SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report: October 31, 1997
Cramer, Inc.
Kansas 2-69336 48-0638707
(State of Incorporation) (Commission File Number) (IRS Employer I.D. No.)
625 Adams Street, Kansas City, Kansas 66105
(Address of principal executive offices)
Registrant's telephone number, including area code: (913) 621-6700
ITEM 2. ACQUISITION OF ASSETS
On October 31, 1997, the Company entered into an Asset Purchase
Agreement with Floating Arms, Inc., a start-up company engaged in
the development and distribution of a proprietary keyboard system
designed to be placed on the arms of a chair. The keyboard is
split mounted and is suitable for moderate to high use computer
workstation applications. The split mounted design allows users
to perform high volume data entry tasks with a minimum strain on
wrists, arms and shoulders.
Under the agreement, the Company acquired substantially all of
the assets of Floating Arms, Inc. The Company believes that a
user obtains maximum benefit from the chair mounted keyboard when
it is attached to a strong, durable, ergonomically designed chair
such as that manufactured by Cramer. Accordingly, the Company
will use the assets purchased to continue manufacturing and
selling the keyboard device as an expansion of the Company's
product offering.
The assets purchased consist primarily of tooling used in
production of the split mounted keyboard, a patent related to
mechanical keyswitch devices mounted on the arm of a chair,
customer lists and goodwill.
<PAGE>
The purchase price for these assets was negotiated based on
competing offers from other office products manufacturers and
consists of the issuance of 200,000 shares of Cramer, Inc.
unregistered common stock to Floating Arms, Inc., the issuance of
10,750 shares of unregistered common stock to the CEO of Floating
Arms, Inc., who will join Cramer's management team subsequent to
the transaction, and the assumption of approximately $215,000 of
liabilities owed by Floating Arms, Inc. These liabilities were
settled shortly after the date of the closing. The negotiations
placed a value of $1.50 per share on Cramer's common stock. The
Asset Purchase Agreement also obligates the Company to pay a 7%
royalty to Floating Arms, Inc. on Cramer sales of split mounted
keyboard products that exceed $2,500,000 in the three year period
subsequent to the acquisition. These royalty payments are capped
at a maximum of $3,000,000.
The Company financed the cash portion of the purchase used to
settle the assumed liabilities by increasing its borrowings under
the consolidated Rotherwood line of credit (see discussion in
Management Discussion and Analysis in the 1996 Form 10-KSB).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Index to Financial Statements
(A). FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
1. Audited Balance Sheet and Notes as of December 31, 1996
2. Unaudited Income Statement and Statements of Cash Flows
and of Changes in Stockholder's Equity for the Year
Ending December 31, 1996 (to be submitted by amendment)
3. Unaudited Balance Sheet, Income Statement and
Statements of Cash Flows and of Changes in
Stockholder's Equity as of December 31, 1995 and for
the Year Then Ended (to be submitted by amendment)
4. Unaudited Balance Sheet, Income Statement and Statement
of Cash Flows as of September 30, 1997 and for the Nine
Months then Ended (to be submitted by amendment).
5. Unaudited Income Statements for the Quarter Ended
September 30, 1997 and September 30, 1996 (to be
submitted by amendment).
Item 310 of Regulation SB indicates that Items 3 and 4 are
to be audited. The Company will be submitting, by
amendment, unaudited statements which exclude footnote
disclosure typically made in accordance with Generally
Accepted Accounting Principles because they are the only
information available from the seller. An audit of these
statements had not been previously performed. It is the
Company's opinion that the effort and expense necessary to
prepare audited financial statements meeting the
requirements of Generally Accepted Accounting Principles and
SEC <PAGE> Regulation SB would entail unreasonable effort and
expense compared to the size of the acquisition. The
Company believes that audited financial statements would not
be material to understanding the transaction and its
possible effects on Cramer. The future results of the
Company's activities concerning the split keyboard business
will be consolidated with its other business and included
within the regular financial statements provided in
accordance with the appropriate SEC regulations.
The Company believes that the interim statements for
Floating Arms, Inc., presented herein, include all
adjustments necessary in order to make such financial
statements not misleading.
(B). PROFORMA FINANCIAL INFORMATION
1. Proforma Income Statement for the Year Ended December
31, 1996 (to be submitted by amendment).
2. Proforma Balance Sheet as of September 30, 1997 and
Income Statements for the Quarter and Nine Months Ended
September 30, 1997 (to be submitted by amendment).
The proforma financial statements which are to be submitted
by amendment will be derived using the separate financial
statements of the Company and Floating Arms, Inc. The
proforma statements may not be in compliance with Generally
Accepted Accounting Principles or SEC Regulation SB as the
financial statements for floating Arms, Inc. are not in this
format nor do they include all disclosures required under
Item 310 of Regulation SB or Generally Accepted Accounting
Principles.
(C). INDEX TO EXHIBITS
2.1 Asset Purchase Agreement dated October 31, 1997
<PAGE>
BALANCE SHEET
FLOATING ARMS, INC.
DECEMBER 31, 1996
<PAGE>
Floating Arms, Inc.
Balance Sheet
December 31, 1996
CONTENTS
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . .1
BALANCE SHEET. . . . . . . . . . . . . . . . . . . . . . . . . .2
NOTES TO BALANCE SHEET . . . . . . . . . . . . . . . . . . . . .3
<PAGE>
Report of Independent Auditors
Board of Directors and Shareholders
Floating Arms, Inc.
We have audited the accompanying balance sheet of Floating Arms,
Inc. as of December 31, 1996. This balance sheet is the
responsibility of the Company's management. Our responsibility
is to express an opinion on this balance sheet based on our
audit.
Except as discussed in the following paragraph, we conducted our
audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
Because of inadequacies in the Company's accounting records for
the previous year, we were unable to determine the consistency of
application of accounting principles with the preceding year.
In our opinion, the balance sheet referred to in the first
paragraph above presents fairly, in all material respects, the
financial position of Floating Arms, Inc. at December 31, 1996,
in conformity with generally accepted accounting principles.
The accompanying balance sheet has been prepared assuming the
Company will continue as a going concern. As discussed in Note 3
to the balance sheet, the Company's accumulated deficit and
negative working capital raise substantial doubt about its
ability to continue as a going concern. (Management's plans as
to these matters are also described in Note 3.) The balance
sheet does not include any adjustments that might result from the
outcome of this uncertainty.
March 24, 1997
<PAGE>
Floating Arms, Inc.
Balance Sheet
December 31, 1996
ASSETS
Current assets:
Accounts receivable $ 9,019
Inventories:
Raw Materials 27,384
Finished goods 22,047
49,431
Total current assets 58,450
Property and equipment:
Office furniture and equipment 11,773
Production equipment 35,085
46,858
Accumulated depreciation (17,789)
29,069
Other assets:
Deposit on tooling 43,000
Patent and organizational costs,
less amortization of $588 452
Total assets $ 130,971
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 54,995
Bank overdraft 5,967
Accrued compensation 45,279
Accrued liabilities 2,177
Advances from officer 7,750
Current maturities of long-term debt 16,498
Total current liabilities 132,666
Long-term debt 23,305
Stockholders' deficit:
Common stock, $1 par value:
Authorized shares - 1.750,000
Issued and outstanding shares - 1,147,473 1,147,473
Discount on stock (290,025)
Accumulated deficit (882,448)
Total stockholders' deficit (25,000)
Total liabilities and stockholders' deficit $ 130,971
See accompanying notes.
<PAGE>
1. NATURE OF BUSINESS
Floating Arms, Inc., formerly Workplace Designs, Inc.,
("Company") is in the business of developing and providing
medically based ergonomic solutions for users of computer
equipment to reduce or eliminate the effects of cumulative trauma
disorders. The Company's two products, the floating arms
keyboard and the floating arms mousetray, are designed by medical
professionals to alleviate the stress of long-term computer use.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out)
or market and consist primarily of purchased parts and
components.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful
lives of the assets which range from 3 to 7 years.
OTHER ASSETS
Patent costs and organizational costs are amortized over 60
months using the straight-line method.
INCOME TAXES
Income taxes will be provided using the liability method.
Deferred income taxes will be provided for temporary differences
between financial reporting and tax bases of assets and
liabilities.
STOCK BASED COMPENSATION
The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, Accounting
for Stock Based Compensation ("Statement 123"), but applies
Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees ("APB 25"), and related interpretations in
accounting for its stock plans. Under APB 25, when the exercise
price of stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is
recognized.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company will record impairment losses on long-lived assets
used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount.
3. GOING CONCERN
The accompanying balance sheet has been prepared on the basis
that the Company will continue as a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As of December 31,
1996, the Company has an accumulated deficit of $882,448 and
negative working capital of $74,216. As a result, the Company
will need additional financing to continue as a going concern.
Subsequent to December 31, 1996, the Company issued 60,000 shares
of Common Stock and received $75,000 in proceeds. In addition,
the Company issued shares of Common Stock in lieu of payment of
accrued compensation owed for $27,885 as of December 31, 1996.
The Company will be exploring additional financing alternatives
in 1997 and anticipates completing a financing transaction in
1997. However, there can be no assurance that the Company will
be successful in completing a financing transaction.
Because of uncertainties regarding the achievability of
management's plans, no assurance can be given as to the Company's
ability to continue in existence. The balance sheet does not
include any adjustments to reflect the possible future effects on
the recoverability and classification of assets or the amount and
classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
<PAGE>
4. LONG-TERM DEBT
Long-term debt consists of the following:
Note payable to bank at the bank's prime rate
plus 1% (9.25% at December 31, 1996), principal
due September 30, 1997, interest due quarterly.
The Company may receive additional advances
prior to September 30, 1997 with a total credit
limit of $12,000. $ 5,098
Note payable to bank at the bank's prime rate plus
.5% (8.75% at December 31, 1996), due in monthly
installments of $2,000, including interest, through
April 19, 2001. The Company may receive additional
advances prior to April 19, 2001 with a total credit
limit of $110,000. The unamortized balance of related
warrants (see Note 6) as of December 31, 1996 is $30,130. 34,705
39,803
Less current maturities 16,498
$23,305
The above financing agreements are secured by substantially all
of the Company's assets. The note payable due in April 2001 is
personally guaranteed by certain stockholders.
Maturities of long-term debt as of December 31, 1996 are as
follows:
1997 $24,387
1998 20,837
1999 22,735
2000 1,974
$69,933
5. CAPITAL STOCK
In 1996, the Company issued 83,573 shares of Common Stock at
prices ranging from $1.25 to $2.14 from which the Company
received proceeds of $143,226.
In January 1997, the Company issued 60,000 shares of Common Stock
at $1.25 per share from which the Company received proceeds of
$75,000.
<PAGE>
6. STOCK OPTIONS AND WARRANTS
The Company has a stock option plan (the "Plan") under which
incentive stock options and non-statutory options may be granted
to certain eligible employees and non-employee directors of the
Company. The maximum number of shares of Common Stock currently
reserved for issuance under the Plan is 120,000 shares.
Weighted Average
Options Outstanding Exercise Price
Plan Non-Plan Warrants Per Share
Balance at
December 31,
1995 1,100 8,000 76,250 $ 1.50
Granted -- 32,000 82,936 1.39
Balance at
December 31,
1996 1,100 40,000 159,186 $ 1.44
The following table summarizes information about the stock
options outstanding at December 31, 1996:
Options
Options Outstanding Exercisable
Weighted
Average
Exercise Number Remaining Number
Prices Outstanding Contractual Life Exercisable
$1.25 37,100 4.18 37,100
2.00 4,000 3.67 4,000
41,100 4.13 41,100
Plan and non-plan options outstanding expire at various dates
through 2001. The number of options exercisable as of December
31, 1996 was 41,100 at a weighted average exercise price of
$1.33.
The weighted-average grant date fair value of options granted at
market prices during the year ended December 31, 1996 was $.37
per share.
