EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 9th day of November, 2001, by and between RESEARCH, INCORPORATED,
a Minnesota corporation ("Seller"), and CVD EQUIPMENT CORPORATION, a New York
corporation ("Buyer").
RECITALS:
A. Seller is in the business of designing, manufacturing and selling
reflow ovens, drying systems and heating devices primarily for use in the
graphics arts, plastics extrusion and electronics industries.
B. Seller desires to sell and Buyer desires to purchase all of the
assets of Seller which are used in or associated with Seller's reflow oven
business (the "SMT Business") and which are not in any manner used in or
associated with Seller's drying systems and heating devices businesses (the
"Retained Businesses") and, in connection therewith, Buyer is willing to assume
certain designated liabilities of the SMT Business, all on the terms and subject
to the conditions set forth in this Agreement. For purposes of this Agreement,
the SMT Business excludes the Retained Businesses and the assets used in or
associated with the Retained Businesses.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises herein contained, Buyer and Seller each hereby agree as follows:
ARTICLE I. ASSETS TO BE PURCHASED
Section 1.1. Description of Assets. Upon the terms and subject to the
conditions set forth in this Agreement, at the Time of Closing (as defined in
Section 6.1), Seller shall convey, sell, transfer, assign and deliver to Buyer,
free and clear of all liens, pledges, charges, claims, security interests,
encumbrances and restrictions (individually, a "Lien" and collectively, the
"Liens"), and Buyer shall purchase from Seller, all right, title and interest of
Seller at the Time of Closing in and to the following assets, properties and
rights (contractual and otherwise) of Seller that are used in connection with
the SMT Business to the extent that the following do not constitute Excluded
Property, as defined and set forth in Section 1.2 (the following, subject to the
terms and conditions of subsection (j) below, collectively being the "Purchased
Assets"):
(a) All machinery, equipment, computer hardware, tooling,
repair and replacement parts, furniture, fixtures, supplies, and other
tangible personal property listed on Schedule 1.1(a) (the "Personal
Property");
(b) All raw materials, supplies, component parts,
work-in-process, finished goods inventory, packaging and other
inventory which are used in the conduct of the SMT Business and listed
on Schedule 1.1(b) (the "Inventory");
(c) All patents, inventions, trade secrets, processes,
proprietary rights, proprietary knowledge, know-how, computer software
(including, but not limited to, software to operate
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products sold by the SMT Business), manufacturing and engineering
drawings, trademarks, names, service marks, trade names, copyrights,
marks, symbols, logos, franchises and permits and all applications
therefor and registrations thereof which Seller owns and all filings,
registrations or issuances of any of the foregoing with or by any
federal, state, local or foreign regulatory, administrative or
governmental office or offices, all to the extent used in the conduct
of the SMT Business and not used in the conduct of the Retained
Businesses, in each case which are listed on Schedule 1.1(c)
(collectively, the "Proprietary Rights");
(d) All claims and rights under the purchase and sales orders
to which Seller is a party and which are listed on Schedule 1.1(d) (the
"Contracts");
(e) Seller's rights to use five (5) of the "Pro E" seats for
which Seller has a user's license under the "Pro E" software license
between Seller and Parametric Technology Corp.;
(f) Copies of (to the extent relating to both the SMT Business
and the Retained Businesses or to the extent residing on Seller's
computer system) or originals of (to the extent relating exclusively to
the SMT Business and in printed form) the following: books of account,
customer lists, supplier lists, files, manuals, quotations, job files,
sales orders, advertising and marketing materials, papers and records,
in each case used in the conduct of the SMT Business;
(g) Any contractual rights that Seller may have which prohibit
the ability of the officers of Seller listed on Schedule 1.1(g) to
compete with the SMT Business;
(h) Any contractual rights (and claims to enforce such
contractual rights) that Seller may have which prohibit the ability of
current or former employees of Seller to use or otherwise disclose
proprietary information with respect to the Proprietary Rights;
(i) All goodwill of the SMT Business; and
(j) All right, title and interest of Seller at the Time of
Closing in and to the trade names, "Research International," "Chipflo,"
"Deltaflo," "Microflo" and "Thermaflo" and the Internet domain name,
"xxx.xxxxxxxx-xxxx.xxx"; provided, however, that the trade names,
"Research International," "Chipflo," "Deltaflo," "Microflo" and
"Thermaflo" and the Internet domain name, "xxx.xxxxxxxx-xxxx.xxx" will
not be included in the definition of "Purchased Assets" for purposes of
Article IV of this Agreement, meaning that Seller is in no manner by
this Agreement making any representations or warranties with respect to
the trade names, "Research International," "Chipflo," "Deltaflo,"
"Microflo" or "Thermaflo" or the Internet domain name,
"xxx.xxxxxxxx-xxxx.xxx," except as expressly set forth in Section
4.2(n).
Section 1.2. Excluded Property. There shall be excluded from the
assets, properties and rights (contractual and otherwise) of Seller to be
conveyed, sold, transferred, assigned, and delivered to Buyer under this
Agreement, the following assets (the "Excluded Property"):
(a) all cash and cash equivalents;
(b) all amounts due on account of sales of inventory of the
SMT Business on or prior to Closing;
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(c) the "Research, Incorporated" name and all derivatives
thereof (except for the trade name, "Research International"), all
corporate minute books, stock records, corporate seals and treasury
shares of Seller;
(d) any claims (including benefits arising therefrom) which
are related solely to liabilities of Seller which are Retained
Liabilities, or which are related solely to Excluded Property;
(e) Seller's rights under this Agreement and any agreements or
instruments executed in connection herewith;
(f) all insurance policies (including the proceeds thereof)
owned by Seller;
(g) all assets held in trust by or for the benefit of any
current or former employees of the SMT Business under any "employee
pension benefit plan" (as such term is defined in Section 3 of the
Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations promulgated thereunder) maintained or contributed
to by Seller;
(h) the income tax returns and other original income tax
records of Seller and all claims for a refund or deficiency;
(i) prepaid expenses related to auto insurance, worker's
compensation insurance and product liability insurance or deficiencies;
(j) all proprietary rights used in the conduct of the Retained
Businesses, including, but not limited to, Seller's rights to use all
of the "Pro E" seats (other than Seller's rights to use the five (5)
"Pro E" seats which are part of the Purchased Assets) for which Seller
has a user's license under the "Pro E" software license between Seller
and Parametric Technology Corp.;
(k) any real property, buildings, fixtures or improvements,
and any rights and claims under leases of real property;
(l) any automobiles and other vehicles;
(m) any telephone numbers, facsimile numbers and Internet
domain addresses (other than the Internet domain name,
"xxx.xxxxxxxx-xxxx.xxx");
(n) any assets arising under or used in connection with the
Retained Businesses (other than the assets specifically set forth on
Schedule 1.1(a), 1.1(b), 1.1(c) or 1.1(d) or copies of the assets
listed in Section 1.1(f) to the extent such assets relate to both the
SMT Business and the Retained Businesses);
(o) Seller's rights under any contracts with sales
representatives or distributors of the SMT Business;
(p) any contractual rights that Seller may have which prohibit
the ability of the officers of Seller to compete with the Retained
Businesses;
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(q) any contractual rights (and claims to enforce such
contractual rights) that Seller may have which prohibit the ability of
current or former employees of Seller to use or otherwise disclose
proprietary information with respect to proprietary rights other than
the Proprietary Rights; and
(r) any assets not specifically set forth in Section 1.1,
including, but not limited to, the assets listed on Schedule 1.2(r).
Section 1.3. Non-Assignment of Certain Property. Seller represents and
warrants to Buyer that there are no Contracts which are non-assignable or the
assignment of which pursuant hereto requires the consent of any other party.
Notwithstanding anything to the contrary in this Agreement, to the extent that
the assignment hereunder of any of the Contracts shall require the consent of
any other party (or in the event that any of the same shall be non-assignable),
neither this Agreement, any other agreement or instrument delivered at the
Closing nor any action taken pursuant to their provisions shall constitute an
assignment or an agreement to assign if such assignment or attempted assignment
would constitute a breach thereof or result in the loss or diminution thereof;
provided, however, that in each such case, Seller shall use its best efforts to
obtain the consent of such other party to an assignment to Buyer. If such
consent is not obtained, Seller shall provide for Buyer the benefits of such
Contracts, including, without limitation, enforcement, for the account and
benefit of Buyer, of any and all rights of Seller against any other person with
respect to such Contracts.
ARTICLE II. ASSUMPTION OF OBLIGATIONS
Section 2.1. Assumption of Certain Obligations. Subject to the
provisions of this Agreement, from and after the Time of Closing, Buyer shall,
by an Assignment and Assumption Agreement and Xxxx of Sale substantially in the
form attached hereto as Exhibit A (the "Assignment and Assumption Agreement"),
assume: (i) the liabilities and obligations of Seller arising under the
Contracts set forth on Schedule 1.1(d) to the extent Buyer receives the benefit
of such items as contemplated hereby and such liabilities and obligations arise
and are first required to be performed after the Time of Closing; provided,
however, that Buyer shall not assume any obligations or liabilities for any
breach, violation or noncompliance thereunder existing on or relating to the
period on or prior to the Time of Closing; (ii) all liabilities and obligations
for the payment of commissions due to sales representatives and distributors of
Seller for equipment, parts and services sold by Seller prior to the Time of
Closing, where the sales orders underlying such sales of equipment, parts or
services are included in the Contracts set forth on Schedule 1.1(d) and such
equipment or parts have not been shipped or such services have not been
performed prior to the Time of Closing; and (iii) all liabilities and
obligations in respect of customer warranty claims, including, but not limited
to, costs of repair and/or replacement, for products sold or shipped after the
Time of Closing (individually, an "Assumed Liability" and collectively, the
"Assumed Liabilities").
