UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OF THE SECURITIES EXCHANGE ACT OF 1934
Bison Instruments, Inc.
- - ----------------------------------------------
(Name of Small Business Issuer in its charter)
Minnesota E41-0947661
- - ----------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5610 Rowland Road 55343-8956
- - ------------------------------------------ -------------------------------
(Address of principal executive office) (Zip Code)
Issuer's telephone number (612) 931-0051
-----------------------
Securities to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange on which
registered
Common Stock OTCBB
------------------------------------- -------------------------------
Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock
- - --------------------------------------------------------------------------------
Page 1 of 86
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Company was incorporated under the laws of the State of Minnesota on January
18, 1968.
The Company has not been subject to any bankruptcy, receivership or similar
proceedings.
In the last fiscal year and the first quarter of the current year, the Company
sold substantially all of the assets of the Company outside of the ordinary
course of business.
Prior to the sale of its assets, the Company was engaged in the manufacture and
sale of electronic instrumentation. The Company currently is only engaged in
residual sales of inventory on hand. The Company has ceased manufacturing new
products.
The Company currently has one employee.
The Company sends out audited financial statements for each fiscal year-end to
its security holders. The Company has not previously filed any reports with the
Securities and Exchange Commission.
ITEM 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Sales from operations were $520,000 in 1998 compared with $2,554,000 in 1997.
The net loss for 1998 was $152,000, or $0.17 per share, compared with a loss in
1997 of $1,298,000 or $1.46 per share. The 1998 loss includes other income of
$118,000.
The other income received by the Company in 1998 was from the sale of its
Galileo and Jupiter seismic product lines. Proceeds of the transaction totaled
$474,000. In 1998, the total proceeds on disposal of fixed assets and product
lines were $503,000. These proceeds were applied to repay a loan payable to its
parent company, Autrex Inc., in the amount of $450,000.
In October, Bison entered into a conditional agreement to sell it remaining
product line, the Mu-Meter Airport Runway Friction Measuring System. This sale,
which was approved by the shareholders in November, closed that month. The sale
generated proceeds of $179,000 and a gain of $90,000. This gain was recognized
in the first quarter of 1999.
The Company has continued its efforts to sell off its remaining inventory. Sales
through the third quarter were $32,880, resulting in a profit of $83,750. This
compares to sales of $486,950 and a loss of $68,340 for the same period last
year.
Bison has significant losses available to carry forward against future taxable
income.
Page 2 of 86
<PAGE>
As operations have been wound down, Bison's staffing levels have been reduced.
Other operating expenses were also reduced to a minimum, and only one salaried
employee remains in Bison. The General Manager, Larry Martin, administers the
corporate affairs of the Company and monitors residual business matters.
The sale of the product lines has essentially rendered Bison inactive. However,
other business opportunities for the remaining shell corporation, will be
pursued.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company operates out of leased office space located at 5610 Rowland Road,
Minneapolis, Minnesota.
The Company does not currently hold investments in real estate or mortgages
relating to real estate.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security Ownership Greater than 5%
---------------------------------------------------------------------------
(1) (2) (3) (4)
---------------------------------------------------------------------------
TITLE OF CLASS NAME AND ADDRESS AMOUNT AND PERCENT OF
OF BENEFICIAL OWNER NATURE OF CLASS
BENEFICIAL OWNER
---------------------------------------------------------------------------
Common Stock Andus, Inc. 595,539 Common 67.05%
Shares
---------------------------------------------------------------------------
(b) Security Ownership of Management
---------------------------------------------------------------------------
(1) (2) (3) (4)
---------------------------------------------------------------------------
TITLE OF CLASS NAME AND ADDRESS AMOUNT AND PERCENT OF
OF BENEFICIAL OWNER NATURE OF CLASS
BENEFICIAL OWNER
---------------------------------------------------------------------------
Common Stock Allan D. Erickson 12,418 Common 1.40%
Shares
---------------------------------------------------------------------------
Common Stock Andus, Inc.* 595,539 Common 67.05%
Shares
---------------------------------------------------------------------------
* Andus, Inc., a Delaware corporation, is a subsidiary of Autrex
Inc., a Canadian corporation. Androcan Inc., a Canadian
corporation, is the majority shareholder of Autrex Inc. Androcan
Inc. is ultimately controlled by Barrie D. Rose, and members of
his immediate family.
(c) Change in Control
There are not currently any arrangements in place which may result in a
change in control of the Company.
Page 3 of 86
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
DIRECTORS
NAME AGE POSITIONS HELD SERVED
SINCE
Barrie D. Rose 69 Director, Bison Instruments, Inc. 1983
Chairman, and Chief Executive
Officer, Androcan Inc.
Chairman and Chief Executive
Officer, Autrex Inc.
Chairman and President,
Andus Inc.
Allan D. Erickson 55 Director, Bison Instruments, Inc. 1982
President, Dagan Corporation
One of Principal Shareholders,
Dagan Corporation
Glen A. Peer 36 Director, Bison Instruments, Inc. 1996
Director, Autrex Inc.
President, Pylon Electronics Inc.
Edward G. Lampman 54 Director, Chief Executive 1996
Officer, Bison Instruments, Inc.
President, Androcan Inc.
Executive Vice-President,
Autrex Inc.
Vice-President, Andus, Inc.
Lawrence M. Martin 58 Director and General Manager,
Bison Instruments, Inc. 1998
None of the directors or officers, or any companies employing them,
have been subject to any bankruptcy, or criminal proceedings or are
subject to any orders by the civil courts limiting their ability to
carry on business or trade in securities.
Page 4 of 86
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION.
(a) Summary Compensation Table
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------
AWARDS PAYOUTS
------------------------------- --------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- - -------------------------------------------------------------------------------------------------------------
NAME AND
PRINCIPAL YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
POSITION ($) ($) ($) ($) /SARs (#) ($) ($)
- - ----------------- ---- ------------------------------- --------------------- ------- ------------
<S> <C> <C> <C> <C> <C>
Edward G. 1998 nil nil nil nil
----------------------------------------------------------------------------------------
Lampman, Chief 1997 nil nil nil nil
----------------------------------------------------------------------------------------
Executive Officer 1996 nil nil nil nil
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
(b) Option/SAR in Last Fiscal Year
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- - -------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
- - -------------------------------------------------------------------------------------------------------------
NAME NUMBER OF % OF TOTAL EXERCISE OR BASE EXPIRATION DATE
SECURITIES OPTIONS/SARs PRICE ($/Sh)
UNDERLYING GRANTED TO
OPTIONS/SARs EMPLOYEES IN
GRANTED (#) FISCAL YEAR
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
N/A * -- -- -- --
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
(c) Aggregate Option/SAR Exercises in Last Fiscal Year and FY-end Option/Share
Values
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
- - -------------------------------------------------------------------------------------------------------------
NAME SHARES VALUE REALIZED NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON ($) UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARs
EXERCISE (#) OPTIONS/SARs AT FY-END AT FY-END ($)
(#)
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
N/A * -- -- -- --
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
* The Company had previously granted an option to purchase shares in the
Company at $2.25 to a former officer. These options were cancelled in 1997
and were not replaced.
Page 5 of 86
<PAGE>
(d) Long-term Incentive Plans - Awards in Last Fiscal Year
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS UNDER NO
STOCK PRICED-BASED PLANS
- - -------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
- - -------------------------------------------------------------------------------------------------------------
NAME NUMBER OF SHARES, PERFORMANCE OR THRESHOLD TARGET MAXIMUM
UNITS OR OTHER OTHER PERIOD ($ OR #) ($ OR #) ($ OR #)
RIGHTS (3) UNTIL MATURATION
OR PAYOUT
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
N/A -- -- -- -- --
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
(e) Compensation of Directors
Allan D. Erickson and Lawrence M. Martin are each paid an annual retainer
of $1,000, as well as fees in the amount of $200 per meeting for their
services as directors of the Company. None of the other directors receive
compensation for their services as directors.
(f) Employment Contracts and Termination of Employment/Change in Control
Arrangements
The Company does not have any compensatory plan or arrangement regarding
the termination of any executive officer or regarding a change in control
of the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has not entered into any transaction during the last two years to
which the Company was a party in which any director or executive officer or
nominees thereof or securities holders or members of their immediate families
were also involved or have a direct or indirect material interest.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company has authorized the issue of one class of common stock. As of the
date of this report, 888,180 shares of common stock were issued and outstanding.
Dividends are payable on such stock as and when declared. Each share entitles
the holder thereof to one vote. There are no preemptive rights with respect to
this stock. The Company has not issued any debt securities.
Page 6 of 86
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The Company's common equity is traded principally on the OTCBB Bulletin Board
service. The high and low bids on the Company's common equity for each quarter
in the last two fiscal years and subsequent interim periods are set out in the
following table.
-------------------------------------------------------
FISCAL YEAR HIGH LOW
-------------------------------------------------------
1997 Q1 $2.50 $2.50
-------------------------------------------------------
1997 Q2 $2.50 $2.50
-------------------------------------------------------
1997 Q3 $2.50 $2.50
-------------------------------------------------------
1997 Q4 $2.50 $2.50
-------------------------------------------------------
1998 Q1 $2.50 $1.50
-------------------------------------------------------
1998 Q2 $1.50 $0.25
-------------------------------------------------------
1998 Q3 $0.25 $0.25
-------------------------------------------------------
1998 Q4 $0.25 $0.11
-------------------------------------------------------
1999 Q1 $0.11 $0.10
-------------------------------------------------------
1999 Q2 $0.10 $0.10
-------------------------------------------------------
1999 Q3 $0.16 $0.10
-------------------------------------------------------
Note that these are over-the-counter market quotations, which reflect
inter-dealer prices without retail mark-up, mark-down or commission, and may not
represent actual transactions. There are approximately 300 holders of record of
the common stock of the Company.
No dividends have been declared on the common stock of the Company within the
last two fiscal years or any subsequent interim period.
There are no restrictions that limit the ability to pay dividends on the common
stock or that are likely to do so in the future.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not presently party to any pending legal proceeding, and its
property is not the subject of any pending legal proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
No independent accountant whose services were employed by the Company or any
independent accountant on whom the report is relied on by the Company have
resigned or been dismissed in the two most recent fiscal years or subsequent
interim periods.
Page 7 of 86
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has not offered or issued securities to the public within the last
three years.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company provides liability insurance for directors and officers of the
Company. The current annual premium is approximately $1,400 for directors and
officers, all of which was paid by the Company. The policy limit is $5,000,000
with a deductible of $50,000. The individual directors and officers of the
Company and its subsidiaries are insured from claims against them for certain of
their acts, errors or omissions. The Company is insured against any loss arising
out of any liability to indemnify the directors or officers.
PART III
ITEM 1. EXHIBITS AND INDEX TO EXHIBITS
(a) EXHIBITS
The Articles of Incorporation of the Company, its By-laws and all
amendments thereto, are specifically incorporated herein by reference and
form an integral part of this Form for Registration of Securities.
The rights of securities holders are set out in their entirety in the
above-referenced documents and are again incorporated herein by reference
under the classification of Instruments Defining the Rights of Holders.
The Company is not subject to any voting trust agreements.
As the Company is essentially inactive at the time of this filing, it is
not currently party to any material contracts aside from a monthly lease
for a small office space. A copy of the lease document and other related
documents are attached.
The Company was party to two separate material contracts in the last two
years wherein the Company disposed of substantially all of its assets.
Copies of these documents are also attached.
A statement regarding the computation of share earnings has not been
included in this Form for Registration of Securities, as the primary and
fully-diluted share earnings are identical and can be clearly determined
from the financial statements provided.
A Financial Data Schedule is also included.
Page 8 of 86
<PAGE>
(b) INDEX TO EXHIBITS
Page
1. (i) Articles of Incorporation incorporated by reference
(ii) By-laws incorporated by reference
2. Instruments defining the rights of holders incorporated by reference
3. Material Contracts 26
4. Financial Data Schedule 83-86
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Bison Instruments, Inc.
Date: By: /s/ Edward G. Lampman
-------------------------------------
(Signature)
Edward G. Lampman
-----------------------------------------
(Print Name of Signing Officer)
Chief Executive Officer
-----------------------------------------
(Title of Signing Officer)
Page 9 of 86
<PAGE>
BISON INSTRUMENTS, INC.
BALANCE SHEET
JULY 31, 1999
<TABLE>
<CAPTION>
UNAUDITED (000's) 1999 1998
- - ---------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 134 $ 116
Accounts receivable -- 75
Inventory -- 86
Prepaid expenses -- 26
Fixed -- 27
----------- -----------
$ 134 $ 330
=========== ===========
LIABILITIES
Accounts payable and accruals $ -- $ 96
Loan payable -- 100
----------- -----------
-- 196
----------- -----------
SHAREHOLDERS EQUITY
Capital stock 1,003 1,003
Deficit (869) (869)
----------- -----------
134 134
----------- -----------
$ 134 $ 330
=========== ===========
</TABLE>
Page 10 of 86
<PAGE>
BISON INSTRUMENTS, INC.
STATEMENT OF INCOME AND DEFICIT
NINE MONTHS ENDED JULY 31, 1999
<TABLE>
<CAPTION>
UNAUDITED (000's) 1999 1998
- - ----------------------------------------------------------------------------------
<S> <C> <C>
Sales $ 32 $ 487
Cost of sales and operating expenses 44 669
---------- ----------
(12) (182)
Gain on disposal of product line 96 114
---------- ----------
Net income (loss) for the period 84 (68)
Deficit, beginning of period (953) (801)
---------- ----------
Deficit, end of period $ (869) $ (869)
========== ==========
INCOME (LOSS) PER SHARE $ 0.09 $ (0.08)
========== ==========
</TABLE>
Page 11 of 86
<PAGE>
BISON INSTRUMENTS, INC.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JULY 31, 1999
<TABLE>
<CAPTION>
UNAUDITED (000's) 1999 1998
- - ---------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss) $ 84 $ (68)
Depreciation -- 45
Gain on disposal of a product line (96) (105)
Gain on disposal of fixed assets -- (11)
Other non-cash items (74) (384)
---------- ----------
(86) (523)
---------- ----------
Proceeds on disposal of
fixed assets and a product line 187 530
---------- ----------
187 530
---------- ----------
Increase in cash 101 7
Cash, beginning of period 33 109
---------- ----------
Cash, end of period $ 134 $ 116
========== ==========
</TABLE>
Page 12 of 86
<PAGE>
PART F/S
Financial Statements of
BISON INSTRUMENTS, INC.
