liabilities, in
accordance with the provisions of this Agreement.
(a) The Closing Balance Sheet (as set forth in SCHEDULE 2.6 hereof) has
been certified by the chief financial officer of the Seller. Within ninety (90)
days of the Closing, Buyer and Buyer's accountants shall verify the correctness
of the Closing Balance Sheet. If the actual net worth calculated from the
Closing Balance Sheet is less than One Million Nine Hundred Ninety-Five Thousand
Dollars ($1,995,000), the difference between the actual net worth and One
Million Nine Hundred Ninety-Five Thousand Dollars ($1,995,000) ("Net Worth
Shortfall") will be paid from the Escrow Amount to the Buyer. If the Escrow
Amount is insufficient to fund the Net Worth Shortfall, the Seller shall
promptly pay the excess to Buyer.
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(b) If the actual net worth calculated from the Closing Balance Sheet
is in excess of Two Million Two Hundred Five Thousand Dollars ($2,205,000), the
difference between the actual net worth and Two Million Two Hundred Five
Thousand Dollars ($2,205,000) shall be paid by Buyer to Seller as additional
consideration. The net worth amounts of One Million Nine Hundred Ninety-Five
Thousand Dollars ($1,995,000) and Two Million Two Hundred Five Thousand Dollars
($2,205,000) shall be calculated without regard to employee-related liabilities
assumed by Buyer with respect to Seller's employees that are employed by Buyer.
Any payments due from Seller to Buyer under paragraph (a) and on
account of any breach of Seller's representations and warranties as to the
Closing Balance Sheet shall be taken first from the Escrow Amount, and if such
payments exceed the Escrow Amount, Seller shall promptly pay the excess to
Buyer.
All disputes, claims or controversies under this Section 1.4 which are
not resolved by mutual agreement shall be resolved under Section 9.11.
1.5 TIME AND PLACE OF CLOSING. The closing of the purchase and sale
provided for in this Agreement (herein called the "Closing") shall be held at
the offices of Day, Xxxxx & Xxxxxx LLP, CityPlace I, Hartford, Connecticut, at
10:00 a.m. on June _____, 1999 or at such other time and place as shall be
mutually agreed to by the parties, such Closing to be effective as of 5:00 p.m.
on the date thereof (the "Closing Date"). All documents to be delivered at the
Closing and acts to be performed thereat shall be deemed to have been delivered
and performed simultaneously.
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1.6 DELIVERY OF AGREEMENT FOR ASSUMPTION OF LIABILITIES, LEASE
ASSIGNMENTS AND LICENSES. At the Closing, Buyer shall deliver or cause to be
delivered to Seller, an Agreement for Assumption of Liabilities by Buyer in the
form of EXHIBIT 1.6(a) hereto and an Assignment and Assumption of Lease with
respect to the Leases relating to the premises located in Chandler, Arizona, in
the form of EXHIBIT 1.6(b) hereto.
1.7 TRANSFER OF SUBJECT ASSETS. At the Closing, Seller shall deliver or
cause to be delivered to Buyer good and sufficient instruments of transfer
transferring to Buyer title to all the Subject Assets. Such instruments of
transfer (i) shall be in the forms of the Assignment and Xxxx of Sale and the
Patent and Trademark Assignment attached hereto as EXHIBITS 1.7(a) AND (b),
respectively (collectively, the "Transfer Instruments"), and (ii) shall
effectively vest in Buyer good and valid title to all the Subject Assets, free
and clear of all liens and restrictions, other than Permitted Encumbrances, and
subject to Seller's representations and warranties set forth in Section 2.
1.8 DELIVERY OF RECORDS AND CONTRACTS. At the Closing, Seller shall
deliver or cause to be delivered to Buyer all of Seller's leases, contracts,
commitments, agreements (including without limitation non-competition
agreements) and rights relating to the conduct and operation of the Business,
with such assignments thereof and consents to assignments as are identified on
SCHEDULE 1.8 to assure Buyer of the adequate benefit of the same. Seller shall
also deliver to Buyer at the Closing all of the Books and Records other than the
Excluded Records in accordance with the terms of Section 1.1(b)(iv), and Seller
shall take all requisite steps to put Buyer in actual possession and operating
control of such assets. Notwithstanding the foregoing, to the extent that any
such Books and Records are located at the premises of the Business in Chandler,
Arizona or Xxxxxxx,
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Xxxxxxxxxxxxx, Xxxxxxx, at the Closing Date, Seller shall be deemed to have
delivered such Books and Records to Buyer pursuant to this Section 1.8.
1.9 FURTHER ASSURANCES. Seller from time to time after the Closing at
the request of Buyer and without further consideration shall execute and deliver
further instruments of transfer and assignment and take such other action as
Buyer may reasonably require to more effectively transfer and assign to, and
vest in, Buyer each of the Subject Assets in accordance with this Agreement.
Seller shall cooperate with Buyer to permit Buyer to enjoy Seller's rating and
benefits under worker's compensation laws and unemployment compensation laws of
applicable jurisdictions, to the extent permitted by such laws. Nothing herein
shall be deemed a waiver by Buyer of its right to receive at the Closing an
effective assignment of each of the leases, contracts, commitments or rights of
Seller as otherwise set forth in this Agreement.
1.10 ALLOCATION OF PURCHASE PRICE. Buyer will allocate the Purchase
Price based on Buyer's determination of fair market value of the Inventory,
Fixed Assets, Receivables, Trade Payables and other categories as exist on the
Closing Date, which allocation will be in accordance with Section 1.1060-IT of
the Treasury Regulations promulgated under the Code, as amended. Such allocation
shall be conclusive and binding on Buyer and Seller for tax purposes. Neither
Seller nor Buyer shall, without written approval of the other, file any tax
returns which take any position inconsistent with such allocation. Buyer and
Seller will notice each other as soon as reasonably practicable of any audit
adjustment or proposed audit adjustment by any taxing authority which affects
the allocation.
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1.11 SALES AND TRANSFER TAXES. All sales and transfer taxes, fees,
duties and other similar expenses under applicable law incurred in connection
with this Agreement or the transactions contemplated thereby will be borne and
paid by Buyer, and Buyer shall promptly reimburse Seller for the payment of any
such tax, fee or duty which it is required to make under applicable law.
1.12 ACCOUNTS RECEIVABLE.
(a) Seller shall use its commercially reasonable efforts to
assist Buyer in collecting the Receivables following the Closing. Any and all
amounts received by Seller in respect of any Receivables shall be remitted to
Buyer within ten (10) business days. Buyer will follow its normal and customary
practices in trying to collect the Receivables, but it will not be obligated to
begin or prosecute any legal actions to collect them. Buyer, at its option, may
reassign to Seller any Receivables which Buyer has not collected within ninety
(90) days after the Closing Date and may then pursue its remedies under Section
8 with respect to such uncollected Receivables.
(b) "Commercially reasonable efforts" or similar variations
thereof when used in this Agreement mean that the obligated party is required to
make a diligent, reasonable and good faith effort to accomplish the applicable
objective. Such obligation, however, does not require an expenditure of funds or
the incurring of a liability on the part of the obligated party, nor does it
require that the obligated party act in a manner that would be contrary to
normal commercial practices in order to accomplish the objective. The fact that
the objective is not actually accomplished is no indication that the obligated
-25-
party did or did not in fact utilize its reasonable commercial efforts in
attempting to accomplish the objective.
(c) Seller shall reimburse Buyer for any tax Buyer paid on a
Receivable acquired by Buyer where the customer of that Receivable subsequently
demonstrates that such customer was tax exempt.
1.13 PROCEDURES FOR ASSETS NOT TRANSFERABLE.
(a) If any of the Subject Assets, including any Contract,
Lease, License, Governmental Permit, certificate, approval, authorization,
agreement, or other right, is not assignable or transferable either by virtue of
the provisions thereof or under applicable law without the consent of some party
or parties (each a "Nonassignable Asset") and any such consent is not obtained
prior to the Closing, this Agreement and the related instruments of transfer
shall not constitute an assignment or transfer thereof and, unless otherwise
agreed between Buyer and Seller with respect to any such Nonassignable Asset,
Buyer shall not assume Seller's obligations with respect thereto as provided
herein, but Seller shall use all commercially reasonable efforts to obtain any
such consent as soon as possible after the Closing or otherwise obtain for Buyer
the practical benefit of such property or rights and Buyer shall use all
commercially reasonable efforts to assist in that endeavor; provided, however,
that this Section 1.13 shall not apply with respect to Leases related to the
Leased Real Property located in the United Kingdom which will be governed
pursuant to the License to Occupy. Any Nonassignable Asset is set forth in
SCHEDULE 1.13.
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(b) To the extent permitted by applicable law, in the event
consents to assignment cannot be obtained, such Nonassignable Assets shall be
held, as and from the Closing Date, by Seller in trust for Buyer and the
covenants and obligations thereunder shall be performed by Buyer in Seller's
name and all benefits and obligations existing thereunder shall be for Buyer's
account. Seller shall, as Buyer may reasonably request, take or cause to be
taken at Buyer's expense such action in its name or otherwise so as to provide
Buyer with the benefits of the Nonassignable Assets and to effect collection of
money or other consideration to become due and payable under the Nonassignable
Assets, and Seller shall promptly pay over to Buyer all money or other
consideration received by it with respect to all Nonassignable Assets. As of and
from the Closing Date, Seller authorizes Buyer, to the extent permitted by
applicable law and the terms of the Nonassignable Assets, at Buyer's expense, to
perform all the obligations and receive all the benefits of Seller under the
Nonassignable Assets and appoints Buyer its attorney-in-fact to act in its name
on its behalf with respect thereto.
(c) In the event that any purchase order included in the
Subject Assets is not assigned by Seller by reason of the foregoing provisions
of this Section 1.13, Buyer agrees to purchase from Seller at the contract price
all property thereunder which Seller is obligated to purchase and Seller agrees
to sell the same to Buyer at such price. In the event that any sales order
included in the Subject Assets is not assigned by Seller by reason of the
foregoing provisions of this Section 1.13, Buyer agrees to sell to Seller any
products required to complete such contracts at the same price provided for
therein and otherwise to complete such contracts on behalf of Seller and Seller
agrees to purchase the same from Buyer at such price. If Seller fails to comply
with the provisions of this
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Section 1.13, Buyer may, to the extent permitted by applicable law, on its own
behalf undertake to complete such contracts and collect amounts due thereunder
in the name of Seller.
1.14 EMPLOYEES, WAGES AND BENEFITS.
(a) All employees of Seller related to the Business are set
forth on SCHEDULE 1.14. In each case such Schedule includes the current job
title and aggregate annual compensation of each individual. Seller shall
terminate all employees set forth on SCHEDULE 1.14 and Seller shall be
responsible for making all unpaid wage payments and providing any other benefits
due upon termination of employment to such terminated employees and their
spouses or beneficiaries, where applicable, in respect of such terminations,
except for accumulated vacation, holiday or sick leave. Buyer shall assume
obligations and liabilities with respect to any employees of Seller whom Buyer
employs that are associated with or arise out of the Closing and the termination
of their employment by Seller. It is contemplated that Buyer will offer
employment to all such terminated employees, listed on SCHEDULE 1.14A,
immediately after the Closing as at-will employees, at substantially the same
salary as previously provided by Seller, provided that each such employee
agrees, as a condition of employment, to execute Buyer's standard form of
Confidentiality Agreement (as modified to reflect any changes required by or
appropriate under California or other applicable law) and such other agreements
as Buyer deems reasonably necessary to conduct its business. It is understood
that the employment of the employees of the Business who accept Buyer's offer of
employment will not commence until immediately following the close of business
on the Closing Date. Notwithstanding the foregoing, Buyer shall have no
obligation to offer employment to any employees of Seller who are treated by
Seller as a temporary employee, lease employee, or contract employee. Further,
Buyer shall have no obligation to offer
-28-
employment to any employee of Seller who is on an approved leave of absence that
has lasted longer than or is expected to last longer than thirty (30) days other
than any employees on any legally protected leave of absence (e.g. military
leave or leave under the Family and Medical Leave Act), in which case, such
employment shall be effective as of the date they present themselves for work
with Buyer immediately upon the termination of such protected leave of absence.
