EXHIBIT 4.140
ASSET PURCHASE AGREEMENT
THIS AGREEMENT made as of February 6, 2003.
AMONG:
TM SYSTEMS, INC., a corporation organized and existing under the laws
of the State of Delaware with a business address located at 000
Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxx, X.X.X. 00000
(the "Seller")
AND:
TM SYSTEMS II, INC., a corporation organized and existing under the
laws of the State of Delaware with a registered address located at 000
Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx, X.X.X. 00000
(the "Buyer")
AND:
API ELECTRONICS GROUP INC., a corporation organized and existing under
the laws of the Province of Ontario, with a business address located
at 1400 - 000 Xxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
(the "Guarantor")
BACKGROUND:
A. The Seller wishes to sell certain property and assets of the business
presently and heretofore carried on by the Seller at and from 000 Xxxxxx Xxxxxx,
Xxxxxxxxx, Xxx Xxxx, X.X.X. 00000 in the State of New York and at and from 000
Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxx, X.X.X. 00000, consisting of the
primary design and manufacturing of equipment and systems for the United States
government, specifically for naval aircraft landing and launching, flight
control and signalling systems, radar system alteration and test equipment as
well as ground support equipment (the "Purchased Business") upon and subject to
the terms and conditions set out below.
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B. The Buyer wishes to purchase the Purchased Business upon and subject to the
terms and conditions set out below.
AGREEMENTS:
For good and valuable consideration, the receipt and sufficiency of
which each party acknowledges, the parties agree as follows:
ARTICLE I
INTERPRETATION
1.1 Definitions - Whenever used in this Purchase Agreement, unless there is
something in the subject matter or context inconsistent therewith, the following
words and terms will have the respective meanings ascribed to them as follows:
(a) "Add On Conditional Orders" means the amount by which payments to
New TM under any of the Conditional Orders exceeds the amounts set out in
Schedule 1.1(g).
(b) "Add On Earn-Out Payments" means an aggregate amount equal to 10%
of the gross proceeds received after Closing by New TM or the Guarantor of the
Add On Conditional Orders, as paid to the Seller as set out in Section 2.2.
(c) "Adjustment" means a pro rata reduction of the Second Payment
equal to the shortfall, if any, by which the gross orders that New TM ships and
that New TM invoices, and any advance payment that New TM receives in the
aggregate fall below $3,000,000, as measured between the Closing Date and
December 31, 2003, and as recorded in the ordinary course of business consistent
with the Seller's past practices. In no circumstances will there be an upward
adjustment of the Second Payment. By way of example, for illustration purposes
only, if New TM's gross sales orders (i.e. shipments that are invoiced) in the
year 2003 plus New TM's advance payments received in the year 2003 equal
$2,750,000 or 91.67% of $3,000,000, then the Second Payment shall equal 91.67%
of $1,500,000 or $1,375,050.
(d) "AFR" means the applicable federal rate, as most recently
published, prior to the Closing Date, by the United States Internal Revenue
Service for loans maturing within one year, being 1.65%.
(e) "Buyer Indemnified Persons" has the meaning given in Section 9.1.
(f) "Closing" or "Closing Date" means the completion of the purchase
and sale of the Purchased Business by the transfer and delivery of documents of
title thereto and the payment of the Purchase Price to be settled at 11:00
o'clock a.m. on February 6, 2003, or such other date as may be mutually agreed
upon by the parties, at the offices of WeirFoulds LLP, 16th Floor, Exchange
Tower, 000 Xxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx, Xxxxxx and at the offices of
Xxxxx & Xxxx PC, 0000 Xxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxx, X.X.X., or such other
location as may be mutually agreed upon by the parties.
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(g) "Conditional Orders" means those certain evidences of future sales
transactions, memorandums or letters of understanding addressed to the Seller,
or to which the Seller is a party, identified and listed in Schedule 1.1(g).
(h) "confidential and proprietary information" has the meaning given
in Section 7.1.
(i) "Confirmed Contracts" means those certain contracts to which the
Seller is a party, or to which the Seller is bound, identified and listed in
Schedule 1.1(i).
(j) "Damages" has the meaning given in Section 9.1.
(k) "Earn-Out Payments" means an aggregate amount equal to 10% of the
gross proceeds received after Closing for the Future Deliveries, as to which (i)
5% of all the Progress Payments shall be paid upon receipt of such Progress
Payments by New TM, (ii) with the balance payable upon final and full payment to
New TM by the purchasers of the Conditional Orders, (iii) up to a maximum of 10%
of the contract price of the Conditional Orders as paid to the Seller as set out
in Section 2.2.
(l) "Encumbrance" means any and all Liens, mortgages, charges,
hypothecs, pledges, security interests, prior assignments, options, warrants,
Leases, subleases, rights to possession, or other encumbrances and claims,
rights, restrictions and other interests, of any nature and kind whatsoever or
howsoever arising, whether direct or indirect or otherwise which affect,
directly or indirectly, title to any particular property or asset.
(m) "Excluded Assets" means the Seller's cash on hand, stock
portfolio, market funds, cash equivalent, accounts receivable and loan
receivable, all as exist on the Closing Date.
(n) "Face Value" means $1,475,651.75, being that amount which, when
added to the aggregate value of the AFR interest on the Promissory Note, will be
equal to the amount of the Second Payment.
(o) "Future Deliveries" means deliveries to be shipped and invoiced by
New TM under the terms and provisions of the Conditional Orders and the Add On
Conditional Orders, only, for which New TM has received payment in full within
two years of Closing.
(p) "Inventories" means certain inventories owned by the Seller and
pertaining to the Purchased Business as set out in Schedule 3.1(l).
(q) "Law" means with respect to a Person, any United States federal,
state, local or administrative statute, law, regulation, rule order, consent,
decree, judgment, permit, licences, code, common law, treaty, convention,
ordinance or determination of a court or other competent authority, in each case
applicable to or binding upon such Person or any of the property of such Person.
