EXHIBIT 10.1
Asset Purchase Agreement,
by and among
MicroNet Services, Inc.,
Kanfer Associates,
Xxxxxx Xxxxxxxxxxx,
Xxxxx X. Xxxxx and
Protosource Corporation.
ASSET PURCHASE AGREEMENT
BY AND AMONG
MICRONET SERVICES, INC.,
KANFER ASSOCIATES, XXXXXX XXXXXXXXXXX, XXXXX X. XXXXX
AND
PROTOSOURCE CORPORATION
DATED AS OF OCTOBER 28, 1999
AND
EFFECTIVE AS OF NOVEMBER 1, 1999
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of October 28, 1999, and
effective as of November 1, 1999, by and among MicroNet Services, Inc., a
Connecticut corporation ("Seller"); Kanfer Associates, a partnership, Xxxxxx
Xxxxxxxxxxx and Xxxxx Xxxxx, as stockholders and solely for the purpose of
Section 5.1, Section 6.7, Article VII and Article VIII (the "Stockholders"); and
ProtoSource Corporation, a California corporation ("Buyer").
R E C I T A L S:
WHEREAS, Seller, owns certain assets (the "Assets") previously
owned by MicroNet Online Sevices LLC ("Original MicroNet") which it acquired
from Original MicroNet pursuant to a tax free reorganization pursuant to Xxxxxxx
000 xx xxx Xxxxxx Xxxxxx Internal Revenue Code of 1986, as amended (the "Code").
The Assets consist primarily of a dial-up subscriber base to internet services,
and Web hosting which had been provided by Original MicroNet (the "Business").
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase and acquire from Seller, on the terms and subject to the conditions
hereof, those assets, rights and interests of Seller as specified herein that
relate primarily to the Business in consideration of certain payments by all as
specifically set forth herein, and
WHEREAS, each of the Buyer and Seller intend for this asset
purchase transaction to qualify as a tax free reorganization pursuant to Section
368(c) of the Code.
NOW, THEREFORE, the parties hereby agree as follows:
I. ASSETS
1.1 SALE AND TRANSFER OF ASSETS. On the terms and subject to the
conditions set forth in this Agreement, at the Closing (as hereinafter defined),
and effective as of the Closing Date (as hereinafter defined), Buyer will
purchase and acquire from Seller, and Seller will sell, transfer, convey, assign
and deliver (collectively, "Transfer") to Buyer, all of the assets, rights and
interests of Seller relating primarily to the Business (other than the Retained
Assets (as hereinafter defined)) as the same shall exist on the Closing Date,
including without limitation the following (collectively, the "Acquired
Assets"):
(A) INTERNET SUBSCRIBER BASE. Buyer is purchasing the rights
to approximately 2,500 internet subscribers, INCLUDING, WITHOUT
LIMITATION, THOSE ITEMS SET FORTH ON SCHEDULE 1.1(A).
(B) WEB HOSTING SUBSCRIBER BASE. Buyer is purchasing the Web
hosting subscriber base of Seller which generates APPROXIMATELY $2,700
PER MONTH IN REVENUES AS MORE FULLY SET FORTH ON SCHEDULE 1.1(A)
(C) UNITY ACCOUNTS. Buyer is purchasing the Unity account base
of Seller, which includes 514 accounts and generates approximately
$2056 per month in revenues, as more fully set forth on Schedule
1.1(a).
(D) INTELLECTUAL PROPERTY RIGHTS. Buyer is purchasing all,
trademarks, trade names, copyrights (including any derivation of the
name MicroNet, except that Buyer agrees to grant Seller a
non-exclusive, royalty free, limited license to use the name
Xxxxx-Xxx.Xxx) and other confidential information, intellectual and
similar intangible property rights, whether or not patentable or
copyrightable (or otherwise subject to legally enforceable restrictions
or protections against unauthorized third party usage), and any and all
applications for, registrations of and extensions, continuations,
continuations-in-part, divisions, renewals and reissuances of, any of
the foregoing, and rights therein, in each case used primarily in or
relating primarily to the Business (collectively, "Intellectual
Property");
(E) BUSINESS RECORDS. Buyer is purchasing all books and
records, including without limitation all customer lists and files,
material and services vendor files, quotation files, invoices, forms,
accounts, books of account, correspondence, production records,
technical, accounting, manufacturing and procedural manuals,
specifications, employment records, studies, reports or summaries
relating to compliance with any statute, rule, regulation or other law
(collectively, "Laws") or Contracts, electronically stored or other
computerized information, and other books and records in each case used
primarily in or relating primarily to the Business (collectively, the
"Business Records");
(F) CONTRACTS. Subject to Section 1.2(d), 1.2(e), 1.2(f) and
1.2(h) and to Section 1.3, all rights, benefits, claims and interests
of Seller in, to or under all leases, contracts and commitments to
which Seller is a party relating primarily to the Business or the
Acquired Assets ("Contracts"), referred to in Section 5.2(f), including
without limitation all contracts with internet subscribers and Web
hosting clients (collectively, "Assigned Contracts"); and
1.2 RETAINED ASSETS. Notwithstanding anything in Section 1.1
to the contrary, the following assets used primarily in or relating primarily to
the Business (collectively, the "Retained Assets") will be retained by Seller,
and Buyer will not purchase or acquire (and is not obligated to purchase or to
acquire) any interest therein:
(A) BRAINLINK ACCOUNTS. All accounts associated with Brainlink
International, of Richmond Hill, New York (the "Brainlink Accounts").
(B) PREPAIDS. All prepaid expenses, advance payments, deposits,
surety accounts and other similar items relating to the Retained
Assets or Retained Liabilities;
(C) CASH AND CASH EQUIVALENTS. All cash, cash equivalents and
marketable securities;
(D) ACCOUNTS RECEIVABLE. All accounts receivable which relate to
sales prior to the Closing Date;
(E) LEASED REAL PROPERTY. All rights and interests of Seller
under any lease or sublease agreements for real property (including
leasehold improvements);
(F) INSURANCE POLICIES. All rights and interests of Seller under
any insurance policies maintained by Seller in connection with the
Business and the Acquired Assets;
(G) DESIGNATED ASSETS. THOSE ASSETS SET FORTH ON SCHEDULE 1.2(F)
hereto;
(H) CORPORATE RECORDS. Seller's minute books, tax returns, stock
books, stock ledger, any and all copies of financial records through
the Closing Date and corporate seal and any books and records which
Seller is required by Law to retain;
(I) THIS AGREEMENT. Seller's rights under this Agreement;
(J) CLAIMS. All rights to causes of action, claims or demands of
any nature that Seller has or may have against any Person to the
extent relating to the Retained Assets or Retained Liabilities;
(K) TAXES. All rights of Seller to any claims for any federal,
state or local income tax refunds through the Closing Date;
(L) BENEFIT PLAN ASSETS. All assets of the Employee Plans; and
1.3 ASSIGNABILITY AND CONSENTS.
(A) REQUIRED CONSENTS. SET FORTH ON SCHEDULE 1.3 is a list
(which is true and complete in all material respects) provided by
Seller of Assigned Contracts, which are non-assignable or may not be
assigned or subleased to Buyer without the consent of some other
individual, partnership, corporation, association, joint stock company,
trust, joint venture, limited liability company or Governmental
Authority (individually, a "Person") (such Contracts, the
"Consent-Required Contracts"). Seller will take, or cause to be taken
by others, all reasonable actions required to assist Buyer to obtain or
satisfy, at the earliest practicable date, all consents, novations,
approvals, authorizations, requirements, waivers and agreements
("Consents") from any Persons necessary to authorize, approve or permit
the full and complete assignment of the Consent-Required Contracts, and
to consummate and make effective the transactions contemplated by this
Agreement in respect thereof.
II. LIABILITIES
2.1 ASSUMPTION OF LIABILITIES. On the terms and subject to the
conditions set forth in this Agreement, Buyer will assume from Seller, effective
as of the Closing Date, and will thereafter be responsible to perform and
discharge, as and when due, the following, and only the following, liabilities
and obligations of Seller as set forth in paragraphs (a) and (b) of this Section
2.1 (the "Assumed Liabilities"):
(A) CONTRACTS. ALL LIABILITIES AND OBLIGATIONS OF SELLER
ARISING UNDER THE ASSIGNED CONTRACTS; PROVIDED, HOWEVER, that Buyer
will not assume or be responsible for any such liabilities or
obligations to the extent arising from breaches thereof or defaults
thereunder by Seller prior to the Closing Date, and seller will assume
no liabilities owed by Seller or its predecessor to any back bone
service providers, vendors or officers directors stockholders or any
affiliates thereof, all of which liabilities and obligations will
constitute Retained Liabilities (as hereinafter defined); and
(B) POST-CLOSING DATE. All liabilities and obligations (i)
incurred by Buyer or any of its affiliates, directors, officers,
shareholders, agents or employees on or after the Closing Date which do
not relate to the Business or the Acquired Assets, (ii) to the extent
relating to, resulting from or arising out of events or conditions
occurring in connection with, or arising out of, the Business as
operated after the Closing Date, or the ownership, possession, use or
operation after the Closing Date of the Acquired Assets.
2.2 RETAINED LIABILITIES. Except as expressly provided in
Section 2.1, Seller will retain, and Buyer will not assume, or be responsible or
liable for or with respect to, any liabilities or obligations of Seller, whether
or not of, associated with or arising from, the Business or any of the Acquired
Assets, and whether fixed, contingent or otherwise, known or unknown
(collectively referred to hereinafter as the "Retained Liabilities"), including
without limitation the following:
(A) PRE-CLOSING. All liabilities and obligations to the extent
relating to, resulting from or arising out of events or conditions
occurring or existing in connection with, or arising out of, the
Business as operated prior to the Closing Date, or the ownership,
possession, use or operation prior to the Closing Date of the Acquired
Assets (or any other assets, properties, rights or interests
associated, at any time prior to the Closing Date, with the Business
including, but not limited to, all warranty and product liability
claims, and rebate and sales commissions with respect to services
provided prior to Closing);
(B) OBLIGATION RELATED TO MICRO-NET ONLINE SERVICES LLC. Any
liabilities incurred by or on behalf of Original MicroNet, including,
but not limited to, any settlement Original Micronet has made with
PSINet or any threatened claims of litigation, as more specifically
described in Schedule 5.2(h).
