EXHIBIT 2.1
MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT, made and entered into effective as
of the close of business on the 31st day of October, 2003, by and among Aero
Systems Engineering, Inc., a Minnesota corporation ("ASE"), Xxxxxxx X. Xxxx
("Xxxx"), Xxxxxxxx X. Xxxxx ("Gamst") and Xxxxxx X. Xxxxxxxx ("Drenttel") (ASE,
Xxxx, Gamst and Drenttel are collectively referred to as the "Buyers"), and
Xxxxxxx Xxxxxxxx ("Xxxxxxxx").
W I T N E S S E T H:
WHEREAS, Automation, Manufacturing & Robotic Technologies, LLC, a Minnesota
limited liability company (the "Company"), has 1,000 membership interest units
issued and outstanding, all of which are held of record by Xxxxxxxx (the
"Outstanding Units"); and
WHEREAS, Xxxxxxxx desires to sell to Buyers, and Buyers desire to buy from
Xxxxxxxx, 600 of the Outstanding Units (the "Purchased Units"), which Purchased
Units represent 60% of the Outstanding Units, on the terms and conditions set
forth below.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants
and agreements herein contained and other good and valuable consideration, the
receipt, sufficiency and mutuality of which are hereby acknowledged, the parties
agree as follows:
ARTICLE 1.
PURCHASE OF MEMBERSHIP INTEREST
1.1. PURCHASE AND SALE OF PURCHASED UNITS. On the terms and subject to the
conditions herein set forth, on the "Closing Date" (as such term is hereinafter
defined), Xxxxxxxx hereby agrees to sell, transfer and deliver to Buyers, and
Buyers hereby agree to purchase and acquire from Xxxxxxxx, the Purchased Units,
to be acquired by each of the Buyers in accordance with the following:
Number of Percentage of
Name of Buyer Purchased Units Acquired Outstanding Units
------------- ------------------------ -----------------
ASE 510 51%
Xxxx 30 3%
Gamst 30 3%
Drenttel 30 3%
=== ==
Total 600 60%
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The obligations of each of the Buyers to make payment of the "Purchase Price"
(as such term is defined in Section 1.3 below) to Xxxxxxxx are several, and not
joint and several, obligations. Each Buyer shall make its/his proportionate
payment of the Purchase Price. For example, the "Closing Payment" (as such term
is defined in Section 1.3 below) shall be paid $255,000 by ASE and $15,000 each
by Xxxx, Gamst and Drenttel.
1.2. CLOSING. Closing on the purchase and sale of the Purchased Units shall
take place on October 31, 2003, at the offices of Winthrop & Weinstine, P.A.,
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx, Xxxxxxxxx 00000, or on such
other time and date and at such other location as may be mutually agreed upon by
the parties to this Agreement (such date is referred to in this Agreement as the
"Closing Date"). The effective time of the closing shall be as of the close of
business on October 31, 2003 (the "Closing").
1.3. PURCHASE PRICE. The total purchase price (the "Purchase Price") to be
paid by Buyers to Xxxxxxxx for the Purchased Units will be equal to: (i) Three
Hundred Thousand and 00/100 Dollars ($300,000) (the "Closing Payment"); plus
(ii) the "Earn-Out Amount," calculated in accordance with the following:
1.3.1. DEFINITIONS. The following defined terms are used for purpose
of calculating the Earn-Out Amount:
(a) COST OF GOODS SOLD. "Cost of Goods Sold" shall be
equal to all costs directly associated with the production of
Net Revenues, including the costs of equipment and other
products purchased from third parties and re-sold to
customers, assembly labor costs and engineering costs (both
internal and external), plus all research and development
costs and expenses. Items to be included in Costs of Goods
Sold are more specifically identified on attached Exhibit
1.3.1(a). It is acknowledged there likely will be additional
costs and expenses the Company will incur as a result of ASE
being a publicly traded corporation. Although these additional
costs and expenses may have an adverse impact on the overall
earnings of the Company, it is expected that these additional
costs and expenses will not be included within the definition
of Cost of Goods Sold.
(b) NET REVENUES. "Net Revenues" for a given calendar
year means the net revenues of the Company for that calendar
year, calculated in accordance with generally accepted
accounting principles and the ASE accounting policies and
procedures, except that there shall not be a reserve for
doubtful accounts and instead Net Revenues for a given
calendar year shall be adjusted downward for uncollected
receivables as provided in Section 2.5 below.
(c) MODIFIED GROSS MARGIN DOLLARS. "Modified Gross Margin
Dollars" for a given calendar year shall be equal to the Net
Revenues for that calendar year less all Costs of Goods Sold
for that same period.
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1.3.2. APPLICABLE CALENDAR YEARS. The financial results of the
Company only for calendar years 2003, 2004, 2005 and 2006 shall be used
to calculate the Earn-Out Amount.
1.3.3. EARN-OUT AMOUNT. For a given calendar year, the Earn-Out
Amount will be equal to the product of (a) the Modified Gross Margin
Dollars for that calendar year, multiplied by (b) 15.325%. If the
Modified Gross Margin Dollars for a given calendar year are negative,
that amount shall carry forward and reduce, on a dollar for dollar
basis, any positive Modified Gross Margin Dollars for subsequent
calendar years.
1.3.4. MAXIMUM AMOUNT. Notwithstanding anything in this Agreement to
the contrary, the maximum Earn-Out Amount shall be One Million One
Hundred Sixteen Thousand 00/100 Dollars ($1,116,000.00).
1.4. TERMS OF PAYMENT. The Purchase Price shall be paid as follows:
1.4.1. CLOSING PAYMENT. The entire Closing Payment shall be paid by
Buyers, prorata by each, to Xxxxxxxx in cash on the Closing Date.
1.4.2. EARN-OUT AMOUNT. The Earn-Out Amount shall be paid by Buyers,
prorata by each, to Xxxxxxxx in cash or certified funds or by wire
transfer by no later than three (3) months following each applicable
calendar year end. For example, the Earn-Out Amount for calendar year
2003 shall be paid to Xxxxxxxx by no later than March 31, 2004. The
Earn-Out Amount for a given calendar year shall be calculated based
upon the annual financial statements of the Company. Together with
payment of the Earn-Out Amount, Buyers shall deliver to Xxxxxxxx the
annual financial statements of the Company and documentation
summarizing their calculation of the Earn-Out Amount. If Xxxxxxxx
objects to the Earn-Out Amount for a given year, any correcting payment
shall be paid by Buyers to Xxxxxxxx, or by Xxxxxxxx to Buyers, as the
case may be, within ten (10) days following resolution of the
objection. The parties have agreed to the following with respect to
calculation of the Earn-Out Amount and the annual financial statements
of the Company:
(a) As soon as practicable after the Company's fiscal
years ending December 31, 2003, 2004, 2005 and 2006, annual
financial statements of the Company for that fiscal year end
shall be prepared by ASE and the Company in accordance with
generally accepted accounting principles and the internal
accounting policies and procedures of ASE (such internal
policies and procedures shall be consistently applied with
respect to ASE and the Company), except that there shall not
be a reserve for doubtful accounts and instead Net Revenues
for a given calendar year shall be adjusted downward for
uncollected receivables as provided in Section 2.5 below.
Xxxxxxxx will be provided with a copy of such annual financial
statements as soon as they become available and in no event by
later than March 31 of the next year.
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(b) Xxxxxxxx shall have until thirty (30) days from
receipt of the annual financial statements and Earn-Out Amount
payment and calculation documentation to object to the
Earn-Out Amount for that year. The only objections which may
be made by Xxxxxxxx are that (i) the financial statements were
not prepared in accordance with generally accepted accounting
principles, (ii) the internal accounting policies and
procedures of ASE are being applied differently for the
Company as compared to ASE, or (iii) errors have been made in
the calculations. It is agreed and understood that ASE may, in
its sole and absolute discretion, change its internal
accounting policies and procedures so long as they remain in
compliance with generally accepted accounting principles and
are uniformly applied to ASE and the Company; provided,
however, if any such change shall materially impact the
Earn-Out Amount calculations, there shall be an appropriate
adjustment so that the Earn-Out Amount as calculated after
such change shall be substantially the same as the Earn-Out
Amount calculated prior to such change.
(c) If Xxxxxxxx objects to the Earn-Out Amount, he must
do so in writing and specifically itemize his objections and
the basis for each objection, and such written notice must be
sent to ASE by no later than thirty (30) days after Xxxxxxxx'x
receipt of the Company's annual financial statements and the
Earn-Out Amount payment and calculations. If written notice of
dispute is so provided, the dispute shall be resolved in
accordance with Section 7.1 below.
(d) If no objection is so made, Xxxxxxxx will be deemed
to have accepted the annual financial statements and the
Earn-Out Amount payment and calculations for all purposes.
ARTICLE 2.