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(r) "Leases" means those certain leases or agreements in the nature of
a lease and any interest therein, whether of real or personal property, to which
the Seller is a party, whether as lessor or lessee, relating to the Purchased
Business set out in Schedule 3.1(h).
(s) "Letter of Intent" means that certain letter of intent between the
Buyer and the Seller dated December 1, 2002 and agreed and accepted on December
13, 2002, a copy of which is annexed at Schedule 1.1(s).
(t) "Lien" means any mortgage, pledge, security interest, Encumbrance,
lien or charge of any kind, including any agreement to grant any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of or agreement to file any financial
statement under the applicable legislation of any jurisdiction in connection
with any of the foregoing.
(u) "New TM" means the Buyer's subsidiary formed to acquire the
Purchase Assets and operate the Purchased Business following the Closing Date.
(v) "Person" means an individual, a partnership, a corporation, a
limited liability company, a trust, an unincorporated organization and the
heirs, executors, administrators or other legal representatives of an
individual.
(w) "Progress Payments" means any and all payments received by New TM
under the Conditional Orders after Closing but prior to Future Delivery.
(x) "Promissory Note" means a promissory note, evidencing the Second
Payment, accruing interest at the AFR bearing the Face Value, subject to
Adjustment, if any, in the form set out in Schedule 1.1(x). Principal and
interest payable on the Promissory Note will be due and payable on that day
which falls one year after the Closing Date. The Promissory Note will be secured
solely by the Purchased Assets but guaranteed by the Guarantor.
(y) "Purchase Agreement" means this asset purchase agreement and all
instruments expressly in amendment hereof signed by all parties hereto; hereof;
"hereof", "hereto", and "hereunder" and similar expressions mean and refer to
this Purchase Agreement and not to any particular Article or Section; "Article",
"Section", "paragraph" or "clause" means and refers to the specified article,
section, paragraph or clause of this Purchase Agreement.
(z) "Purchase Price" means the aggregate of $1,500,000, the Second
Payment, subject to Adjustment, if any, and the Earn-Out Payments.
(aa) "Purchased Assets" means certain inventory, equipment, certain
work-in-progress, contracts, leases of the Seller's property, files, ledgers,
furniture, trade-marks, trade names, copyrights and patents, general intangibles
and goodwill and as further set out in Schedule 3.1(f), including, but not
limited to, the Confirmed Contracts, the Conditional Orders and the Inventories.
(bb) "Purchased Business" has the meaning given in Recital A.
(cc) "Representatives" has the meaning given in Section 9.1.
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(dd) "Second Payment" means an amount equal to $1,500,000 payable to
the Seller from the Buyer pursuant to the Promissory Note, subject to
Adjustment, if any, due and payable on or before that day which falls one year
after the Closing Date
(ee) "Seller Indemnified Persons" has the meaning given in Section
9.2.
(ff) "Shuldman Employment Agreement" means an employment agreement
between the Buyer and Xxxxx Xxxxxxxx dated as of the Closing Date, in the form
annexed hereto as Schedule 1.1(ff).
(gg) "strictly confidential" has the meaning given in Section 7.1.
(hh) "Weiner Employment Agreement" means an employment agreement
between the Buyer and Xxxxxx Xxxxxx dated as of the Closing Date, in the form
annexed hereto as Schedule 1.1(ff).
1.2 Interpretation - Whenever the singular or masculine is and the same
will be deemed to include the plural or feminine or the body politic where the
content or the parties so require.
1.3 Headings - The headings of this Purchase Agreement are inserted for
convenience only and will not affect the construction or interpretation of this
Purchase Agreement.
1.4 Schedules - The following are the Schedules annexed hereto and
incorporated by reference and deemed to be part hereof:
Schedule 1.1(a) - Add On Conditional Orders
Schedule 1.1(g) - Conditional Orders
Schedule 1.1(i) - Confirmed Contracts
Schedule 1.1(s) - Letter of Intent
Schedule 1.1(x) - Promissory Note
Schedule 1.1(ff) - Form of Employment Agreement
Schedule 2.4 - Statement of Adjustments
Schedule 3.1(f) - Purchased Assets
Schedule 3.1(g) - Intellectual Property
Schedule 3.1(h) - Leases
Schedule 3.1(k) - Litigation and Claims
Schedule 3.1(l) - Inventories
Schedule 10.2(c) - Form of Xxxx of Sale
ARTICLE II
PURCHASE AND SALE AND PURCHASE PRICE
2.1 Purchase and Sale - The Seller agrees to sell, assign and transfer the
Purchased Assets as set out in Schedule 3.1(f), including without limitation,
the Inventories as set out in Schedule 3.1(l), to the Buyer free and clear of
all Liens, and the Buyer agrees to purchase or assume from the Seller the
Purchased Assets, the Inventories, the Confirmed Contracts and the
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Conditional Orders for the Purchase Price, except as hereinafter provided, and
excluding the Excluded Assets, but otherwise including, without limiting the
generality of the foregoing:
(a) the Leases, assumed from the Seller's as follows:
(i) in full, but only up and until March 31, 2004; and
(ii) thereafter, from April 1, 2004 to March 31, 2005, an
indemnity in respect of the Leases only, to Messrs. Shuldman and
Weiner, personally, up to a maximum of $2,000, in the aggregate;
(b) full benefit of all the Confirmed Contracts as set out in Schedule
1.1(i);
(c) full right, title and interest in the Conditional Orders as set
out in Schedule 1.1(g);
(d) all personnel records, all inspection records and all other
records and other books, documents and data relating to the Purchased Business;
(e) certain registered or unregistered trade-marks, trade or brand
names, service marks, copyrights, designs, inventions, patents, patent
applications, patent rights, licences, sublicences, franchises, trade secrets,
formulae, recipes, processes, technology, customer lists, know-how and other
industrial property of or pertaining to the Purchased Business owned by the
Seller and used in connection with the Purchased Business as set out in Schedule
3.1(g), together with the right to file any patent applications and own the
entire right, title and interest in, to and under any patents issued thereon in
connection with any of the said inventions, technology, know-how, process and
other industrial property; and
(f) the goodwill of the Purchased Business including the exclusive
right to the Buyer to represent itself as carrying on the Purchased Business and
the right to use any words indicating that the Purchased Business is so carried
on including, but not limited to, the exclusive right to use the corporate name
"TM SYSTEMS, INC." (such not to impair the Seller's use of any name, but with
the expressed permission of the Buyer or the Buyer's agents, in the conduct of
business necessary to ensure continuity of customer relationships prior to the
novation of government contracts or prior to the assignment of those agreements,
Conditional Orders and Confirmed Contracts anticipated to be signed subsequent
to the Closing Date as hereinafter set forth).
