EXHIBIT 10.1
AGREEMENT OF SALE
THIS AGREEMENT OF SALE ("Agreement") dated this 31st day of December,
1999 by and between Telident, Inc., a Minnesota corporation ("Seller") with an
office located at Ten Xxxxxx Xxxxxx X.X., Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx
00000, and Teltronics, Inc., a Delaware corporation ("Buyer") with an office
located at 0000 Xxxxxxxxx Xxxxxxxxxx Xxx, Xxxxxxxx, Xxxxxxx 00000.
W I T N E S S E T H:
WHEREAS, the Seller desires to dissolve, and in conjunction therewith,
to sell to the Buyer and the Buyer desires to purchase from the Seller
substantially all of its tangible and intangible assets, subject only to certain
liabilities of the Seller described in this Agreement; and
WHEREAS, Buyer desires to sell and Seller desires to purchase from
Buyer certain molds of Buyer's majority owned subsidiary, Interactive Solutions,
Inc.
NOW, THEREFORE, in consideration of the mutual promises herein set
forth and subject to the terms and conditions of this Agreement,
the parties agree as follows:
1. Definitions. As used in this Agreement, terms defined in the
preamble and recitals of this Agreement shall have the meanings set forth
therein and the following terms shall have the meanings set forth below:
"Act" shall mean the Securities Act of 1933, as amended.
"Affiliate" shall mean, with respect to any person or entity, the
shareholders, subsidiaries, officers, directors and/or partners of such person
or entity and any other person which directly or indirectly controls, is
controlled by or is under common control with such person or entity.
"Agreement" shall mean this Agreement of Sale and all Exhibits to this
Agreement.
"Assignment Agreements" shall mean the Assignment Agreements to be
delivered by Seller to Buyer pursuant to Paragraph 4(a).
"Assumed Liabilities" shall mean the Liabilities of the Seller
described in Exhibit A to this Agreement.
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"Bills of Sale" shall mean the Xxxx(s) of Sale to be delivered by
Seller to Buyer pursuant to Paragraph 4(a).
"Buyer's Disclosure Statement" shall mean the disclosure statement and
attachments thereto delivered by Buyer to Seller simultaneously with Buyer's
execution of this Agreement.
"Buyer's SEC Documents" shall mean all forms, documents, financial
statements and schedules included therein filed by Buyer with the SEC under the
Exchange Act or the Act since June 30, 1996 and on or before the Closing Date.
"Closing" shall mean the closing of the transactions contemplated by
this Agreement, which shall occur at the offices of Xxxxxx and
Xxxxxx, P.A. at 10:00 a.m. one (1) day after approval of the dissolution of the
Seller by holders of a majority of the outstanding voting shares of the Seller
at the Special Meeting ("Closing Date"). The Closing may be postponed to a later
date (in which case all references to the Closing Date or Closing in this
Agreement shall refer to the postponed date) or time by mutual agreement of the
Seller and Buyer.
"Code" shall mean the Internal Revenue Code of 1986 and all regulations
promulgated thereunder, as the same have from time been amended.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(and any section of the Code amended by it) and all regulations promulgated
thereunder, as the same have from time to time been amended.
"Escrow Agreement" shall mean the mutually agreeable escrow agreement
to be entered into at the Closing between Buyer, FAMCO III Limited Liability
Company and Special Situations Private Equity Fund, L.P. providing that ten
percent (10%) of the Shares be held in escrow for a period of ninety (90) days
in order to secure Seller's indemnity obligations under Paragraph 14 of this
Agreement.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.
"Financial Statements" shall mean the financial statements of Buyer or
Seller (as applicable) included in such party's SEC Documents.
"GAAP" shall mean generally accepted accounting principles.
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"Indemnity Loss" shall mean any demand, suit, claim, action or cause of
action, assessment, loss, damage, liability, settlement, penalty, or forfeiture,
and reasonable costs and expenses (including court costs, and any other
litigation related expenses incident thereto) which individually, or when
aggregated with any directly related claims, exceeds $10,000.
"Intellectual Property" shall mean all patents, patent applications,
patent registrations, trademarks, trademark applications, trademark
registrations, copyrights, copyright applications, copyright registrations,
trade names, formulae, trade secrets, know-how, inventions and royalties,
technology, licenses relating to intellectual property, permits relating to
intellectual property, technology and "know-how" owned by Seller.
"ISI" shall mean Interactive Solutions, Inc., a majority owned
subsidiary of Buyer.
"ISI Molds" shall mean certain molds of ISI described in Exhibit B to
this Agreement.
"Lease" shall mean a Lease agreement acceptable to Buyer for the
operation of Seller's business and premises located at Ten Xxxxxx Xxxxxx X.X.
Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000.
"Liabilities" shall mean all debts, liabilities, Taxes (including any
sales or transfer taxes on the sale of the Purchased Assets), obligations under
contracts, leases, agreements and commitments, and other obligations of every
kind and character of the Seller as the same may exist as of the Closing Date
(whether accrued, absolute, contingent or otherwise, and whether due or to
become due) or which may arise in the future based upon events or a state of
facts existing as of the Closing Date.
"Proxy Statement" shall mean the Proxy Statement as described in
Paragraph 9 of this Agreement.
"Purchased Assets" shall mean all of the Seller's properties and
assets, personal, tangible and intangible, of every kind and wherever situated,
which are owned by the Seller or in which the Seller has any right, title or
interest, including, without limiting the generality of the foregoing, its
goodwill, franchises and telephone numbers; its trademarks, trademark
registrations, trademark applications, trade names (including but not limited to
"Status Recognition Unit System I", "Station Translation System", "STS", "Trax
OSN", "Site Alert", "On-Site Notification", "Data Base Management Software", and
"Telident"), copyrights, copyright applications, copyright
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registrations, patents, patent applications, patent registrations, its
Intellectual Property, permits, licenses, processes, formulae, trade secrets,
inventions and royalties (including all rights to xxx for past infringement);
its supplies; its commercial paper, stocks, bonds and other investments; its
accounts receivable; its insurance policies (excluding director and officer
insurance); its causes of action, judgments, claims and demands of whatever
nature; its tangible and intangible personal property of all kinds; its deferred
charges, advance payments, pre-paid items, claims for refunds, rights of offset
and credits of all kinds; all credit balances of or inuring to it under any
state unemployment compensation plan or fund; restrictive covenants and
obligations of present and former officers and employees and of individuals and
corporations; its accounts, general intangibles, returned and repossessed goods,
and rights as an unpaid vendor, secured party or lienor; its credit balances,
documents, instruments and other chooses in action; its rights (but not
liabilities other than the Assumed Liabilities) under contracts, purchase
orders, personal property, leases, joint venture agreements or arrangements and
other agreements; its files, papers and records relating to the aforesaid
business, properties and assets; its inventory, securities, machinery,
equipment, software, pre-paid expenses, work in process, contracts, tools, dies,
office furniture and equipment, drawings, product literature, and customer
records; provided that the Purchased Assets shall not include the Retained
Assets.
"Registration Statement" shall mean the Registration Statement
described in Paragraph 9 of this Agreement.
"Retained Assets" shall mean the assets and properties of Seller
described in Exhibit C to this Agreement.
"Retained Liabilities" shall mean all Liabilities of the Seller which
are not Assumed Liabilities.
"SEC" shall mean the Securities and Exchange Commission.
"Seller's Disclosure Statement" shall mean the disclosure statement and
attachments thereto delivered by Seller to Buyer simultaneously with Seller's
execution of this Agreement.
"Seller's Majority Shareholder Approval" shall mean the approval of
this Agreement and the dissolution of the Seller executed simultaneously upon
execution of this Agreement by the holders of a majority of the outstanding
voting shares of the Seller.
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"Seller's SEC Documents" shall mean all forms, documents, financial
statements and schedules included therein filed by Seller with the SEC under the
Exchange Act or the Act since June 30, 1996 and on or before the Closing Date.
"Shares" shall mean the shares of voting common stock of Buyer, par
value $.001 per share to be issued in accordance with this Agreement.
"Special Meeting" shall mean the Special Meeting of the shareholders of
Seller described in Paragraph 9 of this Agreement.
"Subsidiaries" shall mean any entity in which a person holds, directly
or indirectly, a majority of the outstanding voting rights or equity interest in
such entity.
"Taxes" shall mean all federal, state, local and foreign taxes,
including, without limitation, income taxes, excise taxes, sales taxes, use
taxes, gross receipts taxes, franchise taxes, employment and payroll taxes,
property taxes, import duties and interest and penalties in connection with any
of the foregoing.
"Tax Returns" for any specified year shall mean the federal and state
tax returns of the Seller as of and for the period ending June 30 of such year
prepared by the Seller and filed with the appropriate taxing authority, true and
correct copies of which were previously supplied by Seller to Buyer.
2. (a) Sale of Purchased Assets. Subject to and upon the terms and
conditions of this Agreement, at the Closing, the Seller will sell, transfer,
assign, convey and deliver to the Buyer, and the Buyer will purchase, accept and
acquire from the Seller all of the Purchased Assets.
