PURCHASE AGREEMENT
------------------
This PURCHASE AGREEMENT ("Agreement") is made and entered into as of the
15th day of December, 1999, by and among DSG, INC., a California corporation
(the "Seller"), COINLESS SYSTEMS, INC., a Nevada corporation ("CSI"), and
AUTOMATIC DATA CAPTURE TECHNOLOGIES, INC., a California corporation (the
"Buyer").
In consideration of the mutual promises set forth in this Agreement, the
parties agree as follows:
1. Facts.
------
This Agreement is entered into based on the following facts:
A. Seller is engaged in the business of marketing technology and
equipment including but not limited to scanners and printers used in bar coding.
Seller's business operations are located at 00000 Xxxxxx Xxxxxx, Xxxxx 000,
Xxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000 ("Premises"). Seller's business operations
whether at the Premises or elsewhere are referred to herein as the "Business."
B. Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, certain "Assets" (as defined below), utilized in connection with the
Business, on the terms and conditions set forth in this Agreement.
C. CSI is the sole shareholder of Seller.
2. Sale of Assets.
--------------
A. Subject to the terms and conditions set forth in this Agreement,
Seller agrees to transfer, assign, and convey to Buyer, and Buyer agrees to
acquire from Seller, effective at the Closing (as defined below), the following
assets, properties and rights, and
1
business of Seller associated with the Business and/or used by Seller in the
Business, whether owned by Seller, CSI, or the shareholders of CSI (the assets
described in this Paragraph 2.A. are collectively referred to herein as the
"Assets"):
i. All (a) customer pre-paid deposits for products not delivered and
for services not performed (collectively "Deposits"), and (b) inventories held
for sale in the usual course of business, whether in progress or complete (the
"Purchased Inventory"). The Deposits and the Purchased Inventory will be as of
the closing and will be as set forth in Exhibit 2.A.i.
ii. All equipment (used in the Business and not held for sale in the
usual course of business), furniture, removable fixtures and leasehold
improvements, racks, phone and other systems, and other tangible assets owned
and/or used by Seller in its Business. Exhibit 2.A.ii. sets forth a list of all
such items and indicates where applicable, applicable serial number, model,
description.
iii. All other tangible and intangible properties and rights,
including but not limited to: (a) certifications; (b) authorizations; (c)
licenses; (d) permits; (e) customer and vendor lists, data, and records,
including but not limited to records of prior sales and collection history; (f)
all operating records and maintenance schedules and reports, (provided Seller
shall not be required to prepare schedules and reports not routinely kept by
Seller historically in its operations of the Business); (g) trade secrets; (h)
methods of operation and procedures; (i) know-how; (j) work in progress; (k)
purchase orders and all related data and files; (l) contract rights, as set
forth in Paragraph 3 below; (m) hand and other similar tools; (n) rights to
tooling and molds; (o) any registered marks, including all rights associated
therewith including but not limited to the right to xxx for past infringements,
and all other trade names, marks, symbols and the like whether or not
registered; (p) the right to use the existing name, "DSG, Inc." and all rights
thereto of Seller and variations thereof, including any d/b/a variations for a
period of two years from and after the Closing in all manner
2
deemed necessary by Buyer in Buyer's business operations, including but not
limited to the right to license and sub-license business affiliates of Buyer to
use such names; (q) all names other than DSG, Inc. used in the Business; (r)
office and other supplies; (s) phone, facsimile numbers, and all directory
listings, web and similar sites; (t) goodwill; and (u) all other assets as set
forth in the "Financial Statements" of Seller (as defined below).
B. Notwithstanding the foregoing, it is acknowledged Buyer is not
acquiring Seller's assets listed on Exhibit 2.B.
C. On the last business day prior to the Closing, Seller shall
provide Buyer Exhibit 2.C., which Exhibit shall set forth a full and complete
list of Seller's open customer sales orders and vendor open purchase orders as
of such date.
3. Non-Assumption of Liabilities.
-----------------------------
A. Buyer shall not assume any liabilities of Seller or CSI except for
the following matters: (i) Seller's rights and obligations under customer open
sales order and vendor open purchase orders as of the Closing which Buyer elects
to accept; and (ii) Seller's rights and obligations under the other contracts of
the Business as of the Closing which Buyer elects to accept ((i) and (ii) are
jointly "Assumed Contracts"). Buyer shall indicate on Exhibit 3.A.ii. on or
before the Closing the Assumed Contracts, if any. Buyer shall not be required to
accept any such other contract obligations of Seller and any acceptance by Buyer
shall be in Buyer's sole and absolute discretion and shall be only as to those
customer open sales orders and vender open purchase orders and contracts
specifically set forth in Exhibit 3.A.ii.
B. Except as specifically set forth in Paragraph 3.A., it is
expressly understood and agreed that Buyer shall not be liable for, nor is Buyer
assuming in any manner, any other of the obligations or liabilities of Seller of
any kind or nature, whether or not directly related to the Business and/or the
Assets, including but not limited to: (a) any employee benefits and rights of
any nature (even if any such employees are hired by Buyer, if any are hired);
(b)
3
any payroll, withholding or similar taxes or any other taxes of any nature; (c)
any liability for any act, failure to act, or state of facts relating to
Seller's operation of the Business and the Assets; (d) Any liability in respect
of rejections, returns, or reworking costs for products sold or for damages
whether special, general, incidental, or consequential related to the products
sold, in either case for events occurring on or before the Closing by Seller;
(e) Seller's obligations for any lease and occupancy of the Premises; and (f)
any earned but unpaid commissions, bonuses, and rebates.