RELATED AGREEMENTS
2.1. NON-COMPETITION AGREEMENT. On the Closing Date, Xxxxxxxx shall execute
and deliver to Buyers a Non-Competition Agreement substantially in the form
attached hereto as Exhibit 2.1 (the "Non-Competition Agreement"). As provided in
the Non-Competition Agreement, the term of the non-compete obligations will run
from Closing until the later of (i) five (5) years from the Closing Date or (ii)
two (2) years after the termination of the Xxxxxxxx'x employment with ASE, the
Company and their successors and affiliates.
2.2. EMPLOYMENT AGREEMENT. On the Closing Date, Company and Xxxxxxxx shall
enter into an Employment Agreement substantially in the form attached hereto as
Exhibit 2.2 (the "Employment Agreement").
2.3. MEMBER CONTROL AGREEMENT. On the Closing Date, Buyers and Xxxxxxxx
shall enter into a Member Control Agreement for the Company, substantially in
the form attached hereto as Exhibit 2.3 (the "Company Member Control
Agreement").
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2.4. CREDIT FACILITY. ASE agrees to provide or make available (directly,
through a corporate guaranty or otherwise) a $500,000 line of credit to the
Company. This line of credit will be secured by certain or all of the assets of
the Company. Xxxxxxxx will not be obligated to provide a personal guaranty as
additional security for this credit facility; provided if the amount of the
credit facility is increased, ASE may request a personal guaranty of Xxxxxxxx or
other additional security as mutually agreed upon by the parties at that time
and the rate of interest and other terms of the credit facility may be adjusted
to fairly compensate ASE for resulting increased risk. Drenttel, Gamst and Xxxx
shall each commit to reimburse ASE for their pro-rata share of any losses
incurred by ASE relating to this credit facility.
2.5. ACCOUNTS RECEIVABLE.
2.5.1. UNCOLLECTED ACCOUNTS RECEIVABLE. Any accounts receivable of
the Company resulting from sales for a given calendar year which are
not collected by March 31 of the immediately following calendar year
shall be deemed uncollectible for purposes of calculating the Earn-Out
Amount to be paid to Xxxxxxxx for the just completed calendar year;
provided, however, that any account receivable deemed uncollectible in
accordance with the above for a given calendar year which is
subsequently collected shall increase the Net Revenues in the year of
collection to the extent the Net Revenues were previously reduced as a
result of it previously being deemed uncollectible. Additionally, for
calendar year 2006, to the extent Xxxxxxxx has not already been paid
the maximum Earn-Out Amount, he shall receive an additional payment
whereby Net Revenues for calendar year 2006 will include any accounts
receivable of 2006 deemed uncollectible in accordance with the above
which are collected during the period from April 1, 2007 through June
30, 2007.
2.5.2. COLLECTION EFFORTS. Buyers commit to cause the Company to
utilize commercially reasonable efforts to collect all accounts
receivable of the Company; provided, however, that this shall not
require the Company to initiate any suit or other legal process or
engage any collection agency as part of its collection efforts.
2.5.3. APPLICATION OF RECEIPTS. All sums received by the Company from
an account receivable account debtor shall be applied by the Company to
the oldest balance first for each such account debtor; provided,
however, that (i) if the payment specifically references an invoice,
the payment shall be applied to that invoice, (ii) if the account
debtor contests an invoice, the payment shall not be applied to that
invoice unless the account debtor specifically requests that the
payment be applied to such invoice, and (iii) if the amount of the
payment matches up with the amount of a given invoice, the payment
shall be applied to that invoice. The Company shall attempt to give
Xxxxxxxx reasonable notice of any contested invoice.
2.6. PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, ASE may be required to
make a public announcement relating to consummation of the transactions
contemplated by this Agreement. Xxxxxxxx, for himself and on behalf of the
Company, hereby consents to any such
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public announcement; provided ASE agrees to discuss the content of such public
announcement prior to its release.
2.7. BOARD OF GOVERNORS. All parties hereto shall vote their ownership
interest in the Company so as to elect the following individuals as the initial
board of governors of the Company following Closing: Xxxxxxx Xxxxxxxx, Xxxxxxx
X. Xxxx, Xxxxxxx X. Xxxx and Xxxx Ring. So long as Xxxxxxxx continues to be
employed by the Company, each of the Buyers covenants and agrees to vote their
ownership interest in the Company so as to elect Xxxxxxxx to the board of
governors of the Company.
2.8. TECHNOLOGY TRANSFER. On the Closing Date, Xxxxxxxx shall execute and
deliver to the Company a Technology Transfer Agreement substantially in the form
attached hereto as Exhibit 2.8 (the "Technology Transfer Agreement") pursuant to
which Xxxxxxxx assigns and transfers to the Company all rights and interests he
may have to any technology or other intellectual property which relates in any
manner to the Company or its past, present or future business.
2.9. RESIGNATIONS. On the Closing Date, Xxxxxxxx shall deliver to the
Company resignations by all of the officers and directors of the Company other
than Xxxxxxxx, personally signed by such individuals.
2.10. MUTUAL COOPERATION. Subsequent to the Closing Date, Buyers and
Xxxxxxxx, at the request of the other, shall each execute, deliver and
acknowledge all such further instruments and documents and do and perform all
such other acts and deeds as may be reasonably required to consummate the
transactions contemplated by this Agreement and to carry out the purpose and
intent of this Agreement.
ARTICLE 3.
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF XXXXXXXX
In connection with and as an inducement to Buyers to enter into and be bound by
the terms of this Agreement, Xxxxxxxx hereby represents, warrants and covenants
to Buyers as follows:
3.1. OWNERSHIP OF OUTSTANDING UNITS. Xxxxxxxx is the lawful owner of all of
the Outstanding Units free and clear of all liens, encumbrances, restrictions
and claims of every kind. The delivery to Buyers of the Purchased Units pursuant
to the provisions of this Agreement will transfer to Buyers ownership of 60% of
the issued membership interest units of the Company, together with valid legal
title thereto, free and clear of all liens, encumbrances, restrictions and
claims of every kind. Xxxxxxxx is not a party to any agreement which grants any
other party purchase options or rights with respect to, or otherwise restricts
or limits his right to sell, any of the Outstanding Units.
3.2. ORGANIZATION, STANDING AND POWER. The Company is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Minnesota and has all requisite power and authority to own, lease
and operate its properties and assets and to carry
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on its business as is now being conducted. The Company is duly qualified or
licensed as a foreign limited liability company and is in good standing to do
business in each jurisdiction in which property owned, leased or purchased by
it, or the nature of the business conducted by it, make such qualification or
licensing and good standing necessary, each such jurisdiction being listed on
attached Exhibit 3.2. Xxxxxxxx has delivered to Buyers a complete and correct
copy of the record book for the Company, which includes complete and correct
copies of the Articles of Organization, Operating Agreement/Bylaws and Member
Control Agreement of the Company as currently in effect. The Company has no
ownership interest in any other entity.
3.3. STRUCTURE. The authorized capital structure of the Company consists of
membership interest units, each of which has equal and identical rights and
preferences, of which 1,000 are issued and outstanding and owned by Xxxxxxxx.
The Company has no outstanding subscriptions, warrants, options, calls or
commitments relating to its membership interests, no obligations or securities
convertible into or exchangeable for its membership interests, and no plans or
other agreements of any character providing for the purchase, issuance or sale
of any of its membership interests other than as contemplated by this Agreement.
All of the Outstanding Units are validly issued, fully paid and nonassessable
and are owned by the Xxxxxxxx. Attached Exhibit 3.3 lists all of the
officers/managers and members of the Board of Governors of the Company.
3.4. AUTHORITY. Xxxxxxxx has the full power and authority to enter into,
execute and deliver this Agreement and to consummate the transactions
contemplated hereby and any instruments or agreements required herein. This
Agreement has been duly and validly executed and delivered by Xxxxxxxx and
constitutes a valid and binding obligation of Xxxxxxxx according to its terms,
enforceable against Xxxxxxxx in accordance with its terms.
3.5. NO VIOLATION. Neither the execution and delivery by Xxxxxxxx of this
Agreement, consummation of the transactions contemplated hereby nor compliance
by Xxxxxxxx and the Company with any of the provisions hereof will:
3.5.1. Violate or conflict with any provision of the Articles of
Organization, Operating Agreement/Bylaws or Member Control Agreement of
the Company.
3.5.2. Violate or constitute a default under or give rise to any
right of termination, cancellation or acceleration under the terms,
conditions or provisions of any agreement or instrument to which
Xxxxxxxx or the Company is a party or by which any of them or any of
their properties or assets is bound except as has been duly and validly
waived, consented to, or approved of by the other parties to such
agreement or instrument;
3.5.3. Result in the creation or imposition of any security interest,
lien or other encumbrance upon any of the assets of the Company or the
Outstanding Units, including the Purchased Units, under any agreement
or commitment to which Xxxxxxxx or the Company is a party or by which
Xxxxxxxx or the Company is bound or to which Xxxxxxxx, the Company or
any assets of the Company are subject; or
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3.5.4. Violate any statute or law or any judgment, order, decree,
regulation or rule of any court or governmental authority applicable to
Xxxxxxxx, the Company or any assets of the Company.
