Exhibit 2(a)
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made on March 31, 2004, by NC ACQUISITION CORP., a
Michigan corporation ("PURCHASER") and NEMATRON CORPORATION, a Michigan
corporation ("SELLER").
RECITALS
A. Seller is indebted to North Coast Technology Investors,
L.P. ("NORTH COAST") pursuant to the terms of a Promissory Note dated February
20, 2004 in the face amount of $2,500,000 (the "SENIOR NOTE").
B. Seller is indebted to North Coast, Xxxxx Xxxxxx, Xxxxx X.
Xxxxxxx and The Stag Group (the "2001 SUBORDINATED NOTEHOLDERS") pursuant to the
terms of a series of Convertible Subordinated Promissory Notes dated March 23,
2001 in the aggregate principal amount of $1,200,000 (the "2001 SUBORDINATED
NOTES").
C. Seller is indebted to Xxxxxx X. Xxxxxxx and Xxxxxx X.
Xxxxxxxxxxx (the "2002 SUBORDINATED NOTEHOLDERS") pursuant to the terms of a
series of Subordinated Promissory Notes dated October 28, 2002 in the aggregate
principal amount of $200,000 (the "2002 SUBORDINATED NOTES").
D. Seller is indebted to North Coast pursuant to the terms of a
Subordinated Promissory Note dated April 14, 2003 in the principal amount of
$3,000,000 (the "2003 SUBORDINATED NOTE").
E. Seller's indebtedness under the 2001 Subordinated Notes, 2002
Subordinated Notes, the 2003 Subordinated Note and the Senior Note
(collectively, the "NOTES") includes unpaid accrued interest (such indebtedness
is referred to in this Agreement as the "INDEBTEDNESS").
F. To secure Seller's obligations to repay the Indebtedness to
North Coast, pursuant to a Security Agreement dated as of July 31, 2003, North
Coast holds a security interest in the following property of Seller (the
"PERSONAL PROPERTY COLLATERAL"):
All personal property of the Seller, wherever located, and now
owned or hereafter acquired, including accounts; as-extracted
collateral; chattel paper (both tangible and electronic); deposit
accounts; documents; equipment; fixtures; general intangibles,
including payment intangibles; goods; instruments, including promissory
notes; inventory; investment property, including certificated
securities, uncertificated securities, security entitlements,
securities accounts, commodity contracts and commodity accounts;
letters of credit; letter of credit rights; money; software; supporting
obligations; and vehicles.
G. Seller is also party to a Security Agreement dated March 28,
2001, to secure Seller's obligations to the 2001 Subordinated Noteholders, which
grants the 2001 Subordinated Noteholders a security interest in the collateral
described therein. The 2002 and 2003 Subordinated Notes
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provide that as security for the payment of the Notes, Seller grants to the
holders of such notes a continuing security interest in all of the assets of the
Company.
H. To secure Seller's obligations to repay the Indebtedness to
North Coast, Seller has granted North Coast a mortgage on real property owned by
Seller located at 0000 Xxxxxxxxx Xxxxx in Scio Township, Washtenaw County,
Michigan (the "REAL PROPERTY COLLATERAL") pursuant to a Mortgage dated October
15, 2003 (the "MORTGAGE").
I. Seller's board of directors has approved the sale of
substantially all of Seller's tangible and intangible assets, including its real
estate, accounts, equipment, intellectual property, inventory, goodwill and
other intangibles to Purchaser, in consideration of Purchaser's assumption of
all of Seller's liabilities, including the Notes (the "NET ASSET SALE").
J. Seller's shareholders approved the Net Asset Sale at the
annual meeting of the shareholders held on January 13, 2004.
K. North Coast has made demand for payment of the Notes held by
it, which are due and payable on demand. Seller is unable to make such payment,
and is in default.
