EXECUTION COPY
ASSET PURCHASE AGREEMENT
among
RT ACQUISITION FLORIDA CORP.,
a Delaware corporation
("Purchaser"),
RTP CORP.,
a Florida corporation,
("Seller")
and
COMPUTER PRODUCTS, INC.,
a Florida corporation
("Parent"),
Dated as of July 5, 1997
TABLE OF CONTENTS
Page No.
DEFINITIONS 1
1.1 Definitions 1
ARTICLE II
SALE AND PURCHASE OF ASSETS 10
2.1 Purchase of Assets 10
2.2 Assignment of Certain Contracts and Permits 12
2.3 Excluded Assets 13
2.4 Assumed Liabilities 13
2.5 Closing 14
2.6 Payment of Purchase Price 14
2.7 Consistent Treatment 17
2.8 Procedures for Purchased Assets not Transferable 17
2.9 Accounts Receivable 18
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER 19
3.1 Due Incorporation; Subsidiaries 19
3.2 Due Authorization 19
3.3 Consents and Approvals 19
3.4 Financial Statements 20
3.5 No Adverse Effects or Changes 20
3.6 Title to Properties 21
3.7 Computer System 21
3.8 Real Property 22
3.9 Personal Property 23
3.10 Inventories 23
3.11 No Third Party Options 23
3.12 Intellectual Property 23
3.13 Contracts 24
3.14 Permits 26
3.15 Insurance 26
3.16 Employee Benefit Plans and Employment Agreements 27
3.17 Employees 27
3.18 Taxes 27
3.19 No Defaults or Violations 28
3.20 Environmental Matters 28
3.21 Litigation 29
3.22 Related Parties 30
3.23 Intercompany Services, Transactions
and Indebtedness 30
3.24 Customers and Suppliers 30
3.25 Product Warranties 31
3.26 Due Diligence Materials 31
3.27 Brokers 31
3.28 Accuracy of Statements 31
3.29 Reserves and Accruals 31
3.30 [intentionally omitted] 31
3.31 Acceleration of Employee Stock Options. 31
3.32 Other Seller Information. 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER 32
4.1 Due Incorporation 32
4.2 Due Authorization 32
4.3 Consents and Approvals 32
4.4 Brokers 33
4.5 Financing and Initial Capitalization 33
ARTICLE V
COVENANTS 33
5.1 Maintenance of Insurance 33
5.2 Supplemental Information 33
5.3 Noncompetition; Confidentiality 34
5.4 Use of Name 35
5.5 Product Liability and Warranty Claims 35
5.6 Access 36
5.7 [intentionally omitted] 36
5.8 Employees 36
5.9 Payroll Transition 36
5.10 Inventory Resale Certificates 36
ARTICLE VI
CLOSING DELIVERIES 37
ARTICLE VII[INTENTIONALLY OMITTED] 38
ARTICLE VIII[INTENTIONALLY OMITTED] 38
ARTICLE IX
INDEMNIFICATION 38
9.1 Survival 38
9.2 Indemnification by Parent and Seller 38
9.3 Indemnification by Purchaser 39
9.4 Claims 40
9.5 Third Party Claims; Assumption of Defense 40
9.6 Exclusive Remedy 41
ARTICLE X
MISCELLANEOUS 42
10.1 Expenses 42
10.2 Amendment 42
10.3 Notices 42
10.4 Effect of Investigation 43
10.5 Waivers 43
10.6 Counterparts 43
10.7 Interpretation 43
10.8 Applicable Law 44
10.9 Binding Agreement 44
10.10 No Third Party Beneficiaries 44
10.11 Publicity 44
10.12 Further Assurances 45
10.13 Severability 45
10.14 Liability of Parent and Seller 45
10.15 Bulk Sales. 45
10.16 Entire Understanding 45
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 5th day of July, 1997, by and among RT
Acquisition Florida Corp., a Delaware corporation ("Purchaser"), RTP Corp., a
Florida corporation ("Seller"), and Computer Products, Inc., a Florida
corporation ("Parent"). Certain capitalized terms used herein are defined in
Article I.
W I T N E S E T H:
WHEREAS, Purchaser wishes to purchase from Seller, and Seller desires to
sell to Purchaser, all of the Purchased Assets (as defined below) subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the following meanings for the
purposes of this Agreement:
"Affiliate" shall mean, with respect to any specified Person, (a) any
other Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person,
(b) any other Person which is a director, officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class or series of
equity securities of the specified Person or a Person described in clause (a) of
this paragraph, or (c) another Person of which the specified Person is a
director, officer or partner or is, directly or indirectly, the beneficial owner
of 10 percent or more of any class of equity securities.
"Agreement" shall mean this Asset Purchase Agreement, including all
exhibits and schedules hereto, as it may be amended from time to time.
"Assigned Contracts" shall have the meaning set forth in Section 2.2.
"Assignment" means the xxxx of sale, assignment, and assumption
agreement to be dated as of the Closing Date, substantially in the form of
Exhibit A attached hereto.
"Assumed Liabilities" shall have the meaning set forth in Section 2.4.
"Assumed Payables" shall mean all trade accounts payable of Seller
outstanding on the Closing Date that (i)arose in the ordinary course of Seller's
business as historically conducted and (ii) are reflected in the Final Closing
Schedule; provided, that the Assumed Payables shall not include any intercompany
obligation to any Affiliate of Seller, other than amounts payable to Heurikon
Corporation and Power Conversion North America for products delivered to Seller
in accordance with Seller's historic ordering and pricing practices and listed
or described in Schedule 3.23. It is agreed that all of the items listed as
Assumed Payables in Schedule 2.4 constitute Assumed Payables.
"Balance Sheet" shall mean the audited balance sheet of Seller dated
January 3, 1997, a copy of which is set forth on Schedule 3.4.
"Business" means the business conducted by Seller as of the date of
this Agreement, including, without limitation, the manufacture and sale of
engineered real-time products used in data acquisition and control systems
(including input/output products and intelligent controllers).
"Business Day" shall mean any day other than (a) any Saturday or Sunday
or (b) any other day on which banks located in Chicago, Illinois generally are
closed for business.
"Closing" shall mean the consummation of the transactions contemplated
herein.
"Closing Date" shall mean July 5, 1997, as of which the Closing shall
be deemed to have occurred.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Computer System" shall have the meaning set forth in Section 3.7.
"Contract" shall mean any contract, lease, commitment, understanding,
sales order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit or license, whether written or oral.
"Controlled Affiliate" shall mean, with respect to any specified
Person, (a) any other Person which, directly or indirectly, is owned or
controlled by such specified Person, or (b) another Person of which the
specified Person is, directly or indirectly, the beneficial owner of 10 percent
or more of any class of equity securities.
"Current Accrued Obligations" shall mean all accrued obligations of
Seller (other than trade accounts payable) as of the Closing Date that (i) are
reflected on the Balance Sheet or have arisen since the date of the Balance
Sheet in the ordinary course of business as historically conducted, (ii) do not
relate to indebtedness for borrowed money, or liabilities with respect to Taxes
(other than Taxes of the types, and in the amounts, expressly set forth in
Schedule 2.4 as being assumed by Purchaser), or any intercompany liability or
any payment due to any Affiliate of Seller or to Pinecrest Capital, Inc. or any
other broker or investment banker, (iii) do not arise under or relate to the
Executive Employment Agreements or any intercompany obligation to any Affiliate
of Seller, (iv) arose in the ordinary course of Seller's business as
historically conducted, and (v) are reflected in the Final Closing Schedule.
Current Accrued Obligations shall not include (and the Final Closing Schedule
shall not reflect as liabilities) (A) obligations under any Contract which has
not been effectively assigned to Purchaser on the Closing Date (unless
arrangements reasonably satisfactory to Purchaser have been made to provide
Purchaser the benefit of such Contract, as contemplated by Section 2.8), (B)
obligations in respect of product warranties or product liability that are the
responsibility of Seller under Section 5.5, (C) liabilities for any tort or
violation of Law that relates to the Pre-Closing Period or (D) any liability
relating to the Pre-Closing Period arising or resulting from the breach of or
default under any Contract (provided, that the exclusion contained in this
clause (D) shall not limit the Purchaser's assumption of the obligation to
perform obligations under the Assigned Contracts with respect to the
Post-Closing Period). It is agreed that all of the items listed as Current
Accrued Obligations in Schedule 2.4, other than the items referenced as being
retained by Seller (which items shall constitute Retained Liabilities),
constitute Current Accrued Obligations. As used herein, the phrases "relates to
the Pre-Closing Period" and "relating to the Pre-Closing Period" shall be
interpreted, for all purposes under this Agreement, in the same manner as set
forth under the definition of Retained Liabilities.
"Environmental Law" shall mean any applicable Laws pertaining to (a)
the protection of the indoor or outdoor environment (including ambient air,
surface water, ground water, land surface or subsurface strata), or pertaining
to the protection of natural resources or the environment; (b) treatment,
storage, disposal, generation, transportation or Release of Hazardous
Substances; (c) air, waste and noise pollution; (d) the protection of wildlife,
marine sanctuaries and wetlands; (e) underground or other storage tanks or
vessels, abandoned or discarded barrels, containers and other closed
receptacles; and including (f) the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") (42 U.S.C. ss. 9601 et seq.), the
Hazardous ") (42 U.S.C. ss. 6901 et seq.), the Clean Water Act (33 U.S.C. ss.
1251 et seq.), the Clean Air Act (33 U.S.C. ss. 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. ss. 7401 et seq.), and the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the
regulations promulgated pursuant to any of the foregoing, and any such
applicable state or local statutes, and the regulations promulgated pursuant
thereto, as such laws have been and may be amended or supplemented through the
Closing Date.
"Environmental Permit" shall mean any permit, license, approval,
consent or other authorization required by or pursuant to any applicable
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Excluded Assets" shall have the meaning set forth in Section 2.3.
"Excluded Cash Accounts" shall have the meaning set forth in Section
2.1(a).
"Executive Employment Agreements" shall mean the five employment
agreements with senior executives of Seller identified as such in Schedule 3.17.
"Final Closing Schedule" shall have the meaning set forth in Section
2.6.
"Financial Statements" shall mean the audited financial statements of
Seller for the fiscal year ended January 3, 1997.
"GAAP" shall mean U.S. generally accepted accounting principles at the
time in effect.
"Governmental Authority" shall mean the government of the United States
or any foreign country, any state or political subdivision thereof, or any
entity, body or authority exercising executive, legislative, judicial,
regulatory, administrative or other governmental functions or any court,
department, commission, board, agency, instrumentality or administrative body of
any of the foregoing.
"Hazardous Substance" means any hazardous substance, material or waste
which is regulated by any Governmental Authority in the jurisdictions in which
Seller conducts business, or the United States, including, without limitation,
petroleum products, asbestos, lead paint, and any material or substance which is
defined as a "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "contaminant," "toxic
waste" or "toxic substance" under any provision of any Environmental Law.
"Human Resources Information System" shall have the meaning set forth
in Section 2.1.
"Intellectual Property"shall have the meaning set forth at Section 2.1.
"Interim Closing Schedule" shall have the meaning set forth in Section
2.6.
"Interim Financial Statements" shall mean the unaudited monthly
financial statements of Seller for each of the months of February, March, April
and May of 1997, consisting of a balance sheet as of the end of such month and
an income statement and statement of cash flows for that month and for the
portion of the calendar year then ended, in each case prepared on a basis
consistent with the Seller's historical practices in preparing such monthly
financial statements.
"Inventories" shall have the meaning set forth in Section 2.1.