In January 1997, the Company granted options to purchase 105,000
shares of common stock to Directors. The options are exercisable
at $1.25 per share and expire in April 2002.
In connection with the issuance of Common Stock at $2.00 per
share from April through November 1995, the Company granted
warrants to purchase a total of 56,250 shares of Common Stock.
The warrants are exercisable at $2.00 per share and expire three
years from the date of grant.
<PAGE>
6. STOCK OPTION AND WARRANTS (CONTINUED)
In connection with the issuance of Common Stock at $1.25 per
share in December 1996, the Company granted warrants to purchase
a total of 16,000 shares of Common Stock. The warrants are
exercisable at $1.25 per share and expire in December 1999.
The Company granted warrants to purchase 31,936 shares of Common
Stock for services provided. The warrants are exercisable at
$.05 to $2.00 per share and expire at various dates through 2002.
The warrants were deemed to have a value of $6,995 which was
expensed in the period of the services.
In April 1996, the Company granted warrants to purchase 55,000
shares of Common Stock at $2.00 per share to certain stockholders
in return for their personal guarantees on the Company's note
payable to the bank. The warrants expire in April 2001. The
warrants were deemed to have a value of $32,450 which will be
amortized to interest expense over the term of the note.
In connection with the issuance of Common Stock at $1.25 per
share in January 1997, the Company granted warrants to purchase a
total of 30,000 shares of Common Stock. The warrants are
exercisable at $1.25 per share and expire in January 2000.
In January 1997, the Company granted warrants to purchase 18,000
shares of Common Stock for advisory and consulting services. The
warrants are exercisable at $1.25 per share for 3 years.
The Company has elected to follow APB 25 and related
Interpretations in accounting for its employee stock options
because, as discussed below, the alternative fair value
accounting provided for under Statement 123 requires use of
option valuation models that were not developed for use in
valuing employee stock options.
The fair value for these options was estimated at the date of
grant using the minimum value pricing model with the following
assumptions for 1996: risk-free interest rate of 7%; dividend
yield of 0%; and expected life of the options of 5 years.
The minimum value model was developed for use in estimating the
fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions. Because the
Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
<PAGE>
7. INCOME TAXES
At December 31, 1996, the Company has net operating loss
carryforwards of approximately $845,000 which are available to
offset future taxable income and expire in varying amounts
through 2011. These carryforwards are subject to the limitations
of Internal Revenue Code section 382. This section provides that
limitations on the availability of net operating losses to offset
current taxable income result when an ownership change has
occurred for federal tax purposes.
Deferred income taxes reflect the effects of temporary
differences between the carrying amount of assets and liabilities
for financial reporting purposes and amounts used for income tax
purposes. The components of the Company's deferred taxes as of
December 31, 1996 are as follows:
Deferred tax asset:
Net operating loss carryforwards $330,000
Deferred tax liability:
Depreciation (6,000)
Net deferred tax asset 324,000
Less valuation allowance (324,000)
Net deferred tax asset after valuation allowance $ --
The valuation allowance was provided as the recoverability of the
deferred tax assets is dependent on future taxable income.
<PAGE>
8. COMMITMENTS
OPERATING LEASES
The Company has operating leases for vehicles, office equipment
and office space. These leases expire at various times through
2001. Future minimum lease obligations in excess of one year as
of December 31, 1996 are as follows:
1997 $ 5,184
1998 1,553
1999 1,295
2000 1,295
2001 971
$10,298
TOOLING
In 1996, the Company entered into a commitment to purchase
tooling for $110,000. As of December 31, 1996, the Company paid
$43,000 toward this commitment.
9. RELATED PARTY TRANSACTIONS
During the year, the Company received an advance from an officer
for $7,750. For every $25,000 raised during the private
placement, the Company will repay $1,000 to the officer. In the
event that funds raised are insufficient to repay the advance,
the remaining amount will be converted to stock.
In January 1997, an officer received 22,500 shares of Common
Stock at $1.25 per share for payment of accrued compensation owed
as of January 1997. The accrued compensation balance owed to the
officer as of December 31, 1996 was approximately $28,000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereto duly authorized.
Cramer, Inc.
Date: November 13, 1997 /s/ Gary A. Rubin
Gary A. Rubin
Vice President, Finance
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered
into the 31st day of October, 1997 by and between Cramer, Inc., a
Kansas corporation ("Buyer") and Floating Arms, Inc., a Minnesota
corporation ("Seller").
WHEREAS, Seller desires to sell, and Buyer desires to
purchase, certain of the assets of Seller for the consideration
and upon the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises, the
provisions and the respective agreements hereinafter set forth,
the parties hereto hereby agree as follows:
1. PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES.
1.1 AGREEMENT TO PURCHASE AND SELL.
1.1.1 Upon the terms and subject to the
conditions set forth in this Agreement and upon the
representations and warranties made herein by each of
the parties to the other, on the Closing Date (as such
term is hereinafter defined), Seller shall sell, grant,
convey, assign, transfer and deliver to Buyer, and
Buyer will purchase and acquire from Seller, those
assets and properties of Seller, as the same shall
exist on the Closing Date, (said assets and properties
so to be sold, granted, conveyed, transferred, assigned
and delivered to Buyer being hereinafter collectively
referred to as the "Assets"), described as follows:
(a) all purchase orders, accounts
receivable, inventories, spare parts, prepayments,
deferred items, work in process, supplies,
leaseholds, leasehold improvements, tools,
tooling, fixtures, machinery, equipment,
furniture, office furnishings and fixtures of
Seller;
(b) including without limitation those
described in Schedule 1.1.1.a hereof, all patents
and applications therefor and all trademarks and
trade names, trademark and trade name
registrations, service marks and service mark
registrations, copyrights, copyright
registrations, the applications therefor and the
licenses thereto, together with the goodwill and
the business appurtenant thereto;
(c) all drawings, blueprints, specifications
designs and data owned by Seller and relating to
all of its products whether patented or not;
(d) all catalogues, brochures, sales
literature, promotional material and other selling
material of Seller;
<PAGE>
(e) all books and records and all files,
documents, papers, agreements, books of account
and other records pertaining to the Assets; and
(f) all rights of Seller under all
contracts, agreements, licenses, leases, sales
orders, purchase orders and other commitments
Buyer will assume pursuant to Section 1.3 hereof.
Without limiting the generality of the foregoing,
the Assets shall, except as set forth in Section 1.1.2
hereof, include all assets described above and set
forth in a detailed list of tooling and inventory
equipment as of the date of the Balance Sheet (as such
term is hereinafter defined) prepared from the
accounting records of Seller and attached hereto as
Schedule 1.1.1.B, and all such assets as may have been
acquired by Seller which would be included on a list
prepared in like manner from such accounting records as
of the Closing Date, except any such assets which may
have been disposed of since the date of the Balance
Sheet in the ordinary course of business on a basis
consistent with past practice.
1.1.2 Anything herein contained to the contrary
notwithstanding, all other assets and properties of
Seller are specifically excluded from the Assets and
shall be retained by Seller.
1.1.3 Seller shall execute and deliver to Buyer
at the Closing, (i) a Bill of Sale, Assignment and
Assumption Agreement, in the form attached hereto as
Exhibit "A" (the "Bill of Sale, Assignment and
Assumption Agreement"), under the terms of which Seller
shall sell, grant, convey, assign, transfer and deliver
the Assets to Buyer, and (ii) such other bills of sale,
deeds, instruments of assignment and other appropriate
documents as may be reasonably requested by Buyer in
order to carry out the intentions and purposes of this
Agreement.
1.2 PURCHASE PRICE. Upon the terms and subject to the
conditions set forth in this Agreement, in reliance upon the
representations, warranties, covenants and agreements of
Seller contained herein, and in exchange for the Assets,
Buyer agrees to issue to Seller shares of Buyer's Common
Stock, $1.00 par value per share (the "Common Stock"). The
exact number of shares of Common Stock to be issued by Buyer
hereunder is 200,000 shares.
1.3 PAYMENT OF PURCHASE PRICE. The Purchase Price
shall be payable thirty (30) days after the Closing Date by
delivery to Seller of 200,000 shares of Common Stock,
subject to delay of such delivery under Section 4.9 hereof.
1.4 ADDITIONAL PAYMENTS. A royalty payment in an
amount of money equal to seven percent (7%) of the net sales
price received by Buyer from sales of all split keyboards
and mouse trays sold by Buyer during the three (3) years
next after the Closing Date (as defined herein), which such
total net sales price <PAGE> proceeds during said three years
exceed the sum of $2,500,000; provided however, that all
such royalty payments during the total three year period
shall not exceed the sum of $3,000,000. Any such payments
due hereunder shall be made on a quarterly calendar year
basis on or before the last day of the month following the
end of each calendar year quarter as to all sales proceeds
received by Buyer during each such calendar year quarter to
begin after such sales have exceeded $2,500,000.00 on a
cumulative basis.
1.5 ASSUMPTION OF LIABILITIES. On the Closing Date,
and as additional consideration for the sale, grant,
conveyance, assignment, transfer and delivery of the Assets,
subject, however, to Section 1.6 below, Buyer shall assume
and agree to pay, perform and discharge when due only those
liabilities and obligations of Seller on the Closing Date,
which are:
1.5.1 in the categories listed below and which are
reflected on the Balance Sheet or which are current
liabilities or obligations of Seller incurred in the
ordinary course of business and consistent with past
practice after the date of the Balance Sheet and prior
to the Closing Date, less any such liabilities or
obligations paid or discharged by Seller between the
date of the Balance Sheet and the Closing Date, the net
balance to be so assumed for each category shall
approximate the following sums:
Total Accounts Payable $73,665.00
(Trade, Tax and otherwise)
Accrued Expenses 2,071.00
Auto Loan 11,542.00
Bank Accounts/Receivable Line of Credit 5,957.00
Bank Tooling Loan 109,566.000
$202,801.00
and,
1.5.2 liabilities or obligations of Seller which
arise under the terms of its present (i) month-to-month
space lease, (ii) copy machine lease and (iii)
telephone equipment lease and all existing sales orders
and purchase orders.
On the Closing Date, Buyer will execute and deliver to
Seller the Bill of Sale, Assignment and Assumption Agreement
assuming the liabilities and obligations of Seller delivered
to it under Section 1.1.3 hereof.
1.6 NON-ASSUMPTION OF CERTAIN LIABILITIES. Buyer is
not assuming, and shall not be deemed to have assumed, any
liabilities or obligations of Seller of any kind or nature
whatsoever, except as expressly provided in Section 1.4
hereof. Anything in Section 1.4 hereof or elsewhere in this
Agreement to the contrary notwithstanding and without
limiting the generality of the foregoing, it is hereby
agreed that Buyer is not assuming, and shall not be deemed
to have assumed, any liability and shall not have any
obligation for or with respect to any <PAGE> liability or
obligation of Seller (i) in respect of (x) any sales, use or
excise taxes, income taxes, taxes based on or measured by
income or franchise taxes attributable to periods or events
prior to or ending on the Closing Date (other than federal,
state or local payroll taxes on current payroll) or (y) any
of the foregoing or any other taxes, legal, accounting,
brokerage, finder's fees, or other expenses of whatsoever
kind or nature incurred by Seller or any affiliate,
stockholder, director, employee or officer of Seller as a
result of the consummation of the transactions contemplated
by this Agreement, or (ii) arising out of any action, suit
or proceeding based upon an event occurring or a claim
arising (x) prior to the Closing Date or (y) after the
Closing Date in the case of claims in respect of products
sold by Seller prior to the Closing Date and attributable to
acts performed or omitted by Seller prior to the Closing
Date.