3.6. FINANCIAL DOCUMENTS. Xxxxxxxx has furnished or will furnish to Buyers
the financial statements and other financial documents indicated on attached
Exhibit 3.6 (the "Financial Documents"). Except as provided on Exhibit 3.6: (i)
the Financial Documents are true and correct and fairly and accurately represent
the financial matters stated therein; (ii) all financial statements included as
part of the Financial Documents have been prepared in accordance with generally
accepted accounting principles applicable to financial statements of a
partnership and applied on a consistent basis throughout the period specified
therein, and all financial statements present the financial condition of the
Company as of the date specified therein and the results of their operations for
the period specified therein; and (iii) the Financial Documents do not include
any material assets or omit to state any material liability, absolute or
contingent, or other facts, the inclusion or omission of which would render the
Financial Documents, in light of the circumstances in which they are made,
misleading. None of the accounts receivable recorded in the books and records of
account of the Company as being due to the Company as of the Closing Date (the
"Closing Receivables") are subject to any counterclaim or setoff and, to the
best knowledge of Xxxxxxxx, all of the Closing Receivables will be good and
collectible in full in the ordinary course of business, subject to a $5,000
reserve.
3.7. ASSETS. The Company has, and on the Closing Date will have, good and
marketable title to all of its assets, free and clear of all mortgages, pledges,
liens, conditional sales agreements or other encumbrances of any kind or nature
whatsoever, except as disclosed on attached Exhibit 3.7. All of the Company's
assets are, and on the Closing Date will be, in reasonably good operating
condition, normal wear and tear excepted, and each is fit and suitable for the
purpose and use for which it was intended.
3.8. BOOKS, RECORDS AND ACCOUNTS. All accounts, books, ledgers and official
and other records of whatsoever kind material to the business of the Company
have been fully, properly and accurately kept and completed in all material
respects, there are no material inaccuracies or material discrepancies of any
kind contained or reflected therein, and collectively they fairly present the
financial position of the Company. The minute books of the Company, as made
available to Buyers and their representatives, contain complete and accurate
records of all meetings of and corporate actions or written consents by the
members and board of governors of the Company.
3.9. JUDGMENTS. There are no unsatisfied judgments of record against the
Company.
3.10. UNDISCLOSED LIABILITIES. Except with respect to liabilities disclosed
on attached Exhibit 3.10, and other than liabilities incurred by the Company in
the ordinary course of business since August 31, 2003, there are no liabilities
of any kind or character outstanding for which the Company is or may be liable
(whether absolute, accrued, contingent or otherwise, and including, without
limitation, liabilities as a guarantor or otherwise with respect to the
obligations of others) which are not reflected in the August 31, 2003, financial
statements of the Company.
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3.11. NO ADVERSE CHANGE. Except as indicated on attached Exhibit 3.11, the
Company has carried on its business in substantially the same manner as
conducted immediately prior to August 31, 2003, and since August 31, 2003 there
has not been any material adverse change in the condition (financial or
otherwise), assets, liabilities, revenues, income or business of the Company or
in its relationships with suppliers, dealers, customers or employees, including,
but not limited to:
3.11.1. Any increase in the wages, salaries, compensation, pension or
other benefits payable or to become payable by the Company to any of
its directors, employees, agents or contractor.
3.11.2. The declaration, authorization, payment or distribution of any
cash or other dividend or distribution to Xxxxxxxx.
3.11.3. Any incurrence by the Company of any obligations or
liabilities, whether absolute, accrued, contingent or otherwise
(including, without limitation, liabilities as guarantor or otherwise
with respect to obligations of others), other than obligations and
liabilities incurred in the ordinary course of business.
3.11.4. Any discharge or satisfaction of any lien or encumbrance or
payment of any obligation or liability by either Company other than
current liabilities shown or reflected on the August 31, 2003 financial
statements of the Company or liabilities incurred since August 31, 2003
in the ordinary course of business.
3.11.5. Any issuance or agreement to issue any membership interests,
bonds, options, warrants or other securities of the Company.
3.11.6. The mortgage, pledge or subjection to lien, security interest
or any other encumbrance of any of the Company's assets, real or
personal, tangible or intangible, other than in the ordinary course of
business.
3.11.7. The sale or transfer of any of the Company's tangible assets,
or the cancellation or release of any debts or claims, except, in each
case, in the ordinary course of business.
3.11.8. The sale, assignment, transfer or encumbrance by the Company
of any trademarks, trade names or other intangible assets.
3.11.9. Any extraordinary losses incurred by the Company.
3.11.10. The failure by the Company to take or make any charges,
write-offs, increases in bad debt reserves or other adjustments in the
Company's accounts receivable by reason of failure or inability to
collect or diminished prospects for collection of the Company's
accounts receivable.
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3.11.11. Any change in any method of accounting or practice previously
adopted or reflected in any of the Financial Documents.
3.11.12. The occurrence of any event or condition of any character
materially and adversely affecting the Company's business or tax
liabilities or any change in the condition of the Company's assets,
liabilities or business, including any change or expected change in the
relationship of the Company with its suppliers, subcontractors,
independent contractors or employees (whether as a result of
consummation of the transactions contemplated by this Agreement or
otherwise), except changes in the ordinary course of business.
3.11.13. Any entry by the Company into or termination of any other
transaction other than in the ordinary course of business.
3.12. LEASES. The schedule of leases attached hereto as Exhibit 3.12 sets
forth a complete and correct description of all leases of real and personal
property to which the Company is a party. Xxxxxxxx has delivered to Buyers
copies of all lease agreements described in said Exhibit 3.12. Each such lease
agreement is in full force and effect and neither the Company nor, to the best
knowledge of Xxxxxxxx, any other party to any such lease is in default thereof
and neither the Company nor, to the best knowledge of Xxxxxxxx, any other party
to any such lease have committed any act which, if not remedied, would result
under any such lease in a default thereunder after notice, lapse of time or
both. The execution and delivery of this Agreement and consummation of the
transactions contemplated hereby will not cause or give rise to any event of
default under any of the lease agreements. With respect to any and all real
property subject to any of such lease agreements, Xxxxxxxx shall be responsible
for all liability which relates to a period or results from a transaction or
happening occurring prior to the Closing Date under any federal, state or local
statute, regulation or ordinance related to human health or the environment,
including, without limitation, any law, regulation or ordinance concerning the
protection or preservation of natural resources, air, water, noise or soil
pollution or contamination, or the use, generation, storage or disposal of
hazardous materials.
3.13. INSURANCE. The Company has maintained and continues to maintain, with
financially sound and reputable insurers, insurance with respect to their
properties and businesses against loss or damage of the kinds customarily
insured against by corporations of established reputations engaged in the same
or similar businesses and similarly situated. A complete list and summary
description of all insurance policies maintained by the Company is set forth on
Exhibit 3.13. The policies listed on Exhibit 3.13 are in full force and effect,
all premiums due thereon have been paid, Xxxxxxxx and the Company have complied
in all material respects with all provisions of such policies, and neither the
Company nor Xxxxxxxx has received any notice of cancellation, termination or
non-renewal of such policies. If requested by Buyers, Xxxxxxxx agrees to take
all action reasonably necessary to enable Buyers to continue all such policies
of insurance with respect to the Company's operations. If any insurance policies
of the Company are or were "claims made" and not "occurrence" policies, Xxxxxxxx
shall acquire and pay for the related "tail" policies as required by Buyers.
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3.14. LITIGATION. Except as described on Exhibit 3.14 hereto, Xxxxxxxx and
the Company, and their respective assets, properties and businesses, are subject
to no pending (or, to the best of Xxxxxxxx'x knowledge, threatened) litigation,
action, suit or proceeding by or before any court, arbitrator or federal, state
or other governmental commission, board or other agency, or by any private
party. To the extent such matters are not disclosed on Exhibit 3.14, Xxxxxxxx
shall be solely and absolutely responsible for all liabilities, costs and
expenses relating to (i) any and all threatened or pending litigation of the
Company as of the Closing Date or (ii) any litigation commenced after the
Closing Date which relates to facts and circumstances or other occurrences
arising on or before the Closing Date.
3.15. CONTRACTS. Except as described on Exhibit 3.15 hereto or referred to in
any other schedule or exhibit to this Agreement, the Company is not a party to
any contract, commitment or agreement which requires or may result in the
payment by or to the Company of an aggregate amount of more than $20,000 (a
"Material Contract"). Xxxxxxxx has delivered to Buyers complete and correct
copies of all Material Contracts. Each Material Contract is in full force and
effect, and neither the Company nor, to the best knowledge of Xxxxxxxx, any
other party to any such Material Contract is in default of any provisions
thereof and neither the Company nor, to the best knowledge of Xxxxxxxx, any
other party to any such Material Contract have committed any act which, if not
remedied, would result under any such Material Contract in a default thereunder
after notice, lapse of time or both. The execution and delivery of this
Agreement and consummation of the transactions contemplated hereby will not
cause or give rise to any event of default under any of the Material Contracts.