2.2 Earn-Out Payments - In respect of the Future Deliveries, New TM will
pay to the Seller the Earn-Out Payments and the Add On Earn-Out Payments upon
receipt of the Progress Payments or upon receipt of the payment from the
recipients of the Future Deliveries, as the case may be. The Guarantor shall
cause the Buyer to deliver quarterly reports, showing all orders, shipments,
invoices, deliveries and other relevant activities as they relate to Future
Deliveries, the Conditional Orders or the Add On Conditional Orders, only, for
purposes of confirming the appropriate calculation of Earn-Out Payments and Add
On Earn-Out Payments for a period of five years following the Closing Date.
Without limiting anything contained in
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Section 2.4 below, and without respect to the five year period outlined above,
the Seller shall have the right to review and inspect the Buyer's books and
records solely as they relate to Future Deliveries, the Conditional Orders or
the Add On Conditional Orders, upon reasonable advance written notice and not
more frequently than quarterly after the due dates for the reports required to
be delivered to the Seller pursuant to this Section 2.2.
2.3 Purchase Price - Subject to the Adjustment, the Purchase Price will be
paid by the Buyer to the Seller as follows:
(a) on the Closing Date, by delivery to Xxxxx & Xxxx PC, in trust for
the Seller, wire transfer, certified check or bank draft representing an amount
equal to $1,500,000 payable to "Xxxxx & Wolf PC, In Trust";
(b) on the Closing Date, by delivery to the Seller of the Promissory
Note; and
(c) on various dates subsequent to the Closing Date, if necessary,
amounts paid to the Seller equal to the Earn-Out Payments and the Add On Earn
Out Payments as set out in Section 2.2.
2.4 Adjustment - The Second Payment will be adjusted by a percentage
reduction equal to the percentage shortfall, if any, by which the gross orders
that New TM ships and that New TM invoices and any advance payment that New TM
receives, in the aggregate fall below $3,000,000, as measured between the
Closing Date and December 31, 2003 and as recorded in the ordinary course of
business consistent with the Seller's past practices, all as set out and
calculated in Schedule 2.4 which shall be prepared by the Guarantor's chief
financial officer and executed by all parties hereto by no later than February
1, 2004. In the event that the Seller disputes the Adjustment, the Seller and
the Buyer shall mutually select and engage independent certified public
accountants to review and inspect the books and records of the Buyer and to
calculate the Adjustment, whose determination of the Adjustment shall be final
and binding on all parties hereto. The cost of the engagement shall be borne (a)
by the Seller if the accountants so engaged determine the Adjustment to be no
greater than the Adjustment as originally stated by the Buyer or (b) by the
Buyer if the accountants so engaged determine the Adjustment to be greater than
103% of the Adjustment as originally stated by the Buyer or (c) equally by the
Seller and the Buyer if the accountants so engaged determine the Adjustment to
be greater than the Adjustment as originally stated by the Buyer but no greater
than 103% of the Adjustment as originally stated by the Buyer. In no
circumstances will there be an upward adjustment of the Second Payment.
2.5 Allocation of Purchase Price - The Seller and the Buyer agree that the
Purchase Price will be allocated among the Purchased Assets, for tax purposes,
to the extent of the net book value of the assets being transferred and the
excess thereof will be allocated toward the going concern value.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
3.1 The Seller hereby covenants, represents and warrants to the Buyer that:
(a) Organization and Existence of the Seller - The Seller is a
corporation duly incorporated, duly organized and validly existing, and is up to
date in all of the filings and registrations required under the laws of the
State of Delaware and has all necessary corporate power, authority and capacity
to own or lease its property and assets and to carry on the Purchased Business
as presently conducted by it.
(b) No Options - No person, firm or corporation as at Closing has any
right, option, agreement or arrangement capable of becoming an agreement for the
acquisition of any of the Purchased Assets or any interest therein from the
Seller, other than pursuant to purchase orders accepted by the Seller in the
ordinary and usual course of business.
(c) Due Authorization, Etc. - The Seller has all necessary corporate
power, authority and capacity to enter into this Purchase Agreement and the
agreements and other instruments contemplated herein and to perform its
obligations hereunder and thereunder. The execution and delivery of this
Purchase Agreement and the agreements and other instruments contemplated herein
and the consummation of the transactions contemplated hereunder have been duly
authorized by all necessary corporate action on the part of the Seller.
(d) Valid and Binding Obligation - This Purchase Agreement
constitutes, and the agreements and other instruments contemplated herein when
executed will constitute, valid and binding obligations of the Seller
enforceable against the Seller in accordance with the terms hereof.
(e) No Conflict, Law - The execution, delivery and performance of this
Purchase Agreement by the Seller are not in contravention of:
(i) any Law or;
(ii) the terms of the organizational documents of the Seller.