Section 2.2. Retained Liabilities. With the exception of the Assumed
Liabilities, Buyer shall not, by the execution and performance of this
Agreement, or otherwise, assume or otherwise be responsible for any liability or
obligation of any nature of Seller, whether matured or unmatured, liquidated or
unliquidated, fixed or contingent, or known or unknown, whether arising out of
occurrences prior to, at or after the date hereof (individually, a "Retained
Liability" and collectively, the "Retained Liabilities"), including, without
limitation, those arising from: (a) any liability or obligation under or in
connection with the Excluded Property; (b) any federal, state, local, provincial
or other foreign income, capital gain or other tax payable with respect to
Seller, the SMT Business, the Purchased Assets or the Assumed Liabilities for
any period prior to the Closing Date; (c) any indebtedness of Seller for
borrowed money; (d) any fees and expenses incurred by Seller in connection with
negotiating, preparing, closing
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and carrying out this Agreement and the transactions contemplated by this
Agreement, including, without limitation, the fees, disbursements and expenses
for Seller's investment bankers, attorneys, accountants and consultants; (e) any
occurrence or circumstance (whether known or unknown) which occurs prior to the
Time of Closing and which constitutes, or which by the lapse of time or delivery
of notice (or both) would constitute, a breach or default under any lease,
contract, instrument or agreement of Seller (whether written or oral); (f) any
injury to or death of any person or damage to or destruction of any property
resulting from or arising out of any occurrence or circumstance which occurs or
exists at or prior to the Time of Closing, regardless of whether such injury,
death, damage or destruction occurs prior to, at or after the Time of Closing
and whether based on negligence, breach of warranty, breach of contract,
products liability, strict liability or any other theory; (g) any violation of
the requirements of any governmental authority; or (h) any employee benefit plan
or any other fringe benefit program maintained by Seller or to which Seller
contributes or any contributions, benefits or liabilities therefor or any
liability for Seller's withdrawal or partial withdrawal from, or termination of,
any such plan or program; or (i) any lease of real property.
ARTICLE III. PURCHASE PRICE
Section 3.1. Consideration.
(a) Closing Payment. Upon the terms and subject to the
conditions contained in this Agreement, in consideration for the
Purchased Assets, at the Time of Closing, Buyer shall: (i) assume the
Assumed Liabilities as provided in Section 2.1 of this Agreement; and
(ii) pay to Seller the sum of Seven Hundred Fifty Thousand Dollars
($750,000) (together with the royalty payments called for by Section
3.1(b), the "Purchase Price"), less Three Hundred Fifty Thousand
Dollars ($350,000) (the "Holdback Amount"), which Holdback Amount shall
be secured by an irrevocable stand-by letter of credit substantially in
the form attached hereto as Exhibit B (the "Letter of Credit"), issued
by North Fork Bank and dated on or prior to the Closing Date, less the
Inventory Adjustment Amount (as hereinafter defined), if any. For
purposes of this Section 3.1(a), "Inventory Adjustment Amount" shall
mean the product obtained by multiplying (x) the remainder of Two
Million Four Hundred Thousand Dollars ($2,400,000) minus the
fully-burdened cost of all Inventory set forth on Schedule 1.1(b),
times (y) a factor of 0.25; provided, however, that in the event that
the fully-burdened cost of all Inventory set forth on Schedule 1.1(b)
is greater than $2,400,000, the Inventory Adjustment Amount shall be
deemed to be zero. In addition, following the Closing Date, Buyer shall
pay to Seller the royalty payments called for by Section 3.1(b).
(b) Post-Closing Royalty Payments.
(i) Delivery of Royalty Statements. Buyer shall prepare and
complete unaudited statements (the "Royalty Statements") reflecting the
gross sales (less any uncollectible receivables actually written off by
Buyer and any returns) attributable to all sales and leases of
equipment, parts and services ("Gross Sales") of the SMT Business
during each consecutive three-month period during the twenty-four month
period commencing on the first day of the month immediately following
the Closing Date (the twenty-four month period commencing on the first
day of the month immediately following the Closing Date being the
"Royalty Period" and each consecutive three-month period commencing on
the first day of the Royalty Period being a "Quarterly Period"), which
Royalty Statements shall be completed and prepared no later than thirty
(30) days following the expiration of each Quarterly Period; provided,
however, that the Royalty Statements for the Quarterly Period
commencing on the first day of the Royalty
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Period shall also include and reflect the Gross Sales of the SMT
Business for the period commencing on the Closing Date and ending on
the day immediately preceding the Royalty Period (the "Stub Period").
For purposes of this Section 3.1(b), in preparing the Royalty
Statements, Buyer's Gross Sales will be determined in accordance with
U.S. generally accepted accounting principles at the time in effect
("GAAP") applied consistently with the practices employed in preparing
the Financial Statements (as defined in Section 4.2(c)). Promptly after
preparing and completing Royalty Statements for the Quarterly Period
then ended, Buyer shall deliver to Seller such Royalty Statements,
accompanied by a certificate of Buyer's Chief Financial Officer in the
form set forth on Schedule 3.1(b). Seller shall have ten (10) days from
the date of delivery of such Royalty Statements to review them and
raise any disputes with respect thereto, which disputes shall be set
forth in reasonable detail in a written notice delivered to Buyer (a
"Notice of Dispute") by no later than the expiration of such ten-day
period. In the event that Seller delivers to Buyer a Notice of Dispute
with respect to such Royalty Statements, Buyer and Seller shall work
diligently and in good-faith with one another to resolve such disputes
with respect to such Royalty Statements, but in the event that Buyer
and Seller are unable to resolve all of such disputes within thirty
(30) days following the date on which Buyer initially delivers to
Seller such Royalty Statements, such Royalty Statements, as initially
delivered to Seller and modified by any agreements between Buyer and
Seller on disputed items set forth in the related Notice of Dispute,
shall be deemed to be final and agreed upon for purposes of subsections
(ii) and (iii) below (but not for purposes of subsection (iv) below).
(ii) Year One Computation of Royalties; Payment of Holdback
Amount. For each Quarterly Period during the twelve-month period
commencing on the first day of the Royalty Period (the twelve-month
period commencing on the first day of the Royalty Period being the
"Year One Royalty Period"), after delivery to Seller of the Royalty
Statements for the Quarterly Period then ended, if Seller does not
deliver a Notice of Dispute to Buyer by the tenth (10th) day following
delivery of such Royalty Statements, or promptly after finalization of
and agreement upon such Royalty Statements, if Seller does deliver a
Notice of Dispute to Buyer by the tenth (10th) day following delivery
of such Royalty Statements, Buyer shall pay to Seller an amount equal
to ten percent (10.0%) of the Gross Sales of the SMT Business (the
"Accrued Royalty") for the Quarterly Period then ended, less the sum of
(x) the amounts that Buyer Indemnified Parties were entitled to recover
for indemnification claims under Article VII hereof during the
Quarterly Period then ended (subject to the terms and conditions of
Article VII hereof) and (y) the amounts of costs incurred in servicing
warranty claims on behalf of Seller pursuant to Section 5.12 hereof
during the Quarterly Period then ended (subject to the terms and
conditions of Section 5.12 hereof) (the sum of clauses (x) and (y) for
each Quarterly Period being the "Offset Amount" for each such Quarterly
Period). In the event that the Offset Amount for the Quarterly Period
then ended exceeds the Accrued Royalty for the Quarterly Period then
ended, then Buyer may offset against the Accrued Royalty otherwise
payable for the following Quarterly Period or Quarterly Periods during
the Year One Royalty Period, in order beginning with the then
immediately following Quarterly Period, the amount by which the Offset
Amount for the Quarterly Period then ended exceeds the Accrued Royalty
for the Quarterly Period then ended until such amount is satisfied by
offset. In addition, on the date of payment to Seller of the Accrued
Royalty for the last Quarterly Period during the Year One Royalty
Period (or the date that the Accrued Royalty for such Quarterly Period
would have been paid to Seller but for offset against the entire
Accrued Royalty for such Quarterly Period in accordance with the terms
and conditions of this Section 3.1(b)) (the "Holdback Distribution
Date"), Buyer shall pay to Seller an amount equal to the Holdback
Amount, less the amount, if any, by which the aggregate Offset Amount
for the Year
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One Royalty Period exceeds the aggregate Accrued Royalty for the Year
One Royalty Period, as reflected in the Royalty Statements for each
Quarterly Period during the Year One Royalty Period, plus interest on
the Holdback Amount, if any, paid to Seller, calculated at a rate five
and one-half percent (5.5%) per annum, accruing from the Closing Date
through the Holdback Distribution Date; provided, however, that in the
event that the aggregate Offset Amount for the Year One Royalty Period
cannot be satisfied by offset against the aggregate Accrued Royalty for
the Year One Royalty Period, as reflected in the Royalty Statements for
each Quarterly Period during the Year One Royalty Period, and the
Holdback Amount pursuant to the terms and conditions of this subsection
(ii), Buyer may satisfy such unsatisfied Offset Amounts pursuant to the
terms of subsection (iii) below. Buyer and Seller hereby agree that the
Gross Sales of the SMT Business during the Stub Period shall be added
to the Gross Sales of the SMT Business during the Quarterly Period
commencing on the first day of the Royalty Period for purposes of
computing the Accrued Royalty for such Quarterly Period commencing on
the first day of the Royalty Period. Buyer shall reimburse Seller for
all reasonable costs of collection and enforcing Seller's right to
collect any undisputed portion of the Holdback Amount in the event that
Buyer fails to timely pay to Seller such undisputed portion of the
Holdback Amount when payment thereof is due.
(iii) Year Two Computation of Royalties. For each Quarterly
Period during the twelve-month period commencing on the first
anniversary of the first day of the Royalty Period (the twelve-month
period commencing on the first anniversary of the first day of the
Royalty Period being the "Year Two Royalty Period"), after delivery to
Seller of the Royalty Statements for the Quarterly Period then ended,
if Seller does not deliver a Notice of Dispute to Buyer by the tenth
(10th) day following delivery of such Royalty Statements, or promptly
after finalization of and agreement upon such Royalty Statements, if
Seller does deliver a Notice of Dispute to Buyer by the tenth (10th)
day following delivery of such Royalty Statements, Buyer shall pay to
Seller an amount equal to the Accrued Royalty for the Quarterly Period
then ended, less the amount of Offset Amounts during the Year One
Royalty Period which could not be satisfied by offset against the
aggregate Accrued Royalty for the Year One Royalty Period, as reflected
in the Royalty Statements for each Quarterly Period during the Year One
Royalty Period, and the Holdback Amount pursuant to the terms and
conditions of this subsection (ii) above or by offset against the
Accrued Royalty otherwise payable for all then-preceding Quarterly
Periods during the Year Two Royalty Period, less the amounts of costs
incurred in servicing warranty claims on behalf of Seller pursuant to
Section 5.12 hereof during the Quarterly Period then ended (subject to
the terms and conditions of Section 5.12 hereof).
