Exhibit 2.1
ASSET PURCHASE AGREEMENT
by and among
ADVANCED PHOTONIX, INC.
SILICON SENSORS, INC.
As Purchaser
and
SILICON SENSORS, L.L.C.
As Seller
and
THE EQUITY OWNERS NAMED HEREIN
Dated: August 21, 2002
ASSET PURCHASE AGREEMENT (the "Agreement") dated as of August 21, 2002
by and among SILICON SENSORS, INC., a Delaware corporation (hereinafter
referred to as the "Purchaser) with its principal offices located at 0000
Xxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000, ADVANCED PHOTONIX, INC., a
Delaware corporation with its principal offices at 0000 Xxxxxxx Xxxxx,
Xxxxxxxxx, Xxxxxxxxxx 00000, SILICON SENSORS, L.L.C., a Wisconsin limited
liability company (hereinafter referred to as "Seller") with its principal
offices located at 000 Xxxxxx Xxxx XX, Xxxxxxxxxx, Xxxxxxxxx 00000 and the
"EQUITY OWNERS" (as hereinafter defined) of the Seller.
R E C I T A L S:
A. Seller is in the business of the development, manufacture and
distribution of optoelectronic semiconductor based components, hybrid
assemblies and other proprietary solid state light and radiation detection
devices.
B. Seller desires to sell its assets and business to Purchaser and
Purchaser desires to purchase both assets and business from Seller on the
terms and conditions herein set forth.
Therefore, in consideration of the provisions and mutual covenants
contained herein, the Parties hereto hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms.
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As used in this Agreement, the following terms have the meanings set
forth in Schedule 1.1.
1.2 Other Definitional Provisions; Interpretation.
1.2.1 Unless otherwise specified therein, all terms defined in
this Agreement shall have the defined meanings when used in
any certificate or other agreement, instrument or document
made or delivered pursuant hereto.
1.2.2 The phrase "to the knowledge of the Seller" shall mean that
either Xxxx XxXxxx or Xxxx Xxxxxx has actual knowledge of
the matter referred to.
1.2.3 References of the Seller' "receipt of notice" or "receipt of
notification" shall be limited to receipt of written notices
or notifications.
1.2.4 The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular
provision of this Agreement, and Section and Schedule
references are to this Agreement unless otherwise specified.
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1.2.5 The headings in this Agreement are included for convenience
of reference only and shall not in any way affect the
meaning or interpretation of this Agreement.
1.2.6 The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such
terms.
2. PURCHASE AND SALE OF THE ACQUIRED ASSETS.
2.1 Purchase and Sale.
----------------------
Seller agrees to sell, assign, transfer and convey the Acquired Assets
to Purchaser or its assigns at the Closing. In consideration therefore,
Purchaser agrees to pay the Purchase Price as follows:
(i) to pay the Cash Consideration at Closing as follows:
(a) to the Escrow Agent to hold in escrow pursuant to Section 3
hereof, the amount of the Escrow Fund by check or wire
transfer;
(b) to the Lender, the amount certified by the Lender pursuant
to Section 7.6 as being necessary to satisfy all of the
Seller's obligations to the Lender; and
(c) to the Seller, the balance of the Cash Consideration by
check or wire transfer; and
(ii) to deliver to the Seller the Stock Consideration computed in
accordance with Section 2.2 hereof.
2.2 The Stock Consideration.
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2.2.1 The amount of the Stock Consideration shall be Two Hundred
Twenty-Five Thousand ($225,000.00) Dollars. Except as
described in this Section, the Stock Consideration shall be
paid by Purchaser delivering to Seller at Closing the number
of shares of API Stock as is computed by dividing $225,000
by the API Stock Price; provided, however, that in the event
the API Stock price is less than seventy-five ($0.75) cents,
the Purchaser shall have the option to pay the Stock
Consideration in cash, and in the event the API Stock Price
is greater than one dollar and twenty-five ($1.25) cents,
the Seller shall have the option to receive the Stock
Consideration in cash. In either such case, Purchaser or
Seller, as the case may be, must exercise such option to
substitute a cash payment by notice delivered by e-mail or
fax to the other party in accordance with Section 14.2
hereof not later than 1:00 p.m. New York City time on the
day prior to the Closing Date. In the event the Stock
Consideration is to be made in cash, such cash shall be
delivered by Purchaser to Seller at Closing by check or wire
transfer. Seller understands that the certificates
representing the Shares will bear a legend noting these
restrictions on resale.
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2.2.2 In the event that on the first anniversary of the Effective
Date (the "Anniversary") the Seller is unable to sell the
Shares pursuant to Rule 144 (subject to the manner of sale
and volume limitation requirements of Rule 144) because API
has failed to make timely filing of such reports with the
Securities and Exchange Commission as are required to make
Rule 144 available for such sales, Seller (or the Equity
Owners, as successors to Seller) shall have a one-time
option to put all the Shares of API to API at a price equal
to the numerical average of the closing price of the API
stock on the American Stock Exchange (or other exchange
which is the primary listing for the API stock) on the last
ten (10) days on which the API stock was traded on such
exchange properly endorsed. Such option shall be exercisable
by the Seller (or all the Equity Owners) delivering a
written notice of such exercise within thirty (30) days
after the Anniversary. API agrees to accept delivery of the
properly endorsed certificates representing the Shares and
to make payment therefor at its offices on a date (which
shall be not less than 10 nor more than 30 days from the
giving of such notice) specified in such notice.
2.2.3 API agrees that it will bear the expense of obtaining any
opinions of counsel necessary for APIs transfer agent to
effect sales by Seller or the Equity Owners under Rule 144.
2.3 Adjustment of the Purchase Price.
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The Purchase Price shall be subject to adjustment by the amount (the
"Adjustment Amount") that the Net Working Capital of Seller increases or
decreases between July 31, 2002 and the Closing. Promptly after the
Closing, Purchaser shall engage Purchaser's Independent Auditors to prepare
audited financial statements of Sellers Business, including an audited
balance sheet (the "Closing Balance Sheet"). The closing Balance Sheet
shall be delivered to Seller and Purchaser within 60 days after Closing.
Upon such delivery of the Closing Balance Sheet, the Purchase Price will be
increased or decreased by the Adjustment Amount. The Adjustment Amount
shall be computed by subtracting $579,198 (which the parties agree is the
Net Working Capital of Seller as at July 31, 2002 computed as set forth on
Schedule 2.3 hereof) from the Net Working Capital of Seller at Closing as
shown on the Closing Balance Sheet. In the event the Adjustment Amount is
positive, the Purchase Price shall be increased by the amount of the
Adjustment Amount, and Purchaser will within 5 days deliver a check or wire
transfer in the Adjustment Amount to Seller. In the event the Adjustment
Amount is negative, the Purchase Price shall be reduced by such amount and
Escrow Agent shall within 5 days pay to Purchaser such Adjustment Amount
out of the Escrow Fund. Any adjustments required in this Section will be
subject to the dispute resolution procedures set forth in Exhibit 2.3
hereof.
2.4 Allocation of Purchase Price.
---------------------------------
The Seller and the Purchaser will report the allocation of the
Purchase Price as set forth on Schedule 2.4 to this Agreement in a manner
substantially consistent with such Schedule 2.4 in all tax returns and
forms (including, without limitation, Form 8594 filed with the Purchaser's
and the Seller's respective federal income tax returns for the taxable year
that includes the Effective Date) and in the course of any tax audit, tax
review or tax litigation relating thereto. The Seller and the Purchaser
shall cooperate with each other to prepare the Forms 8594 in the manner
required by this Section 2.4. The Seller, on the one hand, and the
Purchaser on the other hand, shall each deliver to the other a copy of the
Form 8594 they file with their respective federal income tax return.
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2.5 Assumption of Assumed Liabilities.
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In addition to the Purchase Price, the Purchaser shall assume all
ofthe Assumed Liabilities at Closing.
3. THE ESCROW FUND.
3.1 The Escrow Fund.
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At Closing, the Purchaser, Seller and the Escrow Agent shall enter
into as Escrow Agreement substantially in the form annexed as Exhibit 3.1
hereto. The Escrow Fund will be delivered to the Escrow Agent for delivery
in accordance with the terms of the Escrow Agreement.
3.2 Uses of the Escrow Fund.
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The Escrow Fund shall be divided into two portions, one portion, equal
to One Hundred Thousand ($100,000) Dollars shall be used to fund any
reduction in the Purchase Price pursuant to Section 2.3 hereof, and will be
distributed to the Seller or returned to the Purchaser upon computation of
the Adjustment Amount as contemplated by Section 2.3. The remaining portion
of the Escrow Fund shall be used to secure Purchaser against any material
incorrect representations or warranties or undisclosed liabilities, and
shall be held for such purpose for one (1) year after the Closing.
3.3 Acceptance of the Escrow.
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By joining the execution of this Agreement at the foot hereof, the
Escrow Agent hereby agrees to accept the escrow created hereunder and
agrees to retain the Escrow Fund as security for the Seller's obligations
of indemnification pursuant to this Agreement and dispose of the Escrow
Fund in accordance with the provisions of the Escrow Agreement.
3.4 The Escrow Agent.
---------------------
Escrow Agent shall be entitled to reasonable attorneys' fees and
costs, to be shared equally by the parties, in connection with any legal
action hereunder or in the event it incurs any attorneys' fees or other
costs in connection with the administration of its duties hereunder. Escrow
Agent shall be entitled to act as counsel for Seller in connection with
this Agreement or otherwise, notwithstanding that it is acting as Escrow
Agent hereunder.
4. CLOSING.
4.1 Time and Place.
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The transaction contemplated hereunder shall be consummated at a
closing (the "Closing") at the offices of Holland & Knight, Xxx Xxxxxxxxxx
Xxxxx, Xxxxx 0000, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000, or at such other place
as may be agreed by the parties. The Closing shall take place at 10:00 a.m.
on a date that is as soon as practicable following the fulfillment or
waiver, in accordance with the terms of this Agreement, of all conditions
to the Closing but in no event later than October 31, 2002, subject only to
the provisions of Section 12.1.4.
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5. REPRESENTATIONS AND WARRANTIES OF SELLER.
In order to induce Purchaser to enter into this Agreement and to
consummate the transactions contemplated herein, Seller and each of the
Equity Owners jointly and severally make each of the representations and
warranties set forth in this Article 5 as follows:
5.1 Corporate Organization of Seller.
-------------------------------------
5.1.1 Seller is a limited liability company duly organized,
validly existing and in good standing under the laws of the
State of Wisconsin and has full power and authority to carry
on its business as it is now being conducted and to own the
properties and assets it now owns; there are no other
jurisdictions in which the Seller's ownership or leasing of
property or the conduct of its business requires
qualification as a foreign limited liability company, except
where the failure to be so qualified or licensed or to be in
good standing would not have a Material Adverse Effect. The
copies of the Articles of Organization and Operating
Agreement of the Seller heretofore delivered to Purchaser
are complete and correct copies of such instruments as
presently in effect.
5.1.2 Schedule 5.1.2 hereto sets forth the name, position and
total compensation of each officer and director of the
Seller, and the name, position and total compensation for
each other employee of or consultant to the Seller whose
total compensation in the fiscal year ending September 30,
2002 was, or in the current fiscal year is expected to be,
in excess of $60,000.
5.2 Subsidiaries.
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Seller owns no subsidiaries.
5.3 Capitalization of Seller.
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The authorized and outstanding capital of the Seller consists solely
of membership interests. The persons set forth on Schedule 5.3 hereof are
the owners of the equity interests in the Seller in the percentages set
forth after their respective names on Schedule 5.3 and, except as disclosed
on Schedule 5.3, each has good, valid and marketable title to such
membership interests free and clear of all liens, encumbrances, security
interests or claims, whatsoever, with full power and authority to transfer
and convey the same. No other person has any record or beneficial equity
interest in the Seller of any kind. All of the outstanding equity interests
in the Seller are validly issued, fully paid and nonassessable. There are
no outstanding (i) securities convertible into or exchangeable for any
equity interests in the Seller; (ii) options, warrants, calls or other
rights (including conversion rights, preemptive rights or appreciation
rights) with respect to the issued and outstanding equity interests in the
Seller, or to purchase or subscribe to any of the equity interests in the
Seller or securities convertible into or exchangeable for equity interests
in the Seller; or (iii) contracts, commitments, agreements, understandings
or arrangements of any kind relating to the issuance, sale, transfer,
and/or assignment of any equity interests in the Seller, any convertible or
exchangeable securities or any such options, warrants or rights.
5.4 Authorization, Etc.
-----------------------
This Agreement and each document, agreement and instrument required to
be delivered by Seller at the Closing, has been duly and validly authorized
by all necessary action of each of the Seller, including, without
limitation, by the vote or written consent of the holders of a sufficient
percentage of the equity interests to satisfy all requirements of Wisconsin
Law and of Seller's governing instruments and has been duly and validly
executed by the Seller. Without limiting the generality of the foregoing,
the Seller has full power and authority to enter into this Agreement, and
to consummate the transactions contemplated hereby. This Agreement is the
legal, valid and binding obligation of each of the Seller and enforceable
against the Seller in accordance with its terms, as applicable.
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5.5 No Violation.
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Neither the execution, delivery or performance of this Agreement nor
the consummation of the transactions contemplated hereby will violate any
provision of the Articles of Organization or Operating Agreement or similar
documents of the Seller or will (a) violate, or be in conflict with, or
constitute a breach or default (or an event which, with the giving of
notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or acceleration of the performance required
by, or cause the acceleration of the maturity of any debt or obligation
pursuant to, or result in the creation or imposition of any security
interest, lien or other encumbrance upon any property or assets of the
Seller under any Contractual Obligation to which the Seller is a party or
by which the Seller is bound, or to which the property of the Seller is
subject, except where such violation, conflict, breach, default,
termination, acceleration, security interest, lien or other encumbrance
would not have a Material Adverse Effect; or (b) violate any statute or law
or any judgment, decree, order, regulation or rule of any court or
Governmental Authority to which the Seller is subject, except where such
violation would not have a Material Adverse Effect.