(C) ACCOUNTS PAYABLE. All liabilities and obligations of
Seller for accounts payable as of the Closing Date;
(D) EMPLOYEE-RELATED LIABILITIES. All liabilities and
obligations to any individuals at any time employed by Seller or to any
such individual's spouses, children, other dependents or beneficiaries,
with respect to incidents, events, exposures or circumstances occurring
during the period or periods of any such persons' employment by Seller
and at any time on or prior to the Closing, whenever such claims mature
or are asserted, including without limitation all liabilities and
obligations arising (i) under any employment, wage and hour
restriction, equal opportunity, discrimination, plant closing or
immigration and naturalization Laws, (ii) under any collective
bargaining Laws, agreements or arrangements, or (iii) in connection
with any written and unwritten "employee benefit plan" (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), or any other payroll practices, bonus,
stock option, stock appreciation, stock purchase, severance,
termination, lay-off, leave of absence, disability, workers
compensation, pension, profit sharing, retirement, medical plan, life
insurance plan, hospitalization plan, insurance, deferred compensation,
phantom stock, other executive compensation arrangement or other
employee or welfare benefit plan, agreement or arrangement which is
sponsored, maintained or contributed to by Seller and is applicable to
Seller's past, present or future employees (collectively, "Employee
Plans");
(E) TAXES. Subject to Section 6.3, any liability or obligation
for any Taxes (as hereinafter defined) accrued or imposed on the
Acquired Assets or the Business for the period ending on the Closing
Date, it being understood that Taxes imposed for periods that begin
before and end after the Closing Date and that are not specifically
attributable either solely to the period ending on the Closing Date or
solely to periods subsequent to the Closing Date shall be allocated
between Seller and Buyer as provided in Section 6.2 hereof; and
(F) LIABILITIES RELATING TO RETAINED ASSETS. All liabilities
and obligations relating to, resulting from or arising out of events or
conditions occurring or existing in connection with, or arising out of,
any and all assets, properties, rights and interests which are not
being acquired by Buyer hereunder, including without limitation the
Retained Assets.
(G) LIABILITIES RELATING TO MICRONET HOLDING CORP. All
liabilities transferred or assumed by MicroNet Holding Corp. from
Original MicroNet as a result of the tax free reorginization pursuant
to which MicroNet Holding Corp., received certain assets and assumed
all of the liabilities of Original MicroNet.
III. PURCHASE PRICE
3.1 PURCHASE PRICE. In consideration of the Transfer of the
Acquired Assets and subject to the terms and conditions of this Agreement, the
aggregate consideration (the "Purchase Price") to be paid by Buyer to Seller
shall be as follows (i) $265 per dial-up account internet service subscriber
(assuming Seller is delivering 2,500 subscribers the Purchase Price shall be
$662,500, as adjusted depending on the actual amount of subscribers). Twenty
percent (20%) of the purchase price ($132,500) is to be paid in cash and the
balance of the purchase price, $530,000, is to be paid in Common Stock of the
Buyer at a rate of $6.725 per share, which equals 78,810 shares of Common Stock.
The Purchase Price shall be allocated in the manner specified in Section 3.3
hereof.
3.2 TIMING AND MANNER OF PAYMENT OF PURCHASE PRICE.
(a) Buyer shall pay (or cause to be paid) the Purchase Price
as follows:
(i) $132,500 to Seller at the Closing;
(ii) 78,810 restricted shares of Common Stock of the
Buyer (the "Shares") at the Closing, 10% of which (7881
shares) shall be held back (the "Holdback Shares") as
security against any undisclosed liability regarding the
subscribers or the business. On December 31, 1999, Buyer
shall pay Seller the Holdback Shares less the number of
Holdback Shares that equals any loss which the Buyer has
incurred, or expects to incur, due to any undisclosed
liability concerning the subscribers or the business which
Buyer should reasonably have known at the time of the
Closing; and
(iii) if the number of active accounts that Seller
transfers to Buyer at Closing, or the number of those
accounts which remains active as of November 30, 1999, is
greater than 2500 then Buyer shall pay Seller $265 times the
difference of 2500 and the number of existing accounts as of
November 30, 1999 (the "Buyer's Account Adjustment"). For
example, if on November 30, 1999, Buyer has 3000 accounts
remaining from those which the Seller transferred to Buyer
at the Closing, then Buyer shall pay Seller $265 x (3000 -
2500), which equals $132,500. Twenty percent (20%) of the
Buyer's Account Adjustment shall be payable in cash and
eighty percent (80%) of the Buyer's Account Adjustment shall
be payable in Buyer's Common Stock. The number of shares
payable in Buyer's Common Stock shall be determined by
dividing the 80% portion of the Buyer's Account Adjustment
by $6.725 and rounding to the nearest share. For example, if
the Buyer's Account Adjustment equals $132,500, then Seller
shall pay Buyer ($132,000 x 20%) = $26,500 in cash and
($132,500 x 80%) / $6.725 = 15762.08, which shall be rounded
to 15,762, shares of Buyer's Common Stock. Payment of
Buyer's Account Adjustment shall be due on December 31,
1999.
(b) If the number of active accounts that Seller transfers to
Buyer at Closing, or the number of those accounts which remains active
as of November 30, 1999, is less than 2500 then Seller, or the
Stockholders in the pro-rata amount of their ownership in the Seller,
severally and not jointly, shall pay Buyer $265 times the difference
of 2500 and the number of existing accounts as of November 30, 1999
(the "Seller's Account Adjustment"). The Seller's Account Adjustment
shall be payable in the same manner as the Buyer's Account Adjustment
describer in Section 3.2(a)(iii). Payment of the Seller's Account
Adjustment shall be due on December 31, 1999. If the number of active
accounts that Seller transfers to Buyer at Closing, or the number of
those accounts which remains active as of November 30, 1999, is less
than 2500 Seller shall be in breach of this Agreement and will be
liable to Buyer for additional payments, notwithstanding this
provision and the payment of the Seller's Account Adjustment.
(c) Cash Payments made pursuant to subparagraph (a) above shall
be paid in cash by wire transfer of immediately available funds to an
account or accounts to be designated by Seller in writing.
(d) Payments of Common Stock shall be made in two certificates;
(i) one certificate in the amount of 70,929 shares of Common Stock to
be delivered to Seller at the Closing and (ii) one certificate in the
amount of 7,881 shares of Common Stock to be held in escrow by Buyers
counsel representing the Holdback Shares.
(I) LOCK-UP OF SHARES. The Shares will be subject to a three
year lock-up agreement with the Buyer which may be released
earlier upon either (A) the Common Stock of the Buyer closing at
or above $15.00 per share for 30 consecutive trading days on the
Nasdaq SmallCap Market ("Nasdaq"), or (B) the Common Stock of
Buyer trading an average of 500,000 shares or more per week on
Nasdaq at a price of $10.00 or more for 30 consecutive trading
days.
(II) REGISTRATION RIGHTS. The Seller will have demand
registration rights on such number of Shares so as to equal
$200,000 of Shares at the prevailing market on the day the
Registration Statement covering such Shares is declared effective
by the Securities and Exchange Commission. (the "Registerable
Shares"). The Buyer will not be responsible for the cost of such
demand registration and all costs of such registration statement
will be the responsibility of the Seller or the person requesting
registration. The Buyer may sell $12,500 worth (at the prevailing
market) of the Registerable Shares every 90 days for a twelve
month period (an aggregate of $50,000). The balance of the
Registerable Shares will be subject to the lock-up provision
referred to in paragraph 3.2(c)(i) above
3.3 POST CLOSING RECEIPTS AND RECONCILIATION PAYMENTS.
(a) Seller shall immediately deliver and assign to Buyer any
account payment made pursuant to a wholesale invoice for service
provided after November 14, 1999, or a retail invoice for service
provided after the billing date in November for such retail account
(the "Anniversary Date");
(b) Seller shall retain the pro rata share of account payments
that is attributable to wholesale service provided from November 1,
1999, to November 14, 1999, and retail service provided from November
1, 1999, to the Anniversary Date. Seller shall pay the pro rata share
of backbone provider expenses that is attributable to wholesale
service provided from November 1 to November 14, and retail service
from November 1, 1999, to the Anniversary Date. For example, if Seller
receives payment for retail services provided from October 17, 1999 to
November 17, 1999, Seller shall retain the entire account payment, and
shall pay the backbone provider expenses attributable to such account
up to November 17, 1999;
(c) Buyer shall pay Seller the pro rata share of Seller's
backbone provider expenses due under the contracts set forth in
Schedule 1.3 (the "Backbone Agreements") that are attributable to
wholesale service provided from November 15, 1999, and retail service
provided from the Anniversary Date, until such time as the Backbone
Agreements are fully assigned to Buyer by Seller, or December 31,
1999, whichever occurs first. For example, if Seller receives two
payments on a retail invoice for services provided in the two monthly
billing periods from November 17, 1999 to January 17, 1999, Seller
shall immediately deliver and assign the account payments, in
accordance with Section 3.3(a), and Buyer shall pay Seller's backbone
expense that is attributable to providing the account with service
from November 17 to December 31, 1999, if such expense is due under a
Backbone Agreement.