3.16. TAXES.
3.16.1. DEFINITION. "Tax" shall mean any tax or liability imposed or
collected by any governmental entity, including specifically, but
without limiting the generality of the foregoing, federal, state,
county, local and foreign income, profits, franchise, gross receipts,
payroll, sales, use, employment, excise, value-added, withholding, real
estate and other taxes, duties or assessments, together with any
related interest, penalties and similar additions and any secondary or
indirect tax liability.
3.16.2. RETURNS. The Company has duly and accurately prepared and
filed any and all Tax returns and reports required by federal, state,
local and foreign taxing authorities and all Taxes reflected thereon
have been paid. The Company has paid any and all Taxes, license fees
and other charges levied, assessed or imposed upon the business or any
of the property of the Company, except those which are not yet due and
payable. The Company has maintained adequate monthly accruals and
reserves for any and all projected or deferred Taxes and such amounts
have been appropriately accrued for in the Financial Documents. There
are no other Taxes of any kind or character for which the Company is or
may be liable which are now past due or delinquent or which are unpaid
and unaccrued for on the Financial Documents (for the periods specified
therein).
3.16.3. EXAMINATIONS. There is no current, pending or threatened
audit, examination, investigation, demand or assessment with respect to
the Company or any Tax for which the Company is or may be liable or has
filed a return or was required to file a return. No
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assets of the Company are subject to any encumbrance arising from any
Tax, other than any liens provided under applicable law prior to the
time that the related Tax is due and payable. The Company has not
entered any agreement, settlement, extension of statute of limitations
or compromise of any Tax matter. The Company has not granted any person
a power of attorney with respect to any Tax matter. To the extent not
specifically accrued for in the Financial Documents, all Taxes of the
Company relating to periods or transactions occurring prior to the
Closing Date shall be the responsibility of and shall be paid by
Xxxxxxxx. Except as disclosed in Exhibit 3.16, the Company has not been
audited by federal, state, local or foreign taxing authorities.
3.16.4. EMPLOYEES. The Company has withheld and paid all applicable
income, payroll, employment, unemployment, social security and other
taxes and any other withholdings (including, but not limited to, child
support and garnishments) required to have been withheld and paid in
connection with amounts paid or owing to any employee, agent, creditor,
independent contractor, stockholder or third party, and has properly
reported such amounts.
3.17. GUARANTEES. Except as described in Exhibit 3.17, the Company has no
liability to any person as a guarantor, surety, co-signer, endorser, co-maker,
indemnitor or obligor.
3.18. EMPLOYEE BENEFIT PLANS.
3.18.1. QUALIFIED PLANS. Except as disclosed on attached Exhibit 3.18:
(a) WELFARE BENEFIT PLANS. The Company (including all
"affiliated service groups" and members of the "controlled
group" of corporations, if any, as defined under Section 414
of the Internal Revenue Code of 1986, as amended (the "Code"))
does not maintain any "employee welfare benefit plans" (as
defined in Section 3(1) of the Employee Retirement Income
Security Act of 1974 ("ERISA")) or make any contributions to
such plans, including any multi-employer welfare plans (such
employee welfare benefit plans hereinafter collectively
referred to as the "Welfare Benefit Plans"). The Company and
all "affiliated service groups" and members of the "controlled
group" of corporations, if any, shall hereinafter be referred
to as the "Company Group".
(b) PENSION BENEFIT PLANS. The Company Group does not
maintain any "employee pension benefit plans" (as defined in
Section 3(2) of ERISA and not exempted under Section 4(b) of
201 of ERISA) or make any contributions to or is required to
make any contributions to such plans, including but not
limited to any pension plans (whether Defined Benefit, Money
Purchase or Target Benefit) profit sharing plans, stock bonus
plans, employee stock ownership plans, 401(k) plans, employer
pension plans, annuity plans and other qualified deferred
compensation plans, and including any multi-employer pension
plans (such employee pension benefit plans hereinafter
collectively referred to as the "Pension Benefit Plans").
-12-
(c) COMPLIANCE WITH LAW. All of the Company Group's
Welfare Benefit Plans and Pension Benefit Plans and their
related trust agreements or annuity contracts (or any other
funding instruments) comply currently, and have complied at
all times since their inception, both as to form and
operation, with all applicable provisions of ERISA and the
Code and the regulations thereunder, including but not limited
to provisions required in order for the Pension Benefit Plans
to be tax-qualified under Sections 401(a) and 403(a) of the
Code. Favorable determination letters as to the Pension
Benefit Plans, as to their initial qualification under the
Code, and each amendment to such Plans, have been received by
the Company Group from the Internal Revenue Service (IRS).
(d) ADMINISTRATION. Each Welfare Benefit Plan and Pension
Benefit Plan has been administered to date in compliance in
all material respects with the requirements of the Code and
ERISA, and all reports required by any government agency with
respect to each Pension Benefit Plan have been timely filed.
Future compliance with the requirements of ERISA as in effect
on the Closing Date will not result in any increase in the
rate of benefit accrual under any Pension Benefit Plan. There
is no current matter which would materially and adversely
affect the qualified tax exempt status of any Welfare Benefit
Plan and Pension Benefit Plan under the Code.
(e) FUNDING DEFICIENCY. The Company Group has not
incurred any material "accumulated funding deficiency" within
the meaning of ERISA Section 302(a)(2) or Section 412(a) of
the Code in connection with any of the Pension Benefit Plans.
(f) NO PROHIBITED TRANSACTIONS. Neither the Company Group
nor any trustee, administrator, investment manager or any
other plan fiduciary of any Pension Benefit Plan has engaged
in any transaction in violation of Section 406(a) or (b) of
ERISA (for which no exemption exists under Section 408 of
ERISA) or any "prohibited transaction" (as defined in Section
4975(c)(1) of the Code) for which no exemption exists under
Section 4975(c)(2) or 4975(d) of the Code, which transaction
would have a material adverse effect on the Company.
(g) FIDUCIARIES. No administrator, trustee, investment
manager or any other plan fiduciary is covered by any
indemnification agreements.
3.18.2. NON-ERISA PLANS. Except as disclosed on attached Exhibit 3.18,
the Company is not a party to and does not maintain, contribute to or
have any other obligations under any plan (including but not limited to
health insurance, life insurance, disability insurance, deferred
compensation, contractual death benefits or stock option) exempt from
some or all of the requirements of ERISA.
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3.18.3. GENERAL PLAN REPRESENTATIONS. There are no pending legal
actions or arbitration proceedings with respect to any qualified or
non-qualified plan of the Company or which may in any way affect such
plans.
3.19. EMPLOYMENT, AGENCY AND INDEPENDENT CONTRACTOR AGREEMENTS. The Company
is not a party to or bound by any written employment, collective bargaining or
other labor contracts or any pension, profit sharing, retirement, bonus or
deferred compensation plan or similar obligations evidenced by writings (or oral
employment contracts other than those terminable at will), except as set forth
on Exhibit 3.18 or Exhibit 3.19 and for which complete and correct copies of
each have been furnished by Xxxxxxxx to Buyers. Exhibit 3.19 lists any
confidentiality or non-disclosure agreements, non-solicitation commitments,
covenants not to compete, guaranties of compensation or other agreements which
the Company has entered into or otherwise become bound or subject to with
respect to its employees, agents and/or independent contractors.
3.20. REAL ESTATE. The Company owns no real estate and has or owns no
interest in any real estate other than the office lease listed on Exhibit 3.12
hereof.
3.21. COMPLIANCE WITH LAWS. The Company is in compliance in all material
respects with all applicable laws, regulations, orders, judgments, decrees,
rules and guidance. The Company has not received any notice claiming the
existence of a hazard to laborers or injury to person or property arising out of
or related to the Company's operations.
3.22. INVESTMENTS. Except as described on Exhibit 3.22 hereto or with respect
to Company pension plan investments, the Company owns no capital stock or other
equity or ownership or proprietary interest in any corporation, partnership,
association, trust, joint venture or other entity; and the Company has no
agreement or right to acquire, directly or indirectly, any equity interest or
investment in any third party and is not subject to any obligation or
requirement to provide funds to or make an investment in any third party.
3.23. INTELLECTUAL PROPERTIES. Set forth on Exhibit 3.23 hereto is a complete
list and description of all patents, patent rights, licenses, trademarks,
trademark rights, trade name rights, service xxxx rights, copyrights or similar
rights and applications therefor (collectively, the "Intellectual Property")
owned by the Company. The Company does not require any intellectual property
rights other than those specified on Exhibit 3.23 in connection with the conduct
of its business. The Company has a sufficient number of licenses to cover all
software used by the Company.