"July 11 Payroll" shall have the meaning set forth in Section 5.9.
"Law" shall mean any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, or entered into, agreed or imposed by any
Governmental Authority.
"Lien" shall mean any mortgage, lien, charge, restriction, pledge,
security interest, option, lease or sublease, claim, easement, encroachment or
encumbrance.
"Loss" or "Losses" shall mean all liabilities, losses, costs, claims,
damages, penalties and expenses (including reasonable attorneys' fees and
expenses and investigation and litigation costs incurred in relation to the
indemnified matter or in enforcing such indemnity).
"Material Adverse Change" shall mean a material adverse change in the
business, operations, assets, liabilities, results of operations, cash flows or
condition (financial or otherwise) of Seller or the Business.
"Material Adverse Effect" shall mean a material adverse effect on the
business, operations, assets, liabilities, results of operations, cash flows or
condition (financial or otherwise) of Seller or the Business.
"Material Contracts" shall have the meaning set forth in Section 3.13
hereof.
"Non-Competition Agreements" shall mean the agreements to be executed
and delivered by the officers and directors of Parent and Seller as provided in
Section 5.3.
"Patent and Trademark Assignment" shall mean the assignment of patents
and trademarks included in the Intellectual Property, to be dated as of the
Closing Date, substantially in the form of Exhibit C.
"Permits" shall have the meaning set forth in Section 2.2.
"Person" shall mean any individual, corporation, proprietorship, firm,
partnership, limited partnership, limited liability company, trust, association,
Governmental Authority or other entity.
"Power Conversion North America" shall mean Xxxxxxx-Xxxxxx, Inc., a
Massachusetts corporation and a wholly-owned subsidiary of Parent, doing
business, variously, under the names "Power Conversion North America" or "Power
Conversion America."
"Pre-Closing Period" shall mean, collectively, all time periods
(regardless of their commencement dates) ending upon the completion of the
Closing, which shall be deemed to have been completed as of 11:59:59 p.m., New
York time, on July 4, 1997.
"Post-Closing Period" shall mean, collectively, all time periods
(regardless of their ending dates) commencing after the completion of the
Closing.
"Purchase Price" shall mean $6,250,000, subject to adjustment pursuant
to Section 2.6.
"Purchased Assets" shall have the meaning set forth in Section 2.1.
"Real Property" shall mean, collectively, (a) the real property leased
by Seller and commonly known as 0000 Xxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxx
00000, (b) the office space leased by Seller located at 0000 Xxxxx Xxxxxx
Xxxxxx, XxXxxxx, Xxxxxxxx 00000 and (c) the office space leased by Parent for
the use of Seller located at 00 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxxx,
Xxxxxxxxxxxxx 00000.
"Receivables" shall have the meaning set forth in Section 2.1.
"Release" means any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment or movement through or in the
air, soil, surface water or ground water or other property.
"Remedial Action" means all actions, including any studies,
investigations, capital expenditures and/or operational expenditures, required
by a Governmental Authority or required under any Environmental Law or
voluntarily undertaken, to (a) clean up, remove, treat, or in any other way
ameliorate or address any Hazardous Substances or other substance in the indoor
or outdoor environment; (b) prevent the Release or threat of Release, or
minimize the further Release of any Hazardous Substance so it does not endanger
or threaten to endanger the public health or welfare of the indoor or outdoor
environment; (c) perform preremedial studies and investigations or post-remedial
monitoring and care; or (d) bring a Person into compliance with any
Environmental Law.
"Retained Liabilities" means all debts of, claims against, or
obligations or other liabilities of, Seller or any of its Affiliates, of any
kind or nature (other than Assumed Liabilities), in each case whether absolute
or contingent, known or unknown, in tort, contract, strict liability or under
any other legal theory, to the extent that any of the foregoing relates to the
Pre-Closing Period, including, without limitation:
(a) all liabilities with respect to any Taxes,
including state, local or Federal Taxes (including interest, penalties,
and additions to such Taxes), other than Taxes of the types, and in the
amounts, expressly set forth in Schedule 2.4 as being assumed by
Purchaser (it being understood that all Taxes set forth on Schedule 2.4
that are not expressly being assumed by Purchaser are Retained
Liabilities);
(b) all liabilities arising or resulting from the ownership, operation or
condition of the Real Property, including liabilities for violations of
any Environmental Laws, off-site disposal of Hazardous Substances or
the Release of Hazardous Substances to or from the Real Property;
(c) all liabilities for borrowed funds;
(d) all liabilities, whether expressly stated in or implied by the
provisions of, or arising from any breach of or default under,
any Contracts;
(e) all warranty, product liability or other claims for products of Seller
manufactured prior to or on the Closing Date, whether or not sold prior
to the Closing Date, except to the extent that Purchaser is responsible
therefor as set forth in Section 5.5;
(f) all intercompany liabilities of Seller to any Affiliate of Seller
except those which are expressly referred to in the definition
of "Assumed Payables";
(g) all liabilities to the employees of Seller, including all
employee compensation and benefit obligations and any claims with
respect to termination of employment, other than the employee
compensation and benefit obligations of the types, and in the amounts,
set forth on Schedule 2.4 as being assumed by Purchaser (it being
understood that all employee compensation and benefit obligations set
forth on Schedule 2.4 that are not expressly being assumed by Purchaser
are Retained Liabilities);
(h) all outstanding and uncleared checks, drafts and other payment
instruments drawn against any of the Excluded Cash Accounts; and
(i) all liabilities arising or resulting from the operation of the
Purchased Assets or any business carried on by Seller or, with respect
only to any Purchased Assets heretofore owned in the name of Parent, by
Parent, during the Pre-Closing Period, including, without limitation,
liabilities arising or resulting from any tort, violation of any Law or
breach of any Contract.
As used herein, any of the foregoing debts, claims against, obligations
or other liabilities of Seller or any of its Affiliates "relate to" the
Pre-Closing Period if such item arose from, as a result of, or in connection
with, (A) any fact, condition, event or occurrence existing at any time during
the Pre-Closing Period regardless of when such item was discovered or alleged to
be discovered by any Person, (B) any act or omission to act on the part of
Seller or any of its Affiliates (as the case may be) that, respectively, took
place or should have taken place at any time during the Pre-Closing Period,
regardless of whether such act or omission was in connection with any
contractual arrangement or other transaction, tort, violation of or other
failure to comply with any Law, or otherwise, and regardless of when such item
was discovered or alleged to be discovered by any Person, or (C) any legal
action or proceeding based upon any matter described in the preceding
sub-clauses (A) and (B) regardless of when such action or proceeding was
commenced. In furtherance of the intent of the parties hereto, and not in
limitation of the foregoing, it is understood that the entire definition of
"Retained Liabilities" is meant to operate as a mechanism to allocate between
Seller and Parent, on the one hand, and Purchaser on the other hand, certain
Losses relating to the conduct of the Business during, respectively, the
Pre-Closing Period and the Post-Closing Period. To the extent that any such Loss
cannot readily be allocated solely to the Pre-Closing Period because Purchaser's
acts or omissions during the Post-Closing Period are found to have increased,
exacerbated, or contributed to the related debt, claim, obligation or other
liability, then that portion of the total amount of such debt, claim, obligation
or other liability that is proportional to the degree of Purchaser's
responsibility therefor shall not constitute a Retained Liability and shall,
instead, constitute an Assumed Liability.
"Seller's Plans" shall have the meaning set forth in Section 3.16.
"Subordination Agreement" shall mean that certain Subordination
Agreement dated as of the date hereof between Purchaser's senior lender or
lenders and Seller.
"Subordinated Note" shall mean the unsecured, non-transferable
subordinated note of Purchaser, in the form of Exhibit E hereto, to be executed
and delivered by Purchaser at Closing in partial payment of the Purchase Price,
as provided by Section 2.6(a) hereof.
"Supply Agreement" shall mean an agreement by and among Purchaser,
Parent, Power Conversion North America, Computer Products Asia-Pacific Limited,
a Hong Kong corporation, and Heurikon Corporation, a Wisconsin corporation, in
the form of Exhibit F hereto.
"Tax Return" shall mean any report, return or other information
required to be supplied to a Governmental Authority in connection with any
Taxes.
"Taxes" shall mean all taxes, charges, fees, duties (including customs
duties), levies or other assessments, including without limitation, income,
gross receipts, net proceeds, ad valorem, turnover, real and personal property
(tangible and intangible), sales, use, franchise, excise, value added, stamp,
leasing, lease, user, transfer, fuel, excess profits, occupational, interest
equalization, windfall profits, severance, license, payroll, environmental,
capital stock, disability, employee's income withholding, other withholding,
unemployment and Social Security taxes, which are imposed by any Governmental
Authority, and such term shall include any interest, penalties or additions to
tax attributable thereto.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Purchase of Assets. Subject to the terms and conditions of this
Agreement, at the Closing, Seller and Parent shall sell, assign, convey,
transfer and deliver to Purchaser, and Purchaser shall purchase, acquire and
take assignment and delivery of, the Purchased Assets. The "Purchased Assets"
shall mean all assets of Seller (other than the Excluded Assets) and certain
specified assets used by Seller but owned or leased by Parent as set forth in
Schedule 3.22, as the case may be, in each case, wherever located and in
whatever form, real, personal, tangible or intangible, including, without
limitation, all right, title and interest of Seller in and to the following:
(a) Cash. All cash on hand held by Seller as "xxxxx cash" but excluding
all of the following (collectively, "Excluded Cash Accounts"):
certificates of deposit, bank deposits and other cash equivalents
(including all receipts deposited but not yet cleared or credited),
together with all accrued interest thereon, and all rights in all
lockbox, deposit, checking, payroll and other bank accounts of Seller.
All unpaid checks or other items that, in accordance with Seller's
historic accounting practices, constitute "negative" cash items shall
constitute Retained Liabilities.
(b) Receivables. All accounts receivable, notes receivables and other
receivables arising from the operation of the Business as of the
Closing Date (the "Receivables").
(c) Inventories. All inventories, wherever located, including all raw
materials, work in process, finished goods and supplies inventories
(the "Inventories").
(d) Prepaid Items. All rights of Seller under prepaid items (excluding
rights of Seller under prepaid insurance policies, which shall
constitute Excluded Assets).
(e) Real Property. Seller's and Parent's leasehold estate in the Real
Property, together with all leasehold improvements owned by Seller or
by Parent, as the case may be.
(f) Equipment. All machinery, equipment, furniture, telephones, tools,
dies, molds, plugs, castings, spare and replacement parts, tooling,
supplies, maintenance equipment, computer equipment, materials and
other personal property located or usually located at the Real
Property or otherwise used in connection with the Business, including
those items listed on Schedule 2.1(f).
(g) Vehicles. All trucks, trailers, automobiles and other vehicles used in
connection with the Business, including those vehicles listed on
Schedule 2.1(g).
(h) Information and Records. All records, files, notebooks, confidential
and nonconfidential information (including electronic information),
price lists, marketing information, sales records, customer lists and
files (including customer credit and collection information),
personnel and labor relations records, employee benefits and
compensation plans and records, environmental control, monitoring and
test records, plats and surveys of the Real Property, plans and
designs of buildings, structures, fixtures and equipment, historical
and financial records and files, and all other proprietary
information, in each case, to the extent related to, or used (whether
by Seller or by Parent) in connection with, the Business (but
excluding legal, accounting and income tax records). Parent and Seller
may retain copies of all records delivered to Purchaser, subject to
the provisions of Section 5.3.
