EX: 2.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the
"Agreement"), dated as of November 1, 1997, is
made and entered into by and among MED
ASSOCIATES, INC., a Mississippi corporation
(the "Company"), XXXXXXX X. XXXXXX, XX., an
individual ("CD"), XXXXXX X. XXXXXX, an
individual ("PD"), and BOATRACS, INC., a
California corporation (the "Purchaser"), who
agree as follows:
1. Recital.
This Agreement is made with reference to the
following recital of essential facts:
1.1. The Company is engaged in the
business of designing, marketing and providing
software development and computer systems
primarily to the maritime industry.
1.2. The parties to this Agreement
have agreed upon the sale to the Purchaser of
all of the business and specified assets of
the Company on the terms set forth in this
Agreement.
1.3. CD and PD (each, a
"Stockholder", and collectively, the
"Stockholders") have represented to Purchaser
that they are the owners of all the issued and
outstanding shares in the capital stock of the
Company.
2. Definitions. For the purposes of
this Agreement capitalized terms not otherwise
defined shall have the following meanings:
2.1. "Affiliate" shall mean any
person or entity controlled by, controlling,
or under common control with, directly or
indirectly, the referenced person or entity.
2.2. "Claims and Encumbrances" shall
mean, with respect to any person or entity,
(i) any lien, mortgage, pledge, encumbrance,
charge (general or specific) or conditional
sale or other title retention agreement
(including without limitation the right of a
lessor under a capital lease to the property
leased thereunder) or other security interest
of any kind upon any property or assets of any
character of such person or entity, whether
now owned or hereafter acquired by such person
or entity, or upon the income or profits
thereof, (ii) the transfer by such person or
entity of any of its property or assets for
the purpose of subjecting the same to the
payment of any indebtedness of such person or
others in priority to the payment by such
person or entity of its general creditors,
(iii) any sale, assignment, pledge or other
transfer by such person or entity of its
accounts receivable, contract rights, general
intangibles or chattel paper, with or without
recourse, and (iv) any agreement to give or do
or claim of any of the foregoing.
2.3. "Permitted Encumbrances" shall
mean Claims and Encumbrances disclosed in the
Company's Financial Statements (including the
notes thereto) and those particular Claims and
Encumbrances set forth on Schedule 2.3.
2.4.
"Subsidiary" shall mean all
corporations, partnerships or other entities,
a majority of the equity in which is owned
directly or indirectly by the person or entity
referred to.
2.5. "Technology" shall mean
software programs, object and source code, all
associated products and know-how which
together comprise packages designed,
developed, marketed, produced and provided by
the Company including all intellectual
property rights of every kind in and to such
programs, object and source code, products and
know-how.
3. Sale and Transfer of Assets.
3.1.
Assets to be Sold.
Subject to the terms and conditions
of this Agreement, the Company will sell,
assign and deliver, free and clear of all
Claims and Encumbrances (other than Permitted
Encumbrances), to Purchaser and Purchaser will
purchase from the Company at the Closing (as
such term is defined in Section 4.1) all of
the Company's right, title and interest in and
to all of the Company's assets and business
(excluding the assets referred to in Section
3.2) as the same may exist on the Closing Date
(as defined in Section 4.1) (collectively, the
"Assets"). The Assets to be sold include, but
are not limited to, the following:
3.1.1.
all of the Company's rights to the
Technology, the right to market and distribute
the Technology, and the good will associated
therewith;
3.1.2.
all of the Company's rights in the
trademarks, trade names and logos (including
registrations and applications for
registration of any of them) now or previously
used by the Company in connection with its
business, the Technology or otherwise,
including the registered trademarks listed on
Schedule 5.14, together with the good will of
the business associated with those trademarks,
trade names and logos;
3.1.3.
all of the Company's copyrights
(including, without limitation, with respect
to the Technology any registrations and
applications for registration of those
copyrights), and all of the Company's rights
of every kind and nature in and relating to
editorial materials, photos, art work,
mechanicals and files, including the
copyrights listed on Schedule 5.14 together
with the good will of the business associated
with those copyrights;
3.1.4.
all of the Company's past and
current mailing lists and customer lists and
all materials used for mailing list
development, customer promotion and
fulfillment of orders;
3.1.5.
all of the Company's rights under
license agreements, orders, leases,
commitments, contracts, arrangements and other
agreements (including, but not limited to,
orders or agreements for the purchase of
supplies and for the receipt of services in
connection with the operation of the Company's
business) which remain unperformed or
unfulfilled on, or by their terms continue in
effect after the Closing Date, to the extent
such orders, leases, commitments, contracts,
arrangements and other agreements are accepted
by the Purchaser, as listed on Schedule 5.13
(other than those agreements listed as
"Agreements not Assumed" on Schedule 5.13), to
receive goods and services pursuant to, and to
assert claims and take other rightful actions
in respect of breaches, defaults and other
violations of, such contracts;
3.1.6.
all of the Company's other books,
records, files, data and proprietary
information relating to the Company's business
and to its mailing lists, customers and the
operation of the Company's business, but
excluding account books of original entry and
general ledgers (any such excluded records and
data to be retained at the Company's executive
offices in Gulfport, Mississippi, and made
available by the Company for inspection by
Purchaser at any time during normal business
hours for a period of five (5) years after the
Closing Date, and Purchaser, at its own
expense, may make such copies and extracts as
it may desire);
3.1.7.
all of the Company's accounts
receivable;
3.1.8.
all of the Company's inventory of
advertising, sales and customer material,
forms, labels, insert cards, envelopes,
promotional materials, and other supplies used
in connection with the Company's business;
3.1.9.
(i) all computer and automatic
machinery software and programs set forth on
Schedule 3.1.9; and (ii) all other computer
and automatic machinery software and programs
not set forth on Schedule 3.1.9, and all the
tangible embodiments thereof (including, by
way of example and not limitation, all tapes,
disks, cards and all copies stored on the hard
disks or other mass storage components of all
such computers and automatic machinery), and
all the user and other documentation with
respect to the foregoing owned by the Company
and copies of the foregoing which the Company
has the right to copy but does not own;
3.1.10.
all machinery, equipment, furniture,
furnishings, tools and parts and similar
property ("Machinery and Equipment") including
without limitation, the Machinery and
Equipment described on Schedule 3.1.10;
3.1.11.
all inventories of paper and other
raw materials, work in process, finished
products and supplies (collectively, the
"Inventories") including Inventories held at
any location for or controlled by the Company
and Inventories previously purchased and in
transit to the Company at such locations;
3.1.12.
all other tangible assets owned by
the Company;
3.1.13.
all products and any products under
research or development prior to or on the
Closing Date (collectively, the "Products");
3.1.14.
all deposits paid on Machinery and
Equipment or other Assets, as listed on
Schedule 3.1.14;
3.1.15.
all prepaid expenses of the Company,
including, without limitation, those listed on
Schedule 3.1.15;
3.1.16.
to the extent the same are
transferrable, all federal, state or local
governmental or regulatory permits, licenses,
approvals and franchises which are owned or
have been received by the Company in
connection with the operation of its business
or the ownership of the Assets (collectively,
"Permits"), including, without limitation, the
Permits which are listed on Schedule 5.20;
3.1.17.
all bank balances, cash on hand and
cash equivalents of the Company at the Closing
Date (excluding the $5,000.00 described in
Section 3.2.7 below); and
3.1.18.
all other rights, properties and
assets owned by the Company not otherwise
described in this Agreement of any character
whatsoever, wherever located, and not
expressly excluded from the Assets by Section
3.2 and all good will of the Company.
The Assets will include without
limitation and with the exception of the
Excluded Assets, all of the assets (i) which
are reflected in the Company's Financial
Statements (as defined in Section 5.5), and
(ii) which have been acquired by the Company
after the date of such Financial Statements,
subject, in each case, to the use of raw
materials and supplies, collection of accounts
receivable, realization of prepaid expenses,
performance of contracts in full, expenditure
of cash and other dispositions of assets, all
in the ordinary course of business prior to
the Closing, and subject to the provisions of
this Agreement.
3.2.
Assets Retained by the Company.
The following assets of the Company,
together with those assets listed on Schedule
3.2 (collectively, the "Excluded Assets"), are
being retained by the Company (and excluded
from the Assets as described in Section 4.1):
3.2.1.
all rights of insurance
coverage relating to the liabilities being
retained by the Company after the Closing
Date;
3.2.2.
income tax records of the
Company; provided that such records shall be
retained at the Company's executive offices in
Gulfport, Mississippi, and the Purchaser shall
have reasonable access to such records and
shall have the right to make copies or
abstracts of such records for five (5) years
after the Closing Date to the extent Purchaser
shall reasonably require such access;
3.2.3.
minute and stock books of the
Company; provided that Purchaser shall have
reasonable access to such records and shall
have the right to make copies or abstracts of
such records for five (5) years after the
Closing Date to the extent Purchaser shall
reasonably require such access;
3.2.4.
the agreements listed on
Schedule 5.13 and identified as "Agreements
Not Assumed";
3.2.5.
subject to Purchaser's rights
under this Agreement, the rights of the
Company under this Agreement and the proceeds
payable to the Company under this Agreement;
3.2.6.
all deposits with respect to
income tax liabilities of the Company or the
Stockholders;
3.2.7. cash on hand of
$5,000.00; and
3.2.8. the 6,000 shares of
capital stock in Boatracs, Inc. held jointly
in the names of CD and PD.
4. The Closing.
4.1.
Place and Date.
The closing of the sale and purchase
of the Assets (the "Closing") shall take place
at the offices of Solomon, Ward, Seidenwurm &
Xxxxx, LLP, 000 X Xxxxxx, Xxxxx 0000, Xxx
Xxxxx, Xxxxxxxxxx 00000 at 10:00 a.m., local
time, on December 31, 1997, or at such other
time or place as agreed to by the parties.
The Company and Purchaser have elected to
treat the sale as having occurred on November
1, 1997 and such date is referred to in this
Agreement as the "Closing Date."
4.2. Deliveries;
Transfer of Assets.
4.2.1.
At the Closing, the Company
shall deliver to Purchaser the following, and
simultaneously with such delivery, the Company
shall take such action as may be necessary or
reasonably requested by Purchaser to place
Purchaser in possession and control of the
Assets:
4.2.1.1.
such bills of sale,
assignments or other instruments of transfer
and assignment as shall be necessary to vest
in Purchaser title (in accordance with this
Section 4) to the Assets to be sold and
assigned under this Agreement free and clear
of all Claims and Encumbrances (other than
Permitted Encumbrances);
4.2.1.2.
a copy of the resolutions
of the board of directors and shareholders of
the Company authorizing the execution,
delivery and performance of this Agreement by
the Company, and a certificate of its
Secretary or Assistant Secretary, dated the
Closing Date, that such resolutions were duly
adopted and are in full force and effect;
4.2.1.3. the certificate
referred to in Section 5.5.5;
4.2.1.4.
the opinion referred to in
Section 8.1.4;
4.2.1.5.
the CD Employment
Agreement (as defined in Section 8.1.6) and
the Additional Employment Agreements (as
defined in Section 8.1.7); and
4.2.1.6.
such other certificates or
other documents or instruments as the
Purchaser or Purchaser's counsel may
reasonably request.