3.4 PURCHASE PRICE ALLOCATION. The parties agree to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes) in a mutually agreed
manner.
Each of the parties will report the purchase and sale of the
Acquired Assets, including without limitation in all federal, foreign, state,
local and other Tax Returns and reports prepared and filed by or for either of
Seller and Buyer, in accordance with the allocation made by Buyer and Seller.
Each party agrees to notify the other if the Internal Revenue Service or any
other taxing authority proposes a reallocation of such amounts.
IV. CLOSING
4.1 GENERAL. As used in this Agreement, the "Closing" means the time on the
Closing Date at which Seller consummates the Transfer (as hereinafter defined)
of the Acquired Assets to Buyer as provided herein by the execution and delivery
by Seller of the documents and instruments referred to in Section 4.2 against
delivery by Buyer of documents provided in Section 4.3. THE CLOSING WILL TAKE
PLACE AT THE OFFICES OF XXXXXXXXX XXXX & XXXXXXXX L.L.P., 000 XXXX 00XX Xxxxxx ,
Xxx Xxxx, XX 00000, at 10:00 A.M. on October 28, 1999 (the "Closing Date").
Legal title, equitable title and risk of loss with respect to the Acquired
Assets will pass to Buyer upon the Transfer of the Acquired Assets at the
Closing, which Transfer, once it has occurred, will be deemed effective for tax,
accounting and other computational purposes (but not for purposes of determining
the Acquired Assets to be Transferred hereby and the Assumed Liabilities to be
assumed hereby, which shall be determined by referring to the actual time of
Transfer on the Closing Date) as of 12:01 A.M. (Eastern Time) on the Closing
Date.
4.2 DOCUMENTS TO BE DELIVERED BY SELLER. At the Closing, Seller will
deliver to Buyer:
(a) Copy of the resolutions of the Board of Directors and
Stockholders of Seller authorizing and approving this Agreement and the
transactions and other agreements contemplated hereby, certified by a
duly authorized officer of Seller to be true, correct, complete and in
full force and effect and unmodified as of the Closing Date;
(b) Short-form good standing certificate for Seller from the
Secretary of State of the State of Connecticut, dated not more than 10
days prior to the Closing;
(c) Xxxx of Sale, duly executed by Seller, Transferring the
Acquired Assets to Buyer, in substantially the form OF EXHIBIT A;
(d) An incumbency certificate of the appropriate officer of
Seller;
(e) Releases, if any, including without limitation termination
statements under the Uniform Commercial Code of any financing
statements filed against any Acquired Assets, evidencing discharge,
removal and termination of all Liens (other than Permitted Liens) to
which any of the Acquired Assets are subject, which releases shall be
effective at or prior to the Closing;
(f) Such other duly executed deeds, bills of sale,
endorsements, assignments, affidavits and other good and sufficient
instruments of Transfer, in form and substance reasonably satisfactory
to Buyer and its counsel, as are necessary or reasonably requested by
Buyer to effectuate the transactions contemplated hereby;
4.3 DOCUMENTS TO BE DELIVERED BY BUYER. At the Closing, Buyer will deliver
to Seller:
(a) A copy of the resolutions of the Board of Directors of
Buyer authorizing and approving this Agreement and all other
transactions and agreements contemplated hereby certified by a duly
authorized officer of Buyer to be true, correct, complete and in full
force and effect and unmodified as of the Closing Date;
(b) Short-form good standing certificate for Buyer from the
Secretary of State of the State of California, dated not more than 10
days prior to the Closing;
(c) An incumbency certificate of the appropriate officer of
Buyer;
(d) Such other duly executed endorsements, assignments,
affidavits, assumptions and other good and sufficient instruments of
Transfer, in form and substance reasonably satisfactory to Seller and
its counsel, as are necessary or reasonably requested by Seller to
effectuate the transactions contemplated hereby.
V. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS. Each Stockholder
represents and warrants to Buyer that this Agreement is a legal, valid and
binding agreement of such Stockholder enforceable in accordance with its terms,
subject to the effects of bankruptcy, insolvency, moratorium, reorganization or
other similar laws affecting creditors' rights generally and the application of
equitable principles or the availability of equitable remedies in any
proceeding, whether at law or in equity.
5.2 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer as follows:
(A) ORGANIZATION AND STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Connecticut and has the requisite corporate power and
authority to operate the Business, to own or lease the Acquired Assets,
to carry on the Business as now being conducted and to enter into and
to perform this Agreement and the transactions and other agreements and
instruments contemplated by this Agreement to be entered into and
performed on its part. Seller is duly qualified or licensed to do
business as a foreign corporation and is in good standing in each
jurisdiction in which the failure to so qualify would have a material
adverse effect upon the financial condition, business, assets,
properties or operations of the Business (a "Material Adverse Effect").
(B) POWER AND AUTHORITY. This Agreement and all other
agreements and instruments executed and delivered or to be executed and
delivered by Seller in connection herewith have been, or upon execution
thereof will be, duly executed and delivered by Seller. This Agreement
and the transactions and other agreements and instruments contemplated
hereby have been duly approved by all necessary corporate action of
Seller and constitute the valid and binding obligations of Seller,
enforceable against Seller in accordance with their respective terms,
subject, in each case, to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(C) NO VIOLATION. Subject to the receipt of Consents pursuant
to Section 1.3, neither the execution and delivery of this Agreement or
the other agreements and instruments executed or to be executed in
connection herewith by Seller, nor the performance by Seller of the
transactions contemplated hereby or thereby, will (i) violate, conflict
with, or result in a breach of any of the terms of Seller's Certificate
of Incorporation or Bylaws, (ii) violate, conflict with, or result in a
breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in the right of termination or
cancellation of, or accelerate the performance required by, any
Assigned Contract, (iii) result in the creation or imposition of any
Liens (other than Permitted Liens) upon any of the Acquired Assets or
(iv) violate any Law, except, in each case, for such matters which
would not have a Material Adverse Effect on the Business or adversely
affect the transactions contemplated by this Agreement.
(D) CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Except
as set forth in Schedule 1.3, no Consent of, or notice to, or
declaration, filing or registration with, any Governmental Authority is
required to be made or obtained by Seller in connection with the
execution, delivery or performance by Seller of this Agreement and the
transactions and other agreements and instruments contemplated hereby.
(E) ACQUIRED ASSETS; TITLE TO ACQUIRED ASSETS.
(i) At the Closing, Seller will deliver to Buyer the
Acquired Assets free and clear of all liens, equities, claims,
prior assignments, mortgages, charges, security interests,
pledges, conditional sales contracts, collateral security
arrangements and other title retention arrangements or
restrictions, (collectively, "Liens") of any kind or nature
whatsoever.
(F) CONTRACTS. SCHEDULE 1.1(A) contains a list (which is true
and complete in all material respects) of each party to a material
Contract, or series of similar Contracts, relating to the Business and
to which Seller is a party as of the date of this Agreement. Seller has
fully performed all material obligations required to be performed under
each of the foregoing Contracts, and Seller has not, nor to Seller's
knowledge any other party to any such Contract has not, materially
breached or improperly terminated any such Contract or is in material
default under any such Contract, and there exists no condition or event
which after notice or lapse of time or both, would constitute any such
breach, termination or default. Each of such Contracts is in full force
and effect, and is a legal, binding and enforceable obligation of or
against Seller, and, to the knowledge of Seller, the other parties
thereto, subject, in each case, to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(G) FINANCIAL STATEMENTS. Seller has heretofore delivered to
Buyer the audited balance sheet and statement of profit and loss of
Original MicroNet dated for the 12 month period ended December 31, 1998
and the unaudited balance sheet and the statement of profit and loss of
Original Micronet for the 3 month period ended March 31, 1999, and the
2 month period ended May 31, 1999. The Seller shall deliver to Buyer
not later than November 31, 1999 the unaudited balance sheet and the
statement of profit and loss of Original MicroNet (the "Unaudited
Financials") for the 3 month period ended June 30, 1999, the 3 month
period ended September 30, 1999, and the 9 month period ended September
30, 1999 (the "Unaudited Financials Date") (audited and unaudited
financial statements collectively, the "Financial Statements"). Each of
the Financial Statements was derived from the books and records for the
Business in accordance with generally accepted accounting principles
consistently applied and fairly presents in all material respects the
financial position of Original MicroNet including the Business as of
such dates, and the results of operations of the Business for the
periods then ended except, with respect to the interim financial
statements, for non-material changes resulting from normal year-end
adjustments.
(H) LEGAL PROCEEDINGS. EXCEPT AS SET FORTH ON SCHEDULE 5.2(H),
there are no material actions, suits or proceedings pending or, to the
Seller's knowledge, threatened against Seller with respect to the
Business or the Acquired Assets, before any Court or other Governmental
Authority, or which would adversely affect the transactions
contemplated by this Agreement.
(I) CUSTOMERS AND SUPPLIERS. SCHEDULE 5.2(I) SETS FORTH A LIST
OF SELLER'S MAJOR CUSTOMERS AND SCHEDULE 5.2(J) sets forth a list of
Seller's major suppliers during the fiscal year ended December 31,
1998. To Seller's knowledge, other THAN THOSE CUSTOMERS OR SUPPLIERS SO
NOTED ON SCHEDULES 5.2(I) OR 5.2(J), RESPECTIVELY, no customer or
supplier otherwise LISTED ON SCHEDULES 5.2(I) OR 5.2(J), RESPECTIVELY,
has advised that such customer or supplier was or is intending to
terminate its relationship with Seller or would not continue to
purchase services relating to the Business for future periods on
account of any alleged failure of Seller's performance or the
transactions contemplated hereby.