(i) Intellectual Property. Subject to the provisions of Section 2.8, the
name "RTP Corp." and any derivation of the foregoing, and all other
tradenames, trade dress, corporate names and logos, trademarks,
service marks, patents, copyrights (and any registrations with any
Governmental Authority of, and applications for registration pending
with respect to, any of the foregoing), trade secrets, mask works,
technology, inventions, processes, designs, know-how, computer
software and data, formulas, goodwill, any licenses related to any of
the foregoing, and all other intangible assets related to the
Business, including (without limitation) those items described on
Schedule 2.1(i), including such rights to xxx and recover for past
infringement or misappropriation thereof and to receive all income,
royalties, damages and payments for past and future infringements
thereof (collectively, the "Intellectual Property").
(j) Permits. Subject to the provisions of Section 2.8, all licenses,
permits, variances, interim permits, permit applications, approvals or
other authorizations under any Law applicable to the Business or
otherwise required in connection with the Business or the ownership or
operation of the Purchased Assets, including those listed on Schedule
2.1(j) (the "Permits").
(k) Phone Numbers, Website, Etc.. The phone numbers (000) 000-0000 and
facsimile numbers (000) 000-0000, the world wide web address
"xxxx://xxx.xxxxxxx.xxx, and all websites associated therewith, and
the e-mail addresses which have the ending "@xxxxxx.xxx.xxxxxx.xxx",
and the mailbox associated therewith, but, in each case, only to the
extent that Seller has any right to convey an interest in such items.
(l) Other Assets. To the extent not included in the foregoing, any assets
which were included in the Balance Sheet (other than assets disposed
of in the ordinary course of business since the date of the Balance
Sheet) or acquired after the date of the Balance Sheet, all other
assets of Seller (except for Excluded Assets) and the other assets
owned or leased by Parent that are used by Seller as set forth in
Schedule 3.22, including the Assigned Contracts and any warranties or
other rights, claims, demands or causes of action relating to the
Purchased Assets.
(m) Human Resources Information System. The software licensed from Abra
Software, Inc., and the employee information database and related
files and records heretofore maintained, by Parent on behalf of Seller
with respect to Seller's employees (the "Human Resources Information
System").
2.2 Assignment of Certain Contracts and Permits. Subject to the terms and
conditions of this Agreement, Seller or Parent, as the case may be, shall assign
and transfer to Purchaser, effective as of the Closing Date, all right, title
and interest in, and Purchaser will take assignment of (and shall assume as
provided in Section 2.4), the following (the "Assigned Contracts"):
(a) Personal Property Leases. The leases of equipment, machinery,
vehicles, computer software and hardware, and other personal property
set forth on Schedule 2.2(a).
(b) Purchase Orders and Contracts. All Contracts for the purchase of goods,
materials or services set forth on Schedule 2.2(b).
(c) Customer Contracts. All contracts for the sale of goods or services
relating to the Business which are listed on Schedule 2.2(c), and all
customer deposits made under such Contracts.
(d) Other Contracts. Those other Contracts listed on Schedule 2.2(d) and
such other Contracts as shall be entered into between the date hereof
and the Closing Date in the ordinary course of business and which, in
the case of any contract involving total payments of $10,000 or more
over the life thereof, shall be expressly accepted and approved in
writing by Purchaser prior to the Closing.
2.3 Excluded Assets. Notwithstanding the foregoing, Seller shall not assign
and transfer, and Purchaser shall not take assignment of, any Contract (a)
listed on Schedule 2.3 or (b) not referred to in Section 2.2. Such Contracts,
together with the rights of Seller under prepaid insurance policies, the rights
of Seller under this Agreement, all inter-company receivables not included in
the Final Closing Schedule, the Excluded Cash Accounts and the other assets of
Seller listed on Schedule 2.3 (collectively the "Excluded Assets") shall be
retained by Seller and are not being sold or assigned to Purchaser hereunder.
2.4 Assumed Liabilities. At the Closing, Purchaser shall assume, and agree
to pay, perform, fulfill and discharge in accordance with their respective
terms, the following liabilities of Seller, or, in the case of the Assigned
Contracts only, of Parent (the "Assumed Liabilities"), and no others:
(a) the Assumed Payables, including those listed on Schedule
2.4;
(b) The Current Accrued Obligations, including those listed
on Schedule 2.4;
(c) obligations that are required to be performed and that
accrue after the Closing Date under the Assigned Contracts, but only to
the extent that (i) all rights of Seller or Parent, as the case may be,
under the Contract to which the Assumed Liability relates are
effectively assigned to Purchaser on the Closing Date (unless
arrangements reasonably satisfactory to Purchaser have been made to
provide Purchaser with the benefit of such Contract as contemplated by
Section 2.8), and (ii) such Assumed Liabilities do not constitute (A)
indemnities, warranties, service or other obligations relating to
matters occurring on or before the Closing Date (except to the extent
of warranty claims reserved against in the Final Closing
Schedule),(B)liabilities for any tort or violation of Law that relates
to the Pre-Closing Period, or (C) any liability relating to the
Pre-Closing Period arising or resulting from the breach of or default
under any Assigned Contract (provided, that the exclusion contained in
this clause (C) shall not limit the Purchaser's assumption of the
obligation to perform obligations under the Assigned Contracts with
respect to the Post-Closing Period); and
(d) with respect to any warranty claim for goods manufactured
or sold by Seller on or before the Closing Date to the extent, but only
to the extent, that Purchaser assumes responsibility for such claim
under Section 5.5 below.
Except as specifically set forth above, neither Purchaser nor any of its
Affiliates shall assume or otherwise be liable in respect of any debt, claim,
obligation or other liability of Seller or any of its Affiliates whatsoever. As
used herein, the phrases "relates to the Pre-Closing Period" and "relating to
the Pre-Closing Period" shall be interpreted, for all purposes under this
Agreement, in the same manner as set forth under the definition of Retained
Liabilities.
To the extent that any of the Assumed Liabilities are required by law
to be paid by Seller or Parent, Purchaser shall provide to Seller or Parent, as
applicable, a reasonable period of time prior to the date such payment is due,
funds sufficient to make such payment.
2.5 Closing. The Closing shall take place at a location in Chicago,
Illinois, mutually acceptable to Purchaser and Seller on July 7, 1997, or such
other date mutually acceptable to Purchaser and Seller. Upon consummation of the
Closing, all transactions contemplated hereby shall be deemed to have taken
place at, and shall be effective as of, 12:01 a.m., Eastern Daylight Time, on
July 5, 1997.
2.6 Payment of Purchase Price.
(a) In consideration for the transfer of the Purchased
Assets, Purchaser shall pay to Seller the sum of $3,500,000.00 (subject
to adjustment in accordance with this Section 2.6), representing the
cash portion of the Purchase Price, by electronic bank transfer in
accordance with Seller's written instructions to be delivered at least
two Business Days prior to the Closing. At Closing, Purchaser shall
also deliver the Subordinated Note in the principal amount of
$2,750,000.00 (subject to adjustment in accordance with Section 2.6),
representing the balance of the Purchase Price. Purchaser may offset
against the Subordinated Note any amount due under Section 9.2, or 2.9
in accordance with such sections. The Purchaser shall not be entitled
to any recovery under Section 9.2 in respect of any Loss if, and only
to the extent that, the condition or event giving rise to such Loss is
reflected in the calculation of a Purchase Price Adjustment pursuant to
Section 2.6(e) or recovery is made pursuant to Section 2.9.
(b)Prior to the Closing, Seller shall prepare the
initial draft of, and Purchaser and Seller shall agree in good faith
on, an interim Closing Schedule (the "Interim Closing Schedule")
setting forth the estimated net book value, as of May 30, 1997, of the
Purchased Assets and Assumed Liabilities determined in accordance with
GAAP (including working capital items, and including reserves and
accruals established in accordance with GAAP and consistent with past
practice), with the following adjustments: (i) all unpaid checks or
other items that, in accordance with Seller's historic accounting
practices, constitute "negative" cash items shall constitute Retained
Liabilities and (ii) all items listed on Schedule 2.4 as adjustments
for liabilities being retained by Seller shall constitute Retained
Liabilities. The Interim Closing Schedule shall be the basis for
determining the cash payment and the amount of the Subordinated Note to
be delivered at Closing. Within sixty (60) days after the Closing,
Purchaser shall deliver to Seller a revised schedule setting forth the
net book value, as of the Closing Date, of the Purchased Assets and
Assumed Liabilities determined in accordance with GAAP (including
working capital items, and including reserves and accruals established
in accordance with GAAP and consistent with past practice), and
adjusted on the same basis as the Interim Closing Schedule. Seller and
its representatives, including Seller's accountants, will be given the
opportunity to observe all physical inventories, which Purchaser hereby
notifies Seller shall begin at 9:00 a.m. on July 14, 1997, taken in
connection with preparation of such post-Closing schedule. The
post-Closing schedule delivered by Purchaser pursuant to this section
shall be audited and accompanied by a report of Xxxxxx Xxxxxxxx LLP,
Purchaser's independent accountants ("Purchaser's Auditors") to the
effect that such schedule and any related notes thereto were prepared
in accordance with GAAP and this Agreement. In rendering the foregoing
audit and report, Purchaser's Auditors shall permit Xxxxxx Xxxxxxxx
LLP, Seller's independent accountants ("Seller's Auditors") to review,
at their request, the report of Purchaser's Auditors, including all
work papers, schedules and calculations related thereto prior to the
issuance thereof.
(c) If Seller does not dispute such audited
post-Closing schedule and report, such audited post-Closing schedule
shall be the "Final Closing Schedule". If Seller disputes such audited
schedule or any item included therein, such dispute shall be resolved
in the following manner:
(i) Seller shall notify Purchaser in writing within
sixty (60) days after Seller's receipt of the audited
schedule, which notice shall specify in reasonable detail the
nature of the dispute;
(ii) during the sixty (60) day period following
Purchaser's receipt of such notice, Purchaser and Seller shall
attempt to resolve such dispute;
(iii) if at the end of such 60 day period Seller and
Purchaser shall have failed to resolve such dispute in
writing, the matter shall be referred to the offices of a
referee having expertise in financial, accounting and
acquisition matter jointly selected by Seller's Auditors and
Purchaser's Auditors (the "Referee"). The Referee shall act as
an arbitrator and shall issue its report resolving all
disputes as to the audited schedule within sixty (60) days
after such dispute is referred to it. The audited schedule, as
modified by any adjustments determined to be appropriate by
the Referee, shall then be the Final Closing Schedule. Each of
the parties hereto shall bear all costs and expenses incurred
by it in connection with such arbitration, except that the
fees and expenses of the Referee hereunder shall be borne
equally by Seller and Purchaser. This provision for
arbitration shall be specifically enforceable by the parties.
The decision of the Referee in accordance with the provisions
hereof shall be final and binding (absent manifest error) and
there shall be no right of appeal therefrom; and
(iv) Upon the final determination of the Final
Closing Schedule, any required adjustments to the amounts paid
or the Subordinated Note delivered by Purchaser at Closing
shall be made as provided in the last sentence of Section
2.6(e).
(d) From the Closing Date until the final determination of the
Final Closing Schedule, each party will grant to the other and its
respective representatives reasonable access during usual business
hours to the agents and employees of such party and to the books,
records and files of the business in its possession to enable such
party to review and otherwise satisfy itself as to the accuracy of the
Final Closing Schedule and the preparation thereof.
