EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
dated as of
August 1, 1998
by and between
TomaHawk II, Inc.
("Buyer")
and
Xxxxx Xxxxxxx
("Seller")
ARTICLE I PURCHASE AND SALE OF BUSINESS.................................6
SECTION 1.1 Purchase and Sale of Assets....................6
SECTION 1.2 Excluded Assets................................6
SECTION 1.3 Assumed and Excluded Liabilities and
Obligations .................................6
SECTION 1.4 Delivery of Purchased Assets...................7
SECTION 1.5 Payment of Certain Taxes.......................7
SECTION 1.6 [[Reserved]]...................................7
SECTION 1.7 Additional Agreements..........................7
ARTICLE II PURCHASE PRICE; PHYSICAL INVENTORY AND METHOD OF PAYMENT......7
SECTION 2.1 Aggregate Purchase Price.......................7
SECTION 2.2 Post-Closing Payment...........................8
SECTION 2.3 Allocation of Purchase Price...................8
ARTICLE III THE CLOSING AND TRANSFER OF BUSINESS..........................8
SECTION 3.1 Closing........................................8
SECTION 3.2 Manner of Conveyance...........................9
ARTICLE IV REPRESENTATIONS AND WARRANTIES................................9
ARTICLE V ADDITIONAL COVENANTS AND AGREEMENTS...........................9
SECTION 5.1 Interim Conduct of the Business................9
SECTION 5.2 Regulatory Consents, Authorizations, etc......11
SECTION 5.3 Access........................................11
SECTION 5.4 Records and Documents.........................11
SECTION 5.5 Notice of Default.............................11
SECTION 5.6 No Inconsistent Action........................12
SECTION 5.7 Publicity.....................................12
SECTION 5.8 Additional Agreements.........................12
SECTION 5.9 Confidential Information......................12
SECTION 5.10 Non-competition and Non-interference..........13
SECTION 5.11 Relocation of the Business....................14
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.................14
SECTION 6.1 Accuracy of Warranties; Performance of
Covenants ..................................14
SECTION 6.2 Regulatory Consents, Authorizations, etc......15
SECTION 6.3 No Pending Action.............................15
SECTION 6.4 No Material Adverse Change....................15
SECTION 6.5 No Adverse Laws...............................15
SECTION 6.6 Force Majeure.................................15
SECTION 6.7 Third Party Consents..........................16
SECTION 6.8 [[Reserved]]..................................16
SECTION 6.9 Further Actions...............................16
SECTION 6.10 Certificates..................................16
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SECTION 6.11 Investigation.................................16
SECTION 6.12 Additional Agreements.........................16
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER................16
SECTION 7.1 Accuracy of Warranties; Performance of
Covenants ..................................17
SECTION 7.2 Regulatory Consents, Authorizations, etc......17
SECTION 7.3 No Pending Action.............................17
SECTION 7.4 No Material Adverse Change....................17
SECTION 7.5 No Adverse Laws...............................17
SECTION 7.6 Force Majeure.................................18
SECTION 7.7 Further Actions...............................18
SECTION 7.8 Certificate...................................18
SECTION 7.9 Additional Agreements.........................18
ARTICLE VIII EMPLOYEES....................................................18
ARTICLE IX SURVIVAL AND INDEMNIFICATION.................................18
SECTION 9.1 Survival......................................18
SECTION 9.2 Indemnification by Seller.....................19
SECTION 9.3 Indemnification by Buyer......................19
SECTION 9.4 Event of Breach and Adverse Consequences......19
SECTION 9.5 Certain Other Agreements......................19
SECTION 9.6 Notice and Demand, etc........................20
SECTION 9.7 Determination of Loss.........................21
ARTICLE X MISCELLANEOUS PROVISIONS.....................................21
SECTION 10.1 Brokers.......................................21
SECTION 10.2 Entire Understanding..........................21
SECTION 10.3 Waiver and Amendment..........................21
SECTION 10.4 Headings......................................21
SECTION 10.5 Counterparts..................................22
SECTION 10.6 Interpretation................................22
SECTION 10.7 Notices.......................................22
SECTION 10.8 Successors and Assigns........................23
SECTION 10.9 Attorneys' Fees...............................23
SECTION 10.10 Governing Law.................................23
SECTION 10.11 Construction..................................23
SECTION 10.12 Cooperation...................................23
SECTION 10.13 Expenses......................................24
SECTION 10.14 Representation by Counsel.....................24
SECTION 10.15 Binding Arbitration...........................24
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EXHIBITS
EXHIBIT SUBJECT
1.1 Purchased Assets
1.2 Excluded Assets
1.7(i) Form of Consulting Agreement
1.7(ii) Form of Promissory Note
1.7(iii) Form of Security Agreement
1.7(iv) Form of Escrow Agreement
4 A Representations and Warranties of Seller
B. Representations and Warranties of Buyer
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SCHEDULES
SCHEDULE SUBJECT
1.1 Purchased Assets
1.1(d) Fixed Assets, Physical Assets and Other Tangible Property
1.1(g) Assumed Equipment Leases
9 Financial Statements
11 Condition and Sufficiency of the Purchased Assets
13 Excluded Accounts Payable
14 Excluded Accounts Receivable
15 Undisclosed Liabilities
20(a) Assumed Contracts
20(b) Restrictions on Agents of the Company
20(c) Unenforceable Assumed Contracts
20(d) Lack of Compliance with Assumed Contracts
21(b) Insurance Arrangements
21(c) Insurance Policy History
22 Employees
24(a) Intellectual Property Assets
24(b) Assumed Contracts Related to Intellectual Property Assets
27 Related Party Agreements
32 Personal and Real Property Leases
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THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of August 1, 1998 (the "Effective Date") by and between TOMAHAWK II, INC., an
Illinois corporation ("Buyer"), and XXXXX XXXXXXX, an individual resident of the
State of California ("Seller").
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF BUSINESS
SECTION 1.1 Purchase and Sale of Assets. On the basis of the
representations and warranties herein, and subject to the terms, conditions and
other provisions contained herein, Seller shall sell, transfer, assign and
deliver to Buyer, and Buyer shall purchase and accept from Seller on the Closing
Date (as defined herein) all right, title and interest in and to all of the
properties and the assets of Aerated Engineering Co., a sole proprietorship (the
"Company"), of every kind, nature and description, used in or relating to the
Business (as defined herein) wherever situated, and all the goodwill related
thereto, including, without limitation, the assets described as Purchased Assets
in Exhibit 1.1 as they relate to the Business (collectively, the "Purchased
Assets"); provided, however, that the Purchased Assets shall not include any
items defined as Excluded Assets in Section 1.2 hereof. The term "Business"
shall mean the manufacture, marketing and selling of precision machining, as
well as products, materials and supplies related to aerospace parts/component
design and manufacturing.
SECTION 1.2 Excluded Assets. The assets described as Excluded Assets in
Exhibit 1.2 shall not be sold, transferred, assigned or delivered to Buyer.
SECTION 1.3 Assumed and Excluded Liabilities and Obligations.
1.3.1 Buyer assumes and agrees to perform the Company's obligations
relating to the Business, to the extent arising on or after the Effective Date,
including, but not limited to (i) the Assumed Equipment Leases (as defined
herein), and (ii) the Assumed Contracts (as defined herein), all of which shall
be assumed and performed by Buyer as and to the extent set forth in Exhibit 1.1.
1.3.2 Except as provided in Section 1.3.1 above, it is expressly
understood and agreed that Buyer shall in no event be liable for, and is not
assuming or agreeing to pay or discharge, any debts, claims, damages,
obligations, liabilities or responsibilities of any kind or nature whatsoever of
the Company, Seller, the Business or any affiliated or related person or entity,
or for any claim against any of the foregoing, whether known or unknown,
contingent or absolute, direct or indirect, or otherwise, including, without
limiting the generality of the foregoing: (a) any liabilities or obligations
which are or should have been reflected on the Financial Statements (as defined
herein) delivered to Buyer; (b) any obligations relating to the revolving credit
line with Bank of America in the approximate, aggregate amount of One Hundred
Thousand Dollars ($100,000); or (c) any liabilities or obligations arising from
or relating to any employee benefit or pension plan (collectively, the "Excluded
Liabilities and
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Obligations"), all of which shall be retained by Seller. Seller agrees to pay
and discharge all of the Excluded Liabilities and Obligations in full as they
become due. Notwithstanding anything herein to the contrary, Buyer hereby agrees
that it shall be liable for, and obligated to perform and fulfill, the
obligations of the Business arising out of or resulting from Buyer's operations
of the Business from and after the Effective Date in accordance with Section 2.2
of this Agreement.
SECTION 1.4 Delivery of Purchased Assets. On the Closing Date, Seller
shall deliver the Purchased Assets to Buyer at the Facility (as defined herein).
SECTION 1.5 Payment of Certain Taxes. Any sales tax arising from or
relating to the Purchased Assets to be transferred hereunder shall be paid by
Seller; provided, however, that Buyer shall reimburse Seller, within ten (10)
days of Seller's delivery to Buyer of related evidence of payment reasonably
satisfactory to Buyer, for any such sales tax paid by Seller in excess of
Fifteen Thousand Dollars ($15,000).
SECTION 1.6 [[Reserved]].
SECTION 1.7 Additional Agreements. Concurrently herewith: (i) Buyer and
Seller shall execute and deliver the consulting agreement, substantially in the
form attached hereto as Exhibit 1.7(i) (the "Consulting Agreement"), which
agreement shall provide for, among other things, Buyer's engagement of Seller as
a consultant for the one-year period following the Closing Date for total
compensation of One Hundred Thousand Dollars ($100,000) to be paid monthly in
arrears; (ii) Buyer shall execute and deliver to Seller the promissory note
substantially in the form attached hereto as Exhibit 1.7(ii) (the "Promissory
Note"); and (iii) Buyer and Seller shall execute and deliver the security
agreement substantially in the form attached hereto as Exhibit 1.7(iii) (the
"Security Agreement"). In the event that the payment of the unpaid balance of
the principal under the Promissory Note is accelerated before the first
anniversary of the Closing Date pursuant to Section 7 of the Promissory Note, as
a condition to such acceleration, Buyer, Seller and Mission Valley Escrow, as
escrow agent, shall execute and deliver the escrow agreement substantially in
the form attached hereto as Exhibit 1.7(iv) (the "Escrow Agreement"), and Buyer
shall withhold an amount equal to One Hundred Twenty Thousand Dollars ($120,000)
from the unpaid principal balance of the Promissory Note and place such amount
in escrow pursuant to the terms and conditions of the Escrow Agreement.