1.7 CLOSING. The closing of the purchase and sale of
the Assets provided herein (the "Closing") will be at the
office of Rotherwood Corporation, 1400 Northland Plaza, 3800
W. 80th Street, Bloomington, Minnesota 56431 at 1:00 p.m.,
local time, October 31, 1997, or at such other place or at
such other date and time as Seller and Buyer may mutually
agree. Such date and time of Closing are herein referred to
as the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller
represents and warrants to Buyer as follows:
2.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY;
COMPLIANCE WITH LAW. Seller is a corporation duly
incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Seller is
duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any
other jurisdictions in which the character of the properties
owned or leased by it therein or in which the transaction of
its business makes such qualification necessary. Seller has
all requisite corporate power and authority to own its
properties and carry on its business as now conducted.
Seller is not in default with respect to any order of any
court, governmental authority or arbitration board or
tribunal to which Seller is a party or is subject, and
Seller is not in violation of any laws, ordinances,
governmental rules or regulations to which it is subject.
Seller has obtained all licenses, permits and other
authorizations and has taken all actions required by
applicable laws or governmental regulations in connection
with its business as now conducted.
2.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS.
The execution and delivery of this Agreement and all
agreements and documents contemplated hereby by Seller, and
the consummation by it of the transactions contemplated
hereby, have been duly authorized by all requisite corporate
action. This Agreement constitutes, and all agreements and
documents contemplated hereby when executed and delivered
pursuant hereto for value received will constitute, the
valid and legally binding obligations of Seller enforceable
in accordance with their terms, except that enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium, bulk sales,
preference, <PAGE> equitable subordination, marshaling or other
similar laws of general application now or hereafter in
effect relating to the enforcement of creditors' rights
generally and except that the remedies of specific
performance, injunction and other forms of equitable relief
are subject to certain tests of equity jurisdiction,
equitable defenses and the discretion of the court before
which any proceeding therefor may be brought. The execution
and delivery of this Agreement by Seller does not, and the
consummation of the transactions contemplated hereby by
Seller will not, (i) require the consent, approval or
authorization of, or declaration, filing or registration
with, any governmental or regulatory authority or any third
party; (ii) result in the breach of any term or provision
of, or constitute a default under, or result in the
acceleration of or entitle any party to accelerate (whether
after the giving of notice or the lapse of time or both) any
obligation under, or result in the creation or imposition of
any lien, charge, pledge, security interest or other
encumbrance upon any part of the property of Seller pursuant
to any provision of, any order, judgment, arbitration award,
injunction, decree, indenture, mortgage, lease, license,
lien, or other agreement or instrument to which Seller, or
the Company is a party or by which it is bound; and (iii)
violate or conflict with any provision of the by-laws or
articles/certificate of incorporation of Seller as amended
to the date of this Agreement.
2.3 FINANCIAL STATEMENTS. Seller has furnished to
Buyer a balance sheet of Seller as of September 30, 1997
(the "Balance Sheet"), and a statement of operations of
Seller for the nine (9) months ended September 30, 1997,
copies of which are attached hereto as Exhibit "B"
(collectively the "Financial Statements"). The Financial
Statements fully and fairly set forth the financial
condition of Seller as of the dates indicated, and the
results of its operations for the periods indicated, in
accordance with generally accepted accounting principles
consistently applied, except as otherwise stated therein.
2.4 UNDISCLOSED LIABILITIES. Seller has no
liabilities or obligations whatsoever, either accrued,
absolute, contingent or otherwise, which are not reflected
or provided for in the Financial Statements or which have
not been otherwise disclosed to Buyer prior to the date
hereof.
2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS SINCE THE
DATE OF THE BALANCE SHEET. Since the date of the Balance
Sheet, Seller has not:
2.5.1 incurred any obligation or liability (fixed
or contingent), except normal trade or business
obligations incurred in the ordinary course of business
and consistent with past practice, none of which is
materially adverse;
2.5.2 mortgaged, pledged or subjected to any
lien, security interest or other encumbrance any of the
Assets;
<PAGE>
2.5.3 transferred or granted any rights under any
concessions, leases, licenses, agreements, patents,
inventions, trademarks, trade names, service marks or
copyrights or with respect to any know-how;
2.5.4 entered into any transaction, contract or
commitment, except (i) those described in Section 1.5.2
hereof and (ii) this Agreement and the transactions
contemplated hereby;
2.5.5 suffered any casualty loss or damage
(whether or not such loss or damage shall have been
covered by insurance) involving the Assets; or
2.5.6 arising out of any prior negotiations with
respect to its possible sale of all or any part of the
Assets, specifically including but not being limited,
to discussions and/or negotiations heretofore held with
ErgoBilt, Inc.
Between the date of this Agreement and the Closing
hereunder, Seller will not, without the prior written
consent of Buyer, do any of the things listed in Sections
2.5.1 through 2.5.5.
2.6 TAXES. Seller (i) has duly and timely filed or
caused to be filed all federal, state, local and foreign tax
returns required to be filed by it prior to the date of this
Agreement which relate to Seller or with respect to which
Seller or the Assets are liable or otherwise in any way
subject, (ii) has paid or fully accrued for all taxes shown
to be due and payable on such returns (which taxes are all
the taxes due and payable under the laws and regulations
pursuant to which such returns were filed), and (iii) has
properly accrued for all such taxes accrued in respect of
Seller or the Assets for periods subsequent to the periods
covered by such returns. No deficiency in payment of taxes
for any period has been asserted by any taxing body and
remains unsettled at the date of this Agreement. Copies of
all federal, state, local and foreign income (or franchise)
tax returns of Seller have been made available for
inspection by Buyer.
2.7 TITLE TO THE ASSETS/BACKLOG. Seller has good and
marketable title to the Assets, free and clear of all
security interests, mortgages, encumbrances, liens, charges
or adverse claims of any kind or character, except as set
forth on the Financial Statements. Seller has accurately
disclosed to Buyer its customer backlog which is represented
by firm purchase orders, including customers, products and
purchase prices.
2.8 CONDITION OF PROPERTY. All tangible personal
property, equipment, fixtures and inventories included
within the Assets or required to be used in the ordinary
course of Seller's business are in good, merchantable or in
reasonably repairable condition and are suitable for the
purposes for which they are being used.
<PAGE>
2.9 REAL ESTATE. Seller has no interest in any real
property other than under its month-to-month space lease.
2.10 LIST OF CONTRACTS AND OTHER DATA. Schedule 2.10
sets forth the following:
2.10.1 (i) all patents and registrations for
trademarks, trade names, service marks and copyrights
which are unexpired as of the date of this Agreement
and which are used in connection with the operation of
Seller's business, as well as all applications pending
on said date for patents or for trademark, trade name,
service mark or copyright registrations, and all other
proprietary rights, owned or held by Seller, or owned
or held by any of Seller's stockholders, directors,
officers, employees or affiliates and reasonably
necessary to, or primarily used in connection with, the
business of Seller, and (ii) all licenses granted by or
to Seller or any of Seller's stockholders, directors,
officers, employees or affiliates and all other
agreements to which Seller or any of Seller's
stockholders, directors, officers, employees or
affiliates is a party which relate, in whole or in
part, to any items of the categories mentioned in (i)
above or to other proprietary rights of any of Seller's
stockholders, directors, officers, employees or
affiliates or of Seller which are reasonably necessary
to, or used by Seller primarily in connection with, the
business of Seller whether owned by Seller or any of
Seller's stockholders, directors, officers, employees
or affiliates or otherwise;
2.10.2 all contracts, understandings and
commitments (including, without limitation, mortgages,
indentures and loan agreements) to which the Assets are
subject and which are not specifically referred to in
Sections 2.10.1 hereof;
True and complete copies of all documents and complete
descriptions of all oral understandings, if any, referred to
in Schedules 2.10 have been provided or made available to
Buyer and its counsel.
2.11 BUSINESS PROPERTY RIGHTS. The property referred
to in Section 2.10.1, together with (i) all designs,
methods, inventions and know-how related thereto, and (ii)
all trademarks, trade names, service marks and copyrights
claimed or used by Seller which have not been registered
(collectively "Business Property Rights"), constitute all
such proprietary rights owned or held by Seller or any of
Seller's stockholders, directors, officers, employees or
affiliates and which, in the case of such stockholders,
directors, officers, employees or affiliates, are
reasonably necessary to, or used by same primarily in, the
conduct of the business of Seller. The designs, methods,
inventions and know-how constitute trade secrets of Seller
or such stockholders, officers, directors, employees or
affiliates within the meaning of all applicable laws, and
Seller has taken all necessary steps required by law to
protect these trade secrets as such. Seller or any such
stockholders, directors, officers, employees or affiliate,
as the case may <PAGE> be, owns or has valid rights to use all such
Business Property Rights without conflict with the rights of
others. No person or corporation has made or threatened to
make any claims that the operation of the business of Seller
is in violation of or infringes any proprietary or trade
rights of any third party. To the knowledge of Seller or
such stockholders, directors, officers, employees or
affiliates, no third party is in violation of or is
infringing upon any Business Property Rights.
2.12 NO BREACH OR DEFAULT. Seller is not in default
under any contract to which it is a party or by which it is
bound, nor has any event occurred which, after the giving of
notice or the passage of time or both, would constitute a
default under any such contract. Seller has no reason to
believe that the parties to such contracts will not fulfill
their obligations under such contracts in all material
respects or are threatened with insolvency.
2.13 LITIGATION. There are no actions, suits or
proceedings with respect to Seller involving claims by or
against Seller or the Assets which are pending or threatened
against Seller or the Assets, at law or in equity, or before
or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or
instrumentality. No basis for any such action, suit or
proceeding exists, and there are no orders, judgments,
injunctions or decrees of any court or governmental agency
with respect to which Seller or the Assets have been named
or to which Seller is a party, which apply, in whole or in
part, to the business of Seller, or to the Assets or which
would result in any material adverse change in the business
or prospects of Seller.
2.14 NO BROKERS. Seller has not entered into any
contract, arrangement or understanding with any person or
firm which may result in the obligation of Buyer to pay any
finder's fees, brokerage or agent's commissions or other
like payments in connection with the negotiations leading to
this Agreement or the consummation of the transactions
contemplated hereby, and Seller is not aware of any claim or
basis for any claim for payment of any finder's fees,
brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement
or the consummation of the transactions contemplated hereby.
2.15 INVESTMENT REPRESENTATION. Seller understands
that (i) the Common Stock being acquired by Seller pursuant
to this Agreement has not been registered under the
Securities Act of 1933, as amended, and is being issued in
reliance upon the exemption afforded by Section 4(2) thereof
for transactions by an issuer not involving any public
offering, (ii) such Common Stock must be held indefinitely
unless a subsequent disposition thereof is registered under
the Securities Act of 1933, as amended, or is exempt from
such registration, (iii) such Common Stock will bear a
legend to such effect, and (iv) Buyer will make a notation
on its transfer books to such effect. Seller further
represents that (i) such Common Stock is being acquired for
investment and without any present view toward distribution
thereof to any other person, (ii) it will not sell or
otherwise <PAGE> dispose of such Common Stock except in compliance
with the registration requirements or exemption provision
under the Securities Act of 1933, as amended, the rules and
regulations thereunder, and as otherwise set forth by the
Securities and Exchange Commission, (iii) it has such
knowledge and experience in financial and business matters
and that it is capable of evaluating the risks and merits of
an investment in such Common Stock, (iv) it has consulted
with counsel, to the extent deemed necessary, as to all
matters covered by this Agreement and has not relied upon
Buyer for any explanation of the application of the various
federal or state securities laws with regard to the
acquisition of such Common Stock, (v) it has investigated
and is familiar with the affairs, financial condition and
prospects of Buyer, and has been given sufficient access to
and has acquired sufficient information about Buyer to reach
an informed and knowledgeable decision to acquire such
Common Stock, (vi) it is able to bear the economic risks of
such an investment, and (vii) no promise or commitment has
been made by Seller with respect to any registration of the
share to be received hereunder.