5.6 Financial Statements.
-------------------------
The Seller has heretofore delivered to API: (a) balance sheets of the
Seller as at September 30, 2001, together with statements of income and
cash flow for the year then ended audited by the Seller's Independent
Auditor (the "Seller's Financial Statements"); and (b) the Unaudited
Balance Sheet, and the unaudited statements of income and cash flow for the
eight month period ended May 31, 2002 (the "Seller's Unaudited Financial
Statements) and Seller's unaudited balance sheet as at July 31, 2002. Such
balance sheets and notes thereto are true, complete and accurate in all
material respects and fairly present in accordance with GAAP the assets,
liabilities and financial condition of Seller as at the respective dates
thereof, and all such statements of income and statements of cash flow and
the notes thereto are true, complete and accurate in all material respects
and fairly present in accordance with GAAP the results of operations for
the periods therein referred to. All of the foregoing financial statements
were prepared in accordance with GAAP consistently applied throughout the
periods involved (except in the case of the Unaudited Balance Sheet to the
extent subject to normal year end adjustments).
5.7 No Undisclosed Liabilities; Etc.
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Except as set forth on Schedule 5.7, Seller has no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise)
which were not properly reflected or adequately reserved against in
accordance with GAAP on the Unaudited Balance Sheet, except for liabilities
and obligations incurred in the ordinary course of business and consistent
with past practice since the date thereof and except as set forth in this
Agreement. The reserves reflected on the Unaudited Balance Sheet are
adequate, appropriate and reasonable in light of historical practices.
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5.8 Absence of Certain Changes.
------------------------------------
Except as and to the extent set forth on Schedule 5.8, from the
Balance Sheet Date through the date hereof, Seller has not (except as
contemplated by, or disclosed in, this Agreement):
5.8.1 entered into or amended any material employment agreement,
entered into any agreement with any labor union or
association representing any material employee or entered
into or amended any material Plan; amended any certificate
5.8.2 incurred any liabilities or obligations (absolute, accrued,
contingent or otherwise) except nonmaterial items incurred
in the ordinary course of business and consistent with past
practice which do not exceed $25,000.00 individually, or
$50,000.00 in the aggregate, (counting obligations or
liabilities arising from any single transaction or a series
of similar transactions, and all periodic installments or
payments under any lease or other agreement providing for
periodic installments or payments, as a single obligation or
liability), or increased, or experienced any change in any
assumptions underlying or methods of calculating, any bad
debt, contingency or other reserves not in accordance with
GAAP or entered into any lease or sublease of real property
or exercised any purchase options or rights of first refusal
contained in any of the Leases (as hereinafter defined)
except in the ordinary course of business and consistent
with past practice;
5.8.3 paid, discharged or satisfied any material claim,
liabilities or obligations (absolute, accrued, contingent or
otherwise) other than the payment, discharge or satisfaction
in the ordinary course of business and consistent with past
practice of liabilities and obligations reflected on or
reserved against on the Unaudited Balance Sheet or incurred
in the ordinary course of business and consistent with past
practice since the Balance Sheet Date;
5.8.4 permitted or allowed any property demised under the Leases
or assets (real, personal or mixed, tangible or intangible)
to be subjected to any mortgage, pledge, lien, security
interest, encumbrance, assignment, restriction or charge of
any kind, except for liens for current taxes not yet due;
5.8.5 written down the value of any inventory (including
write-downs by reason of shrinkage or xxxx-down) or written
off as uncollectible any notes or accounts receivable,
except for immaterial write-downs and write-offs in the
ordinary course of business and consistent with past
practice;
5.8.6 cancelled any debts or waived any claims or rights
involving more than $5,000;
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5.8.7 sold, transferred, abandoned or otherwise disposed of any
properties or assets (real, personal or mixed, tangible or
intangible, or entered into any lease (as lessor or lessee))
except in the ordinary course of business and consistent
with past practice;
5.8.8 disposed of or permitted to lapse (except by its own terms)
any rights to the use of any existing patent, trademark,
trade name or copyright, or disposed of or disclosed (except
as necessary in the conduct of its business) to any person,
other than representatives of Purchaser, any trade secret,
formula, process or know-how not theretofore a matter of
public knowledge;
5.8.9 granted or committed to grant any general increase in the
compensation of officers, directors or employees (including
any such increase pursuant to any bonus, pension, profit
sharing or other plan or commitment) or any increases in the
compensation payable or to become payable to any officer,
director or employee, including payments or commitments to
pay severance or termination pay, except for increases
granted in the ordinary course of business consistent with
past practices or pursuant to existing agreements;
5.8.10 made any single capital expenditure or commitment in excess
of $25,000.00 for additions to property, plant, equipment or
intangible capital assets or made aggregate capital
expenditures and commitments in excess of $50,000.00 since
the Balance Sheet Date for additions to property, plant,
equipment or intangible capital assets;
5.8.11 declared, paid or set aside for payment any dividend or
other distribution in respect of its membership interests
(other than "upstream" distribution from the Operating
Companies) or redeemed, purchased or otherwise acquired,
directly or indirectly, any equity security of the Seller;
5.8.12 made any change in any method of accounting or accounting
practice except as required by GAAP;
5.8.13 paid, distributed, loaned or advanced any amount to, or
sold, transferred or leased any properties or assets (real,
personal or mixed, tangible or intangible) to, or entered
into any agreement or arrangement with any Affiliates,
officers or directors of the Seller, or any Affiliate or
associate of any officers or directors of the Seller except
for directors' fees, and compensation to officers at rates
not exceeding the rates of compensation in effect during the
period ended on the Balance Sheet Date;
5.8.14 entered into or amended any written contract or other
agreement pursuant to which it agrees to indemnify any party
or to refrain from competing with any party;
5.8.15 except for inventory, supplies or equipment acquired in the
ordinary course of business, made any acquisition of all or
any part of the assets, properties, capital stock or
business of any other entity which is material to Seller;
5.8.16 entered into any transaction other than in the ordinary
course of business;
5.8.17 terminated, surrendered, cancelled or assigned any of its
properties demised under the Leases, or any part thereof,
except in the ordinary course of business consistent with
past practice; or
5.8.18 agreed, whether in writing or otherwise, to take any action
described in this Section.
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5.9 Assets Necessary to Conduct Business.
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The Acquired Assets include all rights, properties, interests in
properties and assets reasonably necessary to permit the Purchaser to carry
on the business of the Seller substantially as presently conducted by the
Seller. No Affiliate of the Seller holds any assets used in such business.
5.9.1 Except to the extent reserves for obsolete or unsaleble
inventory have been made on the July 31, 2002 balance sheet,
all Inventory is, and will be at Closing, of a quantity and
quality that is useable or saleable at non-discounted prices
in the ordinary course of the Seller's business, consistent
with past practices and not in amounts in excess of normal
requirements.
5.9.2 Schedule 5.9 includes a complete and accurate list of all of
the accounts receivable of the Seller, as of July 31, 2002,
that shows the amount due and an aging analysis of the
accounts receivables and notes, where applicable, any
accounts receivable that are the subject of any pending or
threatened litigation or that are in dispute. All accounts
receivable, and those arising after the date of the list and
before the Closing, have arisen only in the ordinary course
of business for goods sold.
5.9.3 The accounting books and records of the Seller and its other
business records identify substantially all the customers,
vendors and suppliers related to its business.
5.10 Title to Properties; Encumbrances.
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Seller owns no real property.
5.11 Leases.
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5.11.1 Schedule 5.11.1 hereto is an accurate and complete list of
all leases or rights of occupancy pursuant to which the
Seller leases or subleases any real property or interest
therein or material personal property (the "Leases"). A true
and correct copy of each Lease has been delivered to API
together with all amendments and modifications thereto, and
all subordination, non-disturbance and/or attornment
agreements related thereto, and no changes have been made
thereto since the date of delivery. Each Lease is valid and
in full force and effect except where such invalidity or
ineffectiveness would not have a Material Adverse Effect.
There are no existing defaults under any provision of any
Lease, and no event has occurred which (with or without
notice, lapse of time or both) would constitute a default
thereunder, where any such default would have a Material
Adverse Effect.
5.11.2 The Seller is in actual possession of the properties demised
under the Leases and, except as shown on Schedule 5.11.1,
has good and indefeasible title to the leasehold estates
conveyed under the Leases free and clear of all title
defects or objections, mortgages, liens, claims, charges,
security interests or other encumbrances of any nature
whatsoever, and are not, in the case of the properties
demised under the Leases, to the knowledge of Seller,
subject to any rights of way, building use restrictions,
exceptions, variances, reservations or limitations of any
nature whatsoever except, (i) liens shown on the Unaudited
Balance Sheet as securing specific liabilities or
obligations or other matters with respect to which no
material default exists, (ii) imperfections of title,
covenants or restrictions, if any, none of which are
substantial in amount or would have a Material Adverse
Effect, and (iii) liens for taxes not yet due and payable.
No portion of any of the improvements erected by and under
the direction of the Seller on the properties demised under
the Leases encroach on adjoining property or public streets
and, to the knowledge of the Seller, no portion of any of
the properties demised under the Leases are, or have been,
subjected to a special ad valorem tax valuation such that a
change in ownership or use (whether now existing or in the
future) has caused or will cause additional ad valorem taxes
to be imposed upon the properties demised under the Leases.
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5.11.3 The basic rent and all additional rent payable under the
Leases have been paid to date. To the knowledge of Seller,
except as set forth on Schedule 5.11.3, all work required to
be performed under the Leases by the landlord thereunder or
by the Seller has been performed and to the extent that the
Seller is responsible for payment of such work, has been
fully paid for, whether directly to the contractor
performing such work or to such landlord as reimbursement
therefor except for items which the Seller is disputing in
good faith.
5.11.4 There have been no casualties which could result in the
termination of any Lease or the application of any buy-out
provisions contained in any Lease relative to damage by
casualty.
5.12 Customer and Supplier Relations.
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5.12.1 Schedule 5.12 contains a complete list of all customers of
Seller's business who, during the past 22 months, have
purchased goods from the Seller, including a separate
notation of all customers that accounted for more than ten
percent of Seller's sales in the next previous or current
fiscal years. Except as shown on Schedule 5.12, none of
those customers have given notice of intention to terminate
their relationship with the Seller or, during the past 12
months, have given notice of intention to decrease or delay,
in any significant respect, its purchases or usage of
Seller's products. The Seller is not required to be approved
or certified as a supplier for any of its customers
resulting from any formal application for an approval or
certification process required by a customer as a condition
to conducting business with it.
5.12.2 Schedule 5.12 also contains a complete list of all material
suppliers of Seller's business in any one of the past 22
months. No supplier (including any supplier who is Seller's
sole source of supply of any product or service) has given
notice of intention to terminate its relationship with the
Seller, or during the past 12 months, has given notice of
intention to decrease or delay, in any significant respect,
its sale of products to the Seller.
5.12.3 To the knowledge of the Seller, the transaction contemplated
by this Agreement will not materially and adversely affect
the relationship of the Seller with any of its customers or
suppliers of its business. The Seller is not required to
provide any bonding or any other financial security
arrangements in connection with any transactions with any
customers or suppliers of its business.
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5.13 Patents, Trademarks, Trade Names, Etc..
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5.13.1 The Seller owns no patents, trademarks, service marks,
copyrights or similar intellectual property.
5.13.2 The Seller is not a party (either as licensor or licensee)
or otherwise subject relating to patents, trademarks,
service marks, trade names or copyrights (or applications or
registration as applicable for any thereof), trade secrets
or other proprietary know-how or technical assistance.
5.13.3 The Seller has not been, nor is the Seller the subject of
any pending or, to the knowledge of Seller, threatened,
claim alleging that it has infringed upon any patent,
trademark, trade name or copyright or misappropriated or
misused any invention, trade secret or other proprietary
information entitled to legal protection. The Seller has not
asserted any claim of infringement, misappropriation or
misuse.
5.14 Business Permits.
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Except for immaterial items, the failure of which would not have a
Material Adverse Effect, Seller has obtained all approvals, authorizations,
consents, licenses, franchises, orders, certificates or other permits of
all governmental or regulatory agencies, whether federal, state, local or
foreign (collectively, the "Approvals") necessary to the operations of the
business as presently conducted, including, without limitation, the
constructions, alterations, operation, use and occupancy of the properties
demised under the Leases or any part thereof, or any of the improvements
thereon, including, but not limited to the certificates of occupancy or the
local equivalents, if any, and certificates relating to fire and health
approval. All such Approvals are in full force and effect and good
standing, Seller is not in material default under any Approval and there
exists no basis for the termination, suspension or revocation of any such
Approvals.
5.15 Tax Matters.
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5.15.1 The Seller files federal income tax returns as a limited
liability company. The Seller has (i) filed or has caused to
be filed all federal, foreign, state and local sales, use,
property, ad valorem, franchise, income or other tax returns
and statements which were required to be filed prior to the
date hereof (the "Tax Returns and Statements") on a timely
basis in accordance with the laws, regulations and
administrative requirements of the appropriate Governmental
Authorities except for such Tax Returns and Statements of
which the failure to file would not have a Material Adverse
Effect, and (ii) paid within the time and in the manner
prescribed by law all material amounts of Taxes (as defined
below) shown on any Tax Returns and Statements, due for all
periods ending on or prior to the date hereof. All Tax
Returns and Statements were, when filed, and continue to be,
complete and accurate in all material respects, and there
exist no material inaccuracies in the Tax Returns and
Statements. Except as set forth on Schedule 5.15, no tax
assessments or deficiency has been made or proposed against
the Seller nor has any notice been given of any actual or
proposed assessment or deficiency. Except as set forth on
Schedule 5.15, the Tax Returns and Statements are not
presently the subject of any audit or other administrative
or court proceeding by any Governmental Authority. No
consents extending any applicable statute of limitations
have been filed and no Governmental Authority has made a
written request for such a consent. None of the matters
disclosed on Schedule 5.15 have had or could reasonably be
anticipated to have a Material Adverse Effect.