(b) Sale of ISI Molds. Subject to and upon the terms and conditions
of this Agreement, at the Closing, the Buyer will cause ISI to sell, transfer,
assign, convey and deliver to the Seller, and the Seller will purchase, accept
and acquire from ISI the ISI Molds.
3. (a) Purchase Price for Purchased Assets. The aggregate consideration
to be paid by the Buyer for the Purchased Assets ("Consideration") at the
Closing will be the issuance and delivery of the Shares and the assumption by
the Buyer of the Assumed Liabilities. The Buyer and Seller shall agree that the
Consideration shall be allocated as provided in an Allocation Agreement to be
entered into between Buyer and Seller prior to Closing ("Allocation") and such
Allocation shall be used by Seller and Buyer for all tax return filings and
payments.
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(i) Shares. Subject to the terms of this Agreement, Buyer will
issue and deliver to the Seller at the Closing (a) Six Hundred Thirty-Seven
Thousand Five Hundred (637,500) of the Shares; and (b) any additional Shares
required to be delivered to Seller under Paragraph 25 hereof.
(ii) Assumed Liabilities. The Buyer will assume the Assumed
Liabilities.
(b) Purchase Price for ISI Molds. At the Closing, Seller shall pay
One Million One Hundred Thousand dollars ($1,100,000.00) to the Buyer in
immediately available funds to purchase the ISI Molds and shall assume no
liabilities of Buyer or its Affiliates.
4. Instruments of Transfer; Payment of Purchase Price and Assumption of
Liabilities; Further Assurances.
(a) Seller's Deliveries at Closing. At the Closing, the Seller shall
execute and deliver to Buyer:
(i) Xxxx(s) of Sale and/or Assignment Agreements for the
Purchased Assets in form(s) reasonably satisfactory to the Buyer;
(ii) Assignment of the Lease;
(iii) Assignment to Buyer of the Intellectual Property in form
reasonably satisfactory to Buyer;
(iv) Legal Opinion by Seller's counsel in form reasonably
satisfactory to Buyer and consistent with the provisions set forth in Paragraph
12(f) of this Agreement;
(v) Evidence of the authorization of this Agreement and the
transactions contemplated or required under this Agreement by Seller's Board of
Directors and Shareholders;
(vi) Such other instrument or instruments of transfer in such
form as shall be reasonably necessary or appropriate to vest in the Buyer good
and valid title to the Purchased Assets;
(vii) The Escrow Agreement;
(viii) The purchase price for the ISI Molds described in
Paragraph 3(b) of this Agreement; and
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(ix) UCC, Judgment and Tax Lien searches confirming that the
Purchased Assets are free and clear of any liens, encumbrances, pledges,
security interests, claims and other encumbrances not satisfactory to Buyer.
(c) Buyer's Deliveries at Closing. At the Closing, the Buyer shall
execute and/or deliver to the Seller:
(i) the Shares to be delivered pursuant to Paragraph 3(a)(i) and
Paragraph 25 of this Agreement;
(ii) such instruments, documents and Xxxx(s) of Sale necessary
to transfer to Seller all of ISI's right, title and interest in the ISI Molds,
free and clear of all liens, pledges, security interests, claims and other
encumbrances, all in a form reasonably satisfactory to the Seller;
(iii) the Escrow Agreement;
(iv) an instrument under which Buyer will assume the Assumed
Liabilities in a form reasonably satisfactory to the Seller; and
(v) Evidence of the authorization of this Agreement and the
transactions contemplated or required under this Agreement by Buyer's Board of
Directors;
(vi) Such other instrument or instruments of transfer in such
form as shall be reasonably necessary or appropriate to vest in the Seller good
and valid title to the ISI Molds; and
(vii) Legal Opinion by Buyer's counsel in form reasonably
satisfactory to Seller and consistent with the provisions set forth in Paragraph
11(g) of this Agreement.
(d) Other Transfer Instruments; Inspection Rights. Following the
Closing, at the request of the Buyer, the Seller shall (i) deliver any further
instruments of transfer and take all reasonable action as may be necessary or
appropriate (A) to vest in the Buyer all of the Seller's rights and title in and
to the Purchased Assets, and (B) to transfer to the Buyer all of the Seller's
rights to licenses and permits necessary for the operation of the Purchased
Assets (to the extent such licenses and permits are transferable), and (ii)
permit the Buyer or representatives of the Buyer during normal business hours
upon reasonable notice to inspect and make copies of the Seller's books of
account and other records which are Retained Assets.
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5. Transfer of Name. From and after the Closing, Buyer shall own the
rights of Seller in and to the names "Status Recognition Unit System I",
"Station Translation System", "STS", "Trax OSN", "Site Alert", "On-Site
Notification", "Data Base Management Software", and "Telident". Notwithstanding
the above, Buyer will grant to Seller a limited right to use the name "Telident"
for purposes of Seller's dissolution and winding down.
6. Representations and Warranties of the Seller. The Seller represents
and warrants to the Buyer as follows:
(a) Organization; Good Standing. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation. The Seller has all requisite corporate power and authority and
legal right to own, operate and lease its real and personal properties, to carry
on its business as now being conducted, and to enter into this Agreement and
perform its obligations under this Agreement. Except as disclosed in Section
6(a) of Seller's Disclosure Statement, the Seller is qualified to do business in
each jurisdiction where the conduct of its business or the ownership of its
property requires such qualification and where the failure to so qualify would
have an adverse effect on the business of Seller. The Seller has no outstanding
shares of Series I or Series II Convertible Preferred Stock. The Seller is not a
party to any shareholder control agreements. The chief executive office and
principal place of business and the places where the Seller maintains all
records relating to its business is Ten Xxxxxx Xxxxxx X.X., Xxxxx 000,
Xxxxxxxxxxx, Xxxxxxxxx 00000.
(b) Seller's SEC Documents. The Seller has filed with the SEC, and
has made available to Buyer through XXXXX true and complete copies of Seller's
SEC Documents. The Financial Statements included in the Seller's SEC Documents
(i) were prepared from, and were in accordance with, the books and records of
the Seller as of the dates thereof or for the periods presented therein, (ii)
were prepared in accordance with GAAP applied on a consistent basis as of the
dates thereof or for the periods presented therein (except as otherwise noted
therein and except that the quarterly financial statements were subject to year
end adjustment and do not contain all footnote disclosures required by GAAP),
(iii) complied in all respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto as of the
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dates thereof or for the periods presented therein and (iv) fairly presented in
all material respects the financial position and the results of operations and
cash flows of the Seller all as of the dates thereof or for the periods
presented therein.
(c) Absence of Certain Changes. Except as disclosed in the Seller's
SEC Documents, this Agreement and Section 6(c) of Seller's Disclosure Statement,
from September 30, 1999, to the execution of this Agreement: (i) the business of
the Seller has been conducted in the ordinary course of business, consistent
with past practice; and (ii) there has been no material adverse change in the
financial condition, properties, business or results of operations of the Seller
taken as a whole including (i) any damage, destruction or loss having a material
adverse effect on the properties, business, financial condition or results of
operations of the Seller, taken as a whole; (ii) any declaration, setting aside
of funds for or payment of any dividend or other distribution in respect of any
shares of the Seller's stock or any direct or indirect redemption, purchase or
other acquisition of any of the Seller's stock by Seller, or (iii) any general
increase in the rate of payment of the salaries, wages, bonuses or commissions
of any of the Seller's employees or individual increase for any employee whose
annual rate of compensation exceeds $40,000.
(d) Tax Returns and Payments. Except as disclosed in Section 6(d) of
Seller's Disclosure Statement, Seller has duly filed all state, federal, local
and foreign tax returns and reports (or extension with respect thereto) required
to be filed by the date hereof and has paid all amounts owed for any and all
federal, state and local taxes. All monies required to be withheld by the Seller
from employees for income taxes, Social Security and unemployment insurance
taxes have been collected or withheld, and either paid to the respective
governmental agencies or set aside in accounts for such purpose, or accrued,
reserved against, and entered upon the books of the Seller. The Seller has
furnished to the Buyer true and complete copies of the federal income tax
returns of the Seller and any amendments thereto for each of fiscal years ended
June 30, 1996, 1997, and 1998.
(e) Title to Purchased Assets. Except as disclosed in Section 6(e)
of Seller's Disclosure Statement, the Seller has good and valid title to all of
the Purchased Assets, subject in each case, to no mortgage, pledge, option,
escrow, hypothecation, lien, security interest, financing statement, lease,
charge, encumbrance, easement or conditional sale or other title retention
agreement.
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(f) Completeness and Condition of Property. The Purchased Assets
include all of the properties, software, documents, equipment, licenses,
patents, patent applications, patent registrations, technology, trademarks,
trademark applications, trademark registrations, copyrights, copyright
applications, copyright registrations, Intellectual Property and rights which
are necessary to conduct the Seller's business substantially as conducted
immediately prior to the execution of this Agreement.