Any employee that falls within the immediately preceding sentence is so
indicated on SCHEDULE 1.14.
(b) Buyer specifically reserves to itself the right to employ
or reject any of Seller's employees or other applicants in its sole and absolute
discretion. Seller acknowledges and agrees that Buyer may interview and discuss
employment terms and issues with Seller's employees related to the Business.
Nothing in this Agreement shall be construed as a commitment or obligation of
Buyer to accept for employment, or otherwise employ, any of Seller's employees.
(c) (i) Seller shall pay all wages, salaries, commissions and
the cost of all fringe benefits provided to each employee of Seller that is
engaged in employment with respect to the Business, which wages, salaries,
commissions and benefits shall have become due for work performed by such
employee as of and through the Closing, and Seller shall collect and pay all
taxes in respect of such wages, salaries, commissions and benefits. Seller shall
retain liability for benefits to all individuals entitled to benefits required
to be provided by the continuation health care coverage requirements of Section
4980B of the Code and Sections 601 through 607 of the
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Employee Retirement Income Security Act of 1974 ("ERISA") as of the Closing
including, without limitation, with respect to any individual entitled to such
coverage prior to the Closing and any individual who loses health care coverage
as a result of the transactions contemplated by this Agreement; and
(ii) Buyer shall pay all wages, salaries, commissions and
the cost of all fringe benefits provided to each employee of Buyer that is
engaged in employment by Buyer with respect to the Business, which wages,
salaries, commissions and benefits shall have become due for work performed by
such employee from and after the Closing, and Buyer shall perform all tax
withholding, collection, payment and reporting duties in respect of such wages,
salaries, commissions and benefits.
(d) Seller acknowledges and agrees that Buyer is not assuming
and shall not have any obligations or liabilities under any Employee Program (as
defined in Section 2.21 hereof) maintained by, or for the benefit of employees
of, Seller, except obligations for accumulated vacation, holiday and sick leave
to employees who are employed by Buyer.
(e) As regards any of the employees of Seller in the United
Kingdom ("UK Employees"), if any contract of employment of a person who is not a
UK Employee has effect as if originally made between Buyer and such person as a
result of the Transfer of Undertakings (Protection of Employment) Regulations
1981 (the "Regulations"):
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(i) Buyer may within three (3) months of becoming
aware of the application of the Regulations to such contract, give notice to
such person to terminate such contract; and
(ii) Seller shall indemnify and keep indemnified
Buyer against any costs (including any costs relating to settlement), claims,
liabilities or expenses arising out of or in connection with such termination
and against any sums payable to or in relation to such person under or in
connection with such contract to the date of such termination.
Furthermore, if as of the Closing, any of the terms and conditions of
employment of any of the UK Employees differs or was omitted from those which
have been provided by Seller to Buyer prior to the Closing, Seller shall
indemnify and keep indemnified Buyer against any cost (including any costs
relating to settlement), claims, liabilities or expenses incurred by Buyer which
Buyer would not have incurred in the absence of such difference or omission.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER.
2.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to Buyer to enter into this Agreement and consummate the transactions
contemplated hereby, Seller hereby makes to Buyer the representations and
warranties contained in this Section 2.
2.2 ORGANIZATION AND QUALIFICATIONS OF SELLER. Seller is a corporation
duly organized, validly existing and in good standing under the laws of Nevada
with full corporate power and authority to own or lease its properties related
to, used in or held for
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use in connection with the Business and to conduct the Business in the manner
and in the places where such properties are owned or leased or the Business is
currently conducted or proposed to be conducted. The copies of Seller's Articles
of Incorporation as amended to date, certified by the Secretary of State of the
State of Nevada, and of Seller's bylaws, as amended to date, certified by
Seller's Secretary, and heretofore delivered to Buyer's Counsel, are complete
and correct, and no amendments thereto are pending. Seller is not in violation
of any term of its Articles of Incorporation or bylaws. Seller is duly qualified
or licensed as a foreign corporation to do business and is in good standing in
each jurisdiction where the failure to so qualify would have a material adverse
effect upon the Business.
2.3 SUBSIDIARIES. Seller does not have any subsidiary, other than
Photomatrix Ltd., and does not own or have any direct or indirect interest in or
control over any other corporation, partnership, limited liability company,
joint venture or entity of any kind, which corporation, partnership, limited
liability company, joint venture or other entity is engaged in activities or
operations related to the conduct and operations of the Business.
2.4 AUTHORITY OF SELLER, I-PAC AND PARENT. Seller, I-PAC and Parent
have all necessary corporate power and authority to enter into this Agreement
and each agreement, document and instrument to be executed and delivered by
Seller, I-PAC or Parent pursuant to this Agreement and to carry out the
transactions contemplated hereby. The execution, delivery and performance by
Seller, I-PAC or Parent of this Agreement and each such other agreement,
document and instrument have been duly authorized by all necessary corporate
action of Seller, I-PAC or Parent and no other action on the part of Seller,
I-PAC or Parent is required in connection therewith. Approval by the Board of
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Directors of Seller's Parent of this Agreement and the transfer of the Subject
Assets and the Business to Buyer has been obtained.
This Agreement and each agreement, document and instrument executed and
delivered by Seller, I-PAC or Parent pursuant to this Agreement constitutes, or
when executed and delivered will constitute, valid and binding obligations of
Seller, I-PAC or Parent enforceable in accordance with their terms, except to
the extent that enforcement of the rights and remedies created hereby and
thereby may be affected by bankruptcy, reorganization, moratorium, insolvency
and similar laws of general application affecting the rights and remedies of
creditors and by general equity principles. Except as specifically identified on
SCHEDULE 2.4, the execution, delivery and performance by Seller of this
Agreement and each such agreement, document and instrument:
(i) does not and will not violate any provision of
the organizational documents of Seller, I-PAC or Parent;
(ii) does not and will not violate any applicable
law, order, judgment, decree, rule or regulation of any court or any
governmental body having jurisdiction over Seller, I-PAC or Parent or
any of the Subject Assets or require Seller, I-PAC or Parent to obtain
any approval, consent or waiver of, or make any filing with, any person
or entity (governmental or otherwise), except for consents of third
parties that are required to transfer or assign to Buyer any Subject
Assets or assign the benefits of or delegate performance with regard
thereto; and
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(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, give rise
to a right of termination of, or permit any third party to exercise any
additional rights under, any indenture or loan or credit agreement or
any other agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which Seller, I-PAC or Parent is
a party or by which Seller's, I-PAC's or Parent's property is bound or
affected, or result in the creation or imposition of any mortgage,
pledge, lien, security interest or other charge or encumbrance on any
of the Subject Assets, other than a Permitted Encumbrance arising as a
result of the transactions contemplated hereby, except in each case
(i), (ii) or (iii) which would not have a material adverse effect on
the Subject Assets and the Business taken as a whole.
2.5 REAL AND PERSONAL PROPERTY.
(a) OWNED REAL PROPERTY. Seller does not own any real
property.
(b) LEASED REAL PROPERTY. All of the real property leased by
Seller as tenant or lessee and utilized in the Business is identified on
SCHEDULE 2.5(b) (collectively referred to herein as the "Leased Real Property").
Seller hereby makes the following representations and warranties with respect to
the Leased Real Property:
(i) LEASES. The copies of the leases of the Leased
Real Property, together with any amendments thereto (collectively, the
"Leases"), delivered by Seller to Buyer and the information with
respect to each of the
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Leases set forth in SCHEDULE 2.5(b) is complete, accurate, true and
correct. With respect to each of the Leases, except as set forth on
SCHEDULE 2.5(b):
(1) each of the Leases is in full force and
effect and has not been further modified, amended, or altered,
in writing or otherwise;
(2) all obligations of the landlord and/or
tenant under the Leases which have accrued have been
performed, and to the best of the knowledge of Seller, there
is no default under any Lease by Seller, and to Seller's
knowledge, there is no default under any Lease by the
landlord; and
(3) Seller has obtained or will obtain prior
to the Closing the consent of each landlord or lessor under
any Leases whose consent is required to the assignment of the
Leased Real Property to Buyer;
(ii) TITLE AND DESCRIPTION. Seller holds a valid and
enforceable leasehold interest in the Leased Real Property, free and
clear of all liens, restrictions and incumbrances (except as disclosed
in Schedule 2.5(b) and other than Permitted Encumbrances);
(iii) REAL ESTATE TAXES. To Seller's knowledge,
Seller has not received notice of any pending or threatened real
estate tax deficiency or reassessment or condemnation of all or any
portion of any of the Leased Real Property;
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(iv) CONDITION. Except as set forth on SCHEDULE
2.5(b), to the best of Seller's knowledge there are no material defects
in the physical condition of any improvements constituting a part of
the Leased Real Property leased by Seller, including, without
limitation, structural elements, mechanical systems, roofs or parking
and loading areas, and all of such improvements are in good operating
condition and repair, have been well maintained and are free from
infestation by rodents or insects. Except as set forth on SCHEDULE
2.5(b), none of such Leased Real Property is subject to special flood
or mudslide hazards or within the 100 year flood plain. All water,
sewer, gas, electric, telephone, drainage and other utilities required
by law or necessary for the current or planned operation of such Leased
Real Property have been installed and connected pursuant to valid
permits, and are sufficient to service such Leased Real Property; and
(v) COMPLIANCE WITH LAW; GOVERNMENT APPROVALS. Seller
has not received notice from any governmental authority of any
violations of any law, ordinance, regulation, license, permit or
authorization issued with respect to any of the Leased Real Property
that has not been corrected heretofore, and no such violation now
exists which could have an adverse effect on the operation or value of
such Leased Real Property. To the best of Seller's knowledge all
improvements constituting a part of the Leased Real Property are in
compliance in all respects with all applicable laws, ordinances,
regulations, licenses, permits and authorizations, and there are
presently in effect all licenses, permits and authorizations required
by law, ordinance or regulation. The transfer of the
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Leased Real Property to Buyer shall include all rights to use of any
off-site facilities necessary to ensure compliance with all such laws,
ordinances, codes and regulations. There is at least the minimum access
required by applicable subdivision or similar law to the Leased Real
Property. Seller has not received notice of any pending or threatened
real estate tax deficiency or reassessment or condemnation of all or
any portion of any of the Leased Real Property.
(c) PERSONAL PROPERTY. A complete description of the
machinery, equipment and other tangible property of Seller relating to, used in
or held for use in the Business is contained in SCHEDULE 2.5(c). Except as
specifically disclosed in said Schedule, Seller has good and valid title to or a
leasehold interest in all of such personal property. The transfer of such
personal property from Seller to Buyer pursuant to the terms of this Agreement
and the Transfer Instruments shall effectively transfer to Buyer good and valid
title to or a leasehold interest in all of such personal property, free and
clear of all liens, restrictions and encumbrances (except as disclosed in
SCHEDULE 2.5(c) and other than Permitted Encumbrances). None of such personal
property or assets relating to, used in or held for use in the Business, is
subject to any mortgage, pledge, lien, conditional sale agreement, security
agreement, encumbrance or other charge except for Permitted Encumbrances or as
specifically disclosed in said SCHEDULE 2.5(c). Except as otherwise specified
SCHEDULE 2.5(c), any such items related to, used in or held for use in the
Business are in good repair, have been well maintained, substantially comply
with all applicable laws, ordinances and regulations, and are in good working
order.
2.6 FINANCIAL STATEMENTS.
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(a) Seller has delivered to Buyer the following, copies of
which are attached hereto as SCHEDULE 2.6:
(i) a balance sheet of the Business for its fiscal
year ended on March 31, 1998 and statements of income, retained earning
and cash flow for the year then ended, audited by Seller's independent
accountants; said financial statements having been prepared in
accordance with generally accepted accounting principles ("GAAP"), are
complete and correct in all material respects, and present fairly in
all material respects the financial condition of the Business at the
date of said financial statements; and
(ii) a balance sheet of the Business as of a date
within three (3) business days of the Closing Date (the "Closing
Balance Sheet"), with Accounts Receivable reserves of One Hundred
Forty-Two Thousand Dollars ($142,000) and Inventory reserves of Six
Hundred Ninety-Nine Thousand Dollars ($699,000) (together, the
"Reserves"), certified by the chief financial officer of Seller that
said Closing Balance Sheet has been prepared on a basis consistent with
that of the aforementioned financial statements (i.e., in accordance
with GAAP as to the Company's accounting practices and methods), is
complete and correct in all material respects, and presents fairly in
all material respects the financial condition of the Business at the
date of said Closing Balance Sheet. It is understood between the
parties that the Closing Balance Sheet is not intended to be a complete
set of financial statements prepared in accordance with GAAP.