3.24. RESTRICTIVE DOCUMENTS. Neither the Company nor Xxxxxxxx is subject to,
or a party to, any charter, bylaw, mortgage, lien, lease, license, permit,
agreement, contract, instrument, order, judgment or decree (or, to the best of
Xxxxxxxx'x knowledge, any law, rule, ordinance or regulation), or any other
restriction of any other kind or character, which (i) adversely affects the
business or practices, operations or conditions of the Company or any of its
assets or property, (ii) prevents consummation of the transactions contemplated
by this Agreement, compliance by Xxxxxxxx with the terms, conditions and
provisions hereof or the continued operation of the Company's business after the
Closing Date on substantially the same basis as previously
-14-
operated, or (iii) restricts the ability of the Company to acquire any property
or conduct any business in any area.
3.25. BANK ACCOUNTS AND POWERS OF ATTORNEY. Set forth on Exhibit 3.25 hereto
is an accurate and complete list showing (i) the name and address of each bank
in which the Company has an account or safe deposit box, the number of such
account or any such box, and the name of persons authorized to draw thereon or
to have access thereto; and (ii) the names of all persons, if any, holding power
of attorney from the Company and a summary statement of the terms thereof.
3.26. LICENSES, PERMITS AND AUTHORIZATIONS. Exhibit 3.26 contains a complete
and accurate list of all licenses, franchises, permits and other governmental
authorizations held by the Company (the "Licenses"). The Licenses are valid and
the Company has not received any written notice that any License is to be
cancelled, terminated or not renewed. The Licenses are all of the licenses,
permits and authorizations that are required by law for the operation of the
business of the Company. Except as disclosed on Exhibit 3.26, all Licenses will
continue to be in full force and effect immediately after consummation of the
transactions contemplated by this Agreement.
3.27. RELATED PARTY TRANSACTIONS. Other than as specified on Exhibit 3.27, as
of the Closing Date, there will be no contracts between or loans to or from the
Company and (i) Xxxxxxxx, (ii) any of the Company's officers or directors, or
(iii) any of their affiliates.
3.28. KEY CUSTOMER AND SUPPLIER RELATIONSHIPS. Xxxxxxxx is not aware of any
loss or prospective loss of any significant customer or supplier of the Company
or any reason to expect a material change in the business relationships with any
of such significant customer or supplier (whether as a result of consummation of
the transactions contemplated by this Agreement or otherwise).
3.29. WARRANTY. The Company has not made or given any express warranty or
guaranty with respect to any products or services manufactured, sold or provided
by the Company except as set forth on attached Exhibit 3.29.
3.30. DISCLOSURE. No representation or warranty of the Xxxxxxxx in this
Agreement and no statement contained in this Agreement or in any document
delivered or to be delivered pursuant hereto contains or will contain an untrue
statement of material fact or omits or will omit to state any material fact
necessary to make the statements herein or therein contained, in light of the
circumstances under which made, not misleading; it being understood that as used
in this subparagraph "material" means material to any individual statement or
omission and in the aggregate as to all statements and omissions.
3.31. RELIANCE. The foregoing representations, warranties and covenants are
made by Xxxxxxxx with the knowledge and expectation that Buyers are relying
thereon.
The foregoing representations, warranties and covenants, together with any and
all other representations, warranties and covenants contained in this Agreement,
shall be deemed to have been repeated and reaffirmed at and as of the Closing
Date and shall survive consummation of the purchase and sale contemplated by
this Agreement. All representations and warranties made "to the best knowledge
of Xxxxxxxx" shall be made based on the knowledge
-15-
which a reasonably prudent person would have that occupied a similar position
and had a similar ownership interest in the Company as Xxxxxxxx, assuming such
investigation as a reasonably prudent person would undertake in order to make
such representations and warranties.
ARTICLE 4.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYERS
The following representations, warranties and covenants are made by each of the
Buyers on a several, and not a joint and several, basis. Each Buyer shall only
be liable and obligated to provide indemnification to Xxxxxxxx with respect to
the representations, warranties and covenants made by that Buyer.
4.1. ASE. In connection with and as an inducement to Xxxxxxxx to enter into
and be bound by the terms of this Agreement, ASE hereby represents, warrants and
covenants to Xxxxxxxx as follows:
4.1.1. ORGANIZATION. ASE is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota.
4.1.2. AUTHORITY. ASE has full power and authority to enter into,
execute and deliver this Agreement and to consummate the transactions
contemplated hereby and any instruments or agreements required herein.
This Agreement has been duly and validly executed and delivered by ASE
and constitutes a valid and binding obligation of ASE according to its
terms, enforceable against ASE in accordance with its terms. The
execution of this Agreement by ASE has been duly authorized by the
Board of Directors of ASE.
4.1.3. NO VIOLATION. Neither the execution and delivery by ASE of
this Agreement, the consummation of the transactions contemplated
hereby, nor compliance by ASE with any of the provisions hereof will:
(a) Violate or conflict with any provision of the
Articles of Incorporation or Bylaws of ASE;
(b) Violate or constitute a default under or give rise to
any right of termination, cancellation or acceleration under
the terms, conditions or provisions of any agreement or
instrument to which ASE is a party or by which ASE or any of
its properties or assets are bound except as has been duly and
validly waived, consented to or approved of by the other
parties to such agreement or instrument; or
(c) Violate any statute or law or any judgment, order,
decree, regulation or rule of any court or governmental
authority applicable to ASE.
4.1.4. ACQUISITION OF UNITS. ASE is acquiring its portion of the
Purchased Units for its own account and not to offer or sell the
Purchased Units as part of a public distribution, and ASE is not
participating, directly or indirectly, in an underwriting of any such
public
-16-
distribution. ASE is aware that state and federal securities laws
impose restrictions on transferability of the Purchased Units and ASE
agrees to comply with such restrictions.
4.1.5. DISCLOSURE. No representation or warranty by ASE in this
Agreement and no statement contained in this Agreement or in any other
document delivered or to be delivered pursuant hereto contains or will
contain an untrue statement of material fact or omits or will omit to
state any material fact necessary to make the statements herein or
therein contained, in light of the circumstances under which made, not
misleading; it being understood that as used in this subparagraph
"material" means material to any individual statement or omission and
in the aggregate as to all statements and omissions.
4.1.6. RELIANCE. The foregoing representations, warranties and
covenants are made by ASE with the knowledge and expectation that
Xxxxxxxx is relying thereon.
4.2. DRENTTEL. In connection with and as an inducement to Xxxxxxxx to enter
into and be bound by the terms of this Agreement, Drenttel hereby represents,
warrants and covenants to Xxxxxxxx as follows:
4.2.1. AUTHORITY. Drenttel has full power and authority to enter
into, execute and deliver this Agreement and to consummate the
transactions contemplated hereby and any instruments or agreements
required herein. This Agreement has been duly and validly executed and
delivered by Drenttel and constitutes a valid and binding obligation of
Drenttel according to its terms, enforceable against Drenttel in
accordance with its terms.
4.2.2. NO VIOLATION. Neither the execution and delivery by Drenttel
of this Agreement, the consummation of the transactions contemplated
hereby, nor compliance by Drenttel with any of the provisions hereof
will:
(a) Violate or constitute a default under or give rise to
any right of termination, cancellation or acceleration under
the terms, conditions or provisions of any agreement or
instrument to which Drenttel is a party or by which Drenttel
or any of his properties or assets are bound except as has
been duly and validly waived, consented to or approved of by
the other parties to such agreement or instrument; or
(b) Violate any statute or law or any judgment, order,
decree, regulation or rule of any court or governmental
authority applicable to Drenttel.
4.2.3. ACQUISITION OF UNITS. Drenttel is acquiring his portion of the
Purchased Units for his own account and not to offer or sell the
Purchased Units as part of a public distribution, and Drenttel is not
participating, directly or indirectly, in an underwriting of any such
public distribution. Drenttel is aware that state and federal
securities laws impose restrictions on transferability of the Purchased
Units and Drenttel agrees to comply with such restrictions.
4.2.4. DISCLOSURE. No representation or warranty by Drenttel in this
Agreement and no statement contained in this Agreement or in any other
document delivered or to be delivered pursuant hereto contains or will
contain an untrue statement of material fact or
-17-
omits or will omit to state any material fact necessary to make the
statements herein or therein contained, in light of the circumstances
under which made, not misleading; it being understood that as used in
this subparagraph "material" means material to any individual statement
or omission and in the aggregate as to all statements and omissions.
4.2.5. RELIANCE. The foregoing representations, warranties and
covenants are made by Drenttel with the knowledge and expectation that
Xxxxxxxx is relying thereon.
4.3. GAMST. In connection with and as an inducement to Xxxxxxxx to enter
into and be bound by the terms of this Agreement, Gamst hereby represents,
warrants and covenants to Xxxxxxxx as follows:
4.3.1. AUTHORITY. Gamst has full power and authority to enter into,
execute and deliver this Agreement and to consummate the transactions
contemplated hereby and any instruments or agreements required herein.