(f) Condition and Description of the Seller's Assets - The Purchased
Assets, as set out in Schedule 3.1(f), including certain facilities, vehicles,
inventories, machinery and equipment are owned and used by the Seller in
connection with the Purchased Business and are in good operating condition, in a
state of good repair and maintenance, reasonable wear and tear excepted, usable
except as herein provided in the ordinary and usual course of the Purchased
Business, and are in compliance with all applicable laws, regulations, by-laws,
ordinances and orders.
(g) Intellectual Property Rights - The Seller is not infringing, on
any patent, trademark, trade name, servicemark copyright, proprietary or similar
right, domestic or foreign, of any other person, firm or corporation. The Seller
has not improperly used any trade secrets belonging to any third party. There is
included in Schedule 3.1(g) a list (including, where applicable, application for
registration and registration particulars) of all registered service
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marks, registered copyrights, trade names, industrial designs, trade-marks,
technology and patents, both domestic and foreign, which are owned or used by
the Seller and the Seller has the sole and exclusive right to use the same and
the same are in good standing and duly registered in all appropriate offices to
preserve the right thereof and thereto.
(h) Leases of Real and Personal Property - The Seller is not a party
to or bound by any leases or agreements in the nature of leases or any interest
therein, either as lessor or lessee, or agreements to enter into such leases,
other than the Leases referred to in Schedule 3.1(h) (in which is specified the
parties, their dates of execution and expiration dates, any options to renew,
the location of any leased lands, chattels or premises and the rental payments
thereunder) and all interests held by the Seller as lessor or lessee under such
Leases are free and clear of any and all mortgages, security interests, charges,
adverse claims, rights, pledges, demands, liens, title retention agreements and
other Encumbrances of any nature or kind whatsoever. All rental and other
payments required to be paid by or to the Seller pursuant to such Leases have
been duly paid and the Seller is not otherwise in default in meeting its
obligations under any such Leases. There does not exist under any such Leases
any right of offset or any adverse claim. There are no events or circumstances
which could give rise to such parties claiming default by the Seller under such
Leases other than may occur by virtue of the consummation of the transaction
contemplated hereunder, insofar as consent to the assignment of the Lease of the
Seller's Albertson, New York premises is required.
(i) Novation - The Seller is not in material default under any of the
Confirmed Contacts, whether written or oral, to which it is a party or an
addressee, and there exists no state of facts which after notice or lapse of
time or both would constitute such a material default other than as may occur by
virtue of the consummation of the transaction contemplated hereunder, insofar as
consent to the assignment of the Confirmed Contracts, or a novation as to the
Confirmed Contracts with any governmental entity, is required.
(j) Accuracy of Books and Records - The books and records of the
Seller, financial and otherwise, fairly and correctly set out and disclose in
all material respects the financial position of the Seller in respect of the
Purchased Business and all material financial and other transactions of the
Seller relating to the Purchased Business have been accurately recorded in such
books and records
(k) Litigation and Claims - Except as disclosed in Schedule 3.1(k) or
on the Seller's 2001 financial statements previously delivered to and reviewed
by the Buyer:
(i) There is no suit, action, litigation, labour grievance or
complaint, investigation, (including, without limitation, investigations under
human rights or health and safety legislation) or administrative, governmental,
arbitration or other proceeding (whether or not purportedly on behalf of the
Seller), including without limitation appeals and applications for review, in
progress, pending or threatened against or relating to the Seller, or affecting
the Purchased Business, or affecting the right of the Seller to enter into this
Purchase Agreement or perform the Seller's obligations hereunder.
(ii) The Seller is not aware (after due enquiry of the senior
officers of the Seller) of any existing grounds upon which any suit, action,
litigation, labour grievance or
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complaint, investigation or proceeding referred to in clause (i) above might be
commenced with any reasonable likelihood of success.
(iii) There is not presently outstanding against the Seller any
judgment, decree, injunction, rule, order or award of any court, governmental
department, commission, board, bureau, agency, instrumentality or arbitrator or
any settlement agreement binding upon it or them.
(iv) There are no open files, notices of violation or outstanding
work orders relating to the equipment, building or realty owned or used by the
Seller in relation to the Purchased Business from or required by any police,
fire department, sanitation, health, worker safety or factory authorities or any
federal, state or local authority, or any matters under discussion with any such
authority or department relating to open files, notice of violation or work
orders. No order affecting the Purchased Business has been issued or is expected
to be issued by the Department of Labor, or any other regulatory body, agency or
authority.
(l) Inventories - The Inventories, as set out in Schedule 3.1(l):
(i) consist solely of items of tangible personal property of the
kind and quality regularly used or produced in the Purchased Business by the
Seller and which are of marketable quality; (ii) are saleable or usable in the
ordinary and usual course of the Purchased Business for the purpose for which
they were intended; and
(iii) are in quantities not in excess of reasonably anticipated
requirements.
(m) Copies of Agreements etc. - True, correct and complete copies of
all mortgages, Leases, agreements, instruments and other documents listed in the
Schedules hereto have been delivered to the Buyer.
(n) Absence of Unusual Transactions - To the best of the knowledge,
information and belief of the Seller (after due enquiry of the senior officers
of the Seller), the Seller has the capacity, including the necessary personnel,
equipment and supplies, to perform all its obligations thereunder.
3.2 Reliance - The Seller hereby expressly acknowledges that the Buyer is
relying upon the covenants, representations and warranties of the Seller
contained in this Purchase Agreement or in any agreement, certificate or other
document delivered pursuant hereto in connection with the purchase of the
Purchased Business hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND GUARANTOR
4.1 The Buyer hereby covenants, represents and warrants to the Seller that:
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(a) Organization and Existence - The Buyer is a corporation duly
incorporated, duly organized and validly existing under the laws of the State of
Delaware and is qualified to carry on business as a foreign corporation under
the laws of the State of New York. The Guarantor is a corporation duly
incorporated, duly organized and validly existing under the laws of Ontario.