11
5.15.2 The Seller files Tax Returns and Statements with respect to
the income, capital gain, gross receipts or profits earned
by them in Wisconsin and in no other states or localities.
5.15.3 All taxes that the Seller was required by law to withhold or
collect have been duly withheld or collected and, to the
extent required, have been paid to the appropriate
Governmental Authority, except for those Taxes of which the
failure to withhold or collect would not have a Material
Adverse Effect. There are no liens with respect to Taxes
upon any of the properties or assets, real or personal,
tangible or intangible, of Seller (except for Taxes not yet
due) and except for liens which would not have a Material
Adverse Effect
5.15.4 No consent to the application of Section 341(f)(2) of the
Code has been filed with respect to any assets acquired by
the Seller.
5.15.5 No property owned by the Seller is property as to which an
election was made under Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately
before the enactment of the Tax Reform Act of 1986, or is
"tax-exempt use property" within the meaning of Section
168(h)(1) of the Code.
5.15.6 The Seller: (i) has not agreed to or been required to make
any adjustment pursuant to Section 481(a) of the Code; (ii)
has received no written notice that the Internal Revenue
Service has proposed any such adjustment or change in
accounting method; and (iii) does not have an application
pending with any Governmental Body requesting permission for
any change in accounting method.
5.15.7 The Seller does not have in effect any tax elections under
Section 108, 168, 338, 441, 471, 1017, 1033 or 4977 of the
Code, except that Seller has elected under Section 471 of
the Code to cost its inventory at the lower of cost or
market.
5.15.8 The Seller is not a party (other than as an investor) to any
industrial development bond.
5.15.9 During the previous two fiscal years the Seller has not
engaged in any exchange under which the gain realized on
such exchange was not recognized due to Section 1031 of the
Code.
5.15.10 No written claim has ever been received from any
Governmental Authority representing any jurisdiction in
which Seller do not file Tax Returns that the Seller is or
may be subject to taxation by that jurisdiction.
5.15.11 The Seller is not and have not been a party to any tax
sharing or similar agreement or arrangement.
5.15.12 The Seller has provided API with copies of: (i) all material
Tax Returns and Statement of or with respect to the Seller
for the periods ending September 30, 2000, September 30,
2001 and December 31, 2001; (ii) any written notices,
protests, or closing agreements relating to issues arising
in any audit, litigation or similar proceeding with respect
to the liability for Taxes of the Seller; (iii) any
elections or disclosures filed by or on behalf of the Seller
with any taxing authority (whether or not filed with any Tax
Returns and Statements); and (iv) any letter, rulings,
determination letters or similar documents issued by any
taxing authority with respect to the Seller.
5.15.13 The Seller is not a U.S. Real Property Holding Corporation
within the meaning of Section 897(c)(2) of the Code.
12
5.16 Transactions with Affiliates.
----------------------------------
Except as set forth on Schedule 5.16 hereto, no Affiliate, officer,
director or employee of the Seller has any interest, directly or
indirectly, in any lease, lien, contract, license, encumbrance, loan or
other Agreement to which the Seller is a party, or any interest in any
competitor, supplier or customer of the Seller. Except as set forth on
Schedule 5.16 hereto, the Seller is not indebted, directly or indirectly,
or to any Affiliate for any liability or obligation, whether arising by
reason of stock ownership, contract, oral or written agreement or
otherwise.
5.17 Contracts and Commitments.
-------------------------------
Schedule 5.17 hereto contains a complete, current and correct list of
all material contracts, commitments, obligations or agreements of Seller
(other than the Leases) whether written or oral (the "Contracts). For
purposes of this Section 5.17 a contract which is "material" shall mean a
single contract, whether written or oral:
5.17.1 pursuant to which any party thereto is obligated to make
annual payments aggregating more than $25,000;
5.17.2 which constitutes an employment agreement or an agreement
with any union or member organization;
5.17.3 which is not subject to cancellation by the Seller on not
more than thirty (30) days notice without material penalty;
5.17.4 which constitutes a purchase or sale contract or commitment
which continues for a period of more than twelve (12)
months;
5.17.5 which constitutes an agreement which restricts the Seller
from carrying out its business anywhere in the world or from
competing with any other person;
5.17.6 which constitutes an agreement by the Seller with any
Affiliate.
True, correct and complete copies of all written contracts described
in this Section 5.17 have been delivered to Purchaser. The Seller is not
materially in default, nor does the Seller have any knowledge of any
factual circumstances which can reasonably be expected to give rise to a
claim of default under any contract, except for defaults which would not
have a Material Adverse Effect.
13
5.18 Compliance with Contracts.
-------------------------------
To the knowledge of Seller, each of the Contracts and Leases is valid
and in full force and effect except when such invalidity or ineffectiveness
would not have a Material Adverse Effect. The Seller is not in material
default under any the Contracts or Leases and, to the knowledge of Seller,
no act or omission has occurred which, with notice or lapse of time or
both, would constitute a breach or default under any term or provision of
any such Contract or Lease and no party is in breach or default under any
of the Contracts or Leases, and no act or omission has occurred by any
party which, with notice or lapse of time or both, would constitute such a
breach or default under any term or provision thereof except where such
breach or default would not have a Material Adverse Effect.
5.19 Insurance.
---------------
5.19.1 Schedule 5.19.1 contains a complete list of all policies of
fire, business interruption, liability, worker's
compensation and other forms of insurance owned or held by
the Seller. All such policies are in full force and effect,
all premiums with respect thereto covering all periods up to
and including the date hereof have been paid, and no notice
of cancellation or termination has been received with
respect to any such policy. Such policies are sufficient for
compliance with all requirements of law and of all of the
Contracts and Leases except where any such non-compliance
would not have a Material Adverse Effect; provide adequate
insurance coverage for the assets and operations of the
Seller in light of current industry practice; will remain in
full force and effect through the respective dates set forth
on Schedule 5.19.1. The Seller has not been unable to obtain
any insurance with respect to its assets or operations, nor
has its coverage been limited by any insurance carrier to
which it has applied for any such insurance or with which it
has carried insurance.
5.19.2 Schedule 5.19.2 sets forth a true and complete list of all
group insurance programs in effect for employees of the
Seller. Seller is not in default with respect to any of its
obligations with respect to any such group insurance program
except where such default would not have a Material Adverse
Effect.
14
5.20 Labor Relations.
---------------------
Except to the extent set forth on Schedule 5.20:
5.20.1 The Seller is in compliance with all applicable federal,
state and local laws respecting employment and employment
practices (including, without limitation, the Fair Labor
Standards Act and all matters related to immigration or
citizenship status), terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor
practice except for such minor violations that, individually
or in the aggregate, would have no Material Adverse Effect;
5.20.2 there is no unfair labor practice charge or complaint
against the Seller pending before the NLRB;
5.20.3 there is no labor strike, dispute, slowdown or stoppage
actually pending or threatened against or affecting the
Seller;
5.20.4 no representation question is pending before the NLRB
exists respecting the employees of the Seller;
5.20.5 no grievance against the Seller or the conduct of its
business, nor any arbitration proceeding arising out of or
under collective bargaining agreements is pending;
5.20.6 the Seller is not a party to any collective bargaining
agreement;
5.20.7 the Seller has never experienced any work stoppage or
other labor difficulty; and
5.20.8 the Seller has not, and prior to the Closing Date will not
have, suffered a "plant closing" or "mass layoff" within the
meaning of the US Worker Adjustment and Retraining
Notification Act.
5.21 Securities Act Compliance.
-------------------------------
5.21.1 The Seller is acquiring the shares of API Stock (the
"Shares") for its own account.
5.21.2 The Seller understands that the offering and sale of the
Shares is intended to be exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities
Act and under similar provisions under the applicable state
securities laws, and understands and agrees that the Shares
may not be sold, transferred, hypothecated or pledged,
except pursuant to an effective registration statement under
the Securities Act and under the applicable state securities
laws or pursuant to an available exemption under the
registration requirements of the Securities Act and under
the applicable state securities laws, established to the
satisfaction of the Purchaser, and that the Purchaser is
under no current obligation to register the Shares or to
assist the Seller or the Equity Owners in complying with any
exemption from the registration thereof in connection with
the sale or transfer of the Shares. Any certificates
representing API Stock delivered as the Stock Consideration
will bear the usual and customary legend noting that
transferability of the API Stock is subject to Securities
Act restriction.
5.21.3 The Seller has all documents which it has requested relating
to the business, payments and financial condition of the
Purchaser, including Purchaser's current filings under the
Exchange Act, and understands that, to the extent that any
information set forth in material previously presented to it
is inconsistent with the provisions of this Agreement, the
provisions of this Agreement shall prevail and supercede
such prior information.
5.21.4 The Seller has been given the opportunity to obtain such
additional information as is necessary to verify the
accuracy of the information which was provided in order for
the Seller to evaluate the merits and risks relating to a
purchase of the Shares.
5.21.5 The Seller has such knowledge and experience in financial
and business affairs that it is capable of evaluating the
merits and risks of a purchase of the Shares and has not
relied in connection with such purchase upon any
representations, warranties or agreements other than those
set forth in this Agreement and in the documents filed with
the SEC by API pursuant to the Exchange Act and delivered to
the Seller.
15
5.22 Litigation.
----------------
Except as set forth on Schedule 5.22 hereto:
5.22.1 there is no claim, action, suit or arbitration proceeding,
before any federal, state, municipal, foreign or other court
or governmental or administrative body or agency, or any
private arbitration tribunal or any investigation or inquiry
before any federal, state, municipal, foreign or other court
or governmental or administrative body now pending, relating
to or affecting the Seller or any director, officer, agent
or employee thereof in his capacity as such, or the assets,
properties or business of the Seller, or the transactions
contemplated by this Agreement, nor has the Seller received
written notice of any threat to institute such a proceeding;
5.22.2 there is not in effect any order, judgment or decree of any
court or governmental or administrative body enjoining,
barring, suspending, prohibiting or otherwise limiting the
Seller or any officer, director, employee or agent of the
Seller from conducting or engaging in any aspect of its
business, or requiring the Seller or any officer, director,
employee or agent of the Seller to take certain action with
respect to any aspect of the its business which could
reasonably be anticipated to have a Material Adverse Effect;
and
5.22.3 The Seller is not in violation of or default under any
order, judgment, writ, injunction or decree of any court or
regulatory authority except for such violations or defaults
as would not have a Material Adverse Effect.
5.22.4 none of the matters identified on Schedule 5.22 have had or
could reasonably be anticipated to have a Material Adverse
Effect.
16
5.23 No Condemnation or Expropriation.
--------------------------------------
Neither properties demised under the Leases, or any portion thereof or
any other assets of the Seller is subject to any governmental decree or
order to be sold of which the Seller has received notice or is being
condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor, to the knowledge of the
Seller, has any such condemnation, expropriation or taking been proposed.
5.24 Compliance with Law.
-------------------------
Except to the extent any such non-compliance or violation would not
have a Material Adverse Effect, the operations of the Seller have been
conducted in accordance with all applicable laws, regulations and other
requirements of all national governmental authorities, and of all states,
municipalities and other political subdivisions and agencies thereof,
having jurisdiction over the Seller, including, without limitation, all
such laws, regulations and requirements relating to antitrust, consumer
protection, equal opportunity, discrimination on the basis of race,
national origin, sex, age, immigration, health, occupational safety, plant
closing, pension, requirements of any Board of Fire Underwriters or similar
body, Environmental Laws or toxic waste laws. During the past three (3)
years, the Seller has not received any notification of any asserted present
or past failure by the Seller to comply with such laws, rules or
regulations.
5.25 Environmental Protection.
------------------------------
Except as set forth on Schedule 5.25:
5.25.1 None of the properties demised under the Leases or real
property previously owned or leased by the Seller (which
shall mean the Seller, any subsidiaries of the Seller and
all corporation or other business entities substantially all
of the capital stock or other interest of which, or all or
substantially all of the assets of which, the Seller has
acquired) has been used at any time during which the Seller
owned or leased such real property, or otherwise has been in
possession or control of such real property or leased
property, and, to the knowledge of the Seller, none of the
properties demised under the Leases or any real property
previously owned or leased by the Seller was used at any
time prior to the time such company owned, leased, possessed
or controlled such real property or leased property (i) as a
site for the disposal or storage of Hazardous Materials, or
(ii) so as (x) to cause a material violation or (y) to give
rise to a material removal or restoration obligation or
material liability for the costs of removal or restoration
by others or a material liability for damages to others
under, any Environmental Law or under the regulations of any
Governmental Authority having jurisdiction over any of such
real property. The Seller has complied and are in compliance
with all applicable Environmental Laws except where such
non-compliance would not have a Material Adverse Effect.
5.25.2 The Seller has obtained and are in compliance with (except
where any such non-compliance would not have a Material
Adverse Effect) all environmental permits, licenses and
other authorizations which are required with respect to the
operation of its business, except for such permits, licenses
and other authorizations of which the failure to obtain
would not have a Material Adverse Effect. As to any such
permit, license or other authorization which has or is about
to expire, the Seller has timely applied for renewal thereof
under Environmental Laws except where failure to renew would
not have a Material Adverse Effect.
5.25.3 There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter pending or, to the
knowledge of Seller, threatened against the Seller relating
in any way to the Environmental Laws or any regulation,
code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved
thereunder.
5.25.4 No release, spill, seepage, leak or emission has occurred to
the knowledge of the Seller on the properties demised under
the Leases or on any real property previously owned or
leased by Seller during the time of the Seller's ownership
or possession.
5.25.5 There are no underground storage tanks located on any of the
properties demised under the Leases, nor to the knowledge of
the Seller have there been any underground storage tanks
removed from any real property owned or leased by any
company during the period such real property was owned or
leased by the Seller, except to the extent that such
underground storage tanks were removed in compliance with
all applicable laws or required by applicable laws,
ordinances, rules and regulations, and, to the extent such
removal was performed upon notice and with the approval of,
and the inspection and confirmation of closure as to such
removal was performed by, all applicable governmental
agencies having jurisdiction.