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The financial condition of the Business at the Closing Date will not
differ in any material respect from the financial condition of the Business at
the date of the Closing Balance Sheet.
(b) As of the date of the Closing Balance Sheet and as of the
Closing, Seller has and will have no liabilities related to the Business which
will become liabilities or obligations of Buyer of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation liabilities as guarantor or otherwise with respect
to obligations of others, or liabilities for taxes due or then accrued or to
become due or contingent or potential liabilities relating to the conduct of
Business, or the activities of Seller related thereto, prior to the date of the
Closing Balance Sheet, regardless of whether claims in respect thereof had been
asserted as of such date), except liabilities stated or adequately reserved
against on the Closing Balance Sheet which will be Assumed Liabilities.
(c) As of the date hereof and immediately prior to the
Closing, Seller, I-PAC and Parent had and each will have assets greater than its
liabilities and, immediately after the Closing, each will be able to pay its
debts and obligations as they become due in the ordinary course of business.
2.7 TAXES.
(a) Seller has paid or caused to be paid all federal, state,
local, foreign, and other taxes, including, without limitation, income taxes,
estimated taxes, alternative minimum taxes, excise taxes, sales taxes, use
taxes, value-added taxes, gross receipts taxes, franchise taxes, capital stock
taxes, employment and payroll-related taxes,
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withholding taxes, stamp taxes, transfer taxes, windfall profit taxes,
environmental taxes and property taxes, whether or not measured in whole or in
part by net income, and all deficiencies, or other additions to tax, interest,
fines and penalties (collectively, "Taxes"), required to be paid by it with
respect to the Business through the date hereof.
(b) U.K. TAXES GENERAL.
(i) None of the Subject Assets of that part of the
Business currently carried on in the United Kingdom are subject to an
outstanding Inland Revenue charge as defined in Section 237 Inheritance
Tax Xxx 0000;
(ii) No circumstances exist, or but for Section
204(6) Inheritance Tax Act 1984 would exist, such that a power of sale
could be exercised in relation to any of the Subject Assets pursuant to
Section 212 Inheritance Tax Act 1984 (contingent liability of
transferee for unpaid inheritance tax); and
(iii) There is no instrument which is necessary to
establish Seller's title to any of the Subject Assets pursuant to this
Agreement which is liable to stamp duty in the United Kingdom but which
has not been duly stamped or which would attract stamp duty if brought
within the United Kingdom.
(c) U.K. VALUE ADDED TAX ("VAT").
(i) Seller is a registered and taxable person for
the purposes of the VAT Xxx 0000;
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(ii) So far as Seller is aware, none of the Subject
Assets is an asset to which Part XV of the Value Added Tax Regulations
1995 (adjustments to the deductions of input tax on capital items)
applies;
(iii) So far as Seller is aware, it is not approved
for the purposes of the Customs Duties (Deferred Payment) Regulations
1976 (deferral of duty on imports); and
(iv) Neither Seller nor any member of its VAT group
has made an election pursuant to the provisions of paragraph 2 Schedule
10 of the VAT Xxx 0000 in respect of the Subject Assets and Seller
undertakes that neither it nor any member of its VAT group will make
any such election prior to Closing.
(d) U.K. TAXATION AND EMPLOYEES.
(i) None of Seller's employees to be transferred to
Buyer have any interest in or right to any readily convertible asset
provided by Seller prior to Closing (as defined in Section 203F Income
and Corporation Taxes Act 1988) in respect of which so far as Seller is
aware Buyer will have a liability to account for income tax under Pay
As You Earn ("PAYE") or national insurance contributions in the three
months following Closing; and
(ii) Seller has properly operated the U.K. PAYE and
other tax and national insurance contribution systems relating to the
U.K. Business and has deducted tax as required by U.K. law from all
payments to or treated as made to or benefits provided for Seller's
employees and ex-employees and consultants and has duly accounted to
the Inland Revenue and/or the Department of Social
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Security (as the case may be) for tax so deducted and contributions
payable. Seller has maintained and retained such books and records
relating to PAYE and to national insurance contributions as it is
required to maintain and retain.
(e) U.K. CAPITAL ALLOWANCES CLAUSE.
(i) The parties agree that, as soon as practicable
following the Closing, they will agree on an apportionment of the
Purchase Price to be attributed to those Subject Assets of the Business
in the United Kingdom which constitute machinery and plant for the
purposes of the Capital Allowances Act 1990 and the proportion which
represents fixtures and shall execute an election under Section 59B if
appropriate.
2.8 ACCOUNT RECEIVABLES. The Receivables represent valid obligations
arising from sales actually made or services actually performed by Seller in the
ordinary course of the Business and are or will be at the Closing valid and
enforceable claims and subject to no set off or counterclaim except as set forth
in SCHEDULE 2.8. All Receivables on the Closing Balance Sheet are collectible,
subject to the One Hundred Forty-Two Thousand Dollar ($142,000) accounts
receivable reserve stated thereon. No Receivables exist from any person, firm or
corporation which is affiliated with Seller or from any director, officer or
employee of Seller, except as disclosed in SCHEDULE 2.8; any Receivable from any
such person, firm or corporation shall be paid in cash prior to the Closing.
2.9 INVENTORY. The Inventory is of quality and quantity usable or
saleable in the ordinary course of the Business at prices consistent with
Seller's experience during the fiscal year ended March 31, 1999, except for
obsolete items and items of below-
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standard quality to net realizable values that have been adjusted through the
recording of inventory reserves on Seller's Books and Records. The Inventory on
the Closing Balance Sheet has been valued at the lower of cost or market as
stated on a consistent basis in accordance with GAAP and with Seller's
accounting practices and methods consistently applied. The quantities of
purchase commitments for Inventory are consistent with the conduct of the
Business in the ordinary course by Seller. The Inventory is located on the
Leased Real Property or with field service technicians, or, as set forth on
SCHEDULE 2.9, on the property of customers or perspective customers or vendors
of the Business.
2.10 ORDINARY COURSE; ABSENCE OF CERTAIN CHANGES.
(a) Since March 31, 1998, Seller has conducted the Business
only in the ordinary course and consistently with its prior practices. Except in
the ordinary course consistent with past practices, since March 31, 1998 there
has not been with respect to the Business:
(i) any change in the Subject Assets or the Assumed
Liabilities or the Business taken as a whole (except
continuing operating losses at a level consistent with those
experienced since March 31, 1998), which change by itself or
in conjunction with all other such changes, whether or not
arising in the ordinary course of business, has been
materially adverse with respect to the Business;
(ii) any cancellation of any material debt or claim
owing to, or waiver of any material right of, Seller;
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(iii) any mortgage, encumbrance or lien (other than
Permitted Encumbrances) placed on any of the Subject Assets
which remains in existence on the date hereof or will remain
on the Closing Date;
(iv) any material liabilities related to customers or
suppliers of the Business that are not set forth on Seller's
Books and Records as of March 31, 1998 or incurred in the
ordinary course of the Business since that date (it being
understood that product or service liability claims shall not
be deemed to be incurred in the ordinary course of business);
(v) any purchase, sale or other disposition, or any
agreement or other arrangement for the purchase, sale or other
disposition, of any of the properties or assets of Seller
related to, used in or held for use in the Business, other
than in the ordinary course of the Business;
(vi) any damage, destruction or loss, whether or not
covered by insurance, that had or could reasonably be expected
to have a material adverse effect with respect to the
Business;
(vii) any labor trouble or claim of unfair labor
practices involving the Business; any change in the
compensation payable or to become payable by Seller to any of
its officers, employees, agents or independent contractors
engaged in employment or activities related to the Business,
other than normal merit increases in accordance with its usual
practices, or any bonus payment or arrangement made to or with
any of such officers, employees, agents or independent
contractors;
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(viii) any change with respect to the officers or
management of Seller engaged in employment or activities
related to the Business;
(ix) any obligation or liability incurred by Seller
to any of its officers or employees engaged in employment or
activities related to the Business, or any loans or advances
made by Seller to any of its officers or employees engaged in
employment or activities related to the Business, except
normal compensation and expense allowances payable to officers
or employees;
(x) any other transaction entered into by Seller with
respect to the Business other than transactions in the
ordinary course of business;
(xi) since March 31, 1998, any Inventory which has
been sold or disposed of, except in the ordinary course of the
Business; or
(xii) any agreement or understanding whether in
writing or otherwise, for Seller to take any of the actions
specified in paragraphs (i) through (xi) above.
(b) Since March 31, 1998 there has not been with respect to the
Business, any change in accounting methods or practices, credit practices or
collection policies used by Seller with respect to the Business.
2.11 INTELLECTUAL PROPERTY.
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(a) Except as described in SCHEDULE 2.11, Seller has exclusive
ownership of or a valid right to use the Intellectual Property. Seller's rights
in all of the Intellectual Property are freely transferable. To Seller's
knowledge, there are no claims or demands of any other person pertaining to any
of such Intellectual Property and no material proceedings have been instituted,
or are pending or, to Seller's knowledge, threatened, which challenge the rights
of Seller in respect thereof. Seller, to the best of its knowledge, has the
right to use, free and clear of claims or rights of other persons, all customer
lists, designs, processes, computer software, systems, data compilation research
results and other information required for or incident to the Business as
presently conducted or contemplated to be conducted.
(b) To the knowledge of Seller, the licensors under the
Licenses have and had all requisite power and authority to grant the rights
purported to be conferred thereby.
(c) Seller has taken all steps required in accordance with
sound business practices to establish and preserve its ownership of all
Intellectual Property rights with respect to the services and technology
employed in the Business. Seller has required all of its professional and
technical employees employed in connection with the Business, and other
employees having access to the Millennium Technology or the Proprietary Business
Information, to execute agreements under which such employees are required to
convey to Seller ownership of all inventions and developments conceived or
created by them in the course of their employment and to maintain the
confidentiality of all such information of Seller. Seller has not made any such
information available to any person other than employees of Seller employed in
connection with the Business
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except pursuant to written agreements requiring the recipients to maintain the
confidentiality of such information and appropriately restricting the use
thereof, except for disclosures of information which are not material in amount
or kind. Seller has no knowledge of any material infringement by others of the
Millennium Technology, the Proprietary Business Information or the Trademarks.
(d) To Seller's knowledge, the present and contemplated
business, activities and products of the Business do not infringe any
Intellectual Property of any other person. No proceeding charging Seller with
infringement of any adversely held Intellectual Property has been filed or, to
Seller's knowledge, is threatened to be filed. To Seller's knowledge, there
exists no unexpired patent or patent application owned by any person (including,
without limitation, any affiliates of Seller, other than patents transferred in
connection with Project Millennium) which includes claims that would be
infringed by products of the Business being produced or sold or actively planned
for production or sale at the Closing Date. To Seller's knowledge, Seller is not
making unauthorized use of any confidential information or trade secrets of any
person, including without limitation any former employer of any past or present
employee of Seller. To Seller's knowledge, the activities of Seller's employees
in the Business on behalf of Seller do not violate any agreements or
arrangements which any such employees have with former employers or other
persons.