4.2.2.
At the Closing, the Purchaser shall
deliver to the Company the following:
4.2.2.1.
a bank cashier's check or
evidence of the wire transfer for the amount
referred to in Section 4.3(a);
4.2.2.2.
instruments pursuant to
which Purchaser assumes the obligations and
liabilities to be assumed by it under Section
4.5 in form and substance reasonably
satisfactory to the Company;
4.2.2.3.
a copy of resolutions of
the board of directors of Purchaser
authorizing the execution, delivery and
performance of this Agreement by Purchaser,
and a certificate of its Secretary or
Assistant Secretary, dated the Closing Date,
that such resolutions were duly adopted and
are in full force and effect;
4.2.2.4.
the CD Employment
Agreement; and
4.2.2.5.
such other certificates or
other documents or instruments as the Company
or Company's counsel may reasonably request.
4.3.
Purchase Price; Payment of Purchase
Price.
In addition to assuming the
liabilities pursuant to Section 4.5, and
subject to the terms and conditions of this
Agreement, Purchaser shall pay to the Company
the following consideration as payment in full
for the Assets:
(a) The sum of Two Hundred
Fifty Thousand Dollars ($250,000) in
immediately available funds payable at the
Closing;
(b) The sum of Two Hundred and
Fifty Thousand Dollars ($250,000), which shall
become fully due and payable on the first
anniversary of the Closing Date;
(c)
Delivery to the Company,
subject to adjustment as provided below, of
Three Hundred Thousand (300,000) shares (the
"Shares") of common stock of Purchaser (the
"Deferred Contingent Payment"). The Deferred
Contingent Payment shall be payable in three
installments of One Hundred Thousand (100,000)
shares of such stock on each of (a) March 1,
1999; (b) March 1, 2000; and (c) March 1,
2001. If the Net Income From Operations (as
defined below) for the calendar year ended
December 31, 1998 is less than Three Hundred
Thousand Dollars ($300,000), then the number
of Shares payable as
the Deferred Contingent Payment shall be
reduced by one share for each dollar by which
Net Income From Operations is less than Three
Hundred Thousand Dollars ($300,000). Such
reduction shall be made from the Shares next
due for delivery in accordance with this
Section 4.3(c). For example, if the Net
Income From Operations for the year ended
December 31, 1998 is $200,000 then the number
of shares payable as the Deferred Contingent
Payment would be reduced by 100,000 shares;
4.3.1. The Deferred Contingent
Payment shall be subject to offset pursuant to
Section 11.3 below if, at any time during the
period from the Closing Date until the third
anniversary of the Closing Date, (i) CD
materially breaches the CD Employment
Agreement and such breach is not cured within
10 days after written notice of such breach,
or (ii) CD voluntarily terminates his
employment with the Purchaser (other than on
account of death or material disability)
;
4.3.2.
As used in this Agreement, "Net
Income From Operations" shall mean net income
(loss) before provision for any foreign,
federal, state and local taxes on or measured
by net income, but after deduction of all
other items of expense, including but not
limited to other state or local taxes, and
determined in accordance with generally
accepted accounting principles, consistently
applied, used to generate the Income Statement
previously given to Purchaser and attached as
Exhibit "A" to this Agreement (the "Income
Statement").
4.4.
Allocation of Purchase Price
and the Deferred Contingent Payment.
The Purchase Price and the Deferred
Contingent Payment shall be allocated as set
forth on Schedule 4.4 and all tax returns
filed by the parties shall be consistent with
such allocation. Schedule 4.4 shall be
subject to the review and approval of
Purchaser's auditors within a reasonable time
after the Closing. The Company and Purchaser
shall each prepare IRS Form 8594 in accordance
with such allocation and consistent with one
another and in accordance with applicable law
and regulations. Such Forms shall be
delivered to one another for review prior to
filing with the IRS.
4.5.
Assumption of Specific Liabilities.
At the Closing, Purchaser shall
assume and shall subsequently pay, honor and
discharge when due and payable and otherwise
in accordance with the relevant governing
agreements as the same shall exist on the
Closing Date:
4.5.1.
any and all liabilities,
obligations and commitments of the Company for
unfilled purchase orders entered into by the
Company in the ordinary course of business and
listed on Schedule 4.5.1;
4.5.2.
any and all liabilities,
obligations and commitments of the Company for
unfilled sales orders for the Technology and
any products incorporating the Technology
entered into by the Company in the ordinary
course of business and listed on Schedule
4.5.2;
4.5.3.
any and all liabilities,
obligations and commitments of the Company
under other contracts, leases, arrangements
and agreements to the extent listed on
Schedule 5.13 (other than the agreements
listed under "Agreements Not Assumed");
provided that Purchaser shall NOT assume
liabilities, obligations or commitments of the
Company relating to (i) any local, state or
federal tax liabilities or similar
governmental or other assessments arising from
the conduct of any business or occurrences
prior to the Closing Date; (ii) any
liabilities for breach or default by the
Company under any contract, lease or agreement
assigned to Purchaser hereunder; (iii) any
liability with respect to any claim, suit,
action or judicial or arbitral proceeding (a)
made or pending or commenced against the
Company on or prior to the Closing Date or (b)
made or commenced after the Closing Date in
respect of any action, omission or condition
to the extent existing or occurring prior to
the Closing Date; (iv) any pension or profit
sharing plan benefit, continuation, premium,
withdrawal or other liability, severance
liability, funding deficiency, worker's
compensation, employee life and health
insurance or similar liability to any employee
or former employee of the Company, including,
without limitation, any such liability under
any multi-employer or single-employer plan,
contract or arrangement (including, without
limitation, any plan or other instrument
referred to in Schedule 5.19), or any other
liability in respect of any employee,
including without limitation any wages,
vacation pay, sick leave, back pay, or
compensation of any kind, attributable to or
in respect of any period prior to the Closing
Date, whether or not reflected on the Closing
Balance Sheet; (v) any consulting agreements
or employment agreements except for the
employment agreements listed under the heading
"Agreements Assumed" on Schedule 5.13,
including without limitation any agreement,
understanding or arrangement, oral or written,
in connection with or in contemplation of any
sale of the Company pursuant to this
Agreement, or otherwise, to Purchaser or any
other buyer; or (vi) any liability or
obligation of the Company not expressly
assumed by Purchaser pursuant to this Section
4.5.
4.6.
Limitation on Assumption of
Liabilities.
Except as specifically provided in
this Agreement, Purchaser shall not assume or
have any liability for any liabilities or
obligations of the Company, and the Company
shall pay, perform and discharge all its
liabilities and obligations which are not so
assumed by Purchaser (including, without
limitation, liability for credits or refunds
for Technology or products incorporating the
Technology sold by the Company prior to the
Closing Date).
5. Representations and Warranties of the
Company and the Stockholders.
The Company and the Stockholders
jointly and severally represent and warrant to
Purchaser that the following are true as of
November 1, 1997 the date of the Closing:
5.1.
Organization and Authority.
The Company is a corporation duly
organized, validly existing and in good
standing under the laws of the State of
Mississippi and has all requisite power and
authority to own, operate and lease its
properties and to carry on its business as now
being conducted. To the knowledge of the
Company and the Stockholders, the Company is
duly licensed or qualified to do business and
is in good standing in each jurisdiction where
the failure to be so qualified or licensed
would have a material adverse effect on the
business or financial condition of the
Company. The Company has no subsidiaries and
no direct or indirect interest or interests by
stock ownership or otherwise in any firm,
association, corporation or business
enterprise.
5.2.
Authorization of Agreement.
The Company has the power and
authority to execute and deliver this
Agreement and to perform its obligations
hereunder. The execution, delivery and
performance of this Agreement by the Company
has been duly authorized by all necessary
corporate action on the part of the Company
and its shareholders. This Agreement has been
and the CD Employment Agreement will be duly
executed and delivered by the Company and/or
the Stockholders and constitutes or will, when
executed and delivered, constitute the legal,
valid and binding obligation of the Company
and/or the Stockholders enforceable against
the Company and/or the Stockholders in
accordance with their respective terms, except
as the same may be limited by bankruptcy,
insolvency, reorganization or other laws
affecting the enforcement of creditors' rights
generally now or hereafter in effect and
subject to the application of equitable
principles and the availability of equitable
remedies.
5.3.
Capital Stock.
All of the outstanding capital stock
of the Company has been duly authorized and is
validly issued, fully paid and non-assessable
and is registered to the Stockholders. The
Company has not entered into any contract or
agreement or made any commitment to sell or
otherwise transfer or issue any shares of its
capital stock and there are no outstanding
options, rights, subscriptions, warrants,
conversion rights, agreements or commitments
of any kind to purchase or otherwise acquire
from the Company or either Stockholder any
shares of capital stock of the Company.
Neither Stockholder has issued any proxy or
entered into any voting or voting trust
agreement or other arrangement of any kind
respecting the right to vote the outstanding
shares of capital stock of the Company.
5.4.
No Conflicts.
The execution, delivery and
performance of this Agreement and the
consummation of all of the transactions
contemplated hereby: (i) do not and will not
require the consent, waiver, approval,
license, designation or authorization of, or
declaration with, any person or public
authority (except for the consents to the
assignment of the Assigned Contracts (as
hereinafter defined) set forth on Schedule
5.13); (ii) do not and will not, with or
without the giving of notice or the passage of
time or both, violate or conflict with or
result in a breach or termination of any
provision of, or constitute a default under,
or accelerate or permit the acceleration of
the performance required by the terms of, or
result in the creation of any mortgage,
security interest, claim, lien, charge or
other encumbrance upon any of the Assets
pursuant to, or otherwise give rise to any
liability or obligation under, any agreement,
mortgage, deed of trust, indenture, license,
permit or any other agreement or instrument or
any order, judgment, decree, statute,
regulation or any other restriction of any
kind or description to which the Company or
either Stockholder is a party or by which the
Company or any of the Assets may be bound; and
(iii) will not terminate or result in the
termination of any such agreement or
instrument, or in any way affect or violate
the terms and conditions of, or result in the
cancellation, modification, revocation or
suspension of, any rights included in the
Assets.
5.5.
Financial Statements.
The Income Statement attached to
this Agreement as Exhibit "A" (a) is complete
and correct in all material respects and
presents fairly the income and expenses of the
Company as of November 1, 1997 and the results
of operations as of such dates; and (b) was
prepared in accordance with accounting
principles reasonably designed to present
fairly the income and expenses of the Company,
consistently applied, and are in accordance
with the books and records maintained by the
Company.
Attached to this Agreement as
Schedule 5.5 is the Company's balance sheet as
at November 1 1997 and the related statement
of operations for the periods then ended,
together with all notes related thereto
(collectively, the "Company's Financial
Statements"). The Company's Financial
Statements have been examined and reported
upon by independent auditors, whose report
with respect to such year is included in
Schedule 5.5.
5.5.1.