2.16 NO MISREPRESENTATION OR OMISSION. No
representation or warranty by Seller in this Article 2 or in
any other Article or Section of this Agreement, or in any
certificate or other document furnished or to be furnished
by Seller pursuant hereto, contains or will contain any
untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements
contained therein not misleading or will omit to state a
material fact necessary in order to provide Buyer with
accurate information as to Seller.
3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer
represents and warrants to Seller as follows:
3.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY;
COMPLIANCE WITH LAW. Buyer is a corporation duly
incorporated, validly existing in good standing under the
laws of its jurisdiction of incorporation. Buyer is duly
licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of all
other jurisdictions in which the character of the properties
owned or leased by it therein or in which the transaction of
its business makes such qualification necessary. Buyer has
all requisite corporate power and authority to own its
properties and carry on its business as now conducted.
Buyer is not in default with respect to any order of any
court, governmental authority or arbitration board or
tribunal to which Seller is a party or is subject, and
Seller is not in violation of any laws, ordinances,
governmental rules or regulations to which it is subject.
Buyer has obtained all licenses, permits and other
authorizations and has taken all actions required by
applicable laws or governmental regulations in connection
with its business as now conducted.
3.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS.
The execution and delivery of this Agreement and all
agreements and documents contemplated hereby by Buyer, and
the consummation by it of the transactions contemplated
hereby, have been duly authorized by all requisite corporate
action. This Agreement constitutes, and all agreements and
documents contemplated hereby <PAGE> when executed and delivered
pursuant hereto for value received will constitute, the
valid and legally binding obligations of Buyer enforceable
in accordance with their terms, except that enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium, bulk sales,
preference, equitable subordination, marshaling or other
similar laws of general application now or hereafter in
effect relating to the enforcement of creditors' rights
generally and except that the remedies of specific
performance, injunction and other forms of equitable relief
are subject to certain tests of equity jurisdiction,
equitable defenses and the discretion of the court before
which any proceeding therefor may be brought. The execution
and delivery of this Agreement by Buyer does not, and the
consummation of the transactions contemplated hereby will
not, (i) require the consent, approval or authorization of,
or declaration, filing or registration with, any
governmental or regulatory authority or any third party,
(ii) result in the breach of any term or provision of, or
constitute a default under, or result in the acceleration of
or entitle any party to accelerate (whether after the giving
of notice or the lapse of time or both) any obligation
under, or result in the creation or imposition of any lien,
charge, pledge, security interest or other encumbrance upon
any part of the property of Buyer pursuant to any provision
of any order, judgment, arbitration award, injunction,
decree, indenture, mortgage, lease, license, lien, or other
agreement or instrument to which Buyer is a party or by
which it is bound, and (iii) violate or conflict with any
provision of the by-laws or certificate of incorporation of
Buyer as amended to the date of this Agreement.
4. OTHER COVENANTS AND AGREEMENTS.
4.1 INDEMNIFICATION BY SELLER. Upon the terms and
subject to the conditions set forth in Section 4.3 hereof
and this Section 4.1, Seller agrees to indemnify and hold
Buyer harmless against, and will reimburse Buyer on demand
for, any payment, loss, cost or expense (including
reasonable attorney's fees and reasonable costs of
investigation incurred in defending against such payment,
loss, cost or expense or claim therefor) made or incurred by
or asserted against Buyer at any time after the Closing Date
in respect of:
4.1.1 any and all liabilities or obligations of
Seller, or claims against or imposed on Buyer, of any
nature (whether accrued, absolute, contingent or
otherwise and whether a contractual, tax or other type
of liability, obligation or claim) not assumed by Buyer
pursuant to this Agreement;
4.1.2 any and all damage or deficiency resulting
from any omission, misrepresentation, breach of
warranty, or nonfulfillment of any term, provision,
covenant or agreement on the part of Seller contained
in this Agreement, or from any misrepresentation in, or
omission from, any certificate or other instrument
furnished or to be furnished to Buyer pursuant to this
Agreement;
<PAGE>
4.1.3 any and all liabilities, obligations,
claims, damage or deficiency arising out of or related
to Seller's failure to comply with the bulk transfer
provisions in effect in the state or states in which
the Assets are located; and
4.1.4 to the extent, if any, not covered by
the foregoing, any claim which may now exist or may
heretofore arise out of any agreement, written or oral,
or any negotiation or discussion heretofore occurring
by any officer, director, agent or employee of Seller
with any representative of ErgoBilt, Inc. relating to
the potential sale of any rights or products owned by
Seller.
4.2 INDEMNIFICATION BY BUYER. Upon the terms and
subject to the conditions set forth in Section 4.3 hereof
and this Section 4.2, Buyer agrees to indemnify and hold
Seller harmless against, and will reimburse Seller on demand
for, any payment, loss, cost or expense (including
reasonable attorney's fees and reasonable costs of
investigation incurred in defending against such payment,
loss, cost or expense or claim therefor) made or incurred by
or asserted against Seller at any time after the Closing
Date in respect of any omission, misrepresentation, breach
of warranty, or nonfulfillment of any term, provision,
covenant or agreement on the part of Buyer contained in this
Agreement, or from any misrepresentation in, or omission
from, any certificate or other instrument furnished or to be
furnished to Seller pursuant to this Agreement.
4.3 CONDITIONS OF INDEMNIFICATION. With respect to
any actual or potential claim, any written demand, the
commencement of any action, or the occurrence of any other
event which involves any matter or related series of matters
(a "Claim") against which a party hereto is indemnified (the
"Indemnified Party") by the other party (the "Indemnifying
Party") under Section 4.1 or 4.2 hereof:
4.3.1 Promptly after the Indemnified Party first
receives written documents pertaining to the Claim, or
if such Claim does not involve a third party Claim (a
"Third Party Claim"), promptly after the Indemnified
Party first has actual knowledge of such Claim, the
Indemnified Party shall give notice to the Indemnifying
Party of such Claim in reasonable detail and stating
the amount involved, if know, together with copies of
any such written documents.
4.3.2 The Indemnifying Party shall have no
obligation to indemnify the Indemnified Party with
respect to any Claim if (i) the Indemnified Party fails
to give the notice with respect thereto in accordance
with Section 4.3.1 hereof, or (ii) the notice with
respect thereto is not given on or before the fifth
anniversary of the Closing Date.
<PAGE>
4.3.3 If the Claim involves a Third Party Claim, then
the Indemnifying Party shall have the right, at its sole
cost, expense and ultimate liability regardless of the
outcome, and through counsel of its choice (which counsel
shall be reasonably satisfactory to the Indemnified Party),
to litigate, defend, settle or otherwise attempt to resolve
such Third Party Claim; provided, however, that if in the
Indemnified Party's reasonable judgment a conflict of
interest may exist between the Indemnified Party and the
Indemnifying Party with respect to such Third Party Claim,
then the Indemnified Party shall be entitled to select
counsel of its own choosing, reasonably satisfactory to the
Indemnifying Party, in which event the Indemnifying Party
shall be obligated to pay the fees and expenses of such
counsel. Notwithstanding the preceding sentence, the
Indemnified Party may elect, at any time and at the
Indemnified Party's sole cost, expense and ultimate
liability, regardless of the outcome, and through counsel of
its choice, to litigate, defend, settle or otherwise attempt
to resolve such Third Party Claim. If the Indemnified Party
so elects (for reasons other than the Indemnifying Party's
failure or refusal to provide a defense to such Third Party
Claim), then the Indemnifying Party shall have no obligation
to indemnify the Indemnified Party with respect to such
Third Party Claim, but such disposition will be without
prejudice to any other right the Indemnified Party may have
to indemnification under Section 4.1 or 4.2 hereof,
regardless of the outcome of such Third Party Claim. If the
Indemnifying Party fails or refuses to provide a defense to
any Third Party Claim, then the Indemnified Party shall have
the right to undertake the defense, compromise or settlement
of such Third Party Claim, through counsel of its choice, on
behalf of and for the account and at the risk of the
Indemnifying Party, and the Indemnifying Party shall be
obligated to pay the costs, expenses and attorney's fees
incurred by the Indemnified Party in connection with such
Third Party Claim. In any event, Buyer and Seller shall
fully cooperate with each other and their respective counsel
in connection with any such litigation, defense, settlement
or other attempted resolution.
4.4. TAXES AND EXPENSES.
4.4.1 Seller hereby covenants and agrees to
assume and pay all taxes on the transfer to Buyer of
the Assets hereunder. Except as otherwise specifically
provided for in this Agreement, Seller shall be
responsible for and shall pay all costs, liabilities
and other obligations incurred by Seller in connection
with the performance of and compliance with all
transactions, agreements and conditions contained in
this Agreement to be performed or complied with by
Seller, including legal and accounting fees.
4.4.2 Except as otherwise specifically provided
for in this Agreement, Buyer will assume and pay all
costs, liabilities and other obligations incurred by
Buyer in connection with the performance of and
<PAGE>
compliance with all transactions, agreements and
conditions contained in this Agreement to be performed
or complied with by Buyer, including legal and
accounting fees.
4.5 NON-COMPETITION.
4.5.1 Upon the terms and subject to the
conditions set forth in this Section 4.5, Seller
covenants and agrees that, as a material consideration
running to Buyer for Buyer's payments hereunder, for a
period of five years from and after the Closing Date,
Seller will neither permit Seller's name to be used by
nor engage in or carry on, directly or indirectly,
either for itself or as a member of a partnership or as
a stockholder, investor, agent, associate or consultant
of any person, partnership or corporation (other than
Buyer or a subsidiary or affiliate of Buyer), any
business in competition with the business as carried on
by Seller or any of its subsidiaries or affiliates on
the Closing Date, but only for as long as such like
business is carried on by (i) Buyer or any subsidiary
or affiliate of Buyer, or (ii) any person, corporation,
partnership, trust or other organization or entity
deriving title from Buyer to the assets and goodwill of
the business being carried on by Seller or any of its
subsidiaries or affiliates on the Closing Date, in any
county in which Buyer or any subsidiary or affiliate of
Buyer conducts business, or in any other county in any
state of the United States, or in any country or
political subdivision of the world. The parties intend
that the covenants contained in this Section 4.5.1
shall be deemed to be a series of separate covenants,
one for each county in each state of the United States
and for each country and political subdivision of the
world and, except for geographic coverage, each such
separate covenant shall be identical in terms to the
covenant contained in this Section 4.5.1. Seller
further covenants and agrees that for a period of five
years from and after the Closing Date Seller will not
recruit, hire, assist others in recruiting or hiring,
discuss employment with, or refer to others concerning
employment, any person who is, or within the twelve-
month period immediately prior to the Closing Date was,
an employee of Seller, Buyer or a subsidiary or
affiliate of either.
4.5.2 The term of the covenants contained in
Section 4.5.1 hereof shall be tolled for the period
commencing on the date any successful action is filed
for injunctive relief or damages arising out of a
breach by Seller of Section 4.5.1 hereof and ending
upon final adjudication (including appeals) of such
action.
4.5.3 If, in any judicial proceeding, the court
shall refuse to enforce all of the separate covenants
contained in Section 4.5.1 hereof because the time
limit is too long, it is expressly understood and
agreed between the parties hereto that for purposes of
such proceeding such time limitation shall be deemed
reduced to the extent necessary to permit enforcement
of such covenants. If, in any judicial proceeding, the
court shall refuse to <PAGE> enforce all of the separate
covenants contained in Section 4.5.1 hereof because it
is more extensive (whether as to geographic area, scope
of business or otherwise) than necessary to protect the
business and goodwill of Buyer, it is expressly
understood and agreed between the parties hereto that
for purposes of such proceeding the geographic area,
scope of business or other aspect shall be deemed
reduced to the extent necessary to permit enforcement
of such covenants.