2.12 CONTRACTS. Except for Contracts listed on SCHEDULE 1.1(a)(vii) and
the Licenses listed on SCHEDULE 1.1(a)(xiv) (true and complete copies of which
Contracts and Licenses have been delivered to Buyer) or as otherwise set forth
on SCHEDULE 2.12, Seller
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is not a party to or subject to any of the following with respect to the Subject
Assets or the Business:
(a) any plan or contract providing for bonuses, pensions,
options, stock purchases, deferred compensation, retirement payments, profit
sharing, collective bargaining or the like, or any agreement with any labor
union;
(b) any employment contract, contract for services, loan or
advance, severance arrangement, golden parachute or the like;
(c) any contract or agreement for the purchase of any
commodity, material or equipment except purchase orders in the ordinary course
of less than One Thousand Dollars ($1,000) each, such orders not exceeding
Fifteen Thousand Dollars ($15,000) in the aggregate;
(d) any other material contracts or agreements creating any
material obligations of Seller not specifically disclosed elsewhere under this
Agreement or which will impose any liability or obligation on Buyer;
(e) any contract or agreement providing for the purchase of
all or substantially all of its requirements of a particular product from a
supplier;
(f) any contract or agreement which by its terms does not
terminate or is not terminable without penalty by Seller or any successor or
assign within one year after the date hereof;
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(g) any contract or agreement for the manufacture, sale or
lease of its products not made in the ordinary course of business;
(h) any contract which, as a result of the execution,
delivery and performance of this Agreement and each agreement, document and
instrument executed and delivered by Seller pursuant to this Agreement, will
give rise to or permit any third party to exercise additional rights under any
contract or agreement to which Seller is a party and which is included in or
related to the Subject Assets or the Assumed Liabilities, including, without
limitation, any contract which provides for the transfer of any intellectual
property, such as source code or other information, upon a change in control of
Seller;
(i) any contract with any sales agent or distributor of
products or services of Seller;
(j) any contract containing covenants limiting the freedom of
Seller or its assignees or successors to compete in any line of business or with
any person or entity;
(k) any contract or agreement for the purchase of any fixed
asset;
(l) any license agreement (as licensor or licensee);
(m) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money; or
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(n) any contract or agreement with any officer, employee,
director or stockholder of Seller or with any persons or organizations
controlled by or affiliated with it.
Seller is not in default under any such contracts, commitments, plans,
agreements or licenses described in said Schedule and has no knowledge of
conditions or facts which with notice or passage of time, or both, would
constitute a default.
2.13 LITIGATION. SCHEDULE 2.13 hereto lists all currently pending
litigation (including without limitation any arbitration proceedings) and
governmental or administrative proceedings or investigations relating to the
Business to which Seller is a party. Except for matters described in SCHEDULE
2.13, there is no litigation or governmental or administrative proceeding or
investigation pending or, to the knowledge of Seller, threatened against Seller
or any affiliate of Seller which could reasonably be expected to have any
adverse effect on the Subject Assets or the Business taken as a whole or which
would prevent or hinder the consummation of the transactions contemplated by
this Agreement. With respect to each matter set forth therein, SCHEDULE 2.13
sets forth a description of the matter, the forum (if any) in which it is being
conducted, the parties thereto and the type and amount of relief sought.
2.14 COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 2.14, Seller
is in compliance to the best of its knowledge with all applicable statutes,
ordinances, orders, judgments, decrees and rules and regulations promulgated by
any federal, state, municipal or other governmental authority which apply to
Seller with respect to the conduct of the Business, and Seller has not received
notice of a violation or alleged
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violation of any such statute, ordinance, order, rule or regulation. Seller does
not know of any pending or threatened change of any laws, ordinances or
regulations which could reasonably be expected to have a material adverse effect
on the Subject Assets and the Business taken as a whole.
2.15 INSURANCE. The physical properties and assets of Seller related
to, used in or held for use in, the Business are insured to the extent disclosed
in SCHEDULE 2.15 and all insurance policies and arrangements of Seller with
respect thereto are disclosed in said Schedule. Said insurance policies and
arrangements are in full force and effect, all premiums with respect thereto are
currently paid, and Seller is in compliance in all material respects with the
terms thereof. Said insurance is adequate and customary for the activities
engaged in by Seller with respect to the Business and is sufficient for
compliance by Seller with all requirements of law and all agreements and leases
in which Seller is a party with respect to the Business.
2.16 WARRANTY OR OTHER CLAIMS. Except as set forth in SCHEDULE 2.16,
and since March 31, 1997 there have been no, and there are no existing or to
Seller's knowledge, threatened product liability, warranty, price
redetermination or renegotiation or other similar claims with respect to the
Business, or any facts upon which a material claim of such nature could be
based, against Seller or its products for products or services which are
defective or fail to meet any product or service warranties.
2.17 POWERS OF ATTORNEY. With respect to the conduct and operations of
the Business, Seller has not granted powers of attorney which are presently
outstanding.
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2.18 PERMITS; BURDENSOME AGREEMENTS. SCHEDULE 2.18 lists all
Governmental Permits necessary in order for Seller to conduct the Business as it
is now being operated, which Governmental Permits are required by currently
effective laws, rules or regulations. Seller has obtained all such Governmental
Permits, which are valid and in full force and effect, and is operating in
compliance therewith. Except as disclosed in SCHEDULE 2.18, all such
Governmental Permits will be available and assigned to Buyer and remain in full
force and effect upon Buyer's purchase of the Subject Assets, and no further
Governmental Permits will be required in order for Buyer to conduct the Business
subsequent to the Closing as currently conducted by Seller. Except as disclosed
in SCHEDULE 2.18 or in any other Schedule hereto, Seller is not subject to or
bound by any judgment, decree or order which could reasonably be expected to
have a material adverse effect on the Subject Assets and the Business taken as a
whole.
2.19 CORPORATE RECORDS; COPIES OF DOCUMENTS. Seller has made, or upon
request will make, available for inspection and copying by Buyer and its counsel
complete and correct copies of the Books and Records, the Excluded Records and
any documents referenced in the Schedules delivered to Buyer pursuant to this
Agreement.
2.20 RELATED TRANSACTIONS. Neither Seller nor any of its affiliates,
stockholders, directors, officers or supervisory employees, nor, to the
knowledge of Seller, any of their respective spouses or family members owns
directly or indirectly on an individual or joint basis any material interest in,
or serves as an officer or director or in another similar capacity of, any
competitor or supplier of the Business, or any organization which has a material
contract or arrangement with Seller related to the Business, other than PHRX
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Precision Manufacturing (d.b.a. Amcraft Manufacturing), I-PAC Manufacturing
Inc., Parent, and National Metal Technology.
2.21 EMPLOYEE BENEFIT PROGRAMS.
(a) SCHEDULE 2.21 lists every Employee Program (as defined
below) that Seller has maintained, contributed to or under which it has any
liability at any time since December 31, 1992. With respect to each such
Employee Program, Seller has made available to Buyer true and complete copies of
the most recent summary plan or other written description.
(b) Each Employee Program which has ever been maintained by
Seller or any Affiliate with respect to any employees of Seller engaged in
employment related to the Business and which has at any time been intended to
qualify under Section 401(a) or 501(c)(9) of the Code has received a favorable
determination or approval letter from the Internal Revenue Service ("IRS")
regarding its qualification under such section and has, in fact, been
continuously qualified under the applicable section of the Code since the
effective date of such Employee Program. No event or omission has occurred which
would cause any such Employee Program to lose its qualification under the
applicable Code section.
(c) All payments and/or contributions required to have been
made (under the provisions of any agreements or other governing documents or
applicable law) with respect to all Employee Programs ever maintained by Seller
or any Affiliate with respect to any employees of Seller engaged in employment
related to the Business, have been timely made.
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(d) Except as described in SCHEDULE 2.21, no Employee Program
maintained by Seller or any Affiliate with respect to any employees of Seller
engaged in employment related to the Business (i) that is subject to Title IV of
ERISA (other than a Multiemployer Plan, as defined in Section 3(37) of ERISA)
has any "unfunded benefit liabilities" within the meaning of ERISA Section
4001(a)(18), or (ii) fails to comply with any provision of ERISA, other
applicable law, or any agreement which, in the case of either (i) or (ii) could
subject Buyer to any material liability either directly or indirectly
(including, without limitation, through any obligation of indemnification or
contribution) for any damages, penalties, or taxes, or any other loss or
expense. Neither Seller nor any Affiliate has ever maintained a Multiemployer
Plan, covering any employees of Seller engaged in employment related to the
Business. None of the Employee Programs ever maintained by Seller or any
Affiliate has ever provided health care or any other non-pension benefits to any
employees of Seller engaged in employment related to the Business after their
employment is terminated (other than as required by part 6 of subtitle B of
Title I of ERISA) or has ever promised to provide such post-termination
benefits.
(e) For purposes of this section:
(i) "Employee Program" means, in respect of any
employee of the Business, each "employee benefit plan," as defined in
Section 3(3) of ERISA (including any "multiemployer plan" as defined in
Section 3(37) of ERISA) and each profit-sharing, bonus, stock option,
stock purchase, stock ownership, pension, retirement, severance,
deferred compensation, excess benefit, supplemental unemployment,
post-retirement medical or life insurance, welfare or incentive plan,
or sick leave, long-term disability, medical, hospitalization, life
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insurance, other insurance plan, or other employee benefit plan program
or arrangement, whether written or unwritten, qualified or
non-qualified, funded or unfunded, maintained or contributed to by
Seller;
(ii) An entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or provide
benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity, or
their spouses, dependents, or beneficiaries; and
(iii) An entity is an "Affiliate" of Seller if it
would have ever been considered a single employer with Seller under
ERISA Section 4001(b) or part of the same "controlled group" as Seller
for purposes of ERISA Section 302(d)(8)(C).
2.22 ENVIRONMENTAL MATTERS.
(a) In connection with the operation of the Business conducted
on the Leased Premises, except as set forth in SCHEDULE 2.22 or as otherwise
permitted by law, (i) Seller has never generated, transported, used, stored,
treated, disposed of, or managed any Hazardous Substance (as defined below);
(ii) no Hazardous Substance has ever been spilled, released, discharged, or
disposed of by Seller, or used by Seller, or to Seller's knowledge is currently
located in the soil or groundwater on the Leased Premises; (iii) no Hazardous
Substance has ever been transported by or for Seller for treatment, storage, or
disposal at any other place; and (iv) in connection with the presence of any
Hazardous
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Substance, to Seller's knowledge no lien has ever been imposed by any
governmental agency on any property, facility, machinery, or equipment owned,
operated, leased, or used by Seller.
(b) In connection with the operation of the Business conducted
on the Leased Premises, except as set forth in SCHEDULE 2.22, (i) Seller has to
the best of its knowledge never violated any Environmental Law (as defined
below) nor, to Seller's knowledge, has any material liability under, any
Environmental Law; (ii) Seller is presently in compliance with all applicable
Environmental Laws in all material respects; (iii) Seller has never entered into
or been subject to any judgment, consent decree, compliance order, or
administrative order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law; and (iv) Seller has no knowledge or reason to know that any
of the items enumerated in clause (iii) of this subsection will be forthcoming.
(c) Except as set forth in SCHEDULE 2.22, to Seller's
knowledge, the Leased Premises do not contain any asbestos or
asbestos-containing material, any polychlorinated biphenyls (PCBs) or equipment
containing PCBs, or any urea formaldehyde foam insulation.
(d) Seller has provided to Buyer copies of all documents,
records, and information maintained by Seller for regulatory purposes concerning
any environmental or health and safety matter relevant to Seller and that
relates to the operations of the
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Business, whether generated by Seller or others and given to Seller, including,
without limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Substances,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
(e) For purposes of this Section 2.22, (i) "Hazardous
Substance" means any substance or material that is regulated under any
Environmental Law or is deemed by any Environmental Law to be "hazardous",
"toxic", a "contaminant", "waste", "a source of contamination" or a "pollutant",
other than normal office and janitorial products; (ii) "Environmental Law" shall
mean any environmental or health and safety-related law, regulation, rule,
ordinance, or by-law at the foreign, federal, state, or local level, whether
existing as of the date hereof, previously enforced, or subsequently enacted;
and (iii) "Seller" shall mean and include Seller and any affiliates of Seller
for whose conduct Seller is or may be held responsible under any Environmental
Law.
2.23 EMPLOYEES; LABOR MATTERS. With respect to the Business, Seller
employs approximately thirty-three (33) full time employees, no part-time
employees and no temporary employees. Seller generally enjoys good
employer-employee relationships. None of such employees is covered by any union,
collective bargaining or other similar labor agreement, nor is Seller engaged in
the negotiation of any of the same, nor has Seller received notice from any
union of a request to negotiate any of the same. Except as set forth on SCHEDULE
2.23, Seller does not have any policy, practice, plan or program of paying
severance pay or any form of severance compensation in connection with the
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termination of employment. There is no requirement for a work permit in relation
to the employment of any of the employees in the Business and, other than as set
forth on SCHEDULE 1.14, no such employee has given notice to terminate his
contract of employment or is under notice of termination. Seller has received no
information to indicate that any of its employment policies or practices with
respect to the Business is currently being audited or investigated by any
federal, state, local or foreign governmental agency. No person has a right to
return to work or to be reinstated or reengaged in the Business. Seller is, and
at all times since November 6, 1986 has been, in compliance with the
requirements of this Immigration Reform Control Act of 1986 with respect to
employees in the Business.