For the relevant periods, the
Company's Financial Statements: (1) are
complete and correct in all material respects;
(2) present fairly the financial position of
the Company at such dates and the results of
operations for the respective periods ended on
such dates; and (3) were prepared in
accordance with generally accepted accounting
principles, consistently applied during the
periods, except as indicated in the report or
notes thereto and are in accordance with the
books and records maintained by the Company,
with no differences between such the Company's
Financial Statements and the financial records
maintained and accounting methods applied by
the Company for tax purposes, except as
disclosed in the notes to the Financial
Statements.
5.5.2.
The value at which any or all
of the Assets are carried on the Company's
Financial Statements is not overstated and
does not exceed each asset's or group of
assets' replacement cost and does not exceed
each asset's or group of assets' fair market
value.
5.5.3.
Schedule 5.5.3 is a true,
correct and complete list of all of the
Company's accounts receivable (aged) as of
November 1, 1997. All such accounts
receivable of the Company shown on and all
accounts receivable existing on the Closing
Date are fully collectible in the aggregate
recorded amounts thereof. The aggregate
amount of all such accounts receivable which
have not been paid for thirty (30) days or
more does not exceed the amount reflected on
Schedule 5.5.3. All such accounts receivable
have been (or will be) generated in the
ordinary course of business and reflect (or
will reflect) a bona fide obligation for the
payment of goods or services provided by the
Company. Any account receivable not collected
within one hundred fifty (150) days after the
Closing Date shall be repurchased by the
Company as provided in Section 7.1.
5.5.4.
Except as disclosed in the
Schedules to this Agreement, as at November 1,
1997 the Company had no liabilities,
commitments or obligations of any nature,
whether absolute, accrued, contingent or
otherwise not shown and adequately provided
for in the Company Financial Statements.
5.5.5.
The Company's earnings from
operations through the Closing Date shall not
reflect any material adverse change from the
level of earnings from operations as at
November 1, 1997. The Company shall deliver
to Purchaser a certificate to such effect on
the Closing Date.
5.6. Taxes.
5.6.1.
True and correct copies of the
Company's federal and state income tax returns
for the calendar years ended December 31,
1994, 1995 and 1996 have been delivered to
Purchaser. To the knowledge of the Company
and the Stockholders, all tax returns
(including information returns) required by
any jurisdiction with respect to the Company
have been filed, except for returns with
respect to which extensions have been granted,
and each such return is true and correct.
There are no pending or threatened tax
examinations, claims (whether for taxes,
interest or penalties), liens, assessments,
deficiencies or liabilities to which the
Company or the Assets may be subject; the tax
returns for the Company for the years ended
December 31, 1994, 1995 and 1996 have not been
audited by any governmental body; and no
waiver of the statute of limitations or
extension of time for assessment of
deficiencies has been granted by the Company.
The Company has not filed any consent under
Section 341(f) of the Internal Revenue Code of
1986, as amended (the "Code") or any prior
federal income tax code.
5.6.2.
All liabilities of the Company
to any jurisdiction for taxes (including,
without limitation, all payroll withholding
taxes and all other employment related taxes)
of the Company, including interest thereon and
penalties with respect thereto, relating to
any period prior to the Closing Date have been
paid by the Company or will be paid by the
Company when due.
5.7. No Adverse Changes.
Except as set forth on Schedule 5.7,
since November 1, 1997 (i) the business of the
Company has been conducted only in the
ordinary course; (ii) there has been no change
in the condition (financial or otherwise),
assets, liabilities, business, operations,
prospects, or affairs of the Company, other
than changes in the ordinary course of
business, none of which singly and no
combination of which in the aggregate has been
materially adverse; and (iii) there has been
no damage, destruction or loss or other
occurrence or development, whether or not
insured against, which either singly or in the
aggregate materially adversely affects, and
the Company and the Stockholders have no
knowledge of any threatened occurrence or
development which would materially adversely
affect, the condition (financial or
otherwise), assets, liabilities, business,
operations, prospects or affairs of the
Company.
5.8. Conduct of Business.
Except as disclosed on Schedule 5.8,
since November 1, 1997, the Company has not:
(i) created or incurred any liability
(absolute, accrued, contingent or otherwise)
except unsecured current liabilities incurred
in the ordinary course of business consistent
with past practice; (ii) mortgaged, pledged or
subjected to any lien or otherwise encumbered
any of its assets, tangible or intangible;
(iii) discharged or satisfied any lien or
encumbrance or paid any obligation or
liability (absolute, accrued, contingent or
otherwise) other than current liabilities
shown on the Company's Financial Statements
and taxes and current liabilities incurred
since the date of the Company's Financial
Statements in the ordinary course of business
or under contracts or agreements entered into
in the ordinary course of business and listed
on Schedule 5.13 (other than as a result of
any default or breach of, or penalty under,
any such contracts or agreements); (iv)
waived, released or compromised any claims or
rights of substantial value, or experienced
any labor trouble (including without
limitation any actual or threatened strike or
lock-out) or lost, or been threatened with the
loss of, any key employees or any substantial
number of employees; (v) entered into any
settlement, compromise or consent with respect
to any claim, proceeding or investigation;
(vi) made capital expenditures or capital
additions or betterments which in the
aggregate exceeded $7,500; (vii) sold,
assigned, transferred, leased or otherwise
disposed of any of its assets, tangible or
intangible, or canceled any debts or claims
except, in each case, for fair consideration
in the ordinary course of business (it being
understood that the disposition of any asset,
other than inventory consisting of finished
products, or cancellation of any debt or claim
carried on the books of the Company at more
than $1,000 shall be deemed not to be a
disposition or cancellation in the ordinary
course of business); (viii) declared or paid
any dividends, or made any other distribution
on or in respect of, or directly or indirectly
purchased, retired, redeemed or otherwise
acquired any shares of its capital stock or
paid any notes or open accounts, or paid any
other amount to either Stockholder for any
purpose; (ix) made or become a party to, or
become bound by, any contract or commitment or
renewed, extended, amended, modified or
terminated any contract or commitment which in
any one case involving an amount in excess of
$5,000 (or in the aggregate an amount in
excess of $25,000) or a term in excess of
thirty days (other than this Agreement); (x)
issued or sold any shares of its capital
stock; (xi) paid or agreed to pay, other than
in the ordinary course of business,
conditionally or otherwise, any bonus, extra
compensation, pension or severance pay to any
of its officers or employees, whether under
any existing profit sharing, pension or other
plan or otherwise, or increased the rate or
altered the form of compensation, including
without limitation, salaries, fees, commission
rates, bonuses, profit sharing, incentive,
pension, retirement or other similar payments,
from that being paid at November 1, 1997 to
any of its stockholders, directors, officers
or employees; (xii) entered into any
transaction not in the ordinary course of
business (except for transactions contemplated
by this Agreement); (xiii) made or announced
any change in the terms, including but not
limited to price, of the sale of any products
of the Company or made or announced any change
in the form or manner of distribution of any
of the Company's products; (xiv) changed any
accounting methods or principles used in
recording transactions on the Company's books
or records or in preparing the Company's
Financial Statements; (xv) paid any legal
expenses not in the ordinary course of
business; or (xvi) entered into any contract
or commitment to do any of the foregoing.
5.9. Title to Purchased Assets.
The Company has and on the Closing
Date will convey to Purchaser valid title to
all of its personal property and valid
leasehold interests in all real and personal
property leased by it, free and clear of all
Claims and Encumbrances, except Permitted
Encumbrances. To the Company's and the
Stockholders' knowledge no instrument,
easement, license or grant of record,
applicable zoning or building law, ordinance
or administrative regulation or other
impediment of any kind prohibits or interferes
with, limits or impairs, or would, if not
permitted by any prior nonconforming use,
prohibit or interfere with or limit or impair,
the use, operation, maintenance of, or access
to, the Assets. All of the Assets are located
in Gulfport, Mississippi. The Assets taken as
a whole constitute all of the properties and
assets used or held in conjunction with the
business of the Company and are sufficient and
adequate to carry on the business of the
Company as now conducted.
5.10. Real Property.
Schedule 5.10 to this Agreement sets
forth a true and complete summary list and
description of all of the Company's interests
in real property, including leasehold
interests (the "Real Property"). The Company
owns no fee interest in real property and
leases all real property it uses in its
business. The Company has received no notice,
and has no knowledge, of any taking or
proposed taking of such Real Property by any
authority having the power of eminent domain
or condemnation with respect thereto. To the
Company's and Stockholders' knowledge, no
portion of the Company's Real Property or
plants, structures, fixtures and improvement
is subject to any proposal of any such
assessment. Plants, structures, fixtures and
improvements on the Company's Real Property
are in a state of good working condition and
repair, ordinary wear and tear excepted, and
are adequate and appropriate for the Company's
business as now conducted. No insurance
company has ever required that the Company pay
increased insurance rates or take other
precautions or actions (as a condition to, or
in connection with, obtaining insurance)
because of any geological faults, sinkhole,
general subsidence, rising water or flood
waters, muck or road slides, erosion or any
soil or geological condition or any
contamination from toxic waste affecting the
Company's Real Property. The Company enjoys
quiet possession under all of its leases, each
of which is enforceable in accordance with its
terms against the lessor thereunder, except as
limited by bankruptcy, insolvency,
reorganization or other laws affecting the
enforcement of creditors' rights generally now
or hereafter in effect and subject to the
application of equitable principles and the
availability of equitable remedies. The
Company is not in default under the terms of
any of its leases.
5.11. Personal Property.
Schedule 5.11 to this Agreement sets
forth a true and complete list of all items
(or classes of items) of personal property
owned by the Company included in the Assets.
Such items are in a state of good working
condition and repair, ordinary wear and tear
excepted, and are adequate and appropriate for
the Company's business as now conducted. The
Company does not own or lease any automobiles,
trucks or other vehicles except as described
on Schedule 5.11. Items of personal property,
if any, in which another has any interest and
for which the Company is accountable to
another are identified in Schedule 5.11.
5.12.
Inventory.
Schedule 5.12 to this Agreement sets
forth a true and complete description of all
of the Company's Inventory as at November 1,
1997. The items listed in Schedule 5.12
together with the assets listed in Schedules
3.1.11, 5.10 and 5.11 constitute all of the
tangible assets used in the Company's
business. The Inventory included in Schedule
5.12 is in good condition, is of a quantity
and quality useable and saleable in the
ordinary course of the Company's business as
now conducted. Finished goods in inventory
conform to the specifications of the Company
and are free from defects and are marketable
in their current condition based upon the
Company's past experience.
5.13.
Contracts.