4. Purchase Price.
--------------
A. The Purchase Price ("Purchase Price") to be paid by Buyer to
Seller for the Assets shall be Three Hundred Twenty Five Thousand Dollars
($325,000.00).
B. The parties agree that the purchase price shall be allocated as
set forth in Exhibit 4.B. The parties agree to reflect the allocation of the
purchase price as set forth in Exhibit 4.B. for all state and federal tax
purposes, and to cooperate in preparing and filing all necessary tax documents,
including but not limited to IRS Form 8594
5. Payment of Purchase Price.
-------------------------
Buyer shall pay the purchase price for the Assets as follows:
A. Two Hundred Thousand Dollars ($200,000.00) to be paid at the
Closing.
B. One Hundred Twenty Five Thousand Dollars ($125,000.00) to be paid
from and after the Closing in twelve (12) calendar quarter installments of Ten
Thousand Four Hundred Sixteen Dollars and Sixty-Seven Cents ($10,416.67)
commencing on the calendar quarter ending June 30, 2000 and continuing on the
last day of the subsequent calendar quarters ending September 30, December 31,
March 31 and June 30 until the entire $125,000 has been paid or otherwise offset
by the terms of this Agreement. Such sums to be paid under this paragraph 5.B.
shall be paid into the "Escrow Account" and paid to Seller when evidence
satisfactory to Buyer is provided demonstrating that the "Interim Permitted
Liens"
4
(as that term is defined below) are removed from Assets. The term "Escrow
Account" is defined as such term is defined pursuant to the Escrow Agreement
attached hereto as Exhibit 5.B. In the event the Escrow Agreement has
terminated, by the mutual agreement of Buyer, Seller and CSI, any such funds
shall be paid directly to Seller.
C. In the event Buyer asserts a claim for indemnity and hold harmless
against Seller and/or CSI under this Agreement Buyer shall have the right to
offset the amount of such claim against any installment otherwise then due and
payable or due and payable in the future under paragraph 5.B. of this Agreement.
Such offset shall not be a limit on the amount of the indemnity and hold
harmless obligation of Seller and/or CSI or of Buyer's rights and remedies
incident to such claim. Buyer shall provide Seller notice of any offset and
reasonable details regarding such claim.
6. Condition of Assets.
-------------------
Buyer shall acquire the Assets free and clear of all liens,
liabilities, debts and claims of all nature of third parties, Seller and CSI
except for the matters set forth in Exhibit 6 ("Interim Permitted Liens"). It is
acknowledged and specifically agreed that Buyer shall not be responsible for any
liabilities, obligations, claims, or other responsibilities of Seller or CSI
except as set forth in Paragraph 3 of this Agreement. Without limiting the
foregoing, Buyer specifically is not assuming any of the Interim Permitted
Liens.
7. Payment of Taxes.
----------------
Seller shall pay all state and Federal income taxes arising out of the
transfer of the Assets and the operation of the Business through the Closing,
including, but not limited to, taxes resulting from recapture of depreciation or
investment tax credit. Any sales or use taxes applicable to the sale of the
Assets to Buyer under this Agreement shall be paid by Seller. Seller shall pay
its portion, prorated as of the Closing, of state and local personal property
taxes on the Assets. Buyer shall not be responsible for any business, income,
5
occupation, withholding, sales, use or similar tax, of any kind related to any
period prior to and through the Closing incident to the Business and/or the
Assets.
8. Reliance Upon Representations and Warranties of Seller and CSI.
--------------------------------------------------------------
A. It is acknowledged that Buyer is relying upon the full disclosure
of Seller and CSI under this Agreement as to the Assets and the Business
including but not limited to the matters set forth in Paragraph 9 of this
Agreement in entering into this Agreement.
B. The "Due Diligence Investigation," (as defined below) by Buyer
shall in no manner limit, modify, or waive any representation or warranty of
Seller and/or CSI under this Agreement and all representations and warranties
shall survive any Due Diligence Investigation, or other report, verification,
examination or audit by Buyer.
9. Representations, Warranties and Certain Covenants of Seller and CSI.
-------------------------------------------------------------------
Seller and CSI jointly and severally represent and warrant to Buyer
that the following are now true and correct and covenant that the following will
be true and correct as of the Closing:
A. Exhibit 9.A. includes the internally prepared profit and loss
statements of Seller as at December 31, 1997, December 31, 1998, and for the
period ended October 30, 1999 and the balance sheet of Seller as at December 31,
1999 ("Balance Sheet"). December 31, 1999 is referred to as the "Balance Sheet
Date". Exhibit 9.A. also includes the tax return of Seller for the fiscal years
ended December 31, 1997 and 1998 for Federal and state purposes. The Financial
Statements included in Exhibit 9.A. are collectively referred to in this
Agreement as the "Financial Statements". The Financial Statements fairly
present the financial condition of Seller and the results of its operations,
specifically including, but not limited to, the amounts of sales, income and
liabilities, on the dates and for the periods involved. The Financial
Statements have been prepared in accordance with Generally Accepted Accounting
Principles, consistently applied. The Financial Statements are full and
complete.
6
B. Since the Balance Sheet Date:
(i) Seller has carried on the Business in substantially the
same manner as prior to the Balance Sheet Date and has not changed its
accounting methods, or materially or adversely altered or changed the methods by
which Seller's products are marketed, the vendors represented by Seller, the
pricing and terms of sale of the products, or the manner in which the Business
is carried on.