AGREEMENT
Intending to be legally bound, Purchaser and Seller agree as follows:
1. ASSETS SOLD AND PURCHASED. At the Closing, Seller shall sell
and deliver to Purchaser all of the assets, rights, and interests of every
conceivable kind or character whatsoever, whether real or personal, tangible or
intangible, that on the Closing Date are owned by Seller or in which Seller has
an interest of any kind, other than the Excluded Assets (as defined below) (the
"Purchased Assets"). The Purchased Assets include, without limitation, all of
the following, wherever situated:
(a) The real property located in Scio Township, Washtenaw
County, Michigan, which is legally described in EXHIBIT 1 (the "REAL PROPERTY").
(b) Equipment, fixtures, goods, motor vehicles and all
other items of tangible personal property.
(c) Inventory, including finished goods, work in process
and raw materials.
(d) Investment property, including certificated
securities, uncertificated securities, security entitlements, security accounts,
commodity contracts and commodity accounts, and including in particular Seller's
shares of capital stock in A-OK Controls Engineering, Inc., Optimation, Inc,
Nematron Limited and Nematron Canada, Inc. (the "Subsidiaries").
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(e) As-extracted collateral.
(f) Accounts, chattel paper (both tangible and
electronic), documents, instruments (including promissory notes), letters of
credit and letter of credit rights, and supporting obligations, including all
accrued interest receivable and also any security Seller holds for the payment
thereof, general intangibles, including payment intangibles and, to the extent
not otherwise constituting general intangibles as defined above, any interest of
Seller in any and all claims by Seller against any other person or entity,
whether now accrued or later to accrue, contingent or otherwise, known or
unknown, including, but not limited to, all rights under express or implied
warranties from suppliers, claims for collection or indemnity, claims in
bankruptcy, and choses in action.
(g) Money, cash, cash equivalents, and amounts held on
deposit in all deposit accounts and other savings, checking, money market,
investment, and other similar accounts, other than the money that is part of the
Excluded Assets.
(h) Seller's right, title, benefit, and interest in and
to all intellectual property and intellectual property rights owned by or
licensed by the Seller, including, but not limited to, all inventions,
discoveries, improvements, designs, prototypes, trade secrets, manufacturing and
engineering drawings, process sheets, specifications, bills of material,
patents, patent applications, registered and unregistered copyrights in both
published and unpublished works, registered and unregistered trademarks, trade
names, formulae and secret and confidential processes, know-how, technology,
customer lists, software, databases, data, process technology, and other
industrial property (whether patentable or unpatentable), and all goodwill of
Seller relating to any of the foregoing.
(i) Rights under contracts, including the full benefit of
(i) purchase orders placed with and accepted by Seller in the ordinary course of
business on or before the Closing Date that have not been completely performed
or filled before the Closing Date, covering the purchase from Seller of products
to be supplied by Seller, or covering the rendition by Seller of services, and
including all deposits, progress payments, and credits; (ii) purchase orders
placed by Seller before the Closing Date that have not been completely performed
before the Closing Date, covering Seller's purchase of inventory, supplies, or
materials in the ordinary course of business; (iv) leases of personal property
and other agreements; (v) employment agreements, non-competition agreements,
non-disclosure agreements, invention rights agreements and other similar
agreements between Seller and any other person, including current and former
employees, and (vi) any and all policies of insurance and rights to make claims
and other rights thereunder.
(j) Records and lists that pertain directly or
indirectly, in whole or in part, to any one or more of the following: Seller's
customers, suppliers, advertising, promotional material, sales, services,
delivery, internal organization, employees, and/or operations.
(k) Security deposits, prepaid expenses, and similar
items.
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(l) Transferable local, state, and federal franchises,
licenses, bonds, permits, and similar items pertaining to the Seller's business
and/or the Purchased Assets (the "Permits").
(m) The business conducted by Seller as a going concern,
including any and all goodwill, telephone and FAX numbers, yellow-page
advertisements, and Seller's right to use the name "NEMATRON" and all related
names and derivations, and the entire right, title, and interest in the United
States and throughout the world of all Internet domain names registered by
Seller (the "Domain Names"), including but not limited to the following domain
names registered by Seller with Network Solutions: XXXXXXXX.XXX (registered
November 10, 1994), XXXXXXXXXXXXX.XXX (registered June 27, 2000),
XXXXXXXXXXXXX.XXX (registered September 6, 2000); XXXXXXXXXXXXX.XXX (registered
September 19, 2002); X-XXXXXXXXXX.XXX (registered November 8, 2001);
XXXXXXXX.XXX (registered February 13, 1997).