(J) COMPLIANCE WITH LAWS. The Business has been conducted, the
Acquired Assets have been maintained and Seller is currently in
compliance in all material respects with all applicable Laws,
regulations and other requirements of all Governmental Authorities
having jurisdiction over Seller except where failure to so comply would
not result in a Material Adverse Effect on the Business.
(K) BROKERS, FINDERS AND AGENTS. Except for commissions
payable to Cheetah Financial Services, Inc. ("Cheetah") by Seller in
connection with Cheetah's services rendered to Seller in connection
herewith, Seller is not directly or indirectly obligated to anyone
acting as a broker, finder, investment banker or in any other similar
capacity in connection with this Agreement or the transactions
contemplated hereby. In no way shall Buyer or Xxxxxx Xxxxxxxxx Xxxx &
Company, Incorporated "AAW", who has acted as investment banker to
Buyer in this transaction be liable to Cheetah for any commissions due
and owed to Cheetah by Seller in connection herewith. Seller has
entered into an agreement with Cheetah dated July 8, 1999, which
obligates Original Micronet to pay Cheetah certain fees in regard to
this transaction. Seller and each Shareholder hereby individually
indemnifies Buyer against any claim Cheetah may bring against Buyer
resulting from this transaction.
(L) INTELLECTUAL PROPERTY.
(i) To Seller's knowledge, Seller owns, or possess
adequate licenses or other rights to use the Intellectual
Property.
(ii) SCHEDULE 5.2(M)(ii) sets forth a list (which is
true and complete in all material respects) of, as of the date
of this Agreement, all patents, patent applications, copyright
registrations (and applications therefor), trademark
registrations (and applications therefor), (hereinafter the
"Registered IP") owned by the Seller (or obliged to be
assigned to the Seller) either in whole or in part and used
primarily in connection with the Business.
(iii) The Registered IP are in full force and effect
and there are no liens, claims, proceedings, or causes of
action which in any way affect the validity or enforceability
of such Registered IP.
(iv) To the knowledge of Seller, no product (or
component thereof) or process used or manufactured by and/or
for Seller or sold by Seller infringes or otherwise violates
the proprietary rights of any other Person. EXCEPT AS SET
FORTH IN SCHEDULE 5.2(M)(IV), the Seller has not received
written notice of any, nor are there any pending claims,
disputes, actions, proceedings, suits or appeals against
Seller with respect to the Registered IP or an allegation that
Seller is infringing an intellectual property right of any
third party.
(M) LICENSES. SCHEDULE 5.2(N) sets forth a list (which is true
and complete in all material respects) of all licenses, permits,
approvals or authorizations relating primarily to the Business
(collectively, "Licenses") issued by any United States, state, local or
foreign governmental entity or municipality or subdivision thereof or
any authority, department, commission, board, bureau, agency, court or
instrumentality (collectively, "Governmental Authorities"), which are
material to the Business as presently operated. Seller is in compliance
with all such Licenses, except where failure to so comply would not
result in a Material Adverse Effect on the Business. To the knowledge
of Seller, the Licenses listed on SCHEDULE 5.2(N) are in full force and
effect.
(i)
(N) EMPLOYEE RELATIONS; COLLECTIVE BARGAINING AGREEMENTS.
EXCEPT AS SET FORTH ON SCHEDULE 5.2(O), there are no material
employment controversies pending, or to the Seller's knowledge,
threatened which involve any of the Business' employees. Seller is in
compliance with all Laws relating to the employment of labor, except
where failure to so comply WOULD NOT RESULT IN A MATERIAL ADVERSE
EFFECT ON THE BUSINESS. EXCEPT AS SET FORTH ON SCHEDULE 5.2(O), Seller
is not a party to any collective bargaining or union Contract, and to
the Seller's knowledge, there exists no current union organizational
effort or proceeding by or before any Governmental Authority with
respect to any of Seller's employees.
(O) EMPLOYEES AND EMPLOYEE PLANS.
(i) SCHEDULE 5.2(p) contains a list (which is true
and complete in all material respects) as of the date of this
Agreement of all Employee Plans.
To the Seller's knowledge, each Employee
Plan is in material compliance with its terms and the
requirements of applicable Law. Buyer will incur no liability
under any Employee Plan as a result of the consummation of the
transactions contemplated hereby. No legal action or suit is
pending or, to the knowledge of Seller, threatened with
respect to any Employee Plan (other than claims for benefits
in the ordinary course).
(P) CHANGES IN CIRCUMSTANCES. EXCEPT AS A RESULT OF THE TAX
FREE REORGANIZATION AND AS SET FORTH ON SCHEDULE 5.2(Q), from the
Unaudited Financials Date to the date of this Agreement, the Business
has been conducted in the ordinary and normal course and Seller has not
with respect to the Business or Acquired Assets (i) Transferred or
otherwise disposed of any of the Acquired Assets outside the ordinary
and normal course of business; (ii) mortgaged, pledged or subjected to
any Lien (other than a Permitted Lien) any of the Acquired Assets;
(iii) acquired any Acquired Assets outside the ordinary and normal
course of business; (iv) sustained any damage, loss or destruction of
or to the Acquired Assets (whether or not covered by insurance) with a
book value in excess of $15,000; (v) modified, amended, canceled or
terminated any Contracts under circumstances which would have a
Material Adverse Effect on the Business; (vi) written down the value of
any Inventory other than in the normal and ordinary course of business;
(vii) canceled any other debts or claims or waived any rights of
substantial value other than in the ordinary and normal course of
business; (viii) made any change in any method of accounting or
accounting practice; (ix) other than pursuant to the terms hereof and
except as specifically set forth in SCHEDULE 5.2(Q), agreed to, or
obligated itself to, do anything identified in (i) through (viii)
above.
(Q) INSURANCE. SET FORTH ON SCHEDULE 5.2(R) is a list of all
material policies of presently in effect and maintained fire,
liability, workers' compensation and other forms of insurance which
relate to the Business. Seller has not been refused any insurance with
respect to the Business or the Acquired Assets, and has not had its
coverage limited, by any insurance carrier to which it has applied for
any insurance or with which it has carried insurance during the last
two years.
(R) ENVIRONMENTAL COMPLIANCE.
(I) EXCEPT AS SET FORTH ON SCHEDULE 5.2(S), to
Seller's knowledge, with respect to the Business and the
Acquired Assets, Seller has no liability, fixed or contingent,
under any Environmental Law or Environmental Permit (including
without limitation in respect of the handling, treatment,
storage or disposal of Hazardous Substances or the Release
thereof);
(ii) To Seller's knowledge, with respect to the
Business and the Acquired Assets, Seller has no knowledge of
any past usage, storage, treatment, spillage or Release of any
Hazardous Substances which, whether or not lawful at the time
of such event, has imposed upon Seller a risk of liability
under current (i.e., at the time of this Agreement)
Environmental Laws for remediation or response obligations.
(iii) There has been no environmental investigation,
study, audit, test, review or other analysis conducted by or
on behalf of Seller (or by a third party of which Seller has
knowledge) in relation to the Business or any property or
facility currently or, to the knowledge of Seller, previously
owned or leased by Seller in connection with the Business
which has not been delivered to Buyer prior to the date
hereof. No claim is pending, or to the knowledge of Seller,
threatened against Seller, relating to any alleged violation
by Seller of any Environmental Laws.
(iv) For purposes of this section, the following
terms have the following meanings:
"Environmental Laws" means any and all Laws relating
to occupational, health and safety, human health, the
environment or to emissions, discharges or releases of
Hazardous Substances into the environment, or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
Hazardous Substances or the clean-up or other remediation
thereof.
"Environmental Permits" means all permits, licenses,
authorizations, certificates and approvals of Governmental
Authorities relating to or required by Environmental Laws and
necessary or proper for the Business as currently conducted.
"Hazardous Substances" means any toxic, radioactive,
caustic or otherwise hazardous substance, including petroleum,
its derivatives, by-products and other hydrocarbons, or any
substance having any constituent elements displaying any of
the foregoing characteristics, including without limitation
any substance regulated under Environmental Laws.
"Release" means any discharge, emission or release,
including a Release as defined in the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, as amended, and the rules and regulations thereunder.
The term "Released" has a corresponding meaning.
(S) TAXES. EXCEPT AS SET FORTH ON SCHEDULE 5.2(T), (i) Seller
has filed all Tax Returns that it is required to file, and has paid all
Taxes shown thereon as owing, except where failure to file Tax Returns
or pay Taxes would not result in a Lien upon any of the Acquired Assets
or result in Buyer incurring any Liability therefor and (ii) there are
no Liens for Taxes upon any of the Acquired Assets and (iii) Original
MicroNet, Seller and Micro-Net Holdings Corp., have taken all necessary
steps to insure the tax free status of the Internal Revenue Code,
Section 352 reorganization which these entities were part to
immediately prior to this transaction. For the purposes of this
Agreement (i) "Tax" or "Taxes" means all income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, customs duties or other taxes,
fees, assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority (domestic or foreign) and (ii) "Tax
Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereto.
(T) NUMBER OF ACTIVE DIAL-UP INTERNET SERVICE ACCOUNTS. As of
the date of Closing Seller has at least 2,500 dial-up Internet service
accounts, including all of the accounts set forth in Schedule 1.1(a)
and excluding the Brainlink ACCOUNTS.
5.3 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to Seller and Stockholders as of the date of this Agreement that:
(A) ORGANIZATION AND STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of California, has the requisite corporate power and authority to
carry on its business as presently conducted and to enter into, make
and perform this Agreement and the transactions and other agreements
and instruments contemplated by this Agreement to be entered into and
performed on its part.