(ii) Seller has kept in effect the insurance on the Assets and
upon the properties, assets, the Premises, and the operations of Seller and the
Business.
(iii) There has been no event, claim or activity which adversely
affects the Assets or the operations of the Business.
(iv) There has been no material or adverse change in the
prospects with respect to the Business.
C. Seller is a California corporation duly organized, validly existing
and in good standing under the laws of the State of California and in each other
state in which Seller is required to qualify to do business, and has all
necessary corporate powers and authority to own its properties and to operate
the Business as now owned and operated by Seller.
D. The execution of this Agreement by Seller and CSI and its delivery
to Buyer and performance by Seller and CSI under this Agreement prior to, at and
after the Closing have been duly authorized by the respective Boards of
Directors of Seller and CSI, and each entity's shareholders to the extent
required, and no further corporate action is or will be necessary on the part of
Seller and CSI and no approvals or consents of any Federal, state or local
authority or administrative agency or any third party, person or entity
(including, without limitation, consents of lessors, financial institutions,
lenders and suppliers) are or will be necessary:
(i) to make this Agreement valid and binding upon each of
Seller and CSI in accordance with its terms.
(ii) to enable each of Seller and CSI to perform under this
Agreement.
7
E. Exhibits 2.A.i. and 2.A.ii. include a true and complete list of
all tangible assets included in the Assets, and the general location of that
property, and such Exhibits are true and accurate, and the data is consistent
with the Financial Statements.
(i) Seller has good and marketable title to all items included
in the Assets, tangible and intangible, reflected on the Balance Sheet.
(ii) Except on set forth in Exhibit 6 the Assets are free and
clear of all charges, commitments, obligations, liabilities, mortgages, pledges,
liens, title retention agreements, assessments, easements and other burdens and
encumbrances of any nature.
(iii) All equipment, tools and similar items included in the
Assets are in good working condition and repair, subject to reasonable wear and
tear and are in sufficient condition to support the Business.
(iv) The Assets constitute all the assets, tangible and
intangible, used by Seller in the conduct of the Business and necessary to
continue the Business as historically operated except for the items listed on
Exhibit 2.B.
(v) Except as to the Premises, no property used by Seller in
connection with the Business is held under any lease, security agreement,
conditional sales contract, or other title retention or security arrangement.
(vi) All ownership registrations, guarantees, and maintenance
records are on file at the Premises and will be delivered to Buyer at the
Closing.
(vii) None of the Assets are in violation of any material law,
ordinance, code or regulation applicable to it, and no notice from any
governmental body, department or agency or from any insurance carrier or other
person or entity has been served claiming any violation or calling attention to
the need for any work in connection with such properties with which Seller has
not complied.
F. Exhibit 9.F. includes a true and complete list of all trademarks,
trade names, brand names, fictitious business names, copyrights, and all pending
applications therefor owned or used by or licensed to Seller, together with a
summary description and full
8
information in respect of the filing, registration or issuance thereof relating
to the Business and of all fictitious or other names used by Seller in the
conduct of the Business for the past five (5) years. All of such are included in
the assets. No licenses, sublicenses, covenants or agreements have been granted
or entered into by Seller in respect of the trademarks, trade names, brand
names, fictitious business names, copyrights or licenses. All trademarks, trade
names, brand names, fictitious business names, other names used by Seller,
copyrights, pending applications, licenses and other rights owned or used by or
licensed to Seller are valid and in good standing and are assignable to Buyer
and none of these are involved in any action, litigation or interference
proceedings. The operations of the Business, use and sale by Seller of the
business products, the use by it of the Assets, and its equipment and processes,
the use of its products by its customers for the purpose which sold and the use
or publication by it of its trademarks, trade names, fictitious business names,
other names used by Seller, brand names, and advertising, technical or other
literature do not involve infringement or claimed infringement of any United
States patent, trademark, trade name or copyright.
G. Exhibit 9.G. is a true and complete list of all contracts,
agreements, leases, licenses, plans, arrangements and commitments to which
Seller is a party or by which Seller is in any way affected or bound (in the
event any of the foregoing are oral, then a summary of its substance shall be
set forth) relating to the Business. Seller has not waived any material right
or made any compromise under any of the agreements nor has any party to any of
the agreements indicated an intent to cancel or terminate any of the agreements,
or to exercise or not exercise any options under any of the agreements. Copies
of the agreements described in Exhibit 9.G. will be delivered to Buyer on
request prior to the Closing and when delivered are and will be true and
complete and include all amendments, supplements or modifications to the
agreements. Each agreement listed on Exhibit 9.G. is a valid and binding
agreement of the Seller enforceable against Seller in accordance with its terms
and Seller and CSI do not have any knowledge that such agreement is not a valid
and binding agreement of the other parties thereto. Seller has fulfilled all
material obligations required
9
pursuant to each agreement to have been performed by Seller on its part prior to
the date hereof, and Seller and CSI have no reason to believe that Seller will
not be able to fulfill, when due, all of its obligations under each agreement
which remain to be performed after the date hereof. Seller is not in breach of
or default under any agreement, and no event has occurred which with the passage
of time or giving of notice or both would constitute such a breach or default.
To the best knowledge of Seller and CSI, there is no existing breach or default
by any other party to any agreement, and no event has occurred which with the
passage of time or giving of notice or both would constitute a breach or default
by such other party.