(g) Trademarks, Copyrights, Licenses, etc. A list and brief
description of the Intellectual Property are included in Section 6(g) of
Seller's Disclosure Statement. Seller owns or possesses the right to the
Intellectual Property, described in Section 6(g) of Seller's Disclosure
Statement, necessary for the conduct of its business and Seller has not received
notice of any conflict with the rights of others, or any use by others which
conflicts in any respect with the rights of the Seller in the Intellectual
Property described in Section 6(g) of Seller's Disclosure Statement. Except as
disclosed in Section 6(g) of Seller's Disclosure Statement, the Intellectual
Property is fully assignable without the consent of any third party. Seller has
not received or given notice of any default or claimed or purported or alleged
default on the part of any party in the performance or payment of any material
obligation to be performed or paid by any party under the Intellectual Property
described in Section 6(g) of Seller's Disclosure Statement. During the past two
years the only names by which the Seller has been known or which Seller has used
are "Telident", "Telident, Inc.", "Status Recognition Unit System I", "Station
Translation System", "STS", "Trax OSN", "Site Alert", "On-Site Notification",
"Data Base Management Software", "911 Solutions", "Sitealert" and "Tel-a-lert".
Seller will deliver to Buyer true and correct copies of each agreement, patent,
copyright or trademark described in Section 6(g) of Seller's Disclosure
Statement.
(h) Litigation; Compliance with Laws; etc. Except as included in
Section 6(h) of Seller's Disclosure Statement, there is (i) no suit or action
pending or to Seller's knowledge threatened, against Seller or the property of
Seller, or (ii) no governmental investigation or inquiry pending or to Seller's
knowledge threatened against the Seller, affecting Seller or its business
operations, of which Seller has received notice, which matter referred to in
clauses (i) and (ii) above would, severally or in the aggregate, have an adverse
affect on the condition (financial or otherwise) of the business of Seller
(taken as a whole) or the Purchased Assets (taken as a whole). Seller has
complied with and to its knowledge is not in default in any respect under any
laws, ordinances or
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governmental requirements, regulations or orders applicable to its business and
properties where such failure or default would have an adverse affect on the
condition (financial or otherwise), business of the Seller (taken as a whole) or
the Purchased Assets (taken as a whole). To Seller's knowledge, no investigation
is pending by any federal, state or local government, or by any agency or
instrumentality thereof, the effect of which would have an adverse affect on the
business of the Seller (taken as a whole) or the Purchased Assets (taken as a
whole).
(i) Authority. The execution and delivery of this Agreement and the
consummation of the transactions contemplated or required under this Agreement
have been duly authorized by all necessary corporate action on the part of the
Seller subject to the approval of the dissolution of Seller by the shareholders
of the Seller. This Agreement has been duly authorized, executed and delivered
by the Seller and constitutes, subject to the approval of the dissolution of
Seller by the shareholders of the Seller, a legal, valid and binding obligation
of the Seller enforceable against the Seller in accordance with its terms except
to the extent that enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally and principles of equity.
(j) Compliance with Other Instruments, etc. Except as the terms of
the leases and agreements provided on Section 6(l) of Seller's Disclosure
Statement so specify, to Seller's knowledge, neither the execution and delivery
of the Agreement nor the consummation of the transactions contemplated under
this Agreement will conflict with or result in any violation of or constitute a
default under any term of the certificate of incorporation or by-laws of Seller
or any agreement, mortgage, indenture, franchise, license, permit,
authorization, lease or other instrument, judgment, decree or order involving
the Seller, its assets or the Purchased Assets, or, to the knowledge of Seller,
any law or regulation, by which the Seller, its assets, or the Purchased Assets
are bound.
(k) Governmental and Other Consents. Except as otherwise disclosed
by the Seller to Buyer in Section 6(k) of Seller's Disclosure Statement, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any federal, state, local or foreign governmental authority is
required by or with respect to the Seller in connection with the execution and
delivery of this Agreement by the Seller or the consummation by the Seller of
the transactions contemplated or required hereby, except for (i) the filing of
the Proxy Statement with the SEC in
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connection with Special Meeting described in Paragraph 9 of this Agreement, (ii)
the filing and effectiveness of the Registration Statement to be filed with the
SEC, and (iii) filings and effectiveness of the Registration Statement to be
filed with various Blue Sky authorities.
(l) Agreements, etc. Section 6(l) of Seller's Disclosure Statement
contains a true, correct and complete list of all real property leases, personal
property leases, distributor agreements, sale, agency or marketing agreements,
licensing agreements, royalty agreements, development agreements and franchise
agreements to which Seller is a party or in which the Seller has an interest.
Except as the terms of the leases and agreements listed on Section 6(l) of
Seller's Disclosure Statement so specify, Seller is not aware of any reason why
such leases and agreements are not fully assignable without the consent of any
third party. To Seller's knowledge, there exists no default or claimed or
purported or alleged default of any party in the performance of any obligation
to be performed or paid by any party under any contracts, plans or other
instruments or arrangements referred to in or submitted as a part of Section
6(l) of Seller's Disclosure Statement. Seller has not received or given notice
of any default or claimed or purported or alleged default on the part of any
party in the performance or payment of any obligation to be performed or paid by
any party under any contracts, plans or other instruments or arrangements
referred to in or submitted as a part of Section 6(l) of Seller's Disclosure
Statement.
(m) ERISA. To the Seller's knowledge, the Seller is, has been at all
times, and will remain in compliance in all respects with all applicable
provisions of ERISA and other federal and state statutes and regulations
relating to "employee benefit plans," as such term is defined in ss.3(3) of
ERISA, and the Seller is current with respect to all contributions required to
be made to any such plan. No event has occurred which would constitute a
reportable event within the meaning of ss.4043(b) of ERISA, or which would
constitute grounds for the appointment by the appropriate United States district
court of a trustee to administer any employee benefit plan maintained by the
Seller, and no notice of termination has been filed by the plan administrator
pursuant to ss.4041 of ERISA or issued by the Pension Benefit Guaranty
Corporation pursuant to ss.4043 of ERISA with respect to any pension benefit
plan subject to ERISA. The Seller does not maintain or contribute, has not
maintained or contributed, nor is it now nor has it ever been required
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to, maintain or contribute to a defined benefit pension plan or multi-employer
pension plan, and the Seller is not and has not been under common control
(within the meaning of Sections 414(b) or (c) of the Code) with an entity.
(n) Safety Deposit Boxes, Lock Boxes, Securities. A list and brief
description of all safe deposit boxes, lock boxes, stocks, bonds and other
securities in the names of or owned or controlled by the Seller and details
about persons having access thereto is included in Section 6(n) of Seller's
Disclosure Statement.
(o) Environmental Compliance. The Seller will deliver to the Buyer a
copy of each of the following items: (i) every written communication during the
past two (2) years between the Seller and any environmental agency which alleges
noncompliance with applicable environmental laws and regulations or demands
payment of penalties and fines for alleged violations of such laws and
regulations; (ii) a description of the nature and quantities of any hazardous
materials (as defined below) generated, transported or disposed of in material
quantities by the Seller during the past two (2) years, together with a
description of the location at which such materials were generated, transported
or disposed; and (iii) a summary of the nature and quantities of any hazardous
materials (as defined below) that have been disposed of in material quantities
by Seller or found by Seller in material quantities at the subject site. Seller
has no direct knowledge that it is not in compliance with all applicable
federal, state and local laws and regulations relating to pollution control and
environmental contamination including, without limitation, all laws and
regulations governing the generation, use, collecting, treatment, storage,
transportation, recovery, removal, discharge or disposal of hazardous materials
(as defined below) and all laws and regulations with regard to record keeping,
notification and reporting requirements respecting hazardous materials (defined
below) where the failure to be in such compliance would have an adverse effect
on the business, properties, Purchased Assets, or condition (financial or
otherwise) of the Seller, taken as a whole. The Seller has not received any
written notice of, and has not been subject to any administrative or judicial
proceeding pursuant to laws or regulations relating to pollution control and
environmental contamination at any time during the past two (2) years. There are
no facts or circumstances which now exist of which Seller has direct knowledge
that could form the basis for the assertion of a claim against the Seller
relating to past or present environmental practices of Seller asserted under the
Comprehensive Environmental Response Compensation and Liability Act of 1980
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("CERCLA"), the Resource Conservation and Recovery Act ("RCRA") or any other
federal, state or local environmental statute, which claim, if adversely
determined would have an adverse effect on the business, properties or condition
(financial or otherwise) of the Seller, taken as a whole. For purposes of this
Paragraph 6(o), the term "hazardous materials" means materials defined as
"hazardous substance" or "hazardous waste" in CERCLA, RCRA and in any similar
federal, state or local environmental statute.
(p) Customers and Suppliers. A complete list of names and addresses
of the entities that account for 5% or more of the sales or 10% or more of the
purchases, respectively, made by the Seller during the last fiscal year is
included in Section 6(p) of Seller's Disclosure Statement. The Seller has no
knowledge of any intention of any customer or supplier to terminate, cancel,
modify, or change its business relationship with the Seller which individually
or in the aggregate would be materially adverse to the business of the Seller
taken as a whole. Except as to the agreements listed in Section 6(l) of Seller's
Disclosure Statement which may not be assigned pursuant to their terms, the
Seller has no knowledge of any existing events or conditions or state of facts
or circumstances relating to the Seller's relationships with customers and
suppliers that will prevent the Buyer from conducting the business of the Seller
after the consummation of the transactions contemplated by this Agreement in
essentially the same manner in which it had been conducted by the Seller prior
to the Closing Date.