5.25.6 The Seller has delivered to Purchaser true, correct and
complete copies or results of any reports inspections,
safety procedures, logs, data, contracts, invoices, studies
or tests initiated by the Seller or landlords or by any
Governmental Authority which are in the possession of the
Seller pertaining to Hazardous Materials, at any part of the
properties demised under the Leases or Seller with respect
to the business, any of Seller's predecessors or concerning
compliance with or liability under Environmental Laws and
other environmental matters in the operation of the business
and such properties.
17
5.26 Employee Benefit Plans.
----------------------------
5.26.1 Schedule 5.26 hereto contains a complete list of "Plans" of
the Seller consisting of each:
(a) "multiemployer pension plan," as defined in Section 3(37) of
ERISA, to which the Seller (or any entity that is treated as
a single employer with the Seller under Section 414(b), (c),
(m) or (o) of the Code ("Common Control Entity") contributes
or is required to contribute, or with respect to which any
of the Seller or a Common Control Entity has any liability
(the foregoing plans and any additional multiemployer
pension plan to which the Seller or any Common Control
Entity has previously contributed or been required to
contribute at any time after September 25, 1980 (the
"Multiemployer Plans");
(b) "employee welfare benefit plan," as defined in Section 3(l)
of ERISA, sponsored or maintained by the Seller or any
Common Control Entity, or to which the Seller or any Common
Control Entity contributes or is required to contribute,
including each multiemployer welfare plan ("Welfare Plan");
(c) "employee pension benefit plan," as defined in Section 3(2)
of ERISA (other than a Multiemployer Plan), sponsored or
maintained by the Seller or any Common Control Entity or to
which the Seller or any Common Control Entity contributes or
is required to contribute ("Pension Plan"); and
(d) any other bonus, deferred or incentive compensation,
pension, profit-sharing, retirement, stock purchase, stock
grant, stock option, disability, sick pay, salary
continuation, cafeteria, flexible spending account,
dependent care assistance, or any other fringe benefit plan,
arrangement or practices, other than normal payroll
practices and policies concerning holidays and vacations,
sponsored or maintained by the Seller, whether formal or
informal (collectively, "Employment Plans").
5.26.2 There are no "accumulated funding deficiencies," as defined
in Section 302(a)(2) of ERISA and Section 412 of the Code,
whether or not waived, with respect to any of the Pension
Plans.
5.26.3 The Unaudited Balance Sheet reflects, to the extent required
by GAAP as consistently applied by the Seller, an accrual of
all accrued but unpaid contributions to any Pension Plan, a
Multiemployer Plan, and an accrual of all amounts accrued
but unpaid under the Welfare Plans and the Employment Plans,
all as of the Balance Sheet Date.
5.26.4 Each Pension Plan and each related trust agreement, annuity
contract, or other funding instrument, is qualified and tax
exempt under the provisions of Sections 401(a) (or 403(a) as
appropriate) and 501(a) of the Internal Revenue Code
("Code"), and a determination letter has been received from
the Internal Revenue Service as to such qualified status.
18
5.26.5 Each Pension Plan, Welfare Plan and Employment Plan complies
in all material respects with all applicable laws (including
to the extent applicable, without limitation, the Code and
ERISA) and is operated in accordance with its terms, except
where such non-compliance would have no Material Adverse
Effect.
5.26.6 Each of the Seller and any Common Control Entity has paid
all premiums (and interest charges and penalties for late
payment, if applicable), due heretofore to the PBGC with
respect to each Pension Plan. Except as described on
Schedule 5.26, there has been no "reportable event", as
defined in Section 4043(b) of ERISA and the PBGC regulations
under that Section, with respect to any Pension Plan as to
which notice has not been waived under applicable PBGC under
PBGC regulations. No liability to the PBGC has been incurred
by the Seller or any Common Control Entity, on account of
the termination of any Pension Plan. The PBGC has not
instituted proceedings to terminate any Pension Plan and to
the knowledge of Seller, there exists no condition or set of
circumstances which could reasonably be expected to present
a significant risk of the termination of any Pension Plan by
the PBGC.
5.26.7 Except as set forth on Schedule 5.26, none of the Seller nor
any Common Control Entity has withdrawn from a Multiemployer
Plan in a "complete withdrawal" or a "partial withdrawal" as
defined in Sections 4203 and 4205 of ERISA, respectively.
5.26.8 True and complete copies of each of the following documents
have been delivered by the Seller to the Purchaser: (i) each
Welfare Plan, each Pension Plan and each Multiemployer Plan,
related trust agreements, annuity contracts, or other
funding instruments; (ii) each Employment Plan and complete
descriptions of any such plans that are not in writing;
(iii) the most recent determination letter issued by the
Internal Revenue Service with respect to each Pension Plan;
(iv) Annual Reports on Form 5500 Series required to be filed
with any governmental agency for each Welfare Plan and each
Pension Plan for the two most recent plan years; and (v) all
actuarial reports prepared for the last two available plan
years for each Pension Plan.
5.26.9 Except as described on Schedule 5.26, neither the Seller nor
any Welfare Plan or Employment Plan is obligated to make any
payment of post-retirement life, accidental death, medical
or disability insurance benefits of any type, excluding, for
this purpose, the provisions of any such benefit as a result
of an individual's exercise of his or her health care
continuation rights under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, to or with respect
to any former employee of the Seller.
19
5.27 Brokers and Finders.
-------------------------
Except as set forth on Schedule 5.27, the Seller is not a party to any
agreement with any person that would obligate the Purchaser to pay any
brokerage fee, commission, finder's fees or investment banking fee in
connection with the transactions contemplated by this Agreement.
5.28 Consents.
--------------
Except as set forth in this Agreement, the consummation of the
transactions contemplated hereby in respect to the Seller and the
fulfillment of the terms of this Agreement in respect of the Seller do not
require the consent, approval, filing with, registration or release of any
governmental authority or any other Person including, without limitation,
any Person who is a party to a contract or a lease, except for those
approvals, consents, filings, registrations or releases the failure of
which to file or obtain would not have a Material Adverse Effect.
20
5.29 Books and Records.
-----------------------
Seller has maintained complete and correct copies of: (a) the Articles
of Organization and Operating Agreements and all amendments thereto; and
(b) the equity ownership records of the Seller. Minutes or other records of
the meetings and other proceedings of the members and directors of the
Seller have not been maintained except to the extent heretofore delivered
to Purchaser.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
In order to induce Seller to enter into this Agreement and to
consummate the transactions contemplated herein, the Purchaser represents
and warrants to the Seller as follows:
6.1 Corporate Organizations; Etc.
---------------------------------
Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
6.2 Authorization, Etc..
------------------------
This Agreement and each agreement, document and instrument required to
be delivered by Purchaser at the Closing have been duly and validly
authorized by all necessary corporate action of Purchaser full corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The issue of the Shares of API Stock
constituting the Stock Consideration has been duly and validly authorized
by all necessary corporate action of API. This Agreement is the valid and
binding agreement of Purchaser enforceable against Purchaser in accordance
with its terms.
6.3 No Violation.
-----------------
Neither the execution, delivery or performance of this Agreement nor
the consummation of the transactions contemplated hereby will violate any
provision of the Certificate of Incorporation or By-Laws or similar
corporate documents of Purchaser or will (a) violate, or be in conflict
with, or constitute a breach or default (or an event which, with the giving
of notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or acceleration of the performance required
by, or cause the acceleration of the maturity of any debt or obligation
pursuant to, or result in the creation or imposition of any security
interest, lien or other encumbrance upon any property or assets of API or
any subsidiary of API under any Contractual Obligation to which API or any
subsidiary of API is a party or by which API or any subsidiary of API is
bound, or to which the property of API or any subsidiary of API is subject,
except where such violation, conflict, breach, default, termination,
acceleration, security interest, lien or other encumbrance would not have a
Material Adverse Effect; or (b) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or Governmental Authority to
which API is subject, except where such violation would not have a Material
Adverse Effect.
6.4 Approvals of Governmental Authorities.
------------------------------------------
No action, consent, approval or authorization of or declaration,
filing or registration with any person or entity, including without
limitation, any Governmental Authority is required to be obtained or made
by or on behalf of API or the Purchaser in connection with the execution,
delivery and performance by the Purchaser of this Agreement or the
consummation of the transactions contemplated hereby in respect of the
Purchaser.
21
6.5 True and Complete.
----------------------
None of the documents filed by the Purchaser under the Exchange Act
and delivered to the Seller (which are listed on Schedule 6.5) contained
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained therein no misleading.
6.6 The API Stock.
------------------
The Shares of API Stock, if any, to be issued as the Stock
Consideration hereunder, when issued and delivered in accordance with the
provisions of this Agreement, will be duly authorized, validly issued
shares of API Stock and will be fully paid and non-accessible.
6.7 Brokers and Finders.
------------------------
The Purchaser is not a party to any agreement with any person or
entity which would obligate the Seller to pay any commission, finder's fee,
investment banking fee, or brokerage fee in connection with the
transactions contemplated by this Agreement.
7. COVENANTS OF SELLER.
7.1 Conduct of Business - Negative Covenants.
---------------------------------------------
From the date hereof through the Effective Date and except as
contemplated by this Agreement, the Seller shall not, without the prior
written consent of Purchaser, conduct its business other than in the
ordinary course or commit or cause or authorize any act or omission which
deviates from the ordinary course of business. Without limiting the
generality of the foregoing, from the date hereof through the Effective
Date, none of the following shall occur without the prior written consent
of Purchaser:
22
7.1.1 The Seller shall not institute any new methods of purchase,
sale, lease, management, accounting or operation or engage
in any transaction or activity, enter into any agreement or
make any commitment or amend any existing material
agreement, except in the ordinary course of business and
consistent with past practice.
7.1.2 The Seller shall not change or amend its Articles of
Organization or Operating Agreement or propose any such
change or amendment.
7.1.3 The Seller shall not offer, issue or sell any securities of
any kind whatsoever, whether debt or equity, acquire
directly or indirectly, by redemption or otherwise, any such
security, reclassify or split-up any such security, declare
or pay any dividends thereon in cash, securities or other
property, or make any other distribution with respect
thereto, or grant or enter into any options, warrants, or
other rights to acquire securities of the Seller or enter
into any other contracts or commitments of any kind with
respect to the issuance of any securities of the Seller.
7.1.4 The Seller shall not borrow or agree to borrow any funds or
incur, or assume or become subject to, whether directly or
by way of guaranty or otherwise, any obligation or liability
(absolute or contingent), except in the ordinary court of
business consistent with past practices or pursuant to
existing credit arrangements copies of which have previously
been furnished to the Purchaser.
7.1.5 The Seller shall not pay, discharge, waive, satisfy or
compromise or adjust any claim, liability or obligation
(absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities or
obligations reflected or reserved against the Unaudited
Balance Sheet or incurred in the ordinary course of business
and consistent with past practice since the date of the
Unaudited Balance Sheet.
7.1.6 The Seller shall not make any single capital expenditure or
commitment in excess of $10,000 for additions to property,
plant, equipment or intangible capital assets or make any
capital expenditure or commitments so that the aggregate of
capital expenditures and commitments do not exceed $25,000
since the Balance Sheet Date for additions to property,
plant, equipment or intangible capital assets;
7.1.7 The Seller shall not prepay any obligation having a fixed
maturity of more than sixty (60) days from the date such
obligation was incurred.
7.1.8 The Seller shall not permit or allow any of its property or
assets (real, personal or mixed, tangible or intangible) to
be subjected to any mortgage, pledge, lien or encumbrance,
except in the ordinary course of business and consistent
with past practice or pursuant to existing credit
arrangements which have been disclosed to the Purchaser.
7.1.9 The Seller shall not write down the value of any inventory
(including write-downs by reason of shrinkage or markdown)
or write off as uncollectible any notes or accounts
receivable, except for immaterial write-downs of inventory
or accounts receivable in the ordinary course of business
and consistent with past practice.
7.1.10 The Seller shall not cancel any debts or waive any claims or
rights involving more than $1,000 or sell, transfer, or
otherwise dispose of any of its properties or assets, except
in the ordinary course of business and consistent with past
practice.
7.1.11 The Seller shall not dispose of any rights to the use of any
patent, trademark, trade name or copyright, or dispose of or
disclose to any person any trade secret, formula, process or
know-how not theretofore a matter of public knowledge except
where such disposition or disclosure would not have a
Material Adverse Effect.
7.1.12 The Seller shall not grant any increase in the compensation
of officers or general increase in the compensation of
employees (including any such increase pursuant to any
bonus, pension, profit sharing or other plan or commitment)
or any increase in the compensation payable or to become
payable to any officer or employee, except increases granted
in the ordinary course of business and reasonable increases
to employees who are not officers consistent with past
practice and pursuant to existing agreements.
7.1.13 The Seller shall not sell, transfer, surrender, terminate,
sublease or lease any properties or assets to, or enter into
any agreement or arrangement with, any of its Members,
officers or directors.
7.1.14 The Seller shall not modify any collective bargaining or
other labor agreement to which they are a party or by which
it may be bound, except for immaterial modifications in the
ordinary course of business which are consistent with past
practice or required by applicable law.
7.1.15 The Seller shall not terminate any Plan or withdraw from any
Multiemployer Plan or fail to notify the Purchaser of any
"prohibited transaction", as such term is defined in Section
4975 of the Internal Revenue Code.
7.1.16 The Seller shall not enter into or consent to any amendment
of, or sublease with respect to the properties demised under
the Leases except in the ordinary course of business and
consistent with past practice.
7.1.17 The Seller shall not take any action, or omit the taking of
any action, which would cause any of the representations or
warranties made in Article 5 hereof to be or become untrue
or incorrect in any material respect as of the Closing Date.
7.1.18 The Seller shall not agree or commit, whether in writing or
otherwise, to do any of the foregoing.