H. Except as disclosed on Exhibit 9.H., there are no suits, actions,
claims, investigations by any person or entity or any governmental body, or
legal, administrative or arbitration proceedings pending or to the knowledge of
Seller and CSI threatened against or affecting any of the properties, assets or
the Business or the Assets or any of them, or to which Seller is or might become
a party, and the Seller does not know of any basis or grounds for any suit,
action, claim, investigation or proceeding. There is no outstanding order,
writ, injunction or decree of any court, governmental agency or other tribunal
against or affecting the assets of the Business or the Assets or any of them
except as disclosed in Exhibit 9.H.
All federal, state and local income, profit, withholding, franchise,
sales, use, occupation, property, Social Security, unemployment, Workers'
Compensation, ad valorem, excise or other taxes of Seller and all assessments,
deficiencies, interest, and penalties related to such taxes, whether disputed or
not, due and payable on or before the Closing have been or will be paid and no
agreements are currently in effect with respect to the filing of any tax returns
or the payment or assessment of any tax or deficiency or waiving or extending
the provisions of any statute of limitations. Seller has not received any notice
of any assessments, deficiencies, interest, or penalties.
10
I. Exhibit 9.I. is a correct, true and complete list showing all
liability insurance policies (listing the insurer, the amount of coverage, the
expiration date, the type of insurance and the policy number) maintained by or
relating to the Business and the Assets. Seller will keep all the insurance and
each of the policies or renewals in full force and effect until the Closing.
Seller is not in default with respect to any material provision contained in the
insurance policies nor has it failed to give notice or pay any premium under the
policies in timely fashion nor has it been denied insurance coverage or been
granted coverage or a claim accepted only with a reservation of rights in whole
or in part. There is no event for which a claim could be made and which Seller
has not filed. The insurance listed in Exhibit 9.I. fully and adequately covers
the Seller and the Assets against any and all liability for claims which may
arise from events prior to the Closing relating to the Business.
J. All items included in the Purchased Inventory are the property of
Seller. No items included in the Purchased Inventory will be pledged as
collateral or held by Seller on consignment from others as of the Closing. All
of the Purchased Inventory is saleable in the ordinary course of the Business.
All of the Purchased Inventory is "fresh" and free of defects.
K. Exhibit 9.K. is a schedule setting forth the name, current annual
salaries, date and amount of last increase compensation or adjustment, date of
last review, position, duties, place of employment, date of hire of each
employee set forth on such Exhibit and any bonus, and other forms of
compensation, remuneration, commission and benefits of any nature paid or
payable or promised or accrued or earned to or for the benefit of or by that
employee for the immediately preceding fiscal year and for the current fiscal
year of the Business.
L. Seller's existing customer purchase orders and vender purchase
orders were obtained in the ordinary course of business. Seller and CSI
reasonably anticipate that Seller will derive a profit on all of these customer
purchase orders. At the time of execution of this Agreement, Seller will attach
hereto as Exhibit 9.L. a true, correct and complete list of Seller's customers
for the past five (5) years of operation of the Business.
11
M. The Seller has not received notice of any kind from any
Government Authority alleging that the Seller has failed to comply with any
applicable law, ordinance, regulation, statute, rule or restriction relative to
the use, handling, storage or disposal of Hazardous Materials or as to
environmental matters pertaining to or affecting the Premises (whether on, under
or about) or the Business.
N. The Deposits reflected on Exhibit 2.A.i. are and will be bona
fide deposits from the customers indicated, and arose out of the ordinary course
of Seller's business and will be in individual amounts sufficient to cover the
products to be delivered and/or services to be performed and are sufficient in
amount to permit Buyer to derive a profit in connection with the particular
customer purchase order related to the particular Deposit.
O. Neither Seller nor CSI has any knowledge of or reason to know of
any current or anticipated termination, cancellation, limitation, modification
or change in the business relationship of Seller for any reason with any
customer or group of affiliated customers whose purchases individually or in the
aggregate constituted more than five percent (5%) of any Seller's invoiced sales
during 1998 or 1999.
P. To the best knowledge of Seller and CSI, all the representations
and warranties under this Agreement and all Exhibits and data provided by Seller
and CSI under this Agreement are true and correct, contain all amendments,
supplements or modifications thereto, and fully and accurately present the data
and material set forth, and none of them omit any fact or matter necessary to
more fully set forth the data provided or to not make the data misleading.
10. Representations, Warranties and Certain Covenants of Buyer.
----------------------------------------------------------
Buyer represents and warrants to Seller that the following facts are
now true and correct and covenants that they will be true and correct as of the
Closing.
12
A. Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has all necessary
corporate powers and authority to own its properties and to operate the Assets
being acquired.
B. The execution of this Agreement by Buyer and its delivery to
Seller and performance under this Agreement prior to and after the Closing have
been duly authorized by the Board of Directors of Buyer and no further corporate
action will be necessary on the part of Buyer or any other person or entity to
make the Agreement valid and binding upon Buyer in accordance with its terms and
to enable Buyer to perform under this Agreement; no approvals or consents of any
person or entity (including without limitation, consents of financial
institutions, lenders and suppliers) are necessary to enable transfers,
assignments or conveyances of the Assets; Buyer has full power and authority to
enter into and perform under this Agreement and no approvals or consents of any
federal, state or local authority or administrative agency or third party are
necessary to authorize the execution of this Agreement by Buyer and to perform
under this Agreement. Neither the execution and delivery of the Agreement by
the Buyer nor the consummation of the transactions contemplated by this
Agreement will constitute a default under the Articles of Incorporation or By-
Laws of Buyer or under any lease, license, promissory note, conditional sales
contract, commitment, indenture, mortgage, deed of trust, loan agreement or
other agreement, permit, authority, instrument, document, right or arrangement
to which Buyer is bound, operates under or uses.
