Exhibit 10.1
EXECUTION COPY
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made on this 6th day of
February, 2004, among Evenstar, Inc. (the "Seller"), Xxxx X. Xxxxxx, Xxxxx X.
Xxxxxx and Xxxxxxx X. Xxxxxx (collectively, the "Shareholders"), and SLS
International, Inc., a Delaware corporation (the "Purchaser").
RECITALS
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A. Seller, through its Hyperion Amplification division, owns all rights to the
trade name "Hyperion Amplification" and all rights in various inventions
concerning digital amplification technologies, which are disclosed and described
in one U.S. Patent No. 6,563,377 B2 (the "Patent"), U.S. Patent Application
Serial No. 10/377,559 (the "Patent Application"), and expired U.S. Provisional
Patent Application No. 60/390,242 ("Provisional Patent Application"), all of
which are set forth on Schedule A attached hereto (collectively, the "Purchased
Proprietary Rights," as further defined below).
B. Shareholders own 100% of the issued and outstanding shares of
capital stock of Seller.
C. Seller desires to sell, transfer and assign to Purchaser, and
Purchaser agrees to purchase from Seller, all of the Purchased Proprietary
Rights, as well as the Additional Technology (as defined below), for an amount
in cash and other consideration, all as herein provided and on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, in consideration of the foregoing recitals and the mutual promises,
covenants and representations herein contained, agree as follows:
1. PURCHASE AND SALE OF PURCHASED PROPRIETARY RIGHTS
(A) PURCHASED PROPRIETARY RIGHTS. Upon the terms set forth herein,
Seller shall sell, assign, transfer, convey and deliver to Purchaser, and
Purchaser shall acquire from Seller, free and clear of all liens, mortgages,
pledges, security interests, claims, assessments, restrictions, encumbrances and
charges of any kind, all of the Purchased Proprietary Rights, which include the
Additional Technology (as defined below), on the Closing Date (as defined
below). The Purchased Proprietary Rights include, without limitation: (i) all
rights to the inventions disclosed and described in the Patent (including
improvements, continuations, continuations-in-part, extensions or divisions
thereof); (ii) all rights to the inventions disclosed and described in the
Patent Application (including improvements, continuations,
continuations-in-part, extensions or divisions thereof); (iii) all rights to the
inventions disclosed and described in the expired Provisional Patent
Application; (iv) all trade secrets, inventions, discoveries, know-how,
formulas, processes, concepts, proprietary product designs, proprietary
technical documentation or information, and source and object code for any
computer software programs related to these inventions, including those
described on Schedule A attached hereto or otherwise used in the Business
(collectively, the "Trade Secrets"); (iv) the trademark and trade name "Hyperion
Amplification," the logo associated therewith, and the goodwill associated
therewith (collectively, the "Trade Name"); (v) any copyrights or copyrightable
works related to the Purchased Proprietary Rights or otherwise used in the
Business (the "Copyrights") ; (vi) all income, royalties, damages and payments
hereafter that may be due and/or payable under and with respect to the Patent,
Patent Application, Trade Secrets, Trade Name and Copyrights, including, without
limitation, payments under all licenses entered into in connection therewith and
damages and payments for past or future infringements thereof, and the right to
xxx for past, present and future infringements thereof.
(B) ADDITIONAL TECHNOLOGY. The Purchased Proprietary Rights shall
include the technology of Seller (the "Additional Technology") set forth on
Schedule 1(b) attached hereto, which are disclosed to Seller on the date hereof
pursuant to a Confidentiality Agreement between the Purchaser and the Seller
dated the date hereof.
(C) ASSIGNMENT OF CONTRACTS. Purchaser shall cooperate with Seller in
obtaining any third-party consents as may be required to transfer the Purchased
Proprietary Rights to Purchaser, including the provision of such information of
Purchaser as may be reasonably requested by such third parties in the context of
their review of requests for consent; provided that Purchaser shall not be
obligated to expend any sum or advance any costs, or commence any litigation or
other legal proceedings, in connection with such cooperation. Seller and
Shareholder(s) acknowledge and agree that any and all costs and fees charged by
such third parties in connection with such consents, whether charged prior to or
following the Closing Date, shall be the responsibility of the Seller and the
Shareholder(s).
2. PURCHASE PRICE AND PAYMENT.
(A) PAYMENT TO SELLER. In consideration for the Purchased Proprietary
Rights, at the Closing, Purchaser shall deliver to Seller an aggregate amount of
cash and stock as set forth in (iii) and (iv) below ("Purchase Price"). The
Purchase Price shall be delivered to Seller through a combination of cash and
shares of the Purchaser's Common Stock (the "Common Stock"), as more
specifically set forth below.
(i) Initial Deposit. Simultaneously with the execution of this
Agreement, the Purchaser shall deposit with the Seller an amount equal
to $30,000 in cash (the "Initial Deposit") by wire transfer of
immediately available funds to an account previously identified by the
Seller. The Initial Deposit is non-refundable except as set forth in
Section 2(a)(ii) below.