(b) Due Authorization, etc. - The Buyer has all necessary corporate
power, authority and capacity to enter into this Purchase Agreement and the
agreements and other instruments contemplated herein and to perform its
obligations hereunder and thereunder. The execution and delivery of this
Purchase Agreement and the agreements and other instruments contemplated herein
and the performance of the transactions contemplated hereunder and thereunder
have been duly authorized by all necessary corporate action on the part of the
Buyer.
(c) Due Authorization of Guarantor - The Guarantor has all necessary
corporate power, authority and capacity to guarantee the Buyer's obligations
hereunder and the agreements and other instruments applicable to it contemplated
herein and to perform its obligations hereunder and thereunder. The execution
and delivery of this Purchase Agreement, the Promissory Note and the agreements
and other instruments applicable to it contemplated herein and the performance
of the transactions contemplated hereunder and thereunder have been duly
authorized by all necessary corporate action on the part of the Guarantor.
(d) Valid and Binding Obligation - This Purchase Agreement
constitutes, and the agreements and other instruments contemplated herein when
executed will constitute, valid and binding obligations of the Buyer enforceable
against the Buyer and, as applicable, the Guarantor, in accordance with the
terms hereof.
4.2 Reliance - The Buyer hereby expressly acknowledges that the Seller is
relying upon the covenants, representations and warranties of the Buyer
contained in this Purchase Agreement or in any agreement, certificate or other
document delivered pursuant hereto in connection with the sale of the Purchased
Business hereunder.
ARTICLE V
NO BROKER
5.1 No Broker - Each of the parties hereto represents and warrants to the
others that all negotiations relating to this Purchase Agreement and the
transactions contemplated hereby have been carried on between them directly and
without the intervention of any other party in such manner as to give rise to
any valid claim against any of the parties hereto for a brokerage commission,
finder's fee or other like payment.
ARTICLE VI
CONDITIONS PRECEDENT TO THE PERFORMANCE BY THE BUYER
AND THE SELLER OF THEIR OBLIGATIONS UNDER THIS PURCHASE AGREEMENT
6.1 Buyer's Conditions - The obligation of the Buyer to complete the
purchase of the Purchased Business hereunder will be subject to the satisfaction
of, or compliance with, at or before the Closing Date, each of the following
conditions precedent (each of which is hereby
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acknowledged to be inserted for the exclusive benefit of the Buyer and may be
waived by the Buyer in whole or in part):
(a) Truth and Accuracy of Representations of Seller at the Closing
Date - All of the representations and warranties of the Seller made in or
pursuant to this Purchase Agreement (including the Schedules hereto) including,
without limitation, the representations and warranties set out in Article III,
will be true and correct in all material respects on the Closing Date.
(b) Novation; Assignment of Contracts - Unless waived by the Buyer in
accordance with Section 6.3, below, the Seller shall obtain novations of all
Confirmed Contracts with governmental entities, and in the case of all other
Confirmed Contracts, shall obtain consent to the assignment thereof from the
counter-party thereto. As to any Confirmed Contract for which a novation or
consent to assignment has not been obtained prior to the Closing Date, Seller's
execution of this Agreement and the closing documents contemplated hereunder
shall constitute (i) a subcontract with Buyer, effective as of the Closing Date,
to perform and discharge each and every obligation of Seller contained therein,
in consideration of which all benefits due the Seller thereunder shall be deemed
assigned to the Buyer, (ii) a subcontract with Buyer, contingent on the
execution of formal contracts with respect to those Conditional Orders comprised
merely of a bid as of the Closing Date, effective as of the date on which such
bids become formal contracts, to perform and discharge each and every obligation
of Seller contained therein pending the novation or consent to assignment
thereof (as the case may be), in consideration of which all benefits due the
Seller thereunder shall be deemed assigned to the Buyer, (iii) an undertaking by
the Seller to use its best efforts subsequent to the Closing Date to obtain
novations and consents to assignment, as applicable, of the Confirmed Contracts
and the contracts deriving from such bids.
6.2 Seller's Conditions - The obligation of the Seller to complete the sale
of the Purchased Business hereunder will be subject to the satisfaction of or
compliance with, at or before Closing, each of the following conditions
precedent (each of which is hereby acknowledged to be inserted for the exclusive
benefit of the Seller and may be waived by the Seller in whole or in part):
(a) Truth and Accuracy of Representations of Buyer at Closing - All of
the representations and warranties of the Buyer made in or pursuant to this
Purchase Agreement (including the Schedules hereto) including without limitation
the representations and warranties set out in Article IV, will be true and
correct in all material respects as at the Closing Date.
6.3 Non-Performance of Conditions for the Benefit of the Buyer - In the
event that any of the conditions set out in Section 6.1 will not be fulfilled
and/or performed at or before the Closing Date, the Buyer may terminate this
Purchase Agreement by notice in writing to the Seller, and the Buyer will
thereupon be released from all obligations under this Purchase Agreement and,
unless the condition or conditions for the non-fulfilment or non-performance of
which the Buyer has terminated this Purchase Agreement are reasonably capable of
being fulfilled and/or performed or caused to be fulfilled or performed by the
Seller, then the Seller will also be released from all obligations under this
Purchase Agreement, provided any of the said conditions shall be deemed waived
by the Buyer if the Buyer shall have elected to
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consummate the purchase and sale of assets contemplated hereunder
notwithstanding the non-fulfilment and/or non-performance of the condition.