(e) The amount of the Purchase Price shall be increased or
reduced, dollar for dollar for the amount by which the aggregate
adjusted net book value of the Purchased Assets and Assumed
Liabilities, as reflected on the Interim Closing Schedule and the Final
Closing Schedule, is greater or less than $7,404,000. The first
$1,000,000 of any increase to be made pursuant to this Section 2.6(e)
shall be paid in cash, and the balance of any such increase shall be
added to the principal amount of the Subordinated Note. The amount of
any reduction to be made pursuant to this Section 2.6(e) shall be first
applied to reduce the cash portion of the Purchase Price, until such
cash portion shall have been reduced to $2,000,000. Any remaining
amount of the reduction to be made pursuant to this Section 2.6(e)
shall be applied to reduce the principal amount of the Subordinated
Note. If any adjustment to the Interim Closing Schedule is made
pursuant to the Final Closing Schedule, then the principal amount of
the Subordinated Note shall be adjusted, to the extent required, and/or
Seller or Purchaser shall make the required cash payment to the other,
so that the net amount of cash paid to Seller and the amount of the
Subordinated Note are equal to the amounts that would have been in
effect had the Final Closing Schedule been delivered at the Closing in
lieu of the Interim Closing Schedule, and such adjustments shall be
retroactive to, and effective as of, the Closing Date.
2.7 Consistent Treatment. The parties shall allocate the purchase price
among the Purchased Assets and the covenant not to compete set forth in Section
5.3 in accordance with Schedule 2.7 (which shall be prepared in a manner
consistent with Section 1060 of the Code), treat and report the transactions
contemplated by this Agreement in all respects consistently with such allocation
for purposes of any Taxes and the filing of all Tax Returns, including without
limitation Internal Revenue Service Form 8594, and not take any action
inconsistent with such obligation.
2.8 Procedures for Purchased Assets non Transferable. If, either by virtue
of the provisions thereof or under applicable law, any of the Contracts or any
other property or rights included in the Purchased Assets are not assignable or
transferable without the consent of some other Person, Seller and, in the case
of any Contracts or Purchased Assets owned, licensed or leased by Parent but
used by Seller, Parent shall use all commercially reasonable efforts to obtain
such consent prior to the Closing Date and Purchaser shall use all commercially
reasonable efforts to assist in that endeavor. If any such consent cannot be
obtained prior to the Closing Date and the Closing occurs, this Agreement and
the related instruments of transfer shall not constitute an assignment or
transfer thereof, but Seller and, in the case of any Contracts or Purchased
Assets owned, licensed or leased by Parent but used by Seller, Parent shall use
all commercially reasonable efforts to obtain such consent as soon as possible
after the Closing Date or otherwise obtain for Purchaser the practical benefit
(and Purchaser shall be responsible for the related obligations) of such
property or rights and Purchaser shall use all commercially reasonable efforts
to assist in that endeavor.
2.9 Accounts Receivable. (a) On the six-month anniversary of the Closing
Date, Seller shall repurchase from Purchaser, if requested by Purchaser, all
Receivables which have not been collected as of such date, for the amount, if
any, by which the net value of the Receivables (after reserves), as stated on
the Final Closing Schedule, exceeds the amount collected by Purchaser on such
Receivables on or before the six-month anniversary of the Closing Date. The
purchase price for such Receivables shall be paid one-half in cash, by wire
transfer of immediately available funds to an account designated by Purchaser,
and one-half by a reduction of the principal amount of the Subordinated Note. At
all times prior to and after such repurchase by Seller, Purchaser shall have
sole control over the collection of all Receivables, and neither Parent, Seller
nor any of their employees or agents shall contact any account debtor with
respect to any such Receivables or make any other effort to collect the same.
Purchaser shall exercise collection practices consistent with the historical
collection practices of Seller in collecting such Receivables. After the payment
by Seller of the full amount due to Purchaser hereunder, Purchaser shall deliver
to Seller, as received, cash equal to one-half of any amounts thereafter
actually collected with respect to Receivables for which Seller has made payment
to Purchaser hereunder and shall retain the other one-half of such collections,
and the principal amount of the Subordinated Note shall be increased dollar for
dollar by all collections so retained by Purchaser. In applying payments to
Receivables, any customer designation shall be controlling; provided that
Purchaser shall not attempt to influence any customer designation of the invoice
to which a payment is applicable. If the customer fails to designate the invoice
to which a payment is applicable, and if the invoice to which payment relates is
not otherwise readily determinable (based on the amount of the payment or
otherwise), then payment shall be allocated pro rata to all outstanding
undisputed invoices to such customer. The Purchaser shall not settle,
compromise, reduce the amount of or extend the time for payment of any invoice
existing as of the Closing Date except in the ordinary course of business and
consistent with the Seller's prior practice.
(b) Seller shall co-operate with Purchaser in notifying account debtors
to make payments of receivables outstanding at the Closing Date to make payments
to an account designated by Purchaser. If any such receivables are paid to or
received by Seller or Parent, Seller and Parent shall hold the proceeds of such
receivables in trust, for the benefit of Purchaser, and shall remit such
proceeds by wire transfer to Purchaser's senior lender at such times as
Purchaser may request, but no less often than weekly. All such wire transfer
costs shall be borne by Purchaser. At the request of Purchaser, Seller shall
enter into reasonable agreements with Purchaser's senior lender to evidence
Purchaser's ownership of such proceeds and perfect such senior lender's security
interest therein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
Parent and Seller jointly and severally represent and warrant to
Purchaser, as of the date of this Agreement, as follows:
3.1 Due incorporation; Subsidiaries. Parent and Seller are duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation, and possess all requisite power and authority to
own, lease and operate their respective properties and to carry on their
respective businesses as they are now being owned, leased, operated and
conducted. Seller is duly licensed or qualified to do business and in good
standing as a foreign corporation in each jurisdiction where the nature of the
properties owned, leased or operated by it or the Business requires such
licensing or qualification, except where the failure to be so qualified would
not have a Material Adverse Effect on the Purchased Assets or the Business.
3.2 Authorization. Parent and Seller have full power and corporate
authority to enter into this Agreement and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by
Parent and Seller of this Agreement have been duly and validly approved by all
necessary corporate action. Parent and Seller have duly and validly executed and
delivered this Agreement. This Agreement constitutes the legal, valid and
binding obligation of Parent and Seller, in each case enforceable in accordance
with its terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or
similar laws in effect which affect the enforcement of creditors' rights
generally, or (b) by equitable limitations on the availability of specific
remedies.
3.3 Consents and Approvals. No consent, authorization or approval of,
filing or registration with, any Governmental Authority or any other Person not
a party to this Agreement is necessary in connection with the execution,
delivery and performance by Parent and Seller of this Agreement and the
consummation by Parent and Seller of the transactions contemplated hereby or
thereby, or otherwise necessary with respect to the Purchased Assets, other than
(a) the consents set forth on Schedule 3.3 and (b) filings and consents that may
be required under any Environmental Law necessitated by the transactions
contemplated herein. Except for matters set forth in Schedule 3.3, the
execution, delivery and performance by Seller and Parent of this Agreement does
not and will not (i) violate or conflict with, result in a breach or termination
of, constitute a default under, or permit cancellation of any Assigned Contract,
(ii) result in the creation of any Lien upon any of the Purchased Assets, or
(iii) violate or conflict with any provision of the Certificate of Incorporation
or By-laws of Seller or Parent.
3.4 Financial Statements. (a) The Financial Statements have been prepared
in accordance with GAAP consistently applied and (b) the Interim Financial
Statements have been prepared on a basis consistent with Seller's historical
practices in preparing its unaudited monthly statements. The Financial
Statements present fairly the financial position, assets and liabilities of
Seller as of the dates thereof and the revenues, expenses, results of operations
and cash flows of Seller for the periods covered thereby. The Financial
Statements and the Interim Financial Statements are derived from the books and
records of Seller, and do not reflect any transactions which are not bona fide
transactions. To the knowledge of Seller and Parent, except as set forth in
Schedule 3.4, in the Financial Statements or in the Interim Financial
Statements, the Seller has no liabilities, debts, claims or obligations, whether
accrued, absolute, contingent or otherwise, whether due or to become due, other
than trade payables, obligations or liabilities under Contracts and accrued
expenses, in each case incurred in the ordinary course of business since January
3, 1997.
3.5 No Adverse Effects or Changes. Except as listed on Schedule 3.5, since
January 3, 1997 Seller and, with respect to Contracts or Purchased Assets owned,
licensed or leased by Parent but used by Seller, Parent have not (a) suffered
any damage or destruction to, or loss of, any of its respective assets or
properties (whether or not covered by insurance); (b) permitted the imposition
of a Lien on, or disposed of, any of its respective assets (other than Excluded
Assets or sales of Inventories in the ordinary course of business, consistent
with past practice); (c) terminated, modified or entered into any Material
Contract; (d) canceled, waived, released or otherwise compromised any trade
debt, receivable or claim exceeding $25,000 individually or $100,000 in the
aggregate; (e) made or committed to make any capital expenditures or capital
additions or betterments in excess of $25,000, whether individually or as a part
of related transactions; (f) entered into, adopted, amended or terminated any
bonus, profit sharing, compensation, termination, stock option, stock
appreciation right, restricted stock, performance unit, pension, retirement,
deferred compensation, employment, severance or other employee benefit
agreements, trusts, plans, funds or other arrangements for the benefit or
welfare of any director, officer or employee, or increased in any manner the
compensation or fringe benefits of any director, officer or employee or paid any
benefit not required by any existing plan and arrangement or entered into any
contract, agreement, commitment or arrangement to do any of the foregoing; (g)
disposed of or permitted the lapse in registration of any Intellectual Property;
(h) made any significant changes in its accounting methods or policies;(i)
incurred indebtedness that would be an Assumed Liability (other than for trade
payables in the ordinary course of business); (j) amended its charter documents;
or (k) otherwise experienced a Material Adverse Change.
3.6 Title to Properties. Except as disclosed on Schedule 3.6, Seller or
Parent, as the case may be, has good title to, and is the lawful owner of, the
Purchased Assets (other than the Real Property and the other property shown as
leased on Schedule 3.6). The Purchased Assets include all of the tangible and
intangible assets, properties and rights used in connection with or material to
the Business (other than assets leased under the leases set forth on Schedules
2.2(a) or 3.6 and Inventories disposed of in the ordinary course of business
since the date of the Balance Sheet) and all of the tangible and intangible
assets, properties and rights reflected in Seller's Balance Sheet. Except as set
forth in Schedule 3.6, (x) no other person (including Parent or any of its
Affiliates), owns any assets, properties or rights relating to the Business or
performs or furnishes services for the benefit of the Business, and (y) no other
person (including Parent or any of its Affiliates) is a party to or otherwise
enjoys rights under any Contract or other arrangement under which such person
receives benefits on behalf of Seller that pertain to the operation of Seller or
the Business. Except as set forth on Schedule 3.6, all tangible property of
Seller is located at the Real Property.
3.7 Computer System. Except as disclosed in Schedule 3.7, all computer
hardware and software and related materials used by Seller, other than the
"Hyperion" software which will not be assigned to Purchaser (collectively,
"Computer System") are in good working order and condition, normal wear and tear
excepted, and Seller is not experiencing any significant defects in design,
workmanship or material with respect to the Computer System. To the knowledge of
Parent and Seller, the use of the Computer System by the Business (including any
software modifications) (a) has not violated or infringed upon and will not
violate or infringe upon the rights of any third parties and (b) has not
resulted in the termination of any maintenance, service or support agreement
relating to any part of the Computer System or any reduction in the services
provided to the Business, warranties available to the Business or rights of the
Business thereunder. Seller has, and at the Closing will transfer to Purchaser,
copies of any user and service documentation in Seller's or Parent's possession
for the Computer System.