(ii) Second Deposit. If the Closing has not occurred on or prior to the
Scheduled Closing Date (as defined below), then the Purchaser shall
have the option, in Purchaser's sole discretion, to (x) terminate this
Agreement, in which case the Seller shall be entitled to retain the
Initial Deposit if but only if such failure to close is not the result
of a failure of the Seller or the Shareholders to comply with the terms
of this Agreement, which shall constitute liquidated damages for the
Purchaser's failure to close the transactions contemplated hereby, and
this Agreement shall thereby be terminated; or (y) extend the Scheduled
Closing Date to April 20, 2004 and deposit with the Seller an
additional amount equal to $30,000 in cash (the "Second Deposit") by
wire transfer of immediately available funds to an account previously
identified by the Seller. The Second Deposit is also non-refundable
except as set forth in this Section 2(a) (ii). If Purchaser elects to
terminate this Agreement pursuant to clause (x) and the failure to
close prior to the Scheduled Closing Date is the result of a failure of
the Seller or the Shareholders to comply with the terms of this
Agreement, then Seller shall promptly return the Initial Deposit to the
Purchaser. If the Closing has not occurred on or prior to April 20,
2004, then Purchaser may terminate this Agreement, in which case the
Seller shall be entitled to retain the Initial Deposit and the Second
Deposit if but only if such failure to close is not the result of a
failure of the Seller or the Shareholders to comply with the terms of
this Agreement, which shall constitute liquidated damages for the
Purchaser's failure to close the transactions contemplated hereby, and
this Agreement shall thereby be terminated. If the Closing has not
occurred on or prior to April 20, 2004 and the failure to close is the
result of a failure of the Seller or the Shareholders to comply with
the terms of this Agreement, then the Seller shall promptly return the
Initial Deposit and the Second Deposit to the Purchaser.
(iii) Cash Portion. At the Closing, Seller will receive an aggregate
amount of cash equal to $300,000 less the Deposit and the Second
Deposit (to the extent previously paid).
(iv) Stock Issuance. At the Closing, Seller will receive 300,000 shares
of Common Stock (the "Shares") which are deemed to have an aggregate
value of $_______ (the "Aggregate Share Value"). The Shares will vest
over time as follows, if but only if Xxxx Xxxxxx remains an employee of
the Purchaser in good standing on each date specified below:
Date Shares Vested
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Closing Date 100,000
First Anniversary of Closing Date 200,000
Second Anniversary of Closing Date 300,000
If Xxxx Xxxxxx is no longer an employee in good standing at any time
prior to the second anniversary of the Closing Date, the Seller shall
return the stock certificate to the Purchaser and the Purchaser shall
cancel any shares that have not vested prior to the termination date of
his employment and issue a new certificate reflecting only those shares
that have vested (and have not been sold previously). Notwithstanding
the foregoing, if Xxxx Xxxxxx'x employment is terminated by the
Purchaser without cause (as defined in his employment agreement with
the Purchaser) prior to the second anniversary of the Closing Date, or
if Xxxx Xxxxxx dies prior to such second anniversary, then all of the
Shares shall immediately become fully vested, and the immediately
preceding sentence shall be inapplicable. Also, the Seller agrees that
it will sell no more than 5,000 vested Shares in any one trading day;
provided that if the twenty-day average daily trading volume in the
Purchaser's Shares equals or exceeds 500,000 shares, then the Seller
will sell no more than 25,000 vested Shares in any one trading day (in
each case subject to any restrictions of applicable law, including Rule
144 of the U.S. Securities and Exchange Commission). The certificate(s)
issued to the Seller evidencing the Shares shall contain a legend
giving notice of the restrictions on such Shares provided in this
Section 2(a).
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(B) Following the Closing, Purchaser will prepare (and Seller may
review) Form 8594 and any other notice or filing required pursuant to Section
1060 of the Internal Revenue Code of 1986, as amended. The parties hereto agree
to execute and file the Form 8594 prepared by Purchaser and such other forms,
notices and filings as required by applicable laws.
(C) Seller agrees to pay all sales or similar taxes required to be paid
by reason of the sale by Seller of the Purchased Proprietary Rights to Purchaser
hereunder.
3. LIABILITIES.
Purchaser will assume no liabilities of Seller. Seller and Shareholders
agree to timely pay, satisfy or discharge and indemnify and hold harmless
Purchaser from all liabilities of the Seller.