This Agreement has been duly and validly executed and delivered by
Gamst and constitutes a valid and binding obligation of Gamst according
to its terms, enforceable against Gamst in accordance with its terms.
4.3.2. NO VIOLATION. Neither the execution and delivery by Gamst of
this Agreement, the consummation of the transactions contemplated
hereby, nor compliance by Gamst with any of the provisions hereof will:
(a) Violate or constitute a default under or give rise to
any right of termination, cancellation or acceleration under
the terms, conditions or provisions of any agreement or
instrument to which Gamst is a party or by which Gamst or any
of his properties or assets are bound except as has been duly
and validly waived, consented to or approved of by the other
parties to such agreement or instrument; or
(b) Violate any statute or law or any judgment, order,
decree, regulation or rule of any court or governmental
authority applicable to Gamst.
4.3.3. ACQUISITION OF UNITS. Gamst is acquiring his portion of the
Purchased Units for his own account and not to offer or sell the
Purchased Units as part of a public distribution, and Gamst is not
participating, directly or indirectly, in an underwriting of any such
public distribution. Gamst is aware that state and federal securities
laws impose restrictions on transferability of the Purchased Units and
Gamst agrees to comply with such restrictions.
4.3.4. DISCLOSURE. No representation or warranty by Gamst in this
Agreement and no statement contained in this Agreement or in any other
document delivered or to be delivered pursuant hereto contains or will
contain an untrue statement of material fact or omits or will omit to
state any material fact necessary to make the statements herein or
therein contained, in light of the circumstances under which made, not
misleading; it being understood that as used in this subparagraph
"material" means material to any individual statement or omission and
in the aggregate as to all statements and omissions.
-18-
4.3.5. RELIANCE. The foregoing representations, warranties and
covenants are made by Gamst with the knowledge and expectation that
Xxxxxxxx is relying thereon.
4.4. XXXX. In connection with and as an inducement to Xxxxxxxx to enter into
and be bound by the terms of this Agreement, Xxxx hereby represents, warrants
and covenants to Xxxxxxxx as follows:
4.4.1. AUTHORITY. Xxxx has full power and authority to enter into,
execute and deliver this Agreement and to consummate the transactions
contemplated hereby and any instruments or agreements required herein.
This Agreement has been duly and validly executed and delivered by Xxxx
and constitutes a valid and binding obligation of Xxxx according to its
terms, enforceable against Xxxx in accordance with its terms.
4.4.2. NO VIOLATION. Neither the execution and delivery by Xxxx of
this Agreement, the consummation of the transactions contemplated
hereby, nor compliance by Xxxx with any of the provisions hereof will:
(a) Violate or constitute a default under or give rise to
any right of termination, cancellation or acceleration under
the terms, conditions or provisions of any agreement or
instrument to which Xxxx is a party or by which Xxxx or any of
his properties or assets are bound except as has been duly and
validly waived, consented to or approved of by the other
parties to such agreement or instrument; or
(b) Violate any statute or law or any judgment, order,
decree, regulation or rule of any court or governmental
authority applicable to Xxxx.
4.4.3. ACQUISITION OF UNITS. Xxxx is acquiring his portion of the
Purchased Units for his own account and not to offer or sell the
Purchased Units as part of a public distribution, and Xxxx is not
participating, directly or indirectly, in an underwriting of any such
public distribution. Xxxx is aware that state and federal securities
laws impose restrictions on transferability of the Purchased Units and
Xxxx agrees to comply with such restrictions.
4.4.4. DISCLOSURE. No representation or warranty by Xxxx in this
Agreement and no statement contained in this Agreement or in any other
document delivered or to be delivered pursuant hereto contains or will
contain an untrue statement of material fact or omits or will omit to
state any material fact necessary to make the statements herein or
therein contained, in light of the circumstances under which made, not
misleading; it being understood that as used in this subparagraph
"material" means material to any individual statement or omission and
in the aggregate as to all statements and omissions.
4.4.5. RELIANCE. The foregoing representations, warranties and
covenants are made by Xxxx with the knowledge and expectation that
Xxxxxxxx is relying thereon.
The foregoing representations, warranties and covenants, together with any and
all other representations, warranties and covenants contained in this Agreement,
shall be deemed to have been repeated and reaffirmed at and as of the Closing
Date and shall survive consummation of the purchase and sale contemplated by
this Agreement.
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ARTICLE 5.
DELIVERY OF DOCUMENTS
On the Closing Date, Buyers, as one party, and Xxxxxxxx, as another party, shall
execute and deliver to each other the following documents, instruments and
agreements, together with such other documents, instruments and agreements as
the other party may reasonably request to consummate the purchase and sale
contemplated hereby:
5.1. BY BUYERS TO THE XXXXXXXX. Buyers shall deliver the following to the
Xxxxxxxx:
5.1.1. CASH PAYMENT. Certified funds or a wire transfer of funds to
Xxxxxxxx in the amount required in Section 1.4.1.
5.1.2. NON-COMPETITION AGREEMENT. The Non-Competition Agreement, duly
executed by Buyers.
5.1.3. EMPLOYMENT AGREEMENT. The Employment Agreement, duly executed
by the Company.
5.1.4. MEMBER CONTROL AGREEMENT. The Member Control Agreement, duly
executed by each of the Buyers.
5.1.5. ELECTION OF BOARD OF GOVERNORS. A Written Action of the
members of the Company electing a new board of governors for the
Company in accordance with Section 2.7 above, duly executed by each of
the Buyers.
5.1.6. OPINION OF BUYERS' COUNSEL. An opinion from Winthrop &
Weinstine, P.A. substantially in the form provided on attached Exhibit
5.1.6.
5.1.7. AUTHORIZING RESOLUTIONS. A copy, certified by an officer of
ASE, of the duly adopted resolutions of the Board of Directors of ASE
approving this Agreement and authorizing the execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby.
5.1.8. CLOSING CERTIFICATES. A certificate executed by an officer of
ASE, and a certificate for each of the other Buyers executed by the
respective Buyer, each dated as of the Closing Date, to the effect that
the representations and warranties made by that Buyer in this Agreement
are substantially accurate in all material respects on and as of the
Closing Date with the same force and effect as though such
representations and warranties had been made on or given as of the
Closing Date and that such Buyer has performed and complied with all of
its/his covenants and obligations under this Agreement.
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5.2. BY XXXXXXXX TO BUYERS. Xxxxxxxx shall deliver the following to
Buyers:
5.2.1. PURCHASED UNITS ASSIGNMENT DOCUMENTS. Xxxxxxxx shall deliver
to Buyers assignment documents, as reasonably requested by Buyer, duly
executed by Xxxxxxxx, so as to transfer to Buyers all right, title and
interest in and to all of the Purchased Units, free and clear of all
liens, encumbrances, proxies or other interests.
5.2.2. NON-COMPETITION AGREEMENT. The Non-Competition Agreement, duly
executed by Xxxxxxxx.
5.2.3. EMPLOYMENT AGREEMENT. The Employment Agreement, duly executed
by Xxxxxxxx.
5.2.4. MEMBER CONTROL AGREEMENT. The Member Control Agreement, duly
executed by Xxxxxxxx.
5.2.5. TECHNOLOGY TRANSFER AGREEMENT. The Technology Transfer
Agreement, duly executed by Xxxxxxxx.
5.2.6. RESIGNATIONS. Resignations from all officers and directors of
the Company other than Xxxxxxxx, personally signed by such individuals.
5.2.7. ELECTION OF BOARD OF GOVERNORS. A Written Action of the
members of the Company electing a new board of governors for the
Company in accordance with Section 2.7 above, duly executed by
Xxxxxxxx.
5.2.8. OPINION OF XXXXXXXX'X COUNSEL. An opinion from Xxxxxxxx'x
legal counsel substantially in the form provided on attached Exhibit
5.2.8.
5.2.9. EMPLOYEE CONFIDENTIALITY/WORK FOR HIRE AGREEMENTS.
Confidentiality/work for hire agreements, in form mutually acceptable
to Xxxxxxxx and the Buyers, signed by each of the employees of the
Company.
5.2.10. CLOSING CERTIFICATE. A certificate executed by Xxxxxxxx, dated
as of the Closing Date, to the effect that the representations and
warranties made by Xxxxxxxx in this Agreement are substantially
accurate in all material respects on and as of the Closing Date with
the same force and effect as though such representations and warranties
had been made on or given as of the Closing Date and that Xxxxxxxx has
performed and complied with all of his covenants and obligations under
this Agreement.
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ARTICLE 6.