ARTICLE II
PURCHASE PRICE; PHYSICAL INVENTORY AND METHOD OF PAYMENT
SECTION 2.1 Aggregate Purchase Price. The aggregate purchase price for all
of the Purchased Assets (the "Aggregate Purchase Price") shall be One Million
Five Hundred Thousand Dollars ($1,500,000). At the Closing (as defined herein),
Buyer shall: (a) pay to Seller an amount equal to Four Hundred Thousand Dollars
($400,000) in cash or by certified check or wire transfer; and (b) deliver to
Seller the Promissory Note in the aggregate principal amount of One Million One
Hundred Thousand Dollars ($1,100,000).
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SECTION 2.2 Post-Closing Payment. On or before the thirtieth (30th) day
following the Closing Date (the "Post-Closing Date"), the parties hereto shall
calculate the following post-closing adjustment (the "Post-Closing Payment"), in
the amount equal to: (a) the aggregate amount of cash and/or other consideration
paid by Seller, from the Effective Date through and including the Closing Date,
for reasonable operating expenses incurred in the ordinary course of the
Business consistent with past practice, less (b) the aggregate amount of cash
and/or other consideration received and retained by Seller, from the Effective
Date through and including the Closing Date, for sales made, services performed
and/or invoices billed by the Company from the Effective Date through and
including the Closing Date; provided, however, that the Post-Closing Payment
shall not include any collections relating to the Excluded Accounts Receivable
(as defined herein). In the event that the Post-Closing Payment is greater than
zero, Buyer shall pay to Seller the Post-Closing Payment within ten (10) days of
the Post-Closing Date. In the event that the Post-Closing Payment is less than
zero, Seller shall pay to Buyer the amount equal to the absolute value of the
Post-Closing Payment within ten (10) days of the Post-Closing Date.
On the Post-Closing Date, Seller shall deliver to Buyer an
itemized list, in form and substance reasonably satisfactory to Buyer, of the
cash and/or other consideration paid and/or collected by Seller pursuant to this
Section 2.2 (the "Pre-Closing Activity List").
SECTION 2.3 Allocation of Purchase Price. The Aggregate Purchase Price
reflects payment for the Purchased Assets. The total consideration to be paid by
Buyer for the Purchased Assets shall be mutually determined by the parties
hereto, which determination shall be made prior to September 15, 1998.
Except as provided in Section 9.7 hereof, Buyer and Seller
agree that each shall be bound by such determination and shall reflect such
allocation in any filing pursuant to Section 1060 of the Internal Revenue Code
and the regulations thereunder.
ARTICLE III
THE CLOSING AND TRANSFER OF BUSINESS
SECTION 3.1 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place on August 20, 1998, or as soon as
practicable thereafter as all of the conditions to the Closing set forth in
Articles VI and VII hereof shall have been satisfied or waived (the "Closing
Date"); provided, however, that the Closing may be changed to (a) the latest
date which may from time to time be designated in writing by Buyer if, on the
Closing Date, there is any claim, action, suit or proceeding, at law or in
equity, or by or before any government or governmental instrumentality or
agency, threatened or pending against Seller, the Company or Buyer for the
purpose of enjoining or preventing the consummation of the transactions
contemplated by this Agreement, or otherwise claiming that this Agreement or the
consummation thereof, is improper, or which might materially affect the right of
Buyer to purchase the Purchased Assets or to operate the Business; or (b) any
other date mutually agreed upon in writing by Buyer and Seller. The Closing
shall take place at the offices of Xxxxx &
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XxXxxxxx, 000 Xxxx Xxxxxxxx, Xxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000. If for
any reason the Closing does not occur by October 31, 1998, either Seller or
Buyer may terminate this Agreement and all further obligations of the parties
hereunder shall terminate, except that if this Agreement is so terminated by one
party because one or more of the conditions to such party's obligations
hereunder is not satisfied as a result of such party's failure to comply with
its obligations under this Agreement, and no condition precedent hereunder
excuses such performance, it is expressly agreed and understood that the
non-breaching party's right to pursue all legal rights and remedies for breach
of contract or otherwise, including, without limitation, damages relating
thereto, shall survive such termination unimpaired.
SECTION 3.2 Manner of Conveyance. The sale and purchase of the Purchased
Assets shall be consummated at the Closing by good and sufficient bills of sale
and by individual assignments, as necessary, in form and substance satisfactory
to Buyer, in each case, with such other appropriate instruments of title,
consents of third parties, estoppel certificates and other instruments and
documents as Buyer shall reasonably request. At the Closing, Seller shall
transfer to Buyer good and marketable title to each of the Purchased Assets,
free and clear of all liens, claims, mortgages, charges, commission
arrangements, title retention agreements, covenants, restrictions, options,
purchase agreements, security agreements, security interests, encumbrances and
adverse interests of any kind or nature whatsoever, other than those contained
in the schedules hereto or disclosed to Buyer in writing and approved by Buyer
in writing (each, an "Adverse Interest"). At any time and from time to time
after the Closing Date, the parties shall duly execute, acknowledge and deliver
all such further assignments, conveyances, instruments and documents, and will
take such other action consistent with the terms of this Agreement, in each
case, as may be reasonably necessary to assign, transfer and convey to Buyer
good and marketable title to any and all of the Purchased Assets, free and clear
of all Adverse Interests, to carry out the transactions contemplated by this
Agreement, and to comply with the terms hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to, and agrees with, Buyer, its successors
and assigns, as of the Effective Date and as of the Closing Date, as set forth
in Section A of Exhibit 4. Buyer represents and warrants to, and agrees with
Seller, its successors and assigns, as of the Effective Date and as of the
Closing Date, as set forth in Section B of Exhibit 4.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 5.1 Interim Conduct of the Business. At all times during the
period from the Effective Date through the Closing Date:
5.1.1 Operations in the Ordinary Course of Business. Except for actions
required by this Agreement, Seller agrees that he has caused and will cause the
Business and the
4
operations of the Company to be conducted only in the lawful, ordinary and usual
course of business and neither Seller nor the Company shall take any action
inconsistent therewith or engage in any transaction other than in the ordinary
and usual course of business as heretofore conducted; and, subject to the
foregoing, Seller covenants and agrees to preserve, protect and maintain the
Purchased Assets and the Business and to preserve intact the Company's business
organization and to keep available the services of its officers and employees.
Seller further covenants and agrees to maintain in full force and effect until
the Closing Date a policy or policies of insurance on the Purchased Assets that
provide a scope and amount of coverage that are usual and customary and
consistent with past practices in the Company's Business. Seller shall confer
with representatives of Buyer to keep it informed with respect to operational
matters of a material nature. Matters which are material in nature are those
described in Section 5.1.2 below. Further, Seller shall report the general
status of the ongoing operations of the Business of the Company upon Buyer's
reasonable request.
5.1.2 Forbearances by Seller. Notwithstanding Section 5.1.1 hereof,
and without limiting the generality of Section 5.1.1, Seller represents and
warrants that neither Seller nor the Company has, and covenants and agrees that
neither Seller nor the Company will, in connection with or in respect of the
Business or any of the Purchased Assets without the prior written consent of
Buyer:
(a) directly or indirectly, solicit or initiate discussions or
engage in negotiations with, or provide any information to, or authorize any
financial advisor or other person to solicit or initiate discussions or engage
in negotiations with, or provide any such information to, any corporation,
partnership, person or other entity or group (other than Buyer) concerning any
possible proposal regarding a merger, consolidation, sale of assets or other
similar transaction involving the Company, or any division or asset of the
Company;
(b) mortgage, pledge or otherwise encumber any of the
Purchased Assets;
(c) sell, lease, transfer or dispose of or enter into any
agreement to dispose of any of the Purchased Assets except in the ordinary
course of business consistent with past practice;
(d) waive or release any rights of material value, or cancel,
compromise, release or assign any indebtedness owed to the Company or any claims
held by the Company;
(e) enter into any contract, agreement, commitment, obligation
or transaction of or for the Business in an amount exceeding, individually or in
the aggregate, Fifty Thousand Dollars ($50,000), without the express prior
written consent of Buyer;
(f) amend, modify, terminate or cancel any contract,
agreement, commitment, obligation or transaction of or for the Business other
than in the ordinary and lawful course of business as heretofore conducted;
5
(g) enter into any collective bargaining agreements;
(h) increase in any manner the salary and bonus compensation
or fringe benefits payable to any of its officers or employees, except for merit
raises in the ordinary course of business consistent with past practice; or pay
or agree to pay any pension or retirement allowance not required by any existing
employment agreement or employment plan to any such officers or employees; or
commit itself to any employment agreement or employment plan with or for the
benefit of any officer or employee; or alter, amend or terminate, in whole or in
part, any employee pension or other benefit plan;
(i) release or waive any claim or right without receiving fair
consideration;
(j) enter into any employment agreement or arrangement with
officers or employees, except in the ordinary course of business consistent with
past practice, in which annual compensation (including base salary, cash bonuses
and commissions) exceeds in the aggregate Thirty Thousand Dollars ($30,000); or
(k) agree or commit to do any of the things described in
clauses (a) through (j) of this Section 5.1.2.
SECTION 5.2 Regulatory Consents, Authorizations, etc. Each of the parties
hereto will use its best efforts to obtain all consents, authorizations, orders
and approvals of, and make all filings and registrations with, any governmental
commission, board or other regulatory body or any other person required for or
in connection with the consummation by it of the transactions contemplated on
its part hereby and will cooperate fully with the other party in assisting it to
obtain such consents, authorizations, orders and approvals and to make such
filings and registrations. No party hereto will take or omit to take any action
for the purpose of delaying, impairing or impeding the receipt of any required
consent, authorization, order or approval or the making of any required filing
or registration.