4. COVENANT NOT TO COMPETE.
(A) To assure that Purchaser will realize the value and goodwill
inherent in the Purchased Proprietary Rights, Shareholders agree that they shall
not (i) directly or indirectly engage in (as an owner, partner, employee, agent,
consultant or otherwise), for a period of five (5) years following the Closing
Date, any business that designs, manufactures, distributes or sells commercial,
professional or residential loudspeakers, amplifiers or other stereo or sound
equipment (the "Business") in the United States (the "Territory"); (ii) directly
or indirectly, for a period of five (5) years following the Closing Date,
request or advise any individual or company which is a customer of Seller at the
Closing Date to withdraw, curtail or cancel any such customer's relationship
with Purchaser; or (iii) solicit or cause, directly or indirectly, to be
solicited, nor attempt to induce, for a period of five (5) years after the
Closing Date, any person employed by Seller at or at any time within 180 days
prior to the Closing Date, unless such person was either not offered employment
by Purchaser immediately following the Closing or was terminated thereafter, (A)
to refuse an offer of employment from Purchaser; (B) if such an offer is
accepted, to terminate his or her employment with Purchaser; or (C) to work,
directly or indirectly, with or for Seller.
(B) Shareholders agree and acknowledge that the restrictions contained
in Section 4(a) are reasonable in scope and duration and are necessary to
protect Purchaser after the Closing Date. If, however, any provision of Section
4(a), as applied to any party or to any circumstances, is adjudged by a court to
be invalid or unenforceable, the same will in no way affect any other provision
of Section 4(a) or any other part of this Agreement, the application of such
provision in any other circumstances or the validity or enforceability of this
Agreement. If any such provision, or any part thereof, is held to be
unenforceable because of the duration of such provision or the area covered
thereby, the parties agree that the court making such determination will have
the power to reduce the duration and/or area of such provision, and/or to delete
specific words or phrases, and in its reduced form such provision will then be
enforceable and will be enforced. Upon breach of any provision of Section 4(a),
Purchaser will be entitled to injunctive relief (without posting bond or other
security), since the remedy at law would be inadequate and insufficient. In
addition, Purchaser will be entitled to such damages as it can show it has
sustained by reason of such breach.
5. CLOSING.
(A) TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxxxx & Xxxxxx, 000 X. Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx, on
February 20, 2004 (the "Scheduled Closing Date"), as potentially extended
pursuant to Section 2(a) above, or by mail or facsimile transmission of the
applicable documents, certificates and instruments required to consummate the
transactions contemplated by this Agreement, or at such other place and time as
agreed upon by the parties. The date on which the Closing occurs is referred to
herein as the "Closing Date."
(B) CLOSING TRANSACTIONS. Subject to the conditions set forth in this
Agreement, the parties shall consummate the following transactions (the "Closing
Transactions") on the Closing Date:
(i) Seller shall deliver to Purchaser a Xxxx of Sale for the Purchased
Proprietary Rights to be sold by Seller hereunder;
(ii) Seller shall deliver to Purchaser Assignments of Patents for each
patent and patent application to be sold by Seller hereunder;
(iii) Purchaser shall deliver the Purchase Price to Seller (by wire
transfer of immediately available funds to an account designated by
Seller) and shall instruct its transfer agent to issue and deliver to
Shareholder(s) the certificates representing the Shares; and
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(iv) Purchaser and Xxxx Xxxxxx shall enter into a two-year employment
agreement with an annual salary of $90,000, all benefits generally
available to the Purchaser's other employees (the "Benefits"), and
reimbursement of expenses reasonably incurred in relocating to
Springfield, Missouri (subject to the Purchaser's advance approval of
such expenses), and otherwise in form and substance reasonably
satisfactory to Purchaser and Xxxx Xxxxxx. The employment agreement
shall contain a non-competition and non-solicitation covenant during
the employment period and for two years following termination of
employment (if terminated by the Purchaser without cause, then one year
following termination) and shall contain assignments to the Purchaser
of all technology developed by Xxxx Xxxxxx during the employment
period. Pursuant to the employment agreement, on the first day of
employment, Xxxx Xxxxxx will receive an Option to purchase 100,000
shares of the Purchaser's common stock ("Hiring Option") at a price
equal to the Market Value (as defined below) of the Purchaser's common
stock on the date of this Agreement. The Closing Option shall become
exercisable ninety days after the Closing Date, shall expire on the
fifth anniversary of the Closing Date, and shall otherwise be in a form
reasonably acceptable to the Purchaser and Xxxx Xxxxxx. Further, on
each anniversary of the employee's first day of employment until the
termination of employee's employment, the Purchaser shall issue to Xxxx
Xxxxxx options to acquire the Purchaser's common stock ("Annual Bonus
Options") at an exercise price per share equal to the Market Value of
the Purchaser's common stock on the applicable anniversary date. Each
Annual Bonus Option shall have a term of five years. The number of
shares issuable pursuant to an Annual Bonus Option shall equal the net
profit (as reasonably determined by the Purchaser in accordance with
generally accepted accounting principles and other reasonable
assumptions and estimates necessary to make the determination), in the
year ending on such anniversary date, of the Purchaser's products that
incorporate the Purchased Proprietary Rights multiplied by 5% and
divided by the option exercise price per share. For example, if the net
profits in a year ending on the first anniversary date equal $2 million
and the Market Value on the anniversary date is $5, the exercise price
per share shall be $5 (i.e., the Market Value) and the number of shares
issuable pursuant to the first Annual Bonus Option shall be 20,000
shares of common stock (2 million x 5% / $5). If the employment
agreement is terminated by the Purchaser prior to the first anniversary
of the Closing Date, and the termination is without "cause" (as such
term will be defined in the employment agreement), then the Purchaser
shall continue to pay Xxxx Xxxxxx the annual salary and the Benefits
through the first anniversary of the Closing Date, as well as
reimbursing Xxxx Xxxxxx for any relocation expenses incurred by Xxxx
Xxxxxx prior to the termination of employment and granting the Hiring
Option. If the employment agreement is terminated for cause by the
Purchaser prior to the first anniversary of the Closing Date, or if it
is terminated by Xxxx Xxxxxx prior to the first anniversary of the
Closing Date, then all compensation shall immediately terminate and
Xxxx Xxxxxx shall refund to the Purchaser all moving expenses
previously reimbursed or paid directly by the Purchaser.