4.5.4 Seller acknowledges that a breach of
Section 4.5.1 hereof would cause irreparable damage to
Buyer, and in the event of Seller's actual or
threatened breach of the provisions of Section 4.5.1
hereof, Buyer shall be entitled to a temporary
restraining order and an injunction restraining Seller
from breaching such covenants without the necessity of
posting bond or proving irreparable harm, such being
conclusively admitted by Seller. Nothing shall be
construed as prohibiting Buyer from pursuing any other
available remedies for such breach or threatened
breach, including the recovery of damages from Seller.
Seller acknowledges that the restrictions set forth in
this Agreement are reasonable in scope and duration,
given the nature of the business of Buyer.
4.6 ABSENCE OF REGISTRATION RIGHTS.
4.6.1 Certain Definitions. As used in this
Section 4.6, the following shall have the following
respective meanings:
"Buyer Shares" shall mean the shares of Common
Stock issued by Buyer pursuant to Section 1.2 of this
Agreement and any other securities that may be issued
by Buyer, or any successor of Buyer, as a distribution
upon or in exchange for such shares or any such other
securities.
"Commission" shall mean the Securities and
Exchange Commission, or any other federal agency at the
time administering the Securities Act.
"Holder" shall mean any person who is the owner of
record of any of the Buyer Shares.
"Securities Act" shall mean the Securities Act of
1933 or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the
same shall be in effect at the time.
"Transfer" shall mean any sale or other
disposition of any Buyer Shares which would constitute
a sale thereof under the Securities Act.
4.6.2 Restrictive Legend. Each certificate
representing any Buyer Shares and, except as otherwise
provided in Section 4.6.3 hereof, each certificate
issued upon exchange or transfer of any Buyer Shares
(whether <PAGE> or not such exchange or transfer shall
constitute a Transfer) shall be stamped or otherwise
imprinted with a legend substantially in the following
form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER ANY SECURITIES LAWS AND MAY ONLY BE
SOLD IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS.
IN PARTICULAR, THE SHARES EVIDENCED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF (1) UNLESS A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
WITH RESPECT TO SUCH SHARES SHALL THEN BE IN EFFECT OR
UNLESS THE COMPANY SHALL HAVE RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT ANY PROPOSED
TRANSFER OR DISPOSITION OF SUCH SHARES IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND (2) EXCEPT IN ACCORDANCE WITH THE ASSET
PURCHASE AGREEMENT DATED OCTOBER , 1997 BETWEEN THE
COMPANY AND FLOATING ARMS, INC., A COPY OF WHICH IS ON
FILE WITH THE COMPANY AT ITS PRINCIPAL OFFICE."
4.6.3 Notice of Proposed Transfer. Prior to any
proposed Transfer of any Buyer Shares, the Holder
thereof shall give written notice to Buyer of the
intention to effect such Transfer. Each such notice
shall describe the manner of the proposed Transfer and
shall be accompanied by an opinion of counsel
satisfactory to Buyer to the effect that the proposed
transfer of the Buyer Shares may be effected without
registration under the Securities Act and under
applicable state securities or blue sky laws. Upon
confirmation that such opinion is satisfactory to
Buyer, the Holder of such Buyer Shares shall be
entitled to transfer such Buyer Shares in accordance
with the terms of its notice. Each certificate for
Buyer Shares transferred as above provided shall bear
the legend set forth in Section 4.6.2 hereof except
that such certificate shall not bear such legend if (i)
such Transfer is in accordance the provisions of Rule
144 (or any other rule permitting public sale without
registration under the Securities Act) or (ii) the
opinion of counsel referred to above is to the further
effect that the transferee and any subsequent
transferee (other than an affiliate of Buyer) would be
entitled to Transfer such securities in a public sale
without registration under the Securities Act. Buyer
acknowledges that Seller may, by liquidation or other
means, distribute the Buyers Shares to its
shareholders. Buyer will not object to such
transaction so long as it is done in accordance with
the provisions hereof and does not violate any federal
or state securities laws, rule and regulations.
<PAGE>
4.6.4 Lack of Required Registration. Buyer is
under no obligation to file or provide any registration
of the Buyer Shares under any Federal or State laws,
including but not limited to the Securities Act,
provided however that:
(a) Incidental Registration. If Buyer
determines that it will file a Registration
Statement, at any time after the Closing Date but
before the third anniversary of the Closing Date,
for any public offering of securities of the same
class as Buyers Shares, either for its own account
or the account of any security holder, Buyer shall
give written notice to each Holder, at least
thirty (30) days in advance of filing such
Registration Statement, that such filing is
expected to be made. Upon the written request of
any Holder received by Buyer at least fifteen (15)
days in advance of the filing, and subject to the
limitation set forth in this Section 4.8.4, Buyer
shall include in such Registration Statement Buyer
Shares specified in the Holder's request for the
purpose of registering those Buyer Shares for sale
by or for the account of such Holder. Buyer shall
have exclusive control over the filing, amending,
withdrawal and other actions regarding such
Registration Statement. Buyer shall have no
obligation to give notice to any Holder with
respect to the filing of, or to include any Buyers
Shares for any Holder in, any registration
statement on Form S-4 or Form S-8 or on any other
form that does not include substantially the same
information or is not in substantially the same
format as would be required for a Registration
Statement for a sale of Buyer Shares by a Holder.
(b) If the securities to be sold by Buyer
pursuant to a registration statement described in
Section 4.6.4(a) hereof, or if none are to be sold
by Buyer then if the majority of the securities to
be sold by others pursuant to any such
registration statement, are to be sold in any
underwritten public offering, the right of any
Holder to have Buyers Shares included in the same
Registration Statement shall be conditioned upon
the inclusion of such Holder's Buyer Shares in the
same underwriting. Buyer, all Holders and all
other security holders proposing to sell
securities in such underwriting shall enter into
an underwriting agreement in customary form with
the underwriter or underwriters selected by Buyer.
Notwithstanding any of the provisions of this
Section 4.8.4, if the managing underwriter
determines that marketing factors require a
limitation of the number of securities to be
included in the underwriting or should not include
the Buyers Shares then held by any Holder thereof,
or any portion thereof, the managing underwriter
may limit the number of Buyers Shares to be
included in the underwriting for all or any
specific Holder to any number which it shall
approve. Buyer shall advise all Holders who shall
have requested inclusion of their Buyer Shares
that may be included for all Holders and any
<PAGE>
limitation apply to any specific Holder any such
aggregate number shall be allocated among all such
Holders not specifically excluded from such
offering in proportion, as nearly as practical, to
the number of Buyers Shares for which each Holder
requested registration. No Buyers Shares excluded
from an underwriting by reason of such marketing
limitation shall be included in the Registration
Statement. If any Holder disapproves of the terms
of the underwriting, he may elect to withdraw his
Buyers Shares by giving written notice to Buyer
and the managing underwriter. After receiving any
such notice, Buyer shall withdraw those Buyers
Shares from the Registration Statement. If a
withdrawal of Buyers Shares or any withdrawal of
other securities (except a complete withdrawal of
all securities that were to be sold by Buyer, in
which case Buyer may withdraw the Registration
Statement in its entirety) makes it possible, with
the marketing limitation set by the managing
underwriter and Buyer, to include in the
underwriting a greater number of Buyers Shares
held by other Holders participating in such
underwriting, then to the extent practical,
without delaying the underwriting, Buyer shall
offer to all Holders who then have Buyers Shares
included in the underwriting an opportunity to
include additional Buyer Shares in the proportion
previously described in this Section 4.6.4(B). No
Holder shall have any claim for damages or other
relief against Buyer or any underwriter as a
result of exclusion of it from such registration
or reduction of its Shares included therein.
4.6.5 State Securities or Blue Sky Laws. In
connection with any registration under the Securities
act of any sale of Buyer Shares by or for the account
of any Holder pursuant to Section 4.6.4 hereof, Buyer
shall file on a timely basis appropriate applications
or other instruments to register, qualify or obtain
exemptions for the sale under such state securities or
blue sky laws as the managing underwriter shall
reasonably specify or, if the sale is not to be an
underwritten public offering, such state securities or
blue sky laws as the Holder may reasonably request.
Buyer, however, shall have no obligation to file any
applications or other instruments in any jurisdiction
in which either (i) no such filing is required with
respect to the proposed sale of Buyers Shares by or for
the account of the Holder, in the opinion of qualified
counsel selected by Buyer, or (ii) Buyer would be
required to execute a general consent to service of
process, to register as a broker or dealer or to cause
any officer or employee of Buyer to register as a
dealer, broker, or salesman or in any similar capacity.
Buyer shall use its best efforts in good faith to
obtain and maintain for a reasonable period, up to six
(6) months, an effective registration, qualification or
exemption under the applications or other instruments
filed by Buyer pursuant to this Section 4.6.5.
<PAGE>
4.6.6 All expenses incurred in connection with
any Registration Statement filed or prepared for filing
pursuant to Section 4.6.4 hereof and in connection with
all related state securities or blue sky applications
or other instruments, including without limitation all
registration, filing and qualification fees, printing
expenses, fees and disbursements of counsel for Buyer
and fees and expenses of accountants incidental to such
Registration Statement, shall be borne by the Holders
whose Buyers Shares are included in such Registration
Statement when it becomes effective, or if such
Registration Statement does not become effective then
by all Holders who originally requested the filing of
such Registration Statement, in the proportion that the
number of Buyers Shares included of reach such Holder
bears to the total number of Buyers Shares and other
securities of the same class, if any, that are included
in such Registration Statement. All expenses incurred
in connection with any Registration Statement filed or
prepared for filing pursuant to section 4.6.4 hereof
and in connection with all related state securities or
blue sky applications or other instruments that would
not have been incurred if Buyers Shares of one or more
Holders had not been included in the Registration
Statement, as reasonably determined by Buyer, shall be
borne by each Holder whose Buyers Shares are included
in the Registration Statement when it becomes effective
in the proportion that the number of Buyers Shares
included for each Holder bears to the total number of
Buyers Shares included for all Holders.
Notwithstanding any other provision of this Section
4.6.6, each Holder shall be the entire amount of any
discount or commission allowed or paid to any
underwriter in connection with any sale of Buyers
Shares by or for the account of such Holder.
4.6.7 Indemnifications. In connection with
any Registration Statement filed pursuant to this
Section 4.6, Buyer shall indemnify and hold harmless
each Holder whose Buyers Shares are included in the
Registration Statement, each underwriter who may
purchase from or sell any Buyers Shares for any such
Holder and each person who controls any such Holder or
any such underwriter, within the meaning of the
Securities Act, from and against any and all losses,
claims, damages and liabilities caused by any untrue
statements or alleged untrue statement of a material
fact contained in the Registration Statement or nay
related state securities or blue sky applications or
other instruments or caused by any omission or alleged
omission to state in the Registration Statement or any
related stated securities or blue sky applications or
other instruments any material fact required to be
stated or necessary to make the statement which are
made not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any untrue
statement or alleged untrue statement or omission or
alleged omission based upon information furnished to
Buyer by such Holder, underwriter or controlling person
expressly for use in the Registration Statement or any
related state securities or blue sky applications or
other instruments. Each Holder whose Buyer Shares are
included in any Registration Statement filed pursuant
to this Section 4.6 <PAGE> shall indemnify Buyer, its
directors, each officer signing the Registration
Statement, each other person (including each other
Holder) whose securities are included in the
Registration Statement, each underwriter who may
purchase from or sell any securities for Buyer or any
other person pursuant to the Registration Statement and
each person, if any, who controls Buyer, any such other
person or any such underwriter, within the meaning of
the Securities Act, from and against any and all
losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement
or nay related state securities or blue sky
applications or other instruments or caused by any
omission or alleged omission to state in the
Registration Statement or any related state securities
or blue sky applications or other instruments any
material fact required to be stated or necessary to
make the statements which are made not misleading,
insofar as such losses, claims, damages or liabilities
are caused by any untrue statement or alleged untrue
statement or omission or alleged omission based upon
information furnished by the Holder from whom
indemnification is sought expressly for use in the
Registration Statement or any related state securities
or blue sky applications or other instruments. To the
extent the provisions contained in this Section 4.6 are
in conflict with any indemnification provisions that
are included in any underwriting agreement entered into
by Buyer and one or more Holders with one or more
underwriters in connection with any underwritten public
offering registered under any Registration Statement
filed pursuant to this Section 4.6, the provisions of
the underwriting agreement shall govern. The
indemnities provided for this Section 4.6.6 shall be
independent of an in addition to any other indemnity
provisions of this Agreement.