Years ended October 31, 1998 and 1997
Page 13 of 86
<PAGE>
AUDITORS' REPORT
To the Directors and Stockholders of Bison Instruments, Inc.
We have audited the balance sheets of Bison Instruments, Inc. as at October 31,
1998 and 1997 and the statements of operations and deficit and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at October 31, 1998 and 1997
and the results of its operations and its cash flows for the years then ended in
accordance with generally accepted accounting principles in the United States.
KPMG
Chartered Accountants
Toronto, Canada
December 9, 1998
Page 14 of 86
<PAGE>
BISON INSTRUMENTS, INC.
Balance Sheets
(Expressed in United States dollars)
<TABLE>
<CAPTION>
October 31, 1998 and 1997
- - -----------------------------------------------------------------------------------------------
1998 1997
- - -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 33,199 $ 109,117
Accounts receivable 16,167 307,691
Inventories (note 3) 79,000 319,100
Current portion of notes receivable -- 151,667
Prepaid expenses and other assets 2,226 38,494
-----------------------------------------------------------------------------------------
130,592 926,069
Fixed assets (note 4) -- 118,586
- - -----------------------------------------------------------------------------------------------
$ 130,592 $ 1,044,655
===============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 80,120 $ 306,986
Accrued wages and commissions -- 84,723
Loan payable (note 6) -- 450,560
- - -----------------------------------------------------------------------------------------------
80,120 842,269
Stockholders' equity (note 7):
Capital stock:
Authorized: 2,000,000 common shares, $.10 par value
Issued and outstanding: 889,890 common shares 88,989 88,989
Capital in excess of par value 914,002 914,002
Deficit (952,519) (800,605)
-----------------------------------------------------------------------------------------
50,472 202,386
Operations (note 1)
- - -----------------------------------------------------------------------------------------------
$ 130,592 $ 1,044,655
===============================================================================================
</TABLE>
See accompanying notes to financial statements.
On behalf of the Board:
/s/ Edward G. Lampman Director
- - ----------------------------
/s/ Lawrence M. Martin Director
- - ----------------------------
Page 15 of 86
<PAGE>
BISON INSTRUMENTS, INC.
Statements of Operations and Deficit
(Expressed in United States dollars)
<TABLE>
<CAPTION>
Years ended October 31, 1998 and 1997
- - -------------------------------------------------------------------------------------
1998 1997
- - -------------------------------------------------------------------------------------
<S> <C> <C>
Sales $ 519,733 $ 2,554,416
Cost of goods sold 255,583 1,721,711
- - -------------------------------------------------------------------------------------
Gross profit 264,150 832,705
Operating expenses:
Selling, general and administrative 553,293 1,027,131
New product line development -- 563,337
Provision for restructuring (note 8) (18,717) 377,734
-------------------------------------------------------------------------------
534,576 1,968,202
- - -------------------------------------------------------------------------------------
Operating loss (270,426) (1,135,497)
Other income (expense) (note 1) 118,512 (67,256)
- - -------------------------------------------------------------------------------------
Loss before income taxes (151,914) (1,202,753)
Income taxes (note 9) -- 95,000
- - -------------------------------------------------------------------------------------
Loss for the year (151,914) (1,297,753)
Retained earnings (deficit), beginning of year (800,605) 497,148
- - -------------------------------------------------------------------------------------
Deficit, end of year $ (952,519) $ (800,605)
=====================================================================================
Loss per share $ (.171) $ (1.458)
=====================================================================================
</TABLE>
See accompanying notes to financial statements.
Page 16 of 86
<PAGE>
BISON INSTRUMENTS, INC.
Statements of Cash Flows
(Expressed in United States dollars)
<TABLE>
<CAPTION>
Years ended October 31, 1998 and 1997
- - -------------------------------------------------------------------------------------------------
1998 1997
- - -------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used in):
Cash flows from operating activities:
Loss for the year $ (151,914) $(1,297,753)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 59,974 101,303
Gain on disposal of product lines (105,465) --
Gain on disposal of fixed assets (10,905) --
Deferred income taxes -- 95,000
Loss on disposition of equipment held for rental -- 5,370
-------------------------------------------------------------------------------------------
(208,310) (1,096,080)
Changes in non-cash working capital balances
related to operations:
Accounts receivable 291,524 253,265
Notes receivable 151,667 192,155
Inventories (82,882) 667,410
Prepaid expenses and other assets 36,268 40,000
Accounts payable and accrued liabilities (226,866) (306,012)
Accrued wages and commissions (84,723) 38,658
-------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (123,322) (210,604)
Cash flows from investing activities:
Proceeds on disposal of fixed assets 37,382 --
Proceeds on disposal of product lines 466,094 --
Capital expenditures (5,512) (31,527)
-------------------------------------------------------------------------------------------
497,964 (31,527)
Cash flows from financing activities:
Loan payable (450,560) 450,560
Line of credit -- (150,000)
-------------------------------------------------------------------------------------------
Net cash provided by financing activities (450,560) 300,560
- - -------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (75,918) 58,429
Cash, beginning of year 109,117 50,688
- - -------------------------------------------------------------------------------------------------
Cash, end of year $ 33,199 $ 109,117
=================================================================================================
Supplemental information:
Cash paid for interest $ -- $ 25,614
Notes receivable obtained on sale of equipment $ -- $ 48,513
=================================================================================================
</TABLE>
See accompanying notes to financial statements.
Page 17 of 86
<PAGE>
BISON INSTRUMENTS, INC.
Notes to Financial Statements
(Expressed in United States dollars)
Years ended October 31, 1998 and 1997
- - --------------------------------------------------------------------------------
Bison Instruments, Inc. (the "Company") was engaged in the manufacture of
geophysical and other measurement instruments, sold internationally, until the
end of this fiscal year. Andus Inc. owns approximately 66.9% of the Company's
outstanding common stock. Andus is a subsidiary of Autrex Inc. of Toronto,
Canada.
1. GAIN ON DISPOSAL OF PRODUCT LINES AND FIXED ASSETS:
On June 5, 1998, Bison sold the seismic products lines, including all
inventory and intellectual property associated therewith, to a third party
resulting in a net gain on disposal of product lines and fixed assets of
$116,370.
An agreement to sell the Mu-Meter product line, including inventory and
intellectual property rights, for $179,000 was entered into on October 23,
1998, and closed in November 1998 with a net gain of approximately $90,000
being recognized in the first quarter of 1999.
At October 31, 1998, the operations of Bison had essentially ceased and the
corresponding assets were written down to net realizable value.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Inventories:
Inventories are stated at the lower of cost and net realizable value.
(b) Fixed assets:
There are no remaining fixed assets at October 31, 1998. Depreciation
has been provided throughout the year using the following methods and
useful lives:
----------------------------------------------------------------------
Useful
Asset Basis lives
----------------------------------------------------------------------
Shop equipment Straight line 2-10 years
Furniture and fixtures Straight line 3-5 years
Leasehold improvements Straight line 3 years
Equipment held for rental Straight line 3 years
======================================================================
(c) Product warranty costs:
Anticipated future costs of product warranties were charged to
operations in the year the product was sold.
Page 18 of 86
<PAGE>
BISON INSTRUMENTS, INC.
Notes to Financial Statements (continued)
(Expressed in United States dollars)
Years ended October 31, 1998 and 1997
- - --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(d) Income taxes:
The Company accounts for income taxes in accordance with the Financial
Accounting Standards Board Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes. Under the asset and liability
method of Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(e) Fair value of financial assets and financial liabilities:
The fair value of the Company's cash, accounts receivable, notes
receivable, accounts payable and accrued liabilities approximates
their carrying amounts due to the relatively short periods to maturity
of the instruments.
(f) Use of estimates:
These financial statements are prepared in accordance with generally
accepted accounting principles which require management to make
estimates and assumptions which affect the reported amounts of assets
and liabilities at the date of the financial statements and the
reported amounts of income, expenses and changes in financial position
for the year. Actual results could differ from these estimates.
(g) Earnings per share:
The earnings per share computations are based on the weighted average
number of common shares outstanding during each year (889,890 shares).
3. INVENTORIES:
Inventories consist of the following:
----------------------------------------------------------------------
1998 1997
----------------------------------------------------------------------
Finished goods $ 79,000 $ 165,548
Work-in-process -- 43,481
Raw materials -- 110,071
----------------------------------------------------------------------
$ 79,000 $ 319,100
======================================================================
Page 19 of 86
<PAGE>
BISON INSTRUMENTS, INC.
Notes to Financial Statements (continued)
(Expressed in United States dollars)
Years ended October 31, 1998 and 1997
- - --------------------------------------------------------------------------------
4. FIXED ASSETS:
Fixed assets consist of the following:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
1998 1997
----------------------------------------------------------------------------------------------
Accumulated Net book Net book
Cost depreciation value value
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shop equipment $ -- $ -- $ -- $ 23,393
Furniture and fixtures -- -- -- 26,032
Leasehold improvements -- -- -- 1,938
Equipment held for rental -- -- -- 67,223
----------------------------------------------------------------------------------------------
$ -- $ -- $ -- $ 118,586
==============================================================================================
</TABLE>
5. RELATED PARTY TRANSACTIONS:
The Company accrued management fees of $25,000 (1997 - nil) to Autrex Inc.
Included in accrued liabilities is $25,000 (1997 - $14,931) payable to
Autrex Inc.
6. LOAN PAYABLE:
The non-interest bearing loan payable to Autrex Inc. was repaid during the
year.
7. STOCKHOLDERS' EQUITY:
In 1995, the Company granted to an officer an option to purchase 50,000
shares of the Company at $2.25 per share. The options vest at the rate of
10,000 on January 7 of each year from 1995 to 1998 inclusive and expire on
January 7, 2001. On July 23, 1997, these 50,000 stock options were
cancelled and not replaced.
8. RESTRUCTURING EXPENSES:
During 1997, the Company commenced reorganizing and downsizing its
operations. Certain product lines were eliminated, resulting in inventory
writedowns of $257,000, other intangible assets in the amount of $33,000
were written off, and severance payments and other related expenses of
$88,000 were accrued in the 1997 financial statements. Of the $88,000,
approximately $70,000 was paid out by October 31, 1998; the remaining
$18,000 was taken into income this year.
Page 20 of 86
<PAGE>
BISON INSTRUMENTS, INC.
Notes to Financial Statements (continued)
(Expressed in United States dollars)
Years ended October 31, 1998 and 1997
- - --------------------------------------------------------------------------------
9. INCOME TAXES:
Income tax expenses in the 1997 fiscal year were the result of an increase
in the valuation allowance for deferred tax debits representing loss
carryforwards for which a future benefit is no longer probable.
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at October 31,
1998 and October 31, 1997 are presented below:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
1998 1997
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets primarily attributable to losses available
for carryforward, reserves on receivables and
non-deductible accruals $ 1,400,000 $ 1,200,000
Less valuation allowance (1,400,000) (1,200,000)
------------------------------------------------------------------------------------------------------
-- --
Deferred tax liabilities primarily attributable to excess
tax depreciation over financial reporting depreciation -- --
------------------------------------------------------------------------------------------------------
Net deferred tax asset $ -- $ --
======================================================================================================
</TABLE>
10. RETIREMENT PLAN:
The Company has a 401(k) defined contribution retirement plan which is
available to all company employees who have reached age 21 and completed
six months of employment. Employer contributions to a maximum of 4% of
qualified compensation are made at a rate of 50% of employees'
contributions. Expenses incurred by the Company related to such
contributions were $6,950 (1997 - $22,650).
Page 21 of 86
<PAGE>
BISON INSTRUMENTS, INC.
Notes to Financial Statements (continued)
(Expressed in United States dollars)
Years ended October 31, 1998 and 1997
- - --------------------------------------------------------------------------------
11. SEGMENT OF BUSINESS:
The Company's operations are in one principal segment - the manufacture and
sale of geophysical and other measurement instrumentation. A breakdown of
sales by geographic area for the year is as follows:
---------------------------------------------------------------------------
1998 1997
---------------------------------------------------------------------------
Domestic customers $ 339,358 $ 1,193,859
Foreign customers:
Europe 76,704 401,745
Canada 91,191 406,919
Asia 2,262 256,479
Argentina 1,202 --
South America 1,468 159,545
All other 7,548 135,869
---------------------------------------------------------------------------
$ 519,733 $ 2,554,416
===========================================================================
Sales amounts reported include instrument rental income of $116,256 (1997 -
$151,980).
Page 22 of 86
EXHIBIT 10.1
LEASE TERMINATION AGREEMENT
THIS AGREEMENT, made and entered into this 18th day of June, 1998, by and
between LIBERTY PROPERTY LIMITED PARTNERSHIP, a Pennsylvania limited partnership
(hereinafter called "Landlord") and BISON INSTRUMENTS, a Minnesota corporation
(hereinafter called "Tenant").
WITNESSETH:
WHEREAS, LANDLORD AND TENANT ENTERED INTO A LEASE DATED JULY 20, 1994 ("LEASE"),
COVERING CERTAIN PREMISES KNOWN AS SUITE 145 AND CONSISTING OF APPROXIMATELY
10,165 SQUARE FEET OF SPACE ("PREMISES") IN THE BUILDING LOCATED AT 5610 ROWLAND
POND, MINNETONKA, MINNESOTA ("BUILDING"), WHICH PREMISES ARE MORE PARTICULARLY
DESCRIBED IN SAID LEASE; AND
WHEREAS, Landlord and Tenant now desire to terminate the Lease pursuant to the
terms and conditions contained herein.
NOW, THEREFORE, in consideration of the preambles and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. The Lease is hereby terminated as of October 1, 1998 (the "Effective
Date"), and thereafter the parties shall have no rights, duties or
obligations under the Lease and are hereby released therefrom, except
those which are expressly stated in the Lease to survive the
termination of the Lease.
2. In consideration of Landlord's agreement to terminate the Lease as set
forth in Section 1, Tenant hereby agrees to pay to Landlord the
following amounts:
a) A termination fee of $25,000.00, which will be paid as of the
date of this Agreement;
b) All rent due and unpaid under the Lease as of the date of this
Agreement, totaling $18,259.96; and
c) All rent due under the Lease from the date of this Agreement
to the Effective Date, totaling $27,389.94. The parties agree
that Landlord shall apply Tenant's security deposit under the
Lease, in the amount of $5,481.00, to the amount owed under
this Sub-Section C. Tenant shall pay to Landlord the balance
owed of $21,908.94 by no later than July 1, 1998.