(iv) Royalty Audit. Within ninety (90) days of each fiscal
year end of Buyer during the Royalty Period, Buyer shall cause Buyer's
independent accountants to deliver to Seller a letter stating that, in
the opinion of such independent accountants, the Royalty Statements
delivered to Seller through the end of Buyer's fiscal year then-ended
fairly and accurately reflect the amount of Gross Sales of the SMT
Business since the commencement of the Royalty Period. In the event
that Buyer's accountants are unwilling or are unable to deliver to
Seller such a letter, Buyer shall allow Seller's independent
accountants to review, at Buyer's expense, Buyer's books and records to
determine whether the amount of Gross Sales as reflected in the Royalty
Statements delivered to Seller through the end of Buyer's fiscal year
then-ended fairly and accurately reflect the amount of Gross Sales of
the SMT Business since the commencement of the Royalty Period. In the
event that, based on Seller's independent accountants' review of
Buyer's books and records, Seller believes, in its sole discretion,
that the Royalty Statements delivered to Seller through the end of
Buyer's fiscal year then-ended reflect an underreporting of Gross Sales
of the SMT Business since the commencement of the Royalty Period, Buyer
and Seller shall submit the matter to an independent accounting firm
reasonably acceptable to Buyer and Seller (the "Independent
Accountants") for resolution by the Independent Accountants within
thirty (30) days of so being submitted. Buyer and Seller shall share
equally in the costs of retaining the Independent Accountants. In the
event that the Independent Accountants determine that the Royalty
Statements delivered to Seller through the
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end of Buyer's fiscal year then-ended reflect an underreporting of
Gross Sales of the SMT Business since the commencement of the Royalty
Period, within ten (10) days of such determination, Buyer shall pay to
Seller, by wire transfer of immediately available funds to a bank
account designated in writing by Seller, an amount equal to ten percent
(10.0%) of the Gross Sales that were so underreported.
Section 3.2. Payment. The Purchase Price and any other payment by Buyer
to Seller hereunder shall be payable by a check issued by a bank, with such bank
as payor and Seller as payee, or by wire transfer of immediately available funds
to a bank account designated in writing by Seller.
Section 3.3. Purchase Price Allocation. Seller and Buyer hereby agree
that the Purchase Price shall be allocated for purposes of this Agreement and
for federal, state and local tax purposes as set forth on Schedule 3.3. Buyer
and Seller shall file all federal, state, local and foreign tax returns,
including Internal Revenue Form 8594, in accordance with the allocation set
forth on Schedule 3.3 and shall not take a position for tax purposes
inconsistent therewith.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
Section 4.1. Buyer's Representations and Warranties. Buyer hereby
represents and warrants to Seller that:
(a) Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
New York and has the corporate power and authority to perform its
obligations under this Agreement and its Related Agreements.
(b) Authorization; No Conflicts. Buyer has all requisite
corporate power and authority to enter into this Agreement and any
other agreements delivered by Buyer at the Closing (the "Buyer's
Related Agreements"), perform its obligations hereunder and thereunder
and consummate the transactions contemplated hereby and thereby. All
necessary and appropriate corporate action has been taken by Buyer with
respect to the execution, delivery and performance of this Agreement,
Buyer's Related Agreements and all other documents and instruments to
be executed and delivered by Buyer in accordance with Section 6.3 (the
"Buyer's Closing Documents") and no other actions or proceedings on the
part of Buyer are necessary to authorize Buyer's Closing Documents, the
consummation of the transactions contemplated hereby and thereby and
the performance of the agreements contained herein and therein. Buyer
has duly and validly executed and delivered Buyer's Closing Documents
and Buyer's Closing Documents constitute legal, valid and binding
obligations of Buyer enforceable against Buyer in accordance with their
respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws in effect which affect the enforcement of creditors'
rights generally and by equitable limitations on the availability of
specific remedies.
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(c) Consents; No Violation. Except as set forth on Schedule
4.1(c), the execution, delivery and performance by Buyer of this
Agreement and Buyer's Related Agreements will not (a) require any
filing or registration by Buyer with, or consent or approval with
respect to Buyer of, any governmental authority or third party, (b)
violate or conflict with the certificate of incorporation, by-laws or
other organizational documents of Buyer or to Buyer's knowledge,
violate any law, regulation or order of any governmental authority
applicable to Buyer.
(d) Litigation. There is no claim, litigation, action, suit,
proceeding, investigation or inquiry, administrative or judicial,
pending or, to the knowledge of Buyer, threatened against Buyer, at law
or in equity, before any federal, state or local court or regulatory
agency, or other governmental authority, which might have an adverse
effect on its ability to perform any of its obligations under this
Agreement or Buyer's Related Agreements or upon the consummation of the
transactions contemplated hereby or thereby.
(e) Brokers and Finders. Neither Buyer nor any of its
officers, directors or employees, has engaged any broker or finder or
incurred any liability for any brokerage fees, commissions, finders'
fees or similar fees or expenses and no broker or finder has acted
directly or indirectly for Buyer in connection with this Agreement or
the transactions contemplated hereby. No investment banking, financial
advisory or similar fees have been incurred or are or will be payable
by Buyer in connection with this Agreement or the transactions
contemplated hereby.
Section 4.2. Seller's Representations and Warranties. Seller hereby
represents and warrants to Buyer that:
(a) Corporate Organization. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Minnesota, and has all requisite corporate power and authority
to own, lease and operate its properties and conduct its business as
now being conducted.
(b) Authorization; Validity. Seller has full corporate power
and authority to enter into this Agreement and Agreement and any other
agreements delivered by Buyer at the Closing (the "Seller's Related
Agreements"), perform its obligations hereunder and thereunder and
consummate the transactions contemplated hereby and thereby. All
necessary and appropriate corporate action has been taken by Seller
with respect to the execution, delivery and performance of this
Agreement, Seller's Related Agreements and all other documents and
instruments to be executed and delivered by Seller in accordance with
Section 6.2 (collectively, the "Seller's Closing Documents") and no
other actions or proceedings on the part of Buyer are necessary to
authorize Seller's Closing Documents, the consummation of the
transactions contemplated hereby and thereby and the performance of the
agreements contained herein and therein. Seller has duly and validly
executed and delivered Seller's Closing Documents and Seller's Closing
Documents constitute legal, valid and binding obligations of Seller
enforceable against Seller in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies.
(c) Financial Statements; SEC Reports. The following financial
statements of Seller, which have been previously furnished to Buyer or
its authorized representatives by Seller, have
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been prepared from and are in accordance with the books and records of
Seller and, except as set forth on Schedule 4.2(c), have been prepared
in conformity with GAAP applied on a consistent basis for such periods
using an accrual basis method, and fairly present, in all material
respects, the financial condition of Seller as of the dates stated and
the results of operations of Seller for the periods then ended in
accordance with such practices: the consolidated balance sheet of
Seller as at September 30, 2000, and the related consolidated statement
of operations and consolidated statement of cash flows for the year
then ended, which have been examined by and accompanied by the reports
of Xxxxxx Xxxxxxxx (collectively, the "Audited Financial Statements"),
and the consolidated balance sheet of Seller as at and for the
nine-month period ended June 30, 2001, and the related consolidated
statement of operations and consolidated statement of cash flows for
the nine-month period then ended (the "2001 Financial Statements") (the
Audited Financial Statements and 2001 Financial Statements are
hereinafter sometimes collectively referred to as the "Financial
Statements"). Seller has filed all required forms, reports and
documents with the Securities and Exchange Commission required to be
filed by it during the past two (2) years pursuant to the Securities
Act of 1933, as amended (the "Securities Act"), and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder, all of which have complied in
all material respects with the applicable requirements of the
Securities Act and the Exchange Act, respectively, and the such rules
and regulations.
(d) Undisclosed Liabilities. Except as disclosed on Schedule
4.2(d), Seller has no liability or obligation of any nature with
respect to the SMT Business (whether liquidated, unliquidated, accrued,
absolute, contingent or otherwise and whether due or to become due)
except: (i) those set forth or reflected in the 2001 Financial
Statements which have not been paid or discharged since the date
thereof; (ii) liabilities incurred in the ordinary course of business
since June 30, 2001; (iii) those arising under any contracts of Seller
related to the SMT Business; and (iv) those described in any schedule
to this Agreement.
(e) Taxes. Seller has duly filed all federal, state, local and
foreign tax returns and tax reports required to be filed by it, all
such returns and reports are true and correct in all material respects,
none of such returns and reports has been amended, and all taxes,
assessments, fees and other governmental charges arising under such
returns and reports have been fully paid or will be timely paid. No
waivers of any applicable statutes of limitations are outstanding.
There is no pending or, to Seller's Knowledge, threatened federal,
state, local or foreign tax audit of Seller and no agreement with any
federal, state, local or foreign tax authority that may affect the
subsequent tax liabilities of Seller. At the Closing, Seller is not and
will not be obligated to pay taxes, assessments, fees or governmental
charges for which Seller has not made adequate provision on its books
and records, except that, after the Closing, Seller will continue to be
obligated for the foregoing which accrue with respect to its business,
including those applicable to the SMT Business through the Closing
Date.
(f) Compliance With Law. Seller is in compliance with all
applicable laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered, by
any federal, state, local or foreign court or governmental authority or
instrumentality relating to Seller or the SMT Business (collectively,
the "Applicable Laws"), except to the extent that any failure to so be
in compliance would not have a material adverse effect on Seller or the
SMT Business. Except as set forth in Schedule 4.2(f), Seller is not, to
Seller's Knowledge, under investigation with respect to, and has not
been charged with or given notice of any material
13
violation of, any Applicable Laws with respect to the SMT Business,
which violation is still outstanding.