"Market Value" of a share of the Purchaser's common stock shall be the
average closing price of the common stock on all securities exchanges
on which the common stock may at the time be listed, or, if there has
been no sales on any exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as
of 4:00 P.M., New York time, or, if on the day such security is not
quoted in the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 10
trading days immediately preceding the day as of which "Market Value"
is being determined. If at any time the common stock is not listed on
any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, "Fair Market Value" shall be determined in the
reasonable, good faith discretion of the Purchaser's board of directors
(taking into account all factors relevant to the value of the common
stock, including, without limitation, the most recent price at which
the common stock was sold to a third party).
(C) SELLER'S CLOSING DELIVERIES. Subject to and conditioned upon the
Closing, on or prior to the Closing Date, Seller shall have delivered to
Purchaser all of the following:
(i) a certificate of the Secretary of State or such other appropriate
governmental body of the State in which Seller is organized providing
that Seller is in good standing;
(ii) copies of all third-party (including landlords) and governmental
consents, approvals, filings, releases and terminations required in
connection with the consummation of the transactions contemplated
herein;
(iii) an opinion, dated the Closing Date, of counsel to Seller, in form
and substance reasonably satisfactory to Purchaser; and
(iv) such other documents or instruments as Purchaser may reasonably
request to effect the transactions contemplated hereby.
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(D) PURCHASER'S CLOSING DELIVERIES. Subject to and conditioned upon the
Closing, on or prior to the Closing Date, the Purchaser shall have delivered to
Seller all of the following:
(i) a certificate of the Secretary of State or such other appropriate
governmental body of the State in which Purchaser is organized,
providing that Purchaser is in good standing; and
(ii) such other documents or instruments as Seller may reasonably
request to effect the transactions contemplated hereby.
6. REPRESENTATIONS AND WARRANTIES. Seller and Shareholders each make
the following representations and warranties to Purchaser, upon which Purchaser
has relied:
(A) ORGANIZATION, POWER AND AUTHORITY; SUBSIDIARIES. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Kansas and has all requisite corporate power and authority to
own or lease its properties and to carry on its business as it is now being
conducted. Seller and Shareholders have the power and authority and capacity to
enter into this Agreement, and upon execution of this Agreement by Seller and
Shareholders same shall be binding upon and enforceable against Seller and
Shareholders according to the terms hereof.
(B) AUTHORIZATION; EXECUTION AND DELIVERY; NON-CONTRAVENTION. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action of the Seller. This Agreement has been duly executed and
delivered by the Seller and is a valid and binding obligation of the Seller,
enforceable in accordance with its terms. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
(x) contravene any provision of the certificate of incorporation or by-laws of
Seller; (y) violate or conflict with any federal, state or local law, statute,
ordinance, rule, regulation or any decree, writ, injunction, judgment or order
of any court or administrative or other governmental body or of any arbitration
award which is either applicable to, binding upon or enforceable against Seller
or any of the Shareholders; or (z) conflict with, result in any breach of or
default (or an event which would, with the passage of time or the giving of
notice or both, constitute a default) under any material contract, agreement,
lease, license, indenture, trust or other instrument which is either binding
upon or enforceable against the Seller or any of the Shareholders.
(C) TAXES. Seller has filed all federal, state, county and local tax
returns due prior to the date hereof and all taxes of every nature (including
all sales and use taxes, income taxes and real estate taxes); and all penalties
and interest thereon, due for or attributable to periods ending on or prior to
the Closing Date, have been paid timely and in full.
(D) GOOD TITLE. Seller has good and marketable title to the Purchased
Proprietary Rights, and Seller shall convey same to Purchaser, free and clear of
any mortgage, security interest, pledge, lien, conditional sales or other
agreement, lease, encumbrance or claim of any nature. Seller does not know of
any defects or deficiencies in the Purchased Proprietary Rights.