(q) Permits and Licenses. Included in Section 6(q) of Seller's
Disclosure Statement is a list and brief description of all permits, licenses,
notices and similar filings that are required in the Seller's operation of its
business in each jurisdiction in which it conducts business, the failure of
which to possess would have an adverse effect on the business, properties or
condition (financial or otherwise) of the Seller, taken as a whole. Except as
set forth in Section 6(q) of Seller's Disclosure Statement, all such permits,
licenses, notices and similar filings may be freely transferred to the Buyer.
(r) Accuracy of Documents. All agreements, contracts, leases,
titles, patents, copyrights, licenses, permits, trademarks and other documents
delivered by the Seller to the Buyer for the Buyer's review in connection with
this Agreement and the transactions contemplated
14
hereby, including without limitation, the certificate of incorporation, by-laws,
corporate minutes and tax returns are true, correct and complete copies of all
such agreements, contracts, titles and other documents.
(s) Inventory. Except as set forth in Section 6(s) of Seller's
Disclosure Statement, the Seller's inventory
(i) is of merchantable quality, useable and saleable in the
ordinary course of Seller's business, as determined in accordance with GAAP,
consistently applied, ordinary wear and tear excepted, and
(ii) is valued at the lower of Seller's actual cost or market
value.
(t) Accounts Receivable. All of Seller's accounts receivable
represent bona fide amounts due for sales of goods or provision of services;
arose in the ordinary course of business; and except as set forth in Section
6(t) of Seller's Disclosure Statement, all of the accounts receivable are fully
collectible. Except as set forth in Section 6(t) of Seller's Disclosure
Statement, the Seller has no knowledge of any accounts receivable that are being
contested or disputed by the obligor thereon, or which the Seller has reason to
believe will be contested or disputed.
(u) Transactions with Affiliates. No transaction in excess of $5,000
between the Seller and any Affiliate, relating to Purchased Assets or Assumed
Liabilities, has been fraudulent with respect to any creditor of the Seller or
any of its Affiliates.
(v) Product Warranties. Section 6(v) of Seller's Disclosure
Statement includes a copy of the standard maintenance and warranty policy for
products sold by Seller. The Seller (i) has not made any warranties other than
specified in the distribution agreements listed in Section 6(l) of the Seller's
Disclosure Statement and the standard warranties disclosed in Section 6(v) of
Seller's Disclosure Statement; (ii) has not received written notice of any claim
based on any product warranty and/or based upon any alleged failure to meet
Seller's specifications; and (iii) has no knowledge or any reasonable ground to
know of any claim (actual or threatened) based on any product warranty of which
it has received no written notice.
(w) Brokers' or Finder's Fee. Except as disclosed in Section 6(w) of
Seller's Disclosure Statement, no agent, broker, investment banker, or other
firm acting on behalf of Seller, or any shareholder of Seller, or under the
authority of any of them, is or will be entitled to any broker's or finder's fee
or any other commission or similar fee directly or indirectly from
15
Seller or any such shareholder in connection with any of the transactions
contemplated by this Agreement.
(x) Securities Law Compliance. The information supplied by the
Seller for inclusion in the Proxy Statement shall not, on the date the Proxy
Statement is first mailed to shareholders of the Seller, at the time of the
Special Meeting, and at the time of Closing, contain any statement which, at
such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made in the Proxy
Statement not false or misleading. If at any time prior to the Closing, any
event relating to the Seller or any of its Affiliates should be discovered by
the Seller which should be set forth in a supplement to the Proxy Statement, the
Seller shall promptly inform the Buyer. Notwithstanding the foregoing, the
Seller makes no representation, warranty or covenant with respect to any
information supplied by the Buyer that is contained in any of the foregoing
documents.
(y) Year 2000 Compliance. The Year 2000 Readiness Disclosure
contained in Seller's Form 10-QSB for the quarter ended September 30, 1999 is
true in all material respects as of the date of execution of this Agreement.
7. Representations and Warranties of Buyer. Buyer represents and
warrants to the Seller as follows:
(a) Organization; Good Standing. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation. The Buyer has all requisite corporate power and authority and
legal right to own, operate and lease its real and personal properties, to carry
on its business as now being conducted, and to enter into this Agreement and
perform its obligations under this Agreement. The Buyer is qualified to do
business in each jurisdiction where the conduct of its business or the ownership
of its property requires such qualification and where the failure to so qualify
would have an adverse effect on the business of Buyer.
(b) Buyer's SEC Documents. The Buyer has filed with the SEC, and has
made available to Seller through XXXXX true and complete copies of Buyer's SEC
Documents. The Financial Statements included in the Buyer's SEC Documents (i)
were prepared from, and are were
16
in accordance with, the books and records of the Seller as of the dates thereof
or for the periods presented therein, (ii) were prepared in accordance with GAAP
applied on a consistent basis as of the dates thereof or for the periods
presented therein (except as otherwise noted therein and except that the
quarterly financial statements were subject to year end adjustment and do not
contain all footnote disclosures required by GAAP), (iii) complied in all
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto as of the dates thereof or for
the periods presented therein and (iv) fairly presented in all material respects
the financial position and the results of operations and cash flows of the
Seller all as of the dates thereof or for the periods presented therein.
(c) Absence of Certain Changes. Except as disclosed in the Buyer's
SEC Documents, this Agreement and Section 7(c) of Buyer's Disclosure Statement,
from September 30, 1999, to the execution of this Agreement, the respective
business of the Buyer has been conducted in the ordinary course of business,
consistent with past practice. From September 30, 1999, to the execution of this
Agreement, there has been no material adverse change in the financial condition,
properties, business or results of operations of the Buyer taken as a whole
including (i) any damage, destruction or loss having a material adverse effect
on the properties, business, financial condition or results of operations of the
Buyer, taken as a whole; or (ii) any declaration, setting aside of funds for or
payment of any dividend or other distribution in respect of any shares of the
Buyer's stock or any direct or indirect redemption, purchase or other
acquisition of any of the Buyer's stock by Buyer.
(d) Tax Returns and Payments. Except as disclosed in Section 7(d) of
Buyer's Disclosure Statement, Buyer has duly filed all state, federal, local and
foreign tax returns and reports (or extension with respect thereto) required to
be filed by the date hereof and has paid all amounts owed for any and all
federal, state and local taxes. All monies required to be withheld by the Buyer
from employees for income taxes, Social Security and unemployment insurance
taxes have been collected or withheld, and either paid to the respective
governmental agencies or set aside in accounts for such purpose, or accrued,
reserved against, and entered upon the books of the Buyer.
(e) Litigation; Compliance with Laws; etc. Except as included in
Section 7(e) of Buyer's Disclosure Statement or the Buyer's SEC Documents, there
is (i) no suit or action pending or to Buyer's knowledge threatened, against
Buyer or the property of Buyer, or (ii) no governmental investigation or inquiry
pending or to Buyer's knowledge threatened against the
17
Buyer, affecting Buyer or its business operations, of which Buyer has received
notice, which matter referred to in clauses (i) and (ii) above would, severally
or in the aggregate, have a material adverse affect on the condition (financial
or otherwise) of the business of Buyer (taken as a whole) or the Buyer's ability
to acquire the Purchased Assets (taken as a whole) as contemplated by this
Agreement. Buyer has complied with and to its knowledge is not in default in any
respect under any laws, ordinances or governmental requirements, regulations or
orders applicable to its business and properties where such failure or default
would have a material adverse affect on the condition (financial or otherwise),
of the business of the Buyer (taken as a whole) or the Buyer's ability to
acquire the Purchased Assets (taken as a whole) as contemplated by this
Agreement. To Buyer's knowledge, no investigation is pending by any federal,
state or local government, or by any agency or instrumentality thereof, the
effect of which could have a material adverse affect on the business of the
Buyer (taken as a whole) or the Buyer's ability to acquire the Purchased Assets
(taken as a whole) as contemplated by this Agreement.
(f) Authority. The execution and delivery of this Agreement and the
consummation of the transactions contemplated or required hereby have been duly
authorized by all necessary corporate action on the part of the Buyer. This
Agreement has been duly executed and delivered by the Buyer and constitutes a
valid and binding obligation of the Buyer enforceable in accordance with its
terms except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally and principles of equity.
(g) Compliance with Instruments, Consents, Adverse Agreements.