Except as disclosed in Schedule 5.13
to this Agreement, the Company is not a party
to or bound by any oral or written contracts,
obligations or commitments, including without
limitation any:
5.13.1.
contract, commitment or
arrangement involving in any one case, $1,000
or more;
5.13.2.
contract, commitment or
arrangement, relating to creation, production,
composing, printing, order fulfillment or
distribution of the Technology;
5.13.3.
contract, commitment or
arrangement relating to new products;
5.13.4. contract, commitment
or arrangement relating to the sale or rental
of customer or mailing lists;
5.13.5. contract with a term
of, or requiring performance, more than three
(3) months from its date;
5.13.6.
commitment, contract or
undertaking which is not terminable upon
notice of thirty (30) days or less without
penalty, cost or liability to the Company or,
after the Closing Date to the Purchaser;
5.13.7.
lease or lease purchase
agreement, mortgage, conditional sale or title
retention agreement, indenture, security
agreement, credit agreement, pledge or option
with respect to any interest in any property,
real or personal (tangible or intangible), in
any capacity;
5.13.8.
commitment, contract or
undertaking for the purchase or use of
services, materials, supplies, inventory,
machinery or equipment;
5.13.9.
commitment, contract or
undertaking for the sale or use (other than
sales of inventory in the ordinary course of
business to customers who are individual
customers) of the Company's products;
5.13.10.
employment contract,
undertaking, understanding or arrangement,
including without limitation any agreement,
understanding or arrangement, oral or written,
in connection with or in contemplation of any
sale of the Company pursuant to this
Agreement, or otherwise, to Purchaser or any
other buyer;
5.13.11.
contract or agreement with any
labor union or other collective bargaining
group;
5.13.12.
bonus, pension, savings,
welfare, profit sharing, stock option,
retirement, commission, executive
compensation, hospitalization, insurance or
similar plan providing for employee benefits
or any other arrangement providing for
benefits for any former or current employees
or for the remuneration, direct or indirect,
of the Company's directors, officers or
employees;
5.13.13.
note, loan, credit or financing
agreement or other contract for money
borrowed, and all related security agreements
and collateral documents, including any
agreement for any commitment for future loans,
credit or financing;
5.13.14.
guarantee;
5.13.15.
contract or understanding
regarding any capital expenditures;
5.13.16.
agency (sales or otherwise),
distribution, brokerage (including, without
limitation, any brokerage or finder's
agreement or arrangement with respect to any
of the transactions contemplated by this
Agreement) or advertising agreement;
5.13.17.
contract with investment
bankers, accountants, attorneys, consultants
or other independent contractors;
5.13.18.
contract with any director or
officer of the Company or any Affiliate of
such person;
5.13.19.
contract, commitment or
arrangement which would restrain the Purchaser
or any Affiliate of the Purchaser from
engaging or competing in any business or to
maintain the confidentiality of any matter;
5.13.20.
contract, commitment or
arrangement not made in the ordinary course of
business of the business of the Company,
including without limitation any agreement,
understanding or arrangement, oral or written,
in connection with or in contemplation of any
sale of the Company pursuant to this
Agreement, or otherwise, to Purchaser or any
other buyer;
5.13.21.
license, permit, franchise or
royalty agreement.
The Company has delivered to the
Purchaser correct and complete copies of all
of the contracts, agreements and other
documents listed in Schedule 5.13 which are to
be assigned to Purchaser and all amendments
thereto and waivers granted thereunder (the
"Assigned Contracts"). All oral or written
contracts, obligations or commitments, not
specifically identified on Schedule 5.13 as
being an Assigned Contract or listed under the
heading "Agreements Not Assumed" shall not be
assigned or assumed by Purchaser. The rights
and interests of the Company in all Assigned
Contracts may be assigned to the Purchaser
without the consent of any other person,
except as otherwise disclosed on Schedule 5.13
and at the Closing the Purchaser will acquire
all such rights and interests. The Company
enjoys satisfactory working relationships
under all Assigned Contracts, and no
unresolved disputes are pending or, to the
best of Company's and the Stockholders'
knowledge, threatened under or in respect of
any such Assigned Contracts. The prices to be
received or paid by the Company under all
Assigned Contracts with its customers and
others have been determined in accordance with
the Company's established pricing policies.
The Company has no contracts with the United
States Government. The Company has no
outstanding power of attorney other than
routine power of attorney relating to
representation before governmental agencies or
given in connection with qualification to do
business in another jurisdiction.
Except as described in Schedule
5.13, all Assigned Contracts described in such
Schedule 5.13 are valid and enforceable in
accordance with their respective terms, except
as the same may be limited by bankruptcy,
insolvency, reorganization or other laws
affecting the enforcement of creditors' rights
generally now or hereafter in effect and
subject to the application of equitable
principles and the availability of equitable
remedies, and there is not, under any of such
documents or agreements or any obligation, or
covenant or condition contained therein, any
existing material default by the Company or,
to the Company's and the Stockholders'
knowledge, any other party, or any event which
with notice, lapse of time, or both, would
constitute a default and which would have a
material adverse effect on the continued
operation of the business by Purchaser.
5.14.
Intellectual Property.
Schedule 5.14 sets forth a true and
complete list of all of the Company's
trademarks, trade names, copyrights, patents
and similar rights, and any applications in
respect thereto (the "Intellectual Property")
used by the Company now or in the past in
whole or in part for the conduct of its
business. Except as disclosed on Schedule
5.14, all the Intellectual Property is owned
by the Company free and clear of any and all
licenses, liens, claims, security interests,
charges or other encumbrances or restrictions
of any kind, and no licenses for the use of
any of such rights have been granted by the
Company to any third parties. All of such
rights are valid and in good standing and are
adequate and appropriate for the Company's
business as now conducted. All of such rights
will be acquired by Purchaser at the Closing,
and the transfer of such rights to, and use by
Purchaser will not require the consent of any
other person. Except as disclosed on Schedule
5.14, the operation of the Company's business
does not infringe in any way on or conflict
with any registered or unregistered patent,
trademark, trade name, copyright, license or
other right, of any person and the Company
does not license any such right from others
except as set forth on Schedule 5.14. No
claim is pending, has been made within the
past five (5) years, or, to the Company's or
Stockholders' knowledge, is threatened to the
effect that any such infringement or conflict
has occurred.
5.15.
Insurance.
Schedule 5.15 to this Agreement
contains a complete and correct list of all
insurance policies maintained by the Company.
The Company has furnished to Purchaser
complete and correct copies of all such
policies together with all riders and
amendments thereto. Such policies are in full
force and effect, and all premiums due thereon
have been paid. The Company has complied in
all material respects with the provisions of
such policies. All of such insurance policies
are transferable by the Company without the
consents of any other person except the
insurer and except as disclosed on Schedule
5.15 and the Company has not received any
notice canceling or threatening to cancel or
refusing to renew any of such insurance. The
rights of the insured under such policies will
not be terminated or adversely affected by
this Agreement or the transactions
contemplated thereby and on the Closing Date
Purchaser will acquire all of the Company's
rights under such policies, if Purchaser
notifies the Company and the insurer prior
thereto of its desire to acquire such rights.
5.16.
Customer and Supplier Relationships.
Attached as Schedule 5.16 is a
complete and correct list of all suppliers
whose sales to the Company amounted to more
than $10,000 during any calendar year since
January 1, 1995, showing the sales of each.
During such periods no single customer and no
group of related customers accounted for more
than five percent (5%) by dollar amount of the
gross sales of the Company and no single
supplier or group of related suppliers
accounts for more than five percent (5%) by
dollar amount of the cost of sales of the
Company's business, except as disclosed in
Schedule 5.16. With respect to any such
customer or supplier or group of related
customers or suppliers listed on Schedule
5.16, neither the Company nor either
Stockholder has any knowledge that any
customer, supplier or group of related
customers, suppliers has terminated or expects
to terminate a material portion of its normal
business with the Company, and no facts or
circumstances exist that would or might cause
any customer, supplier or group of related
customers, suppliers to terminate a material
portion of its normal business with the
Company. Except as disclosed in Schedule
5.16, no director or officer of the Company,
nor to the best of the Company's or
Stockholders' knowledge any Affiliate of the
Company, has any direct or indirect interest,
either by way of stock ownership or otherwise,
in any firm, corporation, association or
business enterprise, which competes with, is a
supplier or customer of, or is a distributor
or sales agent for, the Company.
5.17.
Employees.
Attached as Schedule 5.17 is a list
of all of the employees and officers of the
Company employed by the Company at any time
during the 1996 calendar year and 1997 to the
date of this Agreement (listing each such
person individually by name and indicating
whether he or she is currently employed by the
Company) with a description of their job
designations, compensation (including a
designation of those persons paid on an hourly
or salaried basis and those persons paid
pursuant to a collective bargaining
agreement), benefits (including termination
pay and bonuses), except that such listing
need not include any employee hired on a
temporary basis subject to at will termination
and to whom the Company owes no severance or
continuing obligation. Also set forth on
Schedule 5.17 is a listing of outstanding
loans to officers or employees and all
understandings relating to terms and
conditions of employment (including
compensation, bonuses, commissions and
benefits) whether or not legally binding. All
of the employees of the Company are legal
residents of the United States.
5.18.
Labor Relations.
There is no work stoppage, strike,
slowdown, lockout, picketing or other material
labor problem involving persons employed in
the Company's business pending or, to the
Company's and Stockholders' knowledge,
threatened. The Company has had good labor
relations with its employees for the previous
five (5) years. There are no labor union
contracts relating to the Company's business.
No charges of unfair labor practices or
employment discrimination are pending or, to
the Company's or Stockholders' knowledge,
threatened before any governmental authority
as a result of employment in connection with
the Company's business.
5.19.
Benefit Plans.
5.19.1.
Schedule 5.19 sets forth a true
and complete list of each "employee welfare
benefit plan" (as defined in Section 3(1) of
the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), maintained by the
Company or to which the Company contributes or
is required to contribute, including any
multiemployer employee welfare benefit plan
(such multiemployer and other employee welfare
benefits plans being hereinafter collective
referred to as the "Welfare Benefit Plans").
5.19.2.
Schedule 5.19 sets forth a true
and complete list of each "employee pension
benefit plan" (as defined in Section 3(2) of
ERISA and not exempted under Section 4(b) or
201 of ERISA) maintained by the Company to
which the Company contributes or is required
to contribute, including any multiemployer
employee pension benefit plan (such
multiemployer and other employee pension
benefit plans being hereinafter collectively
referred to as the "Pension Benefit Plans").
With respect to each Pension Benefit Plan
which is subject to Title I, Subtitle B, Part
3 of ERISA the funding method used in
connection with such Pension Benefit Plan is
acceptable under ERISA, the actuarial
assumptions used in connection with funding
such Pension Benefit Plan, in the aggregate,
are reasonable (taking into account the
experience of such Pension Benefit Plan and
reasonable expectations) and Schedule 5.19
accurately sets forth the following
information as of November 1, 1997: (i) the
actuarial present value (based upon the same
actuarial assumptions as those heretofore used
for funding purposes) of all vested and
nonvested (but without any assumption that
unvested accrued benefits have become
nonforfeitable) accrued benefits (whether on
account of retirement, termination, death or
disability) under such Pension Benefit Plan;
(ii) if such Pension Benefit Plan uses a
benefit accrual formula having reference to
final earnings, the actuarial present value of
the benefits under such Pension Benefit Plan
as calculated in (i), but based upon projected
earning increases of five percent (5%) per
annum; (iii) the actuarial present value
(based upon the same actuarial assumptions,
other than turnover assumptions, as those
heretofore used for funding purposes) of
vested benefits under such Pension Benefit
Plan; (iv) the net fair market value of the
assets held to fund such Pension Benefit Plan;
(v) the funding method used in connection with
such Pension Benefit Plan; and (vi) the amount
and plan year of any "accumulated funding
deficiency" as defined in Section 302(a)(2) of
ERISA (whether or not waived and whether
arising on account of inadequate
contributions, improper amortization of
charges or credits in any funding standard
account, improper determination of any such
charge or credit, or any other reason) which
exists with respect to any play year of any
Pension Benefit Plan. With respect to each
Pension Benefit Plan including an "individual
account plan" (as defined in Section 3(34) of
ERISA), Schedule 5.19 sets forth (A) the
amount of any liability of the Company for
contributions due with respect to such Pension
Benefit Plan as of November 1, 1997, and as of
the end of any subsequent plan year ending
prior to the closing, and the date any such
amounts were paid, and (B) the amount of any
contribution paid with respect to such Pension
Benefit Plan for the plan year in which the
Closing occurs.