23
7.2 Conduct of Business - Affirmative Covenants.
------------------------------------------------
From the date hereof through the Effective Date, the Seller will
conduct its business in the ordinary course and consistent with past
practice, except where the failure to do so would not have a Material
Adverse Effect. Without limiting the generality of the foregoing, from the
date hereof through the Effective Date, the Seller:
7.2.1 will maintain its good standing and qualification to do
business in all jurisdictions where it is required to be
qualified to do business, and all licenses, permits,
franchises, rights and privileges which are necessary for
the conduct of the its business;
7.2.2 shall continue at its expense to maintain its property and
equipment in customary repair, order and working condition,
reasonable wear and use excepted, and keep in full force and
effect the Leases, except those which expire by their terms,
and, if any Leases expire by their own terms, renew the same
if such renewal is in the ordinary course of business and
consistent with past custom and practice;
7.2.3 shall duly comply with all laws, regulatory requirements
and agreements to which it is subject or by which it is
bound;
7.2.4 shall maintain the current insurance upon its properties
and with respect to the conduct of its business;
7.2.5 shall pay and discharge, before the same shall become
delinquent, all Taxes imposed on it or against its income or
profits or any of its properties, and all other Liabilities
which, if unpaid, might become an encumbrance, except to the
extent and so long as (i) the same are being contested in
good faith and by appropriate proceedings, and (ii) it shall
have set aside on its books reasonable reserves with respect
thereto under GAAP consistently applied;
7.2.6 shall use commercially reasonable efforts to keep intact its
present business organizations, keep available the services
of its present officers, employees and agents and use
commercially reasonable efforts to preserve its present
relationships with all customers, clients, accounts,
suppliers and other entities or persons having business
relationships with it, in each case in the ordinary course
of business or in a manner consistent with customary
historical practices or course of conduct;
7.2.7 shall furnish to the Purchaser for its examination (i) its
minute books containing all records required to be set forth
of all proceedings, consents, actions and meetings of the
shareholders and Board of Directors; (ii) all permits,
orders, and consents issued by any governmental authority
with respect to the Seller, and all applications for such
permits, orders, and consents; and (iii) its transfer books
setting forth all transfers of any shares of membership
interests;
7.2.8 shall maintain its books, records and accounts with
accuracy and consistently with past practices; and
7.2.9 shall comply with the requirements of any state, city or
local law, statute, ordinance, regulation or otherwise in
any state, city or locality in which any of the properties
demised under the Leases are located, which law, statute,
ordinance or regulation imposes a transfer tax and/or filing
requirement in connection with the transactions contemplated
hereby.
24
7.3 Access to Information and Personnel.
----------------------------------------
Subject to the confidentiality obligations under Section 9.1 hereof,
at reasonable times before the Effective Time, API, through its duly
appointed representatives and agents, during normal business hours and in a
manner which does not unduly interfere with the business operations of the
Seller, shall have the right to speak with, interview and discuss the
business and operations of the Seller with the officers, employees,
attorneys and agents of the Seller and shall have the right to visit the
premises of the Seller, to examine, to the extent permitted by law, any and
all records, books, contracts, commitments, shareholder lists, files,
working papers and drafts prepared by accountants and any independent
public accounting firms retained by the Seller and other documents
pertaining to the business and operations of the Seller and the ownership
of its properties and to undertake such other steps as Purchaser considers
appropriate to familiarize itself with the Seller. All of such interviews,
discussions and inspections shall be coordinated reasonably in advance with
the representatives of the Seller.
25
7.4 Estoppel Certificates and Landlord Consents.
------------------------------------------------
Immediately upon its execution of this Agreement, the Seller shall
obtain and deliver to Purchaser at the Closing customary estoppel
certificates from the Landlords and, with respect to Leases which require
the consent of the Landlord thereunder for the transactions contemplated
hereby, landlord consents (such consents not to be conditioned on any
increased rental, other payment, reduced term, or other change of lease
terms) to the assignment of the Leases as contemplated herein in form and
substance reasonably satisfactory to the Purchaser.
7.5 Confidentiality.
--------------------
From the date hereof through the Effective Date, the Seller covenants
that it shall not disclose or assist in the disclosure by any person or
entity, or use to the competitive detriment of API, any confidential or
proprietary information regarding API, except that disclosure of such
information may be made to their respective legal counsel, accountants,
financial advisors, investment bankers and their other authorized agents
and representatives, and to such persons only to the extent required for
activities directly related to the transactions contemplated by this
Agreement, or except to the extent that disclosure is required by law or by
a court of competent jurisdiction. Following the Closing, the Seller and
its officers, managers and Equity Owners shall not disclose or acquiesce in
the disclosure by any person or entity, or use to the competitive detriment
of API or Purchaser, any confidential or proprietary information regarding
API or Purchaser.
7.6 Statement of Lender.
------------------------
Prior to the Closing, the Seller shall obtain and transmit to the
Purchaser the payoff letter of the Lender as to the outstanding balance, as
of the Closing Date, of the Seller's indebtedness to Lender, and Seller
shall arrange for the Lender to deliver appropriate evidence of
satisfaction of indebtedness and Termination Statement on Form UCC-3 to the
Purchaser at Closing.
7.7 No Solicitation.
--------------------
Neither the Seller nor its representatives, agents, its officers,
directors and Members shall, directly or indirectly, solicit, initiate or
participate in discussions or negotiations with, or provide any information
to, any Person (other than API or Purchaser) concerning, or enter into any
agreement providing for any merger, sale of material assets, sale of
membership interests or similar transactions involving the Seller.
7.8 Best Efforts.
-----------------
So long as this Agreement remains in effect, Seller shall use its best
efforts (without resort to ligation) to cause the transactions contemplated
herein to be consummated at the earliest practicable date. Seller shall
proceed as soon as practicable in the procurement of permits, consents and
approvals and in the taking of any other action, and the satisfaction of
all other requirements prescribed by law or otherwise necessary for
consummation of the acquisition on the terms herein provided, and shall
diligently prosecute the same.
26
7.9 Tax Returns.
----------------
For all periods ending on or prior to the Effective Date, the Seller
shall file all Tax Returns and Statements which are required by applicable
law to be filed, all in a manner consistent with past practices.
7.10 Payment of Excluded Liabilities.
-------------------------------------
At, or immediately after the Closing, Seller shall satisfy all
Excluded Liabilities (other than debt obligation to Lender satisfied at
Closing) and will provide Purchaser with evidence of such satisfactions.
8. COVENANTS OF PURCHASER; GUARANTY OF API.
8.1 Confidentiality.
--------------------
Prior to the Closing, Purchaser shall not disclose or acquiesce in the
disclosure by any Person, or use to the competitive detriment of the
Seller, any confidential or proprietary information regarding the Seller or
its business or financial condition, contained in any documents or
otherwise furnished by or on behalf of the Seller, or otherwise learned by
Purchaser as a result of participation in the transactions contemplated
hereby, to any Person except its legal counsel, accountants, financial
advisors, bankers, investment bankers and other authorized agents and
representatives, and to such persons only to the extent required for
activities directly related to the transactions contemplated by this
Agreement, including, without limitation, the financing of Purchaser's
obligation hereunder. If the transaction contemplated by this Agreement for
any reason does not close, Purchaser agrees to, and shall thereafter
continue to, abide by the preceding provisions of this Section 8.1 and in
so doing, and without limitation, shall permanently protect the
confidentiality of all confidential or proprietary information provided to
it by the Seller and return to the Seller all written information provided
to API and the Purchaser by the Seller, and also shall return or, at the
Seller's election, destroy all copies made of such written information and
submit its affidavit of its duly authorized officers that all such written
information and copies have been returned.
8.2 Best Efforts.
-----------------
So long as this Agreement remains in effect, Purchaser shall use its
best efforts to cause the transactions contemplated hereby to be
consummated at the earliest practicable date. Purchaser shall proceed as
soon as practicable in the procurement of permits, consents and approvals
and in the taking of any other action, and the satisfaction of all other
requirements prescribed by law or otherwise necessary for consummation of
the acquisition on the terms herein provided, and shall diligently
prosecute the same.
8.3 Employees of Seller.
------------------------
At Closing, Purchaser shall hire all employees of Seller (other than
Xxxx X. XxXxxx, if Xx. XxXxxx is an employee) on the same terms and
conditions as such employees are currently employed by Seller. Nothing in
this provision shall create any right in any employee to continued
employment by Purchaser after the Closing.
8.4 Guaranty of API.
--------------------
API acknowledges that it expects to benefit from the covenants running
to the Purchaser, its wholly-owned subsidiary, in this Agreement and from
the transaction contemplated hereby. API, accordingly, hereby guaranties
the performance of the Purchaser of its covenants set forth in the
Agreements and particularly guaranties payment to the Seller of any amounts
which the Purchaser may owe to the Seller.
27
8.5 Accrued Bonuses.
--------------------
Within seven (7) days following the Closing, Purchaser will pay the
deferred bonuses shown on the July 31, 2002 Balance Sheet in the aggregate
amount of $45,000 less the amount of cash held by Seller at Closing to the
Equity Owners.
9. CONDITIONS TO CLOSING.
9.1 Conditions Precedent to the Performance of the Purchaser.
-------------------------------------------------------------
The obligations of Purchaser to consummate the acquisition in
accordance with this Agreement is subject to the fulfillment of each of the
following conditions, any of which may be waived in writing by Purchaser,
in whole or in part, in its sole discretion:
9.1.1 Compliance with this Agreement.
(a) The Seller shall have performed and satisfied in all
material respects all covenants, obligations, agreements and
conditions required by this Agreement to be performed and
satisfied by it, on or prior to the Effective Date;
(b) The representations and warranties contained in Article 5
hereof shall be in all material respects true, correct and
complete as of the date when made and at and as of the
Effective Date as though such representations and warranties
were made at and as of such date, except for changes
expressly permitted or contemplated by the terms of this
Agreement.
(c) The Seller shall have delivered to Purchaser a certificate
signed by its two managers dated as of the Effective Date.
Such certificate shall certify as to the truth, completeness
and correctness in all material respects of each of the
representations and warranties set forth in Article 5 made
by the Seller and as to the fulfillment in all material
respects of the covenants set forth in Article 8 hereof
which are required by this Agreement to be performed and
satisfied by the Seller on or before the Effective Date.
9.1.2 Approvals. All action, including approval by the members of
the Seller, necessary for the Seller to approve the
execution and delivery of this Agreement and the
consummation of the transactions contemplated by this
Agreement shall have been taken and not revoked and shall
have delivered to the Purchaser certified copies of all
resolutions of the Seller evidencing such action.
9.1.3 No Material Adverse Effect. As of the Effective Date, there
shall have been no condition, development or occurrence in
respect of the assets, business, financial condition or
prospects of the Seller which would constitute a Material
Adverse Effect when compared to such condition as at the
Balance Sheet Date, other than any such condition,
development or occurrence arising from operations in the
ordinary course and consistent with past practices or course
of conduct and which does not consist of or result from a
violation of any covenant of Seller hereunder, and, on the
Effective Date, the Seller shall deliver a certificate to
such effect signed by the two managers.
28
9.1.4 [Intentionally Omitted].
9.1.5 No Injunction. On the Effective Date, there shall be no
effective injunction, writ, preliminary or temporary
restraining order or order of any nature issued by a court
of competent jurisdiction directing that the transactions
provided for herein or any of them not be consummated as so
provided or imposing any conditions on the consummation of
the transaction contemplated hereby that Purchaser deems
unacceptable in its sole discretion.
9.1.6 Consents and Approvals. The Purchaser shall have received
any necessary approvals and consents from all third parties,
including, without limitation, the Landlords (to the extent
such consent is required by the terms of the Leases) and the
estoppel certificates required by Section 7.4, and such
approvals and consents shall not have expired or been
withdrawn as of the Effective Date. Each of such required
consents is set forth on Schedule 9.1.6 hereof.
9.1.7 Employment Agreements. Xxxx Xxxxxx shall have entered into
an Employment Agreement with API, in substantially the form
annexed as Exhibit 9.1.7 hereto with the specific terms as
follows:
Term: 3 Years
Salary: $160,000
Title: Vice President and Chief Operating Officer
Options: 100,000 Shares of API Stock priced at closing
price day prior to Closing. Vesting over a 4
year schedule with acceleration if employment
terminates prior to full vesting
Bonus: 33% or greater, based on meeting incentive goal
goals set by Chairman or Compensation Committee.
9.1.8 Consulting Agreement. Xxxx XxXxxx shall have entered into a
Consulting Agreement (the "Consulting Agreement") with API
substantially in the form annexed hereto as Exhibit 9.1.8.
Such Agreement will be for a term of eighteen months. The
Consulting Agreement will provide that Xx. XxXxxx receive an
immediately exercisable option to purchase 25,000 Shares of
API Stock at a price equal to the closing price for the API
Stock on the day prior to the Closing.
9.1.9 Non Compete Agreements. Each of the Equity Owners shall have
entered into a Non Compete Agreement with API substantially
in the form annexed as Exhibit 9.1.9. In consideration of
his execution and performance of his Non Compete Agreement,
Xxxx XxXxxx will receive an aggregate of $225,000, payable
$99,000 at Closing and $7,000 per month commencing 30 days
after the Closing Date.
29
9.1.10 No Litigation. As of the Effective Date, no writ, action,
investigation, inquiry, litigation or other proceeding
relating to or affecting the Seller or any of their
respective directors, officers, employees or agents in their
capacities as such, the assets, properties or business of
Seller or the transactions contemplated by this Agreement
shall have been instituted seeking any relief which, if
granted, would have a Material Adverse Effect or challenging
the legality of the transaction contemplated hereby, seeking
to restrain the consummation thereof or seeking damages in
connection therewith.
9.1.11 Approval of Documentation. The form and substance of all
certificates, instruments and other documents delivered to
Purchaser under this Agreement shall be reasonably
satisfactory in all material respects to Purchaser and its
counsel.