4.6.7 Miscellaneous
(a) Each Holder whose Buyers Shares are
included in any Registration Statement filed
pursuant to this Section 4.6 shall furnish to
Buyer such information regarding such Holder
and the sale proposed by such Holder as may
be required for inclusion in the Registration
Statement or any related state securities or
blue sky applications or other instruments,
as may be necessary to provide supplemental
information to the Commission, the National
Association of Securities Dealers, Inc. or
any administrator of any state securities or
blue sky law, or as Buyer or any underwriter
may reasonably request.
(b) The registration rights granted in
this Section 4.6 are not assignable, in whole
or in part, without the prior written consent
of Buyer, except such rights shall transfer
with the ownership of Buyers Shares to the
shareholders of Seller.
<PAGE>
(c) As a condition to having Buyers
Shares included in any Registration Statement
filed pursuant to this Section 4.6, each
Holder may be required to agree, in a manner
acceptable to Buyer, that in selling Buyers
Shares, the Holder will comply with all
applicable laws and regulations including,
but not limited to, Rules 10b-2, 10b-6 and
10b-7 promulgated under the Securities
Exchange Act of 1934.
4.6.8 Obligation of Seller to file Schedule(s)
and Reports. Seller shall be obligated to make all
reports and filing of schedules under federal and/or
state laws, rules and regulations relating to its
acquisition and ownership of the Buyers Shares.
4.7 OFFSETS AND CREDITS AGAINST ADDITIONAL PAYMENTS.
In the event that Seller has not performed or is not
performing its obligations under this Agreement or any
agreement or document executed pursuant hereto or in the
event that the failure of any representation, warranty or
covenant made by Seller to Buyer in accordance with this
Agreement results in any damage or loss to Buyer for which
Buyer would be entitled to recover under this Agreement,
Buyer shall give written notice of same to Seller and shall
be entitled to withhold payment of any Additional Payments.
If Seller has not corrected or remedied such failure of
performance, representation, warranty or covenant within 30
days (ten days for failure to make the payment, if any,
referred to in the Guaranty) following receipt of such
notice, then Seller acknowledges that Buyer shall be
entitled to an offset and credit against any Additional
Payments, in the order of their maturity, equal to the
amount of such payment or the value of such claim of
obligation, damage or loss.
4.8 BEST EFFORTS. Seller agrees to use its best
efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, including,
without limitation, obtaining all authorizations, consents,
waivers and approvals as may be required in connection with
the assignment of those contracts, agreements, licenses,
leases, sales orders, purchase orders and other commitments
to be assumed by Buyer pursuant to this Agreement.
4.9 EXECUTION OF ADDITIONAL DOCUMENTS. Each party
hereto will at any time, and from time to time after the
Closing Date, upon request of the other party hereto,
execute, acknowledge and deliver all such further deeds,
assignments, transfers, conveyances, powers of attorney and
assurances, and take all such further action, as may be
required to carry out the intent of this Agreement, and to
transfer and vest title to any Asset being transferred
hereunder, and to protect the right, title and interest in
and enjoyment of all of the Assets sold, granted, <PAGE> assigned,
transferred, delivered and conveyed pursuant to this
Agreement; provided, however, that this Agreement shall be
effective regardless of whether any such additional
documents are executed. It is understood and acknowledged
by the parties hereto that Seller's Board of Directors has
approved the transaction contemplated hereunder and is
seeking the approval by a vote of its shareholders approving
the contemplated hereunder by the majority vote required by
law. Seller shall obtain such approval and delivery
evidence thereof in form acceptable to Seller prior to
Seller delivering Buyers Shares to Seller.
4.10 FEES AND EXPENSES. All costs and expenses
incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
4.11 CHANGE OF CORPORATE NAME. Within thirty (30)
days of the Closing Date, Seller shall change its corporate
name so as not to include the words "Floating" or "Arms"
therein.
5. CONDITIONS OF CLOSING.
5.1 BUYER'S CONDITIONS OF CLOSING. The obligation of
Buyer to purchase and pay for the Assets and to assume the
liabilities and obligations set forth herein shall be
subject to and conditioned upon the satisfaction at the
Closing of each of the following conditions:
5.1.1 All representations and warranties of
Seller contained in this Agreement and the Schedules
hereto shall be true and correct at and as of the
Closing Date and Seller shall have performed all
agreements and covenants and satisfied all conditions
on its part to be performed or satisfied by the Closing
Date pursuant to the terms of this Agreement, and Buyer
shall have received a certificate of an authorized
officer of Seller dated the Closing Date to such
effect.
5.1.2 There shall have been no material adverse
change since the date of the Balance Sheet in the
financial condition, business or affairs of Seller, and
Seller shall not have suffered any material loss
(whether or not insured) by reason of physical damage
caused by fire, earthquake, accident or other calamity
which substantially affects the value of its assets,
properties or business, and Buyer shall have received a
certificate of the principal financial officer of
Seller dated the Closing Date to such effect.
5.1.3 Seller shall have delivered to Buyer a
Certificate of the Secretary of State (or other
authorized public official) of Seller's jurisdiction of
incorporation certifying as of a date reasonably close
to the Closing Date that Seller has filed all required
reports, paid all required fees and taxes, and is, as
of such date, in good standing and authorized to
transact business as a domestic corporation.
<PAGE>
5.1.4 Seller shall have obtained all
authorizations, consents, waivers and approvals as may
be required in connection with the assignment of those
contracts, agreements, licenses, leases, sales orders,
purchase orders and other commitments to be assigned to
Buyer pursuant to this Agreement.
5.1.5 Seller shall have executed and delivered
the Bill of Sale, Assignment and Assumption Agreement
to Buyer.
5.1.6 Seller shall have delivered to Buyer a
certificate of its corporate Secretary certifying:
(a) Resolutions of its stockholders and
Board of Directors authorizing execution of this
Agreement and the execution, performance and
delivery of all agreements, documents and
transactions contemplated hereby; and
(b) The incumbency of its officers executing
this Agreement and all agreements and documents
contemplated hereby.
5.1.7 Neither any investigation of Seller by
Buyer, nor the Schedules attached hereto or any
supplement thereto nor any other document delivered to
Buyer as contemplated by this Agreement, shall have
revealed any facts or circumstances which, in the sole
and exclusive judgment of Buyer and regardless of the
cause thereof, reflect in an adverse way on Seller or
its financial condition, assets, liabilities (absolute,
accrued, contingent or otherwise), reserves, business,
operations or prospects.
5.1.8 The approval and all consents from third
parties and governmental agencies required to
consummate the transactions contemplated hereby shall
have been obtained.
5.1.9 No suit, action, investigation, inquiry or
other proceeding by any governmental body or other
person or legal or administrative proceeding shall have
been instituted or threatened which questions the
validity or legality of the transactions contemplated
hereby.
5.1.10 As of the Closing, there shall be no
effective injunction, writ, preliminary restraining
order or any order of any nature issued by a court of
competent jurisdiction directing that the transactions
provided for herein or any of them not be consummated
as so provided or imposing any conditions on the
consummation of the transactions contemplated hereby,
which is unduly burdensome on Buyer.
<PAGE>
5.1.11 Cathy O'Brien shall have entered into an
agreement with Buyer relating to her employment by
Buyer and for settlement of accrued employment benefits
due her by Seller, on terms and conditions acceptable
to Buyer.
5.2 SELLER'S CONDITIONS OF CLOSING. The obligation of
Seller to sell, grant, convey, assign, transfer and deliver
the Assets shall be subject to and conditioned upon the
satisfaction at the Closing of each of the following
conditions:
5.2.1 All representations and warranties of Buyer
contained in this Agreement shall be true and correct
at and as of the Closing Date and Buyer shall have
performed all agreements and covenants and satisfied
all conditions on its part to be performed or satisfied
by the Closing Date pursuant to the terms of this
Agreement, and Seller shall have received a certificate
of Buyer dated the Closing Date to such effect.
5.2.2 Buyer shall have executed and delivered the
Bill of Sale, Assignment and Assumption Agreement to
Seller.
5.2.3 Buyer shall have delivered to Seller a
certificate of its corporate Secretary certifying:
(a) resolutions of its Board of Directors
authorizing execution of this Agreement and the
execution, performance and delivery of all
agreements, documents and transactions
contemplated hereby; and
(b) the incumbency of its officers executing
this Agreement and all agreements and documents
contemplated hereby.
5.2.4 The approval and all consents from third
parties and governmental agencies required to
consummate the transactions contemplated hereby shall
have been obtained.
5.2.5 No suit, action, investigation, inquiry or
other proceeding by any governmental body or other
person or legal or administrative proceeding shall have
been instituted or threatened which questions the
validity or legality of the transactions contemplated
hereby.
5.2.6 As of the Closing, there shall be no
effective injunction, writ, preliminary restraining
order or any order of any nature issued by a court of
competent jurisdiction directing that the transactions
provided for herein or any of them not be consummated
as so provided or imposing any conditions on the
consummation of the transactions contemplated hereby,
which is unduly burdensome on Seller.
<PAGE>
6. MISCELLANEOUS.
6.1 NOTICES. Any notice, consent, approval, request,
demand or other communication required or permitted
hereunder must be in writing to be effective and shall be
deemed delivered and received (i) if personally delivered or
if delivered by telex or telecopy with electronic
confirmation when actually received by the party to whom
sent, or (ii) if delivered by mail (whether actually
received or not), at the close of business on the third
business day next following the day when placed in the
federal mail, postage prepaid, certified or registered mail,
return receipt requested, addressed as follows:
If to Buyer:
Cramer, Inc.
626 Adams Street
Kansas City, KS 66105
Copy to:
Phillip A. Kusnetzky, Esq.
McDowell, Rice, Smith & Gaar, P.C.
605 W. 47th Street, Suite 350
Kansas City, MO 64112
If to Seller:
Floating Arms, Inc.
6381 Osgood Avenue North
Stillwater, MN 55082
Copy to:
Terry Cullen, Esq.
Felhaber, Larson, Fenlon & Vogt
2100 Minnesota World Trade Center
St. Paul, MN
(or to such other address as any party shall specify by
written notice so given).
6.2 BINDING EFFECT; BENEFITS. This Agreement shall be
binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties
hereto or their respective successors and assigns any
rights, remedies, obligations or liabilities under or by
reason of this Agreement.
<PAGE>
6.3 ENTIRE AGREEMENT. This Agreement, together with
the Exhibits, Schedules and other documents contemplated
hereby, constitute the final written expression of all of
the agreements between the parties, and is a complete and
exclusive statement of those terms. It supersedes all
understandings and negotiations concerning the matters
specified herein. Any representations, promises, warranties
or statements made by any party that differ in any way from
the terms of this written Agreement, and the Exhibits,
Schedules and other documents contemplated hereby, shall be
given no force or effect. The parties specifically
represent, each to the other, that there are no additional
or supplemental agreements between them related in any way
to the matters herein contained unless specifically included
or referred to herein. No addition to or modification of
any provision of this Agreement shall be binding upon any
party unless made in writing and signed by all parties.