(g) Proprietary Rights. Except for the trade names "Research
International," "Chipflo," "Deltaflo," "Microflo" and "Thermaflo" and
the Internet domain name "xxx.xxxxxxxx-xxxx.xxx," Schedule 1.1(c) sets
forth all registered patents, trademarks, service marks, trade names,
and copyrights, and all applications therefor, and licenses,
sublicenses or agreements in respect thereof which Seller owns or has
the right to use or to which Seller is a party and, in each case, that
are used by Seller in connection with the operation of the SMT Business
and not used by Seller in connection with the operation of the Retained
Businesses (collectively, the "Registered Rights"). The SMT Business of
Seller as conducted immediately prior to the Closing and the sale by
Seller and ownership by Buyer of any of the Purchased Assets, was not,
is not and will not be in contravention of any trade name, service
xxxx, patent, trademark, copyright or other proprietary right of any
third party. Except as set forth in Schedule 4.2(g), none of the
Proprietary Rights: has been hypothecated, sold, assigned or licensed
by Seller, or to the Knowledge of Seller, any other person,
corporation, firm or other legal entity; to the Knowledge of Seller,
infringe upon or violate the rights of any person, firm, corporation,
or other legal entity; are subject to challenge, claims of
infringement, unfair competition or other claims; or, to the Knowledge
of Seller, are being infringed upon or violated by any person, firm,
corporation or other legal entity. Except as set forth in Schedule
4.2(g): no product, process, method or operation presently sold,
engaged in or employed by Seller in the SMT Business, to the Knowledge
of Seller, infringes upon any rights owned by any other person, firm,
corporation or other legal entity; there is not pending or, to the
Knowledge of Seller, threatened any claim or litigation against Seller
contesting the right of Seller to sell, engage in or employ any such
product, process, method or operation in the SMT Business.
(h) Title to Properties. Except for the Liens set forth on
Schedule 4.2(h) which will be released at Closing, all of the Purchased
Assets are held free and clear of all Liens.
(i) Brokers, Finders. The transactions contemplated herein
were not submitted to Seller by any broker or other person entitled to
a commission or finder's fee thereon, and were not with the consent of
Seller submitted to Buyer by any such broker or other person. No
investment banking, financial advisory or similar fees or commissions
have been incurred or are or will be payable by Seller in connection
with this Agreement or the transactions contemplated hereby.
(j) Legal Proceedings, etc. Except as set forth on Schedule
4.2(j), there is no claim, litigation, action, suit or proceeding,
administrative or judicial, filed, pending, or, to Seller's Knowledge,
threatened against Seller, the SMT Business or involving the Purchased
Assets, this Agreement or the transactions contemplated hereby, at law
or in equity, before any federal, state or local court or regulatory
agency, or other governmental authority. Seller is not subject to any
judgment, order or decree of any federal, state or local court or
regulatory agency, or other governmental authority.
(k) Sufficiency of Assets. Except for any of the Excluded
Property described in Section 1.2(a) through (o), no material property
or assets, other than the Purchased Assets, are necessary to conduct
the SMT Business substantially as presently conducted by Seller.
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(l) No Conflict or Default. Neither the execution and delivery
of this Agreement by Seller, nor compliance with the terms and
provisions hereof by Seller, including, without limitation, the
consummation of the transactions contemplated hereby, will violate any
statute, regulation or ordinance of any governmental authority, or
conflict with or result in the breach of any term, condition or
provision of the certificate or articles of incorporation or bylaws of
Seller or of any material agreement, deed, contract, mortgage,
indenture, writ, order, decree, legal obligation or instrument to which
Seller is a party or by which Seller or any of the Purchased Assets are
or may be bound, or constitute a material default (or an event which,
with the lapse of time or the giving of notice, or both, would
constitute a material default) thereunder, or result in the creation or
imposition of any material lien, charge or encumbrance, or restriction
of any nature whatsoever with respect to any of the Purchased Assets,
or give to others any interest or rights, including, without
limitation, rights of termination, acceleration or cancellation in or
with respect to the Purchased Assets or the SMT Business.
(m) Contracts and Commitments. Except as set forth on Schedule
4.2(m), Seller has not assigned, mortgaged, pledged, encumbered, or
otherwise hypothecated any of its right, title or interest under any
Contract. Except as set forth on Schedule 4.2(m), neither Seller nor,
to the Knowledge of Seller, any other party thereto, is in violation
of, in default in respect of nor has there occurred an event or
condition which, with the passage of time or giving or notice (or both)
would constitute a violation or default of any Contract, and, to the
Knowledge of Seller, there are no facts or circumstances which would
reasonably indicate that Seller (or any other party) will be or may be
in material violation of or in material default in respect of any
Contract, subsequent to the date hereof. Except as set forth on
Schedule 4.2(m), no notice has been received by Seller claiming any
such default by Seller or indicating the desire or intention of any
other party thereto amend, modify, rescind or terminate the same.
(n) Research International Trade Name. Seller has not sold,
assigned or otherwise transferred Seller's right, title and interest in
the trade name, "Research International," or in the Internet domain
name, "xxx.xxxxxxxx-xxxx.xxx."
(o) Warranty. Attached hereto as Schedule 4.2(o) is a true,
correct and complete copy of Seller's warranty to customers as in
effect on the Closing Date and, to the Knowledge of Seller, Seller has
not issued a warranty to customers of a duration longer than that set
forth in the warranty attached hereto as Schedule 4.2(o).
ARTICLE V. COVENANTS
Section 5.1. Covenant Not to Compete.
(a) Seller agrees that it will not, for a period of five (5)
years following the Closing Date, directly or indirectly, whether on
its own account or as a shareholder, partner, joint venturer and/or
agent of any person, firm, corporation or other entity or otherwise,
directly or indirectly: (i) own, manage, operate, join, control or
participate in the ownership, management, operation, or control of any
business or enter into or engage in any business which competes with
the SMT Business as conducted by Seller; or (ii) induce or encourage
any customer of the SMT Business to terminate its relationship with
Buyer or solicit customers or business patronage which results in
direct competition with the SMT Business as conducted by Seller; or
(iii) promote or assist, financially or otherwise, any person, firm,
association, corporation or other entity engaged in any business which
competes with the SMT Business as conducted by Seller (except
investments in
15
three percent (3%) or less of the capital stock of any corporation
subject to the Securities Exchange Act of 1934, as amended). In the
event that, after the Closing Date, Seller sells the Retained
Businesses, in whole or in part, to any purchaser who, prior to and at
the time of such sale, operated a business which directly or indirectly
competes with the SMT Business, the provisions of this Section 5.1(a)
shall be automatically and irrevocably excluded from the terms of
Section 8.3 hereof such that the purchaser of the Retained Businesses,
in whole or in part, shall not be bound hereby.
(b) Buyer agrees that it will not, directly or indirectly,
whether on its own account or as a shareholder, partner, joint venturer
and/or agent of any person, firm, corporation or other entity or
otherwise, directly or indirectly: (A) use any secrets, confidential
information, customer lists, supplier information, and all other data
of or pertaining to Seller (other than the SMT Business) and Seller's
affiliates, their respective businesses (other than the SMT Business)
or financial affairs or products and services (other than the products
and services of the SMT Business) (collectively, "Seller's Confidential
Information") that are not and have not become ascertainable from
public or published record, to compete with the business activities of
the Retained Businesses; or (B) use the trade name, "Research
International" or any derivations thereof (i) in connection with any
business activities that compete with the business activities of the
Retained Businesses, (ii) in any way that suggests Buyer has control
over Seller or is an affiliate, partner or joint venturer of Seller, or
(iii) in any way that would cause confusion with the business
activities of the Retained Businesses. In addition, Buyer shall, and
shall cause its affiliates to, maintain Seller's Confidential
Information in strict confidence in accordance with the procedures
Buyer uses to protect its own information of a similar nature and shall
not use any such Seller's Confidential Information for any purpose.
Section 5.2. Covenant Against Disclosure.
(a) Seller agrees that it will not: (i) disclose to any
person, association, firm, corporation or other entity (other than
Buyer or those designated in writing by Buyer) in any manner, directly
or indirectly, any information or data pertaining to the SMT Business
and in no manner pertaining to the Retained Businesses, whether of a
technical or commercial nature; or (ii) use, or permit or assist, by
acquiescence or otherwise, any person, association, firm, corporation
or other entity (other than Buyer or those designated in writing by
Buyer) to use, in any manner, directly or indirectly, any information
or data directly or indirectly pertaining to the SMT Business and in no
manner pertaining to the Retained Businesses, excepting only use of
such data or information as is at the time generally known to the
public and which did not become generally known through any breach of
any provision of Section 5.1(a) or this Section 5.2(a) by Seller.
(b) Buyer agrees that it will not: (i) disclose to any person,
association, firm, corporation or other entity (other than Seller or
those designated in writing by Seller) in any manner, directly or
indirectly, any information or data pertaining to the Retained
Businesses, whether of a technical or commercial nature; or (ii) use,
or permit or assist, by acquiescence or otherwise, any person,
association, firm, corporation or other entity (other than Seller or
those designated in writing by Seller) to use, in any manner, directly
or indirectly, any information or data directly or indirectly
pertaining to the Retained Businesses, excepting only use of such data
or information as is at the time generally known to the public and
which did not become generally known through any breach of any
provision of Section 5.1(b) or this Section 5.2(b) hereof by Buyer.
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Section 5.3. Covenant Against Hiring.
(a) Seller agrees that it shall not, for a period of two (2)
years following the Closing Date, take any action which would induce or
solicit any employee of the SMT Business as operated by Buyer not to
continue as an employee of Buyer or to become employed by Buyer. Seller
agrees that it shall not, during the thirty-day period commencing on
the Closing Date, solicit for employment by Seller any SMT Employee (as
defined in Section 5.3(b)) who is not employed by Seller on the Closing
Date. Seller agrees that it shall not, whether directly or indirectly
through any subsidiary or affiliate, employ, whether an employee,
officer or director, or enter into any partnership, joint venture or
other business association with, any person who at any time between
January 1, 2001 and the Closing Date was an employee, officer or
director of Buyer, for a period of twelve (12) months after such person
ceases or has ceased, for any reason, to be an employee, officer or
director of Buyer.
(b) Buyer agrees that it shall not, for a period of two (2)
years following the Closing Date, take any action which would induce or
solicit any employee of Seller's Retained Businesses not to continue as
an employee of Seller or to become employed by Buyer. Schedule 5.3(b)
sets forth a list of all current employees of Seller who are, and all
former employees of Seller who since January 1, 2001 were, active in
the operations of the SMT Business (the "SMT Employees"). In the event
that, from time to time during the thirty-day period commencing on the
Closing Date, Buyer desires to speak with one or more SMT Employees
regarding potential employment with Buyer, Buyer shall deliver to
Seller written notice thereof (a "Employment Notice"), setting forth
the name of each SMT Employee with whom Buyer so desires to speak.