3.8 Real Property
(a) Seller does not own any real estate. Seller operates the
Business at the Real Property and at no other locations. Neither Seller
nor Parent has any knowledge of any pending or threatened eminent
domain or condemnation proceeding with respect to the Real Property or
any portion thereof. Neither Seller nor Parent is a party to any lease
of any real property used in connection with the Business, whether as
lessor or as lessee, except as set forth on Schedule 3.8. To the
knowledge of Parent and Seller, no notice has been received from any
Governmental Authority requiring or advising the need for any repair,
alteration, restoration, improvement or Remedial Action in connection
with the Real Property that has not been fully complied with. Other
than its respective leasehold interests in the Real Property, neither
Seller nor Parent has any interests in any other real property used in
connection with the Business.
(b) All contractors, subcontractors, suppliers, architects,
engineers, and others who have performed services or labor or have
supplied materials on behalf of Seller or Parent, as the case may be,
in connection with the Real Property have been paid in full and all
Liens arising therefrom (or claims which with the passage of time or
the giving of notice, or both, could mature into Liens) have been
satisfied and released.
(c) The leases set forth on Schedule 3.8 cover all of the real
estate leased, used or occupied by Seller in connection with the
Business. Each of the leases set forth on Schedule 3.8 is in full force
and effect and Seller or Parent, as applicable, holds a valid and
existing leasehold interest under each of such leases. Seller and
Parent, as applicable, are not in default, and no circumstances exist
which would result in such default (including upon the giving of notice
or the passage of time, or both), under any of such leases, and no
other party to such leases has the right to terminate, accelerate
performance under or otherwise modify any of such leases. To the
knowledge of Seller and Parent, no lessor under any such lease is in
default under any of such leases in its duties to the lessee. Neither
Seller nor Parent, as the case may be, has assigned, transferred,
conveyed, or otherwise encumbered any interest in any of the leases set
forth on Schedule 3.8.
(d) Except as described in Schedule 3.8, there is no current
dispute between Seller or Parent, as the case may be, and the landlords
under its respective leases of the Real Property, and Seller or Parent,
as the case may be, is not currently obligated to perform any work,
expend any funds, or reimburse the landlord for any expenditures, under
Seller's or Parent's, as the case may be, lease of the Real Property,
other than regularly scheduled payments of basic rent, taxes and
insurance thereunder.
3.9 Personal Property. Except as disclosed on Schedule 3.9, all of the
tangible assets (whether owned or leased) included in the Purchased Assets are
in the aggregate in good operating condition and repair (normal wear and tear
excepted).
3.10 Inventories. Except as described on Schedule 3.10, the Inventories of
Seller are of merchantable quality, usable and saleable in the ordinary course
of business, except to the extent of obsolete or slow-moving items which have
been written down to net realizable value on the Balance Sheet or for which
adequate reserves have been established on the Balance Sheet. None of the
Inventories of Seller are held on assignment or consignment. The Inventories are
fairly reflected on the Balance Sheet, after giving effect to all reserves, and
are valued at the lower of cost or market. Other than as set forth in Schedule
3.10, Seller is not under any obligation with respect to the return of any
Inventories. All of the Inventories are located at the Real Property.
3.11 No Third Party Options. There are no agreements, options, commitments
or rights with, of or to any Person (other than Purchaser) to acquire any of
Seller's assets, properties or rights or shares (or any of Parent's assets used
by Seller in connection with the Business) except for those Contracts entered
into for the sale of Inventories in the ordinary course of business, consistent
with past practice.
3.12 Intellectual Property. Schedule 2.1(i) includes a true and complete
list of all of the Intellectual Property used in the conduct of the Business of
the following types: trade names, corporate names and logos, trademarks, service
marks, patents, copyrights (and any registrations with any Governmental
Authority of, and applications for registration pending with respect to, any of
the foregoing), computer software, and any licenses related to the foregoing.
Except as disclosed on Schedule 3.12 or Schedule 2.1(i):
(a) All of the Intellectual Property, other than Intellectual
Property shown as licensed by Seller or by Parent on Schedule 2.1(i),
is owned by Seller or by Parent, as the case may be, free and clear of
all Liens, and is not subject to any license, royalty or other
agreement, and neither Seller nor Parent, as the case may be, has
granted any license or agreed to pay or receive any royalty in respect
of any of the Intellectual Property. All of the Intellectual Property
shown as licensed by Seller or by Parent on Schedule 2.1(i) is held by
Seller or by Parent, as the case may be, pursuant to valid and
effective license agreements, all royalties and other amounts required
to be paid thereunder prior to the date hereof have been paid, and true
and complete copies of all such license agreements and all other
agreements related thereto have been delivered to Purchaser. All
registration and maintenance fees that have become due and payable to
any Governmental Authority with respect to any Intellectual Property
for which a registration has been issued have been paid and no act or
omission of Seller or Parent has occurred to cancel, impair, dedicate
to the public or entitle any Governmental Authority to cancel, modify,
forfeit or hold abandoned any such Intellectual Property.
(b) To the knowledge of Parent and Seller, the
products manufactured or sold by Seller and any process, method, part,
design, material or other Intellectual Property they employ, and the
marketing and use by Seller of any such product, service or other
Intellectual Property, do not infringe any Intellectual Property or
confidential or proprietary rights of another. Neither Seller nor
Parent has received any notice contesting its right to use any
Intellectual Property. To the knowledge of Parent and Seller, no
products manufactured or activities conducted by any other Person
infringe on the Intellectual Property.
3.13 Contracts
(a) All of the Assigned Contracts are in full force and
effect and constitute the legal, valid and binding obligations of
Seller or of Parent, as the case may be, and, to the knowledge of
Seller and Parent, the other parties thereto. All of the Assigned
Contracts are enforceable in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the
rights of creditors generally and by equitable limitations on the
availability of specific remedies. No termination notice has been
delivered by any party to any other party with respect to any Assigned
Contract. Seller and Parent have delivered to Purchaser true and
complete copies of each Assigned Contract and a complete and accurate
written description of any Assigned Contract not reduced to writing.
(b) Schedule 3.13 lists all the Contracts and
arrangements of the following types to which Seller or, in the case of
Contracts to which Parent is a party in lieu of Seller and which relate
to the Business, Parent is a party, by which it is bound, or to which
any of its assets or properties is subject (collectively, the "Material
Contracts", and each a "Material Contract"):
(i) any collective bargaining or other labor agreement;
(ii) any Contract or arrangement of any kind with any employee, officer,
director or stockholder of Seller or Parent or any of their respective
Affiliates;
(iii)any Contract or arrangement with a sales representative,
manufacturer's representative, distributor, dealer, broker, sales
agency, advertising agency or other Person engaged in sales,
distributing or promotional activities, or any Contract to act as one
of the foregoing on behalf of any Person;
(iv) any Contract or arrangement of any nature having an aggregate value in
excess of $100,000 or not terminable on notice of thirty (30) days or
less;
(v) any indenture, credit agreement, loan agreement, note, mortgage,
security agreement, letter of credit, loan commitment, guaranty,
repurchase agreement or other Contract or arrangement relating to the
borrowing of funds, an extension of credit or financing, pledging of
assets or guarantying the obligations of any Person;
(vi) any Contract or arrangement involving Seller as a participant in a
partnership, joint venture or other cooperative undertaking;
(vii) any Contract or arrangement involving any restrictions with respect to
the geographical area of operations or scope or type of business of
Seller;
(viii)any power of attorney or agency agreement or arrangement pursuant to
which a Person is granted the authority to act for or on behalf of
Seller, or Seller is granted the authority to act for or on behalf of
any Person;
(ix) any Contract relating to the Computer System;
(x) any Contract granting to any Person a right at such Person's option to
purchase or acquire any asset or property of Seller (or interest
therein);
(xi) any Contract for capital improvements or expenditures having an
aggregate value in excess of $15,000;
(xii) any Contract having an aggregate value in excess of $100,000 for which
the full performance thereof may extend beyond sixty (60) days from
the date of this Agreement;
(xiii) any Contract not made in the ordinary course of business which is to
be performed in whole or in part at or after the date of this
Agreement;
(xiv) any Contract or arrangement relating to management support, facilities
support or similar arrangement; and
(xv) any Contract or arrangement not specified above that is material to
Seller or to the Business.
3.14 Permits. Schedule 2.1(j) is a true and accurate list of all material
Permits held by Seller. Except for such Permits, there are no permits, licenses,
consents or authorizations, whether federal, state, local or foreign, which are
materially necessary for the lawful operation of the Business. Seller is in full
compliance with all requirements and limitations under such Permits. No
employee, officer, director or Affiliate of Seller owns or has any interest in
any such Permit.
3.15 Insurance. Schedule 3.15 contains an accurate and complete list of all
policies of fire, liability, workmen's compensation, public and product
liability, title and other forms of insurance owned, held by or applicable to
Seller, its assets or the Business. Seller has heretofore delivered to Purchaser
a true and complete copy of all such policies, including all occurrence-based
policies applicable to Seller or the Business for all periods prior to the
Closing Date. All such policies are in full force and effect, all premiums with
respect thereto covering all periods up to and including the Closing Date have
been paid, and no notice of cancellation or termination has been received with
respect to any such policy. Seller has not been refused any insurance nor has
its coverage been limited during the past two (2) years.
3.16 Employee Benefit Plans and Employment Agreements.
(a)Schedule 3.16 is a list of all employee contracts,
and employee benefit plans, programs, policies and arrangements
(including all collective bargaining, stock purchase, stock option,
employment, compensation, deferred compensation, pension, retirement,
severance, termination, separation, vacation, sickness, health
insurance, welfare and bonus plans, arrangements, and agreements) under
or with respect to which Seller has any obligation or liability
(collectively, the "Seller's Plans").
(b) Seller has provided Purchaser with true and correct
copies of each of Seller's Plans and all contracts relating thereto, or
to the funding thereof, including, without limitation, all trust
agreements, insurance contracts, administration contracts, investment
management agreements, subscription and participation agreements, and
recordkeeping agreements, each as in effect on the date hereof, and an
accurate description of any Seller's Plans that are not in written
form.
3.17 Employees. Schedule 3.17 contains a true, complete and accurate list
of the names, titles, annual compensation and all bonuses and similar payments
made for the current and preceding two (2) years for each director and officer
of Seller and each employee of Seller who has an annual base salary of $50,000
or more. Schedule 3.17 contains a true and complete list of the Executive
Employment Agreements. Except for the Executive Employment Agreements listed in
Schedule 3.17, Seller is not a party to any Contract providing for the payment
by Seller of any severance upon the Seller's termination of the employment of
any person. Except as disclosed on Schedule 3.17, there is no, and during the
past two years there has been no, labor strike, picketing, dispute, slow-down,
work stoppage, union organization effort, grievance filing or proceeding, or
other labor difficulty actually pending or to the knowledge of Parent or Seller
threatened against or involving Seller. Seller is not a party to any collective
bargaining agreement and no such agreement determines the terms and conditions
of the employment of employees of Seller. No collective bargaining agent has
been certified as a representative of any of employees of Seller and no
representation campaign or election is now in progress with respect to any
employees of Seller. Seller has complied in all material respects with all Laws
relating to employment.
3.18 Taxes. Except for current Taxes not due and payable prior to or on the
Closing Date (such Taxes to be paid when due by Seller), Seller has paid to, and
where necessary collected or withheld and remitted to, the proper Governmental
Authority all Taxes related to taxable periods or portions thereof ending prior
to or on the Closing Date (including governmental charges, assessments and
required contributions of Seller with respect to the Business) that may result
in the filing of a Lien on the Purchased Assets or that may result in the
imposition of transferee or other liability on Purchaser for the payment of such
Taxes.