9.2 Conditions Precedent to Seller's Performance.
-------------------------------------------------
The obligation of the Seller to consummate the transactions
contemplated by this Agreement is subject to the fulfillment of each of the
following conditions, any of which may be waived in writing by the Seller,
in whole or in part, in its sole discretion:
9.2.1 Compliance with This Agreement.
(a) The Purchaser shall have performed and satisfied in all
material respects all covenants, obligations, agreements and
conditions required by this Agreement to be performed and
satisfied by the Purchaser on or prior to the Effective
Date;
(b) The representations and warranties of the Purchaser
contained in Article 6 hereof shall be true, correct and
complete in all material respects as of the date when made
and at and as of the Effective Date as though such
representations and warranties had been made on such date,
except for changes expressly permitted on contemplated by
the terms of this Agreement;
(c) The Purchaser shall have delivered to the Seller a
certificate, signed by its Chairman, dated as of the
Effective Date, certifying as to the truth, completeness and
correctness in all material respects of each of the
representations and warranties set forth in Article 6 hereof
and the fulfillment in all material respects of each of the
covenants set forth in Article 8 hereof.
9.2.2 Approvals. All corporate action by Purchaser and API
necessary to approve the execution and delivery of this
Agreement and the consummation of the transactions
contemplated by this Agreement prior to the Closing Date
shall have been taken and not revoked and Purchaser shall
have delivered to Seller certified copies of resolutions of
the Board of Directors of Purchaser and API evidencing such
actions.
30
9.2.3 Employment Agreement. API shall have executed and delivered
the Employment Agreement to Xxxx Xxxxxx.
9.2.4 Consulting Agreement. API shall have executed and delivered
the Consulting Agreement to Xxxx XxXxxx.
9.2.5 Non-Compete Agreement. API shall have executed and
delivered the Non-Competition Agreement to Xxxx XxXxxx.
9.2.6 Stock Option Agreements. API shall have entered into Stock
Option Agreements in substantially the form annexed as
Exhibit 9.2.5 under its 2000 Stock Option Plan hereto for
the stock option required by the Employment Agreement and
the Consulting Agreement.
9.2.7 [Intentionally Omitted].
9.2.8 Approval of Documentation. The form and substance of all
certificates, instruments and other documents delivered to
Seller under this Agreement shall be reasonably satisfactory
in all material respects to Seller and their counsel.
9.2.9 Absence of Legal Challenge. As of the Effective Date, there
shall be in effect no order, writ, injunction, judgment or
decree of any court or Governmental Authority in the United
States or any state or territory thereof, prohibiting the
consummation of any of the transactions specified in or
required by the terms of this Agreement, and there shall be
no action, suit or proceeding or pending before any court,
Governmental Authority or other body challenging the
legality of any of the transactions specified in or required
by the terms of this Agreement, seeking to restrain their
consummation or seeking damages in connection therewith.
10. DELIVERIES AT CLOSING.
10.1 Seller Obligations.
------------------------
At the Closing, Seller shall deliver to Purchaser or as Purchaser may
designate:
10.1.1 the certificates required by Section 9.1.1 and 9.1.3
hereof;
10.1.2 copy of Seller's Articles of Organization and all
amendments certified by the Secretary of State of Wisconsin;
10.1.3 certificate of the Secretary of Seller as to the
incumbency of its officers, the Operating Agreement and the
resolutions required by Section 9.1.2;
31
10.1.4 the duly executed consents (including the consents and
estoppel certificates of the Landlords) required by Section
9.1.6;
10.1.5 the Employment Agreement required by Section 9.1.7 hereof;
10.1.6 the Consulting Agreement required by Section 9.1.8;
10.1.7 the Non Compete Agreements required by Section 9.1.9;
10.1.8 assignments of the Leases to the Purchaser;
10.1.9 a xxxx of sale from the Seller to the Purchaser relating
to all of the Acquired Assets;
10.1.10 the Escrow Agreement required by Section 3.1; and
10.1.11 Evidence of satisfaction from the Lender.
10.2 Obligations of the Purchaser.
----------------------------------
At the Closing, and against delivery of each of the items required to
be delivered by Seller under Section 10.1 above, Purchaser shall deliver
the following.
10.2.1 the Certificate required by Section 9.2.1(c);
10.2.2 the Certificate of the Secretary of the Purchaser as to
the incumbency of its officers, its By-Laws and the
resolutions required by Section 9.2.2;
10.2.3 Certificate of Incorporation of the Purchaser, and all
amendments thereto, certified by the Secretary of State of
Delaware;
10.2.4 Assumption Agreement from the Purchaser assuming the
Assumed Liabilities under contracts;
10.2.5 the Employment Agreement required by Section 9.2.3;
10.2.6 the Consulting Agreement required by Section 9.2.4;
10.2.7 the Stock Option Agreements required by Section 9.2.5;
10.2.8 the Escrow Fund will be delivered to the Escrow Agent;
10.2.9 the amount necessary to satisfy the indebtedness will be
delivered to the Lender by wire transfer;
10.2.10 check or wire transfer to the Seller for the balance of
the Cash Consideration;
10.2.11 the Stock Consideration (in API Stock or cash); and
10.2.12 The Escrow Agreement required by Section 3.1.
32
11. POST CLOSING OBLIGATIONS.
11.1 Change of Names.
---------------------
Promptly after the Closing, the Seller will change its name to a name
dissimilar to "Silicon Sensors" and will furnish the Purchaser with proof
of such change.
11.2 Cooperation in Post-Closing Audit.
---------------------------------------
The Seller and the Equity Owners will provide all cooperation
reasonably requested to assist Purchaser's Independent Auditor in
completing its post-closing audit of the Seller's financial statements.
11.3 Further Cooperation.
-------------------------
Each of the Seller and the Purchaser will, at any time and from time
to time after the Closing Date, execute and deliver such further
instruments of conveyance, transfer and license, and take such additional
actions as the Purchaser or the Seller or their respective successors
and/or assigns may reasonably request, to effect, consummate, confirm or
evidence the sale of the Acquired Assets and the other transactions
contemplated by this Agreement.
11.4 Notification.
------------------
The Seller will reasonably cooperate with the Purchaser in notifying
its customers that its business has been sold to the Purchaser, including,
without limitation, executing any additional notices which the Purchaser
may reasonably request. The Seller will not, directly or indirectly, take
any action which is designed or intended to have the effect of discouraging
customers, suppliers or vendors and other business associates of its
business from maintaining the same business relationship with the Purchaser
or its respective successors and/or assigns after the Closing Dates as were
maintained with the Seller with respect to such business prior to the
Closing Date.
12. TERMINATION.
12.1 Termination.
---------------------
This Agreement and the transactions contemplated herein may be
terminated and/or abandoned at any time before the Closing:
12.1.1 By the written mutual consent of the Seller and the
Purchaser;
12.1.2 By the Seller, by giving written notice to the Purchaser, if
there is a continuing material breach by the Purchaser of
any of the representations, warranties, covenants or
obligations of the Purchaser set forth herein; provided,
however, that at the time of such termination, the Seller is
not in material breach of any of their representations,
warranties, covenants or obligations hereunder; provided
further, however, that the Purchaser has a period of 30 days
in which to cure such default;
33
12.1.3 By the Purchaser by giving written notice to the Seller, if
there is a continuing material breach by the Seller of any
of the representations, warranties, covenants or obligations
of the Seller set forth herein; provided, however, that at
the time of such termination, the Purchaser is not in
material breach of any of its representations, warranties,
covenants or obligations hereunder; provided further,
however, that the Seller have a period of 30 days in which
to cure such default;
12.1.4 By either the Purchaser or the Seller, if the Closing shall
not have taken place by October 31, 2002 (the "Final Date"),
provided that at the time of such termination the
terminating party is not in material breach of any of its
representations, warranties, covenants or obligations
hereunder (or, if in such material breach, has not commenced
to cure and is not then continuing to diligently pursue the
cure of such breach). In addition, if, at the Final Date,
the sole reason that the Closing has not taken place is the
failure of a third party to have taken any action required
to be taken in order to satisfy any party's obligation to
consummate the transaction (for example, the receipt of
consent for the assignment of the Lease) and each party
hereto has taken all steps reasonably required hereunder of
such party to cause such third party to take such action
(but without any obligation to litigate), then either party
may elect to extent the Final Date, effective upon notice to
the other party, to a date no later than December 31, 2002;
12.2 Effect of Termination.
---------------------------
12.2.1 Breach By the Seller . If this Agreement is terminated by
Purchaser pursuant to Sections 12.1.3 (including the failure
by Seller to timely close), then the Purchaser shall be
entitled as its sole and exclusive remedy to reimbursement
for any and all costs or expenses incurred or suffered by
the Purchaser in connection with, or in respect of, this
Agreement and the transactions contemplated hereby
(excluding any commitment fees or other amounts paid or
payable by Purchaser to any financing source or otherwise
incurred in connection with arranging for, soliciting or
obtaining any such financing).
12.2.2 Breach By the Purchaser. If this Agreement is terminated by
the Seller pursuant to Section 12.1.2 (including the failure
by Purchaser to timely close), then the Seller shall be
entitled as its sole and exclusive remedy to reimbursement
for any and all costs or expenses incurred or suffered by
Seller in connection with or in respect of this Agreement
and the transaction contemplated hereby.
12.2.3 Other Terminations. If this Agreement is terminated as
permitted by Subsection 12.1.1, or otherwise pursuant to
Section 12.1 and Subsections 12.2.1 and 12.2.2 and 12.2.3
are not applicable, such termination shall be without
liability of any party (or any shareholder, director,
employee, agent, consultant or representative of such party)
to any other party.
34
12.3 Procedure Upon Termination.
--------------------------------
In the event of termination and abandonment pursuant to this Article
12, written notice thereof shall forthwith be given to the other party and
the transactions contemplated by this Agreement shall be terminated and/or
abandoned, without further action by any party. If the transactions
contemplated by this Agreement are terminated and/or abandoned as provided
herein:
12.3.1 Each party will redeliver all documents, work papers and
other material of any other party relating to the
transactions contemplated hereby, whether so obtained before
or after the execution hereof, to the party furnishing the
same; and
12.3.2 All confidential information received by any party hereto
with respect to the business of any other party or its
subsidiaries shall be treated in accordance with Sections
7.5 and 8.1 hereof.
13. INDEMNIFICATION.
13.1 Indemnification.
---------------------
The Seller and the Equity Owners, jointly and severally, shall defend,
indemnify and hold API, the Purchaser and their respective directors,
officers, employees and agents (the "Indemnified Buyers") harmless from and
against any and all claims, demands, damages, liabilities, losses, costs
and expenses (including attorneys' fees and expenses and costs of
investigation, including, without limitation, fees and disbursements of
counsel incurred by the Indemnified Buyers (as such term is hereinafter
defined) in any action or proceeding between Indemnitor (as such term is
hereinafter defined) and the Indemnified Buyers or between the Indemnified
Buyers and any third party)) of any kind or nature whatsoever
(collectively, the "Losses") that may be asserted by anyone against the any
Indemnified Buyer, or sustained or suffered by any Indemnified Buyer based
upon or related to a breach of any representation, warranty, covenant or
Agreement made by Seller in this Agreement or in any exhibit, schedule, or
certificate delivered thereunder. The obligations of the Seller and the
Equity Owners under this Section 13.1 shall survive the Closing for one (1)
year following the Closing Date except that the obligation to indemnify
against losses incurred by reason of a misrepresentation of the
representations contained in Sections 5.3 (relating to the Equity Owners'
sole ownership of all equity interests in the Seller), which shall survive
in perpetuity and 5.15 (Tax Matters) shall survive until any action by the
respective taxing authorities is barred by the relevant statute of
limitations.
13.2 Procedures.
----------------
13.2.1 Claims. A party entitled to indemnification hereunder
(together with its affiliates, designees, nominees,
successors and assigns, an "Indemnified Party") shall notify
the indemnifying party ("Indemnitor") and the Escrow Agent
of any claim of such Indemnified Party for indemnification
under this Agreement within thirty (30) days of the date on
which an executive officer of such Indemnified Party first
becomes aware of the existence of such claim. Such notice
shall specify the nature of such claim in reasonable detail
and the Indemnitor shall be given reasonable access to any
documents or properties within the control of the
Indemnified Party as may be useful in the investigation of
the basis for the claim.
35
13.2.2 Third Party Claims.
(a) In the event any Indemnified Party is entitled to
indemnification hereunder based upon a claim asserted by a
third party, the Indemnitor shall be given prompt notice
thereof, in reasonable detail. The Indemnitor shall have the
right (without prejudice to the right of any Indemnified
Party to participate at its expense through counsel of its
own choosing) undertake, conduct, control, at its expense
and through counsel of its own choosing (subject to the
consent of the Indemnified Party, which consent shall not be
unreasonably withheld) the settlement or defense of such
claim by giving written notice of its intention to do so not
later than twenty (20) days following notice of such claim
by the Indemnified Party, or such shorter time period as
required so that the interests of the Indemnified Party
would not be materially prejudiced as a result of its
failure to have received such notice; provided, however,
that if the defendants in any action shall include both an
Indemnitor and an Indemnified Party, the Indemnified Party
shall have the right to select separate counsel to
participate in the defense of such action on its behalf, at
the expense of the Indemnitor.
(b) The Indemnified Party shall be entitled to recover from the
Indemnitor, on a monthly basis, all reasonable attorney's
fees and other costs and expenses incurred in the defense of
such claim and the Indemnified Party shall have the right to
contest, settle or compromise any claims in the exercise of
its sole discretion at the expense of the Indemnitor. The
Indemnified Party shall, however, notify the Indemnitor in
writing of any settlement or compromise of such claim.
(c) If the Indemnitor assumes the defense of any such claim, the
Indemnitor will promptly reimburse the Indemnified Party for
the full amount of any loss resulting from such claim
incurred by the Indemnified Party. So long as the Indemnitor
is reasonably contesting any such claim in good faith, the
Indemnified Party shall not pay or settle any such claim
provided that in the event of any such payment of
settlement, the Indemnified Party shall waive any right to
indemnity by the Indemnitor.