2.24 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. SCHEDULE 2.24(a) lists each
customer, representative or distributor of the Business (whether pursuant to a
commission, royalty or other arrangement) (collectively, the "Customers and
Distributors"). SCHEDULE 2.24(b) is a true and complete list of the suppliers of
the Business (the "Suppliers"). With respect to the Business, the relationships
of Seller with its Suppliers, Customers and Distributors are good commercial
working relationships.
2.25 PURCHASE COMMITMENTS. Except as set forth in SCHEDULE 2.25, Buyer
shall have no obligation to Seller or Seller's affiliates for open purchase
orders as of the Closing or thereafter.
2.26 REQUIRED CONSENTS. SCHEDULE 2.26 lists all of the Contracts and
whether (i) such Contracts require consent to permit them to be assigned to
Buyer, (ii) such
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Contracts are silent on whether consent is required or (iii) such Contracts do
not require consent to permit them to be assigned to Buyer.
2.27 ADEQUACY OF SUBJECT ASSETS. Except for the Excluded Assets set
forth in Section 1.1(b)(ii)-(iv), the Subject Assets represent all of the
properties and assets that the Buyer requires in order to operate the Business
in the same manner as the Seller operated it on and prior to the Closing Date.
In the event this Section 2.27 is breached because Seller has failed to identify
and transfer any assets or properties used in the Business, such breach shall be
deemed cured if Seller promptly transfers such properties or assets to Buyer and
Buyer shall have no further remedy with respect thereto.
2.28 YEAR 2000 COMPLIANCE.
(a) PRODUCTS OF THE BUSINESS. The products of the Business can
properly receive, transmit, process, manipulate, store, retrieve, re-transmit or
in any other way utilize data and information due to the occurrence of the year
2000 or the inclusion of dates on or after January 1, 2000.
(b) INTERNAL SYSTEMS AND OPERATIONS. Except as set forth
SCHEDULE 2.28(b), all material internal systems used by or on behalf of Seller
in the operation and management of the Business and that are being transferred
to Buyer, including without limitation financial management and accounting,
manufacturing, order processing, distribution, and similar systems used in
operations, are Year 2000 Compliant.
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(c) THIRD PARTIES. Seller has made the inquiries and
investigation as to the Year 2000 Compliance of all third parties as set forth
in SCHEDULE 2.28(c). Responses received thereto are set forth in SCHEDULE
2.28(c).
(d) DEFINITION. For purposes of this Agreement, "Year 2000
Compliant" shall mean, as to any product (including without limitation
software), service or system, (i) that such product, service or system shall
operate in the same manner during and after January 1, 2000 (without limitation
as to time); and (ii) record, process, store and present data containing dates
in the Year 2000, and thereafter (without limitation as to time) in the same
manner as data containing dates prior to the Year 2000.
2.29 BROKERS. Seller has not engaged any broker, investment banker,
financial advisor or other person in respect of which Buyer would be responsible
for or obligated in respect of the payment of any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement, and Seller agrees to pay any such fees or
commissions of any such person which it has engaged.
2.30 DISCLOSURE. The representations, warranties and statements
contained in this Agreement and in the certificates, Exhibits and Schedules
delivered by Seller pursuant to this Agreement to Buyer do not contain any
untrue statement of a material fact, and, when taken together, do not omit to
state a material fact necessary in order to make such representations,
warranties or statements not misleading in the light of the circumstances under
which they were made. To Seller's knowledge there are no facts which would
reasonably be likely to have a material adverse affect on the Subject Assets
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and the Business taken as a whole which have not been specifically disclosed
herein or in a Schedule furnished herewith, other than general economic
conditions affecting Seller's industry as applicable to the Business.
SECTION 3. COVENANTS OF SELLER AND BUYER.
3.1 MAKING OF COVENANTS AND AGREEMENTS. Seller and Buyer hereby make
their respective covenants and agreements set forth in this Section 3.
3.2 NOTICE OF DEFAULT. Promptly upon the occurrence of, or promptly
upon either Seller or Buyer becoming aware of the impending or threatened
occurrence of, any event which would cause or constitute a breach or default, or
would have caused or constituted a breach or default had such event occurred or
been known to either Seller or Buyer prior to the date hereof, of any of the
representations, warranties or covenants of either Seller or Buyer contained in
or referred to in this Agreement or in any Schedule or Exhibit referred to in
this Agreement, Seller or Buyer shall give detailed written notice thereof to
Buyer or Seller, as the case may be.
3.3 CONSUMMATION OF AGREEMENT. Seller and Buyer shall each use their
commercially reasonable efforts to perform and fulfill all conditions and
obligations on their or any of their affiliates' parts to be performed and
fulfilled under this Agreement and the Transition Agreement. To this end, Seller
will promptly in connection with or following the Closing take all appropriate
actions to transfer the Subject Assets, including all Intellectual Property, to
Buyer.
3.4 COOPERATION OF SELLER.
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(a) Seller shall cooperate with all reasonable requests of
Buyer and Buyer's counsel in connection with the consummation of the
transactions contemplated hereby, including, without limitation, providing all
necessary audited financial statements and consents of the auditors preparing
such audited financial statements, and access to all other financial information
required for Buyer to comply with its reporting obligations under the Securities
Exchange Act of 1934, as amended, and shall use its best efforts to cause its
counsel and auditors to cooperate with all such requests of Buyer and Buyer's
counsel. The expense of all reasonable necessary consents of Seller's auditors
required for Buyer to comply with its reporting obligations under the Securities
Exchange Act of 1934, as amended, including, without limitation, any auditor's
consents necessary in connection with the filing of a Form 8-K in connection
with the transaction contemplated hereby, shall be borne by Buyer.
(b) Seller shall, from time to time after the Closing, at the
request of Buyer and without further consideration, cooperate with Buyer to the
extent such cooperation is required by Buyer to enable Buyer, at Buyers expense,
to complete a full audit of the Business.
3.5 NON-COMPETITION. As a material inducement to Buyer to enter into
this Agreement and consummate the transactions contemplated hereby, Seller,
Parent and I-PAC agree, on behalf of themselves and their subsidiaries, that,
for five (5) years after the Closing (the "Non-Compete Period"), they will not,
without the prior written consent of Buyer, directly or indirectly, engage or
participate in, be employed by or assist in any manner or in any capacity, or
have any interest in or make any loan to any person, firm, corporation or
business which engages in any activity anywhere in the world where
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Buyer does business which is similar to or competitive with the Business.
Seller, Parent and I-PAC agree to enforce, and to cause any of their existing or
future subsidiaries to enforce, the agreements with their respective employees
who are retained by Seller, Parent or I-PAC or such existing or future
subsidiaries following the Closing prohibiting such employees from disclosing
confidential information relating to the Business.
3.6 NO SOLICITATION OF EMPLOYEES. Neither Seller, Parent, I-PAC nor any
of their existing or future subsidiaries will at any time during the three (3)
year period after the Closing, directly or indirectly, hire, solicit or accept
for hire the employment of any person who, at the time of the Closing, was an
employee of Buyer or of Seller in the Business being sold pursuant to this
Agreement. The term "solicit the employment" shall not be deemed to include
generalized searches for employees through media advertisements, employment
firms or otherwise. This restriction shall not apply to any employee of the
Business who is not employed by Buyer immediately subsequent to Closing, or
whose employment with Buyer is involuntarily terminated by Buyer after the
Closing. Seller, Parent and I-PAC agree to give, and to cause such subsidiaries
to give, notice of this provision to all recruiters and all headhunters or
recruiting, employment and executive search firms or other similar types of
organizations that are currently or that in the future are engaged by them.
Seller, Parent and I-PAC further agree not to and to cause such subsidiaries not
to, pay any incentive fees, referral bonuses or similar types of compensation to
any of their employees in the event that any employee of the Business employed
by Buyer is offered employment by any of them after the Closing.
3.7 CONFIDENTIALITY. Seller, Parent and I-PAC agree that, after the
Closing has been consummated, they and their subsidiaries, and their respective
officers, directors,
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and employees, will hold in strict confidence, and will not use, distribute or
make available to others, any confidential or proprietary data or information of
Seller that is used in connection with or related to the Business and the
Subject Assets. For this purpose, the following shall be deemed not to
constitute confidential or proprietary data or information: (a) information
which is generally known to the public or in the trade, or becomes so generally
known without breach of this Agreement by Seller; (b) information disclosed to
Seller without restriction by a third party who is not in breach of any
obligation of confidentiality in making such disclosure; or (c) information
which is required to be disclosed by law or legal process, provided that Seller
shall notify Buyer prior to making such disclosure and shall permit Buyer to
intervene in any relevant proceeding to protect its interests. However, Seller
may disclose information as a consequence of a requirement of any Securities
Exchange Act filing or disclosure requirement.
3.8 TAX RETURNS. To the extent reasonably necessary to Buyer's
compliance with federal, state, local and foreign tax laws, from and after the
Closing, Seller shall provide Buyer with reasonable access to all books and
records with respect to the Business.
3.9 BANK ACCOUNTS. Immediately following the Closing, Seller agrees to
eliminate the signing authority of Seller and any officer or other agent or
representative of Seller to each of Seller's bank or similar accounts
established with respect to the Business that are transferred to Buyer.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
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4.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to Seller to enter into this Agreement and consummate the transactions
contemplated hereby, Buyer hereby makes the representations and warranties to
Seller contained in this Section 4.
4.2 ORGANIZATION OF BUYER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Delaware with full
corporate power to own or lease its properties and to conduct business in the
manner and in the places where such properties are owned or leased or such
business is conducted by it.
4.3 AUTHORITY OF BUYER. Buyer has all necessary corporate power and
authority to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by Buyer pursuant to this Agreement and
to carry out the transactions contemplated hereby. The execution, delivery and
performance by Buyer of this Agreement and each such other agreement, document
and instrument have been duly authorized by all necessary corporate action of
Buyer and no other action on the part of Buyer is required in connection
therewith. This Agreement and each other agreement, document and instrument
executed and delivered by Buyer pursuant to this Agreement constitute, or when
executed and delivered will constitute, valid and binding obligations of Buyer
enforceable in accordance with their terms, except to the extent that
enforcement of the rights and remedies created hereby and thereby may be
affected by bankruptcy, reorganization, moratorium, insolvency and similar laws
of general application affecting the rights and remedies of creditors and by
general equity principles. The execution, delivery and performance by Buyer of
this Agreement and each such agreement, document and instrument:
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(i) does not and will not violate any provision of the
organization documents or bylaws of Buyer;
(ii) does not and will not violate any applicable law,
order, judgment, decree, rule or regulation of any
court or any governmental body having jurisdiction over
Buyer or require Buyer to obtain any approval, consent
or waiver of, or make any filing with, any person or
entity (governmental or otherwise) which has not been
obtained or made; and
(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation
under, give rise to a right of termination of, or
permit any third party to exercise any additional
rights under, any indenture or loan or credit agreement
or any other agreement, contract, instrument, mortgage,
lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or
arbitration award to which Buyer is a party or by which
the property of Buyer is bound or affected, except in
each case (i), (ii) or (iii) which would not have a
material adverse effect on the business of Buyer.
4.4 LITIGATION. There is no litigation or governmental or
administrative proceeding or investigation pending or, to its knowledge,
threatened against Buyer which would prevent or hinder the consummation of the
transactions contemplated by this Agreement.
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4.5 BROKERS. Buyer has not engaged any broker, investment banker,
financial advisor or other person in respect of which Seller would be
responsible for or obligated in respect of the payment of any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement, and Buyer agrees to pay
any such fees or commissions of any such person which it has engaged.
SECTION 5. U.K. VAT MATTERS
5.1 TRANSFER OF A GOING CONCERN.
(a) All amounts expressed in this Agreement to be payable by
Buyer are expressed exclusive of any VAT which may be chargeable thereon.