6.4 Non-Performance of Conditions for the Benefit of the Seller - In the
event that any of the conditions set out in Section 6.2 will not be fulfilled
and/or performed at or before the Closing Date, the Seller may terminate this
Purchase Agreement by notice in writing to the Buyer, and the Seller will
thereupon be released from all obligations under this Purchase Agreement and,
unless the condition or conditions for the non-fulfilment or non-performance of
which the Seller has terminated this Purchase Agreement are reasonably capable
of being fulfilled and/or performed or caused to be fulfilled or performed by
the Buyer, then the Buyer will also be released from all obligations under this
Purchase Agreement, provided any of the said conditions may be waived in whole
or in part by the Seller at any time without prejudice to its right of
termination in the event of a non-fulfilment and/or non-performance of any other
condition or conditions, any such waiver to be binding upon the Seller only if
the same is in writing.
ARTICLE VII
COVENANTS OF THE SELLER AND THE BUYER
7.1 Confidentiality - In the event of termination of this Purchase
Agreement without consummation of the transactions contemplated herein, the
parties acknowledge that this transaction, as well as the information to be
investigated with respect to this Purchase Agreement, is highly sensitive,
confidential and proprietary information. Each party shall keep the existence
and subject matter of this Purchase Agreement, including all exhibits and
schedules hereto, as well as any and all information gathered in connection with
the investigation and due diligence to be conducted hereunder, strictly
confidential. "Strictly confidential" shall mean, for the purposes hereof, that
(a) neither party shall use, exploit or otherwise appropriate the confidential
or proprietary information, or any other information which it naturally derives
or extracts therefrom, except in the course of analyzing whether or not to
pursue this transaction, and (b) the parties shall not disclose any of the
confidential or proprietary information gathered in connection with the due
diligence investigation conducted hereunder to any third parties other than the
specific employees, consultants, attorneys or accountants engaged to assist in
the due diligence investigation hereunder, limited in all respects to applicable
Law or an order of any court or other tribunal of competent jurisdiction
ordering the disclosure of such confidential information. As used herein,
"confidential and proprietary information" shall mean trade secrets and that
information which a prudent business person would deem to be of such sensitive
nature that its unauthorized dissemination would cause material harm. Nothing
shall be deemed to treat as confidential or proprietary any information which is
obtainable in the public domain, or is otherwise general public knowledge or
knowledge readily accessible within the marketplace in which the parties hereto
conduct their business. If this Purchase Agreement is so terminated, promptly
after such termination, all documents, working papers and other written
materials obtained from one party in connection with this Purchase Agreement and
not theretofore made public (including all copies thereof) will be returned to
the party which provided such material. The confidentiality provisions of this
Section 7.1 will be subject to all applicable securities Laws and current and
on-going public disclosure obligations imposed by the Ontario Securities
Commission and the Securities and Exchange Commission.
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7.2 Covenants of the Seller - Without limiting anything elsewhere herein
contained, the Seller covenants and agrees that the Seller will do the
following:
(a) Actual Possession - At Closing, the Seller will deliver actual
possession of the Purchased Assets and Inventories to the Buyer.
(b) Lessor's Acknowledgement - At the Closing Date, the Seller will
deliver to the Buyer the Leases listed in Schedule 3.1(h).
(c) Undertaking regarding Business Name - At the Closing Date, the
Seller will deliver to the Buyer a written undertaking in form satisfactory to
counsel for the Buyer that the Seller will within 30 days after the Closing Date
change its corporate name to a name acceptable to Buyer, with the expressed
permission of the Buyer, which will not result in confusion within the Buyer's
and Seller's industry, consistent with Section 2.1(f) hereof.
(d) Transfer of Purchased Business - At the Closing Date, the Seller
will take all necessary steps and proceedings as approved by counsel for the
Buyer to permit all of the Purchased Assets and Inventories, except as
contemplated hereunder with respect to Confirmed Contracts and Conditional
Orders requiring consent, or novation, as the case may be, to be duly and
regularly transferred to the Buyer or its nominee(s) at the Closing.
(e) Employment Agreement - The Seller will deliver and cause to be
delivered to the Buyer at the Closing Date the Shuldman Employment Agreement and
the Weiner Employment Agreement, both duly executed and in substantially the
form of employment agreement annexed hereto as Schedule 1.1(ff).
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE SELLER AND BUYER
8.1 Survival of Representations, Warranties and Covenants of the Seller -
The representations, warranties and covenants of the Seller contained in this
Purchase Agreement or in any agreement, certificate or any other document
delivered or given pursuant to this Purchase Agreement will survive the
completion of the transactions contemplated by this Purchase Agreement and,
notwithstanding such completion or any investigation made by or on behalf of the
Buyer, will continue in full force and effect for the benefit of the Buyer
provided, however, that subject to Article IX:
(a) the covenants, representations and warranties of the Seller other
than those described in subsection (b) below, will terminate at the expiration
of one year from the Closing Date; and
(b) those covenants, representations and warranties of the Seller
relating to novation or consent to the assignment of the Confirmed Contracts and
the Conditional Orders will terminate two years from the Closing Date.
8.2 Survival of Representations, Warranties and Covenants of the Buyer -
The covenants, representations and warranties of the Buyer contained in this
Purchase Agreement or
15
in any agreement, certificate or any other document delivered or given pursuant
to this Purchase Agreement will survive the completion of the transactions
contemplated by this Purchase Agreement and, notwithstanding such completion or
any investigation made by or on behalf of the Seller, will continue in full
force and effect for the benefit of the Seller until the expiration of the
period referred to in Section 8.1(a) but subject to Article IX. Notwithstanding
the foregoing, the obligations set forth in Section 2.2 hereof or in the
Promissory Note shall survive the Closing Date until satisfied in accordance
with the terms thereof.