SECTION 5.3 Access. Prior to the Closing, Buyer may make or cause to be
made, at Buyer's sole cost and expense, such reasonable investigation of the
Business, properties and assets of the Company and its financial and legal
condition as Buyer deems necessary or advisable to familiarize itself therewith.
From the date hereof through the Closing Date, Seller and the Company shall give
to Buyer and its authorized representatives, or cause them to be permitted,
during normal business hours and upon reasonable notice, full access to all
officers, employees, properties, customer lists, books, contracts, leases,
commitments and records of the Company and the Business; and during this period,
Seller shall furnish Buyer and its authorized representatives with all financial
and operating data and other information as to the Business, properties and
assets of the Company as Buyer may from time to time reasonably request;
provided, however, that such investigation shall not interfere with the conduct
of the Business and shall not limit any of the representations and warranties of
Seller hereunder.
SECTION 5.4 Records and Documents. For three (3) years, except with
respect to tax matters which rights granted pursuant to this section shall
continue until the applicable
6
statute of limitation expires, following the Closing Date, Seller shall grant to
Buyer and its representatives, at their reasonable request, access to and the
right to make copies, at Buyer's expense, of all records of the Company that
relate to the Business as may be necessary, useful, desirable or appropriate in
connection with Buyer's operation of the Business after the Closing.
SECTION 5.5 Notice of Default. Seller shall give prompt notice to Buyer of
any notice of default received prior to the Closing Date under any instrument to
which Seller or the Company is a party or by which Seller or the Company is or
may be bound, and of the assertion of any claim which, if upheld, would render
wrong, incomplete or inaccurate any representation of Seller contained herein.
SECTION 5.6 No Inconsistent Action. Each of the parties hereto will use
its best efforts to consummate the transactions contemplated by this Agreement
and shall not take any action inconsistent with its obligations hereunder or
which could hinder or delay the consummation of the transactions contemplated
hereby.
SECTION 5.7 Publicity. Each party hereto agrees not to issue any press
release or otherwise make any public statement in any general circulation medium
with respect to the transactions contemplated by this Agreement, without the
prior consent, which shall not be unreasonably withheld, of the other party.
SECTION 5.8 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto shall use its best efforts to effect
the transactions contemplated by this Agreement, as soon as practicable,
including the execution and delivery of all instruments and other documents, and
shall take or cause to be taken such further actions necessary, proper or
desirable to carry out the intent and purposes of, and consummate the
transactions contemplated by, this Agreement. No party will take or knowingly
permit to be taken any action or do or knowingly permit to be done anything in
the conduct of its business, or otherwise, which would be contrary to or in
breach of any of the terms or provisions of this Agreement, or which would cause
any of the representations or warranties contained herein to become untrue or
incomplete.
SECTION 5.9 Confidential Information. Buyer acknowledges and agrees that
Seller is hereby agreeing to make available to Buyer, in the course of its
investigation of the Business, certain information, some of which may constitute
trade secrets of the Company. Such trade secret information includes, without
limitation, information related to customers, including customer lists, the
identities of existing, past or prospective customers, prices charged or
proposed to be charged to customers, the quantity and quality of customer mail,
customer contacts, special customer requirements and all related information,
marketing techniques, compilations of information, copyrightable material and
technical information relating to the Business (collectively the "Confidential
Information"). The Confidential Information does not include information which
(i) was already in Buyer's possession prior to July 2, 1998 (the date on which
negotiations between the parties commenced with respect to this transaction (the
"Start Date")), provided that such information is not known by Buyer to be
subject to another confidentiality agreement with or other obligation of secrecy
to Seller, the Company or another
7
party, or (ii) becomes, or since the Start Date has become, generally available
to the public other than as a result of a disclosure by Buyer or its agents or
(iii) becomes, or since the Start Date has become, available to Buyer on a
non-confidential basis from a source other than Seller, the Company or its
advisors, provided that such source is not known by Buyer to be bound by a
confidentiality agreement with or other obligation of secrecy to Seller, the
Company or another party. As a condition to providing Buyer with any such
information, Buyer represents, warrants, and covenants to Seller, on behalf of
Buyer and its authorized representatives that:
5.9.1 Any and all Confidential Information, including, without
limitation, Confidential Information with respect to the Company's financial
affairs, the Company's willingness to consider a business or asset sale, and any
and all other Confidential Information relating to the Company, is given to
Buyer and/or Buyer's authorized representatives in strictest confidence and
includes confidential business information and trade secrets of the Company.
Buyer acknowledges that the disclosure of any of such information to anyone but
Buyer or Buyer's authorized representatives (as needed only) could be harmful to
and could cause damage to the Company.
5.9.2 All Confidential Information relating to the Company provided
to Buyer or Buyer's authorized representatives, by any source whatsoever, will
be kept in strict confidence, will not be disclosed to any persons or entities
except Buyer and/or Buyer's authorized representatives, and all necessary
precautions will be taken to preclude the disclosure of such information to any
persons or entities except Buyer and/or Buyer's authorized representatives.
5.9.3 Any Confidential Information concerning the Company provided
to Buyer and or Buyer's authorized representatives, from any source whatsoever,
will not be used to compete, directly or indirectly with the Company or to
engage in the same business as the Company whether or not in direct or indirect
competition with the Company. Such information will be used solely for the
purpose of determining whether to acquire the Purchased Assets and for no other
purpose.
5.9.4 If the transactions contemplated by this Agreement are not
consummated, Buyer will return to Seller, upon Seller's request, all documents
or other materials, of any kind whatsoever, obtained by Buyer or Buyer's agents
concerning the Company, as well as all summaries, reports, financial statements,
documents, recordings, and any reproductions thereof.
SECTION 5.10 Non-competition and Non-interference.
5.10.1 Seller acknowledges that: (a) Buyer's business is national in
scope and its products are marketed throughout the United States of America,
including the State of California; (b) Buyer competes with other businesses that
are or could be located in any part of the United States of America, including
the State of California; and (c) the provisions of this Section 5.10 are
reasonable and necessary to protect Buyer's business.
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5.10.2 As an inducement for Buyer to enter into this Agreement,
Seller agrees that for a period of two (2) years from the Closing Date (the
"Noncompetition Period"), Seller shall not, directly or indirectly:
(a) during the Noncompetition Period, engage or invest in,
own, manage, operate, finance, control, or participate in the ownership,
management, operation, financing or control of, be employed by, associated with,
or in any manner connected with, lend Seller's or the Company's name or any
similar name to, lend Seller's or the Company's credit to, or render services or
advice to, any business whose products or activities compete in whole or in part
with the products or activities (a) sold or engaged in, respectively, by Buyer,
anywhere within the State of California where the Company is doing business or
marketing its services in the areas of precision machining and aerospace
part/component design and manufacturing.
(b) either for himself or any other person, at any time during
the Noncompetition Period: (i) induce or attempt to induce any employee of Buyer
to leave the employ of Buyer; (ii) in any way interfere with the relationship
between Buyer and any of its employees; (iii) employ, or otherwise engage as an
employee, independent contractor, or otherwise, any employee of Buyer; or (iv)
induce or attempt to induce any customer, supplier, licensee, or business
relation of Buyer to cease doing business with Buyer, or in any way interfere
with the relationship between any customer, supplier, licensee or business
relation of Buyer;
(c) either for himself or any other Person, at any time during
the Noncompetition Period, solicit the business of any Person known to Seller to
be a customer of Buyer, whether or not Seller had personal contact with such
Person, with respect to products or activities which compete in whole or in part
with the products or activities of Buyer;
5.10.3 If any covenant in this Section 5.10 is held to be
unreasonable, arbitrary or against public policy, such covenant will be
considered to be divisible with respect to scope, time and geographic area, and
such lesser scope, time or geographic area, or all of them, as a court of
competent jurisdiction may determine to be reasonable, not arbitrary and not
against public policy, will be effective, binding and enforceable against
Seller.
5.10.4 The period of time applicable to any covenant in this Section
5.10 will be extended by the duration of any violation by Seller of such
covenant.
SECTION 5.11 Relocation of the Business. Buyer shall: (a) reserve the
right, in its sole discretion, to relocate the Business and the Purchased Assets
situated at the Facility (as defined herein) at Buyer's sole cost and expense
(the "Relocation"); and (b) have no obligation to continue any lease or other
obligation relating to the Facility upon the Relocation.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
9
Unless, at the Closing Date, each of the following conditions is either
satisfied or waived by Buyer in writing, Buyer shall not be obligated to
purchase the Purchased Assets and shall not otherwise be obligated to consummate
or effect this Agreement, or any of the other transactions contemplated by this
Agreement. Buyer shall have the right to waive in writing any or all of the
foregoing conditions precedent to the obligations of Buyer; provided, however,
that no waiver by Buyer of any conditions precedent to the obligations of Buyer
shall constitute a waiver by Buyer of any other condition precedent.
SECTION 6.1 Accuracy of Warranties; Performance of Covenants. The
representations and warranties of Seller contained or incorporated herein shall
be true, accurate and correct on the date hereof and shall also be true,
accurate and correct in all material respects on and as of the Closing Date with
the same effect as if such representations and warranties had been made on and
as of the Closing Date, and Seller and the Company shall have performed each and
every obligation and complied with each and every agreement and covenant
required by this Agreement to be performed or complied with on his, its or their
part on or prior to the date hereof and the Closing Date, as the case may be.
Each of the documents required to be delivered by Seller and the Company to
Buyer hereunder shall be in form and substance reasonably satisfactory to Buyer.