(B) POWER AND AUTHORITY. This Agreement and all other
agreements and instruments executed and delivered or to be executed and
delivered by Buyer in connection herewith have been, or upon execution
thereof will be, duly executed and delivered by Buyer. This Agreement
and the transactions and other agreements and instruments contemplated
hereby have been duly approved by all necessary corporate action of
Buyer and constitute the valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms,
subject, in each case, to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(C) NO VIOLATION. Subject to the receipt of Consents pursuant
to Section 1.3, neither the execution and delivery of this Agreement
and the other agreements and instruments executed or to be executed in
connection herewith by Buyer, nor the performance by Buyer of the
transactions contemplated hereby or thereby, will (i) violate, conflict
with, or result in a breach of any of the terms of Buyer's Certificate
of Incorporation or Bylaws, (ii) violate, conflict with, or result in a
breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in the right of termination or
cancellation of, or accelerate the performance required by, any lease,
agreement, commitment, contract or other instrument to which Buyer is a
party or by which it is bound, or (iii) violate any Law, except for
such matters which would not adversely affect the transactions
contemplated by this Agreement.
(D) CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. EXCEPT
AS SET FORTH IN SCHEDULE 1.3, no Consent of, or notice to, or
declaration, filing or registration with, any Governmental Authority is
required to be made or obtained by Buyer in connection with the
execution, delivery or performance by Buyer of this Agreement and the
transactions and other agreements and instruments contemplated hereby.
(E) BROKERS, FINDERS AND AGENTS. Other than paying 5% of the
transaction value to Xxxxxx Xxxxxxxxx Xxxx & Company, Incorporated,
("AWW") an NASD member firm who has acted as investment banker to the
Buyer in this transaction, Buyer is not directly or indirectly
obligated to anyone acting as a broker, finder or in any other similar
capacity in connection with this Agreement or the transactions
contemplated hereby. In no way shall Seller or any Stockholder be
liable to AAW for any commissions due and owed to Xxxxxxxxx Xxxx by
Buyer in connection herewith.
(F) LITIGATION. There exists no litigation, action, suit or
proceeding pending or, to Buyer's knowledge, threatened against Buyer
which would adversely affect the transactions contemplated by this
Agreement.
VI. COVENANTS
6.1 MUTUAL COOPERATION; FURTHER ASSURANCES. Upon the terms and subject to
the conditions of this Agreement, Seller and Buyer shall each use their
respective reasonable best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things necessary, proper or advisable,
consistent with applicable law, to consummate and make effective the
transactions contemplated hereby in the most expeditious manner (including,
without limitation, obtaining all Consents of all Governmental Authorities and
other third parties required in connection with the transactions contemplated by
this Agreement). Consistent with the foregoing, Seller and Buyer each agree from
time to time following the Closing, at the reasonable request of the other and
without further cost or expense to such requested party, to execute and deliver
such other instruments of conveyance and transfer and take such other actions as
the requesting party may reasonably request in order to more effectively
consummate and make effective the transactions contemplated hereby.
6.2 TAX MATTERS. The following provisions will govern the allocation of
responsibility as between Buyer and Seller for certain tax matters following the
Closing Date:
(a) To the extent they relate to the Acquired Assets or the
Business, all sales, use, and personal property taxes and assessments,
accrued and assessed (other than sales taxes relating to the transfer
of the Acquired Assets), if any, shall be prorated as of the Closing
Date with the Seller being responsible for the portions of such items
accruing before the Closing Date and the Buyer responsible for portions
of such items accruing on or after the Closing Date.
(b) Each party will provide the other with such assistance as
may reasonably be requested in the connection with the preparation of
any reimbursement-related audit, any Tax Return, any audit or
examination by any taxing authority, or any judicial or administrative
proceeding relating to liability for Taxes, and each will retain and
provide the other with any records or information which may be relevant
to such return, audit or examination, proceedings or determination. The
party requesting assistance hereunder shall reimburse the other party
for reasonable expenses incurred in providing such assistance. Any
information obtained pursuant to this Section or pursuant to any other
Section hereunder providing for the sharing of information or the
review of any Tax Return or schedule relating to Taxes shall be kept
confidential by the parties and not disclosed to any Person.
6.3 EXPENSES; TRANSFER TAXES. Each party hereto will bear the legal,
accounting and other expenses incurred by such party in connection with the
negotiation, preparation and execution of this Agreement and except as provided
in Article VII hereof, the transactions and other agreements and instruments
contemplated hereby. Buyer shall assume and be responsible for the payment of
any liability, exposure or obligation for any sales, use, excise, value added,
transfer, recording, filing, stamp, or other similar Tax or governmental charge
with respect to the sale or purchase of the Acquired Assets pursuant to this
Agreement, whether levied on Seller or Buyer.
6.4. Xxxxxx Xxxxxxxxxxx Board Appointment. Xxxxxx Xxxxxxxxxxx shall upon
the receipt of the all of the Financial Documents referred to in Section 5.2(g)
be appointed a member of the Board of Directors of Buyer as the designee of the
Seller. In the event Xxxxxxxxxxx is removed from the Board of Directors prior
the next annual meeting of the shareholders of Buyer, Buyer shall appoint
another designee of Seller to serve as a director of Buyer until the next annual
meeting of shareholders and his or her successor is duly elected and qualified.
6.5 INSURANCE. Buyer agrees that as of the close of business on the Closing
Date, Seller may cease providing insurance coverage for the Business and the
Acquired Assets and may permit coverage under such policies to cease for any
occurrence after that time.
6.6 EMPLOYEES.
(a) Buyer shall not be liable for any severance payments to
which an employee becomes entitled (i) under any Employee Plan or (ii)
under any applicable Law or otherwise, as a result of or in connection
with employee's employment with Seller.
(b) Seller shall be liable for all vacation time of employees
accrued and unused as of the Closing Date.
6.7 EMPLOYMENT AGREEMENTS AND NON-COMPETITION
(A) EMPLOYMENT AGREEMENTS. Buyer shall enter into employment
agreements ("Employment Agreements") with Xxxxx Xxxxx and Xxxx Xxxxxxx
who will be employed as executive officers of the Buyer upon the
Closing. Pursuant to the employment agreements, Xx. Xxxxx will receive
$100,000 per year plus $520 per month car allowance and 50,000 stock
options of Buyer which shall vest over time and in certain events. Xx.
Xxxxxxx will receive a base salary of $80,000 per year and a $500 per
month car allowance, medical benefits and 20,000 stock options that
will vest 1/3 per year over a three year period. The Employment
Agreements will all contain customary non-competition terms. The
definitive terms of employment will be contained in definitive
Employment Agreements to be executed on the Closing Date.
(B) NON COMPETITION; PERIOD AND CONDUCT. In consideration for
the Employment Agreements set out in Section 6.7 (a) hereof, during the
period commencing on the date hereof and continuing for three years,
none of Seller, Stockholders or any of Seller's Subsidiaries, including
MicroNet Holdings Corp., and MicroNet Online Services, LLC
(collectively, "Seller Group") will compete with Buyer or any of its
Affiliates in the Business. For purpose hereof, "Seller's Subsidiaries"
shall mean any entities in which Seller or Stockholders directly or
indirectly owns a 50% or greater voting interest.
(C) TERRITORY. Seller Group will refrain from engaging in the
activities described in this Section 6.7 during the period specified in
Section 6.7(a) hereof in the United States or any other country in
which Seller has carried on the Business.
(D) DEFINITIONS. Seller Group will be deemed to be competing
with Buyer if any of Seller Group are engaged or participate in the
Business, directly or indirectly, whether for their own account or for
that of any other entity or as principal, agent, representative,
proprietor, or partner, or in any capacity. Ownership of the following
shall not be considered competition for purposes of this Agreement: (i)
equity securities held by Seller or any of the Stockholders or their
affiliates on the date hereof, or (ii) publicly-traded equity in
companies which compete with the Company acquired after the date hereof
in normal brokerage transactions in amounts less that four percent (4%)
in the aggregate of the outstanding equity of such company.
(E) REMEDIES. Inasmuch as a breach, or failure to comply with,
this Section 6.7 will cause serious and substantial damage to Buyer if
any of Seller Group should in any way breach, or fail to comply with,
the terms of this Section 6.7, Buyer will be entitled to an injunction
restraining Seller Group from any such breach or failure and
reimbursement of costs and attorney's fees incurred in obtaining such
injunction. Resort to the remedy specified herein will not preclude or
bar the concurrent or subsequent seeking of recovery pursuant to
Article VII.
(F) SEVERABILITY. Each subdivision of this Section 6.7
constitutes a separate and distinct provision hereof. In the event that
any provision of this Section 6.7 shall finally be judicially
determined to be invalid, ineffective or unenforceable, such
determination will apply only in the jurisdiction in which such
adjudication is made and every other provision of this Section 6.7 will
remain in full force and effect. The invalid, ineffective or
unenforceable provision will without further action by the parties, be
automatically amended to effect the original purpose and intent of the
INVALID, INEFFECTIVE OR UNENFORCEABLE PROVISION; PROVIDED, HOWEVER,
that such amendment will apply only with respect to the operation of
such provision in the particular jurisdiction in which such
adjudication is made.
6.8 POST-CLOSING ASSISTANCE WITH CUSTOMERS. For a period of three years
following the Closing, Seller will use reasonable efforts, as requested by Buyer
from time to time (and not involving any payments by Seller) to assist Buyer at
Buyer's expense in Buyer's efforts to provide that Seller's current customers
will continue to do business with Buyer. Nothing contained herein shall be
deemed to obligate Seller to retain any employee or incur any expenses
6.9 POST-CLOSING TRANSFER OF ACQUIRED ASSETS. As soon as reasonably
practicable following the Closing, Buyer shall arrange for and cause the
transfer of the Acquired Assets to the Buyers billing facilities. Seller shall
cooperate, as reasonably requested by Buyer in connection with the foregoing,
including, but not limited to, providing any reasonable assistance to facilitate
the transfer of the Acquired Assets, granting access to Seller's Facility for
Buyer's employees and any third party retained by Buyer to assist with the
transfer of the Acquired Assets. Seller shall arrange for and cause the
disconnection of all electrical systems and software from the Acquired Assets,
and shall otherwise promptly prepare the Acquired Assets for removal and
shipment. Seller shall use its best efforts to maintain uninterrupted service to
the subscribers purchased by Buyer up and until Buyer is able to transfer all of
the Acquired Assets and, for the 30 day period commencing on the Closing, Seller
shall do so at its own expense. After such 30-day period, Buyer shall reimburse
Seller for Seller's reasonable expenses incurred in connection therewith.