Neither the execution and the delivery of this Agreement nor the consummation of
the transaction contemplated hereby will conflict with or result in any
violation of or constitute a default under the Buyer's organization documents or
any agreement, mortgage, indenture, license, permit, lease or other instrument,
judgment, decree, order, or, to the knowledge of the Buyer, any law or
regulation by which the Buyer is bound. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority or persons
or entities on the part of the Buyer is required in connection with the
execution or delivery of this Agreement, or the consummation of the transaction
contemplated hereby except for the Proxy Statement and Registration Statement
described in Paragraph 9 of this Agreement. The Buyer is not a party to or
subject to any agreement
18
or instrument, or subject to any charter or other restriction or any judgment,
order, writ, injunction, decree, law, rule or regulation which adversely affects
or, so far as the Buyer can now reasonably foresee, may in the future adversely
affect the business operations, prospects, properties, assets or condition,
financial or otherwise, of the Buyer.
(h) Brokers' or Finder's Fee. No agent, broker, investment banker,
or other firm acting on behalf of Buyer, or any shareholder of Buyer, or under
the authority of any of them, is or will be entitled to any broker's or finder's
fee or any other commission or similar fee directly or indirectly from Buyer or
any such shareholder in connection with any of the transactions contemplated by
this Agreement.
(i) Registration Statement; Proxy Statement/Prospectus. The
information to be supplied by Buyer for inclusion in the Registration Statement
shall not at the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. If at any time prior
to the Closing, any event relating to the Buyer or any of its Affiliates should
be discovered by the Buyer which should be set forth in an amendment to the
Registration Statement, the Buyer shall promptly inform the Seller.
Notwithstanding the foregoing, the Buyer makes no representation, warranty or
covenant with respect to any information supplied by Seller that is contained in
any of the foregoing documents.
(j) Title to ISI Molds. Except for liens in favor of the CIT Group /
Credit Finance, Inc. and Finova Capital which shall be released at Closing, ISI
has good and valid title to all of the ISI Molds, subject in each case, to no
mortgage, pledge, option, escrow, hypothecation, lien, security interest,
financing statement, lease, charge, encumbrance, easement or conditional sale or
other title retention agreement.
(k) Title to Shares. All Shares to be transferred to Seller at
Closing will be fully paid and nonassessable and shall be free and clear of all
liens and encumbrances.
(l) Preemptive Rights. There are no preemptive rights or other
rights to subscribe for or to purchase any shares of capital stock of the Buyer
pursuant to Buyer's articles of incorporation, bylaws or any agreement or other
instrument to which Buyer is a party or by which
19
Buyer is bound which would be triggered by the transactions contemplated or
evidenced by this Agreement.
8. Conduct of Business.
(a) After the execution by both parties of this Agreement and up to
and including the Closing Date, the Seller will:
(i) use commercially reasonable efforts to preserve its business
organization intact, to keep available the services of its employees and
representatives and to preserve the goodwill of its employees, customers,
suppliers and others having business relations with the Seller; and
(ii) maintain its books, accounts and records in the usual
manner on a basis consistent with prior years.
(iii) maintain in good repair, working order and condition,
reasonable wear and tear excepted, all items of tools, furniture, machinery,
vehicles, equipment and all other items of tangible personal property included
in the Purchased Assets.
(b) After the execution by both parties of this Agreement and up to
and including the Closing Date, the Seller will not, without the prior written
consent of Buyer:
(i) modify its practices with respect to employee compensation
or benefits, enter into any new oral or written compensation agreements with
employees or amend any existing oral or written compensation agreements (except
for annual increases in compensation of employees in the ordinary course of
business and consistent with past practice);
(ii) issue or contract to issue any debt or guarantees of debt
other than draws under existing lines of credit;
(iii) enter into any joint venture, partnership or other similar
arrangement for the conduct of its business;
(iv) make any loans or advances to any employee, officer,
director or Affiliate of the Seller;
(v) directly or indirectly dispose or accelerate realization of
any of its assets, including inventory and receivables, except in the ordinary
course of business and consistent with past practice;
20
(vi) change the character of its business; or
(vii) enter into any other transaction not in the ordinary
course of business;
(viii) enter into any contract to merge or consolidate with any
other corporation; or
(ix) sell, transfer, or otherwise dispose of or encumber all or
any part of the Purchased Assets, other than in the ordinary course of business.
(c) After the execution of this Agreement by both parties and up to
and including the Closing Date and the Special Meeting, the Seller will not,
without the prior written consent of Buyer, issue any voting securities the
effect of which would cause Special Situations Private Equity Fund, L.P., and/or
FAMCO III, Limited Liability Company to hold voting rights less than fifty-one
percent (51%) of the aggregate voting rights of the Seller.
9. Additional Covenants.
(a) Access to Properties and Records. Seller shall permit the Buyer
reasonable access to its properties, and shall disclose and make available to
the Buyer hereto all books, papers and records relating to the Purchased Assets,
including, but not limited to, all books of account, the general ledger, tax
records, minute books of directors' and stockholders' meetings, organizational
documents, by-laws, material contracts and agreements, filings with any
regulatory authority, accountants' work papers, litigation files, employees, and
any other business activities or prospects in which the Buyer may have a
reasonable interest in light of the transactions contemplated or required under
this Agreement.
(b) Confidentiality. All information furnished by each party hereto
to the other shall be treated as the sole property of the party furnishing the
information except that, after the Closing, all information relating to the
Purchased Assets shall be treated as the sole property of the Buyer. If this
Agreement shall be terminated, the party receiving the information shall return
to the party which furnished such information all documents or other materials
containing, reflecting or referring to such information, shall keep confidential
all such information, and shall not directly or indirectly use such information
for any competitive or other commercial purpose. The obligation to keep such
information confidential shall continue for five (5) years from the date this
Agreement
21
is terminated and shall not apply to any information which (i) the party
receiving the information can establish by convincing evidence was already in
its possession prior to the disclosure thereof by the party furnishing the
information; (ii) was at the time of disclosure generally known to the public;
(iii) thereafter became known to the public through no fault of the party
receiving the information; (iv) was disclosed to the party receiving the
information by a third party not bound by an obligation of confidentiality; (v)
is required to be disclosed in accordance with an order of a court of competent
jurisdiction; or (vi) is required to be disclosed upon the advice of counsel in
any document which must be publicly filed as a result of this Agreement and the
transactions evidenced thereby.
(c) Proxy Statement/Prospectus; Registration Statement. As promptly
as practical after execution of this Agreement, Buyer and Seller shall prepare
and file with the SEC the Registration Statement, in which the Proxy Statement
will be included as a prospectus. The Buyer and Seller shall use all reasonable
efforts to cause the Registration Statement to become effective as soon after
such filing as practical. The Proxy Statement, and any supplement thereto, shall
include the recommendation of the Board of Directors of Seller in favor of this
Agreement, provided that the Board of Directors of the Seller may withdraw such
recommendation if it believes in its good faith reasonable judgment, based upon
and consistent with advice received in consultation with outside legal counsel,
that the withdrawal of such recommendation is necessary for the Board of
Directors of Seller to comply with its fiduciary duties under applicable law.
(d) Approval of Stockholders; Proxy Statement. The Seller shall
cause the Special Meeting to be duly called and held for the purpose of
approving the dissolution of the Seller, which approval will result in Seller
causing the transactions contemplated by this Agreement to occur. The Seller
will use its best efforts to call and hold the Special Meeting as promptly as
practicable following the effective date of the Registration Statement. The
Seller shall cause the Proxy Statement to be distributed to each shareholder of
record of the Seller as of the record date for the Special Meeting in accordance
with Regulation 14A under the Exchange Act and applicable state law. The Seller
will deliver to Buyer promptly after the conclusion of the Special Meeting a
certificate of its Secretary stating the number of shares voted for and against
such proposal as well as the number of abstentions and broker non-votes.
22
(e) Regulatory Filings. The Seller and Buyer will take all such
action as may be necessary under the federal securities laws applicable to or
necessary for, and will file and, if appropriate, use their best efforts to have
declared effective or approved all documents and notifications with the SEC and
other governmental or regulatory bodies which they deem necessary or appropriate
for the consummation of this Agreement and the transactions contemplated or
required hereby under the Securities Act, the Exchange Act, applicable state
blue sky laws and the rules and regulations thereunder, and each party shall
give the other information reasonably requested by such other party pertaining
to it and its subsidiaries and Affiliates to enable such other party to take
such actions.
(f) Public Announcements. At all times until the approval of
Seller's shareholders as described in Paragraph 9(d), each party shall promptly
advise and cooperate with the other before issuing, or permitting any of its
subsidiaries, directors, officers, employees or agents to issue any press
release or other public announcement to the press or any third party with
respect to this Agreement or the transactions contemplated or required hereby.
(g) Certain Notices. Each of the parties hereto shall promptly
notify the other in writing upon becoming aware of (i) any order or decree or
any complaint (or threat thereof) seeking any order or decree restraining or
enjoining or seeking damages in connection with the consummation of this
Agreement or any of the transactions contemplated or required under this
Agreement, or upon receiving any notice from any person, firm or corporation or
any governmental department, court, agency or commission of his or its intention
to institute an investigation into, or institute a suit or proceeding to
restrain or enjoin or to seek damages in connection with the consummation of
this Agreement, or to nullify or render ineffective this Agreement or such
transactions contemplated or required under this Agreement or (ii) the
occurrence or impending or threatened occurrence of any event which would cause
or constitute a breach, or would have caused a breach had such event occurred or
been known prior to the date hereof, of any of its representations and
warranties contained in this Agreement.