SECTION 6.2 Regulatory Consents, Authorizations, etc. All consents,
authorizations, orders and approvals of, and filings and registrations with, any
governmental commission, board or other regulatory body which are required in
connection with the execution and delivery of this Agreement and the
consummation by each party hereto of the transactions contemplated on its part
hereby, shall have been obtained or made, other than consents, authorizations,
orders, approvals, filings and registrations as to which the failure to obtain
or make will not, after the Closing Date, (a) materially and adversely affect
the Business, assets, properties, operations, prospects or the condition,
financial or otherwise, or the results of operations of the Company, (b) limit
the right of Buyer to own each of the Purchased Assets or conduct any material
aspect of the Business, or (c) subject Buyer, any of its subsidiaries or any of
its or their respective directors, officers or employees to liability on the
ground that he, it or they have breached any law or regulation or have otherwise
acted improperly in relation to the transactions contemplated by this Agreement.
SECTION 6.3 No Pending Action. No (a) claim, investigation, action, suit,
proceeding or litigation, either administrative or judicial, at law or in
equity, by any governmental or regulatory commission, agency or other body or
authority or by any other person, firm, corporation or other entity shall have
been instituted, or to Seller's knowledge, threatened or pending on the Closing
Date (i) for the purposes of challenging, prohibiting, operating, enjoining,
restricting or delaying the consummation of this Agreement or any of the
transactions contemplated by this Agreement, or any of the conditions to the
consummation of the transactions contemplated by this Agreement, (ii) which
claims damages against Buyer or Seller or the Company as a result of the
consummation of the transactions contemplated hereby or otherwise claims that
this Agreement or the consummation thereof is improper, or (iii) which in the
reasonable opinion of Buyer, could adversely affect the right of Buyer to retain
the Purchased Assets or to conduct any material aspect of the Business of the
Company after the
10
Closing Date, or the ability of Seller and the Company to consummate the
transactions contemplated hereby, and (b) injunction or restraining order shall
be in effect prohibiting the transactions contemplated by this Agreement.
SECTION 6.4 No Material Adverse Change. There shall have been no material
and adverse change in the Company, the Business or the Purchased Assets.
SECTION 6.5 No Adverse Laws. There shall not have been enacted by any
foreign, federal, state or local governmental agency, body or entity, any
statute, ordinance or regulation which has a material and adverse effect upon
the Company, the Business or the Purchased Assets.
SECTION 6.6 Force Majeure. All or any material part of the Purchased
Assets shall not have been materially and adversely affected in any way by any
act of God, fire, flood, war, legislation (proposed or enacted) or other event
or occurrence, whether or not covered by insurance.
SECTION 6.7 Third Party Consents.
6.7.1 All consents of third parties, including, without limitation,
lenders and lessors of each of the parties hereto, which are required for the
consummation of the transactions contemplated hereby, shall have been obtained
in writing on terms and conditions and in form and substance reasonably
satisfactory to Buyer.
6.7.2 Buyer shall also be reasonably satisfied that no material
adverse change in the relationship with trade vendors to the Business will arise
after the Closing Date as a result of the transactions contemplated by this
Agreement and related agreements. This condition shall cease to be a condition
precedent to Buyer's performance sixty (60) calendar days after the Effective
Date.
SECTION 6.8 [[Reserved]].
SECTION 6.9 Further Actions. All proceedings to be taken in connection
with the consummation of the transactions contemplated by this Agreement, and
all certificates, documents and instruments incidental thereto, shall be
satisfactory in form and substance to Buyer, and Buyer shall have received
copies of such documents and instruments as Buyer and its counsel may reasonably
request in connection with such transactions.
SECTION 6.10 Certificates. Prior to the Closing Date, Buyer shall have
received from Seller a certificate dated the Closing Date and signed by Seller
certifying that nothing has come to the attention of Seller which has led him to
believe that the conditions set forth in Sections 6.1 through 6.8 hereof have
not been satisfied.
SECTION 6.11 Investigation. The Business, properties, assets, financial
and legal condition, balance sheets, statements of operations and earnings,
books, contracts, agreements, leases, commitments, financial and operating data,
records, documents and files of the Company,
11
and other information and documents furnished to or obtained by Buyer pursuant
to Section 5.3 hereof or otherwise, shall be reasonably satisfactory to Buyer.
This condition shall cease to be a condition precedent to Buyer's performance
thirty (30) days after the Effective Date.
SECTION 6.12 Additional Agreements. Seller shall have delivered to Buyer
executed copies of the Consulting Agreement and the Security Agreement.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Unless, at the Closing, each of the following conditions is either
satisfied, or waived by Seller in writing, Seller shall not be obligated to sell
the Purchased Assets and shall not be otherwise obligated to effect the
transactions contemplated by this Agreement. Seller shall have the right to
waive in writing any or all of the foregoing conditions precedent to the
obligations of Seller; provided, however, that no waiver by Seller of any
conditions precedent to the obligations of Seller shall constitute a waiver by
seller of any other condition precedent.
SECTION 7.1 Accuracy of Warranties; Performance of Covenants. The
representations and warranties of Buyer contained or incorporated herein shall
be true, accurate and correct in all material respects, on and as of the Closing
Date with the same force and effect as if such representations and warranties
had been made on and as of the Closing Date, and Buyer shall have performed each
and every obligation and complied with each and every covenant required by this
Agreement to be performed or complied with on its part on or prior to the
Closing Date. Each of the documents required to be delivered by Buyer to Seller
hereunder shall be in form and substance reasonably satisfactory to Seller.
SECTION 7.2 Regulatory Consents, Authorizations, etc. All consents,
authorizations, orders and approvals of, and filings and registrations with, any
governmental commission, board or other regulatory body which are required in
connection with the execution and delivery of this Agreement and the
consummation by each party hereto of the transactions contemplated on its part
hereby, shall have been obtained or made, other than consents, authorizations,
orders, approvals, filings and registrations as to which the failure to obtain
or make will not, after the Closing Date, (a) materially and adversely affect
the Business, assets, properties, operations, prospects or the condition,
financial or otherwise, or the results of operations of the Company, (b) limit
the right of Buyer to own each of the Purchased Assets or conduct any material
aspect of the Business, or (c) subject Buyer, any of its subsidiaries or any of
its or their respective directors or officers to liability on the ground that
he, it or they have breached any law or regulation or have otherwise acted
improperly in relation to the transactions contemplated by this Agreement.
SECTION 7.3 No Pending Action. No (a) claim, investigation, action, suit,
proceeding or litigation, either administrative or judicial, at law or in
equity, by any governmental or regulatory commission, agency or other body or
authority or by any other person, firm, corporation or other entity shall have
been instituted, or to the best knowledge of Buyer, threatened or pending on the
Closing Date (i) for the purposes of challenging, prohibiting,
12
operating, enjoining, restricting or delaying the consummation of this Agreement
or any of the transactions contemplated by this Agreement, or any of the
conditions to the consummation of the transactions contemplated by this
Agreement, (ii) which claims damages against Buyer or Seller or the Company as a
result of the consummation of the transactions contemplated hereby or otherwise
claims that this Agreement or the consummation thereof is improper, or (iii)
which, in Seller's reasonable opinion, could materially and adversely affect the
ability of Buyer to make the payments under the Promissory Note, and (b)
injunction or restraining order shall be in effect prohibiting the transactions
contemplated by this Agreement.
SECTION 7.4 No Material Adverse Change. There shall have been no material
and adverse change in Buyer's business.
SECTION 7.5 No Adverse Laws. There shall not have been enacted by any
foreign, federal, state or local governmental agency, body or entity, any
statute, ordinance or regulation which has had a material and adverse effect
upon Buyer's business.
SECTION 7.6 Force Majeure. All or any material part of Buyer's business
shall not have been materially and adversely affected in any way by any act of
God, fire, flood, war, legislation (proposed or enacted) or other event or
occurrence, whether or not covered by insurance.
SECTION 7.7 Further Actions. All proceedings to be taken by Buyer in
connection with the consummation of the transactions contemplated by this
Agreement, and all certificates, documents and instruments incidental thereto,
shall be reasonably satisfactory in form and substance to Seller, and Seller
shall have received copies of such documents and instruments as Seller and its
counsel may reasonably request in connection with such transactions.
SECTION 7.8 Certificate. Prior to the Closing Date, Seller shall have
received from Buyer a certificate dated the Closing Date and signed by Buyer
certifying that the conditions set forth in Sections 7.1 to 7.7 have been
fulfilled.
SECTION 7.9 Additional Agreements. Buyer shall have delivered to Seller
executed copies of the Consulting Agreement, the Promissory Note and the
Security Agreement.
ARTICLE VIII
EMPLOYEES
Except pursuant to the Assumed Contracts set forth in Exhibit 1.1, Buyer
shall not be obligated in any way to offer employment to any employee of the
Company and Buyer will not be responsible or liable in connection with any
employment arrangements (whether written or oral) with employees of the Company,
or for any salaries, severance pay, vacation accruals or other benefits owed or
payable to any employees of the Company; provided, however, that Buyer shall be
responsible for any salaries, severance pay, vacation accruals or other benefits
owed or
13
payable to former employees of the Company employed by Buyer after the
Closing Date, to the extent such payments relate to periods as of and after the
Closing Date.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
SECTION 9.1 Survival. Each of the representations, warranties, covenants
and agreements of Seller contained in this Agreement (including those made in
the exhibits and schedules hereto) shall be deemed renewed by Seller at the
Closing Date as if made at such time and shall survive the Closing and shall be
fully effective and enforceable until the first anniversary of the Closing Date,
except with respect to: (i) the representations and warranties contained in the
first sentence of Section A(8) of Exhibit 4, which shall survive the Closing in
perpetuity; and (ii) the representations and warranties contained in Section
A(17) of Exhibit 4, which shall survive the Closing until the expiration of the
applicable statute of limitations period; provided, however, that none of such
representations, warranties, covenants and agreements shall be limited with
respect to time in the event that Seller has acted fraudulently in connection
with, or intentionally breached, any of such representations, warranties,
covenants and agreements.
SECTION 9.2 Indemnification by Seller. Seller hereby agrees to indemnify
and hold harmless Buyer and every subsidiary, affiliate, officer, director,
shareholder, employee or agent of Buyer and the successors and assigns of each
of them (collectively, "Buyer's Representatives"), from any and all Adverse
Consequences (as defined herein) arising out of or relating to an Event of
Breach (as defined herein) or any of the Excluded Liabilities and Obligations.