Notwithstanding the foregoing, each party shall be responsible for its
respective costs and expenses incurred pursuant to any activity in accordance
with this Section 6.9. Upon and following the Closing, Seller shall be under no
obligation to maintain insurance coverage with respect to the Acquired Assets.
VII. SURVIVAL AND INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS.
(a) The representations and warranties of Seller contained in
Section 5.2(t) shall survive the Closing and remain in full force and
effect for the period of the applicable statute of limitations. The
representations and warranties of Stockholders contained in Section 5.1
of the Agreement and of Seller contained in Section 5.2 of the
Agreement, other than Section 5.2(t) for which a survival period is
provided above, will survive the Closing and remain in full force and
effect until two years from the Closing Date, except for the
representations and warranties contained in Section 5.2(s) of the
Agreement, which shall survive the Closing and remain in full force and
effect until three years from the Closing Date.
(b) The representations and warranties of Buyer under Section
5.3 of the Agreement will survive the Closing and remain in full force
and effect until two years from the Closing Date.
(c) Any claim for indemnification with respect to any breach
of a representation or warranty which is not asserted pursuant to the
giving of a Notice of Claim for Indemnity (as hereafter defined) within
such specified periods of survival may not be pursued and is hereby
irrevocably waived. Any claim for indemnification with respect to any
breach of a representation or warranty asserted within such specified
periods of survival pursuant to the giving of a Notice of Claim for
Indemnity will be timely made for purposes hereof.
(d) Unless a specified period is set forth in this Agreement
(in which event such specified period will control), the covenants and
agreements contained in this Agreement will survive the Closings and
remain in effect indefinitely.
7.2 LIMITATIONS ON LIABILITY.
(a) For purposes of this Agreement, (i) "Indemnity Payment"
means any amount of Indemnifiable Losses required to be paid pursuant
to this Agreement, (ii) "Indemnitee" means any person or entity
entitled to indemnification under this Agreement, (iii) "Indemnifying
Party" means any person or entity required to provide indemnification
under this Agreement, (iv) "Indemnifiable Losses" means any and all
loss, liability, claim, demand, obligation, damage, deficiency, cost or
expense (including without limitation reasonable attorneys' fees and
expenses), including without limitation any of the foregoing relating
to, resulting from or arising out of any action, suit, administrative
proceeding, investigation, audit or other proceeding brought by any
person or entity and any settlement or compromise thereof, reduced by
the amount of any Third-Party Recovery (as hereafter defined) and
reduced to take account of any actual net tax benefit realized from the
payment of any Indemnified Loss ("Tax Benefits"), (v) "Third Party
Claim" means any threat, demand, action, suit, administrative
proceeding, investigation or audit or other proceeding made or brought
by any person or entity who or which is not a party to this Agreement
or an Affiliate of a party to this Agreement reduced by the amount of
any Third-Party Recovery and Tax Benefit, and (vi) "Notice of Claim for
Indemnity" means a written notice given in accordance with Section 7.4
which (A) if based upon a Third Party Claim against any Indemnitee,
must include copies of all material notices and documents received by
the Indemnitee with respect to such Third Party Claim and will indicate
the estimated amount, if reasonably practicable, of the Indemnifiable
Loss that has been or may be sustained by the Indemnitee, or (B) if
based upon an alleged breach of a representation, warranty or covenant
contained in this Agreement, which does not relate to, result from or
arise out of a Third Party Claim (a "Direct Claim"), and which relates
to, results from or arises out of an event or circumstance discovered
by the Indemnitee which the Indemnitee in good faith reasonably
believes is reasonably likely to lead to the incurrence of an
Indemnifiable Loss by reason of such alleged breach, whether or not the
Indemnifiable Loss is actually suffered or sustained within the
applicable period of survival specified in Section 7.1, must include in
reasonable detail the basis for the Indemnitee's good faith, reasonable
belief and must indicate the estimated amount, if reasonably
practicable, of the Indemnifiable Loss that has been or may be
sustained by the Indemnitee reduced by the amount of any THIRD-PARTY
RECOVERY AND TAX BENEFIT; PROVIDED, HOWEVER, that the Indemnifying
Party will have no liability with respect to any estimate referred to
in this clause (vi) and any such estimate will, itself, in no way limit
or enlarge the amount of Indemnifiable Loss recoverable by the
Indemnitee indicating such estimate.
Notwithstanding the foregoing, items that would be considered
Indemnifiable Losses (such as investigative costs and expenses)
incurred by an Indemnitee in connection with any Third-Party Claim will
not be considered Indemnifiable unless and until a claim, action, suit
or administrative proceeding is actually commenced or such Third-Party
Claim is settled.
(b) Notwithstanding any other provision of this Agreement or
of any applicable Law, Buyer will not be entitled to recovery under
Section 7.3(a) and neither Seller nor Stockholders will not be entitled
to recovery under Section 7.3(b) (other than with respect to Buyer's
obligations under Section 3.2(b) and Section 3.4) unless and until the
aggregate amount of Indemnifiable Losses incurred by the Buyer, on the
one hand, or the Seller and Stockholders in the aggregate, on the other
hand, as the case may be, in respect of all individual events or
occurrences or any series of related events or occurrences giving rise
to such Indemnifiable Losses exceeds $25,000, in which event (subject
to Section 7.2(c)), Buyer, on the one hand, or Seller and Stockholders,
on the other hand, may assert its right to indemnification hereunder to
the extent of all Indemnifiable Losses suffered by such Indemnitee
(excluding the first $25,000 with respect to the Buyer or the Seller
and Stockholders in the aggregate, as the case may be).
(c) Notwithstanding any other provision of this Agreement or
of applicable Law, the indemnification obligations of Seller and
Stockholders in the aggregate under Section 7.3 will not exceed
$500,000 (or such lesser amount to the extent that Buyer is in breach
of its obligations under Section 3.2(b)) plus any amounts actually paid
to Seller under Section 3.4.
(d) Anything in this Article VII to the contrary
notwithstanding, Indemnifiable Losses shall not include any
consequential or punitive damages or loss of profits or earnings
incurred by an Indemnitee and shall be strictly limited to actual
out-of-pocket losses, costs and expenses of Indemnitee.
7.3 INDEMNIFICATION.
(a) Subject to the other provisions of this Article VII, each
Stockholder will severally indemnify, defend and hold harmless Buyer
and its Affiliates and its directors, officers, partners, employees,
agents and representatives from and against any and all Indemnifiable
Losses relating to, resulting from or arising out of:
(i) Any material breach by such Stockholder of any of
the representations or warranties of such Stockholder
contained in Section 5.1 of this Agreement;
(ii) Any material breach by such Stockholder of any
covenant, obligation or agreement of such Stockholder
contained in this Agreement;
(iii) Any use by such Stockholder of the name
Xxxxx-Xxx.Xxx, or any derivation thereof (except as
contempated by the license).
(b) Subject to the other provisions of this Article VII,
Seller, and each Stockholder severally and not jointly, pro rata in
accordance with such Stockholder's percentage interest in Seller, will
indemnify, defend and hold harmless Buyer and its Affiliates and its
directors, officers, partners, employees, agents and representatives
from and against any and all Indemnifiable Losses relating to,
resulting from or arising out of:
(i) Any material breach by Seller of any of the
representations or warranties of Seller contained in Section
5.2 of this Agreement;
(ii) Any material breach by Seller of any covenant,
obligation or agreement of Seller contained in this Agreement;
(v) Any use by Seller of the name Xxxxx-Xxx.Xxx, or
any derivation thereof (except as contemplated by the
license).
(c) Subject to the other provisions of this Article VII, Buyer
will indemnify, defend and hold harmless Seller and its Affiliates
(including the Stockholders) and its directors, officers, partners,
employees, agents and representatives from and against any and all
Indemnifiable Losses relating to, resulting from or arising out of:
(i) Any material breach by Buyer of any of the
representations or warranties of Buyer contained in Section
5.3 of this Agreement; and
(ii) Any material breach by Buyer of any covenant,
obligation or agreement of Buyer contained in this Agreement.
7.4 DEFENSE OF CLAIMS.
(a) If any Indemnitee receives notice of the assertion of any
claim, or the commencement of any Third Party Claim, or the Indemnitee
intends to seek indemnity hereunder, then the Indemnitee will promptly
provide the Indemnifying Party with a Notice of Claim for Indemnity,
but in any event not later than 20 calendar days after receipt of such
notice of the assertion of any claim or the commencement of any Third
Party Claim. The failure by an Indemnitee to provide a Notice of Claim
for Indemnity to an Indemnifying Party of a Third Party Claim will not
relieve the Indemnifying Party of any indemnification responsibility
under this Article VII, except to the extent, if any, that such failure
materially prejudices the ability of the Indemnifying Party to defend
such Third Party Claim.