(b) The parties acknowledge and agree that the transfer of the
Subject Assets of the U.K. Business pursuant to this Agreement constitutes a
transfer of a business as a going concern for the purposes of Section 49 of the
VAT Act of 1994 and Article 5 of the VAT (Special Provisions) Order 1995 (the
"Special Provisions Order"), and accordingly the transfer of the Subject Assets
of the U.K. Business is neither a supply of goods nor a supply of services for
the purposes of U.K. VAT.
(c) The parties agree to use all their reasonable endeavors to
ensure that the sale of the Subject Assets of the U.K. Business is treated as
neither a supply of goods nor a supply of services for VAT purposes.
5.2 EFFECT OF CERTAIN REPRESENTATIONS.
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(a) Notwithstanding Section 5.1(b) and 5.1(c), if H.M. Customs
& Excise subsequently determine (the "Determination") that Seller is obliged to
account for VAT on the transfer of the Business, Seller shall issue a valid VAT
invoice in respect thereof against which Buyer shall pay to Seller by way of
additional consideration the amount of VAT chargeable on the transfer of the
Subject Assets pursuant to this Agreement.
(b) Seller hereby undertakes to Buyer that, at the date of
Closing, Seller shall deliver to Buyer the VAT business records relating to the
Business. Buyer shall preserve the records for such period as may be required by
law and shall allow Seller on reasonable notice to inspect and make copies of
the same.
(c) If Buyer disagrees with the Determination referred to in
Section 5.2(a) it may, within twenty-one (21) business days of being notified by
Seller of the Determination, by notice require Seller to request H.M. Customs &
Excise to review the Determination, such notice to specify the reasons to be
advanced by Seller when requesting the review. Seller shall make that request in
writing forthwith upon receiving the notice.
(d) Seller shall forthwith, upon receipt, forward to Buyer the
Determination following any review made in accordance with Section 5.1(c). If
Buyer is not satisfied with the Determination as reviewed, Buyer may by notice
require Seller, provided Seller has been indemnified to its reasonable
satisfaction against any costs, expenses or losses which may be incurred in so
doing, to appeal against the Determination and Seller shall delegate the conduct
of such appeal and of any further
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appeals entirely to Buyer. Buyer shall indemnify Seller against all reasonable
costs and expenses that Seller may incur in respect of any such appeal. In any
case where an appeal cannot be made against the Determination without Seller
accounting for the VAT, Seller shall deliver to Buyer a valid VAT invoice,
against which Buyer will pay to Seller the amount of the VAT.
(e) Following the Determination, upon any review referred to
in Section 5.2(c),or if pursuant to Section 5.2(d) an appeal has been made
against the Determination, following the final determination of that appeal and
any further appeal, Seller shall deliver to Buyer a valid VAT invoice against
which Buyer shall pay to Seller the amount of VAT that has been determined to be
properly chargeable on the transfer of the Subject Assets pursuant to this
Agreement, less any amount previously paid by Buyer to Seller under Section
5.2(a) and/or Section 5.2(d). If the amount paid by Buyer to Seller under
Section 5.2(a) and/or Section 5.2(d) is greater than the amount of VAT properly
chargeable, Seller shall refund the difference to Buyer together with interest
at the rate or rates then current for refunds by H.M. Customs & Excise of VAT.
5.3 BUYER VAT REPRESENTATIONS. Buyer hereby represents to Seller that:
(a) with effect from Closing, Buyer is a taxable person for
VAT purposes; and
(b) for the purposes of paragraph 5 of the Special Provisions
Order, Buyer intends to use the Subject Assets of the U.K. Business in carrying
on the same kind of business as that currently carried on by Seller with the
Subject Assets of the U.K. Business.
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SECTION 6. CONDITIONS.
6.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate this Agreement and the transactions contemplated hereby are subject
to the fulfillment of the following conditions:
(a) REPRESENTATIONS; WARRANTIES: COVENANTS. Each of the representations
and warranties of Seller contained in Section 2 shall be true and correct as
though made on and as of the Closing except (i) as affected by the transactions
contemplated hereby and (ii) to the extent that such representations and
warranties are made as of a specified date, in which case such representations
and warranties shall be true and correct as of the specified date; and Seller
shall, on or before the Closing, have performed all of its obligations hereunder
which by the terms hereof are to be performed on or before the Closing.
(b) NO MATERIAL CHANGE. There shall have been no material adverse
change (except continuing operating losses at a level consistent with those
experienced since September, 1998) in the financial condition, prospects,
properties, assets, liabilities, business or operations of the Business since
March 31, 1998, whether or not in the ordinary course of business.
(c) CERTIFICATE FROM OFFICERS. Seller shall have delivered to Buyer a
certificate of Seller's President dated as of the Closing to the effect that the
statements set forth in paragraph (a) and (b) above in this Section 6.1 are true
and correct.
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(d) APPROVAL OF BUYER'S COUNSEL. All actions, proceedings, instruments
and documents required to carry out this Agreement and the transactions
contemplated hereby and all related legal matters contemplated by this Agreement
shall have been approved by Day, Xxxxx & Xxxxxx LLP as counsel for Buyer, and
such counsel shall have received on behalf of Buyer such other certificates,
opinions, and documents, in form satisfactory to such counsel, as Buyer may
reasonably require from Seller to evidence compliance with the terms and
conditions hereof as of the Closing.
(e) OPINION OF COUNSEL. On the date of the Closing, Buyer shall have
received from counsel for Seller, an opinion as of the date of the Closing, in
the form attached hereto as EXHIBIT 6.1(e).
(f) NO LITIGATION. There shall have been no commencement by any person
or any federal, state, local, foreign or other governmental authority of
litigation, proceedings or other action against Buyer, Seller or any of its
respective affiliates that seeks to enjoin, restrain, condition or prohibit
consummation of this Agreement, nor shall there have been a material adverse
change in the laws or regulations applicable to Seller or any of its affiliates
with respect to the Business.
(g) CONSENTS. Seller shall have made, or shall have caused to be made,
all filings with and notifications to governmental authorities, regulatory
agencies and other governmental entities required to be made by Seller or any of
its affiliates in connection with the execution and delivery of this Agreement
by Seller or the performance by Seller of the transactions contemplated hereby;
and Seller shall have received all authorizations, waivers, consents and
permits, required from all third parties, including, without
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limitation, applicable governmental authorities, regulatory agencies, lessors,
lenders and contract parties, required to permit the consummation by Seller of
the transactions contemplated by this Agreement.
(h) EMPLOYEE PROGRAMS. Seller shall have taken all steps necessary to
provide Buyer with such pertinent data or information as Buyer may reasonably
request with respect to each employee of Seller offered employment by Buyer in
order to effect a transition of employment and employee benefits as of the
Closing Date.
(i) NO LIENS. Prior to or at the Closing, the Subject Assets shall be
free and clear of all liens, encumbrances and charges other than Permitted
Encumbrances.
(j) TRANSITION AGREEMENT. Seller and Buyer shall have executed and
delivered a transition agreement ("Transition Agreement") in substantially the
form of EXHIBIT 6.1(j) attached hereto.
(k) LANDLORD CONSENTS AND/OR LICENSES. Buyer shall have received from
Seller consents from the applicable landlords with respect to the assignment by
Seller to Buyer of the Leases concerning premises located in the United States
identified on SCHEDULE 2.5(b) or, with respect to those Leases concerning
premises located in the United Kingdom, a license or licenses, as applicable,
from Seller to use the premises in respect of such leases.
(l) BOARD OF DIRECTOR APPROVAL. Buyer's Board of Directors shall have
authorized the execution and delivery by Buyer of this Agreement and all related
agreements and the consummation of the transactions contemplated hereby.
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(m) EMPLOYEES. Each former employee of Seller shall, as a condition to
being hired by Buyer, execute Buyer's standard form of Confidentiality
Agreement, with such modifications required by or appropriate under California
law.
6.2 CONDITIONS TO OBLIGATIONS OF SELLER. Seller's obligation to
consummate this Agreement and the transactions contemplated hereby is subject to
the fulfillment, prior to or at the Closing, of the following conditions
precedent:
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the representations
and warranties of Buyer contained in Section 4 shall be true and correct in all
respects as though made on and as of the Closing except (i) as affected by the
transactions contemplated hereby and (ii) to the extent such representations and
warranties are made as of a specified date, in which case such representations
and warranties shall be true and correct as of the specified date. Buyer shall,
on or before the Closing, have performed all of its obligations hereunder which
by the terms hereof are to be performed on or before the Closing; and Buyer
shall have delivered to Seller a certificate of the President or any Vice
President of Buyer dated on the Closing to such effect.
(b) APPROVAL OF SELLER'S COUNSEL. All actions, proceedings, instruments
and documents required to carry out this Agreement and the transactions
contemplated hereby and all related legal matters contemplated by this agreement
shall have been approved by Xxxx, Forward, Xxxxxxxx & Scripps LLP as counsel for
Seller, and such counsel shall have received on behalf of Seller such other
certificates, opinions and documents in form satisfactory to counsel for Seller
as Seller may reasonably require from Buyer to evidence compliance with the
terms and conditions hereof as of the Closing.
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(c) NO LITIGATION. There shall have been no commencement by any person
or any federal, state, local, foreign or other governmental authority of
litigation, proceedings or other action against Buyer, Seller or any of its
respective affiliates that seeks to enjoin, restrain, condition or prohibit
consummation of this Agreement.
(d) OPINION OF BUYER'S COUNSEL. On the date of the Closing, Seller
shall have received from counsel for Buyer, an opinion as of the date of the
Closing, in the form attached hereto as EXHIBIT 6.2(d).
(e) MANUFACTURING AGREEMENT. Seller and Buyer shall have defined and
executed the Manufacturing Agreement, in the form attached hereto as
EXHIBIT 6.2(e).
SECTION 7. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations, warranties, agreements, covenants and obligations herein or any
other agreement entered into in connection therewith are material, shall be
deemed to have been relied upon by the other party and shall survive the Closing
regardless of any investigation and shall not merge in the performance of any
obligation by either party hereto. Notwithstanding the foregoing, the
representations and warranties shall only survive for the period of time as to
which indemnification is available under Section 8. Neither Seller nor Buyer
shall have any liability whatsoever with respect to a breach of any such
representations and warranties after the expiration of the period of time as to
which indemnification is available under Section 8.
7.2 COLLECTION OF ASSETS. Subsequent to the Closing, Buyer shall have
the right and authority to collect all Receivables and other items transferred
and assigned to it
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by Seller hereunder and to endorse with the name of Seller any checks received
on account of such Receivables or other items, and Seller agrees that it will
promptly transfer or deliver to Buyer within ten (10) business days any cash or
other property that Seller may receive with respect to any Receivables of any
character or any other items included in the Subject Assets.
7.3 PAYMENT OF OBLIGATIONS. Seller shall pay all of the Excluded
Liabilities in the ordinary course of business as they become due, and Buyer
shall pay all of the Assumed Liabilities in the ordinary course of business as
they become due.
7.4 ASSISTANCE AFTER CLOSING. For a period of six (6) months after the
Closing Date, Seller shall provide commercially reasonable assistance to Buyer
with respect to the transfer of the Subject Assets and in preserving
relationships with clients of the Business and otherwise facilitating the
transition of ownership of the Subject Assets. Such assistance shall include
furnishing Buyer with any information concerning the Business as Buyer may
reasonable request.
SECTION 8. INDEMNIFICATION.
8.1 INDEMNIFICATION BY SELLER, I-PAC AND PARENT. Seller, I-PAC and
Parent agree subsequent to the Closing jointly and severally to indemnify and
hold Buyer and its representatives, subsidiaries and affiliates and persons
serving as officers, directors, partners or employees thereof (individually a
"Buyer Indemnified Party" and collectively the "Buyer Indemnified Parties")
harmless from and against any damages, liabilities, diminution in value, losses,
taxes, fines, penalties, costs, and expenses (including, without limitation,
reasonable fees of counsel) of any kind or nature whatsoever (whether or not
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arising out of third-party claims and including all amounts paid in
investigation, defense or settlement of the foregoing) which may be sustained or
suffered by any of them arising out of or based upon any of the following
matters:
(a) any breach of any representation or warranty of Seller under this
Agreement or in any other agreement, or in any certificate, schedule or exhibit
delivered by it pursuant hereto or thereto, or by reason of any claim, action or
proceeding asserted or instituted growing out of any matter or thing
constituting a breach of such representations or warranties;
(b) any breach of any agreement or covenant of Seller under this
Agreement, to the extent not waived in writing by Buyer;
(c) all claims asserted under any bulk transfer or bulk sales act; and
(d) any failure by Seller to perform and discharge any of the Excluded
Liabilities as set forth in this Agreement.