Seller shall not be obligated to indemnify or hold Buyer or Buyer's
Representatives harmless against any Adverse Consequences which it or they may
suffer as a result of its or their gross negligence or willful misconduct on or
after the discovery of any such Event of Breach.
SECTION 9.3 Indemnification by Buyer. Buyer hereby agrees to indemnify and
hold harmless Seller and its affiliates or agents and the successors and assigns
of each of them (collectively, "Seller's Representatives"), from any and all
Adverse Consequences arising out of or relating to an Event of Breach or from
the Assumed Equipment Leases, the Assumed Contracts, or the Assumed Payables.
Buyer shall not be obligated to indemnify or hold Seller or Seller's
Representatives harmless against any Adverse Consequences which it or they may
suffer as a result of its or their gross negligence or willful misconduct on or
after the discovery of any such Event of Breach.
SECTION 9.4 Event of Breach and Adverse Consequences.
9.4.1 As used herein, an "Event of Breach" shall mean any one or
more of the following: (i) any material untruth, inaccuracy or misrepresentation
in or material breach of any of the representations, warranties, covenants or
agreements made by the party making such representation, warranty, covenant or
agreement; (ii) any material failure of a party to perform or observe any term,
provision, covenant, obligation, agreement or condition on the part of that
party to be performed or observed under this Agreement; and (iii) any
misrepresentation of a party in, or omission from, any statement, certificate,
schedule, exhibit or other document
14
prepared or furnished by that party pursuant to this Agreement. In addition,
"Event of Breach" shall also mean as to Seller or the Company, (a) any failure
by Seller or the Company to fully perform and discharge the obligations,
including, without limitation, the Excluded Liabilities and Obligations, of the
Business arising prior to the Closing Date, and (b) claims or liabilities of any
kind or nature which arise out of, result from or are related to the operations,
ownership, conduct, activities or failure to act of Seller, the Company or their
respective affiliates, or the Business or the Purchased Assets, including,
without limitation, liabilities related to actual, potential or inchoate
security interests, liens, claims or encumbrances involving any of the Purchased
Assets, prior to, on or after the Closing Date which, individually or in the
aggregate, have had or could have a material adverse effect on the Company, the
Business or the Purchased Assets.
9.4.2 "Adverse Consequences" are all charges, complaints, actions,
suits, proceedings, hearings, investigations, claims, demands, judgments,
orders, decrees, stipulations, injunctions, damages, dues, penalties, fines,
costs, amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses, and fees, including all attorneys' fees and court costs.
SECTION 9.5 Certain Other Agreements. Notwithstanding anything herein to
the contrary, the party who has suffered losses due to Adverse Consequences
shall not enforce the indemnification obligations contained herein until the
aggregate amount for which it has suffered losses due to Adverse Consequences
hereunder exceeds Forty-Five Thousand Dollars ($45,000) (the "Threshold
Amount"); provided, however, that such party shall be indemnified for the full
amount of its loss thereafter without giving effect to the Threshold Amount. To
the extent, and only to the extent, required by law, each indemnified party
hereunder will use commercially reasonable efforts to mitigate Adverse
Consequences resulting from, arising out of, or caused by an Event of Breach;
provided, however, that nothing herein shall impose, create, supplement, reduce,
change or affect in any way any burden of proof, burden of persuasion or any
other procedural or substantive requirement or law in the prosecution of its
rights hereunder.
Notwithstanding the foregoing, unless and to the extent that any losses
due to Adverse Consequences result from or arise out of fraud, a violation of
any representation or warranty contained in the first sentence of Section A(8)
of Exhibit 4, or any intentional breach of any representation or warranty or
agreement contained herein, the indemnity obligations of Seller will not exceed
Five Hundred Thousand Dollars ($500,000). In the event and to the extent that
the indemnity obligations of Seller or Buyer result from or arise out of fraud
or any intentional breach of any representation or warranty or agreement
contained in this Agreement, no such limitation on indemnity obligations shall
apply.
SECTION 9.6 Notice and Demand, etc.
9.6.1 Each indemnified party hereunder agrees that, upon its
obtaining actual knowledge of facts indicating that there may be an Event of
Breach giving rise to a colorable claim for indemnity by an unidentified party
under the provisions hereof, it will give prompt notice thereof in writing to
the indemnifying party. If an Event of Breach occurs, the
15
indemnifying party shall indemnify the indemnified party from and against the
Adverse Consequences the indemnified party suffers, subject to the limitations
set forth in this Article IX.
9.6.2 If any third party shall notify any party (the "Indemnified
Party") with respect to any Event of Breach which may give rise to a colorable
claim for indemnification against the other party (the "Indemnifying Party"),
then the Indemnified Party shall notify the Indemnifying Party within 60 days
after receiving any written notice from a third party. Once the Indemnified
Party has given notice of the matter to the Indemnifying Party, the Indemnified
Party may defend against the matter in any reasonable manner it may deem
appropriate at the Indemnifying Party's sole cost and expense. However, in the
event the Indemnifying Party notifies the Indemnified Party, at any time after
the Indemnified Party has given notice of the matter, that the Indemnifying
Party is assuming the defense thereof, (i) the Indemnifying Party will defend
the Indemnified Party against the matter with counsel of its choice reasonably
satisfactory to the Indemnified Party, (ii) the Indemnified Party may retain
separate co-counsel at its sole cost and expense, (iii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the matter without the written consent of the Indemnifying Party (not
to be withheld unreasonably) and (iv) the Indemnifying Party will not consent to
the entry of any judgment with respect to the matter, or enter into any
settlement which does not include a provision whereby the plaintiff or claimant
in the matter releases the Indemnified Party from all liability with respect
thereto, without the written consent of the Indemnified Party not to be withheld
unreasonably.
9.6.3 Disputed issues regarding (i) whether or not an Event of
Breach has occurred, (ii) the scope or amount of Adverse Consequences, or (iii)
whether a party has performed duties reasonably, shall be resolved by
arbitration hereunder as provided in Section 10.15 hereof. In addition, the
parties hereto acknowledge and agree that any claim or dispute under this
Article IX existing or pending as of August 20, 1999 shall be submitted to
arbitration pursuant to Section 10.15 of this Agreement on or before September
4, 1999, otherwise such Claim or dispute shall be terminated.
SECTION 9.7 Determination of Loss. The parties hereto shall make
appropriate adjustments for tax benefits and insurance proceeds (reasonably
certain of receipt and utility in each case) and for the time cost of money
(using the applicable federal rate as the discount rate) in determining the
amount of Adverse Consequences for purposes of this Article. All indemnification
payments under this Article shall be deemed adjustments to the Aggregate
Purchase Price.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Brokers. Buyer, on the one hand, and Seller, on the other,
represent and warrant to each other that no broker, investment banker or finder
is entitled to any financial advisory fee brokerage fee or finder's fee or other
similar payment with respect to (i) this Agreement or (ii) the transactions
contemplated hereby. Buyer, on the one hand, and Seller,
16
on the other, each agrees to indemnify, defend and hold each other harmless
against and in respect of all claims, losses, liabilities and expenses which may
be asserted against one of the parties hereto by any broker or other person who
claims to be entitled to a broker's, finder's or similar fee or commission in
respect of the execution of this Agreement, or the consummation of the
transactions contemplated hereby, by reason of his acting at the request of the
other.
SECTION 10.2 Entire Understanding. This Agreement (including the exhibits
and schedules hereto, each of which is incorporated herein and made a part of
this Agreement) and the other agreements and instruments, the execution and
delivery of which are provided for herein, constitutes the entire agreement and
understanding of the parties hereto and terminates and supersedes any and all
prior agreements, arrangements and understandings, both oral and written,
between the parties hereto concerning the subject matter of this Agreement.
SECTION 10.3 Waiver and Amendment. No waiver, amendment, modification or
change of any provision of this Agreement shall be effective unless and until
made in writing and signed by all of the parties hereto. No waiver, forbearance
or failure by any party of its right to enforce any provision of this Agreement
shall constitute a waiver or estoppel of such party's right to enforce any other
provision of this Agreement or a continuing waiver by such party of compliance
with any provision.
SECTION 10.4 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement, and shall not be deemed to limit or
affect any of the provisions hereof.
SECTION 10.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be original, but all of which
together shall constitute one and the same instrument.
SECTION 10.6 Interpretation. The provisions of this Agreement are intended
to be interpreted and construed in a manner so as to make such provisions valid,
binding and enforceable. In the event that any provision of this Agreement is
determined to be partially or wholly invalid, illegal or unenforceable, then
such provision shall be deemed to be modified or restricted to the extent
necessary to make such provision valid, binding and enforceable, or, if such
provision cannot be modified or restricted in a manner so as to make such
provision valid, binding and enforceable, then such provision shall be deemed to
be excised from this Agreement and the validity, binding effect and
enforceability of the remaining provisions of this Agreement shall not be
affected or impaired in any manner. Nothing in this Agreement shall be
interpreted or construed as creating, expressly or by implication, a
partnership, joint venture, agency relationship or employment relationship
between the parties hereto or any of their respective officers, directors,
agents, employees or representatives.
SECTION 10.7 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been delivered: three (3) business days after having been mailed in a
general or branch post office and enclosed in a registered or certified
post-paid envelope; one (1) business day after having been sent by overnight
courier; when delivered to a telegraph company or when telecopied or scanned
17
graphically or otherwise by communications equipment of the sending party on a
business day, or otherwise on the next succeeding business day thereafter; and,
in each case, addressed to the respective parties at the addresses stated below
or to such other changed addresses the parties may have fixed by notice as
provided herein:
If to Seller: Aerated Engineering Co.
000 00xx Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xx. Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
With a copy to: Xxxxx, Xxxxxxxx & Xxxxxxxxx
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Buyer: TomaHawk II, Inc.