(E) RELIANCE ON STATEMENTS. No representation contained herein or
written statement made or furnished by any officer of Seller to Purchaser in
connection with this Agreement contains any untrue statement of a material fact
or omits any material fact necessary to make such representation or statement
not misleading.
(F) LITIGATION. There are no actions, suits, arbitrations, proceedings
or investigations pending, or to the knowledge of Seller threatened, against or
affecting Seller, Seller's operations, the Purchased Proprietary Rights, or
Seller's use of the Purchased Proprietary Rights.
(G) COMPLIANCE WITH LAWS. Seller is not in violation of any order,
writ, notice, injunction or decree of any court, board, or agency. Seller has
complied with, and is in present compliance with, all laws, regulations, rules
and orders applicable to Seller's business and/or to any or all of the Purchased
Proprietary Rights.
(H) SOLE OWNER. Seller is the sole owner of all right, title and
interest in and to the Purchased Proprietary Rights. There are not currently
outstanding any options or other rights to purchase or license any interest in
the Purchased Proprietary Rights.
(I) LICENSES AND PERMITS. Seller possesses all licenses and required
governmental or official approvals, permits or authorizations (collectively, the
"Permits") for the business and operations of Seller. All such Permits are valid
and in full force and effect, Seller is in substantial compliance with their
requirements, and no proceeding is pending or, to the best of Seller's or
Shareholders' knowledge, threatened to revoke or amend any of them. Schedule
6(i) contains a complete list of all such Permits. Except as indicated on
Schedule 6(i), none of such Permits will be impaired or in any way affected by
the execution and delivery of this Agreement or the consummation of the
transactions contemplated herein.
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(J) PROPRIETARY RIGHTS. (i) Seller has received no notice of any claim
by any third party asserting the invalidity, abuse, misuse, or unenforceability
of any of Seller's rights in, the use of, or the validity of the Purchased
Proprietary Rights, and to Seller's knowledge there are no grounds for the same.
The Purchased Proprietary Rights do not infringe, conflict with, dilute or
misappropriate any proprietary rights of others, and the Seller has never
received a notice claiming any such infringement, conflict, dilution or
misappropriation. The conduct of Seller's business has not infringed any
proprietary rights of others. To the knowledge of the Seller, no other person or
entity is infringing, diluting or misappropriating any of the Purchased
Proprietary Rights.
(ii) Any employee, agent, consultant, or contractor who has contributed
to or participated in the creation or development of any portion of the
Purchased Proprietary Rights on behalf of the Seller either (i) is a
party to a "work-for-hire" agreement under which the Seller is deemed
to be the original owner / author of all property rights therein, or
(ii) has executed an assignment to the Seller of all right, title and
interest therein.
(iii) The Purchased Proprietary Rights are valid and enforceable, and
each portion of the Purchased Proprietary Rights that is registered
with or issued by a governmental or regulatory authority has been duly
registered with, filed in or issued by the appropriate governmental or
regulatory authority and each such registration or issuance is valid
and remains in full force and effect, and all applications therefor
that are pending are in good standing and without challenge of any
kind. The Seller has taken all actions reasonably necessary to protect
each item of the Purchased Proprietary Rights, and has not taken any
action that would impair or otherwise adversely affect its rights in
the Purchased Proprietary Rights.
(iv) The Seller has the sole and exclusive right to bring actions for
infringement or unauthorized use of the Purchased Proprietary Rights,
and to the knowledge of Seller, there is no basis for any such action.
7. PRE-CLOSING COVENANTS OF PURCHASER.
(A) CONDUCT OF BUSINESS. During the period from the date of this
Agreement until the earlier of the Closing Date or the date this Agreement is
terminated, (i) the Seller shall conduct its operations according to its
ordinary and usual course of business, (ii) except as is required by applicable
law, as may be approved by the Purchaser (which approval shall not be
unreasonably withheld, delayed or conditioned) or as is otherwise contemplated
by this Agreement, the Seller and the Shareholders shall refrain from taking any
of the following actions:
(i) failing to take the Business's customary measures, in the ordinary
course of business consistent with past practice, to prevent the
Business from suffering any theft, damage, destruction or casualty to
the Purchased Proprietary Rights, whether or not covered by
(ii) permitting any of the Purchased Proprietary Rights to be subjected
to any lien;
(iii) selling, leasing, assigning, licensing, transferring or otherwise
disposing of any portion of the Purchased Proprietary Rights;
(iv) issuing, selling or transferring any interest in the Seller or any
rights to acquire any interest in the Seller, other than pursuant to
this Agreement;
(v) disclosing any confidential information;
(vi) failing to maintain all reasonably necessary Permits or fail to
make all reasonably necessary registrations or filings with or notices
to any governmental or regulatory authority for the lawful ownership of
the Purchased Proprietary Rights and the operation of its businesses as
presently conducted;
(vii) committing to do any of the foregoing.