5.19.3.
All of the Pension Benefit
Plans and any related trust agreements or
annuity contracts (or any other funding
instruments) comply currently, and have
complied in the past, both as to form and
operation, with the provisions of (A) the Code
(including Section 410(b) of the Code relating
to coverage) where required in order to be tax
qualified under Section 401(a) or 403(a) of
the Code, (B) ERISA; and (C) all other
applicable laws, rules and regulations; all
necessary government approvals for the Pension
Benefit Plans have been obtained; and
favorable determination letters, copies of
which have been provided to Purchaser, as to
the qualification under the Code of each of
the Pension Benefit Plans and each amendment
thereto, have been received from the Internal
Revenue Service.
5.19.4.
Each Welfare Benefit Plan and
each Pension Benefit Plan has been
administered to date in compliance with the
requirements of the Code, ERISA and all other
applicable laws and all reports required by
any government agency with respect to each
Welfare Benefit Plan and each Pension Benefit
Plan have been timely filed. Future
compliance with the requirements of ERISA or
any other applicable laws as in effect on the
date of the Closing or any collective
bargaining agreements to which the Company is
a party will not result in any increase in the
rate of benefit accrual under any Pension
Benefit Plan except as otherwise stated in
Schedule 5.19.
5.19.5.
On and after January 1, 1975,
neither the Company nor, to the knowledge of
the Company or Stockholders, any plan
fiduciary of any Welfare Benefit Plan or
Pension Benefit Plan has engaged in any
transaction in violation of Section 406(a) or
(b) of ERISA (for which no exemption exists
under Section 4975(c)(1) of the Code) or any
"prohibited transaction" (as defined in
Section 4975(c)(1) of the Code) for which no
exemption exists under Section 4975(c)(2) or
4975(d) of the Code.
5.19.6.
Schedule 5.19 lists each
deferred compensation plan, bonus plan, stock
option plan, employee stock purchase plan and
any other employee benefit plan, agreement,
arrangement or commitment not required under a
previous subsection to be listed on Schedule
5.19 (other than normal policies concerning
holidays, vacations and salary continuation
during short absences for illness or other
reasons) maintained by the Company.
5.19.7.
The Company has paid all
premiums (and interest charges and penalties
for late payment, if applicable) due the
Pension Benefit Guaranty Corporation ("PBGC")
with respect to each Pension Benefit Plan and
each plan year thereof for which such premiums
are required. On and after September 2, 1974,
there has been no "reportable event" (as
defined in Section 4043(c) of ERISA and the
regulations of the PBGC under such Section)
with respect to any Pension Benefit Plan
subject to Title IV of ERISA. No liability to
the PBGC has been incurred by the Company or
any corporation or other trade or business
under common control with the Company (as
determined under Section 414(c) of the Code)
("Common Control Entity") on account of any
termination of an employee pension benefit
plan subject to Title IV of ERISA. Except as
set forth on Schedule 5.19, on and after
September 2, 1974, no filing has been made by
the Company (or any Common Control Entity)
with the PBGC (and no proceeding has been
commenced by the PBGC) to terminate any
employee pension benefit plan subject to Title
IV of ERISA maintained, or wholly or partially
funded, by the Company (or any Common Control
Entity). Except as set forth on Schedule
5.19, neither the Company nor any Common
Control Entity has (i) ceased operations at a
facility so as to become subject to the
provisions of Section 4062(e) of ERISA, (ii)
withdrawn as a substantial employer so as to
become subject to the provisions of Section
4063 of ERISA, (iii) ceased making
contributions on or before the date of the
Closing to any employee pension benefit plan
subject to Section 4064(a) of ERISA to which
the Company (or any Common Control Entity)
made contributions during the five (5) years
prior to the date of the Closing, or (iv) made
a complete or partial withdrawal from a
multiemployer plan (as defined in Section
3(37) of ERISA) so as to incur withdrawal
liability as defined in Section 4201 of ERISA
(without regard to subsequent reduction or
waiver of such liability under Section 4207 or
4208 of ERISA).
5.19.8.
True and complete copies of
each Welfare Benefit Plan and each Pension
Benefit Plan, related trust agreements or
annuity contracts (or any other funding
instruments, each plan, agreement,
arrangement, and commitment referred to in
subsection (f) of this Section, the most
recent determination letter issued by the
Internal Revenue Service with respect to each
Pension Benefit Plan, Annual Reports on Form
5500 Series required to be filed with any
governmental agency for each Welfare Benefit
Plan and each Pension Benefit Plan for the
three most recent plan years and all actuarial
reports prepared for the last three plan years
of each Pension Benefit Plan, other than an
"individual account plan," have heretofore
been delivered by the Company to Purchaser.
5.19.9.
All Welfare Benefit Plans,
Pension Benefit Plans, related trust
agreements or annuity contracts (or any other
funding instruments), and all plans,
agreements, arrangements and commitments
referred to in this Section are legally valid
and binding and in full force and effect, and
will be terminated in accordance with
applicable laws and regulations effective as
soon as practicable after the Closing Date.
5.20.
Litigation, Compliance
5.20.1.
Except as disclosed in Section
5.20, there are no actions, suits, proceedings
or arbitrations or governmental investigations
pending or, to the Company's and the
Stockholders' knowledge, threatened against,
by or affecting the Company (or, to the best
of the Company's and the Stockholders'
knowledge, any basis therefor) in which,
individually or in the aggregate, an
unfavorable determination could materially
affect the Company's business or the Company's
earnings or condition (financial or otherwise)
or any of the Assets or result in any material
liability on the part of the Company or impede
the execution and performance of this
Agreement or any of the transactions or events
contemplated hereby or could declare this
Agreement unlawful or cause the rescission of
any of the transactions hereunder or require
Purchaser to divest itself of the Assets to be
acquired pursuant hereto, nor has any such
suit been pending within the three (3) years
prior to the Closing Date. Except as
disclosed on Schedule 5.20, the Company has
received no notice that it has been charged
with or received notice of any violation of
any applicable federal, state, local or
foreign law, rule, regulation, ordinance,
order or decree relating to the Assets, or the
operation of the Company's business, and the
Company and the Stockholders are not aware of
any threatened claim of such violation
(including any investigation or informal
inquiry). The Company and the Stockholders
are not aware of any basis for any claim or
charge of such violation.
5.20.2.
Except as set forth on Schedule
5.20, the Company has complied and is in
compliance with, all material respects, all
laws, rules, regulations, ordinances, orders,
decrees, writs, injunctions, building codes,
safety, fire and health approvals,
certificates of occupancy or other
governmental restrictions applicable to the
Company and the Assets.
5.20.3.
Except as set forth on Schedule
5.20, the Company has all governmental
licenses, permits, approvals or other
authorizations required for the conduct of its
business as now conducted. All of such
licenses, permits or approvals are in full
force and effect and all of which are listed
on Schedule 5.20; there is no action pending
or, to the knowledge of Company and the
Stockholders, threatened to terminate rights
under any such governmental licenses, permits
or authorizations; and except as disclosed on
Schedule 5.20 at the Closing, Purchaser will
acquire all of the rights of the Company under
such licenses, permits, approvals and
authorizations.
5.21.
Environmental Compliance.
No toxic waste or by-product has
been or is being discharged on, or stored,
processed, or treated at, any Real Property or
other facilities now or previously used by the
Company by either the Company, or to its
knowledge, by any other person. No substance
defined as hazardous or toxic by any
applicable federal, state, or local laws,
rules or regulations has been or is being used
by, or has been or is being discharged on, or
stored, processed, or treated at, any Real
Property or other facilities now or previously
owned, leased or used by the Company by either
the Company or, to its and the Stockholders'
knowledge by any other person. No employee or
other person has ever made a claim or demand
against the Company based on alleged damage to
health caused by any such hazardous or toxic
materials or by any waste or by-product. The
Company has never been charged with improperly
using, handling, storing, discharging, or
disposing of any such hazardous or toxic
substance, or with causing or permitting any
pollution of any ground water aquifer, surface
waters, or other lakes, streams, rivers, or
bodies of water. The Company has not caused
or suffered to occur any discharge, spillage,
uncontrolled loss, seepage, or filtration of
oil or petroleum or chemical liquids or
solids, liquid or gaseous products, or
hazardous waste, or hazardous substance at,
under, or within any Real Property now or
previously owned or leased by the Company.
There is no asbestos or PCB's on the Real
Property.
5.22.
Corporate Records.
The copy of the certificate of
incorporation of the Company, and all
amendments thereof to date, and a long form
certificate as to the good standing of the
Company in the State of Mississippi each
certified by the State of Mississippi, and of
the by-laws of the Company, as amended to
date, certified by the Secretary or an
Assistant Secretary of the Company, all under
a date not more than five (5) days prior to
the Closing Date which shall have been
delivered to Purchaser are complete and
correct, and the minute books of the Company
correctly reflect all material corporate
actions taken at all meetings of directors
(including committees thereof) and
stockholders, and correctly record all
resolutions, correct and complete copies of
which have been delivered to Purchaser. The
stock transfer books (with all canceled and
unused stock certificates attached) and stock
ledgers are complete and correct and correctly
reflect all transfers of the capital stock of
the Company, correct and complete copies of
which have been delivered to Purchaser.
5.23.
Brokers, Finders, etc.
Neither the Company nor the
Stockholders have employed any finder, broker,
agent or other intermediary in connection with
the negotiation or consummation of this
Agreement or any of the transactions
contemplated hereby. Except as set forth on
Schedule 5.23, neither the Company nor the
Stockholders have entered into any agreement,
understanding or arrangement, oral or written,
whether in the nature of a consulting, broker,
or finders agreement or otherwise, in
connection with or in contemplation of any
sale of the Company, including without
limitation any sale pursuant to this Agreement
or otherwise, to Purchaser or to any other
buyer. The Company and the Stockholders
hereby indemnify the Purchaser and hold the
Purchaser harmless against and from any and
all liabilities, expenses, costs, loss and
claims arising from any employment by the
Company or the Stockholders of, or services
rendered to the Company or the Stockholders by
finder, broker, agent or other intermediary in
such connection.
5.24.
Disclosure.
No representation or warranty by the
Company or the Stockholders and no statement
or certificate furnished or to be furnished by
or on behalf of the Company or the
Stockholders to Purchaser or its agents
pursuant to this Agreement or in connection
with the transactions contemplated hereby
contains any untrue statement of a material
fact or omits to state a material fact
necessary in order to make the statements
contained in this Agreement or therein not
misleading or necessary to provide a
prospective purchaser of the Assets with
proper information as to the Company and its
affairs. There is so far as is known to the
Company and its Stockholders no fact which
materially adversely affects the business,
condition (financial or otherwise), prospects,
affairs or operations of the Company which has
not been set forth in this Agreement or on a
Schedule hereto.