Seller shall promptly contact each such SMT Employee listed in an
Employment Notice and apprise him or her of Buyer's desire to contact
him or her regarding potential employment with Buyer. Seller shall
promptly thereafter provide to Seller contact information for each SMT
Employee listed in an Employment Notice who expresses a willingness to
speak with Buyer about potential employment with Buyer. Seller agrees
not to discourage any SMT Employee listed in an Employment Notice from
accepting employment with Buyer; provided, however, that Seller shall
not be under any obligation to encourage any SMT Employee then employed
by Seller to leave the employment of Seller. Buyer agrees that it shall
not contact a SMT Employee unless and until Buyer delivers to Seller an
Employment Notice listing such SMT Employee and Seller notifies Buyer
that such SMT Employee has expressed a willingness to speak with Buyer
about potential employment with Buyer. Without limiting the generality
of the foregoing, Buyer shall not, whether directly or indirectly
through any subsidiary or affiliate, employ, whether an employee,
officer or director, or enter into any partnership, joint venture or
other business association with, any person who was at any time between
January 1, 2001 and the Closing Date was an employee, officer or
director of Seller's Retained Businesses, for a period of twelve (12)
months after such person ceases or has ceased, for any reason, to be an
employee, officer or director of Seller's Retained Businesses.
Section 5.4. Injunctive Relief. Each party acknowledges and agrees that
remedies at law for any breach of any of the other party's obligations under
Sections 5.1, 5.2 or 5.3 hereof would be inadequate, and agrees and consents
that temporary and permanent injunctive relief may be granted in a proceeding
which may be brought to enforce any provision of Sections 5.1, 5.2 or 5.3
without the necessity of proof of actual damage.
17
Section 5.5. Collection and Storage of Purchased Assets. Schedule
5.5(a) sets forth the nature and location of all of the tangible Purchased
Assets that are not located at Seller's facility in Eden Prairie, Minnesota (the
"Eden Prairie Facility"). Except as set forth on Schedule 5.5(b), Seller agrees
to have all of the Purchased Assets set forth on Schedule 5.5(a) shipped, at
Seller's expense, to the Eden Prairie Facility as soon as practicable following
the Closing Date. In the event that any of the Purchased Assets set forth on
Schedule 5.5(a) and not set forth on Schedule 5.5(b) are damaged while in the
process of being shipped to the Eden Prairie Facility and Seller recovers
insurance proceeds due to such damage, Seller shall assign to Buyer such
proceeds to the extent they directly relate to damage of such Purchased Assets.
Seller shall use commercially reasonable efforts to pursue the recovery of
insurance proceeds for damage to any of the Purchased Assets set forth on
Schedule 5.5(a) and not set forth on Schedule 5.5(b) to the extent such
Purchased Assets are covered by insurance. Seller agrees to permit Buyer to
store, at no cost to Buyer, any tangible Purchased Assets located at the Eden
Prairie Facility (whether such Purchased Assets were located at the Eden Prairie
Facility on the Closing Date or shipped thereto following the Closing Date)
during the period commencing on the Closing Date and ending sixty (60) days
thereafter (the "Storage Period"); provided, however, that any and all risk of
loss and liability with respect to the Purchased Assets shall pass to Buyer on
the Closing Date and Seller shall in no event be liable therefor; and, provided,
further, that Seller shall in no event be responsible, financially or otherwise,
for any loss or deterioration in the value of the Purchased Assets following the
Closing Date; and, provided, further, that Buyer may store, at no cost to Buyer,
any of the Purchased Assets set forth in Schedule 5.5(a) (other than the
Purchased Assets set forth on Schedule 5.5(b)) which are not received at the
Eden Prairie Facility before expiration of the Storage Period (the "Late
Arriving Assets"), for a period of thirty (30) days commencing on the date of
their receipt at the Eden Prairie Facility. Buyer shall be responsible for
procuring and paying for any and all insurance covering the Purchased Assets
following the Closing Date, including, but not limited to, the Purchased Assets
being stored at the Eden Prairie Facility and any of the Purchased Assets set
forth on Schedule 5.5(a). Buyer shall be responsible for making arrangements to
ship the Purchased Assets from the Eden Prairie Facility by no later than the
expiration of the Storage Period or, in the case of any Late Arriving Assets, by
no later than thirty (30) days from their date of receipt at the Eden Prairie
Facility, and Buyer shall pay any and all shipping costs and expenses to ship
the Purchased Assets (including, but not limited to, any Late Arriving Assets)
from the Eden Prairie Facility. Buyer shall pay any and all costs and expenses
associated with preparing the Purchased Assets (including, but not limited to,
any Late Arriving Assets) for shipment, including, but not limited to, costs of
loading. On the Closing Date and upon reasonable notice to Seller after the
Closing Date, Seller shall allow Buyer or Buyer's appointed representatives
access to the Eden Prairie Facility for a reasonable period of time during
normal business hours for purposes of preparing and loading the Purchased Assets
for shipment from the Eden Prairie Facility. Buyer shall pay Seller a fee of
$0.1385 per square foot of storage space used to store the Purchased Assets
during each week or partial week after the expiration of the Storage Period or,
in the case of any Late Arriving Assets, after expiration of the 30-day period
following their receipt at the Eden Prairie Facility, in which any of the
Purchased Assets remain at the Eden Prairie Facility.
Section 5.6. Intellectual Property License. Buyer acknowledges and
agrees that certain technology associated with Seller's compartmentalized oven
(i.e., the Tower product), which technology is more specifically described and
set forth on Schedule 5.6, is among the Purchased Assets and that Seller may
require use of such technology to operate the Retained Businesses following the
Closing Date. Buyer hereby grants Seller a royalty-free, non-exclusive,
worldwide, perpetual, irrevocable license to use the technology set forth on
Schedule 5.6 in connection with Seller's operation of the Retained Businesses
following the Closing Date and not in connection with the operation of any
business which competes with either the SMT Business or any of Buyer's
businesses as Buyer's businesses are operated on the Closing
18
Date; provided, however, that Seller may not sublicense, sell, assign or
otherwise transfer its rights in the foregoing license without the prior written
consent of Buyer.
Section 5.7. Notice of Proposed Divestiture. Seller hereby covenants
and agrees that during the 180-day period following the Closing Date, Seller
shall provide written notice to Buyer of any vote by Seller's Board of Directors
approving to seek a divestiture, in whole or in part, of any of the Retained
Businesses, in which event Buyer shall have the opportunity to make an offer to
purchase the Retained Businesses to be so divested; provided, however, that this
Section 5.7 shall in no event require Seller to enter into negotiations with
Buyer regarding a divestiture of the Retained Businesses or to accept Buyer's
offer therefor. In addition, during the 180-day period following the Closing
Date, Seller covenants and agrees that Seller shall not, without giving Buyer at
least ten (10) business days' written notice thereof, enter into any agreement
or make any arrangement granting a third-party an exclusive right to negotiate
for the purchase of any of the Retained Businesses.
Section 5.8. Access to Accountants. Seller shall cause its independent
auditors to provide Buyer's independent auditors, at Buyer's expense, with any
such information as they might reasonably request to assist Buyer in complying
with any and all rules and regulations of the Securities and Exchange Commission
resulting from the transactions contemplated by this Agreement; provided,
however, in no event shall Seller or Seller's independent auditors be liable,
financially or otherwise, due to Buyer's failure to be in compliance with such
rules and regulations.
Section 5.9. Use of Trade Name. Buyer acknowledges and agrees that
Seller operates a wholly-owed subsidiary named "Research International Latin
America, S. deR.L. deC.V.," and that Seller plans to continue to operate
Research International Latin America, S. deR.L. deC.V. following the Closing
Date. Following the Closing Date, Buyer agrees that, notwithstanding Buyer's
purchase from Seller hereunder of the trade name, "Research International,"
Buyer shall allow Seller to operate Research International Latin America, S.
deR.L. deC.V. under such name so long as Seller is not in violation of Section
5.1(a) hereof.
Section 5.10. Termination of Internet Link. Buyer acknowledges and
agrees that the Internet domain name, "xxx.xxxxxxxx-xxxx.xxx," which is part of
the Purchased Assets (but not part of the Purchased Assets for purposes of
Article IV hereof), is linked to and accessible from Seller's Website located at
"xxx.xxxxxxxxxxx.xxx," which is not part of the Purchased Assets, and that the
Website located at "xxx.xxxxxxxx-xxxx.xxx" currently resides on the computer
server of a third-party Internet service provider ("ISP") with whom Seller has
entered into an ISP agreement, which is not part of the Purchased Assets. Seller
further acknowledges and agrees that, by no later than the thirtieth (30th) day
following the Closing Date, Seller intends to and shall make arrangements with
the ISP to terminate the link between Seller's Website located at
"xxx.xxxxxxxxxxx.xxx" and the Website located at "xxx.xxxxxxxx-xxxx.xxx," and
that Seller intends to and shall make arrangements with the ISP to remove the
Website located at "xxx.xxxxxxxx-xxxx.xxx" from the ISP's computer server.
During the thirty-day period following the Closing Date, with reasonable notice
from and at the request of Buyer, Seller shall take all reasonable actions
necessary to assist Buyer in transitioning the Website located at
"xxx.xxxxxxxx-xxxx.xxx" from the ISP's computer server to the computer server on
which Buyer intends to have such Website reside; provided, however, that Seller
shall not be required to take, and Buyer shall be prohibited from taking, any
action that could in any way disrupt the functionality of the Website located at
"xxx.xxxxxxxxxxx.xxx."