(b) Without prejudice to the rights of the Indemnitee prior
thereto, the Indemnifying Party will have the right to control the
defense, compromise or settlement of the Third Party Claim with its own
counsel (reasonably satisfactory to the Indemnitee) if the Indemnifying
Party delivers written notice to the Indemnitee within 30 calendar days
following the Indemnifying Party's receipt of Notice of Claim for
Indemnity from the Indemnitee setting forth its undertaking to defend
SUCH THIRD PARTY CLAIM IN ACCORDANCE WITH THIS ARTICLE VII; PROVIDED,
HOWEVER, that the Indemnifying Party will not enter into any settlement
of any Third Party Claim which would impose or create any obligation or
any financial or other liability on the part of the Indemnitee. In its
defense, compromise or settlement of any Third Party Claim, the
Indemnifying Party will timely provide the Indemnitee with such
information with respect to such defense, compromise or settlement as
the Indemnitee may reasonably request, and each party shall reasonably
cooperate with each other in the defense of such Third Party Claim. No
settlement of any Claim involving performance or any remedy other than
the payment of money damages may be made without the consent of the
party from whom such performance or other remedy would be required,
which consent shall not be unreasonably withheld. The Indemnitee will
be entitled (at the Indemnitee's expense) to participate in the defense
by the Indemnifying Party of any Third Party Claim with its own
counsel.
(c) In the event that the Indemnifying Party does not
undertake the defense, compromise or settlement of a Third Party Claim
in accordance with subsection (b) of this Section 7.4, the Indemnitee
will have the right to control the DEFENSE OR SETTLEMENT OF SUCH THIRD
PARTY CLAIM WITH COUNSEL OF ITS CHOOSING; PROVIDED, HOWEVER, that the
Indemnitee will not settle or compromise any Third Party Claim without
the Indemnifying Party's prior written consent, unless the terms of
such settlement or compromise release the Indemnitee and the
Indemnifying Party from any and all liability with respect to the Third
Party Claim. The Indemnifying Party will be entitled (at the
Indemnifying Party's expense) to participate in the defense of any
Third Party Claim with its own counsel.
(d) Any Direct Claim will be asserted by giving the
Indemnifying Party a Notice of Claim for Indemnity as promptly as
reasonably possible after discovery thereof.
(e) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an Indemnity Payment, is reduced by
recovery, settlement or otherwise under or pursuant to any insurance
coverage, Tax Benefit or pursuant to any claim, recovery, settlement
against or with any person or entity which is not an Affiliate of the
Indemnitee (such reduction, whether occurring before or after the
Indemnify Payment, is referred to herein as a "Third-Party Recovery"),
the amount of such reduction, in each case less any costs, expenses, or
taxes incurred by the Indemnitee in connection therewith, together with
interest thereon from the date of payment thereof at the prime rate of
interest as announced from time to time by Citibank N.A. plus 1%, will
promptly be repaid by the Indemnitee to the Indemnifying Party.
7.5 RIGHT TO OFF-SET . In addition to any and all other remedies under this
Agreement, Buyer will be entitled, and Seller may obligate Buyer, to recover any
Indemnity Payment due from Seller or Stockholders hereunder to the extent, but
only to the extent, such Indemnity Payment is a sum certain which (a) is past
due and owing without dispute or (b) is past due and a judgment is entered by a
court having proper jurisdiction that such Indemnity Payment hereunder is due
and owing by Seller or Stockholders to Buyer (in either case, an "Undisputed
Payment") by retaining and setting off the amounts of such Undisputed Payment
against any AMOUNTS DUE OR TO BECOME DUE FROM BUYER TO SELLER OR SELLER'S
DESIGNEE UNDER SECTION 3.4; PROVIDED that if a judgment with respect to an
Undisputed Payment pursuant to clause (b) above is reversed or stayed, Buyer
will immediately reverse such set-off.
7.6 SOLE REMEDY. Subject to Buyer's right to seek specific performance of
the provisions of this Agreement pursuant to Section 6.7(e), the indemnification
afforded by this Article VII will be the sole and exclusive remedy against
Seller and Stockholders or any of their respective Affiliates for any and all
loss, liability, claim, demand, obligation damage, deficiency, cost or expense
of Buyer or any other Indemnitee in respect of matters arising out of this
Agreement.
VIII. MISCELLANEOUS
8.1 AMENDMENTS, SUPPLEMENTS, ETC. This Agreement may be amended or
supplemented at any time by additional written agreements signed by the parties
hereto as may mutually be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of this Agreement, or to clarify
the intention of the parties hereto or for any other purpose.
8.2 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(together with the Schedules hereto) constitutes the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
the parties hereto with respect to the subject matter hereof and thereof. Except
as provided in Article VII, this Agreement is not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder. Any right
of a Person other than the parties hereto to any rights or remedies under
Article VII is expressly conditioned upon such Persons complying with the
provisions of Article VII applicable to it as a Person seeking indemnification
thereunder and compliance with the last paragraph of Section 8.5.
8.3 SCHEDULES. Specific disclosure of any item on any schedule hereto shall
be deemed sufficient disclosure of such item on any other schedule hereto.
8.4 SEVERABILITY. If any term or other provision of this Agreement, or the
application thereof to any Person, place or circumstances, shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in full force and effect; PROVIDED,
HOWEVER, that in the event that the terms and conditions of this Agreement are
materially altered as a result of this paragraph, the parties will use
reasonable efforts to renegotiate the terms and conditions of this Agreement to
resolve any inequities.
8.5 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law.
8.6 CONSENT TO JURISDICTION; . Each party hereto irrevocably submits to the
non-exclusive jurisdiction of (a) the Supreme Court of the State of New York,
New York County and (b) the United States District Court for the Southern
District of New York for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each party
hereto further agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set forth in Section
8.7 will be effective service of process for any action, suit or proceeding in
New York with respect to any matters to which it has submitted to jurisdiction
as set forth above in the immediately preceding sentence. Each party hereto
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (i) the Supreme Court of the State of New York, New York
County or (ii) the United States District Court for the Southern District of New
York, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
8.7 NOTICES. Any notice, request or other communication required or
permitted hereunder will be in writing and will be deemed to have been duly
given (a) when received if personally delivered, (b) on the fifth day after
being sent by registered or certified mail, return receipt requested, postage
prepaid, (c) on the next business day after being sent by telecopy, with
confirmed answer back, or (d) on the next business day after being sent by
priority delivery by an established overnight courier, to the parties at their
respective addresses set forth below:
To Seller: MicroNet Services, Inc.
0000 Xxxxxx Xxxxxx
Xxx Xxxxx Xxxxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: President
- AND -
With a copy to: Albert, Ward & Xxxxxxx P.C.
(which by itself 000 Xxxxx Xxxxxx
shall not constitute X.X. Xxx 0000
xxxxxx) Xxxxxxxxx Xxxxxxxxxxx 00000
Telecopier (000) 000-0000
Attention: C. Robton Xxxxxxx-Xxxxxxx, Esq.
Stockholders: Kanfer Associates
Xx. Xxxxxx Xxxxxxxxxxx
Xx. Xxxxx Xxxxx
c/o MicroNet Services, Inc.
Telecopier: (000) 000-0000
Attention: Kanfer Associates,
Xxxxxx Xxxxxxxxxxx and Xxxxx Xxxxx
With a copy to: Albert, Ward & Xxxxxxx, P.C.
(which by itself 000 Xxxxx Xxxxxx
shall not constitute X.X. Xxx 0000
xxxxxx) Xxxxxxxxx, Xxxxxxxxxxx 00000
Telecopier (000) 000-0000
Attention: C.Robton Xxxxxxx-Xxxxxxx, Esq.
To Buyer: Protosource Corporation
0000 00XX Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Telecopier: 00-000-0000
Attention: Xxxxxxx X. Xxxxxx, Chief Executive
Officer
With a copy to: Sichenzia, Ross & Xxxxxxxx LLP
(WHICH BY ITSELF 000 XXXX 00XX XXXXXX, 00XX Xxxxx
shall not constitute Xxx Xxxx, Xxx Xxxx 00000
notice) Telecopier: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Any party by written notice to the others given in accordance with this Section
8.7 may change the address or the Persons to whom notices or copies thereof will
be directed.
8.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
8.9 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns but no rights, obligations or liabilities hereunder will be
assignable by any party without the prior written consent of the other party
except as otherwise provided herein.
8.10 WAIVERS. Either Buyer, on the one hand, or Seller and Stockholders, on
the other hand, by written notice to the other may (a) extend the time for
performance of any of the obligations or other actions of the other under this
Agreement, (b) waive any inaccuracies in the representations or warranties of
the other contained in this Agreement, (c) waive compliance with any of the
covenants of the other contained in this Agreement, or (d) waive or modify
performance of any of the obligations of the OTHER UNDER THIS AGREEMENT;
PROVIDED, HOWEVER, that neither Buyer, on the one hand, nor Seller and
Stockholders, on the other hand, may, without the prior written consent of the
other, make or grant such extension of time, waiver of inaccuracies or
compliance or waiver or modification of performance with respect to their
representations, warranties, conditions or covenants hereunder. Except as
provided in the immediately preceding sentence, no action taken pursuant to this
Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this Agreement and will
not operate or be construed as a waiver of any subsequent breach, whether of a
similar or dissimilar nature.
8.11 TITLES AND HEADINGS . The titles and headings in this Agreement are
solely for convenience of reference and will not be given any effect in the
construction or interpretation of this Agreement.
8.12 CERTAIN INTERPRETIVE MATTERS AND DEFINITIONS.
(a) When a reference is made in this Agreement to an Article,
Section, Schedule or Exhibit, such reference shall be to an Article,
Section, Schedule or Exhibit of this Agreement unless otherwise
indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the word
"party" is used in this Agreement, it shall refer to Seller,
Stockholders or the Buyer, as the case may be. Whenever the words
"included", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." All
accounting terms not defined in this Agreement shall have the meanings
determined by generally accepted accounting principles as in effect
from time to time. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement. The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the
masculine as well as the feminine and neuter genders of such term, and
references to a Person are also to its permitted successors and
assigns. Any agreement, instrument or statute defined or referred to
herein or in any agreement or instrument that is referred to herein
means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements
and instruments) by waiver or consent and (in the case of statutes) by
succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. The term
"Affiliate" has the meaning given to that term in Rule 12b-2 of
Regulation 12B under the Securities Exchange Act of 1934, as amended.