5.25. Investment Representations.
The Company (a) has a preexisting
business relationship with Purchaser, or by
reason of its business or financial
experience, is capable of evaluating the risks
and merits of an investment in the Shares and
of protecting its own interests in connection
with the investment; (b) has received and
reviewed all information it considers
necessary or appropriate for deciding whether
to accept the Shares as the Deferred
Contingent Payment; (c) has had an opportunity
to ask questions and receive answers from the
Purchaser and its officers, directors, and
employees regarding the business, financial
affairs, and other aspects of the Purchaser
and has further had the opportunity to obtain
all information which it deems necessary to
evaluate the investment and to verify the
accuracy of information otherwise provided it;
and (d) is acquiring the Shares for its own
account and not with a view to their
distribution within the meaning of Section
2(11) of the Securities Act.
6.
Representations and Warranties of
Purchaser. Purchaser represents and warrants
to the Company as follows:
6.1.
Corporate Status.
Purchaser is a corporation duly
organized, validly existing and in good
standing under the laws of the State of
California with full corporate power and
authority to carry on its business as now
conducted and is duly qualified to transact
business in the State of California.
6.2.
Authority for Agreements.
Purchaser has the power and
authority to execute and deliver this
Agreement and to carry out its obligations
hereunder. Purchaser has the power and
authority to execute and deliver the CD
Employment Agreement and to carry out its
obligations thereunder. The execution,
delivery and performance by Purchaser of this
Agreement and by Purchaser of the CD
Employment Agreement and the consummation of
the transactions contemplated hereby or
thereby have each been duly authorized by all
necessary action on the party of Purchaser, as
the case may be, and constitute or will, when
executed and delivered, constitute the valid
and legally binding obligation of Purchaser,
as the case may be, enforceable in accordance
with their respective terms, except as such
enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or
other laws affecting the enforcement of
creditors' rights generally now or hereafter
in effect and subject to the application of
equitable principles and the availability of
equitable remedies.
6.3.
Brokers, Finders, etc.
Purchaser has employed no finder,
broker, agent or other intermediary in
connection with the negotiation or
consummation of this Agreement or any of the
transactions contemplated hereby. Purchaser
hereby indemnifies the Company and holds the
Company harmless against and from any and all
liabilities, expenses, costs, losses and
claims arising from any employment by
Purchaser of, or services rendered to
Purchaser by any finder, broker, agent or
other intermediary in such connection.
7.
Covenants.
7.1.
Accounts Receivable Collection and
Repurchase.
After the Closing Date, Purchaser
shall be authorized in its name or in the name
of the Company, or both, to direct any and all
of the account debtors with respect to the
accounts receivable of the Company to make all
payments in satisfaction of the accounts
receivable to Purchaser at such address as
Purchaser may designate and to assert and
maintain against such account debtors such
claims and actions as Purchaser may deem
necessary or appropriate to collect the same.
All payments by the Company in satisfaction of
the accounts receivable shall be received and
held by it in trust for the benefit of
Purchaser and immediately paid to Purchaser
without offset or deduction. The Company
shall, at the request of Purchaser, endorse to
the order of Purchaser all checks, drafts and
other instruments payable to the Company and
received by the Company in satisfaction of the
accounts receivable.
If within one hundred fifty (150)
days after the Closing Date, any accounts
receivable of the Company have not been
collected in full and if Purchaser so wishes,
the Company hereby agrees to repurchase from
Purchaser, at a price equal to the face amount
of the uncollected accounts receivable, any
and all such uncollected accounts receivable,
in cash. If the Company fails to so
repurchase such uncollected accounts
receivable within 10 days after written demand
from the Purchaser, then the Purchaser may, at
its election, offset the purchase price for
such uncollected accounts receivable against
other amounts payable to the Company under
this Agreement.
7.2.
Sales Taxes.
The Company shall each pay all state
and local sales or use taxes payable in
connection with the sale of the Assets
pursuant to this Agreement.
7.3.
Employees.
Prior to the Closing, Purchaser may
offer employment to such employees of the
Company as Purchaser may determine, and the
Company shall use its best efforts to assure
the orderly transfer of those employees to
Purchaser. The Company shall be responsible
for payment of all compensation (including
accrued vacation, sick leave and severance
pay) payable to all of those employees for the
period through the Closing Date.
7.4.
Further Assurances.
At any time and from time to time
after the Closing, each party shall, without
further consideration, execute and deliver to
the other such other instruments of transfer
and assumption and shall take such other
action as the other may reasonably request to
carry out the transfer of the Assets and
assumption of the specific liabilities
contemplated by this Agreement.
7.5. Exclusivity.
Neither the Company nor either of
the Stockholders shall, during the period
commencing with the date of this Agreement
until the Closing, directly or indirectly,
solicit, engage in negotiations for, accept or
extend offers for the sale of or otherwise
market the Company nor any of the Assets,
except Inventory in the ordinary course of
business.
8.
Conditions Precedent.
8.1.
Conditions to Obligations of
Purchaser.
The obligation of Purchaser to pay
the Purchase Price to the Company and to
satisfy its other obligations hereunder shall
be subject to the fulfillment (or waiver by
Purchaser) at or prior to the Closing, of the
following additional conditions, which the
Company and each of the Stockholders agrees to
use their respective best efforts to cause to
be fulfilled:
8.1.1.
Representations, Performance.
The representations and warranties contained
in Section 5 of this Agreement shall be true
at and as of the Closing Date, except as
affected by the transactions contemplated
hereby. The Company and the Stockholders
shall have duly performed and complied with
all agreements and conditions required by this
Agreement to be performed or complied with by
them prior to or on the Closing Date.
8.1.2.
Consents. Any required consent
to the transfer of the Assets under any law,
regulation, agreement, lease or contract shall
have been obtained.
8.1.3.
U.C.C. and Lien Search.
Purchaser shall have received (at its expense)
copies of a report of a Uniform Commercial
Code search and tax and judgment lien search
in the State of Mississippi or such other
jurisdiction as Purchaser shall reasonably
request, searching the relevant names of the
Company and the Stockholders, reasonably
satisfactory in form and substance to
Purchaser.
8.1.4.
Opinion of Counsel. Purchaser
shall have received an opinion, addressed to
Purchaser and dated the Closing Date, of
counsel for the Company and the Stockholders,
in the form attached hereto as Exhibit "B."
8.1.5.
Corporate Proceedings. All
corporate and other proceedings of the Company
in connection with the transactions
contemplated by this Agreement, and all
documents and instruments incident to such
corporate proceedings, shall be satisfactory
in substance and form to Purchaser and
Purchaser's counsel, and Purchaser and
Purchaser's counsel have received all such
documents and instruments, or copies thereof,
certified if requested, as may be reasonably
requested.
8.1.6. CD
Employment Agreement.
Purchaser and CD shall have entered into an
Employment Agreement in the form attached
hereto as Exhibit "C" (the "CD Employment
Agreement").
8.1.7. Xxxxxxxxxx and Xxxxxx
Employment Agreement.
Purchaser shall have entered into an
Employment Agreement with each of Xxxx
Xxxxxxxxxx and Xxxxx Xxxxxx (existing
employees of the Company) in forms acceptable
to the Purchaser, in its sole discretion,
which agreements shall include provisions
relating to confidentiality and the protection
of proprietary information of Purchaser (the
"Additional Employment Agreements").
8.1.8. Due Diligence and
Minimum Net Asset Value. Purchaser shall have
completed its due diligence of the Company to
Purchaser's satisfaction and shall have
determined, in Purchaser's sole and absolute
discretion, that the net asset value of the
Company's tangible assets, excluding the
Excluded Assets, is equal to no less than
$75,000.00. On or about January 30, 1998,
Purchaser shall obtain an appraisal of the
tangible Assets of the Company. If such
appraisal determines that the net asset value
of such assets is less than $75,000.00, then
the difference shall be paid by the Company or
CD to Purchaser or, at Purchaser's election,
offset against other amounts owing.
8.2.
Conditions to Obligations of the Company.
The obligation of the Company to deliver the
bills of sale, assignments, endorsements and
other instruments of transfer relating to the
Assets and to satisfy the Company's other
obligations hereunder shall be subject to the
fulfillment, on or prior to the Closing Date
(or waiver by the Company), of the following
conditions, which Purchaser agree to use their
respective best efforts to cause to be
fulfilled:
8.2.1.
Representations, Performance,
etc. The representations and warranties of
Purchaser contained in Section 6 of this
Agreement shall be true at and as of the
Closing Date. Purchaser shall have duly
performed and complied with all agreements and
conditions required by this Agreement to be
performed or complied with by it prior to or
on the Closing Date.
8.2.2.
Consents. Any required consent
to the transfer of the Assets under any law,
regulation, agreement, lease or contract shall
have been obtained.
8.2.3.
Corporate Proceedings. All
corporate and other proceedings of the
Purchaser in connection with the transactions
contemplated by this Agreement, and all
documents and instruments incident thereto,
shall be satisfactory in substance and form to
the Company and Company's counsel, and the
Company and Company's counsel shall have
received all such documents and instruments,
or copies thereof, certified if requested, as
may be reasonably requested.
8.2.4.
Employment Agreement.
Purchaser and CD shall have entered into the
CD Employment Agreement.
9.
Use of Corporate Name.
9.1.
Change of Corporate Name. The
Company and the Stockholders each agrees that
the Company shall be caused to amend its
Articles of Incorporation, effective the
Closing Date, to change its corporate name in
connection with the consummation of the
transactions contemplated in this Agreement
and that from and after the Closing Date the
Company shall not use the name MED Associates,
Inc., Management Engineering Design, or any
other trademark, trade name, or service xxxx
used by the Company now or in the past, or any
similar name, and the Purchaser or its
nominees shall be fully authorized to own and
use such names. The Company and the
Stockholders further covenant and agree that
the Company will conduct no business or
operations after the Closing Date except to
protect or enforce its rights arising under
this Agreement and effect a liquidation and
dissolution.
9.2.
Injunctions.
The Company and the Stockholders
acknowledge that the covenant contained in
this Section 9 is a material and necessary
inducement for Purchaser to agree to the
transactions contemplated hereby, that the
Company and the Stockholders realized
significant monetary benefit from these
transactions, that violation of the covenant
contained in this Section 9 will cause
irreparable and continuing damage to
Purchaser, that Purchaser shall be entitled to
injunctive or other equitable relief from any
court of competent jurisdiction restraining
any further violation of such covenant and
that such injunctive relief shall be
cumulative and in addition to any other rights
or remedies to which Purchaser may be
entitled.
10.
Guarantees and Covenant Not to Compete.
10.1.
Stockholders' Guarantee.
10.1.1.
The Stockholders, jointly and
severally, hereby unconditionally guarantee
the truth and accuracy of all representations
and warranties of the Company contained in
this Agreement and the full and timely
performance by the Company of all of the
Company's duties and obligations under this
Agreement, and the Stockholders further agree
to take all necessary corporate action to
cause the Company to fully and timely perform
such obligations and duties.