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Section 5.11. Transition of Contracts. Promptly following the Closing
Date:
(a) Seller and Buyer shall jointly send, at Buyer's expense, a
letter to each customer and supplier who is party to a sales order or a
purchase order that is included in the Contracts to notify such
customer or supplier that Seller has sold certain assets and
liabilities of the SMT Business to Buyer and that Buyer requests that
such customer or supplier reissue such sales order or purchase order in
Buyer's name, which letter shall be substantially in the form set forth
on Schedule 5.11(a); and
(b) Seller and Buyer shall jointly send, at Seller's expense,
a letter to each sales representative and distributor of the SMT
Business that is party to a sales representative agreement or
distributor agreement that is not included in the Contracts to notify
such sales representative or distributor that Seller has sold certain
assets and liabilities of the SMT Business to Buyer, that Buyer gives
notice to such representative or distributor of its intent not to
continue to operate under such sales representative agreement or
distributor agreement and that Buyer desires to speak with such sales
representative or distributor about entering into a new sales
representative agreement or distributor agreement with Buyer, which
letter shall be substantially in the form set forth on Schedule
5.11(b).
Section 5.12. Processing of Warranty Claims. Seller and Buyer hereby
acknowledge and agree that liabilities and obligations in respect of customer
warranty claims (the "Warranty Claims"), including, but not limited to, costs of
repair and/or replacement, for products of the SMT Business sold and shipped
within two (2) years prior to the Time of Closing are among the Retained
Liabilities. Following the Closing Date, promptly after Buyer receives a
Warranty Claim which is in excess of Fifteen Hundred Dollars ($1,500) and which
Buyer believes is a liability and obligation included among the Retained
Liabilities, Buyer shall deliver a written notice to Seller (a "Warranty Claim
Notice") of such Warranty Claim. A Warranty Claim Notice shall include the
nature and amount of the Warranty Claim, the serial number of the part or
equipment that is the subject of the Warranty Claim and the name, address and
telephone number of the customer making the Warranty Claim. Within ten (10) days
of receiving a Warranty Claim Notice, Seller shall provide written notice to
Buyer of its determination, made in Seller's sole discretion, as to whether the
Warranty Claim set forth in a Warranty Claim Notice is valid. In the event that
Seller determines, in Seller's sole discretion, that the Warranty Claim set
forth in a Warranty Claim Notice is valid, Buyer shall process and service such
Warranty Claim on behalf of Seller; provided, however, that, following the
expiration of the Royalty Period, Buyer shall be obligated to process and
service Warranty Claims on behalf of Seller only if Seller is then not
delinquent in paying to Buyer within thirty (30) days of invoice (which invoice
shall include the information to be set forth in a Warranty Report (as
hereinafter defined)) amounts owed to Buyer for Warranty Claims previously
processed by Buyer on behalf of Seller. Buyer shall service on behalf of Seller
any Warranty Claim which is less than Fifteen Hundred Dollars ($1,500) without
first being required to deliver to Seller a Warranty Claim Notice therefor.
Buyer shall charge Seller: (i) twenty-five percent (25.0%) of the value set
forth on Schedule 1.1(b) for parts which are part of the Purchased Assets and
which are used to service Warranty Claims on behalf of Seller; (ii) Buyer's
actual cost for parts which are not part of the Purchased Assets and which are
used to service Warranty Claims on behalf of Seller; and (iii) Buyer's actual
labor cost for servicing Warranty Claims on behalf of Seller. On the date of
payment to Seller of the Accrued Royalty for each Quarterly Period during the
Royalty Period (or the date that the Accrued Royalty for each such Quarterly
Period would have been paid to Seller but for offset against the entire Accrued
Royalty for each such Quarterly Period) pursuant to Section 3.1(b) hereof, Buyer
shall deliver to Seller a report (a "Warranty Report") setting forth the nature
of each Warranty Claim serviced by Buyer on behalf of Seller
20
during the Quarterly Period then ended, together with the serial number of the
part or equipment that is the subject of each such Warranty Claim and a detailed
summary (including a summary of parts, labor, etc.) of the cost charged by Buyer
to Seller in connection with servicing each such Warranty Claim on behalf of
Seller. Buyer hereby represents and warrants that all goods furnished in
connection with servicing Warranty Claims on behalf of Seller and all services
performed by Buyer in connection therewith, shall be merchantable, shall be fit
for Seller's particular purposes of which Buyer is aware and shall be of high
quality and free of all defects in design, material and workmanship. Any and all
amounts owing to Buyer for Warranty Claims serviced by Buyer on behalf of Seller
shall be collected, first, by offsetting such amounts against the royalties
otherwise accruing to Seller pursuant to the terms and conditions of Section
3.1(b) hereof and, second, if the royalties otherwise accruing to Seller
pursuant to the terms and conditions of Section 3.1(b) hereof are insufficient
to satisfy such amounts, by offsetting such amounts against the Holdback Amount
pursuant to the terms and conditions of Section 3.1(b) hereof.
Section 5.13. Additional Letter of Credit. Buyer hereby covenants and
agrees that it shall deliver to Seller, for receipt by Seller no later than
August 5, 2002, an irrevocable stand-by letter of credit (the "Supplemental
Letter of Credit") in form and substance identical to that of the Letter of
Credit, except that the Supplemental Letter of Credit shall have an issue date
of no later than August 5, 2002 and shall have an expiration date of August 4,
2003. The Supplemental Letter of Credit shall be issued in an amount equal to
Three Hundred Fifty Thousand Dollars ($350,000), less the aggregate amounts that
Buyer was entitled to offset against the Holdback Amount through the end of the
then immediately preceding Quarterly Period in accordance with the terms and
conditions of Section 3.1(b)(ii). Seller agrees that, to the extent Buyer incurs
costs in obtaining the Supplemental Letter of Credit, Seller shall reimburse
Buyer the lesser of (x) Two Thousand Dollars ($2,000) and (y) one-half of the
actual cost to Buyer of obtaining the Supplemental Letter of Credit. Buyer and
Seller hereby agree that Buyer shall not be required to obtain the Supplemental
Letter of Credit in the event that, at any time prior to August 5, 2002, Buyer
and Seller mutually agree in writing that Buyer shall not be required to obtain
the Supplemental Letter of Credit.
Section 5.14. Inspection of Books and Records.
(a) From and after the Closing, Seller shall make or cause to
be made available to Buyer for examination and copying all records and
documents of every character not included in the Purchased Assets but
relating to the SMT Business, and shall permit Buyer and its
representatives, attorneys, accountants and agents to have access to
the same at all reasonable times, if Buyer determines in its reasonable
judgment that such examination is necessary in connection with any
governmental or quasi-governmental inquiry or in connection with any
claim made against Buyer or the Purchased Assets.
(b) From and after the Closing, Buyer agrees to provide Seller
and its representatives reasonable access to all documents, books and
records included in the Purchased Assets for purposes of preparation of
any tax returns by Seller after the Closing, responding to any audit by
the Internal Revenue Service or any other authority and responding to
any claims made against Seller to the extent such documents are
relevant.
Section 5.15. Severability. With respect to any provision of this Article V
finally determined by a court of competent jurisdiction to be unenforceable,
Seller and Buyer hereby agree that such court shall have jurisdiction to reform
such provision so that it is enforceable to the maximum extent permitted by law,
and the parties agree to abide by such court's determination. In the event that
any provision of this
21
Article V cannot be reformed, such provision shall be deemed to be severed from
this Agreement, but every other provision of Article V of this Agreement shall
remain in full force and effect.
Section 5.16. Further Assurances. On and after the Closing, Seller
shall prepare, execute and deliver such further instruments of conveyance, sale,
assignment or transfer, and shall take or cause to be taken such other or
further action as Buyer shall reasonably request at any time or from time to
time in order to perfect, confirm or evidence in Buyer title to all or any part
of the Purchased Assets or to consummate, in any other manner, the terms and
conditions of this Agreement.
Section 5.17. Public Announcement. Buyer and Seller shall agree on the
terms of any press releases to be issued upon the execution of this Agreement
and shall consult with each other before issuing any other press releases with
respect to this Agreement and the transactions contemplated hereby, including
without limitation, any termination of this Agreement for any reason.
Section 5.18. Transfer of Warranties. In the event that any item of
Purchased Assets transferred to Buyer hereunder is under any warranty or
vendor's indemnification agreement from the manufacturer or the original seller
thereof, the Buyer shall be entitled to the benefit of the warranty or vendor's
indemnification agreement to the extent that the warranty or vendor's
indemnification agreement is available to the transferee and Seller shall
execute such instruments as may be required to transfer the warranty to the
Buyer.
ARTICLE VI. CLOSING
Section 6.1. Closing. This transaction shall close and all deliveries
to be made at such time shall take place at 10:00 a.m., local time on November
9, 2001 (such time being the "Time of Closing" and such date being the "Closing
Date"), at the offices of Xxxxxxxxx & Xxxxxx P.L.L.P., 4200 IDS Center, 00 Xxxxx
Xxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000. The "Closing" shall mean the
deliveries to be made by Buyer and Seller respectively at the Closing in
accordance with this Agreement. The Closing shall be effective as of 12:01 a.m.,
Central Time, on the Closing Date.
Section 6.2. Deliveries by Seller. At or prior to the Closing, Seller
shall deliver to Buyer, all duly and properly executed (if necessary), the
following:
(a) The Assignment and Assumption Agreement, conveying,
selling, transferring and assigning to Buyer title to all of the
Purchased Assets (other than any Proprietary Rights for which filings
with the Patent and Trademark Office are required to effectuate an
assignment thereof), free and clear of all security interests, liens,
charges, encumbrances or equities whatsoever, except those matters
approved in writing by Buyer prior to the Closing.
(b) Written consents to assignment to any and all Contracts
for which written consent to assign is required.
(c) An Intellectual Property Assignment, substantially in the
form attached hereto as Exhibit C, conveying, selling transferring and
assigning to Buyer title to all Proprietary Rights for which filings
with the Patent and Trademark Office are required to effectuate an
assignment thereof (the "Intellectual Property Assignment").
22
(d) Resolutions of the directors of Seller authorizing the
execution and delivery of this Agreement by Seller and the performance
of its obligations hereunder certified by the Secretary of Seller.
(e) The legal opinion of Xxxxxxxxx & Xxxxxx P.L.L.P., counsel
for Seller, addressed to Buyer and dated the Closing Date, which shall
be in form and substance satisfactory to Buyer.
(f) Such other separate instruments of sale, assignment or
transfer that Buyer may reasonably deem necessary or appropriate in
order to perfect, confirm or evidence title to all or any part of the
Purchased Assets, including, without limitation, instruments of
assignment in recordable form conveying all of Seller's right, title
and interest in and to the Proprietary Rights.