3. This Agreement shall be governed by and construed under the laws of the
State of Minnesota.
4. This Agreement shall not be binding until executed by all parties
hereto.
Page 23 of 86
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first above written.
LANDLORD:
LIBERTY PROPERTY LIMITED
PARTNERSHIP
By: /s/ Doug Johnson
------------------------------------
Its: Vice President
------------------------------------
TENANT:
BISON INSTRUMENTS
By: /s/ Lawrence M. Martin
------------------------------------
Its: General Manager
------------------------------------
Page 24 of 86
<PAGE>
SUBLEASE AGREEMENT
This Sublease Agreement ("Sublease"), made and entered into this 18th day of
June, 1998, by and between BISON INSTRUMENTS, a Minnesota corporation
("Sublessor'), and ENDURATEC SYSTEMS CORP., a Minnesota corporation ("Tenant").
WITNESSETH:
WHEREAS, Sublessor entered into that certain Lease dated July 20, 1994 (the
"Prime Lease"), by and between MARFIELD, BELGARDE & YAFFE ("Landlord"), as
landlord, and Sublessor, as tenant, for certain premises ("Premises") in the
building located at 5610 Rowland Pond, Minnetonka, Minnesota, a true and correct
copy of which is attached hereto as Exhibit A and made a part hereof; and
WHEREAS, Sublessor desires to sublease to Tenant that portion of the Premises
which is identified by crosshatch on the attached Exhibit B ("Subleased
Premises"), and Tenant desires to sublease the same from Sublessor, upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements herein contained, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby agreed by
and between the parties hereto as follows:
1. SUBLEASED PREMISES. Sublessor hereby leases unto Tenant, and Tenant hereby
takes from Sublessor, in its "as is" condition the Subleased Premises.
2. TERM. The term of this Sublease shall commence on July 1, 1998, and shall
terminate as of October 1st, 1998.
3. RENT. As monthly rent ("Rent") for the Subleased Premises, Tenant will pay
monthly rent in an amount equal to 50% of Sublessor's monthly installments of
Minimum Annual Rent, Annual Operating Expenses, Taxes and other Impositions, and
other additional rent for the Premises. Tenant's Rent shall be payable in
advance, without abatement, deduction or setoff, on the Commencement Date and on
the first day of each calendar month thereafter during the Sublease Term. The
Rent as to any partial months included in the Sublease Term shall be prorated on
a daily basis.
4. ASSUMPTION OF OBLIGATIONS. Except for the rent due under the Prime Lease and
except as otherwise set forth in this Sublease, Tenant assumes and agrees to
keep, obey and perform all of the terms, covenants and conditions of Sublessor
as Tenant under the Prime Lease with respect o the Subleased Premises. Any
failure by Tenant to perform, keep and obey the same shall be a default
hereunder. It is hereby understood and agreed that Tenant's rights to use,
possess and enjoy the Subleased Premises are subject to the terms and conditions
of the Prime Lease and the rights and remedies of Landlord thereunder.
Page 25 of 86
<PAGE>
5. TITLE AND POSSESSION. Sublessor covenants and agrees that it has full right
and authority to enter into this Sublease for the full term hereof, and that
Tenant, upon paying the rents and other sums provided herein, and upon
performing the duties, covenants, agreements and obligations hereof, and upon
keeping and obeying all of the restrictions, conditions and provisions hereof,
will have, hold and enjoy quiet possession of the Subleased Premises for the
term herein granted and with all of the rights and privileges of Sublessor under
the Prime Lease with respect to the Subleased Premises except as herein
expressly excluded or modified and subject to all of said duties, covenants,
agreements, obligations, restrictions, conditions and provisions.
6. SUBLEASE AND ASSIGNMENT. It is mutually agreed that Tenant may not assign
this Sublease or further sublease any portion of the Subleased Premises without
the prior written consent of Sublessor and Landlord. Tenant shall not pledge its
interest hereunder, or allow liens to be placed on such interest, or suffer this
Sublease or any portion thereof to be attached or taken upon execution. No
assignment or further subleasing, even with the consent of Sublessor and
Landlord, shall relieve Tenant from liability for payment of the rent herein
provided for or from the obligation to keep and be bound by all of the terms,
conditions and covenants of this Sublease.
7. DAMAGE, DESTRUCTION OR CONDEMNATION. In the event of damage or destruction of
the Subleased Premises or the taking of all or any part thereof under the power
of eminent domain, this Sublease shall terminate if, but only if, the Prime
Lease is terminated as a result thereof, and the rent payable hereunder shall
abate only as long as and in the same proportion as the rent due from Sublessor
to Landlord under the Prime Lease abates as a result thereof.
8. MUTUAL RELEASE AND WAIVER OF SUBROGATION. Notwithstanding any provision of
this Sublease to the contrary, all parties hereby waive any and all rights of
recovery, claim, action or cause of action, against the others and against
Landlord, their agents (including partners, both general and limited), officers,
directors, shareholders or employees, for any loss or damage that may occur to
the Subleased Premises, or any improvements thereto, or the building of which
the Subleased Premises are a part, or any improvements thereto, or any property
of such party herein, by reason of fire, the elements, or any other cause which
could be insured against under the terms of standard fire and extended coverage
insurance policies, regardless of cause or origin, including negligence of the
other party hereto, its agents, officers or employees, and each covenants that
its insurers shall hold no right of subrogation against any other party.
9. ALTERATIONS. Any alterations, additions and improvements in or upon the
Subleased Premises shall be made by Tenant only after prior written consent by
Sublessor, which consent shall not be withheld if Landlord consents thereto.
Upon the termination of the term hereof, all such alterations, additions and
improvements (except personal property, business and trade fixtures, machinery
and equipment, furniture and movable partitions owned by Tenant) shall be and
remain part of the Subleased Premises and shall not be removed by Tenant unless
such removal is required by Sublessor, in which case Tenant shall remove the
same and restore the Subleased Premises to the same condition in which they were
on the date hereof, reasonable and
Page 26 of 86
<PAGE>
ordinary wear and tear excepted. Personal property, business and trade fixtures,
machinery and equipment, furniture and movable partitions owned by Tenant shall
be and remain the property of Tenant and may be removed by Tenant at any time
during the term hereof when Tenant is not in default hereunder. Tenant covenants
and agrees to indemnify Sublessor and Landlord against, and hold Sublessor and
Landlord harmless from, all liens, whether for labor or materials arising as the
result of alterations, additions, repairs, or improvements to the Subleased
Premises made by Tenant during the term of this Sublease.
10. DEFAULT. If the rent above referred to, or any part thereof, whether the
same be demanded or not, shall remain unpaid for a period of 5 days from the
date when due hereunder, or if any other term, condition or covenant of this
Sublease, express or implied on the part of Tenant to be kept or performed shall
be violated or neglected, and if Tenant shall fail to cure the same within ten
days from the date of written notice from Sublessor to Tenant specifying the
violations, or if the Subleased Premises or Tenant's interest therein shall be
taken on execution or other process of law, or if Tenant shall petition to be or
shall be declared bankrupt or insolvent according to law or shall enter an
assignment for the benefit of creditors, or if Tenant shall abandon the
Subleased premises, or if any default under the Prime Lease shall occur with
respect to Tenant or the performance by Tenant of any of its covenants and
obligations under this Sublease, then and in any of said cases, Tenant shall be
deemed in default, and Sublessor shall have all of the rights and remedies
against Tenant which would be available to Landlord against Sublessor in the
event of a default by Sublessor under the Prime Lease.
11. NOTICES. Any notice or communication required or permitted to be given or
served by either party hereto upon the other shall be deemed given or served in
accordance with the provisions of this Sublease when mailed in a sealed wrapper
by United States registered or certified mail, return receipt requested, postage
prepaid, property addressed as follows:
If to Sublessor: Bison Instruments
5610 Rowland Road
Minnetonka, MN 55343
If to Tenant: EnduraTEC Systems Corporation
5610 Rowland Pond Road
Minnetonka, MN 55343
Each such mailed notice or communication shall be deemed to have been given to,
or served upon, the party to which addressed on the date the same is deposited
in the United States registered or certified mail, postage prepaid, property
addressed in the manner above provided. Any party hereto may change its address
for the service of notice hereunder by serving written notice hereunder upon the
other party hereto, in the manner specified above, at least ten (10) days prior
to the effective date of such change.
12. SURRENDER OF SUBLEASED PREMISES UPON EARLY TERMINATION. Upon any early
termination of this Sublease, Tenant shall quit and surrender possession of the
Page 27 of 86
<PAGE>
Subleased Premises to Sublessor in as good order and condition as the same are
now or hereafter may be improved by Landlord, Sublessor or Tenant, reasonable
wear and tear and repairs which are Landlord's obligation excepted, and shall,
without expense to Sublessor, remove or cause to be removed from the Subleased
Premises all debris and rubbish, all furniture, equipment, business and trade
fixtures, movable partitioning and other articles or personal property owned by
Tenant or installed or placed by Tenant at its expense in the Subleased
Premises, and all similar articles of any other persons claiming under Tenant,
and Tenant shall repair all damage to the Subleased Premises resulting from such
removal.
13. TERMINATION OF PRIME LEASE. It is understood and agreed by and between the
parties hereto that the existence of this Sublease is dependent and conditioned
upon the continued existence of the Prime Lease, and in the event of the
cancellation or termination of the Prime Lease, this Sublease automatically
shall be terminated; provided, however, that this provision shall not be deemed
to release Sublessor from liability if the Prime Lease is cancelled or
terminated by reason of a default by Sublessor as tenant under the Prime Lease,
which default did not result, in whole or in part, from a default by Tenant
hereunder. Sublessor shall have no liability to Tenant if the Prime Lease is
cancelled or terminated by reason of a default by Tenant hereunder, or by reason
of any condemnation or destruction of the Subleased Premises.
14. WAIVER. A waiver by Sublessor of any default, breach or failure of Tenant
under this Sublease shall not be construed as a waiver of any subsequent or
different default, breach or failure.
15. HOLDING OVER. If Tenant holds over after the early termination of the term
hereof without the express written consent of Sublessor, Tenant shall become a
tenant at sufferance only, at a rental rate equal to 150% of the rental rate in
effect upon the date of such expiration and otherwise upon the terms, covenants
and conditions herein specified, so far as applicable. Acceptance by Sublessor
of rent after such expiration or earlier termination shall not constitute a
consent to a holdover hereunder or result in a renewal. The foregoing provisions
of this paragraph are in addition to, and shall not limit, Sublessor's right of
reentry or any other rights of Sublessor hereunder or as otherwise provided by
law. In the event of any unauthorized holding over, Tenant shall indemnify
Sublessor against all claims for damages arising therefrom.
16. SUCCESSORS AND ASSIGNS. All of the terms, covenants, provisions and
conditions of this Sublease shall be biding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
17. CAPTIONS. The captions used on the paragraphs of this Sublease are for
convenience only, are not a part of this Sublease, and are not to be considered
in the interpretation hereof.
18. CONSENT OF LANDLORD. This Sublease is contingent upon approval by Landlord
manifested by Landlord's execution of the Consent to Sublease appearing below.
Unless and until Landlord executes the Consent to Sublease below, this Sublease
shall be of no force or effect, and the parties hereto shall have no liability
or obligation to each
Page 28 of 86
<PAGE>
other. Tenant shall not be permitted access to the Subleased Premises for any
purpose until the Consent to Sublease below has been executed by Landlord.
19. RELATIONSHIP OF PARTIES. This Sublease does not and shall not create the
relationship of principal and agent, or of partnership, or of joint venture, or
of any other association between Sublessor and Tenant, the sole relationship
between the parties hereto being strictly that of landlord and tenant.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed
as of the day and year first above written.
SUBLESSOR:
BISON INSTRUMENTS
By: /s/ Lawrence M. Martin
------------------------------------
Its: General Manager
------------------------------------
TENANT:
ENDURATEC SYSTEMS CORP.
By: /s/ Kent Villander
------------------------------------
Its: President
------------------------------------
CONSENT TO SUBLEASE
THE UNDERSIGNED ("LANDLORD") DOES HEREBY CONSENT TO THE FOREGOING SUBLEASE,
PROVIDED THAT SUCH CONSENT SHALL NOT RELEASE OR DISCHARGE THE SUBLESSOR FROM ANY
OF ITS OBLIGATIONS TO BE PERFORMED UNDER THE PRIME LEASE, AND FURTHER PROVIDED
THAT SUCH CONSENT IS LIMITED TO THE FOREGOING SUBLEASE ONLY, AND ANY FURTHER
ASSIGNMENT, SUBLEASE, AMENDMENT OR MODIFICATION OF THIS SUBLEASE OR THE PRIME
LEASE SHALL REQUIRE THE PRIOR WRITTEN CONSENT OF THE UNDERSIGNED PURSUANT TO OF
THE PRIME LEASE.
LANDLORD:
LIBERTY PROPERTY LIMITED PARTNERSHIP
By: /s/ Douglas Johnson
------------------------------------
Its: Vice President
------------------------------------
Page 29 of 86
EXHIBIT 10.2
THIS AGREEMENT is made the day of 1998
BETWEEN:
(1) DOUGLAS EQUIPMENT LIMITED a company registered in England and Wales
(Company No: 697744) whose registered office is at Village Road, Arle,
Cheltenham, Gloucester GL51 0AB (trading as Douglas Schopf) ("the
Purchaser"); and
(2) BISON INSTRUMENTS INC a company registered in the State of Minnesota
(Federal Identification No: 41-0947661) whose principal place of
business is at 5610 Rowland Road, Minneapolis, MN 55343-8956 ("the
Vendor").
WHEREAS:
The Vendor wishes to sell the Assets (as defined below) and the Purchaser wishes
to purchase the Assets upon the terms and subject to the conditions hereinafter
appearing.