8.2 LIMITATIONS ON INDEMNIFICATION BY SELLER, I-PAC AND PARENT.
Notwithstanding the foregoing, the right of Buyer Indemnified Parties to
indemnification under Section 8.1 shall be subject to the following provisions:
(a) No indemnification shall be payable pursuant to Subsection 8.1(a)
above to any Buyer Indemnified Party, unless the total of all claims for
indemnification pursuant to Section 8.1(a) shall exceed Twenty Thousand Dollars
($20,000) in the aggregate, whereupon the amount in excess of such sum shall be
recoverable as follows: at any point in time, once the aggregate total of all
claims for indemnification exceeds
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Fifty Thousand Dollars ($50,000), Buyer may petition Seller for reimbursement of
those claims. If the aggregate amount of all claims for indemnification in
either the first year (Closing Date through the first anniversary of the Closing
Date) or the second year (first anniversary of the Closing Date through the
second anniversary of the Closing Date) does not exceed Fifty Thousand Dollars
($50,000) for that year, but does exceed Twenty Thousand Dollars ($20,000), then
Buyer shall petition Seller within thirty (30) days of the Closing Date
anniversary date for such reimbursement;
(b) No indemnification shall be payable to a Buyer Indemnified Party
with respect to claims asserted pursuant to Section 8.1(a) (exclusive of claims
for indemnification for a breach of any representation or warranty with respect
to title to the Subject Assets, Taxes, environmental matters or product
liability or any breach relating to or involving fraud or intentional
misrepresentation) after the second anniversary of the Closing Date (the
"Indemnification Cut-Off Date"); provided, however, if prior to the relevant
date of expiration, a Buyer Indemnified Party shall have given written notice of
a claim for indemnification under Section 8.5, then the right to indemnification
with respect thereto shall remain in effect without regard to when such matter
shall have been finally determined and disposed of in accordance with this
Agreement, according to the date on which notice of the applicable claim is
given; and
(c) No indemnification shall be payable to a Buyer Indemnified Party
with respect to claims asserted pursuant to Subsection 8.1(a) (exclusive of
claims for a breach of any representation or warranty with respect to title to
the Subject Assets or any breach relating to or involving fraud or intentional
misrepresentation) to the extent that the aggregate amount payable under Section
8.1(a) exceeds the Purchase Price.
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8.3 INDEMNIFICATION BY BUYER. Buyer agrees subsequent to the Closing to
indemnify and hold Seller and its representatives, affiliates, subsidiaries and
persons serving as officers, directors, partners or employees thereof
(individually a "Seller Indemnified Party" and collectively the "Seller
Indemnified Parties") harmless from and against any damages, liabilities,
diminution in value, losses, fines, penalties, costs and expenses (including,
without limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) which may be sustained
or suffered by any of them arising out of or based upon any of the following
matters:
(a) any breach of any representation or warranty of Buyer under this
Agreement or in any other agreement, or in any certificate, schedule or exhibit
delivered by it pursuant hereto or thereto;
(b) any breach of any agreement or covenant of Buyer under this
Agreement to the extent not waived in writing by Seller; and
(c) any failure by Buyer to perform and discharge any of the Assumed
Liabilities as set forth in this Agreement.
8.4 LIMITATION ON INDEMNIFICATION BY BUYER. Notwithstanding the
foregoing, the right of Seller Indemnified Parties to indemnification under
Section 8.3 shall be subject to the following provisions:
(a) No indemnification pursuant to Section 8.3(a) shall be payable to
any Seller Indemnified Party, unless the total of all claims for indemnification
pursuant to
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Section 8.3(a) shall exceed Twenty Thousand Dollars ($20,000) in the aggregate,
whereupon the amount in excess of such sum shall be recoverable in accordance
with the terms hereof;
(b) No indemnification shall be payable to any Seller Indemnified Party
with respect to claims asserted pursuant to Section 8.3(a) above (exclusive of
any breach relating to or involving fraud or intentional misrepresentation)
after the Indemnification Cut-Off Date; provided, however, if prior to the
relevant date of expiration, a Seller Indemnified Party shall have given written
notice of a claim for indemnification under Section 8.5, then the right to
indemnification with respect thereto shall remain in effect without regard to
when such matter shall have been finally determined and disposed of in
accordance with this Agreement, according to the date on which notice of the
applicable claim is given; and
(c) No indemnification shall be payable to any Seller Indemnified Party
with respect to claims asserted pursuant to Section 8.3(a) above (exclusive of
any breach relating to or involving fraud or intentional misrepresentation) to
the extent that the aggregate amount payable under Section 8.3(a) exceeds the
Purchase Price.
8.5 NOTICE; DEFENSE OF CLAIMS. An indemnified party may make claims for
indemnification hereunder by giving written notice thereof to the indemnifying
party within the period in which indemnification claims can be made hereunder.
If indemnification is sought for a claim or liability asserted by a third party,
the indemnified party shall also give written notice thereof to the indemnifying
party promptly after it receives notice of the claim or liability being
asserted, but the failure to do so shall not
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relieve the indemnifying party from any liability except to the extent that it
is prejudiced by the failure or delay in giving such notice. Such notice shall
summarize the bases for the claim for indemnification and any claim or liability
being asserted by a third party. Within thirty (30) days after receiving such
notice the indemnifying party shall give written notice to the indemnified party
stating whether it disputes the claim for indemnification and whether it will
defend against any third party claim or liability at its own cost and expense.
If the indemnifying party fails to give notice that it disputes an
indemnification claim within thirty (30) days after receipt of notice thereof,
it shall be deemed to have accepted and agreed to the claim, which shall become
immediately due and payable. The indemnifying party shall be entitled to direct
the defense against a third party claim or liability with counsel reasonably
selected by it as long as the indemnifying party is conducting a good faith and
diligent defense. The indemnified party shall at all times have the right to
fully participate in the defense of a third party claim or liability at its own
expense directly or through counsel; provided, however, that if the named
parties to the action or proceeding include both the indemnifying party and the
indemnified party and the indemnified party is advised that representation of
both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the indemnified party may engage separate
counsel at the expense of the indemnifying party. If no such notice of intent to
dispute and defend a third party claim or liability is given by the indemnifying
party, or if such good faith, and diligent defense is not being or ceases to be
conducted by the indemnifying party and written notice by the indemnified party
is given to the indemnifying party to such effect, the indemnified party shall
have the right, at the expense of the indemnifying party, to undertake the
defense of such claim or
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liability (with counsel selected by the indemnified party), and to compromise or
settle it, exercising reasonable business judgment if such claim is one that (i)
involves (and continues to involve) solely money damages or (ii) involves (or
continues to involve) claims for both money damages and equitable relief,
against the indemnifying party that cannot be severed, where the claims for
money damages are the primary claims asserted by a third party and the claims
for equitable relief are incidental to the claims for money damages. If the
third party claim or liability is one that by its nature cannot be defended
solely by the indemnifying party, then the indemnified party shall make
available such information and assistance as the indemnifying party may
reasonably request and shall cooperate with the indemnifying party in such
defense, at the expense of the indemnifying party.
The indemnifying party, if it has assumed the defense of any
third-party claim as provided in this Agreement, shall not consent to a
settlement of, or the entry of any judgment arising from, any such third-party
claim without the indemnified party's prior written consent (which consent shall
not be unreasonably withheld) unless such settlement or judgment relates solely
to monetary damages. The indemnifying party shall not, without the indemnified
party's prior written consent, enter into any compromise or settlement that (i)
commits the indemnified party to take, or to forbear to take, any action or (ii)
does not provide for a complete release by such third party of the indemnified
party. The indemnified party shall have the sole and exclusive right to settle
any third-party claim, on such terms and conditions as it deems reasonably
appropriate, to the extent such third-party claim involves equitable or other
non-monetary relief against the indemnified party, and shall have the right to
settle any third-party claim involving
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money damages for which the indemnifying party has not assumed the defense
pursuant to this Section 8.5 with the written consent of the indemnifying party,
which consent shall not be unreasonably withheld or delayed.
8.6 ADDITIONAL PROVISIONS. Amounts payable in respect to the parties'
indemnification obligations shall be treated as an adjustment to the Purchase
Price, subject to the provisions of Section 1.4. Buyer and Seller agree to
cooperate in the preparation of a supplemental allocation of the Purchase Price
under Section 1.10 and as required by Treas. Reg. ss. 1.1060-1T(f) and
(h)(2)(ii) as a result of any adjustment to the Purchase Price pursuant to the
preceding sentence. Whether or not an indemnifying party chooses to defend or
prosecute any third-party claim, each party hereto shall cooperate in the
defense or prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
and appeals, as may be reasonably requested in connection therewith. The amount
of the indemnifying party's liability under this Agreement shall be determined
taking into account any applicable insurance proceeds actually received by the
indemnified party. The indemnification provided in this Section 8 shall be the
sole and exclusive remedy after the Closing Date for damages available to the
parties to this Agreement for breach of any of the representations or warranties
contained herein. Notwithstanding anything contained in this Agreement to the
contrary, no party shall be liable to the other party for indirect, special,
punitive, exemplary or consequential loss or damage (including any loss of
revenue or profit) for breach of any representation or warranty contained in
this Agreement, provided, however, the foregoing shall not be construed to
preclude recovery
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by the indemnified party in respect of any losses directly incurred from third
party claims. Both parties shall use commercially reasonably efforts to mitigate
their damages.
SECTION 9. MISCELLANEOUS.
9.1 BULK SALES LAW. Buyer waives compliance by Seller with the
provisions of any applicable bulk sales, bulk transfer, fraudulent conveyance or
other law for the protection of creditors (collectively, "Bulk Sales Act") in
connection with the transfer of the Subject Assets under this Agreement.
9.2 FEES AND EXPENSES. Each of the parties will bear its own expenses
in connection with the negotiation and the consummation of the transactions
contemplated by this Agreement, and no expenses of any party relating in any way
to the purchase and sale of the Subject Assets hereunder and the transactions
contemplated hereby, including without limitation legal, accounting or other
professional expenses of any party, shall be charged to or paid by any other
party or included in the Assumed Liabilities.
9.3 GOVERNING LAW. This Agreement shall be construed under and governed
by the internal laws of the State of Connecticut without regard to its conflict
of laws provisions.
9.4 NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail or by a nationally recognized commercial
carrier, upon the sooner of the date on which receipt is acknowledged or the
expiration of five (5) days after deposit in United States post office
facilities properly addressed with postage prepaid. All notices
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to a party will be sent to the addresses set forth below or to such other
address or person as such party may designate by notice to each other party
hereunder:
TO BUYER: Scan-Optics, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Attn: President
Facsimile No.: (000) 000-0000
With a copy to: Day, Xxxxx & Xxxxxx XXX
XxxxXxxxx X
Xxxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
TO SELLER, I-PAC Photomatrix, Inc.
OR PARENT: 0000 Xxxxxxx Xxx.
Xxxxxxxx, XX 00000
Attn: CEO
Facsimile No.: (000) 000-0000
With a copy to: Xxxx, Forward, Xxxxxxxx & Scripps LLP
000 Xxxx Xxxxxxxx
Xxxxx 0000
Xxx Xxxxx, XX 00000
Attn: Xxxx Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
9.5 ENTIRE AGREEMENT. This Agreement together with the other agreements
contemplated hereby, including the Schedules and Exhibits referred to herein and
therein and the other writings specifically identified herein and therein or
contemplated hereby, is complete, reflects the entire agreement of the parties
with respect to its subject matter, and supersedes all previous written or oral
negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements, express or
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implied, have been made by any of the parties hereto except as referred to
herein or therein or in such Schedules and Exhibits or in such other writings;
and all inducements to the making of this Agreement relied upon by either party
hereto have been expressed herein or in such Schedules or Exhibits or in such
other writings.