0000 Xxxxxxx Xxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Vice President-Finance and Chief
Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxx & XxXxxxxx
000 Xxxx Xxxxxxxx; 00xx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
SECTION 10.8 Successors and Assigns. This Agreement shall not be assigned
or delegated by any party without the prior written consent of the other party,
except that Buyer may assign this Agreement and the right to receive the
Purchased Assets or the Business of the Company (i) to one or more subsidiaries
or affiliates of Buyer or (ii) to lending institutions for security purposes.
Subject to the preceding sentence, each term and provision of this Agreement
shall be binding upon and enforceable against and inure to the benefit of any
successors or assigns of Buyer and any successors or assigns of Seller. Nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
SECTION 10.9 Attorneys' Fees. Subject to Section 10.15 of this Agreement,
if any action at law or in equity is brought to enforce or interpret the
provisions of this Agreement or any other agreement or instrument provided for
herein, the prevailing party in such action shall be entitled to recover as an
element of such party's costs of suit, and not as damages,
18
reasonable attorneys' fees to be fixed by the court or arbitrator. The
prevailing party shall be the party who is entitled to recover its costs of suit
as ordered by the court, the arbitrator or by applicable law or court rules. A
party not entitled to recover its costs shall not recover attorneys' fees. No
sum for attorneys' fees shall be counted in calculating the amount of judgment
for purposes of determining whether a party is entitled to recover its costs or
attorneys' fees.
SECTION 10.10 Governing Law. Subject to Section 10.15 of this Agreement,
any action or proceeding seeking to enforce any provision of, or based on any
right or duty arising out of, this Agreement or for damages for breach of this
Agreement shall be brought in San Diego, California and each of the parties
hereto consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California, without regard to
principles of conflict of laws.
SECTION 10.11 Construction. Whenever in this Agreement the context so
requires, references to the masculine shall be deemed to include feminine and
the neuter, reference to the neuter shall be deemed to include the masculine and
feminine, and references to the plural shall be deemed to include the singular
and the singular to include the plural.
SECTION 10.12 Cooperation. Each party hereto shall cooperate with the
other party and shall take such further action and shall execute and deliver
such further documents as may be necessary or desirable in order to carry out
the provisions and purposes of this Agreement.
SECTION 10.13 Expenses. Whether or not the transactions contemplated by
this Agreement and the related agreements are consummated, each party to this
Agreement shall pay its own costs and expenses in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, including but not limited
to, attorneys' fees, accountants' fees and other professional fees and expenses;
provided, however, that Buyer shall pay all costs in connection with the audit
of the Company's Financial Statements (as defined herein) or other financial
review of the Business.
SECTION 10.14 Representation by Counsel. Each party hereto represents and
agrees with the other that it has been represented by, or had the opportunity to
be represented by, independent counsel of its own choosing, and that it has had
the full right and opportunity to consult with its respective attorneys, that to
the extent, if any, that it desired, it availed itself of this right and
opportunity, that its authorized officers have carefully read and fully
understand this Agreement in its entirety and have had it fully explained to
them by such party's respective counsel, that each party is fully aware of the
contents thereof and its meaning, intent and legal effect, and that its
authorized officer is competent to execute this Agreement and has executed this
Agreement free from coercion, duress or undue influence.
SECTION 10.15 Binding Arbitration. The parties hereto agree that all
disputes arising out of or related to the terms and conditions of this Agreement
or to the performance, breach of termination thereof, shall be submitted to
binding arbitration pursuant to the Expedited Procedures of the Commercial
Arbitration Rules (the "Rules") of the American Arbitration
19
Association (the "AAA"). The arbitration will take place in San Diego,
California at the offices of the AAA. The dispute will be resolved by a single
arbitrator appointed by the AAA in accordance with the list procedure described
in Paragraph 13 of the Rules, except that the AAA will transmit the list within
ten (10) business days of the filing of the demand for arbitration, and the
parties thereto will have five (5) business days to return the list to the AAA
with their objections and preferences. Discovery will be limited to no more than
five (5) depositions by each side and written document requests, requesting the
production of specific documents. The parties to the dispute will voluntarily
produce any and all documents that they intend to use at the hearing before the
close of discovery, subject to supplementation for purposes of rebuttal or good
cause shown. The period for taking discovery will be sixty (60) business days,
commencing upon the day that the answer is due under the Rules. The arbitrator
will hold a pre-hearing conference within thirty (30) business days of the close
of discovery and will schedule the hearing within thirty (30) business days of
the close of discovery. After the arbitrator is selected, the arbitrator will
have sole jurisdiction to hear such applications, except that any measure
ordered by the arbitrator may be immediately and specifically enforced by a
court otherwise having jurisdiction over the parties. All fees and costs will be
allocated to the parties to the arbitration as determined by the arbitrator.
Each party will pay its own fees and costs associated with the arbitration and
each party will pay one-half of the estimated arbitrator's fees up front; and if
either party fails to do so, a default will be entered against such party solely
with respect to such fees. Any determination of the arbitrator shall be final
and binding on the parties hereto, without right of appeal. Nothing in this
Agreement will prevent a party hereto from applying to a court that would
otherwise have jurisdiction for provisional or interim injunctive or other
equitable measures.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on August 20, 1998, effective as of the day and year first above
written.
"SELLER"
--------------------------------------------
Xxxxx Xxxxxxx
"BUYER"
TOMAHAWK II, INC.,
an Illinois corporation
By:
-----------------------------------------
Xxxxxx X. Xxxxx
President and Chief Executive Officer
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
21
Exhibit 1.1
PURCHASED ASSETS
The "Purchased Assets" shall be and mean the following at the Effective
Date:
a. All accounts receivable arising from sales made, services performed and/or
invoices billed by the Company on or after the Effective Date (and,
subject to Section 2.2 of this Agreement, all collections thereof through
and including the Closing Date), trade notes receivable and employee notes
receivable (collectively, the "Accounts Receivable");
b. Subject to Section 2.2 of this Agreement, all cash accounts related to the
Business of the Company received or collected from the Effective Date
through and including the Closing Date;
c. All salable inventory (including finished goods, supplies, service parts
and purchased parts, raw materials, work-in-progress, inventory in
transit, and other goods and materials) of the Company, except for
inventory determined in good faith by Buyer to be obsolete, damaged or
otherwise not salable by Buyer in its business;
d. All fixed assets, physical assets and other tangible property, including,
without limitation, all machinery, fixtures, equipment and computer
hardware and software located at the Facility (as defined herein) or used
in or related to the Business as set forth on Schedule 1.1(d) attached
hereto and made a part hereof;
e. All vehicles, including, but not limited to, automobiles, trucks and
trailers, except for those described as Excluded Assets below;
f. All office furnishings, furniture, telephone equipment, telephone numbers,
fixtures and supplies located at the Facility (as defined herein) or used
in or related to the Business, except for those described as Excluded
Assets below;
g. All leasehold interests and all rights to and under equipment leases
related to the Business as set forth on Schedule 1.1(g) attached hereto
and made a part hereof (collectively, the "Assumed Equipment Leases");
h. All rights and claims to and under sales contracts, dealer contracts and
purchase orders and all rights to and under licenses, franchises and all
other such agreements and contracts relating to the Business or the
Purchased Assets (collectively, the "Assumed Contracts");
i. Subject to Section 2.2 of this Agreement, all rights, claims and
obligations to and under reasonable operating expenses incurred in the
ordinary course of the Business consistent with past practice on or after
the Effective Date (collectively, the "Assumed Payables");
j. All deposit accounts reflected on the Interim Balance Sheet relating to
the Business;
1
k. All confidential and proprietary information, including, but not limited
to, information relating to marketing, purchasing, sales, pricing,
customers, suppliers and employees (with consents of employees) and all
customer deposits and credit balances, to the extent such items are used
in or related to the Business;
l. All lists of customers, customer files, lists of suppliers and supplier
files, to the extent such items are used in or related to the Business;
m. All technical or marketing information relating to the Business, including
new developments, inventions, know-how, ideas and trade secrets and
documentation thereof;
n. The name "Aerated Engineering Co.," "A.E.C.," and/or any variation thereof
and any names similar thereto and all fictitious businesses names used by
the Company relating thereto, all trademarks, trade names, service marks,
patents, copyrights and all other rights and all applications and
registrations therefor and licenses thereof relating to the Business;
o. Any proceeds from insurance claims (whether pending or otherwise) which
relate to any of the Purchased Assets; and
p. Goodwill.
2
EXHIBIT 1.2
EXCLUDED ASSETS
The "Excluded Assets" shall be and mean the following at the Effective
Date:
(aa) Tax refunds;
(bb) The 1995 Jeep Cherokee, License No. 3KKU445, V.I.N. 1J4FJ785X5L55197;
(cc) The building situated on the Facility;
(dd) Any fee interest in real property owned by Seller;
(ee) Trade and non-trade receivables, including, without limitation,
workers' compensation or insurance refunds or rebates;
(ff) Cash, cash equivalents and marketable securities held by the Company
at July 31, 1998;
(gg) All rights, claims and obligations to and under the accounts
receivable of the Business as reflected on the books and records of the Company
at July 31, 1998 and the specific accounts receivable listed on the attached
Schedule 14, as mutually agreed to by Buyer and Seller (collectively, the
"Excluded Accounts Receivable");
(hh) All rights, claims and obligations to and under the accounts payable
of the Business as reflected on the books and records of the Company at July 31,
1998 and as set forth on the attached Schedule 13 (the "Excluded Accounts
Payable"); and
With respect to item (gg) above, after the Closing Date, Buyer
agrees to remit to Seller any amounts received in connection with the Excluded
Accounts Receivable within ten (10) business days of their receipt by Buyer.
1
EXHIBIT 4
A. Representations and Warranties of Seller. Seller hereby represents and
warrants to Buyer, as of the Effective Date and as of the Closing Date, the
following:
1. Ownership. Seller is the owner of the Purchased Assets, free and
clear of any and all liens, charges, pledges, security interests, equities,
encumbrances or restrictions of any kind.
2. Due Qualification. The Company is a sole proprietorship, and
Seller and the Company have full power and authority to own and/or lease all of
the Purchased Assets and to carry on the Business as now being conducted and as
and where the Purchased Assets are now owned or leased and the Business is
located.