NOW IT IS HEREBY AGREED as follows:-
1. INTERPRETATION
1.1. In this Agreement the following words and expressions shall
have the following meanings, unless they are inconsistent with
the context:
"THE ASSETS" means the Intellectual Property Rights, the
Stock, the four (4) completed Ultra Chassis Friction Meters,
the Designs, the Software and the Records and any other
property, rights and assets relating to the Business as set
out in Schedule 1;
Page 30 of 86
<PAGE>
"A BUSINESS DAY" means Mondays to Fridays (inclusive) except
any day which is a public holiday in England or the United
States of America;
"THE BUSINESS" means the Vendor's business associated with the
sale of the Vendor's friction measurement product line as
carried on by the Vendor prior to Completion;
"COMPLETION" means the actual completion of the sale of the
Assets to the Purchaser;
"THE COMPLETION DATE" means 2 November 1998 or three Business
Days after the Vendor has obtained Shareholder approval in
accordance with clause 8.1 hereof whichever is the later;
"THE CONTRACTS" means all those contracts and licences of any
nature entered into by the Vendor with agents or distributors
under which such agents or distributors sell, sub-license or
distribute the Software or any friction measurement equipment;
"THE DESIGNS" means the mechanical and electronic design of
the MK4 and MK5 equipment, the mechanical and electrical
design of the Bison Self Watering System (ie speed related
system part number B707 and Dual Speed system part number
B706) and the mechanical design of the Ultra Chassis Friction
Meters;
"THE ESCROW AMOUNT" means the sum of $US 50,000 payable by the
Purchaser to the Purchaser's Solicitors in accordance with
clause 3.2 and to be dealt with in accordance with clause 3.3;
Page 31 of 86
<PAGE>
"GROUP" means a group as defined in section 53(1) of the
Companies Act 1989;
"THE INTELLECTUAL PROPERTY RIGHTS" means the Trade Mark and
all and any patents, patent applications, copyrights, trade
marks, service marks, registered designs, design rights,
business names, know-how, database rights and any other
industrial or intellectual property rights (and applications
for any of these) and any similar or analogous rights in any
jurisdiction anywhere in the world subsisting in any of the
Records, the Software or the Designs with the exception of
those intellectual property rights possessed by the Purchaser
or any Company in its Group prior to the date hereof and with
the exception of those intellectual property rights set out in
clause 2.5 of this Agreement;
"THE PURCHASER'S SOLICITORS" means Manches & Co of 3 Worcester
Street, Oxford OX1 2PZ;
"THE RECORDS" means all and any drawings, papers, documents,
samples, reports, specifications, designs, manuals, drawings,
statistics, accounts, documentation, know-how, marketing or
promotional material and any other material including any
drafts, scraps or work in progress or any other information
relating to the Stock, the Designs, the Software or the
Business, including without limitation:
(i) records of all customers to whom sales have been made;
(ii) contact names and addresses of the Vendor's agents and
distributors in the United States, Canada, Central America and
South
Page 32 of 86
<PAGE>
America and the rest of the world; and
(iii) full details of all suppliers of any and all components
of any equipment to which any of the Designs relate;
"THE SOFTWARE" means the source code and the object code of
the Mu-Meter software and all versions and releases thereof
(including without limitation the MK4 and MK5 versions) and
all specifications and documentation relating to that
software;
"THE STOCK" means the stock of the Business including all the
test equipment as determined under clause 2.1 below;
"THE TRADE MARK" means the trade mark registered in the United
States details of which are set out in Schedule 3 including
all common law rights connected therewith together with all
goodwill relating to that trade mark.
1.2. Reference to any statute, statutory provision or statutory
instrument shall be construed as including a reference to that
statute, statutory provision or statutory instrument (together
with all rules and regulations made under them) as may from
time to time be amended, consolidated or re-enacted.
1.3. References to persons shall include bodies corporate,
unincorporated associations and partnerships.
1.4. References to clauses and Schedules are to clauses of and
Schedules of this Agreement.
Page 33 of 86
<PAGE>
2. SALE AND PURCHASE
2.1. The Vendor shall, on the Completion Date, sell and the
Purchaser shall purchase such of the Stock as the Purchaser
requires and notifies in writing to the Vendor prior to the
Completion Date at the actual cost that the Vendor purchased
that Stock from third parties and the four completed Ultra
Chassis Friction Meters for US $16,000 each.
2.1.1. The Vendor will forthwith make available to the
Purchaser and its authorised representatives the
Stock and the four (4) completed Ultra Chassis
Friction Meters, for review and inspection purposes
in order to allow the Purchaser to determine that
such Stock and the four (4) completed Ultra Chassis
Friction Meters are of merchantable quality and
reasonably fit for their usual purposes. The
Purchaser shall notify the Vendor by the Completion
Date of any obvious defects which render such
defective stock or any of the four (4) completed
Ultra Chassis Friction Meters not of merchantable
quality or reasonably fit for their usual purposes,
as soon as reasonably possible and shall have the
right to return such defective Stock and any of the
four (4) Ultra Chassis Friction Meters, provided such
notice is received by the Completion Date. In such
event, the Purchaser will not be obliged to purchase
such defective Stock or the defective Ultra Chassis
Friction Meters on Completion.
2.1.2. Subject to the Purchaser's rights under clause 2.1.1,
the Purchaser acknowledges that the Stock and the
four (4) completed Ultra Chassis Friction meters are
purchased on an
Page 34 of 86
<PAGE>
"as is, where is" basis, and without warranty,
express or implied.
2.2. Subject to the terms and conditions of this Agreement, on the
Completion Date the Vendor will sell and the Purchaser will
purchase the Assets.
2.3. Subject to the terms and conditions contained in this
Agreement the Assets are sold by the Vendor with full title
guarantee without any liens, charges, claims, encumbrances or
adverse claims.
2.4. The Vendor shall on the Completion Date:
2.4.1. transfer title to all the Assets to the Purchaser;
and
2.4.2. arrange for the shipment of all the Assets to the
Purchaser at the Purchaser's expense and all such
items shall be at the risk of the Purchaser from the
Completion Date; and
2.4.3. deliver to the Purchaser all documents of title
relating to the Assets including without limitation
assignments or the Trade Mark and other Intellectual
Property Rights in the form set out in Schedule 4 and
transfers or assignments of any other of the Assets
which are not transferable by delivery; and
2.4.4. deliver to the Purchaser deeds in the form set out in
Schedule 2 from respectively, the Vendor, Androcan
Inc, and Autrex Inc.
2.5. The Vendor retains the right, title and interest in (i) the
name "Bison Instruments Inc", (ii) the Bison trade mark,
service mark and trade
Page 35 of 86
<PAGE>
name (the "Bison Word Mark") and (iii) the Bison graphic logo
(the "Bison Logo") (together the "Retained Intellectual
Property"). The Purchaser shall have no rights in or to the
Bison Logo, including, without limitation, the right to use
the Bison Logo. All rights in the Bison Word Mark are reserved
to the Vendor. The Purchaser acknowledges that the Bison Word
Mark is the property of the Vendor. The Purchaser shall not,
during the term of this Agreement or thereafter, adopt or use
any service mark, trade name, or trade mark confusingly
similar to the Bison Word Mark. The Purchaser acknowledges
that strict observance and performance of the terms of this
section of the Agreement are necessary to protect the Vendor
and the Bison Word Mark.
3. PAYMENT
3.1. In consideration of the Vendor carrying out its obligations
under this Agreement and subject to the Vendor complying with
clause 2.4 above, the Purchaser shall pay the Vendor the sums
set out in Schedule 1 within 24 hours after the Completion
Date via an electronic bank transfer to the Purchaser's
account number 6046486 with Richfield Bank and Trust, 6625
Lyndale Avenue South, Richfield, Minnesota 55423 USA, Main
Routing 091016498 less the Escrow amount.
3.2. The Purchaser shall pay the Escrow Amount to the Purchaser's
Solicitors on 2 November 1998.
3.3. The parties irrevocably instruct Manches & Co that in the
event that the Vendor shall notify the Purchaser's Solicitors
that the Vendor has received shareholders consent as required
under clause 8.1 of this Agreement, the Purchaser's Solicitors
shall if such notice is received
Page 36 of 86
<PAGE>
more than two Business Days prior to 2 November 1998 pay the
Escrow Amount to the Vendor on 2 November 1998 or if such
notice is received on the date two Business Days prior to 2
November 1998 or any date thereafter pay the Escrow Amount to
the Vendor on the Completion Date. The Purchaser's Solicitors
shall pay the Escrow Amount to the Vendor by electronic
transfer to the account specified in clause 3.1.
3.4. The Vendor may only instruct the Purchaser's Solicitors under
clause 3.3 above if it has obtained its shareholders' consent
in accordance with clause 8.1.
3.5. All sums stated herein are inclusive of any value added, sales
or export taxes (if any) in the United States but is exclusive
of any value added, sales or import taxes in the United
Kingdom.
3.6. The Purchaser will pay the Vendor, within 30 days after any
sale to any third party of any of the four completed Ultra
Chassis Friction Meters included in the Assets, half of the
difference between the price at which it sells any Ultra
Chassis Friction Meter included in the Assets to that third
party and the price it has paid the Vendor for any Ultra
Chassis Friction Meter included in the Assets (as set out in
Schedule 1) provided that:
3.6.1. the sale of any Ultra Chassis Friction Meter to the
third party occurs within 3 years after the date of
this Agreement; and
3.6.2. the third party purchasing any Ultra Chassis Friction
Meter pays the Purchaser more than the price that the
Purchaser has paid the Vendor for that Ultra Chassis
Friction Meter.
Page 37 of 86
<PAGE>
3.7. Subject to clause 3.8, the Purchaser agrees that it shall act
in good faith regarding the sale of the Ultra Chassis Friction
Meters to third parties and, in particular, that:
3.7.1. the Purchaser acting reasonably will attempt to sell
the Ultra Chassis Friction Meters purchased under
this Agreement before any other Ultra Chassis
Friction Meters that the Purchaser acquires later
than those acquired under this Agreement; and
3.7.2. the price at which the Purchaser sells any of the
Ultra Chassis Friction Meters to a third party will
not be unfairly discounted by the Purchaser by
comparison with the discounts offered by the
Purchaser on other meters; and
3.7.3. following the reasonable request of the Vendor, the
Purchaser will inform the Vendor how many of the
Ultra Chassis Friction Meters purchased from the
Vendor under this Agreement have been sold.
3.8. The obligations of the Purchaser in clause 3.7 shall not
prevent the Purchaser from selling any other type of friction
meter to any third party before the Ultra Chassis Friction
Meters purchased under this Agreement, and shall not prevent
the Purchaser from selling any of the Ultra Chassis Friction
Meters at such price as it deems to be appropriate acting
reasonably.
Page 38 of 86
<PAGE>
4. OBLIGATIONS OF THE VENDOR
4.1. Subject to the Purchaser's review of the source code of the
Software to be provided to the Purchaser forthwith, the Vendor
shall procure that the services of Karina Rasyaeva, Hugo Janke
or John Decharinte are made available to the Purchaser for 30
hours (10 hours a day on 3 consecutive days) and that the
services of Karina Rasyaeva or Hugo Janke are made available
to the Purchaser for 18 hours of the total 30 hour period (6
hours a day on 3 consecutive days), at a time to be arranged
between the parties , in order to transfer to a representative
of the Purchaser the Vendor's information and knowledge
relating to the Software and the structure and operation of
the source code for the Software.
4.2. In the event that the Purchaser considers that the transfer of
information set out in clause 4.1 from Karina Rasyaeva or Hugo
Janke has not been achieved within 30 hours, the Vendor shall
make the Services of Karina Rasyaeva or Hugo Janke available
to the Purchaser for a further 18 hours (6 hours a day on 3
consecutive days ) at a time to be arranged between the
parties for the purpose as set out in clause 4.1 above.
4.3. The Vendor shall provide such information as the Purchaser may
require to enable the Purchaser to carry out effective after
sales support to the Purchaser's customers including, without
limitation, full details of the type and mark of any friction
measurement product supplied to individual customers of the
Vendor, the agent (if any) that was involved in that supply
and the contact names, addresses and company names of any such
customers.
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<PAGE>
5. LIABILITIES, CONTRACTS AND CLAIMS
For the avoidance of doubt, the Purchaser shall not be liable to pay,
satisfy or discharge any liabilities (whether accrued, actual or
contingent) of the Vendor in connection with the Business or any of the
Assets arising from any act or omission or event occurring prior to
Completion.
6. WARRANTIES
6.1. The Vendor represents and warrants that:
6.1.1. it has terminated all of the Contracts prior to the
date hereof and no third party shall have any rights
to sell, distribute or sub-license the Software or
any of the Assets, or to use the Trade Mark or any
similar mark in connection with any goods or services
within the class[es] in which the Trade Mark is
registered or used or use any of the other
Intellectual Property Rights in any way whatsoever;
6.1.2. it will not, and will procure that each company in
its Group will not, hereafter use or permit the use
of any of the Intellectual Property Rights (or any
part thereof) without a licence from the Purchaser;
6.1.3. it will promptly provide on request all reasonable
assistance and technical information to the Purchaser
(including allowing reasonable site visits before
Completion) for the purpose of enabling the Purchaser
to grant licences of or assign the Intellectual
Property Rights (or any part thereof) to any third
party but the Vendor will only be obliged to provide
assistance
Page 40 of 86
<PAGE>
where the Vendor is able to do so;
6.1.4. it has caused to be waived irrevocably all moral
rights which may exist in relation to any of the
Assets anywhere in the world;
6.1.5. the Vendor is the sole and legal owner of the
Intellectual Property Rights, has full power to enter
into this Agreement and has not previously assigned
or licensed any of the Intellectual Property Rights
or otherwise encumbered any of the Intellectual
Property Rights;
6.1.6. to the best of the Vendor's knowledge the Assets (or
part thereof) or the possession or use of the Assets
(or part thereof) by the Purchaser, will not infringe
any intellectual property right or any other right of
any third party in any way whatsoever, provided that
no warranty is given under this clause 6.1.6 in
respect of any part of the Software developed by the
Purchaser;
6.1.7. the Software is and will be Year 2000 compliant. For
the purposes of this clause, "Year 2000 compliant"
means neither the performance, operation or
functionality of the Software is or will be affected
by any dates prior to, during or after 1 January 2000
and in particular:
(i) no value for current date causes or will
cause any interruption in the operation,
performance or functionality of the
Software;
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<PAGE>
(ii) date based functionality in the Software
does and will behave consistently for dates
prior to, during and after the Year 2000;
(iii) in all interfaces to and data storage in the
Software, the century in any date is and
will be specified either explicitly or by
unambiguous algorithms or inferencing rules;
(iv) the year 2000 is and will be recognised by
the Software as a leap year;
6.1.8. it is the registered proprietor of the Trade Mark and
nothing has been done or omitted to be done which
entitles any person to cancel or rectify or otherwise
modify any registration of the Trade Mark;
6.1.9. no claim concerning any infringement of any of the
Intellectual Property Rights has been made against or
by the Vendor, the Vendor has not considered making
any such claim and, to the best of the Vendor's
knowledge and belief, there has been no infringement
of any of the Intellectual Property Rights; and
6.1.10. the Vendor uses no assets other than the Assets in
relation to the Business and no marks or names
(registered or otherwise) have been used by the
Vendor in relation to the Assets or the Business
other than those names, logos or marks included in
the Vendor's Retained Intellectual Property.