9.6 ASSIGNABILITY; BINDING EFFECT. This Agreement may not be assigned
by Seller or Buyer without the prior written consent of Buyer or Seller, as the
case may be. This Agreement shall be binding upon and enforceable by, and shall
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns. The provisions of this Agreement are severable, and in the
event that any one or more provisions are deemed illegal or unenforceable, the
remaining provisions shall remain in full force and effect unless the deletion
of such provision shall cause this Agreement to become materially adverse to
either party, in which event the parties shall use reasonable commercial efforts
to arrive at an accommodation that best preserves for the parties the benefits
and obligations of the offending provision.
9.7 CAPTIONS AND GENDER. The captions and Index in this Agreement are
for convenience only and shall not affect the construction or interpretation of
any term or provision hereof. The use in this Agreement of the masculine pronoun
in reference to a party hereto shall be deemed to include the feminine or
neuter, as the context may require.
9.8 EXECUTION IN COUNTERPARTS. For the convenience of the parties and
to facilitate execution, this Agreement may be executed in two or more
counterparts, each
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of which shall be deemed an original, but all of which shall constitute one and
the same document.
9.9 AMENDMENTS. This Agreement may not be amended or modified, nor may
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
9.10 PUBLICITY AND DISCLOSURES. As soon as practicable after the
Closing Date, Seller and Buyer shall issue a press release substantially in the
form agreed to by them. Neither Seller nor Buyer shall, without the approval of
the other party, make any other press release or other announcement concerning
the existence of this Agreement or the terms of the transactions contemplated by
this Agreement, except as and to the extent that any such party shall be so
obligated by law, in which case the other party shall be advised and the parties
shall use their respective reasonable commercial efforts to cause a mutually
agreeable release or announcement to be issued; provided, however, that the
foregoing shall not preclude communications or disclosures necessary to comply
with accounting and federal securities law disclosure obligations.
9.11 DISPUTE RESOLUTION.
(a) All disputes, claims, or controversies, whether based on contract,
tort, statute or other legal theory (including, but not limited to, any claim of
fraud or misrepresentation), arising out of or relating to this Agreement or the
negotiation, validity or performance hereof, that are not resolved by mutual
agreement shall be resolved solely and exclusively by binding arbitration which
shall be held in Hartford, Connecticut and
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shall be conducted in accordance with the rules of the American Arbitration
Association now in force or hereafter adopted unless specifically modified
herein. Arbitration shall be conducted by a single arbitrator approved by all
parties or, in the event that the parties are unable to agree upon a single
arbitrator within seven (7) days after notice of the dispute, by a board of
three (3) arbitrators, one to be appointed by Seller, Parent and I-PAC and one
to be appointed by Buyer, said arbitrators to be appointed within five (5) days
after the end of the seven (7) day period referred to above. The two arbitrators
so selected shall select the third arbitrator within twenty (20) days after the
last of the first two arbitrators has been appointed. If any of said arbitrators
are not appointed within the allowed time as herein provided, then any
arbitrator not so appointed shall be appointed by the American Arbitration
Association. The duty to arbitrate shall extend to any affiliate, officer,
employee, shareholder, principal, agent, trustee in bankruptcy, subsidiary,
third-party beneficiary or guarantor of a party making or defending any claim
which would otherwise be arbitrable hereunder. Notwithstanding the foregoing,
either party shall have the right to proceed in court without prior arbitration
for the limited purpose of seeking a temporary or preliminary injunction so as
to avoid immediate and irreparable harm.
(b) The parties covenant and agree that the arbitration shall commence
within one hundred twenty (120) days after the date on which a written demand
for arbitration is filed by any party hereto. In connection with the arbitration
proceeding, the arbitrator shall have the power to order the production of
documents by each party and any third-party witnesses, the answering of
interrogatories and responses to requests for admission. In addition, each party
may take up to three depositions as of right, and the arbitrator may
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in his or her discretion allow additional depositions upon good cause shown by
the moving party. In connection with any arbitration, each party shall provide
to the other, no later than seven (7) business days before the date of the
arbitration, the identity of all persons that may testify at the arbitration and
a copy of all documents that may be introduced at the arbitration or considered
or used by a party's witness or expert. The arbitrator's decision and award
shall be made and delivered within six (6) months after the selection of the
arbitrator. The arbitrator's decision (i) shall set forth a reasoned basis for
any award of damages or finding of liability; (ii) may in appropriate
circumstances include injunctive relief; and (iii) may be continued and entered
in any court. The arbitrator shall not have power to award damages in excess of
actual compensatory damages and shall not multiply actual damages or award
punitive damages or any other damages that are specifically excluded under, or
in excess of any applicable damage limitations expressed in this Agreement, and
each party hereby irrevocably waives any claim to such damages.
(c) The parties covenant and agree that they will participate in the
arbitration in good faith and that they will share equally its costs, except as
otherwise provided herein. The arbitrator may in his or her discretion assess
costs and expenses (including the reasonable legal fees and expenses of the
prevailing party) against any party to a proceeding. Any party unsuccessfully
refusing to comply with an order of the arbitrators shall be liable for costs
and expenses, including attorneys' fees, incurred by the other party in
enforcing the award. The provisions of this Section 9.11 shall be enforceable in
any court of competent jurisdiction.
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(d) Issues of arbitrability shall be determined in accordance with the
federal substantive and procedural laws relating to arbitration; all other
aspects of this Agreement shall be interpreted in accordance with, and the
arbitrator shall apply and be bound to follow, the substantive laws of the State
of Connecticut without regard to its principles of conflicts of law.
(e) Except as provided in Sections 9.11(a) and (g), the parties agree
not to submit a dispute subject to this Agreement to any federal, state, local
or foreign court or arbitration association, except as may be necessary to
enforce the arbitration procedures of this Section 9.11 or to enforce the award
of the arbitrator. If court proceedings to stay litigation or compel arbitration
are necessary, the party who unsuccessfully opposes such proceedings shall pay
all associated costs, expenses and attorneys' fees which are reasonably incurred
by the other party.
(f) Except to its board of directors, officers, counsel and
accountants, neither party nor the arbitrator may disclose the contents or
results of any arbitration hereunder without prior written consent of all
parties, unless and then only to the extent required to enforce or challenge the
award, as required by law, the rules of any securities exchange or the National
Association of Securities Dealers ("NASD"), as applicable, or as necessary for
financial and tax reports and audits.
(g) Notwithstanding anything to the contrary in this Section 9.11, in
the event of alleged violation of a party's intellectual property rights
(including, but not limited to, unauthorized disclosure of confidential
information), that party may seek temporary
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injunctive relief from any court of competent jurisdiction. The party requesting
such relief shall simultaneously file a demand for arbitration of the dispute.
(h) If any part of this Section 9.11 is held to be unenforceable, it
shall be severed and shall not affect either the duty to arbitrate hereunder or
any other party of this Section 9.11.
9.12 CONSENT TO JURISDICTION. Each of the parties hereto irrevocably
and unconditionally consents to the exclusive jurisdiction of the arbitrator(s)
to resolve all disputes, claims or controversies arising out of or relating to
(i) this Agreement or the negotiation, validity or performance hereof and
further consents to the jurisdiction of the courts of the State of Connecticut
for the purposes of enforcing the arbitration provisions of Section 9.11 of this
Agreement. Each party further irrevocably waives any objection to proceeding
before the arbitrator(s) based upon lack of personal jurisdiction or to the
laying of venue and further irrevocably and unconditionally waives and agrees
not to make a claim in any court that arbitration before the arbitrator(s) has
been brought in an inconvenient forum. Each of the parties hereto hereby
consents to service of process by registered mail at the address to which
notices are to be given. Each of the parties hereto agrees that its or his
submission to jurisdiction and its or his consent to service of process by mail
is made for the express benefit of the other parties hereto.
9.13 THIRD PARTY BENEFICIARIES. Nothing herein expressed or implied is
intended to or shall (a) confer on any person other than the parties hereto and
their respective successors or assigns any rights (including third party
beneficiary rights), remedies, obligations or liabilities under or by reason of
this Agreement or (b) constitute
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the parties hereto as partners or as participants in a joint venture. This
Agreement shall not provide third parties with any remedy, claim, liability,
reimbursement, cause of action or other right in excess of those existing
without reference to the terms of this Agreement. Nothing in this Agreement
shall be construed as giving to any employee of the Business, or any other
individual, any right or entitlement under any Employee Program, policy or
procedure maintained by Buyer or any affiliate thereof or by Seller or an
affiliate thereof, except as expressly provided in such Employee Program, policy
or procedure. No third party shall have any rights under Section 502, 503 or 504
of ERISA or any regulations thereunder because of this Agreement that would not
otherwise exist without reference to this Agreement. No third party shall have
any right, independent of any right that exists irrespective of this Agreement,
under or granted by this Agreement, to bring any suit at law or equity for any
matter governed by or subject to the provisions of this Agreement.
[THIS SPACE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
BUYER:
SCAN-OPTICS, INC.
By:________________________________
Name:______________________________
Title:_______________________________
SELLER:
PHOTOMATRIX IMAGING CORPORATION
By:________________________________
Name:______________________________
Title:_______________________________
I-PAC MANUFACTURING, INC.
By:________________________________
Name:______________________________
Title:_______________________________
PARENT:
PHOTOMATRIX, INC.
By:________________________________
Name:______________________________
Title:_______________________________
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LIST OF SCHEDULES AND EXHIBITS
Schedule 1.1(a)(i) Inventory
Schedule 1.1(a)(ii) Evaluation Units
Schedule 1.1(a)(iii) Fixed Assets
Schedule 1.1(a)(iv) Intellectual Property included in Subject Assets
Schedule 1.1(a)(v) Millennium Software Source Code Modules and related
products
Schedule 1.1(a)(vii) Contracts
Schedule 1.1(a)(ix) Government Permits - Annual Fees
Schedule 1.1(a)(x) Investments and Pre-Paid Expenses
Schedule 1.1(a)(xiv) Licenses
Schedule 1.2(a)(i) Trade Payables
Schedule 1.2(a)(iii) Permitted Encumbrances
Schedule 1.2(b) Assumed Liabilities not listed on Schedule 1.2(a)(i)
Schedule 1.2(c)(iv) Xxxx Debt Promissory Notes
Schedule 1.3 AIIM `99 Expenses
Schedule 1.8 Consents to Assignment
Schedule 1.13 Nonassignable Assets
Schedule 1.14 Employees
Schedule 1.14A Terminated Employees to be Offered Employment
Schedule 2.4 Breaches
Schedule 2.5(b) Leased Real Property
Schedule 2.5(c) Defects in Personal Property
Schedule 2.6 Financial Statements
Schedule 2.8 Accounts or Loans Receivable from Affiliated
Persons/Entities
Schedule 2.9 Inventory Not Located on Leased Property
Schedule 2.11 Intellectual Property (where no exclusive ownership or
valid right to use)
Schedule 2.12 Contracts
Schedule 2.13 Litigation
Schedule 2.14 Compliance with Laws
Schedule 2.15 Insurance
Schedule 2.16 Warranty or Other Claims
Schedule 2.18 Governmental Permits
Schedule 2.21 Employee Benefit Programs
Schedule 2.22 Environmental Matters
Schedule 2.23 Employees; Labor Matters
Schedule 2.24(a) Customers and Distributors
Schedule 2.25(b) Suppliers
Schedule 2.25 Purchase Commitments
Schedule 2.26 Required Consents
Schedule 2.28(b) Year 2000 Compliance - Internal Systems and Operations
Schedule 2.28(c) Year 2000 Compliance - Third Parties
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EXHIBITS
Exhibit 1.4 Form of Escrow Agreement
Exhibit 1.6(a) Form of Agreement for Assumption of Liabilities
Exhibit 1.6(b) Form of Lease Assumption and Assignment (Arizona, USA)
Exhibit 1.7(a) Form of Assignment and Xxxx of Sale
Exhibit 1.7(b) Form of Trademark Assignment
Exhibit 6.1(e) Form of Opinion of Counsel for Seller
Exhibit 6.1(j) Form of Transition Agreement
Exhibit 6.2(d) Form of Opinion of Counsel for Buyer
Exhibit 6.2(e) Form of Manufacturing Agreement
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