(h) NASDAQ. Buyer will use its best efforts to cause all Shares
issued to Seller to be approved for quotation on the NASDAQ SmallCap Market.
(i) Assignment of Lease. Buyer agrees to assume all obligations of
Seller under the Lease arising on or after the date of Closing.
23
(j) Insurance. If requested by Buyer, Seller shall cause Buyer to be
named as an additional insured under all of Seller's existing corporate
insurance policies provided that Buyer pays any additional costs for such
coverage.
(k) FCC Approval. Buyer shall use its best efforts to obtain the FCC
approvals referenced in Section 12(k) hereof on or before March 30, 2000.
10. Survival of Representations and Warranties. The parties hereto
agree that all representations and warranties made in this Agreement or in any
Exhibit attached hereto, certificate or document delivered herewith or at the
Closing shall survive the execution and delivery thereof and the Closing
hereunder for the period of ninety (90) days from the Closing Date.
11. Conditions Precedent to the Obligations of Seller. All obligations
of Seller under this Agreement are subject to the fulfillment, at or prior to
the Closing Date, of each of the following conditions, any or all of which may
be waived in whole or in part at or prior to the Closing Date by Seller:
(a) Buyer's Representations and Warranties. The representations and
warranties of Buyer herein contained shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date, except as affected by transactions
contemplated or permitted by this Agreement.
(b) Buyer's Covenants. Buyer shall have performed all of its
obligations and agreements and complied with all its covenants contained in this
Agreement to be performed and complied with by Buyer on or prior to the Closing
Date.
(c) No Litigation. No action, suit or proceeding before any court or
any governmental or regulatory authority shall have been commenced and still be
pending, no investigation by any governmental or regulatory authority shall have
been commenced and still be pending, and no action, suit or proceeding by any
governmental or regulatory authority shall have been commenced against Buyer,
seeking to restrain, prevent or change the transactions contemplated under this
Agreement or questioning the validity or legality of any of such transactions.
(d) Registration Statement, Proxy Statement, State Securities Laws.
The conditions described in Paragraph 12(g) of this Agreement shall have been
fulfilled.
(e) Seller's Shareholders Approval. Seller shall have obtained the
approval of the shareholders of Seller for the dissolution of the Seller under
Paragraph 9(d).
24
(f) Documentation. All matters and proceedings taken in connection
with the sale of the Purchased Assets and the sale of the ISI Molds as herein
contemplated, including forms of instruments and matters of title, shall be
reasonably satisfactory to Seller and its counsel.
(g) Buyer's Counsel's Opinion. Counsel for Buyer, shall have
delivered to Seller an opinion, dated the Closing Date, in form and substance
satisfactory to counsel for Seller, to the following effect:
(i) Buyer (A) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
and (B) has all corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
(ii) Buyer has all requisite corporate power and authority to
execute and deliver this Agreement, and to perform its obligations hereunder and
thereunder.
(iii) The execution, delivery and performance of this Agreement,
(A) have been duly authorized by all necessary action of Buyer, and (B) do not
violate any provision of the certificate of incorporation or by-laws of Buyer.
(iv) This Agreement has been duly executed and delivered by the
Buyer. Assuming due execution and delivery by Seller, this Agreement constitutes
the valid and binding obligations of Buyer enforceable in accordance with their
respective terms, subject to the qualifications that (1) the rights and remedies
of Seller hereunder and thereunder may be limited by bankruptcy, reorganization
and other laws of general application relating to or affecting the enforcement
of creditors rights, and (2) equitable remedies are subject to the discretion of
the court before which any proceedings therefore may be brought.
(v) Such counsel does not have any actual knowledge of any
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency now pending against the Buyer in which the
alleged damages exceed $25,000 except as described in Buyer's SEC Documents.
(vi) All Shares issued to Seller have been duly authorized,
validly issued and delivered by Buyer.
25
(vii) There are no preemptive rights or other rights to
subscribe for or to purchase any shares of capital stock of Buyer pursuant to
Buyer's articles of incorporation, bylaws or any agreement or other instrument
known to such counsel to which Buyer is a party or by which Buyer is bound which
would be triggered by the transactions evidenced or contemplated by this
Agreement.
(viii) The Registration Statement has been declared effective by
order of the SEC, and to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceeding
for that purpose has been instituted or is pending or threatened under the
Securities Act.
(xi) All Shares to be transferred to Seller at Closing are free
and clear of all liens and encumbrances.
(h) Registration Statement, Proxy Statement, State Securities Laws.
The Registration Statement described in Paragraph 9 of this Agreement shall have
become effective and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
and no similar proceeding in respect of the Proxy Statement shall have been
initiated or threatened by the SEC. Buyer shall have received all state
securities laws or "Blue Sky" permits and other authorizations necessary to
consummate this Agreement and the transactions contemplated by this Agreement.
(i) Lease. The Buyer shall have accepted the assignment of the
Lease.
(j) NASDAQ. The Shares of the Buyer to be issued to the Seller shall
have been approved for quotation on the NASDAQ SmallCap Market.
(k) Liens on ISI Molds. CIT Group / Credit Finance, Inc. and Finova
Capital shall have released their respective liens on the ISI Molds.
12. Conditions Precedent to the Obligations of Buyer. All obligations
of Buyer under this Agreement are subject to the fulfillment, at the Closing
Date, of each of the following conditions, any or all of which may be waived in
whole or in part at or prior to the Closing by Buyer:
26
(a) Seller's Representations and Warranties. The representations and
warranties of Seller herein contained shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date, except as affected by transactions
contemplated or permitted by this Agreement.
(b) Seller's Covenants. Seller shall have performed all of its
obligations and agreements and complied with all of its covenants contained in
this Agreement to be performed and complied with by Seller on or prior to the
Closing Date.
(c) No Litigation. No action, suit or proceeding before any court or
any governmental or regulatory authority shall have been commenced and still be
pending, no investigation by any governmental or regulatory authority shall have
been commenced and still be pending, and no action, suit or proceeding by any
governmental or regulatory authority shall have been commenced against Seller,
seeking to restrain, prevent or change the transactions contemplated under this
Agreement or questioning the validity or legality of any of such transactions.
(d) Consents. Buyer shall have received evidence, satisfactory to
Buyer and its counsel, that all of the consents disclosed in the Seller's
Disclosure Statement have been duly obtained, and that all permits, licenses,
franchises, and other authorizations necessary to the operation of the business
of Seller have been transferred to or issued to Buyer.
(e) Documentation. All matters and proceedings taken in connection
with the sale of the Purchased Assets by Seller to Buyer as herein contemplated,
including forms of instruments and matters of title, shall be reasonably
satisfactory to Buyer and its counsel.
(f) Seller's Counsel's Opinion. Counsel for Seller, shall have
delivered to Buyer an opinion, dated the Closing Date, in form and substance
satisfactory to counsel for Buyer, to the following effect:
(i) Seller (A) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
and (B) has all corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
(ii) Seller has all requisite corporate power and authority to
execute and deliver this Agreement, and to perform its obligations hereunder and
thereunder.
27
(iii) The execution, delivery and performance of this Agreement,
(A) have been duly authorized by all necessary action of Seller, and (B) do not
violate any provision of the certificate of incorporation or by-laws of Seller.
(iv) This Agreement has been duly executed and delivered by the
Seller. Assuming due execution and delivery by Buyer, this Agreement constitutes
the valid and binding obligations of Seller enforceable in accordance with their
respective terms, subject to the qualifications that (1) the rights and remedies
of Buyer hereunder and thereunder may be limited by bankruptcy, reorganization
and other laws of general application relating to or affecting the enforcement
of creditors rights, and (2) equitable remedies are subject to the discretion of
the court before which any proceedings therefore may be brought.
(v) Such counsel does not have any actual knowledge of any
mortgage, lien, encumbrance, security interest or other claim upon or with
respect to any of the Purchased Assets except for those disclosed in the
Seller's Disclosure Statement.
(vi) Except as described in this Agreement , such counsel does
not have any actual knowledge of any action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or other agency now
pending against the Seller.
(g) Registration Statement, Proxy Statement, State Securities Laws.
The Registration Statement described in Paragraph 9 of this Agreement shall have
become effective and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
and no similar proceeding in respect of the Proxy Statement shall have been
initiated or threatened by the SEC. Buyer shall have received all state
securities laws or "Blue Sky" permits and other authorizations necessary to
consummate this Agreement and the transactions contemplated by this Agreement.
(h) Lease. Seller shall have assigned the Lease to Buyer.
(i) Simultaneous Closing of Sale to Seller of ISI Molds. On the
Closing Date, Seller shall simultaneously purchase the ISI Molds for the
purchase price for the ISI Molds described in Paragraph 3(b) of this Agreement.
(j) Seller's Shareholders Approval. The condition described in
Paragraph 11(e) of this Agreement shall be satisfied.