C. There are no suits, actions, claims, investigations by any person
or entity or any governmental body, or legal, administrative or arbitration
proceedings pending or to the knowledge of Buyer threatened against or affecting
the rights and obligations of Buyer under this Agreement or to which Buyer is or
might become a party, and Buyer does not know of any basis or grounds for any
suit, action, claim, investigation or proceeding which would affect the
transactions contemplated by this Agreement. There is no outstanding
13
order, writ, injunction or decree of any court, governmental agency or other
tribunal against or affecting the obligations of Buyer under this Agreement.
D. To the best knowledge of Buyer, all the representations and
warranties under this Agreement and all Exhibits and data provided by Buyer
under this Agreement are true and correct and contain all amendments,
supplements and modifications thereto, and fully and accurately present the data
and material set forth, and none of them omit any fact or matter necessary to
more fully set forth the data provided or to not make the data misleading.
11. Covenants of Seller and CSI.
---------------------------
A. Seller and CSI agree to perform as follows to the Closing and
thereafter as may be applicable:
(a) In order that Buyer may proceed with Buyer's due diligence
investigation ("Due Diligence Investigation") of the Business and the Assets, to
give during ordinary business hours to Buyer and to Buyer's authorized officers,
employees, counsel, agents, accountants, and other advisors and
representatives, full access to the Premises and to furnish all information with
respect to the operations and affairs of the Business and the assets, including
but not limited to: the right to interview employees and officers of Seller;
the right to meet with customers of Seller; the right to interview governmental
and regul atory agencies as to Seller's compliance; the right to review all
customer and vendor-related contracts and data, employee data, financial
records, environmental and other audit and investigation records, other
contracts, leases and other agreements, data regarding litigation and claims of
all nature; and the right to review such other matters as Buyer requests.
Seller shall cooperate in all reasonable manner with Buyer's requests.
Provided, however, that any investigation or inquiry made by Buyer, or on its
behalf under this Agreement, shall not diminish or in any other manner affect
the representations and warranties made by Seller and CSI in this Agreement. The
Due Diligence Investigation shall take place during normal business hours
without undue interference with the business operations of Buyer.
14
(b) To use best efforts to keep the Business and Assets intact;
to assure that the present employees of the Business will to the extent desired
by Buyer become the employees of Buyer from and after the Closing; and to not
create ill will of Seller's suppliers, customers and others who had or who have
business relations with the Business.
(c) To take all steps reasonably necessary to carry into effect
the intention of the parties and their obligations as expressed in this
Agreement.
(d) To provide releases of sales and use taxes for the Business
effective as of the Closing.
(e) To operate the Business in the ordinary course of business
consistent with and in conformity with prior business practices of Seller.
(f) To cause the accounts receivable of Seller outstanding as of
the Closing to be collected from and after the date of this Agreement and
following the Closing in a manner that will not interfere with the prospective
business relationship between Buyer and each customer involved.
(g) To not entertain, negotiate, solicit, or enter into any
agreement for the sale or transfer of the stock of Seller or all or
substantially all of the assets of Seller. This obligation shall terminate on
the Closing or the termination of this Agreement, whichever is the first to
occur.
(h) To not take any action or omit to take any action
constituting a breach or default under any of the Assumed Contracts.
(i) To use best efforts to obtain the satisfaction of the
conditions specified in Paragraph 12.A. of this Agreement.
(j) From time to time prior to the Closing, to deliver or cause
to be delivered to Buyer supplemental information concerning events subsequent
to the date hereof which would render any representation or warranty in this
Agreement or any information contained in any Exhibit inaccurate or incomplete
in any material respect at any time after the date hereof until the Closing.
15
12. Conditions Precedent to Closing.
-------------------------------
A. The Buyer's obligations under this Agreement and the Buyer's
obligations to close at the Closing are subject to fulfillment on or before the
Closing of each of the following conditions, subject, however, to the right of
Buyer to waive any one or more of the conditions in whole or in part in Buyer's
sole discretion:
(a) The representations and warranties of Seller and CSI
contained in this Agreement and in the Exhibits, and the certificates and
documents to be delivered to Buyer pursuant to this Agreement, being true as of
the Closing and Seller and CSI having performed and satisfied all covenants,
agreements and conditions required by this Agreement to be performed and
satisfied by Seller and CSI prior to or at the Closing and such being confirmed
by Seller's and CSI's Officers at the Closing.
(b) Seller and CSI and certain of CSI's Shareholders entering
into a Non-Competition Agreement ("Non-Competition Agreement") in the form of
that Non-Competition Agreement attached to this Agreement as Exhibit 12.A.b.
(c) Seller and CSI delivering instruments of assignment for the
assets as may be reasonably requested by Buyer.
(d) Seller complying with the applicable Bulk Transfer Statutes
of all applicable jurisdictions and Seller providing Buyer evidence of such
satisfaction or evidence that the statutes of an applicable jurisdiction do not
apply to this transaction.
(e) That Buyer concludes its Due Diligence Investigation on or
before the Closing to the satisfaction of Buyer in its sole discretion.