6.2. The Vendor will indemnify and keep the Vendor indemnified
against
Page 42 of 86
<PAGE>
all and any costs, expenses, liabilities, damages, losses and
claims incurred or suffered by the Purchaser which are
notified to the Vendor during the 3 years following Completion
as a result of or arising from any breach of the above
warranties by the Vendor.
7. FURTHER ASSURANCE
7.1. The Vendor will, at the reasonable request of the Purchaser
and at the Purchaser's expense for out of pocket costs:
7.1.1. do all acts, and execute and swear all documents that
are reasonably necessary to vest absolute legal and
beneficial ownership of the Intellectual Property
Rights in the Purchaser or to perfect the Purchaser's
title thereto anywhere in the world; and
7.1.2. give to the Purchaser such reasonable assistance as
the Purchaser may request in evidencing the
Purchaser's title to and enforcing and defending the
Intellectual Property Rights anywhere in the world.
7.2. The Vendor hereby appoints the Purchaser as its attorney on
behalf of the Vendor to complete and execute such documents
and do such things as the Purchaser may reasonably require to
perfect the assignment and transfer of the Intellectual
Property Rights to the Purchaser pursuant to clause 2 and the
Vendor hereby agrees to ratify and confirm such acts of the
Vendor and declares this power to be irrevocable pursuant to
section 4 of the Powers of Attorney Act 1971.
Page 43 of 86
<PAGE>
The Purchaser shall not exercise the power of attorney hereby
granted if
7.2.1. the Vendor advises the Purchaser that it disagrees
with the assignment or transfer within 14 days after
the Purchaser's request; and
7.2.2. unless the Vendor shall have failed to execute and
deliver such documents or do such things within 14
days after the Purchaser's request to do so.
In the event that the Purchaser disagrees with the Vendor then
the provisions of clause 13 shall apply.
7.3. The Vendor may keep one copy of any of the Records that it is
required to keep by law for accounting, legal or tax purposes
and that copy may only be used for such purposes.
7.4. The Vendor will remain liable to any third party under any
warranties it has given to that third party in relation to the
Business or any of the Assets and will indemnify and keep
indemnified the Purchaser against all and any costs, expenses,
liabilities, damages, losses and claims incurred by the
Purchaser as a result of or arising from any breach of the
warranties referred to in this clause.
7.5. Subject to clause 7.4, for a period of 12 months after
Completion the Purchaser will use reasonable endeavours to
fulfil any warranty obligations of the Vendor in relation to
the Software or any Ultra Chassis Friction Meters provided
that the Vendor shall pay and reimburse the Purchaser at the
Purchaser's then standard time and
Page 44 of 86
<PAGE>
material rates for any work carried out under this clause and
will reimburse to the Purchaser all other reasonable direct
expenses incurred in connection with that work, and provided
that the Purchaser shall have no liability to any third party
or to the Vendor for any failure to fulfil such warranty
obligations.
7.6. The Vendor shall use its reasonable endeavours after the
Completion Date to pass onto the Purchaser any enquiries
relating to the Business, the Assets or any sales of any
friction measurement product that it receives from third
parties.
8. CONDITIONS
8.1. The completion of the transfer and assignment of the Assets to
the Purchaser is conditional upon the passing at a duly
convened and held special meeting of the Vendor's shareholders
of a resolution to approve the sale of the Assets. The Vendor
shall procure that all necessary steps are taken so that that
meeting is held on or before the date 30 days from 2 November
1998. The Vendor shall notify the Purchaser and the
Purchaser's Solicitors that it has obtained its shareholders'
consent in accordance with this clause within one Business Day
of obtaining that consent.
8.2. In the event of such resolution not being passed on or before
the date 60 days from 2 November 1998 , this Agreement shall
terminate and neither party shall be liable to the other in
respect of such termination, provided that termination shall
not affect either party's accrued rights at termination.
Page 45 of 86
<PAGE>
8.3. The Vendor undertakes that with effect from the date hereof
until Completion or the termination of this Agreement under
clause 8.2, it will act in concert with the Purchaser in all
matters relating to the Business and the Assets and in
particular it will:
8.3.1. pass all live enquiries relating to the Business or
the Assets to the Purchaser as soon as reasonably
practical;
8.3.2. obtain the prior written approval of the Purchaser
before any quotation is made to any potential
customer or purchaser of any of the Assets or any
friction measurement product; and
8.3.3. will send the Purchaser a copy of all correspondence
which it intends to send to its customers or to its
potential customers for review by the Purchaser and
will alter such correspondence as the Purchaser
reasonably requires.
Any sales of any product (including any of the Assets) to any
third party shall enure for the benefit of the Purchaser
provided that this transaction is completed.
9. INSURANCE
For a period of three years after the date of this Agreement, the Purchaser
shall maintain products liability insurance covering the sale of the Assets to
third parties in a minimum amount of 5 million US dollars.
10. LITIGATION
Each party shall immediately notify the other affected party of any claim of
which it
Page 46 of 86
<PAGE>
becomes aware and for which it is entitled to indemnification from the other
party under this Agreement. The indemnifying party shall be obliged to defend at
the indemnifying party's sole expense any litigation or other administrative or
adversarial proceeding against the indemnified party relating to any claim for
which the indemnifying party has agreed to indemnify and hold the indemnified
party harmless under this Agreement. However, the indemnified party shall have
the right to participate with the indemnifying party in the defence of any such
claim at its own expense.
11. NOTICES
11.1. Any demand, notice or communication shall be deemed to have
been duly served:-
11.1.1. if delivered by hand, when left at the address for
service provided for in this clause 11;
11.1.2. if sent by prepaid first class post, 96 hours after
being posted (excluding Saturdays, Sundays and other
days which are not business days); or
11.1.3. if sent by facsimile, on the next business day after
transmission
provided that where, in the case of delivery by hand such
delivery or transmission occurs on a day which is not a
Business Day or after 4.00 p.m. on a Business Day, service
will be deemed to occur on the next following Business Day.
11.2. Any demand, notice or communication must be made in writing
addressed to the addresses set out below, or sent to the
following fax
Page 47 of 86
<PAGE>
numbers:
the Vendor: Bison Instruments Inc, 5610 Rowland Road,
Minneapolis, Minnesota MN 55343-8956
(Facsimile Number: 001 612 931 0997) with a
copy to Androcan Inc, 50 Bartor Road,
Toronto, Canada M9M 2G5 (Facsimile Number:
001 416 745 9884)
the Purchaser: Douglas Equipment Limited, Village Road,
Arle, Cheltenham, Gloucestershire GL51 0AB
(Facsimile Number: 01242 221198)
12. GENERAL
12.1. Neither party may assign this Agreement in whole or in part
without first obtaining the written consent of the other but,
subject thereto, this Agreement shall be binding on and shall
enure for the benefit of each party's permitted successors and
assigns, as the case may be.
12.2. Except for any obligation fully performed at or prior to
Completion, each of the agreements, covenants, obligations,
warranties, indemnities and undertakings contained in this
Agreement shall continue in full force and effect
notwithstanding Completion but in any event the Vendor's
liability for any of the agreements, covenants, obligations,
warranties, indemnities, or undertakings under this Agreement
shall not survive beyond three years following the Completion
Date, and provided that the maximum liability of the Vendor
under this Agreement is limited to the sums paid to the Vendor
by the Purchaser under this Agreement.
Page 48 of 86
<PAGE>
12.3. Failure or delay by either party in exercising any right or
remedy of that party under this Agreement shall not in any
circumstances operate as a waiver of it, nor shall any single
or partial exercise of any right or remedy in any
circumstances preclude any other or further exercise of it or
the exercise of any other right or remedy. Any waiver of a
breach of, or default under, any of the terms of this
Agreement shall not be deemed a waiver of any subsequent
breach or default and shall in no way affect the other terms
of this Agreement.
12.4. The headings to the clauses of this Agreement shall not affect
its construction.
12.5. This Agreement shall be subject to the laws of England and
Wales and subject to clause 13 each party shall submit to the
exclusive jurisdiction of the English Courts.
13. DISPUTE RESOLUTION
13.1. If any dispute arises between the parties arising from or
relating to this Agreement, the Vendor or the Purchaser shall
refer the dispute to their respective representatives, who
shall promptly discuss the dispute with a view to its
resolution.
13.2. If any dispute cannot be resolved in accordance with Clause
13.1 within 14 days, the Purchaser or the Vendor may require
in writing that the matter be referred for consultation
between the Board of the Purchaser and the Board of the
Vendor. In this event, both the Purchaser and the Vendor shall
be represented by one or more members of their respective
Boards in consultations which shall be held within twenty-one
days of the requirement.
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<PAGE>
13.3. If any dispute can not be resolved under clauses 13.1 and
13.2, the dispute may be referred by either party to a person
agreed by the parties or in default of agreement within 10
Business Days to a person nominated by the President of the
Law Society in the United Kingdom with a request that such a
person make a decision on the dispute within 10 Business Days
of receiving the reference. The nominated person shall act as
an expert and not as an arbitrator and the decision of the
expert in the absence of manifest fraud or error, shall be
final and binding. Each party shall share the costs of
instructing the expert.
AS WITNESS the hands of the duly authorised representatives of the parties the
day and year first above written.
Page 50 of 86
<PAGE>
SCHEDULE 1
- - --------------------------------------------------------------------------------
ASSETS PURCHASE PRICE
$US
- - --------------------------------------------------------------------------------
1. The Stock As determined
under clause 2.1
- - --------------------------------------------------------------------------------
2. Four complete and tested Ultra Chassis Friction Meters US$16,000 each
- - --------------------------------------------------------------------------------
3. The Software, the Records and the Intellectual Property US$100,000
Rights
- - --------------------------------------------------------------------------------
Page 51 of 86
<PAGE>
SCHEDULE 2
THIS DEED OF COVENANT is made the day of 1998
BETWEEN:
(1) DOUGLAS EQUIPMENT LIMITED a company registered in England and Wales
(Company No: 697744) whose registered office is at Village Road, Arle,
Cheltenham, Gloucester GL51 0AB (trading as Douglas Schopf) ("the
Purchaser"); and
(2) [ ] a company registered [ ]
(Company No: [ ]) whose principal place of business is at
[ ] ("the Covenantor").
WHEREAS
The Purchaser has agreed to enter into an agreement with Bison Instruments Inc
("the Company") under which the Company will sell certain assets to the
Purchaser for the sums set out therein ("the Agreement") and, in consideration
of the Purchaser entering into the Agreement, the Covenantor has agreed to give
the Purchaser the covenant set out below.
IT IS AGREED THAT:
1. INTERPRETATION
1.1 Words and expressions defined in the Agreement shall have the
same meaning in this Deed.
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<PAGE>
1.2 In addition, "the Restriction Period" shall mean the period of
[five] years following the date hereof.
2. COVENANT
The Covenantor covenants with the Purchaser that it will not, and will
procure that any body corporate of which it has from time to time
control (within the meaning of Section 840 of the Income and
Corporation Taxes Act 1988) and that and any partnership or any
business in which it may be engaged or interested will not:
2.1 at any time during the Restriction Period, either by itself or
with or on behalf of any other person, firm or company,
directly or indirectly engage or participate in, or carry on
the business of, friction measurement anywhere in the United
States which is similar to or in competition with the Business
or the business carried on from time to time by the Purchaser
in relation to any of the Assets;
2.2 at any time during the Restriction Period, either by itself or
with or on behalf of any other person, firm or company,
directly or indirectly engage or participate in, or carry on
the business of friction measurement anywhere in the world
(other than the United States) which is similar to or in
competition with the Business or the business carried on from
time to time by the Purchaser in relation to the Assets;
2.3 at any time during the Restriction Period, either by itself or
with or on behalf of any other person, firm or company,
directly or indirectly solicit or entice, or endeavour to
solicit or entice, away from the Purchaser or (in relation to
any business which may in any way be in competition with any
of the businesses carried on from time to time by
Page 53 of 86
<PAGE>
the Purchaser) deal with any person, firm or company which at
the date hereof, or at any time during the period of two years
prior to the date hereof, has directly or indirectly been a
customer, agent or supplier or otherwise in the habit of
dealing with the Company or the Purchaser in connection with
the friction measurement business;
2.4 at any time subsequent to Completion represent itself as
currently being in any way connected with or interested in any
friction management business. For the avoidance of doubt, the
Covenantor may represent itself as being connected with the
friction management business which was carried on by the
Vendor prior to Completion;
2.5 at any time disclose or use any confidential information
relating to the Business or to the Company's affairs or trade
secrets.
3. The covenants contained in Clause 2 hereof shall be separate and (if
necessary) severable covenants.
4. The restrictions contained in Clause 2 are considered reasonable by the
parties but in the event that any such restrictions shall be found to
be void, but would be valid if some part thereof were deleted or the
period or area of application reduced, such restriction shall apply
with such modification as may be necessary to make it valid and
effective.
5. It is hereby agreed and declared that the benefit of this Deed shall be
assignable by the Purchaser to any purchaser of its shares or any
assignee of its friction measurement business.
6. This Deed shall be subject to the laws of England and Wales and each
party shall submit to the exclusive jurisdiction of the English Courts.
Page 54 of 86
<PAGE>
IN WITNESS whereof this Deed has been executed by the parties hereto and is
intended to be and is hereby delivered the day and year first before written.
EXECUTED as a DEED )
by Douglas Equipment )
Limited )
....................................... Director
............................. Director/Secretary
EXECUTED as a DEED )
by the Covenantor )
....................................... Director
............................. Director/Secretary
Page 55 of 86
<PAGE>
SCHEDULE 3
DETAILS OF TRADE MARK
------------------------------------------------------------
Trade Mark Date of Registration
Registration Number
------------------------------------------------------------
MU-METER 3 June 1997 1,066,264
------------------------------------------------------------
Page 56 of 86
<PAGE>
SCHEDULE 4
FORM OF ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS
THIS DEED OF ASSIGNMENT is made the day of 1998
BETWEEN
(1) BISON INSTRUMENTS INC a company registered in the State of Minnesota
(Federal Identification No: 41-0947661) whose principal place of
business is at 5610 Rowland Road, Minneapolis, MN 55343-8956 ("the
Vendor");
(2) DOUGLAS EQUPMENT LIMITED a company registered in England & Wales
(Company No: 697744) whose registered office is at Village Road, Arle,
Cheltenham. Gloucester GL51 0AB (trading as Douglas Schopf) ("the
Purchaser").