However, Purchaser will not acquire (a) any of the rights of Seller
with respect to the registration of its securities with the U.S. Securities and
Exchange Commission or any state or foreign securities regulator or the listing
of such securities with any securities exchange or quotation system or (b)
$30,000 in cash to be retained by the Company (collectively, the "EXCLUDED
ASSETS").
As used herein, the term "Personal Property" means all of the Purchased
Assets other than the Real Property.
2. CONSIDERATION FOR PURCHASE. In consideration of the sale and
conveyance of the Purchased Assets to Purchaser, Purchaser shall assume all of
the liabilities of Seller of any kind, fixed or contingent, known or unknown,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
prior to the Effective Date, including, without limitation, amounts owed to
employees, federal, state and local taxing authorities, lenders, lessors,
utility companies, suppliers and other service and product providers (each, an
"Assumed Liability" and, collectively, the "Assumed Liabilities").
Notwithstanding the foregoing, from the Effective Date onward, Seller
will remain responsible for all matters with respect to the registration of its
securities with the United States Securities and Exchange Commission and any
state or foreign securities regulator and the listing of such securities with
any securities exchange or quotation system, and Purchaser does not undertake
any responsibility with respect to same.
The fair value of such consideration shall be determined by mutual
agreement of the parties at or prior to the Closing and in any event shall not
be less than the book amount of the liabilities assumed by Purchaser. Such fair
value is the "Purchase Price." The Purchase Price shall be allocated among the
Purchased Assets as reasonably determined by Purchaser and Seller. Purchaser and
Seller agree to execute and deliver at Closing duplicate IRS Forms 8594, with an
allocation of the Purchase Price in accordance with this Section 2, and to file
all other returns and reports in a manner consistent with the allocations in
this Section.
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3. CLOSING. The closing of the transactions contemplated in this
Agreement (the "Closing") shall take place at the offices of Seller at 1:00 p.m.
on March 31, 2004 or at such other place and/or on such other date and/or time
as the parties may agree in writing (the "Closing Date"). All transactions and
all documents executed and delivered at the Closing shall be deemed to have
occurred simultaneously, and no transaction shall be deemed to have occurred and
no document shall be deemed to have been executed or delivered unless all
transactions have occurred and all documents have been executed and delivered.
The transactions contemplated in this Agreement shall be effective as of the
close of business on March 31, 2004 (the "Effective Date").
4. COVENANTS OF SELLER. From the date of signing of this
Agreement through the Effective Date, Seller covenants as follows:
(a) Access to Data. Seller shall afford to Purchaser free and
full access to the Seller's business premises and to the business premises of
the Subsidiaries and to Seller's and the Subsidiaries' books, records and other
information in order that Purchaser may have full opportunity to make such
investigations and audits, business, financial or otherwise, as Purchaser deems
appropriate.
(b) Conduct of Business. Seller shall conduct its business,
and cause the Subsidiaries to conduct their business, only in the ordinary
course. Seller will use all reasonable efforts (without making any commitments
on behalf of Purchaser) to preserve its goodwill, and all licenses, rights and
relationship with customers, vendors, employees and others having business
dealings with it and its subsidiaries.
(c) Completion of Transaction. Seller will use all necessary
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to satisfy the conditions set forth in, and to consummate and make
effective the transactions contemplated by this Agreement, and in delivering all
documents and instruments deemed reasonably necessary or useful by counsel for
Purchaser.
(d) Compliance with Laws. Seller shall duly comply with all
applicable laws, regulations and rules, including any applicable requirements of
the United States Securities and Exchange Commission, as may be required for the
consummation of the transactions contemplated by this Agreement.