(f) That Buyer is able to hire such of the employees of Seller
as Buyer determines appropriate in its sole discretion; provided it is
understood that neither Seller nor CSI guarantee that any of such employees
offered employed will accept such.
(g) Seller's and CSI's satisfaction of Seller's and CSI's
obligations and covenants up to the Closing as set forth in this Agreement.
16
C. The Seller's and CSI's obligations under this Agreement and the
Seller's and CSI's obligations to close on the Closing are subject to
fulfillment, before the Closing of each of the following conditions subject,
however, to the right of Seller and CSI to waive any one or more of the
conditions in whole or in part in Seller's and CSI's sole discretion:
(a) The representations and warranties of Buyer contained in
this Agreement and in the Exhibits, and the certificates and documents to be
delivered to Seller pursuant to this Agreement, being true as of the Closing and
Buyer having performed and satisfied all covenants, agreements and conditions
required by this Agreement to be performed and satisfied by Buyer prior to or at
the Closing.
13. The Closing.
-----------
A. The Closing under this Agreement shall take place at the offices
of BAKER, OLSON, XxXXXX & XXXXXXXXX, 000 Xxxxx Xxxxx Xxxxxxxxx, X.X. Xxx 00000,
Xxxxxxxx, California, at 10:00 A.M. on December 30, 1999 or another date and
hour and place as shall be mutually agreed upon in writing by Seller and Buyer.
In no event shall the Closing be after January 31, 2000 except Buyer in its sole
discretion may extend the Closing to a later date in the event the conditions
under Paragraph 12.A. of this Agreement have not been satisfied by Seller or
waived in writing by Buyer.
B. At the Closing, Seller and CSI shall deliver to Buyer the
following against delivery of the items specified in Paragraph 13.C of this
Agreement:
(a) All items as Buyer may reasonably request at the Closing.
C. At the Closing, Buyer shall deliver to Seller the following
against delivery of the items specified in Paragraph 13.B of this Agreement:
(a) The Purchase Price as provided for in Paragraph 5.
(b) Exhibit 3 indicating the Assumed Contracts.
(c) Such other items Seller may reasonably request at the
Closing.
17
14. Indemnification of Seller.
-------------------------
Buyer agrees as of and after the Closing to indemnify and hold
harmless Seller against and in respect of the following:
A. Any and all damage, loss, cost, liability or deficiency resulting
from any misrepresentation, breach of warranty, representation or covenant, or
nonfulfillment or breach of any agreement on the part of Buyer under this
Agreement or under any Exhibit or other agreement or instrument furnished or to
be furnished by Buyer under this Agreement.
B. Any and all liabilities and obligations of any nature arising
after the Closing by reason of the operation of the Business and Assets after
the Closing by Buyer, but excluding any matter included with the indemnity
provided to Buyer pursuant to paragraph 15 of this Agreement.
C. Any and all actions, suits, proceedings, demands, assessments,
judgments, costs and legal and other expenses, including reasonable attorneys'
fees, expert witness fees, investigations, penalties, costs and the like
incident to any of the foregoing.
Seller shall promptly notify Buyer of the existence of any claim,
demand or other matter to which Buyer's indemnification obligations would apply,
and shall give Buyer a reasonable opportunity to defend the same at its sole
expense and with counsel of its own selection reasonably acceptable to Seller,
provided that Seller shall at all times also have the right to fully participate
in the defense at its own expense. If Buyer shall, within a reasonable time
after the notice, fail to defend, Seller shall have the right, but not the
obligation, to undertake the defense of, and to compromise or settle (exercising
reasonable business judgment) the claim or other matter on behalf, for the
account, and at the sole risk and expense, of Buyer. Seller shall reasonably
cooperate in any defense and make all records in its possession available to
Buyer.
Notwithstanding the foregoing, the parties agree that any claim for
indemnification under this Agreement shall be made within three (3) years of the
Closing or shall thereafter be invalid. Any claim made shall provide sufficient
specificity as to the claim
18
made. Any indemnities to be provided to Seller or CSI hereunder by Buyer shall
be limited in amount to Two Hundred Thousand Dollars ($200,000.00). Further, no
indemnity shall be owing hereunder by Buyer until an amount of claims in excess
of Five Thousand Dollars ($5,000) has been made by Seller and CSI.
15. Indemnification of Buyer.
------------------------
Seller and CSI jointly and severally agree as of and after the Closing
to indemnify and hold harmless Buyer and the Assets against and in respect of
the following:
A. Any and all damage, loss, cost, liability or deficiency resulting
from any misrepresentation, breach of warranty, representation or covenant, or
nonfulfillment or breach of any agreement on the part of Seller and/or CSI under
this Agreement or under any Exhibit or other agreement or instrument furnished
or to be furnished by Buyer under this Agreement.
B. Any and all liabilities and obligations of any nature relating to
the Assets, the Seller and/or CSI, the Business, and the operation of the Assets
and/or the Business attributable to any time prior to the Closing, regardless of
when such claim, demand or suit or the like is made and regardless of whether
the Seller, CSI, or Buyer did or did not know of the matters, except as to those
matters specifically assumed by Buyer pursuant to Paragraph 3 of this Agreement.
C. Any and all actions, suits, proceedings, demands, assessments,
judgments, costs and legal and other expenses, including attorneys' fees, expert
or other witness fees, investigations, penalties, costs and the like incident to
any of the foregoing.