28
(k) Escrow Agreement. The Escrow Agreement shall have been executed.
(l) NASDAQ Approval. All Shares of the Buyer to be issued to the
Seller shall have been approved for quotation on the NASDAQ SmallCap Market.
(m) Agreements with Affiliates. Not less than ten (10) days prior to
the Closing, the Seller shall deliver to Buyer a list of its Affiliates,
identifying all persons who are reasonably and in good faith believed to be, at
the time of the Special Meeting, Affiliates of the Seller for purposes of Rule
145 under the Act. The Seller shall use its best efforts to cause each person
who is identified as an Affiliate in the list referred to above to deliver to
Buyer on or prior to the effective date of the Registration Statement a written
agreement, in form reasonably satisfactory to Buyer whereby such persons
acknowledge (i) the restrictions on the transfer of Shares issued to Affiliates
necessary or advisable to comply with Rule 145 under the Act, and (ii) the
appropriate legending of the certificates for the Shares to be issued pursuant
to this Agreement. Notwithstanding Paragraph 3 of this Agreement, no stockholder
who at the time of the effective date of the Registration Statement was so
identified as an Affiliate of the Seller shall be entitled to receive
certificates for Buyer's Shares until such stockholder has complied with any and
all provisions of this Paragraph 12(m).
(n) FCC Approval. Receipt by Buyer of FCC Part 15 certificate(s) and
Part 68 equipment registration(s) for the Purchased Assets (other than products
not yet sold by Seller) to which such certificate(s) and registration(s) apply.
13. Shareholder Approval.
Simultaneously upon Seller's execution of this Agreement, Special
Situations Private Equity Fund, L.P. and FAMCO III, Limited Liability Company
shall have delivered their approval of this Agreement and the dissolution of the
Seller and have agreed to vote their shares of Seller in favor of the
dissolution of the Seller at the Special Meeting.
14. Indemnification.
(a) Indemnification by Seller. Seller shall indemnify, defend, and
hold Buyer and their respective officers, directors, employees, and shareholders
and their respective successors and assigns (collectively, "Buyer's Indemnified
Persons") harmless from and against an Indemnity Loss asserted against,
suffered, or incurred by any of Buyer's Indemnified Persons arising
29
out of or in any way related to:
(i) Any misrepresentation in or breach of the representations
and warranties of Seller or the failure of Seller to perform any of its
covenants or obligations contained in this Agreement, the Assignment Agreements,
or in any exhibit, schedule, certificate or other instrument or document
furnished to or to be furnished by Seller pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement;
(ii) Except with respect to the Assumed Liabilities assumed by
Buyer under this Agreement, the operation of Seller's business or the use of the
Purchased Assets prior to the date hereof;
(iii) Any actions, claims, suits, or proceedings asserted by
third parties alleging personal injury or property damage due to, arising out
of, or by reason of the design, manufacture or use of any products of the
Seller's business manufactured on or prior to the Closing Date;
(iv) Any worker's compensation claims of any employee or former
employee of Seller relating to events occurring on or prior to the Closing Date;
(v) Any and all claims for compensation and other employee
benefits (including, but not limited to, severance pay, outplacement benefits,
disability benefits, health, retiree medical, worker's compensation, tuition
assistance, death benefits, and pension and profit sharing plans and claims
relating to employment or termination of employment) accruing on or prior to the
date hereof, or on or after the date hereof with respect to the payment of
severance benefits and other welfare benefit payments, if any, with respect to
(i) employees in the Seller's business who are laid off on or prior to the date
hereof and (ii) employees in the Seller's business who, on the date hereof, are
on medical leave or disability, and related costs and liabilities, regardless of
whether such claims and related costs and liabilities are made or incurred
before, on or after the Closing Date;
(vi) All claims, investigations, actions, suits, proceedings,
demands, assessments, judgments, costs and expenses, including reasonable
attorneys' fees and expenses, incident to the foregoing (other than Assumed
Liabilities); or
(vii) Any liabilities, obligations or expenses of Seller not
included in the Assumed Liabilities assumed by Buyer pursuant to the provisions
of the Agreement.
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(b) Indemnification by Buyer. Buyer shall indemnify, defend, and
hold Seller, and its officers, directors, employees, and shareholders and their
respective successors and assigns (collectively "Seller's Indemnified Persons"),
harmless from and against any Indemnity Loss asserted against, suffered or
incurred by any of Seller's Indemnified Persons arising out of or in any way
related to:
(i) Any misrepresentation in or breach of the representations
and warranties of Buyer or the failure of Buyer to perform any of their
covenants or obligations contained in this Agreement, the Assignment Agreements,
or in any exhibit, schedule, certificate or other instrument or document
furnished or to be furnished by Buyer pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement;
(ii) The use by Buyer of the Purchased Assets after the Buyer
has received good and valid title to the Purchased Assets;
(iii) The Assumed Liabilities;
(iv) All claims, investigations, actions, suits, proceedings,
demands, assessments, judgments, costs, and expenses, including reasonable
attorneys' fees and expenses, incident to the foregoing;
(v) Any actions, investigations, actions, suits, proceedings,
demands, assessments, judgments, costs, and expenses, including reasonable
attorneys' fees and expenses (incurred thereon at trial and upon appeal),
incident to the foregoing;
(c) Notice. If any party believes that it has suffered or incurred
any Indemnity Loss, that party shall so notify the indemnifying party promptly
in writing describing such loss or expense, the amount thereof, if known, and
the method of computation of such Indemnity Loss, all with reasonable
particularity. If any action at law, suit in equity or administrative action is
instituted by or against a third party with respect to which any party intends
to claim any liability or expense as an Indemnity Loss under this Paragraph 14,
such party shall promptly notify the indemnifying party of such action.
(d) Defense of Claims. The indemnifying party shall have ten (10)
business days after receipt of either notice referred to in Paragraph 14(c) of
this Agreement to notify the indemnified party that it elects to conduct and
control any legal or administrative action or suit with respect to an
indemnifiable claim. If the indemnifying party does not give such notice, the
31
indemnified party shall have the right to defend, contest, settle or compromise
such action or suit in the exercise of its exclusive discretion, and the
indemnifying party shall, upon request from the Indemnified Person promptly pay
the indemnified person in accordance with the other terms and conditions of this
Paragraph 14, the amount of any Indemnity Loss resulting from its liability to
the third party claimant. If the indemnifying party gives such notice, it shall
have the right to undertake, conduct and control, through counsel of its own
choosing (which counsel shall be satisfactory to the indemnified party in the
reasonable judgment of the indemnified party) and at its sole expense, the
conduct and settlement of such action or suit, and the indemnified party shall
cooperate with the indemnifying party in connection therewith; provided,
however, that (i) the indemnifying party shall not thereby permit to exist any
lien, encumbrance or other adverse change securing the claims indemnified
hereunder upon any asset of the indemnified party, (ii) the indemnifying party
shall not thereby consent to the imposition of any injunction against the
indemnified party without the prior written consent of the indemnified party,
(iii) the indemnifying party shall permit the indemnified party to participate
in such conduct or settlement through counsel chosen by the indemnified party,
but the fees and expenses of such counsel shall be borne by the indemnified
party except as provided in clause (iv) below, and (iv) upon a final
determination of such action or suit, the indemnifying party shall agree
promptly to reimburse to the extent required under this Paragraph 14 the
indemnified party for the full amount of any Indemnity Loss resulting from such
action or suit and all reasonable and related expenses incurred by the
indemnified party, except fees and expenses of counsel for the indemnified party
incurred after the assumption of the conduct and control of such action or suit
by the indemnifying party. So long as the indemnifying party is contesting any
such action in good faith, the indemnified party shall not pay or settle any
such action or suit. Notwithstanding the foregoing, the indemnified party shall
have the right to pay or settle any such action or suit, provided that in such
event the indemnified party shall waive any right to indemnity therefor from the
indemnifying party and no amount in respect therefor shall be claimed as a
Indemnity Loss under this Agreement.
(e) Cooperation. If requested by the indemnifying party, the
indemnified person shall cooperate with the indemnifying party and its counsel
in contesting any claim which the indemnifying party elects to contest or, if
appropriate, in making any counterclaim against the person asserting the claim,
or any cross-complaint against any person, and further agrees to take such
32
other action as reasonably may be requested by an indemnifying party to reduce
or eliminate any loss or expense for which the indemnifying party would have
responsibility, but the indemnifying party will reimburse the indemnified person
for any expenses incurred by it in so cooperating or acting at the request of
the indemnifying party.
(f) Right to Participate. The indemnified party shall afford the
indemnifying party and its counsel (at the indemnifying party's own expense) the
opportunity to be present at, and to participate in, conferences with all
persons, including governmental authorities, asserting any claim against the
indemnified party or conferences with representatives of or counsel for such
persons.
(g) Payment of Losses. The indemnifying party shall promptly pay to
the indemnified person in cash the amount of any Indemnity Loss to which the
indemnified person is entitled by reason of the provision of this Agreement. Any
claim for which indemnification occurs under this Agreement shall be assigned
(without recourse) to the indemnifying party.