3. Authority. Seller now has, and on the Closing Date will have, the
full right, power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. Seller now has and on the Closing Date will have the full
right, power and authority, without the consent of any other person, to execute
and deliver this Agreement and to carry out this Agreement and the transactions
contemplated hereby.
4. Validity. This Agreement constitutes the valid and legally
binding obligation of Seller, enforceable against him in accordance with its
respective terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles.
5. Non-Contravention. Neither the execution and delivery of this
Agreement by Seller, nor the consummation of the transactions contemplated
hereby, do or would after the giving of notice or the lapse of time or both, (a)
conflict with, result in a breach of, or constitute a default under, to Seller's
knowledge, any federal, state or local court or administrative order or process,
or any agreement, contract, commitment or other instrument, including any
express or implied warranty, to which Seller or the Company is a party or by
which Seller or the Company (or any of its rights, properties or assets) is
subject or bound; (b) to Seller's knowledge, conflict with, result in a breach
of, or constitute a default under, any federal, state or local law, statute,
rule or regulation; (c) result in the creation of, or give any party the right
to create, any lien, charge, encumbrance, security agreement or other rights or
adverse interests upon any of the Purchased Assets; (d) terminate or give any
party the right to terminate, amend, abandon or refuse to perform any agreement,
contract or commitment to which Seller or the Company is a party or by which
Seller or the Company (or any of its rights, properties or assets) is subject or
bound; or (e) accelerate or modify, or give to any party thereto the right to
accelerate or modify, the time within which, or the terms under which, either
Seller, the Company or any third party is to perform any duties or obligations
or receive any rights or benefits under any agreement, contract or commitment.
6. Force Majeure. The Purchased Assets have not been materially and
adversely affected in any way as a result of any fire, explosion, earthquake,
flood, windstorm,
1
accident or any other casualty, labor trouble, condemnation, requisition or
taking of property by any government or any agency of any government, embargo,
riot, act of God or public enemy, or other similar or dissimilar casualty or
event.
7. Facility. The Business is operated exclusively at 000 00xx
Xxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 (the "Facility").
8. Title to Assets. Except for the equipment leased under the
Assumed Equipment Leases, Seller is the sole and exclusive legal and equitable
owner of all right, title and interest in and has good and marketable title to
the Purchased Assets, free and clear of any and all mortgages, liens, claims,
charges, options, purchase agreements, security agreements and interests,
commission arrangements, title retention agreements, encumbrances, covenants,
restrictions and adverse interests of any kind or nature whatsoever. Each of the
Purchased Assets, including the fixtures, vehicles, equipment, machinery,
furniture and other tangible assets transferred hereunder, is in good repair and
in good, marketable and operating condition and is suitable for the purposes for
which it presently is being used.
9. Financial Statements. Seller has delivered to Buyer the balance
sheets of the Company as of December 31, 1996 and December 31, 1997
(collectively, the "Balance Sheets"), and the related statements of operations
for the years then ended (collectively, the "Financial Statements"), which are
attached hereto as Schedule 9. In addition, Schedule 9 contains: (i) the
unaudited balance sheet of the Company for the seven-month period ended on July
31, 1998 (the "Interim Balance Sheet"); (ii) the related unaudited statement of
operations for the seven-month period ended on July 31, 1998 (collectively, the
"Interim Financial Statements"); and (iii) the 1998 fiscal forecast of the
Company. To Seller's knowledge, all such financial statements and information,
together with any notes thereto, are correct and present fairly the financial
position of the Company as of the respective dates indicated and its results of
operations for the periods then ended (subject to normal year-end adjustments).
10. Books and Records. The books of account and other records of the
Company, all of which have been made available to Buyer, are complete and
correct and have been maintained in accordance with sound business practices. At
the Closing, to Seller's knowledge, all of those books and records relating to
the Business and the Purchased Assets will be in the possession of the Company.
11. Condition and Sufficiency of the Purchased Assets. Except as set
forth in Schedule 11, the Purchased Assets are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and to Seller's knowledge none of the Purchased Assets is in need of
maintenance or repair.
12. Inventory. All inventory of the Company, whether or not
reflected in the Balance Sheet or the Interim Balance Sheet, consists of a
quality and quantity usable and salable in the ordinary course of business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Interim Balance
Sheet or on the accounting records of the Company as of the Closing Date, as the
case may be. All inventories not written off have been priced at the lower of
cost or market on a first in, first
2
out basis. The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in the
present circumstances of the Company.
13. Accounts Payable. Schedule 13 contains a complete and accurate
list of all rights, claims and obligations to and under the Excluded Accounts
Payable of the Business at July 31, 1998. Seller shall be solely responsible for
the payment of and/or obligations under the Excluded Accounts Payable.
14. Accounts Receivable. Schedule 14 contains a complete and
accurate list of the Excluded Accounts Receivable of the Company.
15. No Undisclosed Liabilities. Except as set forth in Schedule 15,
the Company has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against the Interim Balance
Sheet and current liabilities incurred in the ordinary course of business since
the respective dates thereof.
16. Litigation. There is no suit, action, claim or litigation, or
legal, administrative, arbitration or other proceeding or governmental
investigation or inquiry pending or, to Seller's knowledge, threatened against
or affecting the Company, the Business or any of its property or assets,
including the Purchased Assets, and there is no basis for any such action, nor
is there any judgment, decree, injunction, ruling, award, order or writ of any
court, governmental department, commission, agency, instrumentality, arbitration
or other person outstanding against, binding upon or involving the Company, the
Business, or any of its properties or assets. Neither Seller nor the Company,
nor any of its officers or, to Seller's knowledge, its employees is currently
charged with, or is currently under investigation with respect to, any violation
of any provision of any foreign, federal, state or local law or administrative
regulation in respect of the Business and the Purchased Assets. The Company is
not in default with respect to any judgment, decree, injunction, ruling, award,
order or writ of any foreign, federal, state, municipal agency or other
governmental department, board, commission, bureau, agency or instrumentality.
17. Taxes. All federal, state, county, local, foreign and other tax
returns, reports and declarations (including income, excise, property,
franchise, sales and use taxes) required to be filed with respect to the Company
or by or on behalf of the Business by the Company have been duly filed (or
extensions for filing have been filed) and such returns are complete and
accurate and disclose all taxes required to be paid for the periods covered
thereby. All taxes shown on such returns and any deficiency assessments,
penalties and interest have been paid. There are no tax liens on any of the
Purchased Assets and no basis exists for the imposition of any such liens. All
federal, state, local and foreign taxes, assessments, fees and charges
(including interest and penalties, if any) required to be paid or claimed to be
due from or with respect to Seller for any period prior to the Closing Date have
been fully paid, as of the date hereof or will be paid by Seller together with
any interest and penalties thereon. All returns required to be filed for any
period prior to the Closing Date which are not filed as of the Closing will be
duly filed. Notwithstanding any other provision set forth in this Agreement,
Seller is
3
satisfied as to, and has relied solely upon his tax advisors with respect to,
the incidents of taxation which will or may result from the transactions
contemplated by this Agreement.
18. No Material Adverse Change. Since the date of the Interim
Balance Sheet, there has not been any material adverse change in the Business,
operations, properties, prospects, assets, or condition of the Company and/or
the Purchased Assets, and no event has occurred or circumstance exists that may
result in such a material adverse change.
19. Legal Compliance.
(a) To Seller's knowledge, Seller has complied with all laws,
statutes, ordinances, rules, regulations and orders of all governmental entities
applicable to the Business or the Purchased Assets, except where noncompliance
individually or in the aggregate would not materially and adversely affect the
Business or the Purchased Assets. Seller and the Company have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of the Business, all of which are valid and
effective.
(b) To Seller's knowledge, the operations, practices, policies
and procedures of the Company and its employees have been conducted and, through
and including the Closing Date, will be conducted in compliance with, and have
not and will not give rise to any loss, liability, damage, costs or expenses
under, all applicable federal, state and local laws, orders, regulations,
directives and restrictions concerning protection of the environment, the
disposal of hazardous, toxic or industrial chemicals, substances or wastes and
health and safety.
(c) There are no claims or correspondence with respect to,
investigations, litigation, administrative proceedings, judgments or orders,
whether pending or threatened relating to any hazardous substances, hazardous
wastes, discharges, emissions or other forms of pollution (collectively "EPA
Matters") relating in any way to the Facility. Neither Seller nor the Company
has liability for clean-up, compliance or required capital expenditures in
connection with any EPA Matter arising prior to the date hereof which affect or
may affect, materially or adversely, the Business or the Purchased Assets.
(d) No hazardous or toxic substances, within the meaning of
any applicable statute or regulation, are presently stored or otherwise located
at the Facility which affects or may affect materially and adversely the
Business and/or the Purchased Assets; and, further within the definition of such
statutes, no part of the Facility or adjacent parcels of real estate, including
the groundwater located thereon or thereunder, is presently contaminated by any
such substance which affects or may affect, materially and adversely, the
Business or the Purchased Assets.
(e) No notice has been issued and no investigation or review
is pending or, to Seller's knowledge, threatened by any governmental entity with
respect to (i) any alleged violation by Seller or the Company of any law,
ordinance, rule, regulation, order, policy or guideline of any governmental
entity, or (ii) any alleged failure to have all permits, certificates, licenses,
approvals and other authorizations required in connection with the operation of
the Business or the Purchased Assets. Seller has furnished Buyer with copies of
all
4
reports or other documents concerning the Company or its employees made by
Seller or the Company during the past five years pursuant to any law, ordinance,
rule, regulation, order, policy or guideline of any governmental entity and
workers' compensation statutes. Neither Seller nor the Company has filed a
notice or report of any release of any hazardous or toxic substances, within the
meaning of any applicable statute or regulation, that affects or may affect,
materially and adversely, the Business or the Purchased Assets.
20. Assumed Contracts; No Defaults.
(a) Schedule 20(a) sets forth: (i) a complete and accurate
list, and Seller has made available to Buyer for inspection true and complete
copies, of each Assumed Contract and (ii) a complete description of all material
oral agreements and contracts relating to the Business or the Purchased Assets;
Schedule 20(a) sets forth reasonably complete details concerning each Assumed
Contract, including the parties to such Assumed Contract and the amount of the
remaining commitment of the Company under such Assumed Contract.