WHEREAS
The parties have entered into the Sale and Purchase Agreement (as defined below)
under which the Vendor agreed to assign the Intellectual Property Rights (as
defined below) to the Purchaser on the terms and conditions set out below.
IT IS AGREED
1. DEFINITION
In this Assignment the following words shall have the following
meanings:
Page 57 of 86
<PAGE>
"THE BUSINESS" means the Vendor's business associated with the sale
of the Vendor's friction measurement product line as
carried on by the Vendor prior to the date hereof;
"THE DESIGNS" means the mechanical and electronic design of the MK4
and MK5 equipment, the mechanical and electrical
design of the Bison Self Watering System (ie speed
related system part number B707 and Dual Speed system
part number B706) and the mechanical design of the
Ultra Chassis Friction Meters;
"THE INTELLECTUAL means the Trade Mark and all and any patents, patent
PROPERTY RIGHTS" applications, copyrights, trade marks, service marks,
registered designs, design rights, business names,
know-how, database rights and any other industrial or
intellectual property rights (and applications for
any of these) and any similar or analogous rights in
any jurisdiction anywhere in the world subsisting in
any of the Records, the Software or the Designs with
the exception of those intellectual property rights
possessed by the Purchaser prior to the date of the
Sale and Purchase Agreement and with the exception of
the name "Bison Instruments Inc, the Bison trade
mark, service mark and trade name (the "Bison Word
Mark") and the Bison graphic logo (the "Bison Logo");
"THE RECORDS" means all and any drawings, papers, documents,
samples, reports, specifications, designs, manuals,
drawings, statistics, accounts, documentation,
know-how,
Page 58 of 86
<PAGE>
marketing or promotional material and any other
material including any drafts, scraps or work in
progress or any other information relating to the
Stock, the Designs, the Software or the Business,
including without limitation:
(i) records of all customers to whom sales have
been made;
(ii) contact names and addresses of the Vendor's
agents and distributors in the United
States, Canada, Central America and South
America and the rest of the world; and
(iii) full details of all suppliers of any and all
components of any equipment to which any of
the Designs relate;
"THE SALE AND means the agreement dated [ ] between the
PURCHASE Vendor and the Purchaser for the sale and purchase of
AGREEMENT" the Intellectual Property Rights and other assets;
"THE SOFTWARE" means the source code and the object code of the
Mu-Meter software and all versions and releases
thereof (including without limitation the MK4 and MK5
versions) and all specifications and documentation
relating to that software;
Page 59 of 86
<PAGE>
"THE STOCK" means the stock of the Business including all the
test equipment as determined in the Sale and Purchase
Agreement;
"THE TRADE MARK" means the trade mark registered in the United States
details of which are set out in the Appendix hereto
and all goodwill attaching to that mark.
2. ASSIGNMENT
In consideration of the sum of (pound)1, exclusive of VAT, the receipt
of which is hereby acknowledged the Vendor hereby assigns with full
title guarantee the Intellectual Property Rights to the Purchaser
absolutely.
3. GOVERNING LAW
This Assignment is subject to and shall be construed in accordance with
English law and the parties hereby irrevocably submit to the exclusive
jurisdiction of the English Courts in relation thereto.
Executed as a Deed by the above parties and is intended to be and is hereby
delivered the day and year appearing above.
EXECUTED as a Deed by )
BISON INSTRUMENTS Inc ) .........................................
Director
.........................................
Director/Secretary
Page 60 of 86
<PAGE>
EXECUTED as a Deed )
by DOUGLAS EQUIPMENT )
LIMITED ) .........................................
Director
.........................................
Director/Secretary
Page 61 of 86
<PAGE>
APPENDIX
DETAILS OF TRADE MARK
------------------------------------------------------------
Trade Mark Date of Registration
Registration Number
------------------------------------------------------------
MU-METER 3 June 1997 1,066,264
------------------------------------------------------------
Page 62 of 86
<PAGE>
SIGNED by )
for and on behalf of ) David Toolan
DOUGLAS EQUIPMENT )
LIMITED )
SIGNED by )
for and on behalf of ) Edward G. Lampman
BISON INSTRUMENTS INC )
Page 63 of 86
<PAGE>
DATED ____________ 1998
DOUGLAS EQUIPMENT LIMITED (1)
- and -
BISON INSTRUMENTS INC (2)
---------------------------------------------------
AGREEMENT FOR THE SALE AND PURCHASE OF
ASSETS AND INTELLECTUAL PROPERTY RIGHTS
---------------------------------------------------
Manches & Co
3 Worcester Street
OXFORD
OX1 2PZ
Tel: 01865 722106
Fax: 01865 201012
Page 64 of 86
EXHIBIT 10.3
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made and entered
into as of June 5, 1998, by and between INNOVATIVE TRANSDUCERS INC., a Delaware
corporation, with offices at 17200 Park Row, Houston, Texas 77084-3925 ("ITI" or
"Buyer"), and BISON INSTRUMENTS, INC., a Minnesota corporation, with offices at
5610 Rowland Road, Minneapolis, Minnesota 55343-8956 ("Bison" or "Seller").
RECITALS
Seller desires to sell and Buyer desires to purchase all of Seller's
right, title and interest in and to the Assets defined herein pursuant to the
terms and conditions of this Agreement.
Therefore, Seller agrees to sell and Buyer agrees to purchase the
Assets on the terms and conditions set forth in this Agreement.
ARTICLE 1. PURCHASE AND SALE
1.1 Assets. Subject to the terms of this Agreement, Seller agrees to
convey, transfer and assign to Buyer, and Buyer agrees to accept, as of
the Closing Date, all of Seller's right, title and interest in and to
the Jupiter and Galileo product lines (hereinafter collectively
referred to as the "Assets"). The Assets including without limitation:
1.1.1 Inventories. All of Seller's right, title and interest in the
inventory of finished goods, work in progress, raw materials,
parts, rental equipment and all other materials and supplies
associated with the Jupiter and Galileo product lines as
listed and valued on Schedule 1.1.1 (the "Inventories");
1.1.2 Intellectual Property. All of Seller's intellectual property
used in developing or operating the Assets, including without
limitation proprietary computer software, patents, trade
secrets, copyrights, marks, logos, goodwill, and the property
licensed to Seller in that certain License Agreement With One
Time Fee dated November 1, 1996, between Bison Instruments,
Inc. and Hugh Winkler, but excluding those assets identified
in Section 1.2.7 of the Agreement (the "Intellectual
Property");
1.1.3 Contracts. All of Seller's right, title and interest in the
contracts, agreements and commitments related to the purchase
of the Jupiter and Galileo products, as listed on Schedule
1.1.3 hereto;
1.1.4 Records. All of Seller's right, title and interest in all
files, records and other data (including but not limited to
those in electronic format) in the actual
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possession of Seller related to the Inventories and
Intellectual Property including without limitation all
operational records, technical records, contract files,
computer records, computer tapes and disks, supplier lists,
marketing document, credit information, operating guides and
manuals, sales records, research and development reports and
records, and production reports and records, but excluding
accounting and tax records and any documents covered by the
attorney-client communication or attorney work product
privileges (the "Seller Records");
1.1.5 Names. All rights of any kind whatsoever in the names "Bison
Instruments", "Galileo", and "Jupiter". However, Buyer agrees
that (a) for a period of one (1) year, Seller may continue to
use the name "Bison Instruments" in connection with Seller's
sale and servicing of its inventory that exists for
seismographic product lines other than the Jupiter and Galileo
product lines, and (b) Seller may continue to use the name
"Bison Instruments, Inc." in connection with Seller's
operation of its Bison Instruments, Inc. company only if such
company's operations do not compete in the same market
encompassing Buyer's seismographic products;
1.1.6 Manufacturing Documentation. All of Seller's right, title, and
interest in all manufacturing documentation associated with
the seismograph product lines listed on Schedule 1.1.6.
1.2 Retained Assets. The Assets to be conveyed to Buyer do not include any
assets other than those set forth in Section 1.1 and exclude
specifically, without limitation, the following property:
1.2.1 Records. Any of Seller's corporate, financial and accounting
and tax records, and legal files, except that Seller will
provide Buyer with copies of any tax records that are
necessary for Buyer's ownership, administration or operation
of the Assets.
1.2.2 Confidential Information. Notwithstanding any other provision
of this Agreement to the contrary, any records or data that
Seller reasonably considers proprietary or confidential
(including without limitation employee information and
excepting the documents described in 1.1.6 above), or which
Seller cannot provide to Buyer because of third-party
restrictions;
1.2.3 Cash. All of Seller's cash.
1.2.4 Accounts Receivable. All of Seller's accounts receivable.
1.2.5 Tax Refunds. Any tax refunds due to Seller.
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1.2.6 Other Product Lines. The assets associated with product lines
of Seller other than the Jupiter and Galileo product lines,
other than those assets described in Section 1.1.7 above.
1.2.7 Retained Intellectual Property. All of Seller's right, title,
and interest in the BISON graphic logo identified in Schedule
1.2.7 as the "BISON LOGO". Buyer shall have no rights in or to
the BISON LOGO, including, without limitation, the right to
use the BISON LOGO. Seller grants a non-exclusive, worldwide
license to Buyer to use the BISON Word Mark in connection with
the Assets and for no other use. All other rights in the BISON
Word Mark are reserved to Seller. Buyer acknowledges that the
BISON Word Mark is the property of the Seller and that by this
Agreement Buyer acquires license rights and not the right,
title or interest in or to the BISON Word Mark. Buyer shall
not, during the term of this Agreement or thereafter, adopt or
use any service mark, trade name, or trademark confusingly
similar to the BISON Word Mark. Buyer acknowledges that strict
observance and performance of the terms of this section of the
Agreement are necessary to protect Seller and the BISON Word
Mark. IN that regard, Buyer agrees that the BISON Word Mark
shall be used only in connection with the Assets and the
quality of the Assets will be the same quality or better than
the quality of the Assets as presently manufacturing and
distributed by Seller. In all agreements entered into by Buyer
in which Buyer's right in the BISON Word Mark are assigned,
Buyer shall specify that all such assignments are subject to
the terms of this Section 1.2.7 and such assignees shall agree
to include such terms in any subsequent assignments. Buyer and
any and all subsequent assignees shall notify Seller of such
assignments of any rights to the BISON Word Mark.
1.2.8 Customer Lists. All of Seller's right, title and interest in
Seller's customer lists. However, Seller shall provide Buyer
with copies of Seller's customer lists used for developing or
operating the Assets and Buyer shall have the exclusive right
to use such lists only in connection with the marketing and
selling of the Assets in the seismographic market.
ARTICLE 2. CONSIDERATION AND PAYMENT
2.1 Consideration. At Closing, Buyer will pay Seller Four Hundred
Seventy-four Thousand Dollars ($474,000) in cash, such amount being
subject to adjustment as provided in Section 2.2 of this Agreement
(collectively the "Cash Consideration").
2.2 Adjustments to the Cash Consideration after Closing. Adjustments to the
Cash Consideration shall be made as between the Seller and the Buyer,
as follows:
2.2.1 Settlement Statement. The Cash Consideration payable to Seller
at Closing will be subject to the adjustments set forth in
Section 2.2.2 and
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2.2.3. Within sixty (60) days after Closing, the Buyer will
prepare and provide to Seller a settlement statement showing
all adjustments to the Cash Consideration paid at Closing
pursuant to this Section 2.2. (However, failure of Buyer to
complete the settlement statement within sixty (60) days after
Closing will not constitute a waiver of any right to an
adjustment otherwise due.) Seller will have thirty (30) days
after receiving the settlement statement to provide Buyer with
any written exceptions to any items in the settlement
statement that Seller believes in good faith to be
questionable. Any such disputed items will be resolved as
provided in Section 2.3.1 All items in the settlement
statement to which Seller does not except in writing within
the thirty (30) day review period will be deemed correct.
2.2.2 Upward Adjustments. The Cash Consideration will be increased
by any increase in value of the Inventories, such value to be
determined in accordance with Section 7.1.
2.2.3 Downward Adjustments. The Cash Consideration will be decreased
by any decrease in value of the Inventories, such value to be
determined in accordance with Section 7.1.
2.2.4 Payment of Undisputed Adjustments. Seller and Buyer, as
applicable, will pay each other the undisputed adjustment to
the Cash Consideration contained in the settlement statement
within ten (10) days after the expiration of Seller's thirty
(30) day review period for the settlement statement.
2.3. Resolution of Disputed Adjustments.
2.3.1 Resolution of Disputed Adjustments. If Seller and Buyer are
unable, within ten (10) days after the expiration of Seller's
thirty (30) day review period for the settlement statement, to
resolve any disputed items pertaining to the settlement
statement, the Seller and the Buyer agree to promptly and
jointly retain the independent accounting firm of Price
Waterhouse LLP to evaluate the items in dispute as between
such parties and render an opinion on their validity, with
each such affected party paying one-half of the charges of
Price Waterhouse LLP. The determination of Price Waterhouse
LLP will be final and binding on the parties. If the
independent accounting firm determines that a payment or
refund is due, the owing party shall pay the full amount
determined by Price Waterhouse LLP to be due within ten (10)
days after receiving written notice of Price Waterhouse LLP's
opinion.
2.4 Payment Method. Unless the parties otherwise agree in writing, all
payments under this Agreement will be by wire transfer in immediately
available funds to an account designated by the party receiving
payment.
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ARTICLE 3. REPRESENTATIONS
3.1 Reciprocal Representations. By their execution of this Agreement,
Seller and Buyer make the following representations as to themselves as
an executing party. These representations are deemed to be made as of
the Closing Date.
3.1.1 Requisite Authority. Seller is a corporation duly organized
and in good standing under the laws of Minnesota, is duly
qualified to carry on its business in the State of Minnesota,
and has all the requisite power and authority to enter into
and perform this Agreement. Buyer is a corporation duly
organized and in good standing under the laws of Delaware, is
duly qualified to carry on its business in the state of Texas,
and has all the requisite power and authority to enter into
and perform this Agreement.