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(B) REVIEW OF THE BUSINESS; CONFIDENTIALITY. The Seller shall permit
the Purchaser and its representatives to have, after the date of execution of
this Agreement, reasonable access during regular business hours to the premises
and to the books and records of the Business, and the Seller shall cause the
officers, employees and other representatives of each of the Seller to furnish
the Purchaser with such financial and operating data and other information with
respect to the Business as the Purchaser shall from time to time reasonably
request.
(C) COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions contained herein, the Seller and the Purchaser shall cooperate and
use their respective commercially reasonable efforts to take, or cause to be
taken, all appropriate action, and to make, or cause to be made, as soon as
practicable after the date of this Agreement, all filings necessary, proper or
advisable under applicable laws, in each case to consummate and make effective
the transactions contemplated by this Agreement in the most expeditious manner
practicable (including their respective commercially reasonable efforts to
obtain, prior to the Closing Date, all permits, consents, approvals,
authorizations, qualifications and orders as are necessary for consummation of
the transactions contemplated by this Agreement, to remove any injunctions or
other impediments or delays (legal or otherwise) and to fulfill the conditions
to consummation of the transactions contemplated hereby set forth in Section 9
of this Agreement).
8. POST-CLOSING COVENANTS OF PURCHASER AND SELLER.
(A) From and after the Closing, Purchaser shall keep and preserve all
books, records, information and data transferred to Purchaser hereunder for a
period of not less than six (6) years after the Closing and provide Seller with
reasonable access thereto to the extent any or all of same is needed by Seller
for tax, accounting or litigation purposes.
(B) Seller and Shareholders agree that after the Closing they will not
use the trade name "Hyperion" (either alone or together with other names or
words) or license other people to use such names in the Business.
(C) Until the second anniversary of the Closing Date, the Purchaser
shall not sell any of the Purchased Proprietary Rights until five business day
after the Purchaser delivers an offer notice (the "Offer Notice") to Xxxx X.
Xxxxxx setting forth the proposed Purchased Proprietary Rights to be sold and
the proposed price thereof. Xxxx Xxxxxx may elect (on behalf of himself or any
of the Shareholders) to purchase all of the Purchased Proprietary Rights
specified in the Offer Notice at the price specified therein by delivering
written notice of such election within five business days after its receipt of
the Offer Notice. If any of the Shareholders have elected to purchase the
Purchased Proprietary Rights from the Purchaser, the sale of such Purchased
Proprietary Rights shall be consummated as soon as practical after the delivery
of the election notice to the Purchaser, but in any event within ten business
days after the Purchaser's receipt of the election notice. If the Shareholders
do not elect to purchase all of the Purchased Proprietary Rights being offered,
the Purchaser may, at any time within 60 business days after the expiration of
the fifth business day following delivery of the Offer Notice, sell such
Purchased Proprietary Rights to one or more third parties at an aggregate price
no less than the price specified in the Offer Notice and on other terms no more
favorable, in the aggregate, to the transferees thereof than set forth in the
Offer Notice. Any Purchased Proprietary Rights not sold within such period shall
be reoffered pursuant to this paragraph 8(c) prior to any subsequent sale.
9. CONDITIONS TO CLOSING
(A) CONDITIONS TO THE PURCHASER'S OBLIGATIONS. The Purchaser may elect
not to close the transactions in its sole discretion for any reason or for no
reason; provided that it shall forfeit the Initial Deposit and the Second
Deposit (to the extent previously paid) if it exercises its rights not to close
pursuant to this Section 9(a), if but only if such failure to close is not the
result of a failure of the Seller or the Shareholders to comply with the terms
of this Agreement, and the forfeiture of the Initial Deposit and the Second
Deposit (to the extent previously paid) shall constitute liquidated damages for
the Purchaser's failure to close.
(B) CONDITIONS TO THE SELLER'S AND SHAREHOLDERS' OBLIGATIONS. The sale
of the Purchased Proprietary Rights by the Seller on the Closing Date is
conditioned upon satisfaction or waiver by the Seller, at or prior to the
Closing, of the following conditions:
(i) All of the agreements and covenants of the Purchaser to be
performed on or prior to the Closing Date pursuant to this Agreement
shall have been duly performed in all material respects.
(ii) No preliminary or permanent injunction, decree or other order
shall have been issued or be the subject of deliberation by any court
or by any governmental or regulatory authority which prohibits the
consummation of the transactions contemplated by this Agreement and
which is in effect at the Closing.
(iii) No law or order of any kind shall have been enacted, entered,
promulgated or enforced by any court or governmental or regulatory
authority which prohibits the consummation of the transactions
contemplated by this Agreement or has the effect of making them
illegal.
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10. INDEMNIFICATION.