(b) Except as set forth in Schedule 20(b):
(i) neither Seller, nor the Company nor any family
member or affiliate ("Related Person") of Seller or the Company has or may
acquire any rights under, and neither Seller nor the Company has or may
become subject to any obligation or liability under, any contract or
agreement that relates to the Business or any of the Purchased Assets; and
(ii) no officer, agent, employee, consultant, or
contractor of the Company is bound by any contract or agreement that
purports to limit the ability of such officer, agent, employee,
consultant, or contractor to (A) engage in or continue any conduct,
activity, or practice relating to the Business of the Company, or (B)
assign to the Company or to any other individual, corporation, partnership
or other entity (a "Person") any rights to any invention, improvement, or
discovery.
(c) Except as set forth in Schedule 20(c), each Assumed
Contract is in full force and effect and is valid and enforceable in accordance
with its terms.
(d) Except as set forth in Schedule 20(d):
(i) each of Seller and the Company is, and at all times
has been, in full compliance with all applicable terms and requirements of
each Assumed Contract under which Seller or the Company has or had any
obligation or liability or by which Seller or the Company or any of the
Purchased Assets is or was bound;
(ii) each other Person that has or had any obligation or
liability under any Assumed Contract under which Seller or the Company has
or
5
had any rights is, and at all times has been, in full compliance with all
applicable terms and requirements of such Assumed Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene, conflict with,
or result in a violation or breach of, or give Seller, the Company or any
other Person the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel, terminate,
or modify, any Assumed Contract; and
(iv) neither Seller nor the Company has given to or
received from any other Person, any notice or other communication (whether
oral or written) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Assumed Contract.
(e) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or payable to the
Company under any Assumed Contract with any Person and no such Person has made
written demand for such renegotiation.
(f) Each of the Assumed Contracts has been entered into in the
ordinary course of business and has been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any applicable
federal, state or local law, order, regulation or directive.
21. Insurance.
(a) Seller has delivered to Buyer:
(i) true and complete copies of all policies of
insurance to which Seller or the Company is a party or under which Seller
or the Company or the Business is or has been covered at any time within
the two years preceding the date of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(b) Schedule 21(b) describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company; and
6
(iii) all obligations of the Company to third parties
with respect to insurance (including such obligations under leases and
service agreements) and identifies the policy under which such coverage is
provided.
(c) Schedule 21(c) sets forth, by year, for the current policy
year and each of the two preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an
insurance policy for an amount in excess of $10,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type
of insurance, and period of coverage; and
(C) the amount and a brief description of the
claim.
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate cost of
such claims.
22. Employees. Schedule 22 sets forth a complete list of all
employees of the Company, their respective positions, locations, salaries or
hourly wages and severance arrangements, if any, each as of the date hereof. To
Seller's knowledge, no key employee or group of employees, with the exception of
Seller, has any plans to terminate employment with the Company. Each employee of
the Company is employed on an "at will" basis and has no right to any material
compensation following termination of employment. The Company is not a party to
or bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Company has not committed any unfair labor practice and
there is no organizational effort presently being made or, to Seller's
knowledge, threatened by or on behalf of any labor union with respect to
employees of the Company.
23. Labor Matters. There are no controversies pending nor, to
Seller's knowledge, is there any basis for any such controversies, between the
Company and any of its employees, which controversies have affected or may
affect materially and adversely the Business or the results of operations of the
Company and/or the Purchased Assets.
24. Intellectual Property.
(a) Intellectual Property Assets. Schedule 24(a) sets forth
each of the Purchased Assets described in Section (m) of Exhibit 1.1 (the
"Intellectual Property Assets"). The Company is the owner of all right, title,
and interest in and to each of the Intellectual
7
Property Assets, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims. There are no outstanding, and
to Seller's knowledge, no threatened disputes or disagreements with respect to
any of the Intellectual Property Assets.
(b) Agreements. Schedule 24(b) contains a complete and
accurate list and summary description of all Assumed Contracts relating to the
Intellectual Property Assets. There are no outstanding and, to Seller's
knowledge, no threatened disputes or disagreements with respect to any such
Assumed Contract.
(c) Know-How Necessary for the Business. The Intellectual
Property Assets are all those used in the operation of the Company's Business as
currently conducted. Seller or the Company is the owner of all right, title, and
interest in and to each of the Intellectual Property Assets, free and clear of
all liens, security interests, charges, encumbrances, equities, and other
adverse claims, and has the right to use without payment to a third party all of
the Intellectual Property Assets.
25. Certain Payments. Since January 1, 1998, neither the Company,
nor any of its officers, agents, or employees, nor any other Person, in each
case, associated with or acting for or on behalf of the Company, has directly or
indirectly: (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any affiliate of the Company, or
(iv) in violation of any legal requirement; or (b) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
26. Disclosure.
(a) No representation or warranty of Seller in this Agreement
and no statement in the schedules hereto omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) There is no fact known to Seller that has specific
application to either Seller or the Company or the Purchased Assets (other than
general economic or industry conditions) and that materially adversely affects
the assets, business, prospects, financial condition, or results of operations
of the Company that has not been set forth in this Agreement (including the
exhibits and schedules hereto).
27. Relationships with Related Persons. Neither Seller nor the
Company nor any Related Person of Seller or of the Company owns, or has owned
(of record or as a beneficial owner) an equity interest or any other financial
or profit interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with the Company, or (ii) engaged in
competition with the Company with respect to any line of the products or
services of the Company (a "Competing Business") in any market presently served
by the Company.
8
Except as set forth in Schedule 27, neither Seller nor any Related Person of
Seller or of the Company is a party to any Contract with, or has any claim or
right against, the Company.
28. No Consents. Except for the consents to assignment of the
Assumed Lease and compliance with Article 6 of the UCC, no permit, consent,
approval, novation, authorization or other order of or filing with any
governmental authority, board or other regulatory body or any other person is
required in connection with the execution, delivery and consummation of this
Agreement by Seller and the consummation of the transactions contemplated
hereby.
29. Information. Seller has furnished and will continue to furnish
to Buyer detailed information with respect to the Facility, the Purchased
Assets, the liabilities and earnings of the Company, and Seller acknowledges
that Buyer has relied and will rely thereon in entering into this Agreement and
consummating the transaction contemplated by this Agreement. All information
contained in the exhibits and schedules attached to this Agreement and in the
documents furnished to Buyer by Seller pursuant to this Agreement or otherwise
is, and shall be at the Closing, true, correct and complete. All underlying
documents incorporated or referred to in such exhibits and schedules, or in
documents otherwise furnished to Buyer by Seller or by the Company are true,
correct and complete copies thereof, as the same have been or shall be amended
or modified.
30. Invoices. The invoices made available to Buyer are true,
complete and correct.
31. Location of Purchased Assets. Except certain machinery and
equipment located at its respective location set forth opposite its description
on Schedule 20(a) attached hereto, all of the Purchased Assets are located at
the Facility.
32. Leases. Set forth on Schedule 32 hereto is an accurate and
complete list of all leases pursuant to which the Company leases real or
personal property and which provide for annual payments on the part of the
Company in excess of $10,000. A true and complete copy of each such lease has
been delivered to Buyer, and no changes have been made therein since the date of
such delivery. Each such lease is valid, binding and enforceable in accordance
with its terms, there are no existing material defaults by the Company
thereunder and no event has occurred which (with or without notice, lapse of
time or both) would constitute a material default thereunder by any party.
33. Pre-Closing Activity List. As of the Closing Date, the Accounts
Receivable listed on the Pre-Closing Activity List represent or will represent
valid obligations arising from sales actually made or services actually
performed in the ordinary course of business. Unless paid prior to the Closing
Date, each of the Accounts Receivable are or will be as of the Closing Date
current and collectible in full, without any set-off, within ninety (90) days
after the day on which it first becomes due and payable. There is no contest,
claim, or right of set-off, other than returns in the ordinary course of
business, under any Assumed Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable.
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B. Representations and Warranties of Buyer. Buyer hereby represents
and warrants to Seller and to the Company as of the date hereof and as of the
Closing Date as follows:
1. Due Organization; Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois, and has full corporate power and authority to consummate the
transactions hereunder.
2. Authority. Buyer now has, and on the Closing Date will have, the
full corporate right, power and authority, without the consent of any other
person, to execute and deliver this Agreement and to carry out the transactions
contemplated hereby. All corporate and other actions required to be taken by
Buyer to authorize the execution, delivery and performance of this Agreement and
all transactions contemplated hereby will have been duly and properly taken as
of the Closing Date.
3. Validity. This Agreement constitutes the valid and legally
binding obligation of Buyer, enforceable against it in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting creditors'
rights generally or by general equitable principles.
4. Non-Contravention. Assuming that all requisite consents of
governmental agencies and third parties have been obtained as provided in
Section B(5) below, neither the execution and delivery of this Agreement by
Buyer nor the consummation of the transactions contemplated hereby, do, or would
after the giving of notice or the lapse of time or both, (a) conflict with,
result in a breach of, or constitute a default under, the Articles of
Incorporation or the Bylaws of Buyer, or any federal, state or local court or
administrative order or process, or any other material agreement, contract,
commitment or other instrument, including any express or implied warranty, to
which Buyer is a party or by which Buyer is subject or bound; (b) conflict with,
result in a breach of, or constitute a default under, any federal, state, or
local law, statute, rule or regulation, or (c) violate or conflict with any
other material restriction of any kind or character whatsoever to which Buyer is
subject.
5. Approvals. No approval, consent, waiver, notice to or filing
with any governmental entity or any party to any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument to which
Buyer is a party or to which any of its properties are subject is required, and
has not been obtained or will not have been obtained on or prior to the Closing,
for the execution and delivery by Buyer of this Agreement and the other
agreements and instruments referred to herein to be executed and delivered by
Buyer in connection herewith or the consummation by Buyer of the transactions
contemplated hereby and thereby.
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