13.3 Cooperation.
-----------------
The Indemnitor and Indemnified Party shall cooperate in furnishing
evidence and testimony and in any other manner which the other may
reasonably request, and shall in all other respects have an obligation of
good faith dealing, one to the other, so as not to unreasonably expose the
other to an undue risk of loss. The Indemnified Party shall be entitled to
reimbursement for out-of-pocket expenses reasonably incurred by it in
connection with such cooperation. Except for fees and expenses for which
indemnification is provided pursuant to Article 13.2.2 hereof, as the case
may be, and as provided in the preceding sentence, each party shall bear
its own fees and expenses incurred pursuant to this Section 13.3.
36
13.4 Limitation on Liability.
-----------------------------
Any provision of this Section 13 to the contrary notwithstanding, in
no event shall the total obligation under this Section 13 of any Equity
Owner exceed such Equity Owner's pro rata share of the Purchaser Price
reduced by the amount of the Excluded Liabilities paid prior to or at
closing.
14. MISCELLANEOUS.
14.1 Expenses.
--------------
Except as otherwise provided hereto, the parties hereto shall each
bear its own expenses in connection with the transactions contemplated by
this Agreement, including the fees of attorneys, accountants, advisors,
brokers, investment bankers and other representatives. The parties agree
that any transfer taxes generated as a result of this transaction are
included in the Purchase Price and are the sole responsibility of the
Seller.
14.2 Notices and Legal Process.
-------------------------------
All notices and other communications and legal process shall be in
writing and shall be personally delivered, transmitted by telecopier, telex
or cable, or transmitted by postage prepaid, registered or certified mail
with return receipt requested or by recognized courier service, as elected
by the party giving such notice, addressed as follows:
(a) If to the Seller:
Silicon Sensors, L.L.C.
000 Xxxxxx Xxxx XX
X.X. Xxx 000
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: President
Fax: (000) 000-0000
E-mail:
With copies to:
Holland & Knight LLC
Xxx Xxxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
E-mail:
(b) If to the Purchaser or API:
Advanced Photonix, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: President
Fax: (000) 000-0000
E-mail:
With copies to:
Xxxxxxx X. Xxxxx
Quantum Compliance Systems
0000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
E-mail:
-and-
Xxxxxxxx Xxxxxx Xxxxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
E-mail:
Notices shall be deemed to have been given, made and received only
when delivered (personally, by facsimile transmission or by courier
services such as FedEx, or by other messenger), addressed as set forth
above. Any party hereto may change its address for purpose hereof by notice
to the other parties hereto.
37
14.3 Disclosure.
----------------
Each party shall provide the other a reasonable opportunity for
consultation with respect to the text of any press release announcing the
execution of this Agreement or the transactions contemplated hereby.
14.4 Counterparts.
------------------
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but such counterparts together shall constitute
one and the same instrument.
14.5 Waiver and Amendment.
--------------------------
The parties may by written instrument extend the time for the
performance of any of the obligations or other acts of the other hereunder
and may waive (i) any inaccuracies of the other in the representations or
warranties contained in this Agreement or in any document delivered
pursuant hereto, (ii) compliance with any of the covenants, undertakings or
agreements of the other, or satisfaction of any of the conditions to its or
their obligations, contained in this Agreement or (iii) the performance
(including performance to the satisfaction of a party or its counsel) by
the other of any of its or their obligations set out herein. Any waiver,
amendment or supplement hereof shall be in writing.
14.6 Entire Agreement.
----------------------
Unless otherwise specifically agreed in writing, this Agreement and
the Schedules and Exhibits hereto and the other agreements anticipated
hereby represent the entire understanding of the parties with reference to
the transactions set forth herein and supersede all prior representations,
warranties, understandings and agreements heretofore made by the parties,
and neither this Agreement nor any provisions hereof may be amended,
waived, modified or discharged except by an Agreement in writing signed by
the party against whom the enforcement of any amendment, waiver, change or
discharge is sought.
38
14.7 Binding Agreement.
-----------------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors and permitted assigns
except that no party may assign or transfer its rights or obligation xxxxxx
this Agreement without the prior written consent of the other parties to
this Agreement.
14.8 Governing Law and Attorneys' Fees.
---------------------------------------
The interpretation and enforceability of this Agreement shall be
governed by and construed in accordance with the internal laws of the State
of Wisconsin without reference to the conflicts of laws provisions thereof.
In the event of any action at law or suit in equity in relation to this
Agreement, the prevailing party in each action or suit shall be entitled to
receive its attorneys' fees and all other costs and expenses of each suit
or action.
14.9 Submission to Jurisdiction and Venue.
------------------------------------------
The parties hereto hereby irrevocably and unconditionally each:
14.9.1 submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition
and enforcement of any judgment in respect thereof, to the
exclusive general jurisdiction of the State of Wisconsin and
its courts and the courts of the United States of America
for the Western District of Wisconsin.
14.9.2 consents that any such action or proceeding shall be brought
in such courts, and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was
brought in an inconvenient court and agrees not to plead or
claim the same; and
14.9.3 agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law.
14.10 Severability; Construction.
---------------------------------
In the event any provision hereof is determined to be invalid or
unenforceable, the remaining provisions hereof shall be deemed severable
therefrom and shall remain in full force and effect. Words and phrases
defined in the plural shall also be used in the singular and vice versa and
be construed in the plural or singular as appropriate and apparent in the
context used. Unless otherwise specifically provided herein, accounting
terms shall be given and assigned their usual meaning and effect as defined
or used in GAAP.
14.11 References to Dollars.
----------------------------
All references to "dollars" and "$" shall mean United States dollars.
39
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written:
SILICON SENSORS, INC.
By: /s/ Xxxxxxx Xxxxx
--------------------------------
Xxxxxxx Xxxxx, Chairman
ADVANCED PHOTONIX, INC.
By: /s/ Xxxxxxx Xxxxx
--------------------------------
Xxxxxxx Xxxxx, Chairman
SILICON SENSORS, L.L.C.
By: /s/ Xxxx X. XxXxxx
--------------------------------
Xxxx X. XxXxxx, Manager
By: /s/ Xxxx X. Xxxxxx
--------------------------------
Xxxx X. Xxxxxx, Manager
The undersigned hereby agrees to serve as Escrow Agent hereunder:
Holland & Knight LLC
By: /s/ Holland & Knight, LLC
--------------------------------------------
EQUITY OWNERS
/s/ Xxxx X. XxXxxx
-------------------------------
Xxxx X. XxXxxx
/s/ Xxxx X. Xxxxxx
-------------------------------
Xxxx X. Xxxxxx
40
1. DEFINITIONS. 1
-----------
1.1 Defined Terms. 1
-------------
1.2 Other Definitional Provisions; Interpretation. 1
---------------------------------------------
2. PURCHASE AND SALE OF THE ACQUIRED ASSETS. 2
-----------------------------------------
2.1 Purchase and Sale. 2
-----------------
2.2 The Stock Consideration. 2
-----------------------
2.3 Adjustment of the Purchase Price. 3
--------------------------------
2.4 Allocation of Purchase Price. 3
----------------------------
2.5 Assumption of Assumed Liabilities. 4
---------------------------------
3. THE ESCROW FUND. 4
---------------
3.1 The Escrow Fund. 4
---------------
3.2 Uses of the Escrow Fund. 4
-----------------------
3.3 Acceptance of the Escrow. 4
------------------------
3.4 The Escrow Agent. 4
----------------
4. CLOSING. 4
-------
4.1 Time and Place. 4
--------------
5. REPRESENTATIONS AND WARRANTIES OF SELLER. 5
----------------------------------------
5.1 Corporate Organization of Seller. 5
--------------------------------
5.2 Subsidiaries. 5
------------
5.3 Capitalization of Seller. 5
------------------------
5.4 Authorization, Etc. 5
-------------------
5.5 No Violation. 6
------------
5.6 Financial Statements. 6
--------------------
5.7 No Undisclosed Liabilities; Etc. 6
--------------------------------
5.8 Absence of Certain Changes. 7
--------------------------
5.9 Assets Necessary to Conduct Business. 9
------------------------------------
5.10 Title to Properties; Encumbrances. 9
---------------------------------
5.11 Leases. 9
------
5.12 Customer and Supplier Relations. 10
-------------------------------
5.13 Patents, Trademarks, Trade Names, Etc.. 11
--------------------------------------
5.14 Business Permits. 11
----------------
5.15 Tax Matters. 11
-----------
5.16 Transactions with Affiliates. 13
----------------------------
5.17 Contracts and Commitments. 13
-------------------------
5.18 Compliance with Contracts. 14
-------------------------
5.19 Insurance. 14
---------
5.20 Labor Relations 15
---------------
5.21 Securities Act Compliance. 15
-------------------------
5.22 Litigation. 16
----------
5.23 No Condemnation or Expropriation. 17
--------------------------------
5.24 Compliance with Law. 17
-------------------
5.25 Environmental Protection. 17
------------------------
5.26 Employee Benefit Plans. 18
----------------------
5.27 Brokers and Finders. 20
-------------------
5.28 Consents. 20
--------
5.29 Books and Records. 21
-----------------
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER. 21
-------------------------------------------
6.1 Corporate Organizations; Etc. 21
-----------------------------
6.2 Authorization, Etc. 21
-------------------
6.3 No Violation. 21
------------
6.4 Approvals of Governmental Authorities. 21
-------------------------------------
6.5 True and Complete. 22
-----------------
6.6 The API Stock. 22
-------------
6.7 Brokers and Finders. 22
-------------------
7. COVENANTS OF SELLER. 22
-------------------
7.1 Conduct of Business - Negative Covenants 22
----------------------------------------
7.2 Conduct of Business - Affirmative Covenants. 24
-------------------------------------------
7.3 Access to Information and Personnel. 25
-----------------------------------
7.4 Estoppel Certificates and Landlord Consents 26
-------------------------------------------
7.5 Confidentiality. 26
---------------
7.6 Statement of Lender. 26
-------------------
7.7 No Solicitation. 26
---------------
7.8 Best Efforts. 26
------------
7.9 Tax Returns. 27
-----------
7.10 Payment of Excluded Liabilities. 27
-------------------------------
8. COVENANTS OF PURCHASER; GUARANTY OF API. 27
---------------------------------------
8.1 Confidentiality. 27
---------------
8.2 Best Efforts. 27
------------
8.3 Employees of Seller. 27
-------------------
8.4 Guaranty of API. 27
---------------
8.5 Accrued Bonuses. 28
---------------
9. CONDITIONS TO CLOSING. 28
---------------------
9.1 Conditions Precedent to the Performance of the Purchaser. 28
--------------------------------------------------------
9.1.1 Compliance with this Agreement. 28
------------------------------
9.1.2 Approvals. 28
---------
9.1.3 No Material Adverse Effect. 28
--------------------------
9.1.4 [Intentionally Omitted]. 29
-----------------------
9.1.5 No Injunction. 29
-------------
9.1.6 Consents and Approvals. 29
----------------------
9.1.7 Employment Agreements. 29
---------------------
9.1.8 Consulting Agreement. 29
--------------------
9.1.9 Non Compete Agreements. 29
----------------------
9.1.10 No Litigation. 30
-------------
9.1.11 Approval of Documentation. 30
-------------------------
9.2 Conditions Precedent to Seller's Performance. 30
--------------------------------------------
9.2.1 Compliance with This Agreement. 30
------------------------------
9.2.2 Approvals. 30
---------
9.2.3 Employment Agreement. 31
--------------------
9.2.4 Consulting Agreement. 31
--------------------
9.2.5 Non-Compete Agreement. 31
---------------------
9.2.6 Stock Option Agreements. 31
-----------------------
9.2.7 [Intentionally Omitted]. 31
-----------------------
9.2.8 Approval of Documentation. 31
-------------------------
9.2.9 Absence of Legal Challenge. 31
--------------------------
10. DELIVERIES AT CLOSING. 31
---------------------
10.1 Seller Obligations. 31
------------------
10.2 Obligations of the Purchaser. 32
----------------------------
11. POST CLOSING OBLIGATIONS. 33
------------------------
11.1 Change of Names. 33
---------------
11.2 Cooperation in Post-Closing Audit. 33
---------------------------------
11.3 Further Cooperation. 33
-------------------
11.4 Notification. 33
------------
12. TERMINATION. 33
-----------
12.1 Termination. 33
-----------
12.2 Effect of Termination. 34
---------------------
12.2.1 Breach By the Seller. 34
---------------------
12.2.2 Breach By the Purchaser. 34
-----------------------
12.2.3 Other Terminations. 34
------------------
12.3 Procedure Upon Termination. 35
--------------------------
13. INDEMNIFICATION. 35
---------------
13.1 Indemnification. 35
---------------
13.2 Procedures. 35
----------
13.2.1 Claims. 35
------
13.2.2 Third Party Claims. 36
------------------
13.3 Cooperation. 36
-----------
13.4 Limitation on Liability. 37
-----------------------
14. MISCELLANEOUS. 37
-------------
14.1 Expenses. 37
--------
14.2 Notices and Legal Process. 37
-------------------------
14.3 Disclosure. 38
----------
14.4 Counterparts. 38
------------
14.5 Waiver and Amendment. 38
--------------------
14.6 Entire Agreement. 38
----------------
14.7 Binding Agreement. 39
-----------------
14.8 Governing Law and Attorneys' Fees. 39
---------------------------------
14.9 Submission to Jurisdiction and Venue. 39
------------------------------------
14.10 Severability; Construction. 39
--------------------------
14.11 References to Dollars. 39
---------------------
EXHIBIT LIST
3.1 Escrow Agreement (omitted)
9.1.7 Form of Employment Agreement (omitted)
9.1.8 Form of Consulting Agreement (omitted)
9.1.9 Form of Non Compete Agreements (omitted)
9.2.6 Form of Stock Option Agreements (omitted)
SCHEDULES
1.1 Definitions
2.1 Assumed Liabilities (omitted)
2.3A Computation of Seller's July 31, 2002 Net Working Capital (omitted)
2.3B Certain Matters Relating to Dispute Resolution of Adjustment Amount
2.4 Allocation of Purchase Price (omitted)
5.1.2 Officers and Directors of Seller (omitted)
5.3 Equity Owners of Seller (omitted)
5.7 Obligations Not Disclosed on Unaudited Balance Sheet (omitted)
5.8 Certain Changes (omitted)
5.11.1 Leases (omitted)
5.11.3 Work on Leased Premises (omitted)
5.12 Customers and Suppliers (omitted)
5.15. Taxes, Assessments and Deficiencies (omitted)
5.16 Transactions with Affiliates (omitted)
5.17. Contracts and Commitments (omitted)
5.19.1 Insurance Policies (omitted)
5.19.2 Group Insurance Policies (omitted)
5.20 Labor Matters (omitted)
5.22 Litigation (omitted)
5.25 Environmental Matters (omitted)
5.26 Employee Benefit Plans (omitted)
5.27 Brokers and Finders (omitted)
6.5 Purchaser's Exchange Act Documents (omitted)
9.1.6 Required Consents (omitted)
SCHEDULE 1.1
DEFINED TERMS
As used in this Agreement, the following terms should have the
following meanings:
"Acquired Assets" means all of the assets of the Seller of any kind,
including, without limitation, the corporate name, all copyrights,
trademarks and other intellectual properties, all contractual rights under
the Leases and the Contracts, all accounts receivable, all Inventory, all
prepaid expenses, all real and personal property and equipment, all
licenses, permits or approvals issued by a Governmental Authority, all
business records relating to product development, marketing and sales, all
rights of action and all other property whether tangible or intangible,
except (i) Seller's interest in this Agreement and in the consideration to
be paid for the Acquired Assets hereunder, and (ii) all cash on hand or in
bank accounts.