(A) Seller and Shareholders (the "Selling Parties") shall indemnify and
hold Purchaser harmless from and against all damages, losses, liabilities, costs
and expenses, including without limitation reasonable attorneys' fees and
litigation expenses and costs, arising out of or resulting from (i) any
representation or warranty made by the Selling Parties in this Agreement being
untrue or incorrect; (ii) any material failure by the Selling Parties to timely
observe or perform all covenants and agreements set forth herein; (iii) any
brokers' fees incurred by the Selling Parties as described in Section 12(f); or
(iv) any liabilities of the Seller. All indemnification owing to Purchaser
hereunder shall be due and payable upon demand and, in Purchaser's discretion,
may also be recovered by setoff against amounts payable to the Selling Parties
hereunder.
(B) Purchaser shall indemnify the Selling Parties, and hold them
harmless from and against, all damages, losses, liabilities, costs and expenses,
including without limitation reasonable attorneys' fees and litigation expenses
and costs arising out of or resulting from any material failure of Purchaser to
observe or perform its covenants and agreements set forth in this Agreement. All
indemnification owing to the Selling Parties shall be due and payable upon
demand.
(C) Each of the representations and warranties made by the Selling
Parties in this Agreement, shall survive after the Closing Date, notwithstanding
any investigation at any time made by or on behalf of any party.
(D) Purchaser shall provide prompt notice ("Claim Notice") of any claim
under Section 10(a) to Seller describing the claim, the amount thereof (if known
and quantifiable), and the basis thereof; provided, however, that failure to
give prompt notice shall bar recovery of indemnification only if and to the
extent the failure to give such timely notice resulted in material prejudice to
the ability of Seller to defend and respond to such claim.
(F) Purchaser may at any time set off any amount for which the Selling
Parties are responsible under Section 10 against any payments or other amounts
owed from Purchaser to the Selling Parties pursuant to the provisions hereof or
otherwise owing to any of the Selling Parties. The amount to be set off (the
"Set Off Amount") shall be (x) the full amount of the claim made in the Claim
Notice if the Selling Parties either agreed to such amount or failed to respond
to such Claim Notice in writing within ten (10) business days from the date of
receipt by the Selling Parties of such Claim Notice (the "Contest Period") or
(y) if such claim is contested by the Selling Parties prior to the end of the
Contest Period, the amount of the claim that is either agreed to by the parties
or the amount of any final, non-appealable judgment on such claim, in each case
together with interest thereon at a rate of 7% per annum from the date on which
the Set Off Amount is determined through the date of payment.
11. ACQUISITION OF SHARES.
(A) Seller represents that the Shares to be received pursuant to
Section 2(a) will be delivered directly to Shareholders at the Closing; provided
that the Shares shall be deemed to have been delivered initially to Seller and
distributed by Seller to the Shareholders.
(B) Each Shareholder acknowledges (x) the Shares to be delivered
pursuant to this Agreement will be "restricted securities" for purposes of the
Federal securities laws and thus will be transferable only pursuant to (i)
public offerings registered under the Securities Act of 1933, as amended (the
"Securities Act"), (ii) Rule 144 or Rule 144A of the Securities and Exchange
Commission (or any similar rule or rules then in force) if such rule is
available and (iii) subject to the conditions specified in Section 11(c) below,
any other legally available means of transfer, and (y) a legend will be placed
on the certificates for the Shares issued hereunder in accordance with Section
11(e) below.
(C) In connection with the transfer of any Shares (other than a
transfer described in Section 11(b)(i) or (ii) above), the holder thereof shall
deliver written notice to Purchaser describing in reasonable detail the transfer
or proposed transfer, together with an opinion of counsel which (to Purchaser's
reasonable satisfaction) is knowledgeable in securities law matters to the
effect that such transfer of Shares may be effected without registration of such
Shares under the Securities Act.
(D) Each Shareholder hereby represents that Shareholder (i) is
acquiring the Shares acquired pursuant hereto for Shareholder's own account with
the present intention of holding such securities for purposes of investment, and
that Shareholder has no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
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securities laws; provided that nothing contained herein shall prevent each
Shareholder and subsequent holders of Shares from transferring such securities
in compliance with the provisions of this Section 11; (ii) is an "accredited
investor" as that term is defined in Rule 501 of Regulation D under the
Securities Act or has designated a "purchaser representative," (iii) either
alone or together with Shareholder's purchaser representative, (x) is a
sophisticated investor, has had prior experience with investments of a similar
nature, and (y) has knowledge and experience in financial and business matters
such that Shareholder is capable of evaluating the merits and risks of an
investment in the Shares, and (iv) has received all material documents, records
and books pertaining to the Purchaser and the Shares which Shareholder has
requested (including but not limited to filings by Purchaser with the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended),
and has been given an opportunity to make any further inquiries of the Purchaser
and its representatives that Shareholder desires to make and that each such
inquiry has been answered, or requested information provided, to Shareholder's
satisfaction. Each Shareholder understands that the Purchaser has a limited
operating history and that an investment in the Shares involves a high degree of
risk.