(e) Other Restrictions. Seller will not without the prior
approval of Purchaser:
(i) borrow money, or permit any Subsidiary to borrow
money or incur any other direct or contingent indebtedness
except trade debt in the ordinary course of business;
(ii) make or permit any Subsidiary to make loans or
advances to any person;
(iii) make or permit any Subsidiary to make any investment
in the stock or obligations of any other person;
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(iv) pay, or permit any Subsidiary to pay, compensation to
employees other than in the ordinary course of business, or
any bonuses;
(v) make or permit any Subsidiary to make, any material
change in the nature of its business.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The
obligations of Purchaser to enter into and complete the closing of the
transactions contemplated in this Agreement are subject to all of the following
conditions precedent having been materially fulfilled at or before the Closing
Date. Purchaser may waive in writing any and all of these conditions in whole or
in part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by Purchaser of any of its other rights or
remedies, at law or in equity, if Seller shall be in default of any of its
representations, warranties or covenants under this Agreement.
(a) Representations and Warranties. All representations and
warranties by Seller which are contained in this Agreement or any agreement,
instrument, list, certificate or writing delivered to Purchaser pursuant to this
Agreement, shall be, in all respects, true and correct on and as of the
Effective Date as though such representations and warranties were made at and as
of the Effective Date, and Purchaser shall have not discovered any material
misstatement or omission in any such representations and warranties.
(b) Compliance With Agreement. Seller shall have performed and
complied with all obligations, covenants, agreements and conditions required by
this Agreement to be performed or complied with by Seller at or prior to the
Effective Date.
(c) Consents. All necessary agreements and consents of any
parties to the consummation of the transactions contemplated by this Agreement,
or otherwise pertaining to the matters covered by it, required to be obtained by
Seller shall have been obtained by Seller and delivered to Purchaser.
(d) No Litigation. No proceeding or investigation shall have
been instituted before or by any court or governmental body (i) to restrain or
prevent the carrying out of the transactions contemplated by this Agreement or
in any way relating to the transactions contemplated by this Agreement or (ii)
that might affect Purchaser's right to own, operate, and control the Purchased
Assets on or after the Effective Date, nor shall any such proceeding or
investigation have been threatened.
6. ITEMS TO BE DELIVERED BY SELLER. Seller shall deliver to
Purchaser at the Closing the following items, the form and substance of which
shall all be reasonably satisfactory to Purchaser and its counsel:
(a) A covenant deed to the Real Property, subject to the
mortgages of Chelsea State Bank and North Coast.
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(b) A general xxxx of sale of the Personal Property, subject
to the liens described in the Recitals.
(c) Assignments of patents and trademarks for filing with the
U.S. Patent and Trademark Office, and assignments of copyrights for filing with
the U.S. Copyright Office.
(d) Assignments of any licenses or similar contract rights.
(e) Stock certificates endorsed to Purchaser for all shares
owned by Seller of the Subsidiaries.
(f) Certificates of title endorsed to Purchaser for all motor
vehicles and other assets subject to certificate of title laws.
(g) An amendment to its articles of incorporation, changing
its name to "Sandston Corporation."
(h) A general closing certificate executed by a duly
authorized officer of Seller, under which such officer shall certify that (i) to
his knowledge, the representations and warranties of Seller set forth in this
Agreement remain true and correct as of the Closing Date, (ii) the copies of the
articles of incorporation and bylaws of Seller attached thereto are true and
correct, (iii) resolutions of Seller's board of directors and shareholders in
form attached thereto were duly adopted and remain in full force and effect, and
(iv) that the officer(s) of Seller who are executing and delivering this
Agreement and the other documents and instruments to be executed and delivered
by Seller are duly elected, acting and qualified officers of the Company.