3.19 No Defaults or Violations. Except as disclosed on Schedule 3.19:or
Violations
(a) Seller and, in the case of any Assigned Contract to which
Parent is a party, Parent are not in breach or default under the terms
of any Assigned Contract, no event has occurred or circumstance exists
which, with notice or lapse of time or both, would constitute a breach
or default under any such Assigned Contract, and, to the knowledge of
Seller and Parent, no other party to any such Assigned Contract is in
breach or default under any such Assigned Contract.
(b) Seller and, in the case of any Purchased Assets owned,
licensed or leased by Parent, Parent are in compliance in all material
respects with, and no material violation exists under, any Laws
applicable to Seller or Parent, the Purchased Assets or the Business,
and no event has occurred or circumstance exists which, with or without
notice or lapse of time or both, would constitute such a violation
under any such Law.
(c) No notice from any Governmental Authority has been received
claiming any violation of any Law or requiring any work, construction
or expenditure, or asserting any Tax, assessment or penalty, that, in
any case, could become binding on or impose any obligation on Purchaser
or the Purchased Assets.
3.20 Environmental Matters. Except as disclosed in Schedule 3.20:l Matters
a) Seller and Parent have not used or stored any, and to the
knowledge of Parent and Seller there are no, Hazardous Substances in,
on, or at the Real Property except for inventories of substances which
are used or are to be used in the ordinary course of business (the
storage and use of which substances complies in all material respects
with all applicable Environmental Laws and Environmental Permits).
There is not now, to the knowledge of Parent or Seller, at the Real
Property any underground storage tank or surface impoundments,
asbestos-containing materials or polychlorinated biphenyls, except in
compliance with applicable Environmental Laws.
b) No written notice has been received from any Governmental
Authority or any other Person that Seller or Parent is responsible (or
potentially responsible) for any Remedial Action at any location or
that the Real Property is required or may be required to be subject to
Remedial Action. Included within the Permits are all Environmental
Permits necessary for the operation of the Business. There is no civil,
criminal or administrative claim, suit, proceeding or investigation
(including a request for information) pending or, to Seller's or
Parent's knowledge, threatened with respect to the Business or the Real
Property relating in any way to any Environmental Laws, Environmental
Permits or Remedial Action and Seller and Parent know of no fact or
circumstance which would give rise to any such claim, suit, proceeding
or investigation, or outstanding written orders or Contracts with any
Governmental Authority or other Person relating in any way to
Environmental Laws, Environmental Permits or Remedial Action. Seller or
Parent, as the case may be, has filed all reports and notifications
required to be filed with respect to, and obtained and maintained all
Environmental Permits required for, the Real Property, all improvements
on either of the foregoing and all operations conducted therein, and
has generated and maintained all required records and data under all
applicable Environmental Laws, except where the failure to do so would
not have a Material Adverse Effect.
3.21 Litigation. Except as disclosed in Schedule 3.21, there are no
actions, suits, arbitrations, regulatory proceedings or other litigation,
proceedings or governmental investigations pending or, to the knowledge of
Seller or Parent, threatened against or affecting Seller or any of its officers,
directors, employees, agents or stockholders in their capacity as such, or any
of its properties or businesses, or any of the Purchased Assets owned, licensed
or leased by Parent. Except as set forth on Schedule 3.21, all of the
proceedings pending or threatened against Seller or Parent, as the case may be,
are fully covered by insurance policies and are being defended by the insurers,
subject to such deductibles and other exceptions as are set forth in such
policies. Schedule 3.21 is a true and accurate list of all pending actions
asserted by Seller or, in the case of Purchased Assets owned, licensed or leased
by Parent, by Parent. Except as disclosed in Schedule 3.21, neither Seller nor,
in the case of Purchased Assets owned, licensed or leased by Parent, Parent is
subject to (a) any order, judgment, decree, injunction, stipulation or consent
order of or with any court or other Governmental Authority or (b) any settlement
agreement with any Governmental Authority or other Person. Neither Seller nor,
in the case of Purchased Assets owned, licensed or leased by Parent, Parent has
entered into any agreement to settle or compromise any proceeding pending or
threatened against it which has involved any obligation other than the payment
of money or for which Seller or Parent, as the case may be, has any continuing
obligation. There are no claims, actions, suits, proceedings or investigations
pending or, to the knowledge of Seller or Parent, threatened by or against
Seller or Parent relating to this Agreement or the transactions contemplated
hereby.
3.22 Related Parties. Except as disclosed on Schedule 3.22, (a) neither
Parent nor any of its Affiliates have or claim to have any direct or indirect
interest in any tangible or intangible property used in the Business (except as
a stockholder or option holder of Parent or Seller), and (b) neither Parent nor
any of its Controlled Affiliates have or claim to have any direct or indirect
interest in any other Person which conducts a business similar to, has any
Contract or arrangement with, or does business or is involved in any way with,
Seller. Schedule 3.22 contains a complete and accurate description of all such
Persons, interests, arrangements and other matters.
3.23 Intercompany Services, Transactions and Indebtness.
(a) Schedule 3.23 contains a complete and accurate list of all
agreements or arrangements (whether written or unwritten)
relating to all intercompany services and transactions currently
existing between Seller and any of its Affiliates.
(b) Schedule 3.23 contains a complete and accurate list of all
outstanding indebtedness, payables and receivables between Seller
and any of its Affiliates.
3.24 Customers and Suppliers. Schedule 3.24 sets forth (a) a list of the 10
largest customers of Seller, in terms of revenue during the 1996 fiscal year and
the portion of 1997 prior to the date hereof (collectively, the "Major
Customers"), showing the total revenue received in each such period from each
such customer; and (b) a list of the 10 largest suppliers of Seller, in terms of
purchases during the 1996 fiscal year and the portion of 1997 prior to the date
hereof (collectively, the "Major Suppliers"), and showing the approximate total
purchases in each such period from each such supplier. Except to the extent set
forth in Schedule 3.24, since January 1, 1997, there has not been any material
adverse change in the business relationship with, and there has been no material
dispute of Seller with, any Major Customer or Major Supplier. To the knowledge
of Parent and Seller, there are no indications that any Major Customer or Major
Supplier intends to materially reduce its purchases from or sales to (as the
case may be) the Business. Schedule 3.24 lists all Contracts between Parent or
Seller and any Major Customer or Major Supplier.
3.25 Product Warranties. Except as set forth on Schedule 3.25 and except to
the extent of any warranty reserves reflected in the Final Closing Schedule,
there is no claim against or liability of Seller (or any predecessor of Seller)
on account of product warranties or with respect to the manufacture, sale,
distribution or rental of defective products and there is no basis for any such
claim on account of defective products heretofore manufactured, sold or rented.
Schedule 3.25 sets forth a summary of all product liability claims filed against
Seller (or any predecessor of Seller) within the past two (2) years. Schedule
3.25 sets forth copies of all product warranties issued for Seller's products
during the past two (2) years. In each of the past two years, warranty claims
have not exceeded 2.0% of Seller's gross sales for that year.
3.26 Due Diligence Materials. There are no significant documents in the
possession of Parent, Seller, or any of their respective agents, representatives
or Affiliates of a character or type described in Purchaser's due diligence
request delivered to Pinecrest Capital, Inc. on March 10, 1997, which have not
been provided or otherwise made available to Purchaser.
3.27 Brokers. Neither Purchaser nor any Affiliate of Purchaser has or shall
have any liability or otherwise suffer or incur any Loss as a result of or in
connection with any brokerage or finder's fee or other commission of any Person
retained by Parent or Seller in connection with any of the transactions
contemplated by this Agreement.
3.28 Accuracy of Statements. Neither this Agreement nor any schedule hereto
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
3.29 Reserves and Accruals. The reserves and accruals of Seller, as stated
in its Financial Statements, including without limitation those established with
respect to Receivables, Inventories and warranty claims, have each been
established in accordance with GAAP.
3.30 [intentionally omitted]
3.31 Acceleration of Employee Stock Options. Seller and Parent have
accelerated the vesting of options held by certain of Seller's employees with
respect to the right to acquire shares of the common stock of Parent as set
forth on Schedule 3.31.
3.32 Other Seller Information. (a) Seller's Federal Tax Identification
number is 00-0000000. (b) Seller has no subsidiaries (including, without
limitation, any ownership interest in partnerships, joint ventures, limited
liability companies, or other entities). (c) All of the active books and records
relating to the Business are located at either (i) Seller's place of business at
0000 Xxxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxx 00000 or (ii) Parent's executive
offices at 0000 Xxxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000, and at no
other location.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Parent and Seller, as of the date
of this Agreement and as of the Closing Date (such representations and
warranties being remade on the Closing Date), as follows:
4.1 Due Incorporation. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
with all requisite power and authority to own, lease and operate its properties
and to carry on its business as they are now being owned, leased, operated and
conducted.
4.2 Due Authorization. Purchaser has full power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Purchaser of this Agreement have been
duly and validly approved by all necessary corporate action. Purchaser has duly
and validly executed and delivered this Agreement. This Agreement constitutes
the legal, valid and binding obligation of Purchaser, enforceable in accordance
with its 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 or by equitable
limitations on the availability of specific remedies.
4.3 Consents and Approvals. No consent, authorization or approval of,
filing or registration with, or cooperation from, any Governmental Authority or
any other Person not a party to this Agreement is necessary in connection with
the execution, delivery and performance by Purchaser of this Agreement and the
consummation by Purchaser of the transactions contemplated hereby or thereby,
other than the consents set forth on Schedule 4.3 and (b) filings and consents
that may be required under any environmental, health or safety law or regulation
necessitated by the transactions contemplated herein. The execution, delivery
and performance by Purchaser of this Agreement does not and will not violate or
conflict with any provision of the Certificate of Incorporation or By-laws of
Purchaser.
4.4 Brokers. Purchaser has used no broker or finder in connection with the
transactions contemplated hereby.
4.5 Financing and Initial Capitalization. Purchaser shall have an initial
capitalization of at least $750,000 in equity. As of the Closing Date (after
giving effect to the transactions contemplated by this Agreement, including the
Purchaser's incurrence of the debt related to such transactions), the Purchaser
does not believe that it is engaged in business, or about to engage in any
business or transaction, with unreasonably small capital. The Purchaser does not
intend to incur, or believe that it will incur, in connection with the
transactions contemplated by this Agreement, debts beyond its ability to pay as
they mature. The obligations incurred by Purchaser in connection with
Purchaser's financing related to this Agreement are not being incurred with the
actual intent to hinder, delay or defraud any existing present or future
creditors of Seller or Purchaser.
ARTICLE V
COVENANTS
5.1 Maintenance of Insurance. Seller shall continue to maintain and carry
its existing insurance through the Closing Date, and shall not allow any breach,
default, termination or cancellation of such insurance policies or agreements to
occur or exist. So long as the Subordinated Note remains outstanding, Purchaser
shall carry or cause to be carried with respect to the Business and the
Purchased Assets product liability insurance and excess liability insurance
(subject to reasonable deductibles, exclusions and limitations), which in each
case is maintained in effect with insurers of recognized reputation and
responsibility, substantially consistent with insurance historically maintained
by Seller; provided, that if such insurance coverage is not available to
Purchaser on commercially reasonable terms and conditions, then Purchaser shall
carry insurance coverage for the types of risks and in amounts and on such other
terms and conditions as is usually carried by business entities in the same
geographic areas that are engaged in the same or similar business as Purchaser.
Purchaser will at all times carry such insurance as is then required under its
senior debt agreement. Subject to the provisions of the Subordination Agreement,
Seller shall be named as an additional insured on such policies.