Section 6.3. Deliveries by Buyer. On or prior to the Closing, Buyer
shall deliver to Seller, all duly and properly executed (if necessary), the
following:
(a) The Purchase Price.
(b) The Letter of Credit
(c) The legal opinion of Xxxxxx X. Xxxxxxxxxx, counsel for
Buyer, addressed to Seller and dated as of the Closing Date, in form
and substance reasonably satisfactory to Seller.
(d) Resolutions of the directors of Buyer authorizing the
execution and delivery of this Agreement by Buyer and the performance
of its obligations hereunder, certified by the Secretary of Buyer.
(e) A counterpart signature page to the Assignment and
Assumption Agreement.
ARTICLE VII. INDEMNIFICATION
Section 7.1. Survival of Representations, Warranties and Agreements.
(a) All representations, warranties, covenants and agreements
of Seller in this Agreement and in the Additional Documents (as defined
herein below) shall survive execution, delivery and performance of this
Agreement for the periods set forth in this Section 7.1(a)
notwithstanding any investigation conducted at any time with regard
thereto by or on behalf of Buyer. All statements contained in any
Additional Document or Schedule or Exhibit hereto shall be deemed
representations and warranties of Seller or Buyer set forth in this
Agreement within the meaning of this Article. All of the
representations and warranties of Seller and the Buyer contained in
this Agreement and all unasserted claims and causes of action with
respect thereto shall terminate upon expiration of twelve (12) months
following the Closing Date, except that:
(i) the representations and warranties in Section 4.2(e)
(Taxes) shall terminate three (3) years following the Closing Date,
except in the case of fraud by Seller, in which event the
representations and warranties in Section 4.2(e) (Taxes) shall
terminate on the close of business on the 90th day after the applicable
statute of limitations with respect to taxes;
23
(ii) the representations and warranties in Section 4.2(a)
(Organization), Section 4.2(b) (Authorization), Section 4.2(h) (Title
to Properties), Section 4.1(a) (Organization) and Section 4.1(b)
(Authorization) shall survive indefinitely;
(iii) the covenants and agreements contained in this Agreement
having specific time periods of applicability shall survive the Closing
Date for the periods set forth therein; and
(iv) all other covenants and agreements (including, without
limitation, the covenant of Buyer to assume the Assumed Liabilities and
the covenant of Seller to retain the Retained Liabilities) shall
survive indefinitely.
(b) In the event notice of any claim for indemnification is
given (as provided for in Section 7.5) within the applicable survival
period and not resolved within such period, the representations,
warranties, covenants and agreements that are the subject of such
indemnification claim shall survive until such time as such claim or
claims are finally resolved but only with respect to the specific
unresolved claim or claims made within the applicable survival period.
(c) As used in this Article, any reference to a
representation, warranty or covenant contained in any Section of this
Agreement shall include the Schedule relating to such Section.
Section 7.2. Indemnification.
(a) Subject to the limitations set forth in Section 7.3 of
this Agreement, Seller shall indemnify and hold harmless the Buyer, its
shareholders, directors, officers and employees (each, a "Buyer
Indemnified Party") from and against any and all losses, liabilities,
damages, demands, claims, suits, actions, judgments or causes of
action, assessments, costs and expenses, including, without limitation,
interest, penalties, attorneys' fees, any and all expenses incurred in
investigating, preparing or defending against any litigation, commenced
or threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation (collectively, "Damages"),
asserted against, resulting to, imposed upon, or incurred or suffered
by any Buyer Indemnified Party, directly or indirectly, as a result of
or arising from the following (collectively, "Buyer's Indemnifiable
Claims"):
(i) Any inaccuracy in or breach of any of the representations
or warranties made by Seller in this Agreement or any misrepresentation
in or any omission from any certificate or other document
(collectively, the "Additional Documents") furnished or to be furnished
by or on behalf of Seller under this Agreement;
(ii) Any nonfulfillment or breach of any of the covenants or
agreements made by Seller in this Agreement; and
(iii) The assertion against any Buyer Indemnified Party of any
of the Retained Liabilities (whether or not arising out of any
inaccuracy in or breach of any representation or warranty and whether
or not disclosed on any Schedule).
(b) Subject to the limitations set forth in Section 7.3 of
this Agreement, Buyer shall indemnify and hold harmless Seller, its
shareholders, directors, officers and employees (each, a "Seller
Indemnified Party") from and against any and all losses, liabilities,
damages, demands,
24
claims, suits, actions, judgments or causes of action, assessments,
costs and expenses, including, without limitation, interest, penalties,
attorneys' fees, any and all expenses incurred in investigating,
preparing or defending against any litigation, commenced or threatened,
or any claim whatsoever, and any and all amounts paid in settlement of
any claim or litigation (collectively, "Damages"), asserted against,
resulting to, imposed upon, or incurred or suffered by any Seller
Indemnified Party, directly or indirectly, as a result of or arising
from the following (collectively, "Seller's Indemnifiable Claims"):
(i) Any inaccuracy in or breach of any of the representations
or warranties made by Buyer in this Agreement or any misrepresentation
in or any omission from any Additional Documents furnished or to be
furnished by or on behalf of Buyer under this Agreement;
(ii) Any nonfulfillment or breach of any of the covenants or
agreements made by Buyer in this Agreement;
(iii) The assertion against any Seller Indemnified Party of
any of the Assumed Liabilities; and
(iv) The operation by Buyer of the Purchased Assets or SMT
Business on or after the Closing.
(c) For purposes of this Article, all Damages shall be
computed net of (i) any actual net income tax benefit resulting
therefrom to the indemnified party, and (ii) any insurance coverage
with respect thereto which reduces the Damages that would otherwise be
sustained. Notwithstanding the foregoing, it is understood and agreed
that the determination of the net tax effect and/or insurance coverage
benefit shall not delay payment or indemnification of such Damages by
the indemnifying party. All Damages shall be paid or reimbursed
promptly upon determination; the indemnified party receiving such
Damages shall reimburse the indemnifying party for the net tax effect
benefit of such Damages, if any, upon the date of filing of the tax
return with respect to which such tax benefit is realizable or upon the
date of recovery of any insurance proceeds.
(d) An indemnified party shall be deemed to have suffered
Damages arising out of or resulting from the matters referred to in
subsections (a) and (b) above if the same shall be suffered by any
parent, subsidiary or affiliate of such party.
(e) If any representation or warranty qualified by materiality
or material adverse effect language is breached, then solely for
purposes of calculating the amount of Damages suffered by any
indemnified party such representation or warranty shall be read as if
it did not contain any qualification as to materiality or material
adverse effect.
Section 7.3. Limitations on Indemnification. Rights to indemnification
hereunder are subject to the following limitations:
(a) No Buyer Indemnified Party shall be entitled to
indemnification hereunder with respect to a Buyer Indemnifiable Claim
(or, if more than one Buyer Indemnifiable Claim is asserted, with
respect to all Buyer Indemnifiable Claims) under clause (i) of Section
7.2(a) unless the aggregate amount of Damages with respect to such
Buyer Indemnifiable Claim or Claims
25
exceeds Thirty Thousand Dollars ($30,000) (the "Threshold Amount"), in
which event the indemnity provided for in Section 7.2 hereof shall be
effective only with respect to the amount of such Damages in excess of
the Threshold Amount.
(b) Notwithstanding anything in this Agreement to the
contrary, Seller shall not be required to indemnify the Buyer
Indemnified Parties for Buyer Indemnifiable Claims under clause (i) of
Section 7.2(a) with respect to which indemnification (on a cumulative
basis) under this Agreement would otherwise be available in excess of
an amount equal to Seven Hundred Fifty Thousand Dollars ($750,000),
less any amounts offset against the Holdback Amount attributable to
amounts owing to Buyer for Warranty Claims serviced by Buyer on behalf
of Seller.
Section 7.4. Exclusive Remedy. Except as otherwise expressly provided
for in this Agreement, following the Closing, the indemnification provided by
this Article VII shall be the exclusive remedy for the Buyer Indemnified Parties
and Seller Indemnified Parties with respect to this Agreement and the
transactions contemplated by this Agreement, other than equitable remedies and
fraud claims.
Section 7.5. Procedure for Indemnification with Respect to Third-Party
Claims.
(a) If a Buyer Indemnified Party determines to seek
indemnification under this Article with respect to Buyer Indemnifiable
Claims resulting from the assertion of liability by third parties, it
shall give notice to Seller within thirty (30) days of becoming aware
of any such Buyer Indemnifiable Claim or of facts upon which any such
Buyer Indemnifiable Claim will be based; the notice shall set forth
such information with respect thereto as is then reasonably available
to the Buyer Indemnified Party. If any such liability is asserted
against a Buyer Indemnified Party, and the Buyer Indemnified Party
notifies Seller thereof, Seller will be entitled, if it so elects by
written notice delivered to the Buyer Indemnified Party within twenty
(20) days after receiving the Buyer Indemnified Party's notice, to
assume the defense thereof with counsel reasonably satisfactory to the
Buyer Indemnified Party. Notwithstanding the foregoing, (i) the Buyer
Indemnified Party shall also have the right to employ its own counsel
in any such case, but the fees and expenses of such counsel shall be at
the expense of the Buyer Indemnified Party; (ii) the Buyer Indemnified
Party shall not have any obligation to give any notice of any assertion
of liability by a third party unless such assertion is in writing; and
(iii) the rights of the Buyer Indemnified Party to be indemnified
hereunder in respect of Buyer Indemnifiable Claims resulting from the
assertion of liability by third parties shall not be adversely affected
by its failure to give notice pursuant to the foregoing unless, and, if
so, only to the extent that, Seller is materially prejudiced thereby.
With respect to any assertion of liability by a third party that
results in an indemnifiable claim, the parties hereto shall make
available to each other all relevant information in their possession
material to any such assertion.
(b) In the event that Seller, within twenty (20) days after
receipt of the aforesaid notice of a Buyer Indemnifiable Claim, fails
to assume the defense of the Buyer Indemnified Party against such Buyer
Indemnifiable Claim, the Buyer Indemnified Party shall have the right
to undertake the defense, compromise or settlement of such action on
behalf of and for the account and risk of Seller; provided Buyer
Indemnified Party shall not settle or compromise any such action
without Seller's written consent, which shall not be unreasonably
withheld.