(i) The favorable opinion of Seller's counsel dated the
Closing Date and in form and substance reasonably satisfactory to Purchaser's
counsel to the effect that (i) Seller has been duly formed and is validly
existing and in good standing in Michigan, (ii) the execution, delivery and
performance of this Agreement and the other documents to be executed and
delivered by Seller at the Closing are within the corporate powers of Seller and
are not in contravention of any federal or state of Michigan law or the terms of
Seller's articles of incorporation or bylaws, (iii) Seller has been duly
authorized to enter into this transaction, (iv) this Agreement and the other
documents to be executed and delivered by Seller at the Closing have been duly
authorized, executed and delivered by Seller, and (v) this Agreement and the
other documents to be executed and delivered by Seller at the Closing are legal,
valid and binding obligations of Seller enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other laws of general application
affecting the enforcement of creditors' rights generally.
(j) Such other and further documents, instruments and
certificates as Purchaser or its representatives shall reasonably require to
carry out and effectuate the purposes and terms of this Agreement and the
transactions among the parties contemplated in this Agreement.
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7. ITEMS TO BE DELIVERED BY PURCHASER. Purchaser shall deliver to
Seller at the Closing the following items, the form and substance of which shall
all be reasonably satisfactory to Purchaser and its counsel:
(a) Purchaser's written assumption of the Senior Note,
together with North Coast's release of Seller from any obligation related to the
Senior Note.
(b) Purchaser's written assumption of the 2001
Subordinated Notes, together with the 2001 Subordinated Noteholders' release of
Seller from any obligation related to the 2001 Subordinated Notes.
(c) Purchaser's written assumption of the 2002
Subordinated Notes, together with the 2002 Subordinated Noteholders' release of
Seller from any obligation related to the 2002 Subordinated Notes.
(d) Purchaser's written assumption of the 2003
Subordinated Note, together with North Coast's release of Seller from any
obligation related to the 2003 Subordinated Note.
(e) The favorable opinion of Purchaser's counsel dated
the Closing Date and in form and substance reasonably satisfactory to Seller's
counsel to the effect that (i) Purchaser has been duly formed and is validly
existing and in good standing in Michigan, (ii) the execution, delivery and
performance of this Agreement and the other documents to be executed and
delivered by Purchaser at the Closing are within the corporate powers of
Purchaser and are not in contravention of any federal or state of Michigan law
or the terms of Purchaser's articles of incorporation or bylaws, (iii) Purchaser
has been duly authorized to enter into this transaction, (iv) this Agreement and
the other documents to be executed and delivered by Purchaser at the Closing
have been duly authorized, executed and delivered by Seller, and (v) this
Agreement and the other documents to be executed and delivered by Purchaser at
the Closing are legal, valid and binding obligations of Purchaser enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other laws of
general application affecting the enforcement of creditors' rights generally.
(f) Purchaser's written assumption of Seller's obligation
to Chelsea State Bank, together with Chelsea State Bank's release of Seller.
(g) A general assignment and assumption agreement
pursuant to which Purchaser shall generally assume the liabilities of Seller
pursuant to Section 2.
(h) Such other and further documents, instruments and
certificates as Seller or its representatives shall reasonably require to carry
out and effectuate the purposes and terms of this Agreement and the transactions
among the parties contemplated in this Agreement.
8. EMPLOYEES. Purchaser agrees to offer employment to all of
Seller's employees.
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9. REPRESENTATIONS AND WARRANTIES. Seller represents, warrants
and covenants to Purchaser as follows:
(a) Seller is a duly organized and validly existing Michigan
corporation in good standing and has the power to execute, deliver and carry out
this Agreement and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement.
(b) There are no claims, disputes, actions, suits,
proceedings, or investigations pending or, to Seller's knowledge, threatened
against or affecting Seller, Seller's business, or the Purchased Assets, except
as listed on SCHEDULE 9(b).
(c) This Agreement is a legal, valid and binding obligation of
Seller, enforceable in accordance with its terms.
These representations and warranties shall survive the Closing.
10. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents, warrants and covenants to Seller as follows:
(a) Purchaser is a duly organized and validly existing
Michigan corporation in good standing and has the power to execute, deliver and
carry out this Agreement and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement.
(b) This Agreement is a legal, valid and binding
obligation of Seller, enforceable in accordance with its terms.