6.4 GOVERNING LAW. THIS AGREEMENT, AND ALL QUESTIONS
RELATING TO ITS VALIDITY, INTERPRETATION, PERFORMANCE AND
ENFORCEMENT (INCLUDING, WITHOUT LIMITATION, PROVISIONS
CONCERNING LIMITATIONS OF ACTION), SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF KANSAS
(EXCLUSIVE OF THE CONFLICT OF LAW PROVISIONS THEREOF)
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
WITHIN SUCH STATE.
6.5 SURVIVAL. All of the terms, conditions,
covenants, agreements, warranties and representations
contained in this Agreement shall survive, in accordance
with their terms, delivery by Buyer of the consideration to
be given by it hereunder and delivery by Sellers of the
consideration to be given by them hereunder, and shall
survive the execution hereof and the Closing hereunder.
6.6 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same
instrument; but in making proof of this Agreement, it shall
not be necessary to produce or account for more than one
such counterpart. It is not necessary that each party
hereto execute the same counterpart, so long as identical
counterparts are executed by all parties.
6.7 HEADINGS. Headings of the Sections of this
Agreement are for the convenience of the parties only, and
shall be given no substantive or interpretive effect
whatsoever.
6.8 WAIVERS. Any party hereto may, by written notice
to the other party hereto, (i) extend the time for the
performance of any of the obligations or other actions of
the other party under this Agreement; (ii) waive any
inaccuracies in the representations or warranties of the
other party contained in this Agreement or in any document
delivered pursuant to this Agreement; (iii) waive compliance
with any of the conditions or covenants of the other party
contained in this Agreement; <PAGE> or (iv) waive performance of
any of the obligations of the other party under this
Agreement. Except as provided in the preceding sentence, no
action taken pursuant to this Agreement, including without
limitation any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations,
warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of
any provision hereunder shall not operate or be construed as
a waiver of any prior or subsequent breach of the same or
any other provision hereunder.
6.9 MERGER OF DOCUMENTS. This Agreement and all
agreements and documents contemplated hereby constitute one
agreement and are interdependent upon each other in all
respects.
6.10 INCORPORATION OF EXHIBITS AND SCHEDULES. All
Exhibits and Schedules attached hereto are by this reference
incorporated herein and made a part hereof for all purposes
as if fully set forth herein.
6.11 SEVERABILITY. If for any reason whatsoever, any
one or more of the provisions of this Agreement shall be
held or deemed to be illegal, inoperative, unenforceable or
invalid as applied to any particular case or in all cases,
such circumstances shall not have the effect of rendering
such provision illegal, inoperative, unenforceable or
invalid in any other case or of rendering any of the other
provisions of this Agreement illegal, inoperative,
unenforceable or invalid. Furthermore, in lieu of each
illegal, invalid, unenforceable or inoperative provision,
there shall be added automatically, as part of this
Agreement, a provision similar in terms of such illegal,
invalid, unenforceable or inoperative provision as may be
possible and as shall be legal, valid, enforceable and
operative.
6.12 ASSIGNABILITY. Neither this Agreement nor any of
the parties' rights hereunder shall be assignable by any
party hereto without the prior written consent of the other
parties hereto; provided, however, that Buyer's, or its
successors' or assigns', rights hereunder may be assigned or
otherwise transferred, in whole or in part, without Sellers'
consent (i) to any successor by merger or consolidation,
(ii) to any bank or other financial institution, or to any
individual, partnership, corporation or other entity,
providing any financing to Buyer, its successors or assigns,
or (iii) to any individual, partnership, corporation or
other entity deriving title from Buyer or its successors or
assigns to all or substantially all of the Assets as
constituted on the date of any such transfer.
6.13 DRAFTING. The parties acknowledge and confirm
that each of their respective attorneys have participated
jointly in the review and revision of this Agreement and
that it has not been written solely by counsel for one
party. The parties hereto therefore stipulate and agree
that the rule of construction to the effect that any
ambiguities are to be or may be resolved against the
drafting party shall not be employed in the interpretation
of this Agreement to favor any party against another.
<PAGE>
6.14 REFERENCES. The use of the words "hereof,"
"herein," "hereunder," and words of similar import shall
refer to this entire Agreement, and not to any particular
article, section, subsection, clause, or paragraph of this
Agreement, unless the context clearly indicates otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement
and caused the same to be duly delivered on their behalf on the
day and year hereinabove first set forth.
SELLER:
FLOATING ARMS, INC.
By: /s/ Cahty Mishek O'Brien
Printed Name: Cathy Mishek O'Brien
Title: President/CEO
BUYER:
CRAMER, INC.
By: /s/ James R. Zicarelli
Printed Name: James R. Zicarelli
Title: CEO
<PAGE>
A S S I G N M E N T
WHEREAS, WORKPLACE DESIGNS, INC., a corporation of the State
of Minnesota, having its principal place of business at 6381
Osgood Avenue North, Stillwater, Minnesota 55082, is the sole and
exclusive owner of record, by assignment, of U.S. Patent
No. 5,311,210, issued May 10, 1994, which assignment was duly
recorded on February 22, 1994, at Reel 6869, Frame 0680-0682 in
the U.S. Patent and Trademark Office; and
WHEREAS, on October 31, 1997, WORKPLACE DESIGNS, INC. has
changed its corporate name to FLOATING ARMS, INC., as reflected
by the document attached hereto as Exhibit A; and
WHEREAS, CRAMER, INC., a Minnesota corporation, having its
principal office located at 625 Adams Street, Kansas City, Kansas
66105, is desirous of acquiring the right, title and interest in,
to and under the said Letters Patent and the inventions covered
thereby, and FLOATING ARMS, INC. has agreed to transfer the said
patent and the inventions covered thereby.
NOW, THEREFORE, Be It Known that for and in consideration of
the sum of One Dollar ($1.00) to it in hand paid by said CRAMER,
INC. and for other good and valuable consideration, the receipt
of all of which is hereby acknowledged, FLOATING ARMS, INC. has
sold, assigned and transferred, and does hereby sell, assign and
transfer unto said CRAMER, INC. the said inventions and U.S.
Patent 5,311,210, issued May 10, 1994, and any reissue or
reissues of said Letters Patent already granted and which may be
granted on said applications for United States Letters Patent,
the same to be held and enjoyed by CRAMER, INC. for its own use
and enjoyment, and for the use and enjoyment of its successors,
assigns or other legal representatives, to the end of the term or
terms for which said Letters Patent are granted or reissued as
fully and entirely as the same would have been held and enjoyed
by FLOATING ARMS, INC., if this assignment and sale had not been
made; together with all claims for damages by reason of past
infringement of said Letters Patent, with the right to sue for,
and collect the same for their own use and behoof, and for the
use and behoof of its successors, assigns or other legal
representatives.
<PAGE>
FLOATING ARMS, INC. hereby covenants that it has full right
to convey the entire right, title and interest herein assigned,
and that it has not executed, and will not execute, any
agreements in conflict herewith.
Signed at Rotherwood, Minneapolis, Minnesota, this 31st day
of October, 1997.
FLOATING ARMS, INC.
By: /s/ Cathy M. O'Brien
Its: President/CEO
STATE OF MINNESOTA )
) ss.
COUNTY OF )
On this 31st day of October, 1997, personally appeared Cathy
O'Brien, to me known and known to me to be the President/CEO of
FLOATING ARMS, INC., and acknowledged that she executed the
foregoing instrument on behalf of FLOATING ARMS, INC. and
pursuant to authority duly received.
______________________________
Notary Public
(Seal)
<PAGE>
A S S I G N M E N T
WHEREAS, WORKPLACE DESIGNS, INC., a corporation organized
and existing under the laws of the State of Minnesota, and having
its principal office located at 6381 Osgood Avenue North,
Stillwater, Minnesota 55082, is the owner of record, by
assignment, of that certain invention disclosed and claimed in
the application for United States Design Letters Patent entitled
"CHAIR-MOUNTED MOUSE PAD ASSEMBLY", filed in the United States
Patent and Trademark Office on March 25, 1997, as Serial
No. 29/069,290, which assignment was duly recorded on March 25,
1997, at Reel 8532, Frame 0868 in the U.S. Patent and Trademark
Office; and
WHEREAS, on October 31, 1997, WORKPLACE DESIGNS, INC. has
changed its corporate name to FLOATING ARMS, INC., as reflected
by the document attached hereto as Exhibit A; and
WHEREAS, CRAMER, INC., a corporation organized and existing
under the laws of the State of Kansas, and having its principal
office located at 625 Adams Street, Kansas City, Kansas 66105 is
desirous of acquiring the entire right, title and interest in and
to said design and in and to any Design Letters Patent that may
be granted therefor in the United States and in any and all
foreign countries.
NOW, THEREFORE, Be It Known that for and in consideration of
the sum of One Dollar ($1.00) to it in hand paid by said CRAMER,
INC., and for other good and valuable consideration, the receipt
of all of which is hereby acknowledged, FLOATING ARMS, INC., has
sold, assigned and transferred, and does hereby sell, assign and
transfer unto said CRAMER, INC., the full and exclusive right to
the said design in the United States and its territorial
possessions and in all foreign countries and the entire right,
title and interest in and to any and all Design Letters Patent
which may be granted therefor in the United States and its
territorial possessions and in any and all foreign countries and
in and to any and all divisions, reissues, continuations and
extensions thereof.
<PAGE>
FLOATING ARMS, INC. hereby authorizes and requests the
Patent Office officials in the United States and any and all
foreign countries to issue any and all of said Design Letters
Patent, when granted, to said CRAMER, INC., as the assignee of
its entire right, title and interest in and to the same, for the
sole use and behoof of said CRAMER, INC., its successors and
assigns.
Signed at Stillwater, Minnesota, this 31st day of October,
1997.
FLOATING ARMS, INC.
By: /s/ Cathy M. O'Brien
Its: President/CEO
STATE OF MINNESOTA )
) ss.
COUNTY OF )
On this 31st day of October, 1997, before me, a Notary
Public for and within the County aforesaid, personally appeared
Cathy O'Brien, to me known, and known to me to be the
President/CEO of FLOATING ARMS, INC., and acknowledged that she
executed the foregoing instrument on behalf of FLOATING ARMS,
INC. and pursuant to authority duly received.
______________________________
Notary Public
(Seal)
<PAGE>
WHEREAS, Cramer, Inc. (the "Company") has, through its
management, negotiated to acquire certain assets, specifically
including patents and trademarks from Floating Arms, Inc.
relating to ergonomic keyboards and related items and an Asset
Purchase Agreement with respect to same has been written, and
WHEREAS, this Board of Directors has reviewed with
management the terms and conditions of said Agreement and
believes it is in the best interests of the Company and its
shareholders to enter in said Agreement.
NOW THEREFORE BE IT RESOLVED, that Cramer, Inc. enter into a
certain Asset Purchase Agreement by and between it and Floating
Arms, Inc. in substantially the form attached hereto identified
as Exhibit 1 and that the officers of the Company are authorized
and directed to execute and deliver said Agreement on behalf of
the Company and take all steps necessary for the closing of the
transaction contemplated therein.
Telephonic Board Meeting
10/30/97
Approval By:
David Crandall
James Workman
James Zicarelli
The entire Board of Directors of Cramer, Inc.
<PAGE>
<TABLE>
Floating Arms, Inc.