5.2 Supplemental Information. Parent and Seller will promptly, provide to
Purchaser complete copies of the tax packages prepared by Seller and furnished
to Parent for periods prior to the Closing.
5.3 Noncompetition; Confidentiality
(a) In order to induce Purchaser to enter into this Agreement,
each of Parent and Seller expressly covenants and agrees that for a
period of five (5) years from and after the Closing Date, neither
Seller, Parent nor any of their respective Controlled Affiliates will
directly or indirectly, without the prior express written consent of
Purchaser, (i) own (other than ownership of stock or other equity
interests constituting less than five percent (5%) of the total equity
interest of any publicly-traded entity), manage, operate, join,
control, consult with or participate in any business, individual,
partnership, firm, corporation or other entity which is engaged in the
Business, wholly or partly, in any part of the world, provided,
however, that the business operations as currently conducted by
Heurikon Corporation, Power Conversion North America and Computer
Products Asia-Pacific Limited shall be deemed not to violate this
clause (i), (ii) interfere with or attempt to interfere with any
business relationship between any third party and Purchaser or any of
its Affiliates in connection with the Business, or (iii) solicit or
encourage any officer, employee, consultant or agent employed or
retained by Purchaser to leave Purchaser's employ or retention.
(b) Except to the extent expressly required by Law, Parent and
Seller shall, and shall cause their Controlled Affiliates to, keep
secret and confidential indefinitely all non-public information
concerning Purchaser, Seller, the Purchased Assets and the Business and
not disclose the same, either directly or indirectly, to any other
Person, or use the same in any way.
(c) Parent and Seller expressly agree that the remedies at law
for any breach of the provisions of this Section 5.3 would be
inadequate and that, in addition to any other remedies that Purchaser
may have, Purchaser shall be entitled to temporary and permanent
injunctive relief without the necessity of proving actual damages or
posting bond. To the extent that any part of this Section 5.3 may be
invalid, illegal or unenforceable for any reason, it is intended that
such part shall be enforceable to the extent that a court of competent
jurisdiction shall determine that such part, if more limited in scope,
would have been enforceable. Parent and Seller acknowledge that
Purchaser would not enter into this Agreement or acquire the Purchased
Assets unless Parent and Seller agreed to the provisions of this
Section 5.3.
(d) In furtherance of the foregoing (i) Xxxxxxx X. Xxxxxxxx,
Xxxxxx X. X'Xxxxxxx and each employee/director of Parent and Seller
will execute and deliver at closing a Non-Competition Agreement
consistent with the foregoing and otherwise reasonably satisfactory to
Purchaser, having a term of five years from the Closing Date, and (ii)
each non-employee director of Parent and Seller will execute and
deliver at closing a Non-Competition Agreement substantially consistent
with the foregoing (except that any such non-employee director shall
not be prohibited from consulting with or participating in any
business, individual, partnership, firm, corporation or other entity
engaged in the Business) and otherwise reasonably satisfactory to
Purchaser, and having a term of 18 months from the Closing Date.
5.4 Use Of Name. From and after the Closing Date, Parent, Seller, and their
respective Controlled Affiliates will not directly or indirectly use in any
manner any name, trade name, trademark, service xxxx or logo used by the
Business or any word or logo that is confusingly similar in sound or appearance.
5.5 Product Liability and Warranty Claims
(a) Seller is and shall be solely responsible for any and all
claims for injury (including, without limitation, death) or claims for damage,
direct or consequential, resulting from or connected with goods manufactured or
sold or services provided by Seller, including, without limitation, goods
manufactured on or before the Closing Date and sold without modification by
Purchaser after the Closing Date. Purchaser shall have no liability for any such
claims.
(b) Purchaser shall be solely responsible for any warranty for
goods manufactured or services rendered by Seller in connection with the
Business to the extent, but only to the extent, that such warranty claims do not
exceed the warranty reserve set forth in the Final Closing Schedule. Except to
the extent provided in the preceding sentence, Seller shall remain solely
responsible for any warranty for goods manufactured or sold or services rendered
by Seller on or before the Closing Date, and Purchaser shall have no obligation
or liability under any such warranty, except as provided above. However,
Purchaser may, in its sole discretion, decide to provide goods or perform
services in excess of the amount for which Purchaser is responsible pursuant to
the first sentence of this subsection 5.5(b), to the extent that such excess
goods or services would be required to be provided or performed by Seller under
Seller's warranty. In any such case described in the immediately preceding
sentence, Seller shall reimburse Purchaser for the costs (without any xxxx-up or
profit margin) of such excess goods, services or repairs provided by Purchaser
which Seller would have been required to provide or perform under Seller's
warranty, as shown on Purchaser's invoice, within thirty (30) days after
Seller's receipt of such invoice. Purchaser shall supply Seller with information
reasonably requested by Seller to substantiate the invoiced amounts.
5.6 Access. Following the Closing Date, Purchaser will permit
representatives of Seller to have full access at all reasonable times to the
books, accounts and records pertaining to the operation of the Business prior to
the Closing Date, to the extent reasonably requested by Seller on reasonable
notice.
5.7 [intentionally omitted]
5.8 Employees. Purchaser will not take any action or omit to take any
action, if such action or omission would impose any obligations upon, or result
in any Loss to, Seller or Parent under the Worker Adjustment and Retraining Act
or under any applicable state or local law regarding notification of plant
closings that result in the termination of employees. Nothing herein shall
impose any obligation on the Purchaser to guaranty employment to any of its
employees, including Transferred Employees after the Closing Date.
5.9 Payroll Transition. With respect to the regularly scheduled payment of
wages (including any Taxes related thereto) to be made to employees of Purchaser
on July 11, 1997 (such payment, the "July 11 Payroll"), Seller agrees that,
notwithstanding that the July 11 Payroll is a payment obligation of Purchaser,
Seller shall, subject to the following sentence, pay the July 11 Payroll on
behalf of Purchaser through the existing provider of Seller's payroll-processing
services. Seller and Purchaser agree that (a) no later than 11:00 a.m., East
Coast time, on July 9, 1997, Seller will notify Purchaser in writing (which may
be delivered by telecopier) of the total amount due with respect to the July 11
Payroll, specifying the account to which Purchaser shall wire transfer such
funds and (b) no later than 4:30 p.m., East Coast time, on July 9, 1997,
Purchaser shall have remitted such funds to Seller and shall promptly provide
Seller with the related wire-transfer confirmation information.
5.10 Inventory Resale Certificates. Purchaser shall promptly, upon Seller's
request therefor, deliver to Seller resale certificates with respect to the sale
hereunder of Inventories to Purchaser, in the form of Exhibit I.
ARTICLE VI
CLOSING DELIVERIES
The following documents, instruments and agreements are being executed
and delivered in connection with this Agreement:
(a) the Assignment;
(b) the Patent and Trademark Assignment;
(c) the Supply Agreement;
(d) the Assignment, Assumption, Consent and Release relating to the
lease of the premises at 0000 Xxxxxxx Xxxxx, Xxxxxxx Xxxxx,
Xxxxxxx;
(e) the original title certificates for the Vehicles owned by Seller,
executed by Seller together with all necessary Lien releases;
(f) the opinion of Xxxxxxx, Calamari & Xxxxxxx, counsel to Seller and
Parent, addressed to Purchaser and Purchaser's senior lender in
the form of Exhibit G;
(g) all material required consents to the transfer of the Assigned
Contracts (except to the extent that any consent to the
assignment of an Assigned Contract has not been obtained, and
arrangements reasonably satisfactory to Purchaser have been made
to provide Purchaser the benefit of such Assigned Contract, as
contemplated by Section 2.8);
(h) releases of all Liens against Intellectual Property;
(i) articles of amendment to the certificate of incorporation of
Seller changing Seller's name to a name not containing the name
"RTP" or any derivation thereof;
(j) An employment agreement between Purchaser and Xxxxxxxxx Xxxxxxxxxx;
(k) an estoppel certificate from each of the landlords under the
leases set forth on Schedule 3.8, pursuant to which Seller or
Parent, as the case may be, is a tenant, in form and substance
reasonably satisfactory to Purchaser, and in any event containing
the landlord's representation that there are no defaults and
agreements reasonably satisfactory to Purchaser regarding the
completion of any required repairs;]
(l) Non-Competition Agreements executed by the individuals named in
Section 5.3(d)(i) and all of the directors and executive officers
of Parent and Seller;
(m) the Subordinated Note;
(n) the opinion of Xxxxx, Xxxxx & Xxxxx, counsel for Purchaser, in
the form of Exhibit H; and
(o) the Subordination Agreement.
ARTICLE VII
[INTENTIONALLY OMITTED]
ARTICLE VIII
[INTENTIONALLY OMITTED]
ARTICLE IX
INDEMNIFICATION
9.1 Survival. The representations and warranties of the parties in
this Agreement or in any document delivered pursuant hereto shall survive the
Closing for a period of 16 months and shall then terminate; provided, however,
that (i) any representation and warranty shall survive the time it would
otherwise terminate only with respect to claims of which notice has been given
as provided in this Agreement prior to such termination, and (ii) such time
limitation shall not apply to the representations and warranties set forth at
Sections 3.1, 3.2, 3.6 (only to the extent related to title), 3.20, 4.1 and 4.2,
which representations and warranties shall survive so long as the Subordinated
Note is outstanding, or to the representations and warranties set forth at
Section 3.18, which shall survive until the expiration of the applicable statute
of limitations.
9.2 Indemnification by Parent and Seller. Parent and Seller jointly
and severally agree to indemnify, defend and hold harmless each of the Purchaser
and its Affiliates against any Losses relating to or arising out of:
(a) any breach of any representation or warranty made by Parent
or Seller in this Agreement; provided, however that (i) neither Parent
nor Seller shall have any liability under this Section 9.2(a) with
respect to breaches of such representations and warranties until the
aggregate Losses arising out of such breaches equal or exceed $62,500,
at which point Purchaser shall be entitled to recover only the amount
of any Losses in excess of $62,500, and (ii) the maximum aggregate
liability of Parent and Seller to Purchaser under this Section 9.2(a)
shall not exceed the Purchase Price, as adjusted pursuant to this
Agreement (except that, the foregoing limitation shall not apply to any
breaches of the representations and warranties set forth at Sections
3.1, 3.2, 3.6 (only to the extent related to title) and 3.20); Any
indemnity paid under this Section 9.2(a) shall be paid fifty percent
(50%) in cash and fifty percent (50%) by reduction of the principal
amount of the Subordinated Note; provided, that the aggregate amount
paid in cash shall not exceed the total amount of the Purchase Price
paid in cash, and any amount that would otherwise be paid in cash but
for the operation of this proviso shall instead be paid by an
additional reduction of the principal amount of the Subordinated Note;
(b) any breach of any covenant made by Parent or Seller in this
Agreement or any other document set forth in Article VI of this
Agreement;
(c) the bulk sales Laws of any jurisdiction applicable to the
transactions contemplated herein, including the failure to comply with
such Laws, except with respect to Assumed Liabilities;
(d) Retained Liabilities, including, without limitation, any
liability to another Person for which Purchaser has been found liable
which would constitute a Retained Liability. No limitation on
Purchaser's right to indemnification with respect to any Retained
Liability shall be implied from the fact that the matters giving rise
to such Retained Liability may also have given rise to a breach of a
representation or warranty; and
(e) product liability claims and warranty claims for which Seller
is responsible pursuant to Section 5.5.