10.1.2.
The obligations of the
Stockholders under this Section 10.1
constitute an absolute, unconditional, present
and continuing irrevocable guarantee of
performance and not of collectibility, and if
the Company shall fail to perform any of its
obligations of this Agreement, the
Stockholders shall immediately so perform or
cause such performance.
10.1.3.
The Stockholders, jointly and
severally, guarantee that the obligations of
the Company under this Agreement and the
obligations of the Stockholders hereunder will
be discharged in favor of the Purchaser
strictly in accordance with the terms of this
Agreement and regardless of any law,
regulation or decree now or hereafter in
effect which in any way affects any such terms
or the rights of the Purchaser against the
Company or the Stockholders, or which might
cause or permit to be invoked any alteration
of the time, amount or manner of performance
by the Company or the Stockholders under such
terms.
10.1.4.
The obligations of the
Stockholders hereunder shall be absolute and
unconditional irrespective of the validity,
legality or enforceability of this Agreement,
or any other document related hereto, and
shall not be affected by or contingent upon
(i) any action taken under this Agreement, or
the exercise of any right or power hereby
conferred, (ii) any failure or omission to
enforce any right hereby conferred, or any
demand or attempt to collect from, or failure
to demand performance from, the Company under
this Agreement or from any other guarantor or
any other person or any failure to pursue any
remedy in Purchaser's power, (iii) the
existence, nonexistence, validity or value of
any security or collateral securing the
obligations of the Company under this
Agreement, (iv) the release or discharge for
any reason of any security for or any other
person or entity liable on or in respect of
the obligations of the Company under this
Agreement, or of the Stockholders hereunder,
(v) the giving of time or any other
forbearance by the Purchaser with respect to
any provision of this Agreement, (vi) the
liquidation or dissolution of, or the merger
or consolidation of the Company into or with
any corporation, or any sale or transfer by
the Company of all or any part of its property
or assets, (vii) the bankruptcy, receivership,
insolvency, reorganization or similar
proceedings involving or affecting the
Company, (viii) any modification, alteration,
amendment or addition of or to this Agreement,
or (ix) any disability or other defense of the
Company or any other person and any other
circumstance whatsoever (with or without
notice to or knowledge of the Stockholders)
which may or might in any manner or to any
extent vary the risks of the Stockholders or
might otherwise constitute a legal or
equitable discharge of a surety or a guarantor
or otherwise, IT BEING THE PURPOSE AND INTENT
of this Section 10.1 that the obligations of
the Stockholders hereunder shall be absolute
and unconditional, present and continuing
under any and all circumstances.
10.1.5.
The Stockholders hereby waive
protest, notice of protest, demand for
performance, diligence, notice of any other
action at any time taken or omitted by the
Purchaser and, generally, all demands and
notices of every kind in connection with this
Section 10.1 and the obligations hereby
guaranteed, and which the Stockholders may
otherwise assert against the Company or the
Purchaser.
10.1.6.
This Section 10.1 shall
continue to be effective or shall be
reinstated, as the case may be, if at any time
payment or performance of any of the
obligations of the Company under this
Agreement or any other document related hereto
is rescinded or must otherwise be restored or
returned by the Purchaser upon the insolvency,
bankruptcy or reorganization of the Company or
otherwise, all as though such restoration or
return had not been made.
10.1.7.
The Stockholders shall not be
subrogated, in whole or in part, to the rights
of the Purchaser against the Company under
this Agreement or any other document related
hereto until the discharge in full of the
obligations of the Company under this
Agreement. The Stockholders waive any defense
either may have based on any election of
remedies by Purchaser which destroys their
subrogation rights or rights to proceed
against the Company for reimbursement,
including, without limitation, any loss of
rights either may suffer by reason of any
rights, powers or remedies of the Company in
connection with any antideficiency laws or any
other laws limiting, qualifying or discharging
the Company's obligations. Until all of the
Company's obligations to the Purchaser shall
have been paid in full, each Stockholder
further waives any right to enforce any remedy
which the Company now has or may hereafter
have against the Purchaser.
10.1.8.
The Stockholders jointly and
severally represent, warrant and agree that
each of the waivers set forth above is made
with full knowledge of its significance and
consequences and under the circumstances the
waivers are reasonable and not contrary to
public policy. If any of said waivers is
determined to be contrary to any applicable
law or public policy, such waivers shall be
effective only to the extent permitted by law.
10.2. Covenant Not to Compete. To
the extent permitted by applicable law:
10.2.1. Neither the Company,
nor either of the Stockholders shall, directly
or indirectly, engage or invest in, own,
manage, operate, finance, control, or
participate in the ownership, management,
operation, or control of, be employed by,
associated with, or in any manner connected
with, or render services or advice to, any
business whose products or activities compete
in whole or in part with the products or
business of the Company within the 48
contiguous United States.
10.2.2. Neither the Company,
nor either of the Stockholders shall, directly
or indirectly, either for themselves or any
other person, (A) induce or attempt to induce
any employee of Purchaser or any Affiliate of
Purchaser to leave the employ of such company,
(B) in any way interfere with the relationship
between Purchaser or any Affiliate of
Purchaser and any employee of such company,
(C) employ, or otherwise engage as an
employee, independent contractor, or
otherwise, any employee of Purchaser or any
Affiliate of Purchaser, or (D) induce or
attempt to induce any customer, supplier,
licensee, or business relation of Purchaser or
any Affiliate of Purchaser to cease doing
business with such company, or in any way
interfere with the relationship between any
customer, supplier, licensee, or business
relation of such company.
10.2.3. Neither the Company
nor either of the Stockholders shall, directly
or indirectly, either for themselves or any
other person, solicit the business of any
person known to the Company or either
Stockholder to be a customer of Purchaser or
any Affiliate of Purchaser, whether or not the
Company or either such Stockholder had
business or personal contact with such person,
unless the Company's or Stockholders'
solicitation of such person is done in
connection with a business that is not
competitive with that of Purchaser or any
Affiliate of Purchaser.
10.2.4. The duration of the
covenants set forth in this Section 10.2 shall
be the entire term of CD's employment with the
Purchaser plus a period of two years after the
termination of such employment. The Company
and Stockholders agree that this covenant is
reasonable with respect to its duration,
geographical area, and scope. Notwithstanding
such restriction, each of the Stockholders may
purchase or otherwise acquire up to (but not
more than) three percent (3%) of any class of
securities of any enterprise (but without
otherwise participating in the activities of
such enterprise) if such securities are listed
on any national or regional securities
exchange or have been registered under Section
12(g) of the Securities Exchange Act of 1934.
In the event of a breach by the Company
or either of the Stockholders of any covenant
set forth in this Section 10.2, the term of
such covenant will be extended by the period
of the duration of such breach, provided,
however, that such extension shall be limited
to two years. In addition to Purchaser's
right to damages and any other rights it may
have, to obtain injunctive or other equitable
relief to restrain any breach or threatened
breach or otherwise to specifically enforce
the provisions of this Section, the Company
and Stockholders agree that money damages
alone would be inadequate to compensate
Purchaser and would be an inadequate remedy
for such breach. If a court of competent
jurisdiction holds that the obligations of the
Company and Stockholders pursuant to this
Section 10.2 are unenforceable due to the
duration, geographical area or scope of this
covenant, then such duration, geographical
area or scope of this covenant shall be
reduced to the least degree necessary to
render this covenant enforceable.
11.
Indemnification and Survival.
11.1.
Indemnification.
11.1.1.
From and after the Closing, the
Company and the Stockholders, jointly and
severally, will indemnify Purchaser against,
and hold Purchaser harmless from any and all
liability, damage, deficiency, loss, cost or
expense (including reasonable attorneys' fees)
that are based upon or that arise out of (i)
any misrepresentation or breach of any
representation, warranty, covenant or
agreement made by the Company and/or the
Stockholders herein, (ii) any obligation, debt
or liability of the Company to the extent that
the same is not expressly assumed in this
Agreement by Purchaser, (iii) the ownership of
the Assets and operation of the Company's
business on or prior to the Closing Date other
than those liabilities specifically assumed by
Purchaser pursuant to Section 4.5, or (iv)
failure to comply with any applicable bulk
transfer laws.
11.1.2.
The Purchaser will indemnify
the Company and the Stockholders against, and
hold the Company and the Stockholders harmless
from, any and all liability, damage,
deficiency, loss, cost or expense (including
reasonable attorneys' fees) that are based
upon or that arise out of (i) any
misrepresentation or breach of any
representation, warranty, covenant or
agreement made by Purchaser in this Agreement,
(ii) the failure by Purchaser to discharge any
and all liabilities, obligations and
commitments of the Company to the extent that
the same are assumed by Purchaser under
Section 4.5 of this Agreement, or (iii)
without limiting the provisions of Section 4.5
(including the limitations and exclusions
contained therein), the ownership of the
Assets and operation of the Company from and
after the Closing Date.
11.1.3.
Each party entitled to an
indemnification under this Agreement (the
"Indemnified Party") shall give notice to the
party required to provide indemnification (the
"Indemnifying Party") promptly after such
Indemnified Party receives notice of any
claim, action or proceeding for which
indemnification may be requested hereunder.
Such Indemnifying Party shall have the right
(at its expense) to assume the defense of any
claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying
Party, who shall conduct the defense of such
claim or litigation, shall be reasonably
satisfactory to the Indemnified Party, and the
Indemnified Party may participate in such
defense, but only at such Indemnified Party's
expense, and provided, further, that the
omission by any Indemnified Party to give
notice as provided in this Agreement shall not
relieve the Indemnifying Party of its
indemnification obligations under this
Agreement except to the extent that the
omission results in a failure of actual notice
to the Indemnifying Party and that such
Indemnifying Party is damaged as a result of
the failure to give notice. No Indemnifying
Party, in the defense of any such claim or
litigation, shall, except with the consent of
each Indemnified Party, consent to entry of
any judgment or enter into any settlement
which does not include as an unconditional
term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a
release from all liability with respect to
such claim or litigation. Notwithstanding the
foregoing, the Indemnified Party shall have
the right at all times to take over and assume
control of the defense, settlement,
negotiations or lawsuit relating to any claim
or demand; provided, however, that if the
Indemnified Party does so take over and assume
control, the amount of the indemnity by the
Indemnifying Party shall be limited to the
amount which the Indemnifying Party has
immediately prior to such time indicated it
would be willing to pay to adjust and settle
such claim or demand. In the event that the
Indemnifying Party does not accept the defense
of any matter as above provided or if the
counsel selected by the Indemnifying Party to
defend such claim or litigation has a conflict
of interest in representing the Indemnified
Party (in the judgment of such counsel or
counsel for the Indemnified Party), the
Indemnified Party shall have the full right to
defend against any such claim or demand at the
expense of the Indemnifying Party (including
reasonable attorney's fees and costs of
investigation), and shall be entitled to
settle or agree to pay in full such claim or
demand, in its sole discretion. In any event,
the Company, the Stockholders, and Purchaser
shall cooperate in the defense of such action
and the records of each shall be available to
the other with respect to such defense.
11.2.
Time and Manner of Claims.