(c) PURCHASER UNDERSTANDS AND AGREES THAT THE PURCHASED
ASSETS, PROPERTIES AND RIGHTS OF SELLER BEING PURCHASED HEREUNDER ARE SOLD,
ASSIGNED, LEASED, TRANSFERRED AND CONVEYED TO PURCHASER IN AN "AS IS" CONDITION
AND ON A "WHERE IS" BASIS, WITHOUT ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED.
(d) Non-Reliance. In connection with its decision to
acquire the Purchased Assets, Purchaser acknowledges that it is not relying upon
any financial projections, budgets or other forward-looking financial data with
respect to the Purchased Assets or the business prepared by or furnished to it
by or on behalf of Seller and that Seller is making no representation or
warranty with respect thereto.
11. FURTHER ASSURANCES. Seller will, at any time and from time to
time, after the Closing, upon request of Purchaser, do, execute, acknowledge and
deliver, all such further acts, deeds, documents, instruments, agreements, etc.,
as may be appropriate, necessary or required to carry out the transactions
contemplated in this Agreement. Purchaser will advance Seller the costs of any
expenses Seller will incur in connection with the foregoing. Purchaser will, at
any time and
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from time to time, after the Closing, upon request of Seller, do, execute,
acknowledge and deliver, all such further acts, deeds, documents, instruments,
agreements, etc., as may be appropriate, necessary or required to carry out the
transactions contemplated in this Agreement. Seller will advance Purchaser the
costs of any expenses Purchaser will incur in connection with the foregoing, or
the Seller's responsibilities under the Agreement.
12. INDEMNIFICATION.
(a) Purchaser hereby indemnifies and agrees to hold Seller
harmless of and from any and all of the Assumed Liabilities.
(b) If any claim is made or if any action is taken against
Seller with respect to any Assumed Liability, Seller shall expeditiously notify
Purchaser, and Purchaser shall have the sole control of and responsibility with
respect to such claim or action, including the right to pay, contest or
compromise such matter. Seller shall cooperate and make available to Purchaser
and its counsel all relevant information in its control and render such other
assistance as Purchaser may deem reasonably necessary in connection with such
matter. If any claim is asserted against Seller by means of a lawsuit or similar
proceeding or action, Purchaser shall be expeditiously notified thereof and
furnished with a copy of the complaint, initial pleading or other document
initiating the action.
(c) Unless and until Purchaser has breached its obligations to
Seller with respect to an Assumed Liability, Seller shall not take any action
with respect to such Assumed Liability, including without limitation, paying
such Assumed Liability, entering into any agreement with respect to such Assumed
Liability, consenting to the entry of any judgment with respect to such Assumed
Liability, or entering into any settlement of such Assumed Liability, except
with the written consent of Seller.
13. ADVICE OF COUNSEL. SELLER ACKNOWLEDGES THAT IT HAS REVIEWED
THIS DOCUMENT IN ITS ENTIRETY, HAVING CONSULTED WITH SUCH LEGAL, ACCOUNTING, TAX
OR OTHER ADVISORS AS IT DEEMS APPROPRIATE AND UNDERSTANDS EACH OF THE PROVISIONS
OF THIS DOCUMENT AND FURTHER ACKNOWLEDGE THAT IT HAS ENTERED INTO THIS DOCUMENT
VOLUNTARILY.
14. ENTIRE AGREEMENT; AMENDMENT. This Agreement sets forth the
entire agreement of the parties. No amendment, modification, rescission, waiver
or release of any provision of this Agreement shall be effective unless the same
is in a writing signed by Purchaser and Seller.
15. COUNTERPARTS; TELECOPIED SIGNATURES. This document may be
executed in any number of counterparts and by different parties to this document
on separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same document.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature.
16. APPLICABLE LAW. This document shall be governed by and
construed in accordance with the laws of the State of Michigan.
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This Asset Purchase Agreement has been executed by the parties as of
March 31, 2004.
NC ACQUISITION CORP. NEMATRON CORPORATION
By: _______________________________ By _______________________________
Xxxx Xxxxx, President
Its: _____________________________
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Exhibit 1 Legal Description of Real Property
Schedule 9(b) Claims