ARTICLE IX
INDEMNIFICATION AND GUARANTEE
9.1 Indemnity - Seller shall indemnify and hold harmless Buyer, the
acquired New TM business, and the Buyer's affiliated entities, and their
respective officers, directors, partners, members, employees, agents,
consultant, advisors and other representatives (collectively,
"Representatives"), stockholders, controlling persons, and affiliates
(collectively, the "Buyer Indemnified Persons") for, and will pay to the Buyer
Indemnified Persons the amount of, any loss, liability, claim, damage, and
expense (including costs of investigation and defense and reasonable attorneys'
fees and expenses), whether or not involving a third-party claim, and only to
the extent in excess of $30,000 (collectively, "Damages"), incurred as the
result of, or in connection with:
(a) any breach of any representation or warranty or covenant made by
the Seller in this Purchase Agreement, and any schedules, exhibits and
agreements attached to this Purchase Agreement, in any other written disclosures
to the Buyer pursuant to this Purchase Agreement, or any certificate delivered
by the Seller pursuant to this Purchase Agreement;
(b) any breach or failure to fulfill or perform by the Seller of any
covenant or Obligation of the Seller in this Purchase Agreement;
(c) any product manufactured or sold, or any services provided, by the
Seller or the acquired business prior to the Closing Date; or
(d) any matter disclosed in the schedules regarding legal proceedings
and orders, and any and all product liability claims in which the date of the
incident occurred prior to the Closing Date.
9.2 Indemnification and Payment of Damages by Buyer - The Buyer shall
indemnify and hold harmless the Seller and its respective Representatives,
shareholders, controlling persons, and affiliates (collectively, the "Seller
Indemnified Persons") for, and will pay to the Seller Indemnified Persons the
amount of, any Damages arising, directly or indirectly, from or in connection
with:
(a) any breach of any representation or warranty or covenant made by
the Buyer in this Purchase Agreement, and any schedules, exhibits and agreements
attached to this Purchase Agreement, in written disclosures to the Seller
pursuant to this Purchase Agreement, or in any certificate delivered by the
Buyer pursuant to this Purchase Agreement;
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(b) any breach or failure to fulfill or perform by the Buyer of any
covenant or Obligation of the Buyer in this Purchase Agreement;
(c) any product manufactured or sold, or any services provided, by any
New TM business after the Closing Date; or
(d) any and all product liability claims in which the incident
occurred after the Closing Date.
9.3 Guarantee of Earn-Out Payments - The Guarantor guarantees as a
continuing guarantee the full and prompt compliance with and performance of all
of Buyer's obligations to the Seller in so far as such obligations relate to the
Earn-Out Payments and the Promissory Note, only (the "Guaranteed Obligations").
The Guarantor acknowledges and agrees that (i) the Guaranteed Obligations of the
Guarantor are those of principal obligor and not a mere guarantor or surety and
the Guarantor hereby waives any legal or equitable defense as surety or
otherwise which may not be waived by the other provisions of this Purchase
Agreement (ii) the Seller may claim or proceed against the Guarantor and need
not first exhaust any remedies against the Buyer or others or enforce any
security over the Guaranteed Obligations (iii) the liability of the Guarantor
will not be affected if the Seller takes, fails from taking or perfecting,
amends, discharges, enforces or otherwise deals with security over the
Guaranteed Obligations as the Seller sees fit and will not be affected by the
bankruptcy; insolvency; dealing with assets; change of constitution, name,
control, legal status or membership; amalgamation; death; incapacity or ceasing
to exist of the Buyer or any other Person and (iv) the Guarantor will indemnify
and save harmless the Seller from and against all claims, actions, causes of
action, damages, losses, liabilities, demands, costs and expenses (including
legal expenses) arising out of the failure of the Buyer to comply with and
perform any of the Guaranteed Obligations. For greater certainty, the Promissory
Note will be secured solely by the Purchased Assets, but shall be guaranteed on
an unsecured basis by the Guarantor.
ARTICLE X
CLOSING
10.1 Closing Date and Transfer of Possession - Subject to compliance with
the terms and conditions hereof, the transfer of possession of the Purchased
Assets will be deemed to take effect as at Closing at the offices of WeirFoulds
LLP, 16th Floor, Exchange Tower, 000 Xxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx, Xxxxxx
and at the offices of Xxxxx & Xxxx PC, 0000 Xxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxx,
X.X.X. or at such other location as may be mutually agreed upon by the parties
hereto.
10.2 Seller's Documents - The Seller will deliver to the Buyer:
(a) a certificate of the Seller in form and substance satisfactory to
the Buyer acting reasonably, duly executed by a senior officer of the Seller on
behalf of the Seller and not in such officer's personal capacity, stating that,
except as disclosed in such certificate:
(i) each of the Seller's covenants and obligations to be
performed under this Purchase Agreement at Section 7.2 at or before the time of
Closing has been performed or satisfied in all material respects; and
17
(ii) each of the conditions for the benefit of the Seller set out
in Section 6.2 has been either satisfied or waived;
(b) certificate of an officer of the Seller undertaking, in good
faith, to proceed with consents to the assignment, or novation of those certain
Confirmed Contracts and those certain Conditional Orders (subject to Section
6.1(b)) that have, as at the Closing Date, not yet received novation from their
respective terms and provisions by the parties thereto;
(c) such approvals or consents as are required to permit the change of
ownership of the Purchased Assets contemplated hereby from all appropriate
federal, state, municipal or other governmental or administrative bodies
including the originally executed Xxxx of Sale, the form of which is attached
hereto as Schedule 10.2(c) as are necessary to effectively vest good and
marketable title to the Purchased Assets in the Buyer free and clear of all
Liens except for permitted Encumbrances and except as otherwise provided in this
Purchase Agreement
(d) certificate of an officer of the Seller undertaking, in good
faith, to within 30 days after the Closing Date change its corporate name to a
name acceptable to Buyer, with the expressed permission of the Buyer, which will
not result in confusion within the Buyer's and Seller's industry;
(e) a certified copy of a resolution of the board of directors and the
majority of the shareholders of the Seller authorizing the execution and
delivery of this Purchase Agreement and the consummation of the transactions
contemplated hereby;
(f) a receipt, duly executed by the Seller, for the Promissory Note
delivered at Closing; and
(g) a receipt, duly executed by the Seller, for the amount equal to
$1,500,000 paid at Closing.