INDEMNIFICATION
6.1. XXXXXXXX INDEMNIFICATION OBLIGATION. Subject to the restrictions and
limitations specified in Section 6.7 below, Xxxxxxxx does hereby agree to, and
shall immediately upon demand, indemnify and hold harmless each of the Buyers
from, against and in respect of:
6.1.1. Any liabilities, penalties, interest, costs, expenses or other
damages or deficiencies resulting from any misrepresentation, breach of
warranty or non-fulfillment of any agreement or covenant on the part of
Xxxxxxxx under this Agreement or from any misrepresentation in or
omission from any certificate, schedule or other instrument furnished
or to be furnished by or on behalf of Xxxxxxxx or the Company to any
Buyer; and
6.1.2. All actions, suits, proceedings, demands, assessments,
judgments, costs and expenses (including, without limitation,
reasonable attorneys' fees) incident to any of the foregoing.
6.2. ASE INDEMNIFICATION OBLIGATIONS. Subject to the restrictions and
limitations specified in Section 6.7 below, ASE does hereby agree to, and shall
immediately upon demand, indemnify and hold harmless Xxxxxxxx from, against and
in respect of:
6.2.1. Any liabilities, penalties, interest, costs, expenses or other
damages or deficiencies resulting from any misrepresentation, breach of
warranty or non-fulfillment of any agreement or covenant on the part of
ASE under this Agreement or from any misrepresentation in or omission
from any certificate, schedule or other instrument furnished or to be
furnished by or on behalf of ASE to Xxxxxxxx; and
6.2.2. All actions, suits, proceedings, demands, assessments,
judgments, costs and expenses (including, without limitation,
reasonable attorneys' fees) incident to any of the foregoing.
6.3. DRENTTEL INDEMNIFICATION OBLIGATION. Subject to the restrictions and
limitations specified in Section 6.7 below, Drenttel does hereby agree to, and
shall immediately upon demand, indemnify and hold harmless Xxxxxxxx from,
against and in respect of:
6.3.1. Any liabilities, penalties, interest, costs, expenses or other
damages or deficiencies resulting from any misrepresentation, breach of
warranty or non-fulfillment of any agreement or covenant on the part of
Drenttel under this Agreement or from any misrepresentation in or
omission from any certificate, schedule or other instrument furnished
or to be furnished by or on behalf of Drenttel to Xxxxxxxx; and
6.3.2. All actions, suits, proceedings, demands, assessments,
judgments, costs and expenses (including, without limitation,
reasonable attorneys' fees) incident to any of the foregoing.
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6.4. GAMST INDEMNIFICATION OBLIGATION. Subject to the restrictions and
limitations specified in Section 6.7 below, Gamst does hereby agree to, and
shall immediately upon demand, indemnify and hold harmless Xxxxxxxx from,
against and in respect of:
6.4.1. Any liabilities, penalties, interest, costs, expenses or other
damages or deficiencies resulting from any misrepresentation, breach of
warranty or non-fulfillment of any agreement or covenant on the part of
Gamst under this Agreement or from any misrepresentation in or omission
from any certificate, schedule or other instrument furnished or to be
furnished by or on behalf of Gamst to Xxxxxxxx; and
6.4.2. All actions, suits, proceedings, demands, assessments,
judgments, costs and expenses (including, without limitation,
reasonable attorneys' fees) incident to any of the foregoing.
6.5. XXXX INDEMNIFICATION OBLIGATION. Subject to the restrictions and
limitations specified in Section 6.7 below, Xxxx does hereby agree to, and shall
immediately upon demand, indemnify and hold harmless Xxxxxxxx from, against and
in respect of:
6.5.1. Any liabilities, penalties, interest, costs, expenses or other
damages or deficiencies resulting from any misrepresentation, breach of
warranty or non-fulfillment of any agreement or covenant on the part of
Xxxx under this Agreement or from any misrepresentation in or omission
from any certificate, schedule or other instrument furnished or to be
furnished by or on behalf of Xxxx to Xxxxxxxx; and
6.5.2. All actions, suits, proceedings, demands, assessments,
judgments, costs and expenses (including, without limitation,
reasonable attorneys' fees) incident to any of the foregoing.
6.6. INDEMNIFICATION PROCEDURES. The indemnifying party shall reimburse the
indemnified party, on demand, for any payment made by the indemnified party at
any time in respect of any liability, obligation or a claim to which the
foregoing indemnities relate. An indemnified party shall be entitled to offset
any amount owed to the indemnifying party against the amount of the
indemnification obligation of the indemnifying party under this Agreement. Each
party agrees to give written notice to the other as soon as reasonably
practicable upon becoming aware of the occurrence of any event which gives rise
to an indemnification claim under this Article 6, and to comply with the
provisions of Section 6.7 below with respect to third party claims.
Notwithstanding any herein to the contrary, the obligations of each party to
provide indemnification as provided above shall not apply until the aggregate
amount for which indemnification is sought exceeds $10,000; provided (i) once
this $10,000 threshold is exceeded, the indemnifying party shall be liable for
the full amount of the claim and (ii) this limitation shall not apply to (a)
knowing and intentional breaches or non-performance, (b) any breach of
Xxxxxxxx'x representations and warranties under Section 3.1 or Section 3.3
(excluding the last sentence thereof) and (c) fraud.
6.7. NOTICE AND OPPORTUNITY TO DEFEND. Each party shall promptly, and in all
events within ninety (90) days of obtaining actual knowledge thereof (the
"Notifying Party"), notify the party obligated to provide indemnification under
this Article (the "Indemnifying Party") of the existence of any claim, demand or
other matter requiring a defense to which the Indemnifying Party's obligations
under this Article would apply. The Notifying Party shall give the Indemnifying
Party a reasonable opportunity to defend the claim, demand or matter at the
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Indemnifying Party's own expense and with counsel selected by the Indemnifying
Party and reasonably satisfactory to the Notifying Party; provided that the
Notifying Party shall at all times also have the right to fully participate in
the defense at its own expense. Any such claim, demand or other matter shall not
be settled or compromised without the consent of the Notifying Party; provided,
however, if the Notifying Party does not consent to such settlement or
compromise, such claim, demand or other matter shall not be settled or
compromised, but the Indemnifying Party's obligation to indemnify with respect
hereto shall be limited to the amount for which such claim, demand or other
matter could have been settled or compromised, together with the cost of defense
through the date such matter could have been settled or compromised. If the
Indemnifying Party shall, within a reasonable time after receipt of notice, fail
to defend, the Notifying Party shall have the right, but not the obligation, to
undertake the defense, and to compromise or settle, exercising reasonable
business judgment, the claim, demand or other matter on behalf, for the account
and at the risk of the Indemnifying Party. If the claim is one that cannot by
its nature be defended solely by the Indemnifying Party (including, without
limitation, any federal or state tax proceeding), the Notifying Party shall make
available, or cause to be made available, all information and assistance that
the Indemnifying Party may reasonably request.
ARTICLE 7.
MISCELLANEOUS PROVISIONS
7.1. ALTERNATIVE DISPUTE RESOLUTION PROCEDURES. Any dispute relating to this
Agreement shall be resolved in accordance with the following:
7.1.1. GOOD FAITH NEGOTIATIONS/MEDIATION. The parties agree to
negotiate in good faith to resolve any such dispute for a period of
sixty (60) days. During this 60-day period, either party may request
that the matter be submitted to mediation by a mediator selected by the
mutual agreement of Xxxxxxxx and the President of ASE. If a dispute is
not resolved within such 60-day period, the dispute shall be finally
determined and settled in accordance with the procedures specified in
Section 7.1.2 below.
7.1.2. ACCOUNTING FIRM/ARBITRATION. The procedures to be followed
with respect to any dispute not resolved pursuant to Section 7.1.1
above shall depend upon the nature of the dispute, as follows:
(a) If the dispute relates to any aspect of determination
of the Earn-Out Amount, the parties to such dispute shall,
within ten (10) days of expiration of the 60-day period
provided in Section 7.1.1 above, jointly retain a mutually
acceptable accounting firm in the Minneapolis/St. Xxxx
metropolitan area that has an active auditing department to
resolve the dispute (such accounting firm may not include any
accounting firm which is then performing services for any of
the parties to this Agreement or their affiliates, parents,
spouses, siblings or descendants). The retained accounting
firm shall be provided all information relating to the dispute
and all parties agree to use their best efforts to cooperate
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with the accounting firm in connection with its resolution of
the dispute. Within fourteen (14) days following appointment
of the accounting firm, both parties will submit written
materials to the accounting firm presenting their case, and
each party shall have an opportunity to make a two-hour oral
presentation. During the twenty-one (21) days thereafter, the
accounting firm shall have the ability to submit written
questions and obtain written answers from the parties. Within
sixty (60) days of its appointment, the accounting firm shall
make its final decision regarding the dispute and such
decision shall be final and binding on all parties. Such
decision and the basis therefore will be in writing and
delivered to the parties hereto. The prevailing party in such
dispute will be entitled to recover its related costs and
expenses (including reasonable attorney's fees) and the
non-prevailing party will be responsible for payment of the
fees and charges of such accounting firm. The prevailing party
shall be the party whose position is substantially upheld.