Purchaser or the Company and the
Stockholders shall be liable for damages
arising from misrepresentations or breaches of
representations and warranties only to the
extent notice of a claim therefor is asserted
in writing and delivered, in the case of
representations and warranties relating to
payment of taxes, prior to the expiration of
the relevant statutes of limitation with
respect to such taxes and, in the case of all
other representations and warranties, prior to
the expiration of five (5) years from the
Closing Date. Any notice of a claim by reason
of any of the representations and warranties
contained in this Agreement shall state
specifically the representation or warranty
with respect to which the claim arose, and the
amount of liability asserted against the other
party by reason of the claim. Subject to the
foregoing, the representations, warranties,
agreements and indemnities contained in this
Agreement shall survive the execution and
delivery of this Agreement, any examination by
or on behalf of such parties, and the
completion of the transactions contemplated in
this Agreement.
11.3.
Offset.
In the event that the Purchaser
has made a claim against the Company or the
Stockholders for indemnification pursuant to
this Section 11 or any other applicable
provision of this Agreement, and regardless of
whether such claim or any portion thereof is a
Matured Claim or a Contingent Claim (as
defined below), the Purchaser shall be
entitled in addition to and without limiting
any other remedies available in law or equity
to the Purchaser, to offset the entire amount
of such claim against any amounts due to the
Company under this Agreement, including
without limitation Sections 4.3(b) and (c).
Such right of offset shall be exercised in the
following manner:
11.3.1.
The Purchaser shall send the
Company a notice (the "Offset Notice")
specifying the amount of the Purchaser's claim
under this Agreement, specifying whether or
the extent to which such claim is mature, non-
contingent and fixed in amount (a "Matured
Claim") or not yet matured, contingent or not
fixed in amount (a "Contingent Claim"),
identifying the provisions of this Agreement
asserted to give rise to the claim and briefly
identify the facts which constitute the basis
of such claim.
11.3.2.
The Purchaser shall be
entitled, at its sole option, to offset the
amount or any part thereof of any Contingent
Claim against payments due from the Purchaser
to the Company under this Agreement, including
without limitation Sections 4.3(b) and (c), by
holding such amount separate from its other
assets in trust for and on account of the
Company until the Contingent Claim becomes a
Matured Claim or such claim is otherwise
resolved.
11.3.3.
If within thirty (30) days
after giving the Offset Notice, the Purchaser
does not receive a written notice from the
Company objecting in good faith to the
validity of any Matured Claim asserted
therein, the Purchaser shall be entitled to
offset the amount of any such Matured Claim
against payments due from Purchaser to the
Company under this Agreement, including
without limitation Sections 4.3(b) and (c) .
11.3.4.
If within thirty (30) business
days after giving the Offset Notice, the
Purchaser receives a written notice from the
Company objecting in good faith to the
validity of any Matured Claim or any part
thereof, then (i) with respect to any portion
of a Matured Claim as to which no such
objection is received, the provisions of
subsection (c) above shall apply, and (ii)
with respect to any portion of a Matured Claim
as to which such an objection is received, the
Purchaser shall be entitled to offset the
amount thereof against payments due from the
Purchaser to the Company under this Agreement,
including without limitation Sections 4.3(b)
and (c), by holding such amount separate from
its other assets.
11.3.5.
Any amounts held separate from
its other assets by the Purchaser shall be
separated from such other assets at the time
such amount is otherwise due the Company under
this Agreement.
11.3.6.
After delivery of an Offset
Notice or Offset Notices to the Company, the
Purchaser shall not be obligated to make any
subsequent payments of any amounts due to the
Company under this Agreement, including
without limitation Sections 4.3(b) and (c), up
to the amount covered by the Offset Notice or
Offset Notices, but shall continue to pay any
amounts when due to the Company under this
Agreement which are not covered by any Offset
Notice or Offset Notices.
11.3.7.
The exercise by the Purchaser
of the right of offset provided in this
Section 11 on account of any liability of the
Company to the Purchaser under this Agreement
shall not, except only to the amount of such
offset (or in the case of monies held separate
from the Purchaser's other assets pursuant
hereto, only to the amount determined to be
retained by the Purchaser) constitute a waiver
or release of any of the Company's rights
under this Agreement against the Company or
the Stockholders, their successors and
assigns.
12. General.
12.1.
Consent of Third Parties.
This Agreement shall not
constitute an agreement to assign any interest
in any instrument, contract, lease, permit or
other agreement or arrangement of the Company
or any claim, right or benefit arising
thereunder or resulting therefrom, if an
assignment without the consent of a third
party would constitute a breach or violation
thereof or adversely affect the rights of the
Purchaser or the Company thereunder. If a
consent of a third party which is required in
order to assign any instrument, contract,
lease, permit or other agreement or
arrangement or any claim, right or benefit
arising thereunder or resulting therefrom,
which consent the Company and the Stockholders
shall use their respective best efforts to
obtain prior to the Closing, is not obtained
prior to the Closing, or if an attempted
assignment would be ineffective or would
adversely affect the ability of the Company to
convey its interest to the Purchaser, the
Company will cooperate with the Purchaser in
any lawful and economically feasible
arrangement to provide that the Purchaser
shall receive the Company's interest in the
benefits under any such instrument, contract,
lease, permit or other agreement or
arrangement; and any transfer or assignment to
the Purchaser by the Company of any interest
under any such instrument, contract, lease,
permit or other agreement or arrangement that
requires the consent of a third party shall be
made subject to such consent or approval being
obtained.
12.2.
Expenses.
Subject to the terms of Section 11
of this Agreement, each of the parties hereto
shall bear its own expenses, costs and fees
(including attorneys' and auditors' fees) in
connection with the transactions contemplated
hereby including the preparation and execution
of this Agreement and compliance herewith,
whether or not the transactions contemplated
hereby shall be consummated. All such
expenses, costs and fees to be borne by the
Company whenever incurred or accrued
(including such legal fees) shall be the
obligation of the Company and shall not be
assumed by Purchaser nor reduce or be paid out
of the Assets being transferred hereunder.
The Company and the Stockholders shall bear
the cost of any audits of the Company
performed by Purchaser's auditors in
connection with the transaction contemplated
by this Agreement.
12.3.
Severability.
If any term or provision of this
Agreement shall be held or deemed to be held
or shall, in fact be inoperative or
unenforceable as applied in any particular
case because it conflicts with any other
provision or provisions of this Agreement or
any constitution or statute or rule of public
policy, or for any other reason, such
circumstances shall not have the effect of
rendering the term or provision in question
inoperative or unenforceable in any other case
or circumstance, or of rendering any other
provision or provisions contained in this
Agreement invalid, inoperative, or
unenforceable to any extent whatsoever, but
such term or provision shall be deemed
modified or deleted as or to the extent
required by applicable law. The invalidity of
one or more phrases, sentences, clauses,
sections or subsections of this Agreement
shall not affect the remaining portions of
this Agreement.
12.4.
Notices.
Each notice and other communication required
or permitted to be given under this Agreement
("Notice") must be in writing. Notice is duly
given to another party upon: (a) hand
delivery to the other party, (b) receipt by
the other party when sent by facsimile to the
address and number for such party set forth
below (provided, however, that the Notice is
not effective unless a duplicate copy of the
facsimile Notice is promptly given by one of
the other methods permitted under this
paragraph), (c) three business days after the
Notice has been deposited with the United
States postal service as first class certified
mail, return receipt requested, postage
prepaid, and addressed to the party as set
forth below, or (d) the next business day
after the Notice has been deposited with a
reputable overnight delivery service, postage
prepaid, addressed to the party as set forth
below with next-business-day delivery
guaranteed, provided that the sending party
receives a confirmation of delivery from the
delivery-service-provider.
Purchaser: BOATRACS, INC.
0000 Xxxx Xxxx., Xxxxx X000
Xxx Xxxxx, XX 00000
Attention: Xxx Xxxxxxx, Esq.
(000) 000-0000 (facsimile)
with a copy to: Xxxxxxx Xxxx Seidenwurm & Xxxxx, LLP
000 X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
(000) 000-0000 (facsimile)
To: MED Associates, Inc.
000 Xxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Xx.
(000) 000-0000 (facsimile)
with a copy to: Perry & Xxxx
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
(000) 000-0000 (facsimile)
Each party shall make a reasonable, good faith
effort to ensure that it will accept or
receive Notices to it that are given in
accordance with this paragraph. A party may
change its address for purposes of this
paragraph by giving the other party(ies)
written notice of a new address in the manner
set forth above.
12.5.
Amendment.
This Agreement may not be amended
except by an instrument in writing duly
executed and delivered on behalf of each of
the parties hereto.
12.6.
Waiver.
Any party may waive compliance by
another with any of the provisions of this
Agreement. No waiver of any provisions shall
be construed as a waiver of any other
provision. Any waiver must be in writing.
12.7.
Publicity.
No party hereto shall issue any
press release or public announcement of any
kind concerning the transactions contemplated
by this Agreement without consulting with the
other; provided, however, that the foregoing
shall not apply and Purchaser shall be
permitted to distribute to its shareholders a
disclosure circular and related materials
concerning the transactions contemplated
hereby and issue such other announcements in
each case as may be required by applicable law
and stock exchange rules nor shall the
foregoing constitute a breach by Purchaser of
any confidentiality agreement previously
entered into by the parties hereto.
12.8.
Form of Documents.
Unless specifically otherwise
provided in this Agreement, all documents to
be delivered by one party to another party to
this Agreement or any Affiliate thereof shall
be in form and substance reasonably
satisfactory to such other party.
12.9. Miscellaneous.
The headings contained in this
Agreement are for reference purposes only and
shall not affect in any way the meaning or
interpretation of this Agreement. This
Agreement constitutes the entire agreement and
supersedes all prior agreements and
understandings, both written and oral, among
the parties with respect to the subject matter
of this Agreement. This Agreement may be
executed in several counterparts, each of
which shall be deemed an original, and all of
which shall constitute one and the same
instrument. This Agreement shall be governed
in all respects, including validity,
interpretation and effect, by the laws of the
State of California, applicable to contracts
made and to be performed in California. This
Agreement shall be binding upon and inure to
the benefit of the successors and assigns of
the parties hereto. In the event any legal
action is taken to enforce or interpret the
terms of this Agreement, the prevailing party
or parties in such action shall be entitled to
recover its reasonable attorneys' and expert
witness fees and costs as established by the
Court. This
Agreement may not be assigned
without the prior written consent of the
nonassigning parties, except by the Purchaser,
to an Affiliate of Purchaser.
IN WITNESS WHEREOF, the parties have duly
executed this Agreement as of the date first
written above.
MED ASSOCIATES, INC., a BOATRACS, INC., a California
Mississippi corporation corporation
By: By:
/S/XXXXXXX X. XXXXXX XX. /S/XXX XXXXXXX
Xxx Xxxxxxx, Chief
Xxxxxxx X. Xxxxxx, Xx., Executive Officer
Chief Executive Officer and President
/S/XXXXXXX X. XXXXXX, XX.
XXXXXXX X. XXXXXX, XX.
/S/ XXXXXX X. XXXXXX
XXXXXX X. XXXXXX