"Adjustment Amount" shall have the meaning set forth in Section 3.1
hereof.
"Affiliate" means, as to any Person, a Person controlling, controlled
by or under common control with such Person.
"Agreement" means this Agreement, as amended, supplemented or
otherwise modified from time to time.
"Anniversary" means the first anniversary of the Effective Date as set
forth in Section 2.2.2.
"API" means Advanced Photonix, Inc., a Delaware corporation and the
sole stockholder of Purchaser.
"API Stock" means the Class A Common Stock of API, par value $.001.
"API Stock Price" means the numerical average of the closing prices
for the API Stock on the American Stock Exchange on the ten consecutive
Trading Days ending on the second to last Business Day prior to the Closing
Date.
"Approvals" has the meaning set forth in Section 5.14.
"Assumed Liabilities" means the current liabilities of Seller incurred
in the ordinary course of business and set forth on Schedule 2.1 as such
Exhibit shall be amended and made current as of the Closing Date and the
Seller's obligation under its executory contracts assumed hereunder, but
excluding the Excluded Liabilities.
"Balance Sheet Date" means May 31, 2002.
"Business Day" means a day of the year on which banks are not
permitted or authorized to close in New York City.
"Cash Consideration" means the amount of One Million Four Hundred
Seventy-Five Thousand ($1,475,000.00) Dollars.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Closing" has the meaning set forth in Section 4.1.
"Closing Balance Sheet" shall mean the balance sheet of the assets and
liabilities acquired by Purchaser as anticipated hereby, as of the Closing
Date, audited by Purchaser's Independent Auditor pursuant to Section 3.1
hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and rulings issued thereunder.
"Common Control Entity" has the meaning set forth in Section 5.26.1.
"Consulting Agreement" means the consulting agreement to be entered
into between Purchaser and Xxxx XxXxxx described in Section 9.1.8.
"Contracts" has the meaning set forth in Section 5.17.
"Contractual Obligation" means as to any Person, any provision of any
agreement, instrument or other undertaking to which such Person is a party
or by which it or any of its property is bound.
"Effective Date" means the date upon which the Effective Time occurs.
"Effective Time" means the time at which the Closing is completed.
"Employment Agreement" means the employment agreement between
Purchaser and Xxxx Xxxxxx described in Section 9.1.7.
"Employment Plans" has the meaning set forth in Section 5.26.1.
"Environmental Laws" means any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, judgments, decrees,
orders, consent agreements, (including common laws), licenses, rules or
regulations pertaining to environmental protection, health or safety
matters, including without limitation those arising under the Resource
Conservation and Recovery Act, as amended, CERCLA, the Superfund Amendments
and Reauthorization Act of 1986, as amended, Water Act, as amended, the
Federal Clean Air Act, as amended, the Toxic Substances Control act, those
relating to the disposition of hazardous materials, or any state or local
analogue.
"Equity Owners" are the record and beneficial owners of all equity
interests (as members or otherwise) in Seller.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and rulings issued
thereunder.
"Escrow Agent" means Holland & Knight LLC in its capacity as Escrow
agent.
"Escrow Agreement" means the Escrow Agreement, in substantially the
form annexed as Exhibit 3.1, to be entered into at Closing among Purchaser,
the Seller and the Escrow Agent, pursuant to Section 3.1 hereof.
"Escrow Fund" means the portion of the Purchase Price equal to
$150,000 to be delivered by Purchaser to the Escrow Agent at the Closing
pursuant to Section 2.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Liabilities" means all obligations of Seller (i) to
Associated Bank N.A.; (ii) to Xxxxxx X. Xxxxxxx relating to an original
seller financing note of Seller referred to as Subordinated Debt and as
Deferred Payment on Seller's Unaudited Balance Sheet; (iii) note payable to
Seller's member, Xxxx X. XxXxxx; and (iv) note payable to Alliant
Utilities.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Authority" means any nation, state, county, local or
other governmental authority or any political subdivision thereof and any
federal, state, county, local or foreign entity or body exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Hazardous Materials" means any (i) "hazardous substance," "waste,"
"pollutants," or "contaminant" (as defined in Sections 101(14),(33) of the
CERCLA or the regulations issued pursuant to Section 102 of CERCLA and
found at 40 C.F.R. ss.302), including any element, compound, mixture,
solutions, or substance that is or may be designated pursuant to Section
102 of CERCLA; (ii) substance that is or may be designated pursuant to
Section 311(b)(2)(A) of the Federal Water Pollution Control Act, as amended
(33 U.S.C. ss.ss.1251, 1321(b)(2)(A) ("FWPCA"); (iii) hazardous waste
having the characteristics identified under or listed pursuant to Section
3001 of the Resource Conservation and Recovery Act, as amended (42 U.S.C.
xx.xx. 6901, 6921) ("RCRA"); (iv) substance containing petroleum, as that
term is defined in Section 9001(8) of RCRA; (v) toxic pollutant that is or
may be listed under Section 307(a) of FWPCA; (vi) hazardous air pollutant
that is or may be listed under Section 112 of the Clean Air Act, as amended
(42 U.S.C. xx.xx. 7401, 7412); (vii) asbestos, asbestos-containing
material, or urea formaldehyde or material that contains it; and (viii)
waste oil and other petroleum products.
"IRS" means the Internal Revenue Service.
"Inventory" means all inventory owned by Seller, whether on order from
Seller's suppliers, raw materials, work-in-process, finished products or in
process of being delivered to Seller's customers (Purchaser acknowledges
that Seller has advised it does not have title to inventory being
delivered.)
"Landlords" means the parties signatory as Landlords to the Leases.
"Lender" means Associated Bank, NA in its capacity as lender under the
Seller's Loan Agreement dated April 1, 2002.
"Leases" has the meaning set forth in Section 5.11.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security interest or agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction in respect of any of
the foregoing).
"Material Adverse Effect" means for a specified party, a material
adverse effect on (a) the business, operations, property, condition, or
prospects of the specified party and its Subsidiaries taken as a whole, (b)
the ability of the specified party to perform its material obligations
under this Agreement, or (c) the validity or enforceability against the
specified party of this Agreement or the rights or remedies of any other
party hereunder to such an extent that such other party would be deprived
of the practical realization of the benefits contemplated by this Agreement
to be derived by such other party from this Agreement and the transactions
expressly referenced in this Agreement, including the exhibits to this
Agreement; provided, however, that the existence of a Material Adverse
Effect shall be deemed not to include (x) the adverse impact, if any, of
changes in laws, rules, regulations, interpretations or other promulgations
of any Governmental Authority, or changes in GAAP, regulatory accounting
requirements and market conditions applicable to companies in the same line
of business as the specified party, or (y) the impact of the fees and
expenses of all counsel, accountants and financial advisors, and the other
costs and expenses reasonably incurred by the specified party, this
Agreement and the transactions referenced in this Agreement and the
exhibits to this Agreement.
"Multiemployer Plans" has the meaning set forth in Section 5.26.1.
"Net Working Capital of Seller" means on the Computation Date, the
amount by which consolidated Current Assets of Seller exceeds consolidated
Current Liabilities of Seller as at the date on which such computation is
made. The terms "Current Assets" and "Current Liabilities" shall have the
meanings ascribed to them under GAAP, as applied to the financial
statements consistent with past practices reflected in the historical
financial statements of Seller, and all computations to be made hereunder
shall be made in accordance with GAAP, and shall include a reasonable
allowance for normal year-end adjustments, if any, on a basis consistent
with the historical practices of Seller, provided, however, that "Cash"
(including cash on hand and cash in bank accounts) shall be excluded from
"Current Assets," and any current portion of any Excluded Liabilities shall
be deducted from the computation of "Current Liabilities."
"NLRB" means the U.S. National Labor Relations Board.
"Non Compete Agreement" means the non compete agreement to be entered
into between API and Xxxx X. XxXxxx described in Section 9.1.9.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" has the meaning set forth in Section 5.27.1.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or other
entity of whatever nature.
"Plans" has the meaning set forth in Section 5.27.1.
"Purchase Price" means the total price of One Million Seven Hundred
Thousand ($1,700,000.00) Dollars, plus or minus the Adjustment Amount.
"Purchaser's Counsel" means Xxxxxxxx Xxxxxx Xxxxxxxxxx & Xxxxxxxxx,
LLP, New York, New York.
"Purchaser's Independent Auditors" shall mean Xxxxxx & Xxxx, LLP,
certified public accountants or such other firm of certified public
accountants as the Purchaser may designate.
"Requirement of Law" means as to any Person, any law, treaty, rule or
regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its
property is subject.
"Rule 144" means Rule 144, promulgated under the Securities Act, as in
effect at the date hereof.
"Seller Financial Statements" has the meaning set forth in Section
5.6.
"Seller Unaudited Financial Statements" has the meaning set forth in
Section 5.6.
"Seller's Counsel" shall mean Holland & Knight LLC, Oakbrook Terrace,
Illinois.
"Seller's Independent Auditor" means Virchow, Xxxxxx & Company, LLP.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Shares" means the shares of API Stock, if any, delivered as the Stock
Consideration.
"Stock Consideration" shall have the meaning set forth in Section 2.2
hereof.
"Subsidiary" means any Person of which shares of stock or other
ownership interests having ordinary voting power (other than stock having
such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such Person are at
the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries.
"Tangible Property" means as to any Person, the plant, machinery,
equipment, leasehold improvements, vehicles, and structures of such Person
and related capitalized items and other tangible property material to the
business of such Person.
"Taxes" shall mean all foreign, federal, state, county, local and
other taxes, levies, impositions, deductions, charges and withholdings,
including, without limitation, income or franchise taxes or other taxes
imposed on or with respect to net income or capital gain, gross receipts,
profits, sales, use, occupation, value added, ad valorem, transfer,
withholding, payroll, employment, excise or property taxes, and shall
include any interest, penalties or additions thereto.
"Tax Returns and Statements" has the meaning set forth in Section
5.15.1.
"Trading Day" means a day on which the API Stock is actually traded on
the American Stock Exchange.
"Unaudited Balance Sheet" means the unaudited balance sheets of the
Seller as at May 31, 2002 previously delivered to Purchaser pursuant to
Section 5.7.
"Unit" means a Unit of the equity capital of Seller.
"Welfare Plan" has the meaning set forth in Section 5.26.1.
"Wisconsin Law" means the Wisconsin Corporation and Limited Liability
Company Law.
SCHEDULE 2.3B
CERTAIN MATTERS RELATING TO
DISPUTE RESOLUTION OF ADJUSTMENT AMOUNT
Section 2.3 of the Agreement provides that the "Adjustment Amount" be
computed from the audited financial statements at the Closing Date, which are to
be prepared by Purchaser's Independent Auditor within sixty (60) days after the
Closing, and that any payments required by said Section 2.3, either from the
Purchaser to the Seller or from the Seller to the Purchaser, be made within five
(5) days after such computation is completed.
The foregoing, notwithstanding, the Seller shall have the right, to be
exercised by written notice to the Purchaser prior to the expiration of such
five (5) day period, to extend such period for payment for an additional fifteen
(15) days to permit Seller's Independent Auditor to review such computation
(including the components of such audited balance sheet) to determine whether it
concurs or disagrees with the amount of the Adjustment Amount so computed.
In the event the Seller and its Independent Auditor disagree with the
computation of the Adjustment Amount, it shall so notify the Purchaser, in
writing, within such fifteen (15) day period. In such case, the Seller and the
Purchaser, and their respective Independent Auditors, shall endeavor in good
faith to reconcile or compromise their differences and agree to an Adjustment
Amount.
In the event the Purchaser and the Seller, and their respective Independent
Auditors, fail to reach agreement on the Adjustment Amount within such second
fifteen (15) day period, a third firm of independent certified public
accountants shall be selected by agreement between Seller's Independent Auditor
and Purchaser's Independent Auditor to act as arbitrator of the dispute. The
parties agree that such arbitration shall be in the form of "baseball"
arbitration - that is, that the arbitrator's authority shall be limited to
selecting from between the last, best offer from the Seller and the last, best
offer from the Purchaser, and shall have no authority to compromise or otherwise
determine any other amount as the Adjustment Amount. Such arbitrator shall be
instructed to deliver its decision within thirty (30) days of the time the
matter has been presented to it.
Each party shall bear its own costs in the foregoing procedure, including
the fees of its respective Independent Auditor; provided, however, that in the
event the arbitration provisions of the preceding paragraph are invoked, the
party losing such arbitration will be responsible for all costs of the
arbitrator, including all fees of the arbitrator and all fees and expenses of
the other party's Independent Auditor in conducting such arbitration proceeding.