(h) Subrogation. In the event of any payment by an indemnifying
party to an indemnified party in connection with any Indemnity Loss, the
indemnifying party shall be subrogated to and shall stand in the place of the
indemnified party as to any events or circumstances in respect of which the
indemnified party may have any right to claim against any third party relating
to such event of indemnification. The indemnified party shall cooperate with the
indemnifying party in any reasonable manner in prosecuting any subrogated claim.
(i) Limitation on Indemnification. Neither Buyer nor Seller shall
assert a claim for an Indemnity Loss pursuant to Paragraph 14 of this Agreement
unless and until the cumulative aggregate of such Indemnity Loss incurred by
Buyer or Seller exceeds $50,000, after which point such party will be obligated
to indemnify against all such Indemnity Loss, including the first $50,000.
(j) Maximum Liability. The total liability of either the Buyer or
the Seller for any claim for an Indemnified Loss under Paragraph 14 of this
Agreement, or for a breach of this Agreement, shall not exceed the value of
those Shares placed in escrow pursuant to the Escrow Agreement. Further, neither
party shall be entitled to assert a claim for indemnification against the other
party after sixty (60) days after the date hereof.
33
(k) Knowledge of Party Seeking Indemnification. Neither party shall
be entitled to seek indemnification from the other party for any matters, claims
or facts of which such party had knowledge prior to entering into this
Agreement.
(l) The Buyer and Seller acknowledge and agree that following the
Closing, the indemnification provisions contained in this Paragraph 14 shall be
the exclusive remedies of Buyer and Seller for any claims of the type described
in this Paragraph 14, including without limitation, any breach of the
representations and warranties under this Agreement.
15. Seller's Claims. Buyer acknowledges that Seller intends to
liquidate and dissolve shortly after the consummation of the transactions set
forth in this Agreement and to distribute all of the shares received from Buyer
pursuant to this Agreement. Any claims Seller may have hereunder may be brought
by Seller or by a designee on behalf of the shareholders of Seller.
16. Non-Compete. To induce Buyer to enter into this Agreement, Seller
covenants and agrees that commencing on the Closing Date and for a period of two
years thereafter, Seller shall not, directly or indirectly, as an owner,
shareholder, partner, agent, representative or in any other manner enter into,
or in any manner take an active part in, any business which is or may be in
competition with the business of Buyer within the United States. Seller
expressly acknowledges that in addition to all rights and remedies at law
available to Buyer to enforce the terms of this Paragraph, Buyer shall have the
right to seek and obtain equitable relief, including injunctive relief, against
Seller for violating the terms of this Paragraph 16.
17. Severability. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be enforceable to the fullest extent permitted by law.
18. Applicable Law. This Agreement shall be governed and construed and
interpreted in accordance with the internal laws of the State of Florida without
regard to principles of conflicts of laws.
34
19. Waivers and Notices. Any failure by any party to this Agreement to
comply with any of its obligations, agreement or covenants hereunder may be
waived by the Seller in the case of a default by the Buyer and by the Buyer in
the case of a default by the Seller. All waivers under this Agreement and all
notices, consents, demands, requests, approvals and other communications which
are required or may be given hereunder shall be in writing and shall be deemed
to have been duly given if delivered or mailed certified first class mail,
postage prepaid, return receipt requested:
a) If to the Seller: Copy to:
Telident, Inc. Xxxxx X. Xxxxxx
Ten Second Street N.E., Suite 212 Xxxxxx and Xxxxxx, P.A.
Xxxxxxxxxxx, Xxxxxxxxx 00000 2400 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
(b) If to the Buyer: Copy to:
Teltronics, Inc. Xxxx Xxxxx
0000 Xxxxxxxxx Xxxxxxxxxx Xxx Xxxxx and Xxxxx
Xxxxxxxx, Xxxxxxx 00000-0000 0000 Xxxxxxxx Xx.
Xxxxxxxxx, XX 00000
or to such other person or persons at such address or addresses as may be
designated by written notice to the other parties hereunder.
20. Access to Books and Records Post-Closing. After the Closing, (i)
the Seller shall provide the Buyer full access during normal business hours
(upon reasonable prior notice) to all books and records which are part of the
Retained Assets insofar as they relate to any Purchased Assets or Assumed
Liabilities or the conduct of the business after the Closing and (ii) the Buyer
shall provide the Seller full access during normal business hours (upon
reasonable prior notice) to all books and records which are part of the
Purchased Assets or which relate to the Purchased Assets, Assumed Liabilities or
the conduct of the business of Seller prior to the Closing.
21. Entire Agreement. This Agreement, together with the other writings
delivered in connection herewith, embodies the entire Agreement and
understanding of the parties hereto and supersedes all prior agreements or
understandings between the parties, oral or written, express or implied. This
Agreement cannot be amended orally, but only by a writing duly executed by the
parties.
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22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same document.
23. Headings. Headings of the Paragraphs in this Agreement are for
reference purposes only and shall not be deemed to have any substantive effect.
24. Binding Effect, Benefits. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns; provided, however, that nothing in this Agreement shall be construed to
confer any rights, remedies, obligations or liabilities on any person other than
the parties hereto or their respective successors and assigns.
25. Expenses. All costs and expenses, including accountant's fees,
incurred by Seller in connection with this Agreement and the transactions
contemplated or required hereby, including, but not limited to, all costs of
dissolving the Seller and all costs relating to the Proxy Statement (the
"Transaction Costs"), shall be paid by the Seller at Closing, except that Buyer
shall pay up to a maximum of fifty thousand dollars ($50,000.00) cash and
twenty-five thousand (25,000) additional Shares. In the event Seller's aggregate
Transaction Costs are less than two hundred and ninety thousand dollars
($290,000.00), fifty percent (50%) of the difference between $290,000.00 and the
aggregate of Seller's Transaction Costs will be credited to Seller up to a
maximum of twelve thousand five hundred (12,500) additional Shares. All costs
and expenses incurred by Buyer in connection with this Agreement and the
transactions contemplated or required hereby including, but not limited to all
costs relating to the typesetting, printing, edgarizing, mailing, and
distribution of the Proxy Statement and the Registration Statement (including
all supplements and amendments thereto), and all costs relating to the issuance
and distribution of the Shares to the Seller and the subsequent distribution of
such shares to Seller's shareholders, shall be paid by Buyer. In addition, Buyer
shall pay to Seller after the Closing up to an additional twenty-five thousand
dollars ($25,000.00) for certain pending litigation of Seller outstanding as of
the date hereof which is outstanding after the Closing Date, including any legal
fees related to such litigation.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
SELLER BUYER
Telident, Inc. Teltronics, Inc.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxx X. Xxxxxxx
---------------------------------- ----------------------------------
Xxxxx X. Xxxxxx, Chief Executive Xxxx X. Xxxxxxx, President
Officer and Chief Executive Officer
37
EXHIBIT A
ASSUMED LIABILITIES
The Assumed Liabilities shall be limited to:
1. All warranty obligations of Seller specified in the distribution
agreements listed in Section 6(l) of the Seller's Disclosure Statement
and all warranty obligations of Seller under the Standard Maintenance
and Warranty policy attached to Section 6(v) of the Seller's Disclosure
Statement.
2. All liabilities set forth on Seller's balance sheet as of the date of
Closing. Such liabilities, other than the liability captioned "Deferred
Income - Maintenance" shall not exceed $400,000, except if caused by
increases in trade payables and amounts drawn under Seller's line of
credit to cover Seller's operating expenses and the purchase of
inventory (the "Excess") related to receivables and inventory (as
reflected on Seller's financial statements prepared in accordance with
GAAP consistently applied) created after October 31, 1999 in amounts at
least equal to two hundred percent (200%) of the Excess.
3. All obligations under the leases and agreements specified in Section
6(l) of Seller's Disclosure Statement accruing on and after the Closing
Date.
4. All deductibles for claims made after the Closing Date under those
insurance policies of Seller for which Buyer has elected, at its
option, to be named as an additional insured.
A-1
EXHIBIT B
ISI MOLDS
CPU, Upper
CPU, Lower
CPU, Door
Tablet, Top
Tablet, Bottom
Battery, Upper
Battery, Lower
UUB, Upper
UUB, Lower
UUB, Door
10.4 Display, Front
10.4 Display, Back
B-1
EXHIBIT C
RETAINED ASSETS
The Retained Assets consist of the following:
1. Cash in two investment accounts at Xxxxx Fargo in excess of
$1,100,000.00, which shall be equal to a minimum of $140,000.00 and
which, provided the Assumed Liabilities under item 2 on Exhibit A are
equal to or less than $400,000 (or such higher amount as Buyer is to
assume under item 2 on Exhibit A), may be greater than $140,000.00.
2. Seller's minute book, stock record book and similar organizational
documents.
3. ISI Molds
4. All corporate insurance policies of Seller and any remaining benefits
under the term of such policies. Seller shall retain any and all
refunds or rebates of premiums under Seller's Director and Officer
Liability policy. Refunds or rebates under all other corporate
insurance policies are included in the Purchased Assets of Buyer.
C-1