(b) Except for actions for equitable relief, which may be
brought before any court of competent jurisdiction, any other
dispute arising after the Closing Date under this Agreement
will be subject to binding arbitration and will be referred to
a panel of three (3) neutral arbitrators for final
determination pursuant to the Commercial Rules (the "Rules")
of the American Arbitration Association (the "AAA"). Such
arbitration will be administered by the AAA and held in
Minneapolis, Minnesota. Any such arbitration will be initiated
by written request for arbitration delivered by one party to
the other and to the AAA. The arbitration panel will consist
of one (1) attorney with experience in business transactions,
one (1) certified public accountant and one (1) business
person. The panel of arbitrators will be selected in
accordance with the Rules within twenty-one (21) days of
expiration of the 60-day period specified in Section 7.1.1
above. The hearing will be commenced within sixty (60) days of
the selection of the arbitrators. Within ten (10) days
following the closing of the hearing, a final decision will be
made concerning the disputed matter, which decision and the
basis therefore will be in writing and delivered to the
parties hereto. The final decision of the arbitrators will be
binding on the parties and enforceable in any court of law
having jurisdiction thereof. Pending final decision of the
disputed matter, the parties will continue to diligently
observe and perform the terms of this Agreement. In such
arbitration (i) the prevailing party will be entitled to
recover its costs and expenses (including reasonable
attorney's fees and travel and lodging expenses) and (ii) the
non-prevailing party will be responsible for the costs of
arbitration (including, but not limited to, the costs of the
arbitrators and AAA fees). The prevailing party shall be the
party whose position is substantially upheld. In any such
arbitration, the laws of the State of Minnesota will be
applied, without regard for choice of law provisions.
7.1.3. CONFIDENTIALITY. The parties shall hold the existence, content
and result of disputes under this Section 7.1 in confidence; provided
that the parties shall be entitled to disclose such information to
their professional advisers who have a need to know the
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same. The parties shall attempt to obtain similar confidentiality
commitments from any mediators and arbitrators retained.
Notwithstanding the foregoing: (i) Buyers, as one party, and Xxxxxxxx, as the
other party, each agrees that any breach of such party's obligations to
consummate the sale of the Purchased Units on the Closing Date (or an extended
Closing Date as agreed to between the parties) will result in irreparable injury
to the non-breaching party for which a remedy at law would be inadequate and
that, in addition to any relief at law which may be available to the
non-breaching party for such breach and regardless of any other provision
contained in this Agreement, the non-breaching party shall be entitled to
injunctive and other equitable relief as a court may grant; and (ii) nothing
contained in this Section 7.1 shall be construed to limit any party's right to
obtain equitable relief for other breaches of this Agreement under general
equitable standards.
7.2. NOTICES. All notices, offers, requests or other communications from
either of the parties hereto to the other shall be in writing and shall be
considered to have been duly delivered or served on the date of meeting if sent
by first class certified mail, return receipt requested, postage prepaid, to the
party at its address as set forth below or to such other address as such party
may hereafter designate by written notice to the other party:
If to Buyers, to:
Aero Systems Engineering, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xx. Xxxx, XX 00000
Attn: President
With a copy to:
Winthrop & Weinstine, P.A.
Suite 3500
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx
If to Xxxxxxxx, to:
Xxxxxxx Xxxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxx Xxxxxxx, XX 00000
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With a copy to:
Best & Xxxxxxxx LLP
Suite 4000
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxx
7.3. BROKERS/COSTS AND EXPENSES. Each party hereto warrants, covenants and
represents to the other that they have dealt with no real estate agent or broker
in connection with this Agreement. Each party shall be responsible for and shall
pay all costs and expenses (including accounting and legal) incurred in
connection with this transaction, including that the Company shall not pay these
costs and expenses of Xxxxxxxx; provided the Company shall pay all legal,
accounting and other professional costs and expenses incurred by the Company
through September 12, 2003, relating to the possible sale, refinancing or other
restructuring of the Company.
7.4. ASSIGNMENT. No party to this Agreement may assign or transfer this
Agreement, either directly or indirectly, without the prior written consent of
the other party to this Agreement; provided ASE may assign all or part of its
interest under this Agreement in connection with a sale, merger or similar
transaction affecting ASE. Unless otherwise agreed by the other party to this
Agreement, any assignment of this Agreement shall not release the assignor from
the duty to perform the assignor's obligations under this Agreement. This
Agreement shall be binding upon, inure to the benefit of and may be enforced by
and against the respective successors and permitted assigns of each of the
parties to this Agreement.
7.5. SPECIFIC PERFORMANCE. Buyers, as one party, and Xxxxxxxx, as the other
party, each agrees that their failure to close on the transactions contemplated
by this Agreement will cause the non-breaching party irreparable harm for which
there is no adequate remedy of law and, without limiting whatever other rights
and remedies the non-breaching party may have under this Agreement, the
non-breaching party is entitled to the remedy of specific performance to enforce
closing on the transactions contemplated by this Agreement and the breaching
party consents to the issuance of an order by a court of competent jurisdiction
requiring such specific performance of this Agreement by the breaching party.
7.6. ENTIRE AGREEMENT. This Agreement expresses the whole agreement between
the parties with respect to the purchase and sale contemplated hereby, there
being no representations, warranties or other agreements (oral or written) not
expressly set forth or provided for herein.
7.7. 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 instrument.
7.8. CHANGES. Any and all agreements by the parties hereto to amend, change,
extend, revise or discharge this Agreement, in whole or in part, shall be
binding upon the parties to such
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agreement, even though such agreements may lack legal consideration, provided
such agreements are in writing and executed by the party against whom
enforcement is sought.
7.9. GOVERNING LAW. This Agreement shall be deemed to be a contract made
under the laws of the State of Minnesota and for all purposes it, plus any
related or supplemental documents and notices, shall be construed in accordance
with and governed by the laws of such state.
7.10. CONSTRUCTION. Wherever possible, each provision of this Agreement and
each related document shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement or any
related document shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Agreement or such related documents.
7.11. WAIVER. No failure on the part of either party to exercise, and no
delay in exercising any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right or remedy granted hereby or by any related document or by law.
7.12. SEVERABILITY. In the event any part of this Agreement is found to be
void, the remaining provisions of this Agreement shall nevertheless be binding
with the same effect as though the void parts were deleted.
7.13. TITLES AND SUB-TITLES. The titles of the paragraphs and subparagraphs
are placed herein for convenient reference only and shall not to any extent have
the effect of modifying, amending or changing the expressed terms and provisions
of this Agreement.
7.14. NO THIRD PARTY BENEFICIARIES. This Agreement is a contract solely among
Buyers and Xxxxxxxx. No third party beneficiaries (including, without
limitation, employees and customers of the Company) are intended and none shall
be inferred, and no party other than Buyers and Xxxxxxxx may assert any right,
make any claim or otherwise attempt to enforce any provision of or under this
Agreement.
[THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK.
SIGNATURES APPEAR ON THE FOLLOWING PAGE(s).]
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[SIGNATURE PAGE TO THAT CERTAIN MEMBERSHIP INTEREST PURCHASE AGREEMENT, DATED
OCTOBER 31, 2003.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
XXXXXXXX: BUYERS:
/s/ Xxxxxxx Xxxxxxxx Aero Systems Engineering, Inc.
------------------------------------
Xxxxxxx Xxxxxxxx
By: /s/ Xxxxxxx Xxxx
--------------------------
Xxxxxxx X. Xxxx, President
/s/ Xxxxxxx X. Xxxx
-----------------------------
Xxxxxxx X. Xxxx
-----------------------------
Xxxxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Xxxxxx X. Xxxxxxxx
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LIST OF EXHIBITS
Exhibit 1.3.1(a) Costs of Goods Sold
Exhibit 2.1 Non-Competition Agreement
Exhibit 2.2 Employment Agreement
Exhibit 2.3 Company Member Control Agreement
Exhibit 2.8 Technology Transfer Agreement
Exhibit 3.2 Company Jurisdictions
Exhibit 3.3 Managers and Governors
Exhibit 3.6 Financial Documents
Exhibit 3.7 Assets: Title Exceptions
Exhibit 3.10 Undisclosed Liabilities
Exhibit 3.11 Adverse Changes
Exhibit 3.12 Leases
Exhibit 3.13 Insurance
Exhibit 3.14 Litigation
Exhibit 3.15 Material Contracts
Exhibit 3.16 Taxes and Audits
Exhibit 3.17 Guarantees
Exhibit 3.18 Employee Qualified Plans
Exhibit 3.19 Employment, Agency and Independent Contractor
Agreements
Exhibit 3.22 Investments
Exhibit 3.23 Intellectual Property
Exhibit 3.25 Bank Accounts and Powers of Attorney
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Exhibit 3.26 Licenses, Permits and Authorizations
Exhibit 3.27 Related Party Transactions
Exhibit 3.29 Warranties
Exhibit 5.1.6 Opinion of Buyers' Counsel
Exhibit 5.2.8 Opinion of Xxxxxxxx'x Counsel
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