A/R AGING SUMMARY
As of October 31, 1997
<CAPTION>
Current 1-30 1-60 61-90 >90 TOTAL
<S> <C> <C> <C> <C> <C> <C>
Anodyne, Inc. 75.00 0.00 0.00 0.00 0.00 75.00
Beth Leible 0.00 0.00 0.00 0.00 -499.00 -499.00
Bethany Stancliff 0.00 25.00 0.00 0.00 0.00 25.00
Bidlo Associates 0.00 0.00 0.00 0.00 315.00 315.00
Chris McMurry 0.00 0.00 0.00 0.00 0.00 0.00
Christopher McGuire 0.00 0.00 0.00 0.00 0.00 0.00
Deluxe Corporation 0.00 424.94 0.00 0.00 0.00 424.94
Eckberg Lammers
Briggs Wolff &
Vierling 866.91 0.00 0.00 0.00 0.00 866.91
ElectraDisplay 0.00 108.00 0.00 0.00 0.00 108.00
Ergonomically
Correct 0.00 102.00 0.00 0.00 0.00 102.00
Floating Arms,
Inc. 0.00 0.00 0.00 0.00 -519.00 -519.00
GE Capital/IT
Solutions 0.00 0.00 0.00 0.00 -46.00 -46.00
Hewlett Packard
Hewlett Packard
Oregon 0.00 0.00 0.00 0.00 0.00 0.00
Total Hewlett
Packard 0.00 0.00 0.00 0.00 0.00 0.00
Katherin
Kirkpatrick 0.00 0.00 0.00 0.00 0.00 0.00
Linda Davis 0.00 0.00 0.00 0.00 0.00 0.00
Logan Fabyanske 0.00 0.00 0.00 0.00 0.00 0.00
Neutral Posture
Ergonomics 0.00 0.00 0.00 0.00 92.00 92.00
Pilot Networking
Group 514.00 0.00 0.00 0.00 0.00 514.00
Relax the Back -
Clearwater 610.00 0.00 0.00 0.00 0.00 610.00
Relax the Back -
Diana Jones 102.00 0.00 0.00 0.00 0.00 102.00
Relax the Back -
Wayne Skalka 102.00 0.00 0.00 0.00 0.00 102.00
Rockwell Collins 0.00 0.00 0.00 0.00 744.00 744.00
Ron Buono 494.00 -494.00 0.00 0.00 0.00 0.00
Seattle Dept. of
Parks and
Recreation 574.00 0.00 0.00 0.00 0.00 574.00
Trina Lankford 0.00 0.00 0.00 0.00 0.00 0.00
Unimation Call
Center 0.00 0.00 0.00 0.00 1,028.00 1,028.00
Veterans Service
Office 0.00 905.94 0.00 0.00 0.00 905.94
TOTAL 3,337.91 1,071.88 0.00 0.00 1,115.00 5,524.79
</TABLE>
<PAGE>
<TABLE>
Floating Arms, Inc.
A/P AGING SUMMARY
As of October 31, 1997
<CAPTION>
Current 1-30 31-60 61-90 >90 TOTAL
<S> <C> <C> <C> <C> <C> <C>
3D Design 0.00 0.00 0.00 0.00 5,753.00 5,753.00
Air Express
International 0.00 0.00 0.00 0.00 45.00 45.00
Arrow
Electronics, Inc. 0.00 0.00 0.00 0.00 2,195.54 2,195.54
AT&T 91.85 91.85 0.00 0.00 0.00 183.70
Bayport Printing 0.00 0.00 0.00 0.00 0.00 0.00
BodyBilt Seating 0.00 578.00 0.00 0.00 0.00 578.00
Boffin, Ltd. 0.00 0.00 280.55 0.00 0.00 280.55
Bruce Johnson 0.00 0.00 0.00 0.00 479.00 479.00
Canon Financial
Services 118.20 118.20 0.00 0.00 0.00 236.40
Cathy Mishek
O'Brien 0.00 40.00 0.00 0.00 56.50 96.50
Charles Clayton 0.00 0.00 0.00 0.00 1,525.00 1,525.00
Chris Andersen 0.00 0.00 0.00 0.00 165.00 165.00
Cirque Corp. 0.00 0.00 0.00 0.00 2,624.00 2,624.00
Colleen Stehr 0.00 0.00 0.00 0.00 1,670.05 1,670.05
Concurrent
Plastics 0.00 0.00 0.00 0.00 16,234.00 16,234.00
Copy Cat Business
Systems 0.00 0.00 0.00 0.00 74.00 74.00
Cornell University 0.00 0.00 0.00 0.00 2,000.00 2,000.00
Craig Vinje 0.00 0.00 0.00 0.00 3,774.00 3,774.00
Creative Carton 0.00 0.00 0.00 0.00 0.89 0.89
Doherty Rumble &
Butler 0.00 0.00 0.00 0.00 220.00 220.00
Edward Knaeble 0.00 0.00 0.00 0.00 1,912.50 1,912.50
Employment
Advertiser 0.00 0.00 0.00 0.00 178.98 178.98
Ernst & Young 0.00 0.00 2,000.00 0.00 4,700.00 6,700.00
Felhaber Larson
Fenion Vogt 0.00 1,534.10 755.00 726.50 2,306.76 5,322.36
First Bank Visa 0.00 1,360.05 477.71 207.08 2,443.04 4,487.88
Furst Group, Inc. 0.00 191.08 125.06 0.00 79.44 395.58
Gallop Studios 0.00 0.00 0.00 0.00 -27.25 -27.25
Haugen & Nikoll 260.00 90.00 0.00 0.00 2,903.18 3,253.18
InterFatron 0.00 863.50 0.00 0.00 0.00 863.50
John Oertel-
Director 787.00 0.00 0.00 0.00 0.00 787.00
Ketcham Design
Products 0.00 0.00 0.00 0.00 250.00 250.00
Lino Manfrotto -
Italy 0.00 0.00 0.00 0.00 3,880.00 3,880.00
Nancy A. Martin 0.00 0.00 0.00 0.00 881.00 881.00
Netrual Posture
Ergonomics 0.00 0.00 0.00 0.00 1,193.86 1,193.86
North Coast
Medical Inc. 0.00 0.00 0.00 0.00 335.50 335.50
Orchard Park 250.00 0.00 0.00 0.00 2,100.00 2,350.00
Procolor 0.00 0.00 0.00 0.00 733.53 733.53
Quality Computer
Products 0.00 0.00 0.00 0.00 240.00 240.00
Reider Machine, Inc. 0.00 0.00 0.00 0.00 856.48 856.48
Secure Mini Storage 75.00 0.00 0.00 0.00 0.00 75.00
Select Seating 0.00 0.00 0.00 0.00 2,112.23 2,112.23
Stillwater Metals 0.00 0.00 0.00 0.00 300.00 300.00
The Big Idea 0.00 0.00 0.00 0.00 2,550.00 2,550.00
The Ohio Casualty
Group 0.00 0.00 0.00 0.00 232.36 232.36
US West
Communications 0.00 247.17 0.00 0.00 0.00 247.17
Vista Technologies 0.00 0.00 0.00 0.00 532.50 532.50
Zignego Agency
Inc. 0.00 132.16 0.00 0.00 892.12 1,024.28
TOTAL 1,682.05 5,248.11 3,638.32 933.58 68,402.21 79,802.27
</TABLE
Floating Arms, Inc.
BALANCE SHEET
As of October 2, 1997
Oct. 2, '97
ASSETS
Current Assets
Checking/Savings
Checking - Bayport
Investments -1445.50
Petty Cash 4.09
100.00
Total Checking/Savings -1,341.41
Accounts Receivable
Accounts Receivable
Allowance For Bad Debts -519.00
Accounts Receivable - Other 3,795.94
Total Accounts Receivable 3,216.94
Total Accounts Receivable 3,216.94
Other Current Assets
Inventory - FG
Inventory - Keyboards -3,803.12
Inventory - Chairs 1,038.15
Inventory - Mousetrays -1,000.00
Inventory - FG - Other 12,304.14
Total Inventory - FG 8,539.17
Inventory - WIP 23,455.90
Total Other Current Assets 31,995.07
Total Current Assets 33,870.50
Fixed Assets
Production Equipment 122,785.00
Office Furniture 9,222.62
Office Furniture - Accum Depr -17,789.00
Total Fixed Assets 114,218.82
Other Assets
Organization Costs 700.00
Organization Costs - Amort -587.50
Patents 301.88
Total Other Assets 414.38
TOTAL ASSETS 148,503.60
<PAGE>
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
Accounts Payable 73,665.45
Total Accounts Payable 73,665.45
Other Current Liabilities
Discount on Note -30,130.00
Notes Payable - Current 24,387.00
Accrued Liabilities 1,920.00
Accrued Compensation 27,470.17
Advances 7,750.00
Sales Tax Payable 151.03
Total Other Current Liabilities 31,548.20
Total Current Liabilities 105,213.65
Long Term Liabilities
Notes Payable - Car Loan 11,542.30
Notes Payable - Tool Loan 85,178.85
Notes Payable - AR Credit Line 5,956.72
Total Long Term Liabilities 102,677.87
Total Liabilities 207,891.52
Equity
Discount on Stock -290,025.00
Capital Stock 1,257,587.24
Opening Bal. Equity 113.92
Retained Earnings -881,856.75
Net Income -145,207.33
Total Equity -58,367.92
TOTAL LIABILITIES & EQUITY 148,503.60
<PAGE>
</TABLE>
<TABLE>
Floating Arms, Inc.
PROFIT AND LOSS
January through September 1997
<CAPTION>
<S> Jan - Sep '97
Ordinary Income/Expense
Income <C> <C> <C>
Sales - Keyboards 41,592.00
Sales - Chairs 7,775.00
Sales - Mousetray 4,057.00
Sales - Shipping 3,209.50
Sales - Returns -399.00
Sales Discounts -16.95
Uncategorized Income 500.22
Total Income 56,717.77
Cost of Goods Sold
COGS - Keyboard 32,118.83
COGS - Chairs 4,955.64
COGS - Mousetray 2,100.00
COGS - Other -10.75
COGS - Shipping 3,262.95
Cost of goods Sold -1,059.89
TOTAL COSTS 41,366.78
Gross Profit 15,350.99
Expense
Freight-In Charges 125.58
Bad Debt Expense 514.00
Administrative
Salaries 38,886.65
Payroll Taxes 10,999.41
Advertising 185.79
Amortization Expense 37.50
Bank Service Charges 734.25
Commissions 400.00
Depreciation Expense 2,550.00
Dues and Subscriptions 75.00
Insurance
Liability Insurance 1,957.73
Insurance - Other 725.00
Total Insurance 2,682.73
Miscellaneous 351.62
Outside Labor 427.50
Professional Fees
Accounting 7,701.60
Consulting 0.00
Legal Fees 8,838.50
Payroll 554.79
Total Professional Fees 14,894.89
Rent
Equipment Rent 1,493.79
Office Rent 3,770.50
Rent - Other 3,839.00
Total Rent 9,103.68
<PAGE>
Supplies 1,256.58
Telephone 6,651.69
Travel & Entertainment
Auto Expense 15,688.45
Meals & Entertainment 1,563.94
Travel & Entertainment
- Other 750.00
Total Travel & Entertainment 17,980.39
Total Administrative 107,217.69
Sales & Marketing
Salaries 2,291.67
Payroll Taxes 198.23
Advertising 3,375.20
Consulting 3,500.00
Dues & Subscriptions 20.00
Outside Labor 14,836.26
Postage Delivery 806.28
Printing -1,271.18
Supplies 9.50
Telephone 253.10
Travel & Entertainment
Auto Expense 1,624.71
Meals & Entertainment 665.23
Travel 864.32
Travel & Entertainment 118.96
- Other
Total Travel & Entertainment 3,271.22
Total Sales & Marketing 27,290.28
Research & Development
Subcontracted Engineering 5,674.00
Supplies 1,951.30
Tooling 14,500.00
Travel & Entertainment
Auto Expense 216.96
Meals & Entertainment 13.72
Total Travel & Entertainment 230.68
Total Research & Development 22,355.98
Total Expense 157,503.53
Net Ordinary Income -142,152.54
Other Income Expense
Other Expense
Interest Expense 1,883.35
Total Other Expense 1,883.35
Net Other Income -1,883.35
NET INCOME -144,835.89
</TABLE>