(E) Each certificate or instrument representing Shares shall be
imprinted with a legend (in addition to any legend pursuant to Section 2(a)
above) in substantially the following form:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES ACT, AND MAY
NOT BE SOLD, PLEDGED, TRANSFERRED OR DISPOSED OF UNLESS THEY
ARE REGISTERED UNDER THE 1933 ACT AND ANY APPLICABLE STATE
SECURITIES ACT OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE."
12. MISCELLANEOUS PROVISIONS.
(A) NOTICES. All notices, requests, demands or other communications
which may be or are required or permitted to be served or given hereunder (in
this Section collectively called "Notices") shall be in writing and shall be
hand delivered, sent by registered or certified mail, return receipt requested,
postage prepaid, or by a nationally recognized overnight delivery service, or
via facsimile, to the parties hereto at the address or facsimile number listed
below (provided that, for a facsimile, a copy is also sent promptly by U.S.
mail, certified mail or overnight delivery service):
If to the Seller or the Shareholders:
------------------------------------
c/o Xxxx Xxxxxx
------------------------
------------------------
------------------------
If to the Purchaser:
-------------------
SLS International, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: President
Fax: (000)000-0000
with a copy to:
Xxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, LLP
000 X. Xxxxxx Xx.
Xxxxx 0000
Xxxxxxx, XX 00000
Fax: (000)000-0000
Either party may, by Notice given as aforesaid, change its address for all
subsequent Notices. Notices shall be deemed given on the date delivered.
(B) NO MODIFICATION. This Agreement may not be modified, altered or
rescinded, or any rights hereunder waived, except by written agreement signed by
the parties hereto, or signed by the party charged with the waiver in the case
of a waiver.
-9-
(C) BINDING AGREEMENT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and the respective heirs, beneficiaries,
personal representatives, successors and assigns. There are no third-party
beneficiaries to this Agreement.
(D) ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto without
the prior consent of the other parties, except that after the Closing, the
Purchaser may assign its rights (but if so must also delegate its duties) to any
of its affiliates or to any person or entity who acquires all or substantially
all of the assets of the Purchaser.
(E) BROKER FEES. Seller and the Shareholders shall be responsible for
any commissions, fees or other amounts payable to a broker, finder, agent or
other person or entity engaged by Seller or the Shareholders which are due and
payable as a result of this Agreement and/or the transactions contemplated
hereby.
(F) SURVIVAL. Time is of the essence for all provisions hereof. All
representations, warranties and covenants shall survive Closing hereunder.
(G) FURTHER ASSURANCES. At any time and from time to time after the
Closing, upon reasonable request of Purchaser, Seller and Shareholders shall do,
execute, acknowledge and deliver such further acts, assignments, transfers,
conveyances and assurances as may be reasonably required for the more complete
consummation of the transactions contemplated herein.
(H) GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Missouri, without
regard to conflicts of laws principles that would cause any other state's laws
to apply.
(I) HEADINGS AND CAPTIONS. The captions set forth in this Agreement are
solely for the convenience of the parties hereto and shall not control or affect
the meaning or construction of this Agreement.
(J) SEVERABILITY. If any term or provision of this Agreement is found
by a court of competent jurisdiction to be unenforceable, in whole or in part,
the rest and remainder of such provision and this Agreement shall be and remain
enforceable to the fullest extent permitted by law.
(K) CONFIDENTIALITY; PUBLICITY. Except as may be required by law, rule
or regulation or as otherwise permitted or expressly contemplated herein,
neither the Selling Parties nor their agents or representatives shall disclose
to any third party the subject matter or terms of, or negotiations relating to,
this Agreement without the prior consent of the Purchaser. In addition, no press
release or other public announcement related to this Agreement or the
transactions contemplated hereby will be issued by any of such persons hereto
without the prior approval of Purchaser.
(L) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. Confirmation of execution
by electronic transmission of a facsimile signature page shall be binding upon
any party so confirming.
(M) ENTIRE AGREEMENT. This Agreement, along with the Schedules and
Exhibits hereto, sets forth all of the terms, agreements and representations
among the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements and understandings.
[SIGNATURES ON THE FOLLOWING PAGE]
-10-
IN WITNESS WHEREOF, the parties hereto, intending to be bound hereby,
have caused this Standard Asset Purchase Agreement to be executed the day and
year first above written.
PURCHASER:
SLS INTERNATIONAL, INC.
By:
-----------------------------
Its:
----------------------------
SELLER:
EVENSTAR, INC.
By:
----------------------------------------
Its:
---------------------------------------
SHAREHOLDERS:
-----------------------------
XXXX X. XXXXXX
-----------------------------
XXXXX X. XXXXXX
-----------------------------
XXXXXXX X. XXXXXX
-11-
LIST OF SCHEDULES
-----------------
Schedule A - Purchased Proprietary Rights
Schedule 1(b) - Additional Technology
Schedule 6(i) - Permits