Buyer shall promptly notify Seller of the existence of any claim,
demand or other matter to which Seller's indemnification obligations would
apply, and shall give Seller reasonable opportunity to defend at Seller's sole
expense and with counsel of its own selection, reasonably acceptable to Buyer,
provided that Buyer shall at all times also have the right to fully participate
in the defense at its own expense. If Seller shall, within a reasonable
19
time after the notice, fail to defend, Buyer shall have the right, but not the
obligation, to undertake the defense of, and to compromise or settle (exercising
reasonable business judgment) the claim or other matter on behalf, for the
account, and at the sole risk and expense, of Seller. Buyer shall reasonably
cooperate in any defense and make all records in its possession available to
Seller.
Notwithstanding the foregoing, the parties agree that any claim for
indemnification under this Agreement shall be made within three (3) years of the
Closing or shall thereafter be invalid. Any claim made shall provide sufficient
specificity as to the claim made. Any indemnities to be provided to Buyer
hereunder by Seller or CSI shall be limited in amount to the Purchase Price.
Further, no indemnity shall be owing by Seller or CSI hereunder until an amount
of valid claims in excess of Five Thousand Dollars ($5,000) has been made by
Buyer.
16. Notices.
-------
All notices, communications and demands required or permitted to be
given under this Agreement shall be in writing, and shall be deemed duly given:
(1) immediately if served on the service party noted below for the respective
party, (2) three days after posting, if mailed, if sent by registered or
certified mail, postage prepaid, first class, three days after posting if sent
to the party at the address indicated below; (3) immediately if sent by
facsimile to the facsimile number noted below for the respective party if
confirmed by "hard copy" sent in the manner mail notice is to be sent; or (4)
one business day after posting if sent to the party at the address indicated
below if sent by Federal Overnight Express or similar carrier postage and costs
prepaid:
If to Seller Coinless Systems, Inc.
or CSI: 00000 Xxxxxx Xxxxxx, Xxx. 000
Xxxxxx Xxxxxxxxx, XX 00000
ATTN: XX. XXXXXX X. XXXXXXXX
20
Fax No.: (000) 000-0000
Service Party: XX. XXXXXX X. XXXXXXXX
Carbon Copy: XXX XXXXX, ESQ.
00000 Xxxxx Xxxxxx Xxxxx
Xxxxxx Xxxxxxxxx, XX 00000
Fax No.: (000) 000-0000
Service Party: XXX XXXXX, ESQ.
If to Buyer: AUTOMATIC DATA CAPTURE TECHNOLOGIES, INC.
0000 Xxxxxx Xxx.
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
ATTN: MR. A. TEE MIGLIORI, President
Fax No.: (000) 000-0000
Service Party: MR. A. TEE MIGLIORI
Carbon Copy: BAKER, OLSON, XxXXXX & XXXXXXXXX
000 Xxxxx Xxxxx Xxxxxxxxx
X.X. Xxx 00000
Xxxxxxxx, Xxxxxxxxxx 00000-0000
ATTN: XXXXXXX X. XXXXX, ESQ.
Fax No.: (000) 000-0000
Service Party: XXXXXXX X. XXXXX, ESQ.
Any party may change the address or service party from time to time by
notice hereunder.
17. No Brokers.
----------
21
Buyer on the one hand and Seller and CSI on the other, each represent
to the other that they have incurred no broker's commissions or other similar
fees in connection with this Agreement.
18. Termination.
------------
Either Buyer on the one hand or Seller and CSI on the other hand may
(but shall not be required to do so) by notice to the other given in the manner
provided in this Agreement terminate this Agreement on or before the Closing if
default shall be made by the other party in the observance, or in the due and
timely performance, of any of that other party's covenants and agreements
contained in this Agreement and the default shall not have been fully cured
within forty-five (45) business days after written notice specifying the alleged
default. Giving notice under this Paragraph 18 by the party not in default
shall not waive or otherwise deprive that party of any rights or remedies which
it may have, as against the party in default, either at law or in equity.
19. Miscellaneous Provisions.
------------------------
A. Each of the parties agrees to execute documents of further
assurance and other documents as are necessary or appropriate to carry out the
terms and conditions of this Agreement both prior to and following the Closing,
and to do any and all acts and things as may be reasonably required to carry out
the obligations of that party and to consummate the transactions contemplated by
this Agreement.
B. This Agreement constitutes the entire agreement between the
parties pertaining to its subject matter and supersedes all prior agreements and
understandings of the parties, including but not limited to the Letter of Intent
dated November 2, 1999. There are no warranties, representations or other
agreements between the parties in connection with the subject matter of this
Agreement except as specifically set forth in this Agreement and in the
attachments to this Agreement.
22
C. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original.
D. No amendment or modification of this Agreement shall be valid
unless in writing and signed by all the parties.
E. Nothing in this Agreement, whether expressed or implied, is
intended to confer upon any person other than the parties and their permitted
respective successors and assigns, any rights or remedies under or by reason of
this Agreement, nor is anything in this Agreement intended to relieve or
discharge the liability of any other entity to any party, nor shall any
provision of this Agreement give any entity any right of subrogation against, or
action over or against any party. Nevertheless, all of the terms and provisions
of this Agreement shall be binding upon, and inure to the benefit of, and be
enforceable by the respective successors and permitted assigns of the parties.
F. In the event any party shall institute an action to enforce any
right under this Agreement, the prevailing party in the action shall be
entitled, in addition to any other relief awarded by the court, to reasonable
attorneys' fees as the court or arbitrator may determine.