3.1.2 Requisite Approvals. The executing party has taken all
necessary or appropriate actions to authorize (i) the
execution and delivery of this Agreement and the other
transaction documents referenced in this Agreement; (ii) the
performance of its obligations under this Agreement and the
other transaction documents; and (iii) the consummation of
this transaction.
3.1.3 Validity of Obligation. This Agreement and the other
transaction documents referenced in this Agreement (I) have
been duly executed and delivered by the executing party; (ii)
constitute the legal, valid and binding obligations of the
executing party, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, or other similar laws
relating to creditors' rights generally and general equitable
principles; and (iii) are enforceable against the executing
party in accordance with their respective terms, subject to
the effect of bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to credits' rights
generally and general equitable principles.
3.1.4 No Conflicts or Impediments. The consummation of the
transaction contemplated by this Agreement (i) does not
require the approval, authorization, consent or other action
by, or filing with, any governmental authority, administrative
agency, court or other party; (ii) will not breach, violate or
conflict with any material agreement or instrument to which
either the executing party or the Assets being transferred by
the executing party is subject, including without limitation
covenants imposed on the executing party by any bank or other
financial institution, lender or debtholder and other terms,
provisions or conditions of the Certificate of Incorporation,
By-Laws or applicable shareholder agreement of the party; and
(iii) does not violate any judgment, decree, law, rule or
regulation of any governmental authority or administrative
agency, in the case of each
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clause (i), (ii) and (iii), in a manner that would adversely
affect the transaction.
3.1.5 Bankruptcy. There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to
its actual knowledge, threatened against it.
3.1.6 Broker's Fee. The executing party has not incurred any
obligation for brokers, finders or similar fees for which the
other executing party or parties would be liable.
3.2 Seller's Representations. By its execution of this Agreement, Seller
makes the following representations to Buyer as to the Assets. These
representations are deemed to be made as of the Closing Date.
3.2.1 Preferential Rights and Consents. There are no prior or
preferential rights to purchase, rights of first refusal, or
other similar rights vested in any other party to purchase or
otherwise acquire the Assets.
3.2.2 Mortgages and Other Instruments. The transfer of the Assets
does not violate any covenants or restrictions imposed on
Seller by any bank or other financial institution in
connection with a mortgage or other instrument, and will not
result in the creation or imposition of a lien on any portion
of the Assets.
3.2.3 Compliance with Law and Agreements. Except as disclosed on
Schedule 3.2.3(a), to the best of Seller's knowledge, (i)
Seller is in compliance with al applicable laws, rules, and
regulations of federal, state and local authorities in
connection with Seller's ownership and operation of the
Assets; and (ii) Seller is in compliance with all of its
obligations under the Contracts and any other agreements
relating to or involving the Assets. Seller is not a party to
any partnership agreements, joint venture agreements,
operating agreements and agreements for the sale of the
Assets. Except as disclosed on Schedule 3.2.3(b), Seller is
not obligated to sell, lease, market, distribute or service
the Assets through or with any Person.
3.2.4 Litigation and Claims. To the best of Seller's knowledge,
there are no material actions, suits or other proceedings
pending before any court or governmental agency in which
Seller is a party or any other claims that (i) would result in
loss of Seller's title to the Assets, (ii) would affect the
value of the Assets, or (iii) would subject Buyer to an legal
or monetary liability, except for those listed in Schedule
3.2.4 to this Agreement.
3.2.5 FIRPTA. Seller is not a "foreign person" as defined in Section
1445 of the Internal Revenue Code of 1986, as amended.
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3.2.6 Bulk Sales Laws. Seller represents that Seller has no
creditors or situations which would require the parties hereto
to comply with or which would result in the violation of the
requirement of any bulk sales act concerning or relating to
the transactions contemplated by this Agreement.
3.3 Buyer's Representations. By execution of this Agreement, Buyer makes
the following representations:
3.3.1 Licensing. Buyer acknowledges that Buyer has met all of the
requirements under applicable local, state and federal law to
accept assignment of the Assets, and is not otherwise
prevented from having the Assets transferred to such Buyer,
and is properly authorized to operate said Assets.
ARTICLE 4. WARRANTIES AND WARRANTY DISCLAIMERS.
4.1 Title to Assets. Seller has good and marketable title to all of the
Assets. Seller represents that it has taken no steps to register or
apply for registration with respect to he Intellectual Property.
4.2 Encumbrances. Seller represents and warrants that it owns and is
assigning, conveying and transferring full legal and beneficial
ownership of Seller's interest in the Assets, free and clear of all
assessments, charges, liens, pledges, mortgages, security interests and
other encumbrances caused by Seller, other than Permitted Liens. For
purposes of this Agreement, "Permitted Liens" means the following:
(i) liens for taxes not due or due but not yet delinquent or which
are being contested in good faith by appropriate proceedings;
(ii) mechanics', materialmens', repairmen's or other like liens
arising in the ordinary course of business;
4.3 Condition and Fitness of Assets. To the best of Seller's knowledge, the
Inventories are of a quality usable and saleable consistent with past
practice in the ordinary course of Seller's business. The Inventories
will not include any obsolete, damaged or defective goods.
4.4 Subrogation of Warranties. To the extent transferable without consent
of a third party, Seller will give and grant to Buyer, its successors
and assigns, as to the Assets, full power and right of substitution and
subrogation in and to all covenants and warranties (including
warranties of title) by preceding owners, vendors, or others, given or
made with respect to the Assets or any part thereof prior to the
Closing Date.
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4.5 Representations and Warranties Exclusive. All representations and
warranties contained in this Agreement (including without limitation
those in Article 3 and 4 of this Agreement) are exclusive, and are
given in lieu of all other representations and warranties, express or
implied.
ARTICLE 5. CASUALTY LOSSES
5.1 Casualty Losses.
5.1.1 Notice of Casualty Losses. If, prior to the date of shipment
of the Assets from Seller's facilities to Buyer's facilities,
all or part of the Assets are damaged or destroyed by fire,
flood, storm or other casualty ("Casualty Losses"), Seller
must promptly notify the Buyer in writing of the nature and
extent of the Casualty Loss and Seller's estimate of the cost
required to repair or replace that portion of the Assets
affected by the Casualty Loss.
5.1.2 Adjustments to Cash Consideration for Casualty Losses. With
respect to each Casualty Loss to the Assets, the Buyer will
have the following rights:
(i) If Seller and the Buyer agree on the cost to repair
or replace the portion of the Assets affected by the
Casualty loss, the Cash Consideration will be
adjusted by the agreed cost of the Casualty Loss.
(ii) If Seller and the Buyer are unable to agree on the
cost to repair or replace the portion of the Assets
affected by the Casualty Loss, then the parties shall
submit the issue to arbitration, as provided for in
Section 9.10, and upon determination of such cost
pursuant to arbitration, the Cash Consideration will
be adjusted by the arbitration derived cost of the
Casualty Loss.
5.1.3 Insurance Proceeds and Settlement Payments. If the Seller and
Buyer agree to an adjustment in the Cash Consideration, Seller
will be entitled to retain (i) all insurance proceeds payable
to Seller with respect to such Casualty Loss, and (ii) all
sums paid to Seller by third parties by reason of the Casualty
Loss.
ARTICLE 6. CLOSING AND POST-CLOSING OBLIGATIONS
6.1 Closing. The closing of the sale (the "Closing") shall take place on or
before 5:00 p.m. CST on June 5, 1998, (the actual date on which Closing
occurs being the "Closing Date") at the offices of Bison Instruments,
Inc., 5610 Rowland Road, Minneapolis, Minnesota, unless the parties
agree in writing to another location.
6.2 Closing Obligations. At Closing, the following events will occur, each
being a condition precedent to the others and each being deemed to have
occurred simultaneously with the others.
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6.2.1 Payment of Cash Consideration. Buyer will pay Seller the Cash
Consideration by wire transfer.
6.2.2 Execution and Delivery of Closing Documents. Seller and Buyer
will execute, acknowledge, and deliver the following closing
documents:
(i) Seller will execute, acknowledge and deliver to Buyer
an Assignment, Assumption and Bill of Sale (in
sufficient counterparts for recording) transferring
Seller's interest in the Assets to Buyer. The
Assignment, Assumption and Bill of Sale will be in
the form set forth in Exhibit A.
(ii) Seller will obtain and deliver to Buyer releases of
any and all liens affecting the Assets.
(iii) Seller and Buyer will execute and deliver any other
documents and instruments necessary to consummate the
transaction contemplated by this Agreement.
6.3 Post-Closing Obligations.
6.3.1 Recording Transfer Documents. Buyer, within thirty (30) days
after Closing, will record the Assignment and Bill of Sale and
all other instruments that must be recorded to effectuate the
transfer of the Assets the Seller is transferring to Buyer.
All costs of recording and filing these documents will be
responsibility of the Buyer.
6.3.2 Files and Records. No later than thirty (30) days after
Closing, Seller will deliver to Buyer (at a location
designated by Buyer) the originals or legible copies of the
Seller Records relating to the Assets, the Seller is
transferring to Buyer. Thereafter, Seller will forward to the
Buyer any other correspondence, documents and other
information Seller receives relating to the Assets the Seller
is transferring to Buyer. Thereafter, Seller will forward to
the Buyer any other correspondence, documents and other
information Seller receives relating to the Assets the Seller
transfers to Buyer. The freight costs and costs of counting
and packing the Seller Records will be borne by Buyer. Seller
shall pay the costs of packaging materials and will provide
assistance with packing the Seller Records. If Seller retains
any original Seller Records, the Buyer will have the right to
review those original Seller Records during normal business
hours. Seller will maintain its computer systems associated
with the Assets for a period up to and including September 30,
1998 and will assist Buyer in obtaining any reasonable
information from the computer systems needed to operate the
Assets. After such period, Seller will give Buyer thirty (30)
days' notice of Seller's intention to destroy any Seller
Records, whereby Buyer will
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have the right to obtain such Seller Records from Seller.
After the thirty (30) days' notice period expires, Seller
shall have the right to destroy any Seller Records it retains
in accordance with its usual and customary records retention
policies. Nothing herein shall be deemed to require the Buyer
to maintain or refrain from disposing of any books and records
transferred pursuant to this Agreement for any period of time
after the Closing Date. However, if Buyer desires to dispose
of any such books or records, Buyer agrees to give Seller
notice of such intention and the opportunity to retain such
books and records, at Seller's expense. From and after the
Closing Date and upon reasonable written require, Seller and
Buyer shall cooperate with each other in providing the other
party with copies of books or records needed in connection
with customer complaints, lawsuits, investigations, and tax
audits and examination. Such books or records shall be
provided at the cost and expense of the requesting party.
6.3.3 Training Cooperation. At no cost to Buyer, Seller agrees to
assist in the training of two of Buyer's technicians on
assembly of the Assets over a period of five (5) full business
days at Seller's facilities. Seller shall have no liability
and Buyer shall have no recourse to Seller with respect to any
assistance provided to Buyer by Seller as a result of its
undertakings pursuant to this section.
6.3.4 Non-competition. Seller and Buyer acknowledge that as an
inducement to Buyer to enter into this Agreement and in
partial consideration of the Purchase Price, Buyer has
required that Seller agree that for a period of three (3)
years after the Closing Date, Seller will not engage directly
or indirectly anywhere in the Restricted Market (as defined
below) in a business which involves products similar to the
Jupiter and Galileo product lines, or solicit customers who
have purchased from Seller the Jupiter and Galileo products.
However, Seller may sell and service any of its existing
inventory not sold to Buyer. "Restricted Market" shall mean
all international markets and all areas of the United States.
Seller agrees that if this Section 6.3.4 is violated, Buyer
shall be entitled to seek injunctive relief in addition to any
other legal remedies available to it. Seller and Buyer hereby
waive any provision of applicable law that would render any
provision of this Section 6.3.4 invalid or unenforceable.
6.3.5 Subrogation of Rights. From and after the Closing Date, if
Buyer becomes liable for or suffers any damage with respect to
any matter associated with the Jupiter and Galileo product
lines that was covered by insurance maintained by Seller or in
which Seller is a named insured at or before the Closing Date,
Buyer shall be and is hereby subrogated to any rights of
Seller under the insurance coverage. Seller shall promptly
remit to Buyer any insurance proceeds received by them on
account of any such liability or damage less Seller's cost
(including any claim amounts), expenses,
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and fees relating thereto. In the event of Seller's liability,
such insurance proceeds shall be used by Seller to satisfy
that liability.
6.3.6 Customer and Business Relationships. From and after the
Closing Date, Seller will cooperate with Buyer in its efforts
to continue and maintain, with customers, suppliers, or other
business associates of Seller, the same business relationship
with Buyer after the Closing Date as maintained with Seller
prior to the Closing Date, with respect to the business to be
carried on by Buyer with the Assets. Seller will not take any
action designed or intended to have the effect of discouraging
any person from continuing or maintaining a business
relationship with Buyer after the Closing Date.
6.3.7 Further Assurances. Seller and Buyer agree to execute and
deliver from time to time such further instruments and do such
other acts as may be reasonably necessary to effectuate the
purposes of this Agreement.
6.3.8 Products Liability Insurance. For a period of one (1) year
following Closing, Buyer shall maintain products liability
insurance in adequate and appropriate amounts to cover the
Inventories. For such period, if Seller becomes liable for or
suffers any damage with respect to any matter that is covered
by such insurance, Seller shall be and is hereby subrogated to
any rights of Buyer under the insurance coverage. Buyer shall
promptly remit to Seller any insurance proceeds received by
them on account of any such liability or damage less Buyer's
cost (including any claim amounts), expenses, and fees
relating thereto. In the event of Buyer's liability, such
insurance proceeds shall be used by Buyer to satisfy that
liability.
6.3.9 Letter of Credit. Within ten (10) business days after Closing,
Seller shall obtain a standby letter of credit with terms
mutually agreeable to Buyer and Seller in favor of Buyer to
cover Seller's Retained Obligations, as defined in Section 8.3
of the Agreement, with the following terms:
$184,000 available up to thirty (30) days after Closing;
$100,000 available from thirty (30) days to sixty (60) days
after Closing;
$75,000 available from sixty (60) days to ninety (90) days
after Closing;
$0 available after ninety (90) days after Closing.