All references to "business days" will be to any day other than a
weekend day or a day which is a Federal holiday in the United States,
and all references to "$" or dollar amounts will be to lawful currency
of the United States of America.
(b) No provision of this Agreement will be interpreted in
favor of, or against, any of the parties hereto by reason of the extent
to which any such party or its counsel participated in the drafting
thereof or by reason of the extent to which any such provision is
inconsistent with any prior draft hereof or thereof.
(c) All provisions of this Agreement which refer to the
"knowledge" of Seller shall mean the actual knowledge of the
Stockholders.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written above.
KANFER ASSOCIATES
By: _______________________________________
Xxxxxx Xxxxxxxxxxx
General Partner
(with respect to Section 5.1,
Section 6.7, Article VII and
Article VIII)
By: _______________________________________
XXXXXX XXXXXXXXXXX (with respect to
Section 5.1, Section 6.7, Article
VII and Article VIII)
By: _______________________________________
XXXXX XXXXX (with respect to Section
5.1, Section 6.7, Article VII and
Article VIII)
MICRONET SERVICES, INC.
By: _______________________________________
Name:
Title:
PROTOSOURCE CORPORATION
By: _______________________________________
Name:
Title:
Table of Contents
Page
I. ASSETS................................................................................................1
1.1 Sale and Transfer of Assets......................................................................1
(A) INVENTORY....................................................................................1
(C) INTELLECTUAL PROPERTY RIGHTS.................................................................1
(D) BUSINESS RECORDS.............................................................................2
(E) CONTRACTS....................................................................................2
1.2 RETAINED ASSETS..............................................................................2
(A) PREPAIDS.....................................................................................2
(B) CASH AND CASH EQUIVALENTS....................................................................2
(C) ACCOUNTS RECEIVABLE..........................................................................2
(D) LEASED REAL PROPERTY.........................................................................2
(E) INSURANCE POLICIES...........................................................................2
(F) DESIGNATED ASSETS............................................................................2
(G) CORPORATE RECORDS............................................................................2
(H) THIS AGREEMENT...............................................................................2
(I) CLAIMS.......................................................................................2
(J) TAXES........................................................................................2
(K) BENEFIT PLAN ASSETS..........................................................................3
1.3 ASSIGNABILITY AND CONSENTS...................................................................3
(A) REQUIRED CONSENTS.............................................................................3
II. LIABILITIES.........................................................................................3
2.1 ASSUMPTION OF LIABILITIES....................................................................3
(A) CONTRACTS....................................................................................3
(B) POST-CLOSING DATE............................................................................3
2.2 RETAINED LIABILITIES.........................................................................3
(B) POST-CLOSING TRANSFER OF ASSIGNED ASSETS.....................................................3
(C) ACCOUNTS PAYABLE.............................................................................4
(D) EMPLOYEE-RELATED LIABILITIES.................................................................4
(E) TAXES........................................................................................4
(F) LIABILITIES RELATING TO RETAINED ASSETS......................................................4
III. PURCHASE PRICE.....................................................................................4
3.1 PURCHASE PRICE...............................................................................4
3.2 TIMING AND MANNER OF PAYMENT OF PURCHASE PRICE...............................................4
3.3 PURCHASE PRICE ALLOCATION....................................................................6
IV. CLOSING.............................................................................................7
4.1 GENERAL......................................................................................7
4.2 DOCUMENTS TO BE DELIVERED BY SELLER..........................................................7
4.3 DOCUMENTS TO BE DELIVERED BY BUYER...........................................................7
V. REPRESENTATIONS AND WARRANTIES.......................................................................8
5.1 REPRESENTATIONS AND WARRANTIES OF SOLE STOCKHOLDER...........................................8
5.2 REPRESENTATIONS AND WARRANTIES OF SELLER.....................................................8
(A) ORGANIZATION AND STANDING....................................................................8
(B) POWER AND AUTHORITY..........................................................................8
(C) NO VIOLATION.................................................................................8
(D) CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES...........................................8
(E) ACQUIRED ASSETS; TITLE TO ACQUIRED ASSETS....................................................9
(F) CONTRACTS....................................................................................9
(G) FINANCIAL STATEMENTS.........................................................................9
(I) LEGAL PROCEEDINGS............................................................................9
(J) CUSTOMERS AND SUPPLIERS......................................................................9
(K) COMPLIANCE WITH LAWS........................................................................10
(L) BROKERS, FINDERS AND AGENTS.................................................................10
(M) INTELLECTUAL PROPERTY....................................................................10
(N) LICENSES....................................................................................10
(O) EMPLOYEE RELATIONS; COLLECTIVE BARGAINING AGREEMENTS........................................10
(P) EMPLOYEES AND EMPLOYEE PLANS................................................................11
(Q) CHANGES IN CIRCUMSTANCES....................................................................11
(R) INSURANCE...................................................................................11
(S) ENVIRONMENTAL COMPLIANCE....................................................................11
(T) TAXES.......................................................................................12
5.3 REPRESENTATIONS AND WARRANTIES OF BUYER.....................................................12
(A) ORGANIZATION AND STANDING...................................................................13
(B) POWER AND AUTHORITY.........................................................................13
(C) NO VIOLATION................................................................................13
(D) CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES..........................................13
(E) BROKERS, FINDERS AND AGENTS.................................................................13
(F) LITIGATION..................................................................................13
VI. COVENANTS..........................................................................................13
6.1 MUTUAL COOPERATION; FURTHER ASSURANCES......................................................13
6.2 TAX MATTERS.................................................................................14
6.3 EXPENSES; TRANSFER TAXES....................................................................14
6.5 Insurance...................................................................................14
6.6 EMPLOYEES...................................................................................14
6.7 NON-COMPETITION.............................................................................15
(A) PERIOD AND CONDUCT..........................................................................15
(B) TERRITORY...................................................................................15
(C) DEFINITIONS.................................................................................15
(D) REMEDIES....................................................................................15
(E) SEVERABILITY................................................................................15
6.9 POST-CLOSING ASSISTANCE WITH CUSTOMERS......................................................15
6.10 POST-CLOSING TRANSFER OF ACQUIRED ASSETS....................................................16
VII. SURVIVAL AND INDEMNIFICATION......................................................................16
7.1 SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS........................................16
7.2 LIMITATIONS ON LIABILITY....................................................................16
7.3 INDEMNIFICATION.............................................................................17
7.4 DEFENSE OF CLAIMS...........................................................................18
7.5 RIGHT TO SET-OFF............................................................................19
7.6 SOLE REMEDY.................................................................................19
VIII. MISCELLANEOUS....................................................................................19
8.1 AMENDMENTS, SUPPLEMENTS. ETC................................................................19
8.2 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES..............................................20
8.3 SCHEDULES...................................................................................20
8.4 SEVERABILITY................................................................................20
8.5 GOVERNING LAW...............................................................................20
8.6 CONSENT TO JURISDICTION; NO JURY TRIAL......................................................20
8.7 NOTICES.....................................................................................20
8.8 COUNTERPARTS................................................................................21
8.9 SUCCESSORS AND ASSIGNS......................................................................21
8.10 WAIVERS.....................................................................................21
8.11 TITLES AND HEADINGS.........................................................................22
8.12 CERTAIN INTERPRETIVE MATTERS AND DEFINITIONS................................................22
DEFINED TERMS
Term Section
Acquired Assets 1.1
Affiliate 10.11(a)
Assigned Contracts 1.1(f)
Assumed Liabilities 2.1
Balance Sheet 5.1(g)
Balance Sheet Date 5.1(g)
Business Preamble
Business Records 1.1(e)
Buyer Preamble
CERCLA 5.1(s)(iii)
Closing 4.1
Closing Date 4.1
Consent-Required Contracts and Licenses 1.3(a)
Consents 1.3(a)
Contracts 1.1(f)
Direct Claim 9.2(a)(vi)
Dispute Notice 3.3(b)
ERISA 2.2(c)
Earn Out Period 3.5(b)
Employee Plans 2.2(c)
Environmental Laws 5.1(s)(iii)
Environmental Permits 5.1(s)(iii)
Financial Statements 5.1(g)
Firm 3.3(c)
Fixed Assets 1.1(c)
Governmental Authorities 1.1(g)
Hazardous Substances 5.1(s)(iii)
Indemnifiable Losses 9.2(a)(iv)
Indemnifying Party 9.2(a)(iii)
Indemnitee 9.2(a)(ii)
Indemnity Payment 9.2(a)(i)
Intellectual Property 1.1(d)
Inventory 1.1(b)
Inventory Statement 3.3(b)
Inventory Valuation Procedures 3.3(b)
Inventory Value 3.3(b)
knowledge 10.11(c)
Laws 1.1(e)
Licenses 1.1(g)
Liens 5.1(e)(ii)
Material Adverse Effect 5.1
Notice of Claim for Indemnity 9.2(a)(vi)
Permitted Liens 5.1(e)(ii)
Person 1.3(a)
Purchase Price 3.1
Registered IP 5.1(m)(ii)
Release 5.1(s)(iii)
Restricted Affiliate 6.9(c)(ii)
Retained Assets 1.2
Retained Liabilities 2.2
Seller Preamble
Seller's Products Gross Sales 3.5(b)
Tax or Taxes 5.1(t)
Tax Benefits 9.2(a)(iv)
Tax Returns 5.1(t)
Third Party Claim 9.2(a)(v)
Transfer 1.1
Transitional Services Agreement 4.4