G. This Agreement is executed, delivered, and is intended to be
performed in the State of California, and shall be construed and enforced in
accordance with the laws of the State of California.
H. All Exhibits attached to this Agreement shall be deemed
incorporated into this Agreement by reference and made a part of this Agreement
as though set forth in full in this Agreement.
I. Except as hereinafter provided, all covenants and obligations of
the parties shall survive the Closing.
J. Each party has retained independent counsel to represent it in
this transaction. CSI and Seller specifically acknowledge Baker, Olson, XxXxxx
& Xxxxxxxxx represented only Buyer in negotiating, drafting and in all other
manner in connection with
23
this Agreement and did not represent CSI or Seller, and that neither CSI nor
Seller has relied on any advise or opinion of Baker, Olson, XxXxxx & Xxxxxxxxx.
K. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
L. The rights and obligations of the parties shall not be assignable
except as specifically set forth in the Agreement.
M. If any provision of this Agreement or Exhibit to this Agreement
shall be adjudged by a court or arbitrator to be invalid or unenforceable, the
provision shall in no way affect the validity or enforceability of any other
provision of this Agreement.
N. Each of Buyer on the one hand and Seller and CSI on the other
shall pay all their legal, accounting and other fees and costs incurred in
connection with the negotiation and execution of this Agreement and in
connection with satisfying their covenants under this Agreement.
O. Seller and CSI acknowledge Buyer has expended time and moneys in
entering into this Agreement and will spend time and money in conducting its Due
Diligence Investigation. Seller and CSI agree for themselves and on behalf of
all of shareholders of CSI to refrain from taking any actions to encourage,
initiate or engage in discussions or negotiations with, or entertain offers
from, or provide any information to any corporation, partnership, person, entity
or group other than Buyer concerning the subject matter of this Agreement or the
stock of Seller.
P. Waiver of any default or breach of this Agreement or of any
warranty, representation, covenant or obligation contained herein shall not be
construed as a waiver of any subsequent breach.
Q. Prior to the Closing no party shall make any announcement
regarding this Agreement or its terms or disclose such without the consent of
the other parties except as may be required by law. After the Closing all
announcements shall be made by Buyer.
24
R. Buyer shall use customary and ordinary efforts to collect the
Accounts Receivable of Seller included within the Assets, which efforts shall
include invoicing; provided however, Buyer shall not be required to pursue or
file litigation or similar measures.
20. Confidentiality.
---------------
Each party agrees that the party, and his respective representatives,
agents and employees, will not disclose, copy or disseminate any information,
documents, instruments, terms, conditions or matters relating to the transaction
contemplated, or relating to the Business and the Assets (collectively
"confidential information") to anyone other than their legal and financial
advisors or to anyone else who has a need or right to know, without the prior
written consent of the other party. If the transaction contemplated should fail
to close for any reason, each party will return to the other as soon as possible
all originals and copies of confidential information provided to the party, and
none of such information will be used by either party in the business operations
of any third party. It is recognized the parties both currently are engaged in
similar business operations. Each party's obligations of confidentiality as
described in this paragraph shall survive the termination of this Agreement.
21. Exhibits.
--------
The parties acknowledge the Exhibits are not attached hereto as of the
execution of this Agreement. The burden of producing such Exhibits rests with
Seller and CSI. The Closing is contingent on Seller and CSI delivering such
Exhibits to Buyer and that such Exhibits and the content thereof are
satisfactory to Buyer. Buyer's acceptance of the Exhibits shall be represented
by Buyer's written acceptance on each Exhibit and the date of acceptance. Upon
delivery and Buyer's acceptance, the Exhibits shall be deemed attached to this
Agreement. Buyer shall indicate its acceptance or rejection within three (3)
business days of Seller's and CSI's delivery of each such Exhibit.
25
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date written above.
"SELLER": "BUYER":
DSG, INC. AUTOMATIC DATA CAPTURE
TECHNOLOGIES, INC
a California corporation a California corporation
By:_________________________ By:_________________________
Its ___________________ Its ___________________
"CSI":
COINLESS SYSTEMS INC., a
Nevada corporation
By:_________________________
Its ___________________
26
LIST OF EXHIBITS
EXHIBIT 2.A.i.
CUSTOMERS DEPOSIT & PURCHASED INVENTORY
EXHIBIT 2.A.ii.
EQUIPMENT, FURNITURE AND FIXTURES
EXHIBIT 2.B.
ASSETS NOT ACQUIRED BY BUYER
EXHIBIT 2.C.
CUSTOMER OPEN SALES ORDERS
VENDOR OPEN PURCHASE ORDERS
EXHIBIT 3.A.ii.
ASSUMED CONTRACTS
EXHIBIT 4.B.
ALLOCATION OF THE PURCHASE PRICE
EXHIBIT 5.B.
ESCROW AGREEMENT
EXHIBIT 6
INTERIM PERMITTED LIENS
EXHIBIT 9.A.
FINANCIAL STATEMENTS
EXHIBIT 9.E.
LIENS
EXHIBIT 9.F.
TRADEMARKS AND COPYRIGHTS
EXHIBIT 9.G.
CONTRACTS
EXHIBIT 9.H.
SUITS
EXHIBIT 9.I.
INSURANCE
EXHIBIT 9.K.
CENSUS DATA
EXHIBIT 9.L.
CUSTOMER LIST
EXHIBIT 12.A.b.
NON-COMPETITION AGREEMENT