The letter of credit shall be payable up to the amount of the
claim by the issuer bank upon presentation by Buyer of a
written notice of claim. Seller may request arbitration in
accordance with Section 9.10 of the Agreement if it disputes
Buyer's claim.
ARTICLE 7. INVENTORIES, REVENUES, EXPENSES AND TAXES
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7.1 Accounting for Inventories. The Buyer will take a physical count of the
Inventories within sixty (60) days of the Closing Date and will
determine the fair value of the Inventories. Seller shall assist Buyer
in counting the Inventories.
7.2 Expenses. Seller will be responsible for the payment of all operating
expenses and capital expenditures related to the Assets the Seller
transfer under this Agreement and attributable to the period prior to
the Closing Date. Buyer will be responsible for the payment of all
operating expenses and capital expenditures related to the Assets
attributable to the period on and after the Closing Date. Any party
that pays any expenses that are the responsibility of another party
will be reimbursed for those expenses.
7.3 Taxes and Incidental Expenses
7.3.1 Ad Valorem and Personal Property Taxes. Ad valorem and
personal property and similar obligations on the Assets the
Seller transfers under this Agreement are the obligation of
Seller for periods before the Closing Date and are the
obligation of the Buyer for periods after the Closing Date.
All such taxes will be prorated as of the Closing Date.
7.3.2 Income Taxes. Each party shall be responsible for its own
state income and federal income taxes, if any, as may result
from this transaction.
7.3.3 Sales and Use Taxes. Buyer will be responsible for all sales,
use and similar taxes applicable to the transfer of the
Assets. If Seller is required to pay such sales, use or
similar taxes on behalf of Buyer, Buyer will reimburse Seller
for such taxes paid by Seller.
7.3.4 Incidental Expenses. Each party shall bear its own respective
expenses incurred in connection with the negotiation and
Closing of this transaction, including it own consultants'
fees, attorneys' fees, accountants' fees, and other similar
costs and expenses.
ARTICLE 8. RETAINED AND ASSUMED RIGHTS AND OBLIGATIONS
8.1 Buyer's Rights After Closing. Upon and after Closing, Buyer will
receive and assume all of Seller's right, title and interest to the
Assets, as of the Closing Date.
8.2 Buyer's Obligations After Closing. Upon and after Closing, Buyer will
unconditionally and irrevocably assume, pay, perform and discharge all
of the liabilities, obligations and duties with respect to the
ownership of the Assets on or after the Closing Date, except as
otherwise provided in this Agreement (the "Buyer's Assumed
Obligations"). The Buyer's Assumed Obligations include without
limitation:
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8.2.1 All performance obligations under the Contracts the Buyer
receives that are attributable to and accrue in the period on
and after the Closing Date;
8.2.2 All Claims (as defined in Section 8.4.1) arising from Buyer's
ownership or operating of the Assets on and after the Closing
Date; and
8.2.3 All Claims (as defined in Section 8.4.1) arising from any
inaccuracy in any representations or warranties of Buyer under
this Agreement.
8.2.4 All warranty obligations, expressed or implied, of Buyer with
respect to the Jupiter and Galileo products sold or services
rendered by Buyer after the Closing Date.
8.2.5 All Claims arising out of any suits, claims or proceedings
brought or asserted by a third party and which are alleged to
have arisen or are attributable to the period on or after the
Closing Date.
8.3 Seller's Obligations After Closing. After Closing, Seller will retain
responsibility for all liabilities, obligations and duties with respect
to the ownership of the Assets before the Closing Date, except as
otherwise specifically provided in this Agreement (the Seller's
Retained Obligations"). The Seller's Retained Obligations include
without limitation:
8.3.1 All performance obligations under the Contracts that are
attributable to and accrue in the period before the Closing
Date;
8.3.2 All Claims (as defined in Section 8.4.1) arising from Seller's
ownership or operation of the Assets before the Closing Date.
8.3.3 All Claims (as defined in Section 8.4.1) arising from any
inaccuracy in any representations or warranties of Seller
under this Agreement.
8.3.4 All warranty obligations, expressed or implied, of Seller with
respect to the Jupiter and Galileo products sold or services
rendered by Seller on or prior to the Closing Date and as set
forth in Schedule 8.3.4 hereto ("Warranty Obligations").
Seller and Buyer agree that Buyer will perform the services
necessary to fulfill the Warranty Obligation that continue
after the Closing Date, and that Seller shall pay all direct
material and labor costs, plus a ten percent (10%) mark-up,
borne by Buyer to fulfill such Warranty Obligations that
continue after the Closing date.
8.3.5 All Claims arising out of any suits , claims or proceedings
brought or asserted by a third party and which are alleged to
have arisen or are attributable to the period prior to the
Closing Date.
8.4 Indemnities.
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8.4.1 Definition of Claims. As used in this Agreement, the term
"Claims" means any and all losses, liabilities, damages,
obligations, expenses, fines, penalties, costs, claims, causes
of action and judgments for: (i) breaches of contract; (ii)
loss or damage to property, injury to or death of persons, and
other tortious injury; (iii) liability assessments due to
strict liability of which notice has been given by the
relevant third party, and (iv) violations of which notice has
been given by the relevant third party of published, binding
and applicable laws, rules, regulations, orders or any other
legal right or duty actionable at law or equity. The term
"Claims" also includes reasonable attorneys; fees, court
costs, and other reasonable costs of litigation resulting from
the defense of any claim or cause of action within the scope
of the indemnities in this Agreement.
8.4.2 Application of Indemnities. All indemnities set forth in this
Agreement extend to the officers, directors, employees and
affiliates of the party indemnified. The indemnities set forth
in this Agreement do not extend to any part of an indemnified
Claim to the extent caused by the negligence, willful
misconduct or fraud of the indemnified party or the result of
the imposition of punitive damages on the indemnified party.
8.4.3 Seller's Indemnity. To the extent that Buyer is not otherwise
indemnified pursuant to indemnification provisions of
Contracts that have been conveyed, transferred and assigned to
Buyer in connection with this Agreement, Seller shall
indemnify, defend and hold Buyer harmless from and against any
and all Claims caused by, resulting from or incidental to
Seller's Retained Obligations described in Section 8.3 of this
Agreement, to the extent such Claims related to the Assets.
8.4.4 Buyer's Indemnity. Buyer shall indemnify, defend and hold
Seller harmless from and against any and all Claims caused by,
resulting from or incidental to Buyer's Assumed Obligations
set forth in Section 8.2 of this Agreement, to the extent such
Claims relate to the Assets.
8.4.5 Notices and Defense of Claims. Each party shall immediately
notify the other affected party of any Claim of which it
becomes aware and for which it is entitled to indemnification
from the other party under this Agreement. The indemnifying
party shall be obligated to defend at the indemnifying party's
sole expense any litigation or other administrative or
adversarial proceeding against the indemnified party relating
to any Claim for which the indemnifying party has agreed to
indemnify and hold the indemnified party harmless under this
Agreement. However, the indemnified party shall have the right
to participate with the indemnifying party in the defense of
any such Claim at its own expense.
8.4.6 Limitations.
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<PAGE>
(i) Each warranty, covenant and agreement of indemnity
contained in this Agreement shall survive the Closing
and the delivery of instruments of conveyance by the
parties hereto, and shall not be deemed to have been
superseded by the terms and conditions of the
instruments delivered at the Closing. All warranties,
representations and agreements of indemnity shall
survive for a period of one (1) year from the Closing
Date, except Buyer's obligation sunder Section 8.2.4
and Seller's obligations under Section 8.3.4 which
shall survive without any limitation.
(ii) In calculating the amount of any Claim for which any
indemnifying person is liable under this Section 8.4,
there shall be taken into consideration the value of
any federal or state income tax effects on, or
insurance amounts recovered by, the indemnified
person that result from the circumstances to which
the Claim related or from which the Claim arose.
8.4.7 Limitation of Seller's Liability.
(i) Notwithstanding anything to the contrary contained in
this Agreement, after the Closing, the aggregate
liability of the Seller for any Claim, individually
or in the aggregate with all other Claims covered by
this Agreement, for which indemnification is required
by Seller pursuant to Section 8.4.3, shall be limited
to the full amount of the adjusted Cash
Consideration. Buyer agrees to hold Seller harmless
for any Claims greater than such amount.
(ii) The Buyer is entitled to indemnification pursuant to
this Agreement only to the extent that the amount of
any Claim, individually or in the aggregate with all
other Claims covered by this Agreement, exceeds Ten
Thousand Dollars ($10,000) and is not a Buyer's
Assumed Obligation.
8.4.8 Limitation of Buyer's Liability.
(i) Notwithstanding anything to the contrary contained in
this Agreement, after the Closing, the aggregate
liability of the Buyer for any Claim, individually or
in the aggregate with all other Claims covered by
this Agreement, for which indemnification is required
by a Buyer pursuant to Section 8.4.4, shall be
limited to the full amount of the adjusted Cash
Consideration. Seller agrees to hold Buyer harmless
for any Claims greater than such amount.
(ii) The Seller is entitled to indemnification pursuant to
this Agreement only to the extent that the amount of
any Claim, individually or in
Page 79 of 86
<PAGE>
the aggregate with all other Claims covered by this
Agreement, exceeds Ten Thousand Dollars ($10,000) and
is not a Seller's Retained Obligation.
8.4.9 Limitation on Claims. Neither party to this Agreement shall
make a claim against the other party to this Agreement except
pursuant to and subject to the limitations contained in, this
Section 8.4.
8.4.10 Inconsistent Provisions. The provisions of this Section 8.4
shall govern and control over any inconsistent provisions of
this Agreement.
ARTICLE 9. MISCELLANEOUS PROVISIONS
9.1 Notices. All notices under this Agreement must be in writing. Any
notice under this Agreement may be given by personal delivery,
facsimile transmission, U.S. mail (postage prepaid), or commercial
delivery service, and will be deemed duly given when received by the
party charged with such notice and addressed as follows:
Buyer Seller
----- ------
Innovative Transducers Inc. Bison Instruments, Inc.
17200 Park Row 5610 Rowland Road
Houston, Texas 77084-4925 Minneapolis, Minnesota
55343-8956
Attn.: Sam Bull Attn.: Larry Martin
Fax: 281-579-8656 Fax: 612-931-0997
with required copy (which shall not constitute notice) to:
Tech-Sym Corporation
10500 Westoffice Drive, Suite 200
Houston, Texas 77042-5391
Attn.: General Counsel
Fax: 713-780-3524
Either party, by written notice to the other, may change the address or
the individual to which or to whom notices are to be sent under this
Agreement.
9.2 Public Announcements. Neither party may make press releases or other
public announcements concerning this transaction, without the other
party's prior written approval and agreement to the form of the
announcement except: (a) as may be required by applicable laws or rules
and regulation of any governmental agency or stock exchange; and (b)
Seller may disclose the transaction to its shareholders in writing and
by announcement.
Page 80 of 86
<PAGE>
9.3 Survival or Representations and Warranties. All of the representations,
warranties, indemnities and other agreements of or by the parties to
this Agreement shall survive the execution and delivery of the closing
documents and the transfer of assets between the parties.
9.4 Exhibits. The Exhibits attached to this Agreement are incorporated into
and make a part of this Agreement. In the event of a conflict between
the provisions of the Exhibits or the executed Closing documents and
the foregoing provisions of this Agreement, the provisions of this
Agreement shall take precedence. The omission of certain provisions of
this Agreement from the Closing documents does not constitute a
conflict between this Agreement and the Closing documents and will not
effect of merger of the omitted provisions.
9.5 Integration and Amendment. This Agreement represents the entire
agreement between the parties, superseding all prior negotiations, and
may not be amended or modified except by written agreement between duly
authorized representatives of the parties.
9.6 Successors and Assigns. This Agreement binds and inures to the benefit
of the parties hereto and their respective permitted successors and
assigns, and nothing contained in this Agreement, express or implied,
is intended to confer upon any other person or entity any benefits,
rights, or remedies.
9.7 Severability. If any provision of this Agreement is found by a court of
competent jurisdiction to be invalid or unenforceable, that provision
will be deemed modified to the extent necessary to make it valid and
enforceable and if it cannot be so modified, it shall be deemed deleted
and the remainder of the Agreement shall continue and remain in full
force and effect.
9.8 Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which shall constitute
one document.
9.9 Governing Law. This Agreement shall be governed by the laws of the
State of Texas.
9.10 Arbitration.
(i) All disputes, differences or questions arising out of or
relating to this Agreement (including, without limitation,
those as to the validity, interpretation, breach, violation or
termination hereof) shall, at the written request of any party
hereto, be finally determined and settled pursuant to
arbitration in Wilmington, Delaware by three arbitrators, one
to by appointed by Buyer, and one by Seller, and a neutral
arbitrator to be appointed by such two appointed arbitrators.
The neutral arbitrator shall be an attorney and shall act as
chairman. Should (a) either party fail to appoint an
arbitrator as hereinabove contemplated within ten (10) days
Page 81 of 86
<PAGE>
after the party not requesting arbitration has received such
written request, or (b) the two arbitrators appointed by or on
behalf of the parties as contemplated by this Section 9.10
fail to appoint a neutral arbitrator as hereinabove
contemplated within ten (10) days after the date of the
appointment of the last arbitrator appointed, then any person
sitting as a Judge of the United Stated District Court for a
district covering Wilmington, Delaware, upon application of
Seller or of Buyer, shall appoint an arbitrator to fill such
position with the same force and effect as though such
arbitrator had been appointed as hereinabove contemplated.
(ii) The arbitration proceeding shall be conducted in accordance
with the Rules of the American Arbitrator Association. A
determination, award of other action shall be considered the
valid action of the arbitrators if supported by the
affirmative vote of two or three of the three arbitrators. The
costs of arbitration (exclusive of extending the arbitration,
and of the fees and expenses of legal counsel to such party,
all of which shall be borne by such party) shall be shared
equally by Buyer and Seller. This arbitration award shall be
final and conclusive and shall receive recognition, and
judgment upon such award may be entered and enforced in any
court of competent jurisdiction.
IN WITNESS WHEREOF, the authorized representatives of the Parties
executed this Agreement on the date indicated in the opening paragraph
of this Agreement.
INNOVATIVE TRANSDUCERS INC. BISON INSTRUMENTS, INC.
By: /s/ Philip "Sam" Bull By: /s/ Lawrence M. Martin
------------------------------- --------------------------------
Name: Philip "Sam" Bull Name: Lawrence M. Martin
Title: President Title: General Manager
Page 82 of 86
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