Notwithstanding the other provisions of this Section 9.2,
Purchaser shall not be entitled to any recovery under this Section 9.2 in
respect of any Loss if, and only to the extent that, the condition or event
giving rise to such Loss is reflected in the calculation of a Purchase Price
Adjustment pursuant to Section 2.6(e) or recovery is made pursuant to Section
2.9.
9.3 Indemnification by Purchaser. Purchaser agrees to indemnify, defend and
hold harmless Parent and Seller and each of their respective Affiliates against
any Losses relating to or arising out of (a) any breach of any representation or
warranty or covenant made by Purchaser in this Agreement or any document
delivered to Seller at the Closing or pursuant to this Agreement,; provided,
however that Purchaser shall have no liability under this Section 9.3(a) with
respect to breaches of such representations and warranties until the aggregate
Losses arising out of such breaches equal or exceed $62,500, at which point
Parent and Seller shall be entitled to recover the amount of any Losses in
excess of $62,500, (b) any Assumed Liability or any liability relating to the
conduct of the Business by Purchaser as it relates to the Post-Closing Period or
(c) any breach of any covenant made by Purchaser in this Agreement or any
document delivered to Parent or Seller at the Closing or pursuant to this
Agreement.
9.4 Claims. The provisions of this Section shall be subject to Section 9.5.
As soon as is reasonably practicable after becoming aware of a claim for
indemnification under this Agreement (including a claim or suit by a third
party) the indemnified Person shall promptly give notice to the indemnifying
Person of such claim. The failure of the indemnified Person to give notice shall
not relieve the indemnifying Person of its obligations under this Article IX
except to the extent that the indemnifying Person shall have been prejudiced
thereby. If the indemnifying Person does not object in writing to such
indemnification claim within 30 calendar days of receiving notice thereof, the
indemnified Person shall be entitled to promptly recover from the indemnifying
Person the amount of such claim, and no later objection by the indemnifying
Person shall be permitted. If the indemnifying Person agrees that it has an
indemnification obligation but objects that it is obligated to pay only a lesser
amount, the indemnifying Person shall promptly pay to the indemnified Person the
lesser amount, without prejudice to the indemnified Person's claim for the
difference.
9.5 Third Party Claims; Assumption of Defense. The indemnifying Person may,
at its own expense, (a) participate in the defense or settlement of any
third-party claim, suit, action or proceeding and (b) upon notice to the
indemnified Person, and the indemnifying Person's delivering to the indemnified
Person a written agreement that the indemnified Person is entitled to
indemnification pursuant to Section 9.2 or 9.3 for all Losses arising out of
such claim, suit, action or proceeding and that the indemnifying Person shall be
liable for the entire amount of any Loss, may at any time during the course of
any such claim, suit, action or proceeding, assume and control the defense
thereof; provided, however, that (i) the indemnifying Person's counsel is
reasonably satisfactory to the indemnified Person, and (ii) the indemnifying
Person shall thereafter consult with the indemnified Person upon the indemnified
Person's reasonable request for such consultation from time to time with respect
to such claim, suit, action or proceeding. If the indemnifying Person assumes
such defense, the indemnified Person shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the indemnifying Person. If, however, the
indemnified Person reasonably determines in its judgment that representation by
the indemnifying Person's counsel of both the indemnifying Person and the
indemnified Person would present such counsel with a conflict of interest, then
such indemnified Person may employ separate counsel to represent or defend it in
any such claim, action, suit or proceeding and the indemnifying Person shall pay
the fees and disbursements of such separate counsel. Whether or not the
indemnifying Person chooses to assume the defense of any such claim, suit,
action or proceeding, all of the parties hereto shall reasonably cooperate in
the defense or prosecution thereof. Any settlement or compromise made or caused
to be made by the indemnified Person or the indemnifying Person, as the case may
be, of any such claim, suit, action or proceeding of the kind referred to in
Section 9.5 shall also be binding upon the indemnifying Person or the
indemnified Person, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in the
amount of such settlement or compromise; provided, however, that the
indemnifying Person may not settle or compromise any claim, suit, action or
proceeding without the prior written consent of the indemnified Person if any
such settlement or compromise agreed to by the indemnifying Person would require
any payment or any admission of liability, fault or wrongdoing by any
indemnified Person, or impose any non-monetary obligation on the indemnified
Person (such as, by way of example and not in limitation, injunctive relief).
The indemnified Person shall not unreasonably withhold or delay consent to any
such proposed settlement; it being agreed that it shall not be unreasonable to
withhold consent to a proposed settlement that would require any admission that
would materially impair, disparage or otherwise adversely affect the business
reputation of the indemnified Person. The indemnifying Person shall not be
required to pay any settlement or compromise made by the indemnified Person of
any claim, suit, action or proceeding without the prior written consent of the
indemnifying Person, which shall not be unreasonably withheld or delayed. In the
event that the indemnifying Person does not elect to assume the defense of any
claim, suit, action or proceeding, then any failure of the indemnified Person to
defend or to participate in the defense of any such claim, suit, action or
proceeding or to cause the same to be done, shall not relieve the indemnifying
Person of its obligations hereunder.
9.6 Exclusive Remedy. It is agreed that the bringing of a claim for
indemnification under this Article IX shall be the exclusive means for the
recovery of damages by Purchaser, Seller and Parent for any claims arising under
this Agreement, including any breach of this Agreement; provided, that the
foregoing shall not limit the right of any party hereto to seek or obtain
specific performance or other equitable relief with respect to this Agreement to
the extent that such equitable relief is available under applicable law.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. Except as provided below, each party hereto shall bear its
own expenses with respect to the transactions contemplated hereby. Buyer and
Seller shall each bear 50% of all sales, use, stamp, transfer, service,
recording, real estate and like taxes or fees, if any, imposed in connection
with the transactions contemplated hereby.
10.2 Amendment. This Agreement may be amended, modified or supplemented
only by written agreement of the parties.
10.3 Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (a) when received if given in person or by courier or a courier
service, (b) on the date of transmission if sent by telex, facsimile or other
wire transmission or (c) three (3) Business Days after being deposited in the
U.S. mail, certified or registered mail, postage prepaid:
(a) If to Parent or Seller, addressed as follows:
Computer Products, Inc.
0000 Xxxxxx Xxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxx
Facsimile No.:(000)000-0000
with a copy to:
Xxxxxxx, Calamari & Xxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx and
Xxxxxxx X. Xxxxxx
Facsimile No.:(000) 000-0000
(b) If to Purchaser, addressed as follows:
RT Acquisition Florida Corp.
c/o Ridge Capital Corporation
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxx Xxxxxx
Facsimile No.: (000) 000-0000
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
10.4 Effect Of Investigation. Any due diligence review, audit or other
investigation or inquiry undertaken or performed by or on behalf of Purchaser
shall not limit, qualify, modify or amend the representations, warranties or
covenants of, or indemnities by, Parent or Seller made pursuant to this
Agreement, irrespective of the knowledge and information received (or which
should have been received) therefrom by Purchaser; provided, that Purchaser
shall be deemed to have waived any breach of Seller's representations and
warranties of which Xxxx Xxxxxx or Xxxxxxx Xxxxx or the Purchaser's accountants
or attorneys acquired actual knowledge or received written notice prior to the
Closing Date. The foregoing shall not affect the respective rights and
obligations of the parties with respect to any other covenants or agreements set
forth herein, including Assumed Liabilities, Retained Liabilities and
indemnification in respect thereof.
10.5 Waivers. The failure of a party to require performance of any
provision shall not affect its right at a later time to enforce the same. No
waiver by a party of any condition or of any breach of any term, covenant,
representation or warranty contained in this Agreement shall be effective unless
in writing. No waiver in any one or more instances shall be deemed to be a
further or continuing waiver of any such condition or breach in other instances
or a waiver of any other condition or breach of any other term, covenant,
representation or warranty. Subject to Section 10.4, consummation of the
transactions contemplated herein shall not be deemed a waiver of a breach of or
inaccuracy in any representation, warranty or covenant or of any party's rights
and remedies with regard thereto.
10.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
10.7 Interpretation. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Schedules attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of the
masculine, feminine or neuter gender shall not limit any provision of this
Agreement. The use of the terms "including" or "include" shall in all cases
herein mean "including, without limitation" or "include, without limitation,"
respectively. If any representation or warranty is qualified by reference to the
knowledge of Parent and/or Seller, it shall mean the actual knowledge of, or
receipt of written notice by, Xxxxxxx Xxxxxxxx or any senior management or
officers of Parent or Seller or the accountants or attorneys of Parent or
Seller. No specific representation, warranty or covenant contained herein shall
limit the generality or applicability of a more general representation, warranty
or covenant contained herein. A breach of or inaccuracy in any representation,
warranty or covenant shall not be affected by the fact that any more general or
less general representation, warranty or covenant was not also breached or
inaccurate. The language in all parts of this Agreement shall be construed, in
all cases, according to its fair meaning. The parties acknowledge that each
party and its counsel have reviewed and revised this Agreement and that any rule
of construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of this
Agreement.
10.8 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Florida without
giving effect to the principles of conflicts of law thereof.
10.9 Binding Agreement. No party hereto may assign its rights or delegate
its obligations hereunder without the prior written consent of the other parties
hereto, except that Purchaser may assign its rights hereunder, as collateral, to
any financial institution that provides financing to Purchaser in connection
with this Agreement. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
10.10 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and no provision of this Agreement shall be deemed
to confer rights upon any other Person.
10.11 Publicity. Prior to the Closing, except as required by Law or the
rules of any stock exchange, no public announcement or other publicity regarding
the transactions referred to herein shall be made by any party hereto or any of
their respective Affiliates, officers, directors, employees, representatives or
agents, without the prior consent of the other party. In any case where a public
announcement is required by Law or the rules of a stock exchange, the parties
shall consult as to the form, content, timing and manner of distribution or
publication. Nothing in this Section shall prevent such parties from discussing
such transactions with those Persons whose approval, agreement or opinion, as
the case may be, is required for consummation of such transactions.
10.12 Further Assurances. Upon the request of Purchaser, Parent and Seller
will on and after the Closing Date execute and deliver to Purchaser such other
documents, further releases, assignments and other instruments as may be
required or reasonably deemed appropriate by Purchaser to effect or evidence
transfer and assignment to Purchaser of all or any of the Purchased Assets, and
to otherwise carry out the purposes of this Agreement.
10.13 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
10.14 Liability of Parent and Seller. Whenever this Agreement requires
Seller or Parent to take any action, such requirement will be deemed to include
an undertaking on the part of each of Parent and Seller. Parent and Seller shall
be jointly and severally liable for all of the obligations to be performed by
either of them under this Agreement and any representation or warranty made by
either of them.
10.15 Bulk Sales. The parties hereto waive compliance with the requirements
of any applicable "bulk sales" Laws in connection with the consummation of the
transactions contemplated hereby. Seller and Parent shall indemnify Purchaser
against any Losses arising from such non-compliance as provided in Section 9.2.
10.16 entire Understanding. This Agreement sets forth the entire agreement
and understanding of the parties hereto and supersede any and all prior
agreements, arrangements and understandings among the parties. No other
representations or warranties are being made except as expressly made herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
RT ACQUISITION FLORIDA CORP.
By: XXXX XXXXXX
-----------
Name:XXXX XXXXXX
Title:
RTP CORP.
By: XXXXXXX X.XXXXXXXX
----------------------
Name:XXXXXXX X. XXXXXXXX
Title:VICE PRESIDENT-FINANCE, CFO
COMPUTER PRODUCTS, INC.
By: XXXXXXX X.XXXXXXXX
----------------------
Name:XXXXXXX X. XXXXXXXX
Title:VICE PRESIDENT -FINANCE, CFO