26
(c) Notwithstanding anything in this Section 7.5 to the
contrary, (i) if there is a reasonable probability that a Buyer
Indemnifiable Claim may materially and adversely affect a Buyer
Indemnified Party, other than as a result of money damages or other
money payments, the Buyer Indemnified Party shall have the right, at
Seller's cost and expense, to defend, compromise or settle such Buyer
Indemnifiable Claim; provided Buyer Indemnified Party shall not settle
or compromise any such action without Seller's written consent, and,
provided, further, that in the event Buyer Indemnified Party defends
such claim and such claim is not resolved adversely to such Buyer
Indemnified Party, Buyer shall reimburse Seller for the costs and
expenses of defending such claim; and (ii) Seller shall not, without
the Buyer Indemnified Party's written consent, which consent shall not
be unreasonably withheld, settle or compromise any Buyer Indemnifiable
Claim or consent to entry of any judgment in respect thereof unless
such settlement, compromise or consent includes as an unconditional
term thereof providing for the giving by the claimant or the plaintiff
to the Buyer Indemnified Party a release from all liability in respect
of such Buyer Indemnifiable Claim.
Section 7.6. Claims; Collection.
(a) The provisions of this Section 7.6(a) shall be subject to
Section 7.3 of this Agreement. Promptly after becoming aware of a claim
for indemnification under this Agreement (or, in the case of a Buyer
Indemnified Party, a claim for which such Buyer Indemnified Party would
be indemnified if not for the terms of Section 7.3(a)), the party
claiming a right to indemnification (the "Indemnified Person") shall
give written notice to the party claimed by such Indemnified Person to
be obligated to provide indemnification (the "Indemnifying Person") of
the nature of such claim and the amount such Indemnified Person alleges
such Indemnified Person is entitled to receive hereunder from such
Indemnifying Person. If the Indemnified Person does not receive from
the Indemnifying Person an objection in writing (a "Indemnification
Objection Notice") to an indemnification claim within fifteen (15) days
after such Indemnifying Person receives notice of such indemnification
claim, such Indemnified Person shall be entitled to recover from such
Indemnifying Person the amount of such indemnification claim in
accordance with the provisions of this Section 7.6. If the Indemnifying
Person objects in a timely-delivered Indemnification Objection Notice
that it has no indemnification obligation or is obligated to pay only a
lesser amount, then the Indemnified Person and such Indemnifying Person
shall engage in good-faith negotiations with a view to resolving any
disagreements set forth in the Indemnification Objection Notice. If
such good-faith negotiations between the Indemnified Person and the
Indemnifying Person are unsuccessful in resolving all of the
disagreement in an Indemnification Objection Notice within thirty (30)
days of delivery of the Indemnification Objection Notice to such
Indemnified Person, then such disagreements that remain in dispute
shall be promptly thereafter submitted to a court of competent
jurisdiction for resolution.
(b) A Buyer Indemnified Party's sole and exclusive method of
recovering amounts to which such Buyer Indemnified Party is entitled
(it being acknowledged and agreed that a Buyer Indemnified Party will
only be entitled to recover amounts that have been agreed upon by such
Buyer Indemnified Party and Seller or that are awarded to such Buyer
Indemnified Party by a court of competent jurisdiction, in accordance
with the terms and provisions of Section 7.6(a)) under this Article VII
is, first, by offsetting such amounts against the royalties otherwise
accruing to Seller pursuant to the terms and conditions of Section
3.1(b) hereof and, second, if the royalties otherwise accruing to
Seller pursuant to the terms and conditions of Section 3.1(b) hereof
are insufficient to satisfy such amounts, by offsetting any unsatisfied
amounts against the Holdback
27
Amount pursuant to the terms and conditions of Section 3.1(b) hereof
and, third, if the foregoing are insufficient to satisfy such amounts,
by collecting any unsatisfied amounts directly from Seller.
ARTICLE VIII. MISCELLANEOUS PROVISIONS
Section 8.1. Notice. All notices and other communications required or
permitted under this Agreement shall be deemed to have been duly given and made,
when received, if in writing and if served either by personal delivery to the
party for whom intended or by being deposited, postage prepaid, certified or
registered mail, return receipt requested, in the United States mail bearing the
address shown in this Agreement for, or such other address as may be designated
in writing hereafter by, such party:
If to Seller: Research, Incorporated
0000 Xxxxxx Xxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxx
with a copy to: Xxxxxxx X. Xxxxxx
Xxxxxxxxx & Xxxxxx P.L.L.P.
0000 XXX Xxxxxx
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
If to Buyer: CVD Equipment Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxxxx
with a copy to: Xxxxxx X. Xxxxxxxxxx
000 Xxxxxx Xxxxxxx Xxxx
X.X. Xxx 000
Xxxxxxxxx, Xxx Xxxx 00000
Section 8.2. Entire Agreement. This Agreement, the exhibits and
schedules hereto, and the documents referred to herein embody the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersede all prior and contemporaneous agreements and
understandings, oral or written, relative to said subject matter.
Section 8.3. Binding Effect; Assignment. This Agreement and the various
rights and obligations arising hereunder shall inure to the benefit of and be
binding upon Seller, its successors and permitted assigns, and Buyer, its
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be transferred or assigned (by
operation of law or otherwise) by any party hereto without the prior written
consent of the other party.
28
Section 8.4. Captions. The Article and Section headings of this
Agreement are inserted for convenience only and shall not constitute a part of
this Agreement in construing or interpreting any provision hereof.
Section 8.5. Expenses of Transaction. Seller shall pay all costs and
expenses incurred by it in connection with this Agreement, and the transactions
contemplated hereby. Seller shall pay all transfer taxes and Buyer shall pay all
sales taxes imposed as a result of the consummation of the transactions
contemplated by this Agreement. Buyer shall pay all costs and expenses incurred
by it in connection with this Agreement and the transactions contemplated
hereby.
Section 8.6. Waiver; Consent. This Agreement may not be changed,
amended, terminated, augmented, rescinded or discharged (other than by
performance), in whole or in part, except by a writing executed by the parties
hereto, and no waiver of any of the provisions or conditions of this Agreement
or any of the rights of a party hereto shall be effective or binding unless such
waiver shall be in writing and signed by the party claimed to have given or
consented thereto. Except to the extent that a party hereto may have otherwise
agreed in writing, no waiver by that party of any condition of this Agreement or
breach by the other party of any of its obligations or representations hereunder
or thereunder shall be deemed to be a waiver of any other condition or
subsequent or prior breach of the same or any other obligation or representation
by the other party, nor shall any forbearance by the first party to seek a
remedy for any noncompliance or breach by the other party be deemed to be a
waiver by the first party of its rights and remedies with respect to such
noncompliance or breach.
Section 8.7. No Third Party Beneficiaries. Subject to Section 8.3
hereof and other than each Buyer Indemnified Party, nothing herein, expressed or
implied, is intended or shall be construed to confer upon or give to any person,
firm, corporation or legal entity, other than the parties hereto, any rights,
remedies or other benefits under or by reason of this Agreement. It is
acknowledged and agreed that each Buyer Indemnified Party shall be a third party
beneficiary of the provisions of Article VII and shall have the right to enforce
the provisions thereof as if each were an original signatory hereto.
Section 8.8. Counterparts. This Agreement may be executed
simultaneously in multiple counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
Section 8.9. Gender. Whenever the context requires, words used in the
singular shall be construed to mean or include the plural and vice versa, and
pronouns of any gender shall be deemed to include and designate the masculine,
feminine or neuter gender.
Section 8.10. Governing Law. This Agreement shall in all respects be
construed in accordance with and governed by the laws of the State of Minnesota.
Section 8.11. Definitions. For purposes of this Agreement, the
"Knowledge of Seller," "to the Knowledge of Seller" or similar type language
shall mean the actual knowledge of Xxxx Xxxx, President of Seller, and Xxxxx
Xxxxxx, Vice President of Seller.
29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SELLER:
RESEARCH, INCORPORATED
/s/ Xxxx Xxxx
-------------------------------
By: Xxxx Xxxx
---------------------------
Title: President
-------------------------
BUYER:
CVD EQUIPMENT CORPORATION
/s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------
By: Xxxxxxx X. Xxxxxxxxx
---------------------------
Title: President
-------------------------
LIST OF EXHIBITS AND SCHEDULES TO THE ASSET PURCHASE AGREEMENT
Exhibit Number Exhibit Description
-------------- -------------------
Exhibit A Form of Assignment and Assumption Agreement and Xxxx of Sale
Exhibit B Form of Irrevocable Letter of Credit
Exhibit C Form of Intellectual Property Assignment
Schedule Number Schedule Description
--------------- --------------------
Schedule 1.1(a) Personal Property
Schedule 1.1(b) Inventory
Schedule 1.1(c) Proprietary Rights
Schedule 1.1(d) Contracts
Schedule 1.1(g) Non-Compete Contracts
Schedule 1.1(r) Other Excluded Property
Schedule 3.1(b) Form of Certificate Accompanying Royalty Statements
Schedule 3.3 Purchase Price Allocation
Schedule 4.1(c) Buyer's Consents; Violations of Law
Schedule 4.2(c) Financial Statements
Schedule 4.2(d) Undisclosed Liabilities
Schedule 4.2(f) Compliance With Laws
Schedule 4.2(g) Transfers; Claims Against Proprietary Rights
Schedule 4.2(h) Liens
Schedule 4.2(j) Legal Proceedings
Schedule 4.2(m) Assignments; Violations of Contracts
Schedule 4.2(o) Warranty
Schedule 5.3(b) SMT Employees
Schedule 5.5(a) Location of Purchased Assets
Schedule 5.5(b) Non-Delivered Off-Site Purchased Assets
Schedule 5.6 Licensed Technology
Schedule 5.11(a) Form of Letter to Vendors and Customers
Schedule 5.11(b) Form of Letter to Representatives and Distributors
These exhibits and schedules are omitted as permitted under Item 601(b)(2) of
Regulation S-K. Research, Incorporated agrees to furnish supplementally a copy
of any omitted exhibit or schedule to the Asset Purchase Agreement to the
Commission upon request.
31