10.3 Buyer's & Guarantor's Documents - The Buyer will deliver, or cause to
be delivered, to the Seller:
(a) a certificate of the Buyer in form and substance satisfactory to
the Seller, acting reasonably, duly executed by a senior officer of the Buyer on
behalf of the Buyer and not in such officer's personal capacity, stating that,
except as disclosed in such certificate each of the conditions for the benefit
of the Buyer set out in Section 6.1 has been either satisfied or waived;
(b) proof of wire transfer or a bank draft or a certified check of
immediately available funds payable to "XXXXX & XXXX PC, IN TRUST" in the amount
set out in Section 2.3(a);
(c) the Promissory Note;
(d) a certified copy of a resolution of the board of directors of the
Buyer authorizing the execution and delivery of this Purchase Agreement and the
Promissory Note and the consummation of the transactions contemplated hereby;
and
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(e) a certified copy of a resolution of the board of directors of the
Guarantor authorizing the execution and delivery of this Purchase Agreement and
the Promissory Note and the consummation of the transactions contemplated
hereby.
10.4 Tender - Any tender of documents or money hereunder may be made upon
the parties hereto or their respective counsel and money may be tendered by wire
transfer, certified check or bank draft payable in immediately available United
States funds.
ARTICLE XI
GENERAL
11.1 Termination of Letter of Intent - The parties acknowledge and agree
with each other that upon execution of this Purchase Agreement by the Buyer and
the Seller, the Letter of Intent will terminate and be of no further force or
legal effect and each party hereby forever waives without recourse any and all
rights or claims to which it may become entitled under the terms of the Letter
of Intent.
11.2 Public Notices - The parties hereto hereby agree that no press release
with respect to the transactions contemplated in this Purchase Agreement will be
issued without the consent of both the Buyer and the Seller, subject to all
applicable securities Laws and current and on-going public disclosure
obligations imposed by the Ontario Securities Commission and the Securities and
Exchange Commission.
11.3 Expenses - All costs and expenses incurred in connection with this
Purchase Agreement and the transactions contemplated hereby will be paid by the
party incurring such expenses.
11.4 Time - Time will be of the essence of this Purchase Agreement and of
every part hereof and no extension or variation of this Purchase Agreement will
operate as a waiver of this provision.
11.5 Notices - All payments and communications which may be or are required
to be given by either party to the other herein, will (in the absence of any
specific provision to the contrary) be in writing and delivered or sent by
prepaid certified mail or telecopier to the parties at their following
respective addresses:
to the Seller:
TM Systems, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxx, X.X.X. 00000
Attention: Xxxxx Xxxxxxxx and Xxxxxx Xxxxxx
Fax No. 000-000-0000
with copies to:
19
Xxxxx & Wolf PC
0000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxxx Xxxxxx
Fax No. 000-000-0000,
To the Buyer and the Guarantor,
API Electronics Group Inc.
Xxxxx 0000 - 000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxxxx XxXxxxxx
Fax No. 000-000-0000
with copies to:
WeirFoulds LLP
Suite 1600 - 000 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxx Xxxx
Fax No. 000-000-0000.
11.6 Governing Law - This Purchase Agreement and the rights and obligations
and relations of the parties hereto will be governed by and construed in
accordance with the Laws of the State of Delaware and the federal Laws of the
United States applicable therein (but without giving effect to any conflict of
laws rules). The parties hereto agree that the Courts located in New York shall
have exclusive jurisdiction to entertain any action or other legal proceedings
based on any provisions of this Purchase Agreement.
11.7 Headings - The index to and headings in this Purchase Agreement and in
the Schedules hereto are inserted solely for convenience of reference and do not
affect the interpretation thereof or define, limit or construe the contents of
any provision of this Purchase Agreement.
11.8 Entire Agreement - With respect to the subject matter of this Purchase
Agreement, this Purchase Agreement (a) sets forth the entire agreement between
the parties hereto and any persons who have in the past or who are now
representing either of the parties hereto, (b) supersedes all prior
understandings and communications between the parties hereto or any of them,
oral or written, including, but not limited to, the Letter of Intent and (c)
constitutes the entire agreement between the parties hereto together with all
exhibits, schedules and the Promissory Note, as this Purchase Agreement,
together with such exhibits, schedules and the Promissory Note, constitutes the
sole governing agreement. Each party hereto acknowledges and
20
represents that this Purchase Agreement is entered into after full investigation
and that no party is relying upon any statement or representation made by any
other which is not embodied in this Purchase Agreement. Each party hereto
acknowledges that he or it will have no right to rely upon any amendment,
promise, modification, statement or representation made or occurring subsequent
to the execution of this Purchase Agreement unless the same is in writing and
executed by each of the parties hereto.
11.9 Counterparts - This Purchase Agreement may be delivered by facsimile
and executed in any number of counterparts as may be necessary, with all such
counterparts, when taken together, constituting one and same original
instrument.
11.10 Negotiation - This Purchase Agreement has been negotiated and
approved by counsel on behalf of all parties hereto and, notwithstanding any
rule or maxim of construction to the contrary, any ambiguity or uncertainty will
not be construed against any party hereto by reason of the authorship of any of
the provisions hereof.
IN WITNESS WHEREOF the parties have duly executed this Purchase
Agreement as of the day and year first above written.
TM SYSTEMS, INC.
------------------------------------------
By: Xxxxxx Xxxxxx
Title: President
I have authority to bind the corporation.
TM SYSTEMS II, INC.
------------------------------------------
By:
Title:
I have authority to bind the corporation.
API ELECTRONICS GROUP INC.
------------------------------------------
By:
Title:
I have authority to bind the corporation.
